The American government will hit the debt ceiling some time in February. The media and many politicians are gearing up for another last minute drama fest. Newly re-elected Speaker of the House John Boehner told his party caucus that he would no longer negotiate one on one with the president; instead he will let the process follow the normal order. That means that the House will pass bills and send them to the Senate. There will be no secret negotiations which get spun constantly through leaks to the press. In other words, the standard operating procedure for the Obama years will end. I hope Boehner holds to this statement. I doubt, however, if the media or the multitude of "experts" believe that the days of closed door deals are over. Each side is drooling over the prospect of more "stands of principle" in which threats are tossed. The Democrat operatives and the media are planning to paint the GOP as threatening to force the USA into default in order to cut payments for the poor, elderly and other needy. The GOP is planning to paint Obama and the Obamacrats as planning to spend the USA into oblivion just so that they can hold onto power for a bit longer. Well, it is all nonsense. It needs to be stopped. The theater may be fun for some to watch, but it does nothing to help the future of America. The truth is, however, that conservatives need a strategy that will accomplish the goal of reducing spending without the media making this into an existential crisis for the USA. I can hear the cries now: "We are going to default. It's unthinkable!"
Let's look at a few truths that no one ought to question:
1. The government cannot now live within its means. The currently scheduled excessive spending will require that the federal government borrow funds from others. In other words, the federal debt ceiling will have to be raised.
2. Failure to raise the debt ceiling would be a disaster for the USA. Should we hit the debt ceiling, about half of federal expenditures would have to stop. Remember the fiscal cliff problems? This would be the fiscal black hole. If we ever fell in, we could never get out. We would see a decline in GDP at a rate of about 11%. The result would be a severe economic depression. Indeed, it could also mean the destruction of the dollar and the appearance of a huge inflationary spiral. No sane person could want that result.
3. Because the results of failing to raised the debt ceiling are so dire, no politician is likely to call for such a result if he or she thinks that the result is possible to achieve. All of Washington well knows this. The press also knows this basic truth.
4. Nothing can get spent by the federal government unless both the House and the Senate authorize the expenditure. Some programs are already approved for spending. These are basically the entitlements like Social Security and Medicare. Payments from these programs go on without further annual action by the Congress. Of course, the Congress can still change these programs.
With these facts in mind, I propose the following strategy to be used by the Republicans in Congress.
A. Let's decouple the debt ceiling raise from spending bills. In other words, let's put forth a bill in the House to raise the debt ceiling by enough to last the country for the next six months. Surely, Obama would like a longer time frame, but ultimately the Democrats will have to take what they can get. A need to raise the debt ceiling every six months will force the issue back into public view on an ongoing basis.
B. Let's work quickly to pass a budget in the House. That budget should cut spending by 15% of the amount of any debt ceiling increase. The future projections of the budget ought to cut spending over the next decade by the same amount as the debt ceiling is raised. The Senate may follow or it may not.
C. At the same time, let's pass appropriations bill for the various federal departments and agencies and send those bills to the Senate. These should cut spending in accordance with the budget and attempt to make the entire government more efficient. Again, the Senate may accept these or not. Obviously, if the Senate does not act, no spending at all will be authorized.
D. If the Senate does not act on the spending bills in time, the ability of the federal government to keep spending will end. Right now, there is a continuing resolution which funds the government through March. House Republicans should announce now that from here on forward, they will not pass any further continuing resolutions that authorize spending for any amounts higher than the levels reached last year. That's right. House Republicans will state that in the absence of proper spending bills, funding through continuing resolutions will be pegged to the same level as was spent last year. Exceptions could be made for the Department of Defense and for emergencies, but not anything else.
This statement may not sound like much. One needs to remember, however, that just holding spending to the levels of 2012 will result in a "savings" of over seven trillion dollars over the next ten years because of what is called baseline budgeting. Each year, the level of expected spending rises something like seven percent. Any spending less than such an amount is called a "spending cut" in Washington. The Democrats will scream that this GOP plan will take food from the mouths of children and force the elderly into the streets. The persistent response, however, must be that the GOP has approved exactly the same level of spending as last year.
E. The GOP should announce in March that it is passing these spending freeze continuing resolutions for three months. In June, the same process should be followed again. In September, however, when the continuing resolution runs out, the GOP should decide which agencies deserve to be cut. At that point, there ought to be continuing resolutions passed for most of the government at the 2012 levels with other resolutions passed for the agencies to be cut at a level of 2012 minus five or ten percent.
F. Moving forward, the process can be repeated.
This strategy has some simple plusses. First, the crisis is removed from the equation. The USA will not default. The government need not shut down. Second, Obama and the Obamacrats will be facing the difficulty of explaining why it is not sufficient in these times of major deficits to spend just the same amount as last year. Instead of the fiction that raising spending more slowly than expected is a "cut", the people will be hearing the argument between spending the same amount as last year and spending more. Obama and the Obamacrats will be arguing for raising spending. Republicans will just be arguing for freezing spending.
In many ways, this strategy produces the reverse of the recent fiscal cliff. There, the Democrats accused the GOP of holding middle class tax cuts hostage to tax cuts for the rich. It was a potent message which was easy to understand and which battered the GOP endlessly. In the future confrontation that I envision, the Democrats will be the ones arguing for spending increases versus the GOP that will want to freeze spending. After many years of hearing both side talk about the need to close the budget deficit, the Democrats will look like idiots as they argue for spending increases.
