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  • Debt Limit Increase Danger

    The House is expected to vote down a clean increase of the debt limit today.  This vote is merely political theater and a way for Members of Congress to go on record as being against an increase in the debt limit without any cuts to spending or reforms to the budget process.  Many worry that the eventual debt limit increase plan will dodge entitlement reform and may include an idea to increase taxes.

    The New York Times reports today that there is no will on the part of House members to pass a clean increase of the debt limit, and they classify as the bill as “doomed to fail.”

    In a bit of political stagecraft, House Republicans plan to bring to a vote on Tuesday evening a measure that President Obama and the Democrats were demanding not so long ago: a clean increase in the national debt ceiling, unencumbered by any requirement that spending be cut.

    The American people want cuts to spending programs, and they fear the consequences of more debt being stacked on the $14.3 trillion the United States has already racked up.  This vote may be political theater, yet it is conventional wisdom in Washington that there will be a debt limit increase bill with some attempt to reduce the debt before August 2nd.  The debt limit increase vote will fail today, but another version of a debt limit increase will be back in the next few weeks for another round of votes.

    The left is truly out to lunch on efforts to cut spending and reign-in entitlement spending to date.  As I wrote in Human Events this week, the Obama budget is a great example of a spending plan without any significant cuts or reforms to entitlement programs. That plan has no support in the Senate.

    The Senate unanimously rejected President Barack Obama’s budget for fiscal year 2012 last week. All but five Republicans stood behind the budget plan of Rep. Paul Ryan (R.-Wis.). The Senate is moving in the right direction—against free-spending, big-government policies and toward comprehensive entitlement reform. Late last week, the Senate structured four votes on motions to proceed to the budget plans of President Obama, Rep. Ryan, Senators Pat Toomey (R.-Pa.) and Rand Paul (R.-Ky.) The vote on President Obama’s budget was a humiliating 0-97. The President lacks any support for his $3.7 trillion plan for next year, which would create $8.7 trillion in new spending, $1.6 trillion in new taxes and add $13 trillion in new debt over the next 10 years.

    Obama 1.0 is politically dead and buried.  This rejection of the Obama budget is strong evidence that the American people reject the tax-and-spend policies of the current administration.  Now that a budget for his year seems impossible, the debt limit increase is the only piece of legislation that can carry cuts to spending and a de-facto budget for the year.

    The American people may be nervous about some of the specifics of entitlement reform proposed by Rep. Paul Ryan (R-WI) and others, yet they are still in the early stages of an education program that is intended to communicate that unreformed entitlement programs will lead to these programs not being able to deliver promised benefits.  The American people should be deeply worried about the prospect of unreformed entitlement programs going belly up. Furthermore, if entitlement programs continue on auto-pilot, they may cause a meltdown of the U.S. economy.  If government spending continues on an unabated pace, neither foreign governments nor the private sector will continue to buy up American debt.

    President Obama has designated Vice President Joe Biden to lead a bipartisan discussion to find common ground on what to include in any debt limit increase.  Conservatives are pushing for entitlement reform and cuts to discretionary programs.  Liberals want to increase taxes.  The great danger in those talks is that Republicans may include the “Debt Failsafe Trigger” as part of the plan in consideration for cuts to discretionary programs or moderate reforms to entitlements.  Make no mistake, the “Debt Failsafe Trigger,” and any other idea that empowers unelected bureaucrats to increase taxes as a means to balance the budget, is bad policy.  The idea of a “Debt Failsafe Trigger” as a means to raise cash for the government is embraced by many on the left.

    Matthew Yglesias at Think Progress dislikes the “Debt Failsafe Trigger” as a means to cut spending, but he loves the idea as a means to sneak a tax increase past a Congress that dislikes voting to increase the tax burden on voters.

    What I think is actually promising here is the reference to tax deductions as being part of the trigger. That means that insofar as members of congress are aware that these loopholes should be closed but don’t actually want to vote for closing them, the trigger mechanism will give them a way to vote for something that makes closure inevitable and then just passively fail to vote to restore the loophole. Our existing tax code, after all, contains plenty of provisions that nobody would put in were they not already there but that few people feel bold enough to specifically try to take out.

    Conservatives need to push back on any idea that will increase the tax burden on all Americans.  Conservatives agree that the tax code should be rid of “tax deductions” and “loopholes,” but not as a pretext to raise revenues.  Tax deductions and loopholes should be shut in the context of revenue-neutral tax reform.

