Sunday, July 17, 2011

Debt Ceiling Deal Pending

Negotiations continue over debt ceiling and spending cuts
Politics is a treacherous but ever-so-predictable business these days. What seemed within reach a few days ago to stop the insanity over debt and spending is now slipping through the cracks of the time-honored traditions of political compromise.

Personally, I favor the ideologically pure notions presented by the "Cut, Cap and Balance" idea coupled with the Lee/Hatch/Cornyn (et. al.) Balanced Budget Amendment, but now the "smart money" tells us there is no chance of passage. They wanted no increase in the debt ceiling without an up or down vote on the BBA. It's the members of the Utah congressional delegation who are leaders in the fight, specifically Hatch and Lee in the Senate and Jason Chaffetz in the House. Watch for the tea-party-dominated House to pass Cut, Cap and Balance this week, then watch it die in the Democrat-laden Senate.

The reason it isn't going to happen, apparently, is because the ideology on the other side in the personification of Barack Obama senses no urgency and wants tax increases on the rich. "We don't need a Balanced Budget Amendment," he says, "We just need to do our jobs." Well, we've all seen how that has worked out. "Doing our jobs" on his watch has included running up record debt, deficits, stimulus bills that didn't stimulate anything, the biggest entitlement program in the history of man, threats of more taxes as far and the eye can see, printing worthless currency and regulating everything that moves in the economy. They don't seem to be aware that tax increases on the wealthiest Americans just isn't enough to close the gap mathematically. If you confiscated, not merely taxed, that wealth it still wouldn't be enough. Perpetuating the myth that you can tax the rich to help the poor is what I've labeled "The Great Big Fat Lie." (Click the link to my post on April 16, 2011, and watch the embedded video).

Yes, blame Bush too -- government programs, unfunded wars, TARP, etc. -- so don't single out the criticism for Obama alone. But you can top all that history with a presidential threat just last week that Social Security recipients might not get their checks in August unless Congress comes to heel at his command. That kind of threat, first, isn't very presidential, and second, it's a big fat whopping lie.

The lies are piling up with every news conference.

Despite it all, there will be a budget spending deal along with an increase in the debt ceiling struck here in the next few days; Washington working in its "finest hour," some will yet say. However, it will be a watered down deal and the questions will remain to haunt us going forward: Will whatever they come up with satisfy the rating agencies, Moody's and S&P as being "sufficient" to stave off a downgrade of America's "AAA" bond rating? Both agencies upped the ante last week in the political poker game, by signalling they will not hesitate to degrade the rating if meaningful progress is not achieved. A downgrade in the bond rating of America would mean higher borrowing costs for everyone.

I suspect Americans, however, are growing weary of the same old rhetoric and class warfare struggles -- "tax the rich for the benefit of all who aren't." Tax revenues have been historically low these last three or four years because of the collapse of the financial markets in the wake of the toxic mortgage securitization marketplace, and this much is clear in hindsight: the federal government promoted that market and its interventions have proven catastrophic in the aftermath.

There have been reams of paper and gallons of newspaper ink spilled over whether or not to raise the debt ceiling. When he was a freshman senator from Illinois, Barack Obama assailed George W. Bush for lack of leadership in coming to Congress to raise the debt ceiling back then, and now as POTUS, Obama rides to the rescue once again proclaiming the end of the world as we know it unless he gets a big budget deal to carry him through the 2012 election. He doesn't really want to have to deal with this question of fiscal responsibility and accountability between now and then. Truth is, the Republicans voted many times under George Bush to raise the debt ceiling. The hypocrisy on both sides is stunning, and they expect Americans to keep buying their explanations? I don't think so.

In the back and forth for over two years now, one detail is seemingly lost. The President has a Constitutional duty to propose a budget each year. This president, however, has failed to do so for two and a half years, abdicating his responsibility to Congress and carping over every proposal that comes his way. John Boehner, Speaker of the House, complained the other day that negotiating with Obama is like trying to strike a deal with Jell-O; he's a little slippery and wiggly. So much for golf diplomacy.

