Daily Archives: 11 January 2013

On Raising the National Debt Ceiling

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Mr President, I rise today to talk about America’s debt problem.

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure.  It is a sign that the US.   Government can’t pay its own bills.  It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

Over the past 5 years, our federal debt has increased by [$5.7 trillion to $16.4 trillion.] That is “trillion” with a “T.”  That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers.  And over the next [4 years, between now and 2017, the President’s budget will increase the debt by almost another $3.5 trillion].

Numbers that large are sometimes hard to understand.  Some people may wonder why they matter.  Here is why: This year, the Federal Government will spend [$483] billion on interest.  That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program.  That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined.  It is more money in one year than we are likely to spend to rebuild the devastated gulf coast in a way that honors the best of America.

And the cost of our debt is one of the fastest growing expenses in the Federal budget.  This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.

Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.  Instead, interest payments are a significant tax on all Americans—a debt tax that Washington doesn’t want to talk about.  If Washington were serious about honest tax relief in this country, we would see an effort to reduce our national debt by returning to responsible fiscal policies.

But we are not doing that.  Despite repeated efforts…the Senate continues to reject a return to the commonsense Pay-go rules that used to apply.  Previously, Pay-go rules applied both to increases in mandatory spending and to tax cuts.  The Senate had to abide by the commonsense budgeting principle of balancing expenses and revenues.  Unfortunately, the principle was abandoned….

As a result, tax breaks have not been paid for by reductions in Federal spending, and thus the only way to pay for them has been to increase our deficit to historically high levels and borrow more and more money.  Now we have to pay for those tax breaks plus the cost of borrowing for them.  Instead of reducing the deficit, as some people claimed, the fiscal policies of this administration and its allies in Congress will add more…debt for each of the next 5 years.  That is why I will once again cosponsor the Pay-go amendment and continue to hope that my colleagues will return to a smart rule that has worked in the past and can work again.

Our debt also matters internationally.  My friend, the ranking member of the Senate Budget Committee, likes to remind us that it took 42 Presidents 224 years to run up only $1 trillion of foreign-held debt.  This administration did more than that in just 5 years.  Now, there is nothing wrong with borrowing from foreign countries.  But we must remember that the more we depend on foreign nations to lend us money, the more our economic security is tied to the whims of foreign leaders whose interests might not be aligned with ours.

Increasing America’s debt weakens us domestically and internationally.  Leadership means that “the buck stops here.”  Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.  America has a debt problem and a failure of leadership.  Americans deserve better.

I therefore intend to oppose the effort to increase America’s debt limit.

Senator Barack Obama (D, IL) 16 Mar 2006, Congressional Record Volume, 152, Number 34 (Thursday, March 16, 2006)] [Senate] [Pages S2236-S2241]

What he said.  Figures in brackets updated to 2013.

Compromise

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The Wall Street Journal also wondered a bit ago why it’s so hard for the two parties in DC to get along—”the two parties have a hard time even agreeing to disagree,” is the way they put it.

I think they’ve missed a key factor.  Here’s the basis for the WSJ‘s conjecture [emphasis in the original]:

Even when the differences between the two sides seem relatively small—whether, for example, to raise the top tax rate four percentage points for families earning more than $250,000, or whether to make that income level $450,000—compromise is difficult because both sides think important precedents would be set.  Today’s decisions will set the backdrop for broader debates on tax reform and spending later in the year.

When Republicans agreed to raise any tax rates at all, for example, they knew that they had opened the door for a new set of arguments about which rates and at what level.  The question had shifted from whether to raise rates to how—and that’s a significant shift.

It’s more than a significant shift.  It’s a complete surrender of a fundamental conservative principle: lower taxes, which benefits the economy and American citizens; don’t raise them, which achieves the opposite.

For the Democrats’ part, the WSJ says

Similarly, when Mr. Obama said he could accept the idea of reducing entitlement costs by embracing a formula for lowering cost-of-living increases for Social Security recipients, he was setting a precedent as well—a precedent saying that Democrats were willing to consider policies that reduced entitlement spending not just by holding down costs but also by reducing benefits to recipients.

But there is no precedent at all here.  The bit about Social Security was just idle chit-chat—bad faith negotiating.  There is no such thing in the actual deal; Obama accepted nothing related to entitlements, and he set no precedent at all.

Compromise requires a number of factors in order to be possible; among these are a need-driven interest in compromise.  The Republican Party has that interest—indeed, they beg for compromise, any compromise, so they can have a fig leaf of having accomplished something, and they’ve shown they’ll give away the store for the smallest trivium.  The Democrats, on the other hand, have no need of compromise, and so they have no interest in one.  They know that they can get whatever they want out of the Republicans—to the extent they need deal with them at all—because they know the Republicans will fold even on their most fundamental principles.

This is why it’s so hard for the two parties to get along—it’s a strictly one-way affair, with the dominant party having no need of it.

Some Miscellaneous Tidbits on Our Economy

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Update: And here’s the actual post [sigh]:

The Wall Street Journal a short time ago printed an updated graph that’s been around for a while; here it is:

That same article pointed out that we currently have 4.2 million fewer employed than we had four years ago—that’s the strength of the failed recovery under President Barack Obama’s policies.  Somebody else also talked (here, here, and here) about where we’d be today were this administration’s policies focused more on employment and economic recovery and less on naked redistribution and outcome equalization.

A rule of thumb, as the WSJ also notes, says that unemployment generally falls by a half per centage point for every per centage point of growth above the long-run trend.  Note, though, the graph above.  We’re not even getting back to our trend, much less getting above it.   Which emphasizes the effect of our shrinking labor force as more and more Americans continue to give up hope of changing their situation and finding an actual job.

Now, the Federal Reserve Bank has cut its long-term growth forecasts: in early 2011, they put the long-term US growth rate at 2.5% to 2.8%.  Now they’re expecting a trivial 2.3% to 2.5%–which is not going to get us back to the long-run trend, much less above it so we can start bringing down our true unemployment rate and actually get Americans back into the labor force and back to work.