TERRE HAUTE —
“Giving money and power to government is like giving whiskey and car keys to teenage boys.”
— P.J. O’Rourke
Watching the mainstream media and Washington politicians bamboozle voters into believing that a failure to raise the debt ceiling would constitute “default” confirms H.L. Mencken’s observation that no one ever went broke underestimating the IQ of the American electorate.
The big lie throughout this manufactured crisis has been the notion that if the debt ceiling was not raised we would be unable to pay our bond holders. Consider: Without a debt ceiling increase, 60 percent of spending would continue, and only about 5 percent of spending is needed to service our debt. Given the consequences, no president would refuse to honor our debt obligations so that spending in other areas could be boosted from 55 percent to 60 percent of current levels.
President Obama knew that refusing to honor our debt obligations would result in his becoming the Democrats’ Herbert Hoover and he wasn’t about to let that happen. Nevertheless, a tsunami of manufactured angst was created by Obama and the media regarding this matter. Instead of the media exposing this canard, they were complicit in hyping it. The money was there to pay the bond holders if the ceiling was not raised. (The point is not argumentative.)
I’m not suggesting that the ceiling shouldn’t have been raised, I’m merely pointing out that a failure to do so would not have resulted in “financial Armageddon” as Obama and the media claimed. It’s unseemly that our president should stoop to fear-mongering.
Moreover, it’s worth noting that Democrats could have raised the debt ceiling last year — sparing all of us this circus — when they controlled both houses of Congress. Instead, they chose to wait until the 11th hour and use Republicans for political cover. What’s more, our Democrat-controlled Senate has failed to propose a budget for the past 828 days. That is both irresponsible and unlawful. But that’s the sort of “leadership” we’ve come to expect from Washington. In fairness, President Obama did propose a budget earlier this year, but it was so expansive in its scope and spending measures that it was voted down by the Senate 97-0.
For all the liberal handwringing over the spending “cuts” that were promised in Sunday’s bipartisan deal, spending will continue to spiral out of control. Any time some politician claims that immediate spending cuts in a debt deal will harm the economy — ignore him. Why? Because in this bloated welfare state spending never goes down. Never. Compare President Obama’s budget with Rep. Paul Ryan’s budget. Granted, Ryan’s is a few trillion dollars lower than Obama’s over the next 10 years. But what do they both have in common? They both go up. Way up. As in roughly $40 to $45 trillion more.
Why is this the case? It’s because of something called the “current services baseline,” which includes population and inflation increases built into the budget. Entitlements have their own formulas and that’s why entitlement reform is crucial for our nation’s financial survival. So when you hear a politician tell you he’s cutting spending, he’s actually referring only to reducing the (growth) of spending. Rarely, if ever, do they actually reduce the (level) of spending.
Last Sunday’s budget deal promises to cut $2.4 trillion over the next decade. But the ratings agencies have warned Washington it must make $4 trillion in real spending cuts, over the midterm, or lose its triple-A credit rating. The question arises, since we’ve amassed over $14 trillion in actual debt and another $61 trillion in unfunded liabilities, why do we have a triple-A credit rating in the first place?
Suppose we do get a credit downgrade, what then? It’s instructive to note that in 2002, Japan was downgraded from AAA to AA and they can still borrow 10-year money for 1 percent. Not quite “the sky is falling” scenario that Obama and the media would have us believe, is it? One might argue that Japan can borrow cheaply because they buy their own bonds. (Japan has a much higher savings rate than America.) To which the correct response is: It’s time Americans sobered up and began acting as responsibly as the Japanese.
And then there’s taxes. President Obama’s liberal base is furious with him because Sunday’s budget deal didn’t impose higher taxes on “the rich” (i.e., married couples earning over $250,000 per year). Can someone explain to me how increasing taxes on successful people and small businesses (at this time) will strengthen our fragile economic recovery and reduce unemployment?
America is facing bankruptcy not because we are taxed too little, but because we spend too much. If the IRS were to confiscate 100 percent of all taxpayer income above $250,000 it would be enough to run our government for a whopping five months. To paraphrase Bill Clinton: It’s the spending, stupid.
All the talk of “default,” “downgrades,” and “raising the debt ceiling” is to ignore our central problem: spending. That’s what a responsible media and informed electorate should be focused on. Instead, the media allow politicians to deflect voters’ attention away from the real problem. Unless Americans force politicians (both Democrats and Republicans) to embark on a 12-step program to curb their fiscal nymphomania our debt crises will continue.
America’s failure to solve its spending addiction amounts to the most egregious example of generational theft in history. The attitude of baby boomers and their predecessors might be summed up thus: “Keep the federal goodies coming and stick the grandkids with the bill.” A message from today’s youth to boomers: “Pay your own goddamned taxes and take responsibility for your fiscal mess” is a slogan whose time has come and portends a new kind of class warfare.
Boomers will be the first generation in American history to bequeath a lower standard of living to the next generation. Which is about what one would expect from a generation that embraced sex, drugs and rock and roll while coining the infantile slogan: “If it feels good do it!”
— Reggie McConnell