Landing on the fiscal rocks below

Fiscal CliffBy Robert Romano — Now that taxes have gone up for everyone making $400,000 and above, and couples making more than $450,000, reflecting the Obama Administration’s “balanced” approach to deficit reduction — it is worth examining just how effective the tax hikes will be at reining in the debt.

But according to estimates by the Joint Committee on Taxation, they will raise just $30 billion this year, doing almost nothing to pay for the $1.2 trillion of new debt the government expects to incur in 2013.

To put that pitiful sum into perspective, 88 cents of every new tax dollar will be spent paying new interest on the debt in 2013.

Meanwhile, the money will come directly out of the pockets of job creators as the U.S. economy braces for what promises to be yet another rocky year.

But as if things could not get any worse, the $16.394 trillion debt ceiling will be reached sometime in February, reports the U.S. Treasury. In fact, it would have been hit already if not for shenanigans by Treasury Secretary Timothy Geithner to underfund federal pensions and to delay other payments.

Just one more showdown in Washington, D.C. that promises to imperil the economy, this time with the threat of default, which will be used as leverage by the Obama Administration to coerce Congress into giving it another blank check.

Why default?

Despite having ample revenue to pay principal and interest to our creditors on time and in full, a recent Inspector General’s report on the Aug. 2011 debt ceiling debacle revealed that the Treasury views it lacks the statutory authority to do so.

“While Congress enacted these expenditures, it did not prioritize them, nor did it direct the President or the Treasury to pay some expenses and not pay others,” the report states. “As a result, Treasury officials determined that there is no fair or sensible way to pick and choose among the many bills that come due every day. Furthermore, because Congress has never provided guidance to the contrary, Treasury’s systems are designed to make each payment in the order it comes due.”

As such, if the debt ceiling is reached, the White House would effectively hold our creditors hostage, defaulting on our obligations until Congress capitulates on the issue.

That is why Congress should instead call Obama’s bluff.

The fact is, the debt ceiling represents the last meaningful semblance of Congress’ constitutional power of the purse — the only means for elected representatives to hold money back from a government that automatically spends more than $2 trillion every year without any vote.

At least one senator thinks we should go in that direction. Appearing on the nationally syndicated Sean Hannity radio program, Sen. Lindsey Graham recently warned the Obama Administration that congressional Republicans are “not going to raise the debt ceiling ever again until we address what got us in debt, and that’s government spending and entitlement growth.”

In addition, it may give the House of Representatives in particular the leverage it needs to enact permanent tax relief for the American people. While they’re at it, members should also tie in a balanced budget, entitlement reform, defund Obamacare, and include the “Full Faith and Credit Act” — legislation that would require the Treasury to prioritize payments to our creditors in the event the debt ceiling is reached — to a catch-all vote on the debt limit.

And then dare the Senate to sit on it, or Obama to veto it. Or to even default on the debt.

The fact is, if Obama wants any financing at all for his Administration’s second term, he would be forced to sign the legislation. Perhaps, sensing this vulnerability, that is why Treasury Secretary Geithner recently proposed that Congress eliminate the debt ceiling all together.

The only alternative for Republicans may be to accept political responsibility for having raised taxes on job creators across the country without having achieved significant spending concessions — the exact outcome Obama envisioned all along.

This failure ironically positions Republicans to now demand the level of cuts needed to avert a Soviet-like economic collapse later on, but only if they’re willing to tell the truth about the budget and finally play to win by refusing to go along with the “everything’s okay” charade any longer.

Robert Romano is the Senior Editor for Americans for Limited Government.

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  • mlc7857

    This is a fix only lawyers could come up with…

  • Greg137

    Wall off washington completely, then fill the city completely with concrete, then forget that there was even a city there… 85 Republicans are sellouts! We ned to make a list of the traitors…

  • Greg137

    I mean, We “need” to make a list of the traitors..

  • Highsider

    Major news break!!!

    The Constitution of the United States of America has been amended
    in a whole new way.
    Article l, section 7, which says; “All bills for raising revenue shall originate in the
    House of Representatives, but the Senate may propose or concur with amendments
    as on other bills.”, is hereby amended in place to say; ”All bills for raising
    revenue shall originate in the House of Congress under the fullest control of
    the Democratic Party. Furthermore, the Constitutional power to make this and all other such amendments hereby given retroactively to the Democratic Party and only the Democratic party by virtue of this amendment. The existing language in
    this Constitution concerning the procedure for Amending this Constitution shall
    remain in full effect for Parties other than the Democratic party.”

  • pduffy

    The author seems to think that the creditors should be protected in prioritizing payments. I disagree. If you are stupid enough to think that loaning government money is ‘risk free’ and that government can give you a ‘return on investment’, you deserve what you get – nothing. When this lesson is learned, then governments may be forced to borrow responsibly because creditors will think twice about “investing”.

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  • MM59

    “The fact is, the debt ceiling represents the last meaningful semblance
    of Congress’ constitutional power of the purse — the only means for
    elected representatives to hold money back from a government that
    automatically spends more than $2 trillion every year without any vote.”

    This is so NOT TRUE. Listen folks, walk into your company’s controller’s office and let him/her explain. CONGRESS sends all spending and tax (revenue) bills to the President for signature. Our CASH account has not had a surplus for many decades, we spend more than we take in. I do not believe that the Executive Office has the unilateral right to sell the assets that Congress legislated to buy. I think Congress has to pass legislation to sell things like land and if I recall I recently got an e-mail from Bill Nelson that he procured more federal funds to buy up more Florida land. So how does the executive office get the cash to pay for the spending bills Congress just passed if they don’t have the cash?They have to borrow. Did Congress know we did not have enough cash when they passed the last Continuing Resolution? Yes. So why did they pass it if they don’t want any more borrowing to occur?

    The Debt ceiling issue is stupid. Just raise it. The fight should have been over the budget bill (which the senate has failed to pass any), the spending bills (which both parties consistently agree to and pass), and these tax bills (which are also filled with more PORK and tax breaks for Hollywood films).

    The House has been controlled by the Republicans for the past TWO years which means all spending bills passed, passed with THEIR FULL CONSENT.

    How about calling for NO more bills will be heard on both floors (House
    & Senate) until the fiscal mess is resolved. This will keep them out
    of our lives for a while.

    Get rid of Boehner, that’s what Graham should have told the reporter.

  • FloridaJim

    This debacle known as Obama has planned to destroy America through our economy and also through the removal of all things Christian and any reminder of sin, their enemy. Marxists and Soros have in their writings how to remove Christ, install homosexuality as normal and indoctrinate our children at all levels of schools to “transform” America.Everything that has been said about Obama and ignored by the lamestream media has come true and more is to come. See the movie “2016″ which describes the events to come frighteningly.

  • Highsider

    Make the wall real high and don’t let the Democrats order the Concrete or it’ll just create more jobs in China.

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