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Heritage Action Issues Letter on Fiscal Crisis

Posted By Mike Brownfield On July 26, 2011 @ 10:20 am In Economics | Comments Disabled

Today, The Heritage Foundation’s sister organization Heritage Action for America [1] issued a letter to all Members of Congress regarding the debt limit impasse. Here is an excerpt:

Our nation is in the midst of a fiscal crisis, but it is one that has nothing to do with an August 2 “deadline” for a deal or President Obama and Secretary Geithner’s fear mongering over recent days and weeks. The crisis is one of over $62 trillion in unfunded obligations that are the loudest warning bell possible of the systemic problems plaguing our nation. Washington should not ignore or postpone dealing with this problem once again.

Twice already this year, the House of Representatives has voted for plans that would address our fiscal crisis and save our nation from a creditworthiness downgrade. In April, the House passed a bold budget, which would place our nation on a different, more sustainable and prosperous course. Last week, the House passed the Cut, Cap and Balance Act, which would force future Congresses to live within their means and rapidly bring down our nation’s debt-to-GDP ratio. Unfortunately, both of these responsible proposals were defeated by an ideological Senate, which has offered few ideas of its own.

Clearly, the most blame belongs to the President and the Senate – a President who comes up with no useful fiscal plan of his own and a Senate that refuses to pass meaningful legislation to save the American dream from a fiscal tsunami. We cannot, however, continue business as usual by raising the debt limit without substantively addressing our nation’s fiscal challenges. The entire purpose of the debt limit is to put an end to borrowing when it reaches a point that our nation finds unacceptable. There is no point in having a debt limit if the option of using it to address overspending and overborrowing is so intimidating that it is unilaterally taken off the table.

Speaker Boehner’s most recent proposal to raise the debt limit is regrettably insufficient to our times. Step one of the Speaker’s proposal would cut $1.2 trillion in discretionary spending. Assuming all of these cuts materialized, this would reduce our nation’s projected debt at the end of the decade from $24.9 trillion to $23.7 trillion. Step two would create a special committee, which has three major problems: (1) The “deficit reduction” of $1.8 trillion remains insufficient for our times; (2) “Deficit reduction” is a well-known codeword for “tax increases”; and (3) 17 blue-ribbon panels, commissions and the like since 1982 have gotten our nation into the mess we are in and there is no obvious reason as to why the 18th will get us out. Further, this proposal would outline a fast track proposal that unduly limits the rights of the congressional minority.

All in all, under a best case scenario where all of the cuts envisioned in the Boehner plan come to fruition, they would only reduce our nation’s projected debt-to-GDP ratio from 104% to 92% – a ratio far higher than its current 62 percent, which Moody’s has already said must come down to maintain our nation’s stable outlook.

Harry Reid’s proposal to raise the debt ceiling is equally unacceptable. It appears to be the latest in a line of proposals that began with the McConnell Proposal, morphed into the McConnell-Reid Proposal, further deteriorated into the Gang of Six Proposal, and has now resurfaced as the Reid Proposal. Each of these insufficiently bold ideas would lead to an increase in the debt limit in exchange for few, if any, actual cuts off existing spending levels. In normal times we might take these as one step toward a path of fiscal sanity.  But we do not have the luxury of taking that kind of small first step at this juncture.  The rating agencies are poised to downgrade us within months if we don’t pass something like the House of Representatives’ first two attempts . . .  The last thing our country needs is a clean debt limit increase with some fancy window dressing to try to fool the American people.

All in all, Heritage Action remains where we were at the start of the summer: absolutely convinced our nation is in fiscal crisis and certain that bold political leadership is necessary to save the American dream. Congress should drive down federal spending on the way to a balanced budget, while protecting America, and without raising taxes. Unfortunately, that does not appear to be what we will get from Washington, which has irresponsibly turned its back on the only real plans out there: The House Budget and the Cut, Cap and Balance Act. As such, Washington should be forced to live under the current debt limit until it’s ready to make tough choices – choices that it should make, and has time to make, this week.

Sincerely,

Michael A. Needham
Chief Executive Officer

 


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URL to article: http://blog.heritage.org/2011/07/26/heritage-action-issues-letter-on-fiscal-crisis/

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[1] Heritage Action for America: http://heritageaction.com/

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