Written by Tad DeHaven, a budget analyst at the Cato Institute. Posted with permission from Cato @ Liberty.
Speaker Boehner says that the House will not pass another increase in the debt ceiling unless the White House and congressional Democrats agree to cut spending by an equal or greater amount. That’s the same line in the sand that Boehner drew during the previous debt ceiling showdown in 2011.
As I noted in a recent piece, the 2011 agreement to increase the debt ceiling accomplished no such thing:
The deal that Republicans ultimately agreed to — The Budget Control Act of 2011 — promised to reduce the growth in spending over the next ten years by $917 billion. In exchange, the president got to increase the debt ceiling by $900 billion. According to the House Republican leadership, the trade was a victory because the debt increase was smaller than the spending cuts. Of course, that’s nonsense. Not only were there no real spending cuts, the federal debt has proceeded to jump another $1.8 trillion since the president signed the bill less than a year and a half ago.
The other part of the deal hasn’t turned out any better. The BCA created a “Super Committee”, tasked with achieving $1.2 trillion in deficit reduction over ten years. When the committee inevitably failed, the agreement stipulated that the deficit reduction instead be achieved through a combination of automatic cuts to defense and non-defense spending (“sequestration”). Republicans and Democrats promptly made it clear that they would figure out a way to avoid the spending cuts.
In case you’ve missed it over the last few days, there is a lot talk from politicians and economists seeking a crafty way for President Barack Obama to bypass a debt ceiling debate with Republicans in Congress, who want spending cuts in any deal to raise the nation’s borrowing limit.
Some, including House Minority Leader Nancy Pelosi (D-CA), believe that the White House should use the 14th Amendment, which states that “the validity of the public debt…shall not be questioned,” to raise the debt ceiling through executive fiat.
The other option that is being floated, as weird as it sounds, would be the Secretary of the Treasury, which is current Timothy Geithner, to use his authority to order the minting of a $1 trillion coin.
Last night on Comedy Central, Stephen Colbert, host of The Colbert Report, gave the idea treatment that only he could deliver, explaining, “All of this means nothing because a $1 trillion coin doesn’t solve anything. Our nation’s debt is $16 trillion, and we can’t make a $16 trillion coin. That’s just silly.”
Watch the whole segment below:
On Tuesday, House Speaker John Boehner (R-OH) released a statement claiming that he would use the new year to “hold the president accountable for the ‘balanced’ approach he promised, meaning significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt.”
In an editorial at Yahoo! News, Senate Majority Leader Mitch McConnell (R-KY) defended the “fiscal cliff” deal and, like Boehner, explained that he is ready to tackle the “real problem” — Washington’s spending addiction:
Predictably, the President is already claiming that his tax hike on the “rich” isn’t enough. I have news for him: the moment that he and virtually every elected Democrat in Washington signed off on the terms of the current arrangement, it was the last word on taxes. That debate is over. Now the conversation turns to cutting spending on the government programs that are the real source of the nation’s fiscal imbalance. And the upcoming debate on the debt limit is the perfect time to have that discussion.
We simply cannot increase the nation’s borrowing limit without committing to long overdue reforms to spending programs that are the very cause of our debt.
The only way to achieve the balance the President claims to want is by cutting spending. As he himself has admitted, no amount of tax hikes or revenue could possibly keep up with the amount of money Washington is projected to spend in the coming years. At some point, high taxes become such a drag on the economy that the revenue stalls.
If you thought the political fighting and deal making in Washington was over with the passage of the “fiscal cliff” deal, then guess again. It looks like Congress will be taking up the debt ceiling next month, which should, based on his track record, give Speaker John Boehner another chance to capitulate President Obama and company:
President Barack Obama scheduled another so-called “fiscal cliff” crisis for February by announcing late Jan. 1 he would refuse to negotiate any curbs on his use of the nation’s maxed-out credit card.
“I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” he claimed during a late-night appearance on the last-minute resolution to the December 2012 fiscal cliff.
However, the GOP-led Congress wants to use its authority over the nation’s debt ceiling to pressure Obama to shrink future spending, not to repudiate existing debts.
While he gave the White House nearly everything it wanted, Boehner announced yesterday that House Republicans would use “2013 to hold the president accountable for the ‘balanced’ approach he promised, meaning significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt.”
Since he’s been in office, President Barack Obama has constantly railed against higher-income earners and talked about the need for tax hikes. Throughout the course of the “fiscal cliff” discussion, Obama stressed the need for a “balanced approach,” meaning a combination of tax hikes and spending cuts.
However, the “fiscal cliff” deal that was passed by Congress yesterday is horribly unbalanced — cutting spending by $1 for every $41 of tax hikes — and costs upwards of $4 trillion. But Zero Hedge put out this chart this morning that really puts it all in perspective:
With the “fiscal cliff” looming, the $1.2 trillion automatic budget cuts, also known as sequestration, will trigger on 1 January 2013, as part of the 2011 Budget Control Act. The Department of Defense will bear 41% of this burden, cutting $492 billion over 10 years.
Although these cuts aren’t actually cuts at all, but merely decreases in the rate of growth, neither political party has the will or the want to let them go into effect. Politicians on both side tell us sequestration will cut our Navy to its smallest size since WWI, and cut our ground forces to their smallest size since WWII. Our Department of Defense, however, currently consumes 20% of the federal budget and 5% of the US economy. At $707.5 billion, the 2012 Defense budget is more than double its $291.1 billion size in 2001, before our modern wars began. Having technically ended a war last year, and currently drawing down in another, what exactly are we spending our money on? How do we, every year, spend more on defense than we did the year before? Instead of sheltering the Department of Defense from spending cuts, perhaps it should be the first place we look.
While the removal of four fiscally conservative members of key committees, House Republican leadership — a decision presumably made by Speaker John Boehner — has made it clear to the rest of their caucus — principled, outspoken members will not be tolerated in positions that could influence a potential “fiscal cliff” deal.
One of the members removed by House Republican leadership, Rep. Justin Amash (R-MI), the only member of Congress who explains each one of his votes, isn’t sitting silently. In fact, speaking out even louder than before.
Yesterday, Amash dropped a couple of tweets noting that, despite the hand wringing and public back-and-forth between Boehner and President Obama, there really isn’t much a difference between the budgets put forward by the two:
— Justin Amash (@repjustinamash) December 12, 2012:
My debt projections assume current-law baseline. Obama’s & Boehner’s plans likely create much MORE debt than $18T by 2022. #ouch
— Justin Amash (@repjustinamash) December 12, 2012
With concern over the “fiscal cliff” growing, one thing has become painfully clear — Republicans are losing the debate in the eyes of the public. Some Republicans in Congress have abandoned the pledge they made to their constituents never to raise taxes and others haven’t effectively made the case as to why President Barack Obama’s tax proposal is a loser for the country.
Let’s get one thing clear on the “fiscal cliff” debate — this is not about a “balanced approach” to solving the deficit problem, despite what President Obama may say. The tax proposal that the White House is pushing would raise revenues by $1.6 trillion over the next 10 years ($160 billion per year), but, as J.D. Foster of the Heritage Foundation recently noted, the “national debt still goes up by about $7 trillion” in that budget window. In other words, our deficit problems are still there.