Thursday, March 31, 2011

Coming to a head

Last year, facing massive losses in the midterm election, Democrats in Congress faced a dilemma, a true no-win situation. Congress is responsible for passing an annual budget which funds the operation of the government. These Democrats faced an even more painful thrashing in the polls if they passed a budget which did not deal with the massive budget deficit and the exploding debt which it is causing. This thrashing would come from a segment of the population I will refer to as the fiscally sane, primarily made up of the 51% of the population who pay taxes. On the other hand, if Congress took the steps necessary to reign in spending and curb the deficit, they would incur the wrath of their base, the statist left who rely on ever-larger and more intrusive government for their power and livelihood.

Faced with these options, the Democrats did the courageous thing: nothing. They opted to not take a stand at all, and to not pass a budget, an unprecedented negligence of duty. That is why the United States Government is operating without a budget today, a state of affairs so foolhardy that you wouldn't ever run your own household that way.

What is the result? In February, the Federal Government ran a deficit of $223 billion, the largest monthly deficit ever, for any country, for anything on earth. In fact, the deficit for February was larger than the deficit for the entire year of 2007. The Government continues to operate based on "Continuing Resolutions" which essentially provide funding at the current level for a few more weeks at a time.

Each time, with the threat of a government shutdown looming, Republicans in the House negotiated for slightly bigger spending cuts, while Democrats fight for the status quo. The result has been very little change, with nearly insignificant cuts to spending which still leave us with trillion dollar deficits for years to come.

The groundswell of voters who threw out the old Democrat power structure last November didn't want a minor correction in the way government fiscal policy was approached, resulting in us going bankrupt slightly more slowly. The election was a clear mandate for a course reversal back to sound fiscal principles of lower spending, smaller government, lower taxes, and an environment which creates jobs and produces wealth through the power of the private sector flourishing in a free market.

Cutting discretionary spending is a good starting point, but even if discretionary spending was cut to zero, we would still face a massive and unsustainable deficit of nearly a trillion dollars. Therefore, reforming entitlements is necessary. Left alone, Social Security and Medicare will die. To save them, they must be reformed and rescoped, as part of a comprehensive change in the way government manages money.

The opportunity to make that happen is approaching, and it is vital that our representatives do not miss it. Just as it took some political guts for Governor Scott Walker to stand up to the union thugs in Wisconsin, it will take real will power to not cave in under the pressure which is sure to come, but if there was anything behind the campaign rhetoric, now is the time to show us by taking action.

Currently the government's debt limit stands at $14.29 trillion. We will reach that limit in just a few months, and Congress will either have to raise the limit once again, start printing money in massive amounts, or cut spending by more than 30% across the board. Given the options, any politician would be inclined to once again take the courageous course and sink our kids further into debt.

In 2006 when Senator BO voted against raising the debt limit to $8.965 trillion he said that, "Raising America's debt limit is a sign of leadership failure." Now that he is leading and he is the one asking to take America closer to insolvency, he wishes that we would forget those words. But what else could we call BO's plunge into debt with no plan to ever get out of it, and nothing but proposals for more spending? It is a failure of leadership of a magnitude never seen before, as evidenced by the fact that BO's own projections show that he intends to increase the national debt in eight years by more than all of the Presidents before him, combined, in the 226 years of American history.

But Congress does not have to cave in to BO's pressure to allow his unchecked spending frenzy to continue. The House of Representatives is where all Legislation begins, and the Republican majority there can attach any conditions they desire to a bill increasing the debt limit. They have the power to ensure that Washington fundamentally changes the way they manage money, so that it will be responsible and sustainable. Here are a few suggestions:
  1. Defund Obama's $105 billion slush fund intended to pay for implementation of the bureaucracy to support Obamacare.
  2. Repeal Obamacare, a massive new entitlement which has already failed to deliver its most basic promises of reducing costs and being deficit-neutral.
  3. Reform Social Security and Medicare. These entitlement programs account for many trillions of dollars of unfunded liabilities which, if left as they exist today, will result in financial collapse and and inability to pay anything in the future.
  4. Make the Bush tax cuts permanent. The looming tax increase scheduled for 2013 is hanging over the head of every business considering whether to hire new employees and grow the business. Job creation will not resume until that tax increase is canceled.
  5. Create a statutory cap on the debt-to-GDP ratio, with aggressive benchmarks to meet each year until the ratio is brought down to a sustainable level of somewhere around 0.5.
There will, without a doubt, be much wailing, gnashing of teeth, demagoguery, whining, and name calling from the big-government statists in response to these actions. Victims of the "draconian" cuts will be trotted out for us to pity. As with Obamacare, most of their sob stories will be entirely fictional. All will be based on the tenant that capable and productive people owe a living to incapable and unproductive looters. None will face the reality that, as painful as facing fiscal reality may be in the short term, it is far better than paying the price for doing nothing, resulting in a debt spiral and economic meltdown which will make events in Greece look like nothing. When America's debt goes into default, who will bail us out? The European Union? China? The UAW, GM, or Fannie Mae?

Representative Marco Rubio has pledged to vote against raising the debt ceiling until real steps are taken to deal with the long-term fiscal situation. Let him know that the voters support him and will stand by him when the statists attack his principled stand.

Let your Representative know that we expect real and significant action to restore fiscal sanity to the budget process, and we expect them to demand it before they agree to one more dollar of debt.

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