“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 U.S. 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.” – Senator Barack Obama (D-IL), Mar. 16, 2006, (emphasis added).
By President Barack Obama’s (D) own criteria, he and the Democratic super-majorities in the House and Senate that have run the show for the last two years are failed leaders.
Faced with a recession that the government could have stopped in its tracks with a sane tax policy and long-overdue federal budget cuts, the new administration doubled-down on President George W. Bush’s (R) dysfunctional bailout and deficit policies and quadrupled the annual deficit in their first year, setting a new record that dwarfed the worst Bush ever did. While the Bush/Obama Bailout Bonanza seems to have mostly come to an end, the destructive deficit spending continues apace. The U.S. federal government—by which I mean us, the taxpayers—now owes $14,083,345,766,082.15 to countless creditors, including foreign companies and governments (as of 2/10/2010,). At some point in the next one or two years, U.S. public debt is expected to rise above 100 percent of our Gross Domestic Product (GDP)—meaning we will owe more to our creditors than the worth of the entire country’s economic production in a year. The last time our debt was more than 100 percent of our GDP was during and immediately following the Second World War.
Bruce L. Hargraves, USN Retired, wrote a pithy letter to the editor which appeared in the Northern Wyoming Daily News on April 2, 2010. Hargraves said, “I object and take exception to everyone saying that Obama and Congress are spending money like a drunken sailor. As a former drunken sailor, I quit when I ran out of money” (emphasis added). It was funny when I read it last year. It’s not so funny anymore.
Obama submitted his budget proposal for the 2012 fiscal year to Congress this morning, which is already being characterized in the media as one that makes ‘painful cuts’ in the name of fiscal responsibility. This budget will reduce the federal deficit by $1.1 trillion over the next ten years; in other words, our government will have $1.1 trillion less debt than it might have otherwise had at the end of the next decade. This sounds all well-and-good, until you realize that the ten-year savings amount to a half-trillion less than what we are planning to add to the debt in 2012 alone. So Obama’s ‘painful cuts’ amount to a ten year project to eliminate less than six months-worth of deficit spending. It leaves the other over-9.5 years-worth of it (plus the 14 trillion dollars of debt we already have) completely un-addressed.
Obama’s projections, even if taken at face-value, are unacceptable. It’s buck-passing of the worst order, leaving a massive and immediate problem for future administrations to solve. There are major deficit reductions each year through 2014, but then they flatten out and remain relatively stable (still adding more than a half-trillion dollars to our debt each year!) until at least 2021. They show an ever-upwards trend in government revenues, which is wishful-thinking at best and willful-deception at worst. They also show a continued upward trend in government spending in a time when most rational politicos and economists insist we need to reduce spending.
And this is the conclusion I reach when being as charitable as humanly possible toward the president. Digging deeper, things get even worse. For example, the actual costs of last year’s health care boondoggle—assuming the Supreme Court leaves the clearly-unconstitutional law intact—are not considered. Through a series of mathematical contortions, Obama’s health care reform plan was made to look like it would reduce the federal deficit. It will not. The argument that a new federal entitlement plan, created without any significant reforms to the existing money-losing entitlements, will somehow reduce the federal deficit simply doesn’t pass the ‘common sense’ test.
If health care reform does somehow reduce the federal deficit, it will do so only by forcing new expenses on the states . . . which you and I will still pay for in higher taxes, which will still have the effect of further depressing the economy by reducing consumer spending, which will still lead back to reduced tax revenues at the federal and state levels. This does not resolve our financial mess, it makes it worse . . . whether the plan reduces the federal deficit on paper or not. Curiously, if Obama’s health care reform law is repealed or ruled unconstitutional, his budget proposals start to make a bit more sense. That’s not saying much, but it does back up the argument that ‘repeal and replace’ might be the best political strategy for the Democratic Party.
Past presidents—especially including Bush, who began this most recent trend of massive deficit spending—are rightly criticized for their contributions to the mess we are in . . . but Obama is the president today and, rightly or wrongly, it is now his mess to clean up. He can’t keep complaining that he inherited a federal deficit, especially when he quadrupled the previous record in his first year in office. He can’t keep kicking the problem down the road with budget plans that don’t address the underlying problem. Reducing the deficit is not success. Reducing the deficit is not really even progress. A reduced deficit is still adding to our 14 trillion dollars in preexisting debt that we, like any responsible debtor, ought to be paying-off.
The target must not be reducing the deficit, but eliminating it. The target must not be slowing down the growth of our national debt, but beginning to pay it off. We don’t need to be debating ten-year budget plans that don’t even try to accomplish these increasingly urgent goals. We need to be crafting an emergency fiscal plan to eliminate federal deficits entirely, preferably in this budget or, worst-case, within the next two or three years.