    For a great example of how to balance the budget without increasing taxes, one should check out the Saving the American Dream plan.  The plan addresses tax reform, ObamaCare, Medicaid, Medicare, Social Security and discretionary government programs.  Members of Congress should take a moment to read this important plan to understand the fact that you don’t need to increase taxes to balance the budget.  All you need is the willingness to look at some reforms to entitlements, cuts to discretionary programs and revenue-neutral tax reform as a means to get the job done.  You can read the plan here.

    Posted in Economics [slideshow_deploy]

    13 Responses to Debt Limit Increase Danger

    1. Tim Zivku says:

      I really like and agree with this statement: "There are times in the course of history when the actions of ordinary citizens spark movements for change because they speak to a longing for freedom which has been building up for years. In America think of the defiance of those patriots in Boston who refused to pay taxes to a king…" Barry Soetoro a.k.a. Barack Obama May 19, 2011.

      Let us in patriotic defiance take back gain back our independence, freedom and liberty from non-representative representatives (and non-representative bureaucrats) who have hijacked our republic and constitution. TZ

    2. George, CO says:

      Along with being an abdication of the right of Congress to levy taxes, it would be an enticement to Congress to increase spending knowing that taxes would be raised to “pay” for the spending. If Congress increased spending by $600 billion then cut it by 50% and taxes were increased by $300 billion, Congress would still get $300 billion of spending. It is not a constraint. It is another liberal method of using taxes to finance unwarranted spending.

      And remember, taxes are never temporary.

    3. Stop NationalDebt, U says:

      There won't be change until the public truly gets how bad US finances are. The public yawns when it hears $trillions in debt thinking "big number, but its a big country". since they have no perspective. We need to rephrase the issue:

      The federal government will need >$1 million per household to pay its IOUs!

      > $116 trillion ="official" debt plus money  short for future social security, medicare, etc

      Even its "official debt" of $14.2 trillion  is $123,754 per household!

      Details at http://StopNationalDebt.com with links to contact congress & complain.

      "POLL REVEALS: Americans Are Still In Deep Denial About The Deficit" http://read.bi/h6QDGR If they realized how bad it is politicians would need to act.

      Be among the first to join the Facebook "event' "Balance the Budget NOW! Stop National Debt!"
      http://www.facebook.com/event.php?eid=22216504780… since if you don't spread the word, who will? We need to spread the word virally to educate non news-junkies. Its online&ongoing.

    4. Bobbie says:

      Liberals should have the decency to "want" something that doesn't "cost" more money no one has. Certainly their college educated minds can think of productive ways at no expense or at their personal expense!

      What sense does it make to call it a debt 'limit" if there's no discipline to that "limit?" There should rarely be a compromise with a "limit" under terms government controls and NEVER is the time to compromise an INCREASE to that "LIMIT!" "INCREASE" to a "LIMIT" EVADES THE DEFINITION and induces confusion! Dummying down of America…

      AMERICA NEEDS STRONG LEADERSHIP NOW fluent in English terminology and respectful enough to live up to and by the words conveyed!

    5. Kurt says:

      You make some good points about the dangers of the debt failsafe trigger and that we need to address spending, not raise taxes. However, I also followed the link to the Heritage Foundation's Saving the American Dream Plan and found that to be disappointing as well.

      Any time someone writes that the federal government's plan will "encourage" the citizens to do anything, whether you label the action as liberal or conservative, it's a bad thing. The fed should not encourage American's to save or spend. It should stay out of our business. Keep in mind, if the plans can be designed to encourage something you support, they can also be redesigned to support something you don't like.

      Furthermore any plan to stabilize Social Security or Medicare, will eventually fail. The fed gov was never intended to provide retirement income or medical care and it does a ridiculously poor job of both. In the end leaving these plans in place for future progressives to pervert will bring us back to the same place again. The plans need to be cut completely. Let people take care of themselves. If they find themselves in a tough spot, they can either figure out a way to solve it themselves or ask family or community to help them with personal charity. It's better for everybody that way.

    6. Pingback: House Defeats President Obama’s Request to Raise the Debt Ceiling, 318-97. « American Elephants

    7. George Colgrove, VA says:

      This debt and the hunger to go deeper into it is a result of criminal neglect by congress – especially this one – and the federal workforce. The constitution will not survive the dangerous implications of what a massive default will be to the nation if confidence in the government deteriorates. History is not kind to these series of events. Democracies fall to totalitarianism and vice versa. The Unites States is not on the right side of these events. If it becomes generally accepted that something drastic has to happen, the constitution is dead.

