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Debt Limit Increase Danger

Posted By Brian Darling On May 31, 2011 @ 4:36 pm In Economics | Comments Disabled

The House is expected to vote down a clean increase of the debt limit [1] 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 [2] 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 [3], 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 [4] 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 [5]” 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 [6] 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 [7].  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 [8].


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/05/31/debt-limit-increase-danger/

URLs in this post:

[1] debt limit: http://www.heritage.org/federalbudget/increases-us-debt-limit

[2] New York Times: http://www.nytimes.com/2011/06/01/us/politics/01fiscal.html?_r=1

[3] national debt ceiling: http://topics.nytimes.com/topics/reference/timestopics/subjects/n/national_debt_us/index.html?inline=nyt-classifier

[4] Human Events: http://www.humanevents.com/article.php?id=43793

[5] Debt Failsafe Trigger: http://blog.heritage.org../../../../../?p=57823

[6] Matthew Yglesias: http://thinkprogress.org/yglesias/2011/04/14/200589/barack-obamas-proposed-debt-failsafe-trigger/

[7] Saving the American Dream plan: http://savingthedream.org/

[8] here: http://savingthedream.org/about-the-plan/plan-details/

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