01.17.2013 6

Why the debt ceiling is the only way

By Robert Romano — There are a great many politicians and pundits in Washington, D.C. arguing that the debt ceiling should not be used to extract spending cuts from the Obama Administration. It is on them that the onus falls to show that the conventional budget “process,” such as it is, in Washington, D.C. can be used to achieve, for example, a balanced budget within ten years.

So, would the traditional appropriations process produce a better or worse outcome spending-wise than using the debt ceiling and/or the continuing resolution to cut spending? In short, if the U.S. Senate were to again start passing budgets for the first time in many years — would it even produce any net reductions in overall spending?

When have spending cuts ever been achieved?

According to data from the Office of Management and Budget (OMB), since 1976, the only years discretionary spending budgeting authority was reduced were in 2012, 2011, 2010, 1996, 1995, 1994, 1993, 1992, and 1986. Just 24 percent of the time.

At least three of those years (2010-2012) were in years when Congress was budgeting by continuing resolution, not appropriations. Much of the recent decrease was “stimulus” spending expiring. But there were also reductions in budget authority achieved in the March 2011 continuing resolution, and during the sequester that passed in August 2011.

It should also be noted that the nominally balanced budgets of the late-1990’s, although the debt was still increasing at the time, were achieved under the threat of government shutdowns.

As far as mandatory spending goes, the only year that was ever cut since 1962 when OMB began tracking that category of spending was in 2010. That decrease came because TARP was being repaid, the so-called “other commerce and housing credit” going down by $65 billion, and deposit insurance decreasing by $32 billion.

In other words, mandatory spending decreased for the first time in a generation not because of any action Congress had taken per se, but because many emergency programs from the financial crisis were being wound down.

Every other year, it increased as the spending operated on autopilot. Because of that, except for 2010, overall spending — i.e. mandatory plus discretionary — has increased every year since 1965.

So, in the past fifty years, with virtually no reductions to the overall budget whatsoever, every single year since 1957 the national debt has always increased. We never pay it down, let alone pay it off, and at this rate, we never will.

Time to act

For those interested in getting the nation’s fiscal house in order sometime before we experience a Soviet-like collapse, it would appear time that we consider more unconventional means.

The reason to use leverage on must-pass votes like the debt ceiling or a continuing resolution to get real spending cuts is because the normal process has failed so catastrophically to produce such outcomes historically.  And in the future it likely will not produce the end result that gets us off the road to insolvency.

Adding to the urgency, when Democrats ever regain the House majority, their very first order of business will undoubtedly be to eliminate the debt ceiling all together.

Unconstitutional or not — Art. 1, Sec. 8 of the Constitution says the Congress has power to borrow money, and Art. 1, Sec. 7 says all bills raising revenue (and that includes debt) must originate in the House — that is what they will do. And then using the debt ceiling to achieve spending cuts will simply become a thing of the past.

So, the upcoming vote to increase the $16.394 trillion debt ceiling may in fact be the last stand the House of Representatives ever takes on the issue.

What power of the purse?

Because of baseline budgeting, Congress already does not get to vote on about 60 percent of the budget — the so-called “mandatory” spending which includes Social Security, Medicare, Medicaid, unemployment, food stamps and every other untouchable program.

The only time Congress has any say, really, on whether to finance these programs or not is the periodic vote on the debt ceiling. Otherwise, when was the last time Congress voted on the Social Security budget? Or the Medicare budget?

If Republicans want to touch those, they would need 60 seats in the Senate to change law regarding the eligibility requirements for these programs. Except Republicans have never had a filibuster-proof majority in the Senate. Ever. Not once in the 96 years since Rule 22 was adopted.

And if that’s what the GOP is holding out for to actually rein in spending, it seems likely the Treasury will go bankrupt before then. Especially at the rate the debt is growing disproportionately larger than the economy: nearly 10 percent annual growth in the national debt versus roughly 4 percent nominal economic growth.

So, now is the time to take a stand. It may be the last chance House Republicans have to use the debt ceiling anyway. On that count, Americans for Limited Government prefers they go for everything: entitlement reform, balance the budget within ten years, fix the tax system, defund Obamacare, and roll back EPA regulations classifying water and CO2 as pollutants under the Clean Air Act and the Clean Water Act.

