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Story Archives: Recipe for disaster
|Recipe for disaster|
There's a time for politics and there are times when politics must be set aside to achieve a greater good.
That's waxing a bit in nostalgia, but the events unfolding on Capitol Hill in Washington are a prime example of petty politics getting in the way of what's best for the country.
Of course, I'm referring to the ongoing debate on whether the Congress should approve raising the government's debt limit. It currently stands at $14 trillion and some change.
On or about Aug. 2, the U.S. Treasury, for the lack of a better description, will reach its limit on the amount of money it can borrow to pay the government's bills. The U.S. government spends about $390 billion per month. The government's income runs about $260 billion each month. In other words, our government bleeds red ink to the tune of about $130 billion each month. It's not a pretty picture.
Don't be misled, raising the debt limit simply allows the government to pay debt it already has incurred. It does not pave the way for the government to continue borrowing money in perpetuity.
Let's recall that deficit spending has been the norm in America for years, though there was a spell in the late 1990s and until about 2001 when the government posted surpluses. Bill Clinton, a Democrat, was president and Republicans controlled the Congress then.
The Balanced Budget Act of 1997 played a significant role in the Congress being able to approve budgets that reflected more income than expenses. Red hot tax receipts thanks to a red hot economy contributed to the surplus situation, too. Remember the dot com bubble?
When George W. Bush became president in January 2001 he inherited a surplus. It disappeared in short order. Some say the income tax cuts the Congress approved in 2001 and 2003 are to blame for the deficit spending we've witnessed on the federal government front for the past 10 years. Others say the costs associated with fighting the wars in Iraq and Afghanistan are to blame for the deficits, too. That's somewhat misleading because outlays for the wars are off-budget expenditures. In other words, expenses for fighting the wars are not included in the general budget the Congress approves each year.
What's rarely talked about among members of the Congress and the president is the true culprit that's causing the deficit spending the U.S. government is engaged in today. That, of course, would be the out-of-control costs for entitlement programs – Social Security and Medicare – while the government is grappling with tax receipts that are less than robust because the U.S. economy is idling along and showing few signs of mounting any momentum in the near future. Entitlement costs are spiraling out of control because all of those Baby Boomers who were born post-World War II are reaching retirement age and the number of people paying the taxes to fund entitlements can't keep up.
We seldom hear members of the Congress and the president talk frankly about controlling entitlement spending because no one – absolutely no one – wants to go on record and take a hard line on curtailing it.
Because the American people, by and large, want everything for nothing or they want someone else to pay for it. Besides, members of the Congress and the president know well that reining in entitlement spending is a career killer politically.
So, where does this leave us?
It's highly possible Aug. 2 will come and go and the Congress will have failed to reach an agreement on raising the debt limit because the two sides – President Obama and the Democrats on one side of the fence and Republicans on the other – can't agree on how deeply to cut spending and whether taxes should be raised to help shore up the deficit over the long term. If that occurs, the financial markets – and eventually the economy in general – will collapse, shocking the Congress and the president into action quicker than you can say Merry Christmas. Though the doomsayers predict the government will default on its debt if an agreement isn't reached by Aug. 2, that's not likely to happen. The government simply will pay the important bills first – interest payments on the debt, Social Security, military expenses and the like – while everyone and everything else will have to wait to be paid.
The irony of it all is as the discussions over raising the debt limit and chopping away at deficit spending unfold on Capitol Hill, President Obama, who's prospects to be re-elected in 2012 looked slim just weeks ago, may very well survive this fiasco in a prime position to secure a second term in office. With ease.
Because Obama has been very successful in convincing the American people he's the only adult working on a solution to the debt limit crisis. Republicans are perceived to be thwarting any logical agreement that's been proposed to solve the problem. That's not an accurate description of what's been taking place in Washington of late, but that's how it's playing out in middle America, particularly among moderate and independent voters.
And that's a recipe for disaster for the GOP.
Think about it.