United Liberty

With conflicting reports claiming where Republicans stand on the budget plan passed last month and rumors of a deal with Obama Administration, Tad DeHaven writes that the GOP shouldn’t be afraid to take on the issue of reckless spending and the debt ceiling, which will be raised in a week or so:

The Obama administration argues that the GOP is playing a dangerous game and has called for a “clean vote” on raising the debt ceiling - i.e., one with no other policy strings attached. Treasury Secretary Tim Geithner has said that failing to increase the ceiling would cause “catastrophic economic consequences that would last for decades.” Austan Goolsbee, the president’s chief economic adviser, warned of “a worse financial economic crisis than anything we saw in 2008.”

That’s heavy stuff, but the administration is just trying to scare the public - and Republicans - into supporting the status quo: a gargantuan federal government that has promised more than it can deliver. This status quo is not sustainable without massive, ruinous tax increases that would put the nation on a course toward economic stagnation or worse.

While Democrats have tried their best to drum up opposition to Rep. Paul Ryan’s budget plan, the “Path to Prosperity,” the latest Gallup poll shows that they are losing three out of four voting blocs; including older voters:

Yes, there has been some backlash at Republican townhall meetings as a result of Ryan’s plan, but nothing to the extent we saw last year when Democrats were forcing ObamaCare down our throats.

Overall Americans oppose the plan, though it’s within the margin of error. Perhaps the biggest thing we can take from this is that young voters are idiots. They have the most to lose from doing nothing or talking in platitudes, which is essentially President Barack Obama’s plan, about the entitlements that make up anywhere from $50 trillion to $100 trillion in unfunded liabilties (depending on whose estimates you’re reading). The fixes that have been proposed by Democrats and the Obama Administration only put a bandaid on a gunshot wound.

Young voters are either ignorant or they don’t care, and their complacency is dragging the country down.

Paul Krugman has had to change positions a couple of times since Barack Obama came into office. For example, Krugman once opposed monetizing debt and budget deficits. But when the Federal Reserve announced plans to monetize debt through quantitative easing, Krugman was on board.

For all the flack he has recently given House Republicans’ plans to deal with entitlements, Krugman once supported raising the retirement age. Michelle Malkin, who dug up these quotes from book reviews Krugman wrote in 1996, notes, “you might think you were listening to Paul Ryan circa 2011” when you look at this:

Generous benefits for the elderly are feasible as long as there are relatively few retirees compared with the number of taxpaying workers — which is the current situation, because the baby boomers swell the workforce. In 2010, however, the boomers will begin to retire. Every year thereafter, for the next quarter-century, several million 65-year-olds will leave the rolls of taxpayers and begin claiming their benefits.

Last week, Standard & Poor’s downgraded the long-term debt outlook for the United States to negative. This sent waves through Washington as many believe it was a wake up call to members of Congress. This week a second shot was fired across the bow as the International Monetary Fund put Washington on notice that China will overtake the United States as world’s economic superpower by 2016:

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.

Put that in your calendar.

It provides a painful context for the budget wrangling taking place in Washington right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.

According to the IMF forecast, which was quietly posted on the Fund’s website just two weeks ago, whoever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.
[…]
[T]he Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.

Just 10 years ago, the U.S. economy was three times the size of China’s.

On Friday, the House of Representatives approved the Path to Prosperity, budget plan offered by Rep. Paul Ryan (R-WI), but not before drama erupted during the vote on the Republican Study Committee’s budget, which offered even more spending cuts:

Democrats unsettled Republicans by voting “present” in a vote on a more conservative budget than the official GOP proposal put forth by Rep. Paul Ryan (R-Wis.), almost enabling that bill to pass.

In the end, it failed in a 119-136 vote, with 172 Democrats voting present.

Several Republicans, including Rules Committee Chairman David Dreier (Calif.) and Rep. Cathy McMorris Rodgers (Wash.), a member of GOP leadership, switched their votes to ensure the more conservative budget backed by the Republican Study Committee did not win approval.
[…]
As the presiding officer tried to close down the vote, about a dozen more Democrats asked to switch their vote from “no” to “present,” which nearly allowed the RSC bill to pass.

“Democrats, vote ‘present!’ ” House Minority Whip Steny Hoyer (D-Md.) shouted at his colleagues, who tried, one by one, to switch their “no” votes to “present.” Ryan, the architect of the official GOP budget, shouted “Shut it down!” in an effort to close the vote and count the tally before Democrats could switch enough of their votes to advance the amendment.

At one point, Rep. Jesse Jackson Jr. (D-Ill.) stood on a chair and pointed at the presiding officer to keep the vote open.

The RSC’s alternative budget resolution would cut even more deeply into spending than Ryan’s bill, and was not expected to be approved by the House.

Yesterday, President Barack Obama gave a speech where he called for reducing the deficit - though without much detail other than acknowledging that spending will have to be cut in all areas and making an all too familiar call for tax hikes on higher income earners:

In a sharply worded address designed to boost the White House in its fight with Republicans over spending, President Obama on Wednesday called for the nation to reduce budget deficits by $4 trillion over the next 12 years.

Obama focused his criticism on the House Republican budget, zeroing in on reforms it would make to Medicare and Medicaid that the president said would fundamentally change the relationship between the government and citizens.

