The Debt Ceiling Showdown in an Uncertain Recovery
The federal government borrows about 40 cents of every dollar it spends. But Democrats think that Congress has no choice but to raise the debt ceiling; to not raise the debt ceiling would usher in the End of the World, Armageddon. Which means the feds must continue to spend trillions of borrowed dollars each year -- until the "experts" say to stop.
Whether the Democrats are correct that we must raise the debt ceiling by the August 2 deadline is debatable. What's not debatable is that Armageddon will visit America if we don't stop running these monster deficits soon.
But Democrats don't want to cut anything out of the budget; not entitlements for rich folks, not ethanol subsidies, not cowboy poetry festivals, not anything -- we need it all. Democrats believe that the way to balance the budget is with more revenue and the way to get more revenue is to get the economy going. But business is spooked.
What's spooked American business is uncertainty. The raft of new regulations being imposed by un-elected regulators and czars is causing the businessman to hold back on expansion and hiring. In his column "U.S. economy is being suffocated by uncertainty" on June 4 in The Kansas City Star, E. Thomas McClanahan writes:
More immediately, there's the worry over pending regulation. ...The health care law authorized a mountain of new rules, which have already begun to stream out of Washington. Ditto for rules mandated by the Dodd-Frank financial reform law, which has many banks wondering how much they will be able to loan.
American business needs a "regulation holiday," at least until the economy picks up. But the one thing that would do the most to un-spook American business is a moratorium on the implementation of ObamaCare, at least until the various court cases making their way to the Supreme Court have been decided. It makes no sense to spend a ton of money gearing up for a new law that the Court may find unconstitutional. (Uncertainty and new regulations have been recurring themes lately on The Kudlow Report; video.)
Charles Krauthammer's column of June 3 is a must read for those worried about the debt ceiling and out-of-control government spending. Dr. Charles will put your mind at ease as he explains the "beauty" of Speaker Boehner's debt ceiling gambit:
Which is why House Speaker John Boehner's offer of a dollar-for-dollar deal -- raise the debt ceiling to match corresponding spending cuts -- is a thing of beauty. It is eminently logical and easy to understand. In a country with a huge 47% to 19% plurality opposed to raising the debt ceiling, the Boehner offer is difficult for the President to refuse.
After all, it invites Obama to choose how much to cut. For example, $500 billion buys him a $500 billion debt-limit hike -- and only a short-term extension. Not wanting to go through this process again, Obama would like a $2 trillion debt-limit hike to get him past Election Day 2012. For that, he'll have to come up with $2 trillion in spending cuts.
It may be blackmail. But it is progress.
In FY2007 the feds ejoyed their most revenue ever. If the feds were spending in 2011 what they spent in 2007, instead of having a $1.645 trillion deficit, it would be more like $555 billion. To be sure, that would still be a monster deficit, bigger than any before Obama -- but it would be one third of this year's estimated deficit.
Jon N. Hall is a programmer/analyst from Kansas City.