Deja Vu: The Pretend Debt Ceiling Crisis
The impending debt ceiling vote is much more important than the budget vote of a couple of weeks ago, the delay of which allegedly "shut down government." This is because the budget vote - which is actually just a temporary continuing resolution - can be resolved by taking out the provision that guts Obamacare. While it would be wonderful to defund Obamacare through this gimmick, sometimes it's better to take on one battle at a time, rather than try to throw everything in there at once. The pro-life movement has learned this lesson over the years; instead of attempting to pass sweeping, multipart bills against abortion, they've learned to propose incremental changes. When they have tried to pack too much into one bill or initiative, it usually ends up defeated.
The problem is Obama and the Democrats in Congress are now using the government shutdown as a negotiating card on the debt limit. They won't negotiate with the GOP on the debt ceiling until the GOP backs down on trying to defund Obamacare as part of the budget. The GOP can't expect to negotiate a win on the budget from a position of weakness. The Democrats control the Senate and the presidency, and to hope to pull off a coup on the budget as the underdog is unrealistic. As we've learned from past history, particularly the government shutdowns of 1995-96, a showdown over the government shutdown will most likely end up backfiring on Republicans. Most Americans have no idea how serious the government shutdown is, so they are taking it very seriously. They hear from the left-leaning media that the GOP is continuing to keep it shut down because of insistence on a gimmick to defund Obamacare, and so they blame the GOP.
Republicans would have been better off backing off on the government shutdown, and instead sinking their teeth into the fight over increasing the debt ceiling. There will be a more realistic opportunity to repeal Obamacare in 2016 if the GOP can retake the presidency and possibly the Senate.
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Obama and Senate Democrats want to increase the debt ceiling for a year with no cuts attached, and the GOP has very little negotiating power to stop them. However, unlike the government shutdown and defunding Obamacare, the link between cutting spending and increasing the debt limit is much more direct, so Republicans have a better chance at gaining some ground in the standoff. Even Obama has indicated he may be willing to allow some budget cuts in exchange for temporarily increasing the debt limit. Tom Coburn (R-Okla.), the most conservative Senator in Congress according to the American Conservative Union, who opposed the attempt to attach Obamacare defunding to the budget, says the GOP can win this one, and needs to hold tough on getting budget cuts in exchange for a temporary debt-ceiling increase.
It is still going to be extraordinarily difficult. Trying to convince Americans to reject Santa Claus and credit cards in favor of cutting out Christmas is a hard sell. When I was a bankruptcy attorney, one of my clients told me he bought his kids Christmas presents on credit rather than skip Christmas. Of course, four months later he came to me to file for bankruptcy. So far, Republicans have failed to come up with a successful recharacterization of the debate that resonates with enough of a majority to kick the Democrats out of office. Considering all of the bright thinkers on the right, you would think that someone would have found a way to reverse and recharacterize the Santa Claus analogy.
This isn't the straightforward type of situation where Republicans can easily vote no on principle - something former Congressman Ron Paul was known for. Republicans can't let the nation default on its debt - particularly when it comes to Social Security payments, interest to bondholders and foreign debt. Instead, Republicans have got to find a way to demand spending cuts in exchange for temporarily increasing the debt ceiling.
Coburn argues there really isn't a debt ceiling; since Congress has never failed to increase it when confronted with default, there is no crisis. Congress will find workarounds after October 17, the day the debt ceiling is reached, if there is no agreement in place. Congressman David Schweikert (R-Ariz.), a former County Treasurer of Maricopa County who has an MBA in business, believes it is a scare tactic for Obama to use the word default. "It is implausible the United States would ever default," he said. "The math makes that clear." The government will continue to pay interest on the debt, cash out old bonds and issue new ones to get by. Sen. Rand Paul (R-Ky.) has pointed out that the government's tax revenues are higher than its interest payments. Credit-rating firms agree, saying as long as the U.S. makes interest payments on its debt, it will not default.
The Democrats ignore all of this and are framing the issue into only two artificially created choices; either Congress lifts the debt ceiling, or the U.S. government will default on some of its payments. They claim the sky will fall if the former doesn't happen. Even though there is no chance the government will default on its interest payments, they speculate endlessly about what would happen if the government did, in order to scare Americans into siding with them. "A prolonged breach could result in a massive dose of fiscal austerity, putting a dent in economic growth," breathlessly warns a reporter for The Washington Post. Obama's Treasury Department issued a dire report that said in part, "Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."
In reality, the only danger to the economy is if we continue postponing the inevitable and don't cut the out-of-control spending. Coburn said he'd rather have a "managed catastrophe now" than "kick it down the road." He says if we don't fix it now, "we're going to pay a price for this."
Evidence that the Democrats are deliberately manufacturing excuses is their insistence that it will be too hard to reverse the system of mailing out government checks. Seriously? The federal government is so incompetent it can't technically stop envelopes from going out in the mail? Yet whenever the Democrats come up with a new spending program, there never seems to be any problem starting the checks for it. Obama himself voted against increasing the debt ceiling in 2006 as a Senator, proof he knows this is not a crisis.
The far left argues there shouldn't even be a debt-ceiling limit; instead, Congress should regulate itself. Considering Congress has done a poor job of keeping spending down, a debt-ceiling limit is an important safeguard, which can at least be used as a wedge issue to force spending cuts.
There are plenty of short-term fixes that are better than fully caving in to the Democrats' demands to increase the debt ceiling long term with no spending cuts. For example, the U.S. government owes $16.699 trillion in debt, which is the current debt-ceiling limit. $2.1 trillion of that debt the government owes to itself, to the Federal Reserve. Both Ron Paul on the far right and Congressman Alan Grayson (D-Fla.) on the far left have proposed canceling this debt to itself.
Sen. Pat Toomey (R-Penn.) proposed "prioritization" during the debt ceiling debate of 2011, where the government is forced to pick and choose which bills to pay, beginning with paying the military, retirees and bondholders. Coburn has identified billions of dollars of waste in the federal budget every year in an annual report. This is a great place to start. There are some options floating around that would involve unilateral action by Obama, but they're probably all unconstitutional. The Wall Street Journal has listed a few other unrealistic quick fixes.
House Speaker John Boehner (R-Ohio) has privately admitted that he is going to cave on the debt ceiling and bring a bill without spending cuts to the floor. This is unfortunate, because if there is a crisis, it's a spending crisis, not a debt-ceiling crisis. If the GOP wants to be viable, they should make a stand on the debt ceiling. Forcing the Democrats to publicly defend item after item of wasteful spending is winnable.