“This debate over budgets and deficits is about more than just numbers on a page, more than just cutting and spending,” Obama said in his address at George Washington University. “It’s about the kind of future we want. It’s about the kind of country we believe in.”
[…]
The key part of the president’s plan is a built-in cap that is far softer than the hard caps on spending called for by Obama’s own fiscal commission.

Instead, Obama proposed a “debt fail-safe” trigger that would initiate “across-the-board spending reductions” if by 2014 the projected ratio of debt-to-gross domestic product (GDP) “is not stabilized and declining toward the end of the decade,” according to a fact sheet released by the White House in advance of the president’s speech.

The White House said the trigger should ensure that deficits average no more than 2.8 percent of GDP in the second half of this decade. The trigger would not be applied to Social Security payments, Medicare benefits or low-income programs.

At the end of last week, I read an article from The Hill with quotes from Sen. Chuck Schumer (D-NY) claiming that there was “momentum” towards a budget deal. Well, that was then; this is now. And with the short-term Continuing Resolution running out - meaning a government shutdown is a very real possibility, Schumer is now leading the rhetorical charge against Republicans:

Moments before a conference call with reporters was scheduled to get underway on Tuesday morning, Charles E. Schumer of New York, the No. 3 Democrat in the Senate, apparently unaware that many of the reporters were already on the line, began to instruct his fellow senators on how to talk to reporters about the contentious budget process.

After thanking his colleagues — Barbara Boxer of California, Benjamin L. Cardin of Maryland, Thomas R. Carper of Delaware and Richard Blumenthal of Connecticut — for doing the budget bidding for the Senate Democrats, who are facing off against the House Republicans over how to cut spending for the rest of the fiscal year, Mr. Schumer told them to portray John A. Boehner of Ohio, the speaker of the House, as painted into a box by the Tea Party, and to decry the spending cuts that he wants as extreme. “I always use the word extreme,” Mr. Schumer said. “That is what the caucus instructed me to use this week.”

In London, there’s been protesting against government cuts.  Money is tight, and the government seeks to restore a little fiscal sanity.  Not much, this is England after all, but some.  The people, on the other hand, are bound and determined to get what they think they deserve.  This, more than anything else, is why it’s imperative to stop the fiscal insanity early.

Once an entitlement or program starts, people become attached to it quickly.  Nothing stirs the blood in politics more than the idea of a favorite program being cut, despite the necessity of it.  As more and more spending programs get trotted out, more and more money is needed to pay for it.  That means you need to actually get more money from folks, and when tough times like a down economy hits, it becomes even more important that you reign in the spending.

However, since you spend like crazy during the good times, people have gotten used to it.  They want their programs to stay, and they’re not going to just quietly let you take it away from them.  After all, they’re entitled to it!

Spending needs to be cut, and there will clearly be people who aren’t happy with it.  The cuts need to be drastic and nothing should be sacred and off the table.  However, that should be followed up in better times with more fiscal sanity.  Just because we might be in a boom time in the future doesn’t mean we should go back to spending like a drunken sailor on a three day pass.  Instead, we should hold onto any extra revenue as a cushion for further lean times.  This will help prevent need to take on more and more debt.

Of course, those people protesting usually don’t care about that.  So long as they get theirs.

The current, ongoing showdown between Democrats and Republicans over the federal budget is giving Americans a front row seat for the fight over national spending priorities and, for the conservative wing of the Republican Party, over the proper role of government itself. There are huge quantities of heated rhetoric being thrown around about greedy corporations, the need to help the poor and dire warnings against “Draconian” cuts to the budget. Yet, make no mistake about it; the problem is solely one of spending. Even if we taxed 100% of earnings for those hated millionaires and billionaires that Obama and the Democrats so love to publicly flog (even as the privately court them for their campaign donations), we wouldn’t even fund the annual budget, much less make a dent in the national debt.

While we will be forced in the very near future to finally have a serious discussion about the Big Three entitlements (Social Security, Medicare and Medicaid…with ObamaCare pending resolution in the courts), there is some low-hanging fruit that we can cut in the budget if we look at a cost-benefit analysis of programs and agencies that are duplicative, outdated or simply unnecessary. Right near the top of that list should be the federal Department of Education.

The federal Department of Education was created in 1976, signed into law by President Jimmy Carter. The legislation narrowly passed Congress, but succeeded in large part because of a heavy lobbying effort by the National Education Association (NEA) and the American Federation of Teachers (AFT). Many politicians, eager to secure the donations, manpower and influence of a large and powerful constituency, jumped at the opportunity to cement this politically incestuous relationship.

In case you didn’t already know, the United States is facing tremendous problems in terms of budget deficits and the national debt. Those problems were reconfirmed yesterday by Richard Fisher, president of the Federal Reserve Bank of Dallas:

The United States is on a fiscal path towards insolvency and policymakers are at a “tipping point,” a Federal Reserve official said on Tuesday.

“If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when,” Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. “The short-term negotiations are very important, I look at this as a tipping point.”

But he added he was confident in the Americans’ ability to take the right decisions and said the country would avoid insolvency.

“I think we are at the beginning of the process and it’s going to be very painful,” he added.

Fisher earlier said the US economic recovery is gathering momentum, adding that he personally was extremely vigilant on inflation pressures.

Fisher’s brief comments on inflation are odd since inflation is on the rise. And his optimism about the public making tough choices is tough to share. Polls generally show that Americans want limited government, but they aren’t willing to make cuts necessary to put the country on a sustainable course.