The historic election of 2010 notwithstanding, where Obama was handed an overwhelming rebuke by the voters, political sea changes are slow in translating into reality and seemingly impossible to make stick. One thing is clear: this president thinks he's got the voters with him. He was bold enough to quote a fuzzy poll result the other day, claiming 80% of Americans favor a tax increase on the wealthy. Really? Whether it's true or not, he absolutely believes he is doing the right thing for America and the people are on his side. That's the belief of an avowed extremist, and one could say the same thing about the other end of the spectrum perhaps.

So this morning it appears likely we will see the classic result coming from Washington once again. Negotiations over political positions where both sides can claim some watered down portion of victory. Political maneuvering continues to plague our national debate. This morning it is reported Paul Ryan, the House's Budget Chief, who actually had the courage to propose a sound but politically suicidal budget a few months ago, and got it passed in the House, has been lecturing the freshmen House members about the futility of pressing their case not to raise the debt ceiling. The voters back home won't be pleased who sent them there to put a cap on the spending spree and to take away the blank checks from the president, but until there is a majority in both houses of Congress and the present occupant of the White House is expelled, there are going to be half-measures that please no one.

There are about four options that are still on the table that can be identified by their biggest supporters. 

  • The McConnell plan would force Barack Obama to take some very uncomfortable public positions but, policy-wise, would likely mean the fewest amount of real spending cuts. 
  • The plan Eric Cantor is pushing for is a short-term small-cut deal that would cut much less than the "grand bargain" and would force more debt ceiling votes and negotiations before the 2012 election. 
  • Barack Obama is negotiating for a medium-term cuts-and-taxes deal that would solve the issue past 2012. 
  • And finally, there's the John Boehner-backed "grand bargain" that would contain up to a reported $4 trillion in cuts.

The average American doesn't wake up every morning wondering whether or not the planet has been saved from a potential debt crisis in the USA. Instead, they awaken to another day oblivious to the issues their elected representatives are tasked to tackle. Even with all the angst on display in the election of 2010, it appears we're back to business as usual in Washington, and both sides are dug in until they find the partial solutions they are so adept at crafting together -- wait for it, it's coming -- "This isn't a perfect deal, but it's the best we could do under the circumstances."

There is a titanic struggle for the future unfolding before our eyes, however, that looms ahead. As anyone who carries enormous debt obligations will tell you, freedom is curtailed with debt and spending money at a rate that cannot be sustained. America has always been among the leaders in freedom in virtually every category, but we are threatened by our self-inflicted cancer of debt and deficits:

We are under siege and sometimes don't even know it or understand what's at stake. It's true for individuals, businesses and countries. We may not see the effects immediately, which is why life appears to go on as normal each day, but the underlying erosion is taking place imperceptibly but unrelentingly.

Until the political gimmickry stops and we put this federal government in a straight jacket that binds future congresses and the president to fiscal sanity, we are in bondage even if we don't see the velvet shackles binding our wrists and ankles. I remember a wise old businessman telling me years ago, "Borrowing money is like wetting the bed -- it keeps you warm for awhile, but eventually you have to get up and change the sheets."

I don't really care much for political parties and their partisan rhetoric that merely keeps them wetting the beds. As I've said before, what we need now are patriots who can rise above party and stop the insanity by changing the course of America. If we can't do it ourselves, the consequences will overtake us.

One final point: The underlying issue distills to whether we should have a larger and more expensive federal government. Over many years, federal spending has averaged about 20 percent of gross domestic product.

The Obama Democrats have raised that to 24 or 25 percent. And the president's budget projects that that percentage will stay the same or increase far into the future. The decision point has arrived at our doorstep. In the process, the national debt as a percentage of gross domestic product has increased from a manageable 40 percent in 2008 to 62 percent this year and an estimated 72 percent in 2012. And it's headed to the 90 percent level that economists Kenneth Rogoff and Carmen Reinhart have identified as the danger point, when governments face fiscal collapse. Those are the stakes and the politicians are still posturing.

I'm still waiting for the serious debate.

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