By Bill Wilson – Tolkien called it the “day the strength of men failed” when the people of Middle Earth failed to destroy the One Ring. So it was with the votes to increase in the debt ceiling, as the American people have received little in exchange for allowing it to keep all of its powers to borrow with abandon.
Was this America’s last chance to kick the spending habit?
All acknowledge the “deal” now struck will not go nearly far enough, as now markets — and the American people — brace for what appears to be an imminent downgrade of our credit rating by at least one major agency.
“Futures down on U.S. credit downgrade worries,” reads a headline from Reuters. “Chinese agency warns of U.S. debt downgrade,” reports CNN International, as Chinese rater Dagong prepares to downgrade the U.S. for the third time since the financial crisis began.
Treasury Secretary Tim Geither, who in April promised the U.S. was at “no risk” of being downgraded, now says, “I don’t know. It’s hard to tell.” Hardly words that inspire confidence about the nation’s credit rating.
In the run-up to the vote, the Obama Administration attempted to strong arm credit rating agencies to back off their threats to downgrade the United States’ Triple-A credit rating, and even to endorse the Reid plan in the Senate in favor over the now-defeated House plan.
S&P, to its credit, has not backed down thus far. Although Moody’s has apparently after hard lobbying from the White House, despite the fact the plan falls far short of the agencies’ calls to cut at least $4 trillion to prevent a downgrade. It cuts only $917 billion over ten years, much of which depends on out-year cuts that likely will not happen based on past experience.
Downgrade or no, the deterioration of U.S. finances was entirely avoidable. That is why the American people, through elections, sent representatives to Congress on a promise not to increase the debt ceiling without trillions in reduced borrowing.
This deal will not balance the budget. It doesn’t even save $1 trillion, when what is required to stabilize American finances totals many trillions in cuts. It will not control the growth of future spending. It will lead to higher interest rates, a sinking dollar, and eventually, a downgrade of our credit rating. Today, the House of Representatives gave America a ‘deal’ when what it was promised was a solution. No amount of spin can obscure the fact that the vaunted pledge to ‘put us on a path to balance the budget and pay down the debt,’ has become a hallow slogan.
Despite an ever-weakening economy resulting from unparalleled debt, Congress has voted to increase the amount of money Washington can borrow. It has ceded what little leverage it had left to stop the madness — by controlling the borrowing and moving toward more sound fiscal policies.
Sadly, there was a chance to stop the deal. Although 66 Republicans voted no, 44 of them had a chance to stop this bad deal in its tracks on Friday. Instead, they voted for a debt increase that enabled the flawed structure of the eventual ‘deal’ to proceed.
Senator John McCain recently blasted holdouts against the raising the debt ceiling as nothing more than “tea party Hobbits,” but that’s more of a compliment than he intended. They were trying to stop Washington’s unparalleled spending and borrowing, and are to be credited with insisting the debt ceiling be used as leverage.
That any concessions were achieved vindicates their position, which the establishment never wanted to use in the first place.
But still, the borrowing endures and the downgrade now looms. Politicians who have spent decades in Washington simply refuse to give up their “Precious” — and we can only hope that their lust for power won’t be all of our undoing.
Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.