Clearly, the response of Obama to this plan would be to call for tax increases to pay for the spending increases. This call, however, will no longer carry the weight that it used to have. Obama already got his tax increases on the wealthy. Further, the GOP can respond to the calls for tax increases by pointing out that even with tax increases, we cannot continue to INCREASE spending. We need to hold the line here.
If you think that this could work, please tell others about it.
Let's look at a few truths that no one ought to question:
1. The government cannot now live within its means. The currently scheduled excessive spending will require that the federal government borrow funds from others. In other words, the federal debt ceiling will have to be raised.
2. Failure to raise the debt ceiling would be a disaster for the USA. Should we hit the debt ceiling, about half of federal expenditures would have to stop. Remember the fiscal cliff problems? This would be the fiscal black hole. If we ever fell in, we could never get out. We would see a decline in GDP at a rate of about 11%. The result would be a severe economic depression. Indeed, it could also mean the destruction of the dollar and the appearance of a huge inflationary spiral. No sane person could want that result.
3. Because the results of failing to raised the debt ceiling are so dire, no politician is likely to call for such a result if he or she thinks that the result is possible to achieve. All of Washington well knows this. The press also knows this basic truth.
4. Nothing can get spent by the federal government unless both the House and the Senate authorize the expenditure. Some programs are already approved for spending. These are basically the entitlements like Social Security and Medicare. Payments from these programs go on without further annual action by the Congress. Of course, the Congress can still change these programs.
With these facts in mind, I propose the following strategy to be used by the Republicans in Congress.
A. Let's decouple the debt ceiling raise from spending bills. In other words, let's put forth a bill in the House to raise the debt ceiling by enough to last the country for the next six months. Surely, Obama would like a longer time frame, but ultimately the Democrats will have to take what they can get. A need to raise the debt ceiling every six months will force the issue back into public view on an ongoing basis.
B. Let's work quickly to pass a budget in the House. That budget should cut spending by 15% of the amount of any debt ceiling increase. The future projections of the budget ought to cut spending over the next decade by the same amount as the debt ceiling is raised. The Senate may follow or it may not.
C. At the same time, let's pass appropriations bill for the various federal departments and agencies and send those bills to the Senate. These should cut spending in accordance with the budget and attempt to make the entire government more efficient. Again, the Senate may accept these or not. Obviously, if the Senate does not act, no spending at all will be authorized.
D. If the Senate does not act on the spending bills in time, the ability of the federal government to keep spending will end. Right now, there is a continuing resolution which funds the government through March. House Republicans should announce now that from here on forward, they will not pass any further continuing resolutions that authorize spending for any amounts higher than the levels reached last year. That's right. House Republicans will state that in the absence of proper spending bills, funding through continuing resolutions will be pegged to the same level as was spent last year. Exceptions could be made for the Department of Defense and for emergencies, but not anything else.
This statement may not sound like much. One needs to remember, however, that just holding spending to the levels of 2012 will result in a "savings" of over seven trillion dollars over the next ten years because of what is called baseline budgeting. Each year, the level of expected spending rises something like seven percent. Any spending less than such an amount is called a "spending cut" in Washington. The Democrats will scream that this GOP plan will take food from the mouths of children and force the elderly into the streets. The persistent response, however, must be that the GOP has approved exactly the same level of spending as last year.
E. The GOP should announce in March that it is passing these spending freeze continuing resolutions for three months. In June, the same process should be followed again. In September, however, when the continuing resolution runs out, the GOP should decide which agencies deserve to be cut. At that point, there ought to be continuing resolutions passed for most of the government at the 2012 levels with other resolutions passed for the agencies to be cut at a level of 2012 minus five or ten percent.
F. Moving forward, the process can be repeated.
This strategy has some simple plusses. First, the crisis is removed from the equation. The USA will not default. The government need not shut down. Second, Obama and the Obamacrats will be facing the difficulty of explaining why it is not sufficient in these times of major deficits to spend just the same amount as last year. Instead of the fiction that raising spending more slowly than expected is a "cut", the people will be hearing the argument between spending the same amount as last year and spending more. Obama and the Obamacrats will be arguing for raising spending. Republicans will just be arguing for freezing spending.
In many ways, this strategy produces the reverse of the recent fiscal cliff. There, the Democrats accused the GOP of holding middle class tax cuts hostage to tax cuts for the rich. It was a potent message which was easy to understand and which battered the GOP endlessly. In the future confrontation that I envision, the Democrats will be the ones arguing for spending increases versus the GOP that will want to freeze spending. After many years of hearing both side talk about the need to close the budget deficit, the Democrats will look like idiots as they argue for spending increases.
Clearly, the response of Obama to this plan would be to call for tax increases to pay for the spending increases. This call, however, will no longer carry the weight that it used to have. Obama already got his tax increases on the wealthy. Further, the GOP can respond to the calls for tax increases by pointing out that even with tax increases, we cannot continue to INCREASE spending. We need to hold the line here.
If you think that this could work, please tell others about it.
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