Debt Ceiling

Raising the National Debt Limit?


Debt Ceiling Article


The Debt Ceiling Limit—Republicans Best Issue
by Donald Mellon - April 7, 2011

Debt Ceiling Debate
Debt Ceiling Debate Continues

There are three issues concerning government spending currently before congress and ultimately the voters, the 2011 budget, the 2012 budget, and raising the debt ceiling.   Generally in these issues Republicans will attempt to significantly reduce government spending while Democrats will resist these attempts.  Since Obama will certainly veto any significant spending reductions there is little likelihood that either budget will include major cuts.   It will be interesting to witness the fate of Paul Ryan’s 2012 budget proposal just released.  So with Obama in the way how can Republicans prevail?

Republicans must gain a large compelling favorable public opinion on attempts to reduce spending.  But who is the public that does not already support reduced spending but can be influenced to support it by Republican arguments?  It is the so called center or independents, roughly 20% of the population that shifts back and forth determining election outcomes by adding to the 40% or so confirmed conservatives or confirmed liberals.  So the message must appeal to this center.  Unfortunately I have a low regard for this group believing most are either lazy or ignorant or just too stupid to realize how important these issues are to their future and to the future of the country.  I envision them deciding how to vote on the way to the polls. 

National Debt
National Debt - Where does it end?

If this opinion is at all accurate then the message to appeal to the center must be simple, limited, and so obviously important to them that it should not be ignored.   Government intrusion into health care was one of those issues that served the Republicans well and will continue to do so but nothing so obvious appears in the spending debate (unless gas prices can be tied to high debt levels).  With these thoughts in mind it is hard to believe that cutting spending in the budgets will be a winning issue with the center.  It is not simple, limited or obvious how it affects them.  To this center I believe spending cuts are negative, somebody loses something, and the gains if any are not obvious and way off down the road somewhere.  My opinion is that it will be very difficult for Republicans to convince a considerable majority of this center of the electorate that significant budget cuts are necessary.  Obama’s vetoes, if it gets that far, will prevail with little damage to his chances for reelection.  Republicans must and will vigorously try to cut the budgets which will hopefully limit or prevent increases but success in reducing spending will be very limited while Obama is in office I fear.

Raising the Debt Ceiling

But raising the debt limit is different from spending cuts for two reasons.  The message is simple, limited, and obvious; it is bad to increase debt and even if one doesn’t understand exactly why, they know from experience that accumulating debt is not good.  How can anyone argue that increasing debt is good?  You might argue it is necessary because of the record high levels of spending but then that supports the need for spending cuts which Democrats are going to be reluctant to make.  And second this is something the Democrats and Obama want but the Republicans have the veto since they control the house.   Further there is no hurry since there will be sufficient revenue to cover debt obligations and fund the government for quite some time into the next fiscal year.  Tim Pawlenty is making this argument. 

National Debt Clock

I believe the winning position with the public on raising the debt limit that the Republicans should make and is being made by several Republicans is that we will not raise the debt limit unless congress passes a balanced budget amendment to the constitution and sends it to the states for ratification.   This keeps the issue very simple and understandable and one very difficult to argue against and as a bonus does not need Obama’s support.  The Tea Party should actively support this position and help increase Republican congressional support.

The arguments being made against delaying or not raising the debt ceiling are basically two fold.   One it will cause the US to default on its debt or obligations and second it will ruin our credibility in the world resulting in increased interest rates.  Both arguments are easily refuted since as stated above there is more than sufficient revenue to service the debt obligations and balancing the budget by not borrowing should enhance not diminish the world’s confidence in the dollar.

The Debt Ceiling Has to be Raised

However at some point during the fiscal year the debt ceiling will have to be raised, next spring at the latest.  This is true because of the fiscal mess we are in resulting from the record levels of current government spending.   Consider the budget numbers for 2012 from the administration, revenue will be $2570B, but  social security, Medicare, Medicaid, and interest payments will consume $1769B leaving just $801B for the rest of the government if there is no borrowing.  The defense department alone with two wars ongoing is budgeted for more than this amount leaving zero for all the rest of the government.  I should note that the interest payments of $251B in the budget are about 10% of revenue so default is unlikely.   The borrowing necessary to achieve this budget is $1270B.  I do not believe that in one year it is possible to reduce current spending levels and or increase revenue by this amount to balance the budget which would be required if the debt ceiling is not raised.

Balanced Budget Amendment 

So it is necessary for Republicans with Tea Party support to make the case to the public for the balanced budget amendment then pass the amendment before raising the debt ceiling.  Even if the amendment fails to pass because of insufficient Democratic support, if the public is on the side of Republicans in wanting to balance the budget it will be a much stronger position in the next election than just being the party that wants to cut spending on all those “wonderful and necessary government programs while preserving tax breaks for the rich”.  Campaigning to balance the budget allows one to be non-specific in that first we pass the amendment then later we negotiate where to cut spending rather than being open for criticism over specific spending cuts with the associated risks of losing support from the important center.  If the amendment passes congress then ratification by at least 38 states will be the next battle where victory may lock in one of our Tea Party founding principles, fiscal responsibility, for the foreseeable future.

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