And include the “Full Faith and Credit Act,” which would prioritize payments to our creditors, Social Security, Medicare, defense, and veterans’ benefits should the debt ceiling be reached. There’s more than enough revenue to meet essential obligations, and no need for a default. Even then, if the White House’s estimate of $2.8 trillion of revenue for 2013 is anywhere near correct, there would be as much as $600 billion left over afterward to pay for other items.

Or Congress could just kick the can and lose the only meaningful leverage it has to cut spending not if, but when Democrats reclaim the House majority, as they eventually will.

And then members will lose the only power they had to address the rapidly growing $2.2 trillion mandatory spending budget — and the means to balance the budget.

Last chance

To underscore this point, if Republicans fail to use the debt ceiling this time to achieve something significant, they may not have a majority in the House in two years as the American people lose faith they can or ever will get the budget under control. The message here is to use it, or lose it.

One potential approach is to tie the “Full Faith and Credit Act” to a shorter extension of the debt ceiling and prepare for the real fight later in the year. It would be a good idea to get the threat of default off the table on the debt ceiling question anyway, especially since there is more than enough revenue to pay our creditors.

But there is no reason that members should not also in the very least insist that the budget be balanced within ten years as well. It is common sense that we cannot forever steal from our children and grandchildren.

While there are also a great many representatives and senators up on Capitol Hill that care deeply about this issue, one does not get nearly the sense of urgency that will be necessary to take care of the debt problem before it is too late.  That is, not yet.

The few tools the American people have left to fight legislatively will be disappearing before their eyes in the very near future. And Republicans do not yet appear to have a united front on this issue. They had two years to pass the “Full Faith and Credit Act” and to take Obama’s default threat off the table. They could have tied it to the original debt ceiling battle. Or the continuing resolution that came afterward. Or the tax deal after that.

Instead it languished in the House Ways and Means Committee. They couldn’t even get that done.

Obama probably does not believe for a single second that Republicans ever intend to balance the budget. That is because right now they look like a paper tiger. There is still time, but it will take a united front from House Republicans and a real willingness to let the debt ceiling be reached in order for their leverage to work.

That is, while they still have any leverage at all.

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

  • The last time I heard about the bill for hurricane sandy relief, the house took the pork away from the original 61billion and voted on a 9billion dollar bill that according to the republicans was the only part of the bill that was really for sandy relief. The rest was for pork, and now your telling us that they passed the rest of the bill, around 50billion. Where is this money comming from, we’re borrowing money and paying interest on it to feed some polititions pork appetite. How dumb are these spineless, impudent lunatics in our congress, and senate. They all need to be replaced along with this illegal president.

  • Idiocy knows no bounds. You can rationalize borrowing more money and plunging us further in debt in order to postpone what must come. Cutting spending is the only solution to spending too much without a sufficient income to warrant the spending. What is wrong with reducing the size of the Federal government?? Why not let the states handle their own department of education, etc. with out interference from the Fed? Federal administrative cost are around 30% with some as for food stamps rising to 80%. With the states then having to administer these agencies at state level there are additional administration costs. We could have the same services with far less cost if the federal government was simply out of the picture. Foreign aid is another place we can cut costs. We are a debtor nation and we borrow money so we can give it to other nations, some of which want us dead. Idiocy has no bounds.Any of these long term, plans will lead us into destruction. We never, under any of these plans, cut enough spending to eliminate borrowing money. and as we borrow money the interest escalates compounding our debt.

  • the damn repubs are in need of a good house cleaning as the are as spineless as any people can get.

  • Robert, your posts are often reasonable so it’s surprising to find you arguing this nonsense. These expenditures were already approved through a process in which these clowns were involved, so now they want to threaten not paying for them to get what they never fought for in the first place, and you think that’s laudable. They’re supposed to come off as fiscally responsible by not paying for what was approved? These jokers are in the House where they are in control . . . so they’ve got to resort to blackmail? I bet you were indignant about Obama putting through recess appointments of people for positions the republicans said they’d never approve anyone for unless the agencies in question were gutted . . . now the shoe is on the other foot and you’re saying that’s fine. Is this hypocrisy, or do you have a rationale?

  • pduffy

    The day Nixon finally killed the gold standard was the day the government anounced to the world that it would NEVER pay down any of the debt, but would just print more, and inflate it away – a perpetual tax spread around to everybody with a continual devaluation of the currency. To actually pay the debt would require a reversal of this policy and a return to a non-fiat based currency. As long as they have a printing press the debt will never be repaid.

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