Many don’t seem to realize it, but we are in a very precarious position. One significant national emergency with the right conditions—a large terrorist attack, a natural disaster of serious enough magnitude, or an unexpected fiscal emergency that starts domestically or internationally—could put us in a position of either defaulting on our debts or, even worse, having the Federal Reserve print trillions upon trillions of dollars in an effort to prevent a default. Our options will be to either destroy our national credit rating and freeze huge swaths of public and private economic activity, or completely debase our currency and foist possible hyperinflation (and the societal mess that inevitably follows) on the taxpaying public. I think you will agree that neither of these outcomes is desirable.
It is possible that we could stand where we are, perilously close to the precipice, but never go over. Perhaps no unexpected emergency occurs until after things have stabilized more in the world economy. Maybe the deficit reductions, combined with the Federal Reserve’s quiet inflation policy, manage to keep things in an uncomfortably-balanced tension without ever leading to collapse. I, however, am not at all comfortable playing these odds.
We urgently need to adopt an austerity plan akin to that implemented in Greece to alleviate the sovereign debt crisis there, preferably before rather than after we find ourselves mired in one here. We must heartlessly cut government programs until the amount our government spends each year is less than the amount the government brings in through taxes. This is not rocket science. Any entity that spends more than it takes in for long enough goes bankrupt; just ask General Motors.
An argument can be made that any practicable austerity plan must also include tax increases along with program cuts, and there is some merit to this position. If you need to balance a family budget, you can cut your expenses, increase your income, or do some combination of both. In other times I might be inclined to agree with this position, not ideologically but in a spirit of bipartisan compromise to get the cuts pushed through. It’s too late for that kind of compromise now. The economy has been terribly destabilized by the last three years of horrific economic policies, and tax increases now would be unacceptably destructive. They would likely undo any revenue benefit by further suppressing a limping economy. At this point, tax increases simply cannot be on the table.
Only a drastic reduction in federal spending can solve the problem. Nothing else will do. We have to cull at least 1 trillion dollars per-year from the federal budget, and we need to do it starting with the 2012 fiscal year. Even the Republican spending proposal released last week, with supposedly ‘dramatic’ cuts pushed by members of the party’s conservative wing, falls woefully short of this target. The Republican plan would cut about 100 billion dollars in spending from the 2012 budget, less than one-tenth as much as would be required to call it ‘balanced’ and far short of anything I would characterize as real progress.
No federal program—excluding a small handful of exceptions like infrastructure investment and direct defense spending—can be spared. Are you going to like it? Probably not. You and I and every other American will be affected by the new, more austere government in some negative way. Maybe hundreds of programs that you consider important will have their funding brutally slashed. Hundreds of mine will too, although I’m admittedly less concerned since I think our federal government ought to get out of doing a lot of what it does anyway. We’ll have to accept less federal funding for schools, Social Security, Medicare, food stamps, and scientific research. Most offices in the Department of Defense will see their budgets slashed as well, as will the FBI, DHS, NASA, and countless others. So be it. You have to live within your means, even if it means cutting out things you might otherwise consider important. The government has to do the same.
Republicans and Democrats alike must accept that even their pet favorites in the federal bureaucracy, no matter how important they may be to them and their constituents, cannot be funded out of thin air anymore. This is not the time for spineless pandering. This is not the time for the gentle adjustments and half-measures President Obama proposed for us today, nor for the only-slightly-better proposals made by the Republicans on Friday. We have let this go on too long. We have let the debts and deficits grow too large. There is simply no time left for small, easy, incremental changes. When you’re standing inches away from a miles-deep economic abyss, you don’t resolve to take smaller steps toward the ledge. You back away from certain death. You retreat to a safe position.
This is what we must do. I don’t know if the cliff is two inches away or twenty feet away, but I know it’s there, and I know it’s a bad idea to keep walking toward it. I have been saying since at least 2004 that our government’s mad deficit spending—which I accepted with some reservations as a temporary measure following the 9/11/2001 attacks and the wars in Afghanistan and Iraq—is unsustainable. I repeated this with four-times as much vehemence when the new administration introduced a federal deficit four-times larger than the previous record. I will repeat it over and over and over and over again, if necessary. You must do the same. We must continually demand that our elected officials stop mortgaging our future.
I call on our Congress and on President Obama to develop and pass into law a balanced federal budget for the 2012 fiscal year. I further call on the American people to contact each of their representatives in the House and Senate and demand that they vote against any federal budget that does not include clear, reasonable, near-term plans for the elimination of the annual deficit and subsequent pay-downs against the national debt. We can’t afford baby steps; we must demand decisive action.