      The president, congress and every federal worker has pledged an oath to the protection of the constitution. Today we will go into debt by another $4 billion by their derelict self-serving behavior and criminal neglect to their sworn duty. That is $13 for every person or $52 for every average household in America. There is no pride in DC now-a-days. I fear we are seeing as Washington warned us, that these goons are acting out the last duty of any government – that being looting the treasury.

    8. George Colgrove, VA says:

      Thank God, the debt increase measure failed last night. If we are talking about a dollar for dollar for dollar "match" for cuts and increases, then with a request of $2.5 trillion, that means we should see a cut of $1.25 trillion and a debt increase of the same. To keep government at the same level of spending the federal workforce needs an increase of 2.5 trillion to get them through FY12 – ONLY! Then they will be back for more in October FY13.

      Now we need to be vigilant about how they term this. This is obfuscation at its best. Let’s say they increase the debt limit by $400 billion for immediate spending and propose a $400 billion cut to "match" we need to make sure the $400 billion is cut from immediate spending and not spread over 10 years or meaning a $40 billion immediate cut – spread over 10 years.

      This is why we need to be very careful about how they make these cuts. If they spread a “matching” cut over 10 years, then we are talking about this formula:

      X + (X / 10) = $2.5 trillion for immediate needs to end of FY12.

      X = Debt increase and corresponding “matching” cut – spread over 10 years.

      Using algebra, this equates to 1.1X = $2.5 trillion

      Solve for X we get X = $2.273 increase and a $2.273 trillion decrease spread over 10 years.

      Essentially – if we buy the arguments they will make for 10-year cuts, we are giving our OK to add nearly the full debt increase the federal workforce desperately needs to keep the current spending going unchanged and for them to keep their lush lifestyles unchanged. In essence, we will be had.

      For FY12 we only get $227 billion in cuts (we saw what happened when they promised $100 billion for FY11!)

      We have 16 months to go until the end of FY12, this works out to about in every other month congress will request a $300 billion dollar increase and a “promise” to cut $300 billion over 10 years. This means that for every $300 billion increase in debt we will only get $30 billion in immediate cuts every two months. Based on the performance of this congress so far, all I can say is “Yeah – right!”

      I think we American citizens are expecting $300 billion to be cut today – in total – as we raise the debt limit by the same.

      These guys are snakes and will try to get away with anything to keep the spending going. My feeling is that we need to start finding replacements for the new so called "tea party" we elected into office. This congress has failed to protect the constitution and the American people born and yet to be born.

      Considering how difficult is was for congress to cut $100 billion, I think we just need to say no to any increase period and force the federal government to shrink – NOW!

    9. Wayne County Ohio says:

      Our arrogant government needs to realize this is not a one way $treet.

      Our hard working ,law abiding family has bee fleeced and used to fund a wasteful spending platform that in the last two plus years has lost touch with reality.

      We have been lied too, taxed beyond words and affordability to the entent of losing our well planned retirement plan.
      Now how are responsible American people suppose to just give a carte blanche card to a selfish, arrogant and socialist agendas.
      Whe the president hangs with socialists such as George Soros and that circle, and WE THE PEOPLE are shut off, then it is time for a peaceful but FIRM revolution of the people by the people for the people.
      We are fearful of our government but we shall take it back.It will not be by hook and crooking those around us.It will be by bringing truth to light and running with that truth that will set us free.

    10. kcwyyh, Cincinnati says:

      How to solve our deficit problem, once and for all?
      http://kcwyyh.blogspot.com/2011/05/how-to-solve-u

    11. Pingback: US House defeats raising debt ceiling 318-97 | OklandPress

    12. Dan-Minnesota says:

      How is it that the only 2 government programs that are user financed,social security and medicare, are going broke?Do you really think with 100% of tax payers paying in to medicare and only a small percentage receiving care, and its going broke, that we can some put everyone on Obama's" shovel-ready" health care and it somehow will work?

    13. Renny, Maryland says:

      Negotiate, you gotta be kidding!!! They want a Debt Increace in order to spend more and take over more controll expanding government. Can't you see this???

      They are not concerned about cutting costs or a budget. They don't even want a budget and will not abide by one.

      I thought it was unconstitional to not have a budget?? "Who can we hang???" What are we afraid of????? You guys in the House are our only hope at this time!!! Be there for us!!!

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