When is a ceiling not a ceiling ? When it’s the debt ceiling and so the sky’s the limit.
By never submitting a meaningful budget and waiting until just before the default deadline to demand action on the debt ceiling, President Obama has very cleverly maneuvered the Republicans into violating the party’s reason for
existence – at least, in theory – fiscal sanity. He is insisting that Republicans increase taxes as part of any deficit-reduction plan. True, Republicans historically have been as guilty as Democrats in running up deficits (except for the Gingrich-led Congress in the late 1990s), but Obama’s infamous recklessness has led to the current imbroglio.
How reckless ? The smallest Bush II deficit (until the fiscal year that followed his presidency that included the rash bailout) was in the $400 billion range, nothing to boast about, but commensurate with a typical debt to GDP ratio. But Obama’s deficits are literally off the charts – averaging $1.3 trillion per year. In his (almost) three years, Obama’s deficits are roughly equivalent to those of all
previous presidents combined. It is rank irresponsibility raised to an exponential power. And he is doing it for a good reason.
Some may remember that Obama was criticized during the 2008 campaign for praising President Reagan as a transformational president. It is not that he agreed with Reagan’s policies, but rather he perceived that Reagan had re-shaped governance in America – and Obama has aspired to do the same. Reagan transformed government by “starving the beast,” by slashing taxes and non-defense spending so that government programs would diminish and ultimately dry up for lack of funding. It was a revolution – revenues increased as a result of lower tax rates and non-defense spending was dramatically cut. This paved the way for the reversal of the welfare state, culminating in the great changes to welfare in the 1990s under President Clinton.
Obama is the anti-Reagan, in the sense that he wants to enlarge and enshrine the role of government in almost every aspect of life. Obama’s theory is that an entitlement once implanted cannot easily be uprooted. Obama’s spending – in the trillions – has created millions of dependents on government largesse, such that the only realistic option, as he sees it, is to continue spending and supporting his many wards. He has endeavored to make tens of millions of people utterly dependent on government for jobs, health care, retirement, food, welfare, energy, education, etc. His contempt for private business is such that the wealthy that create jobs are demonized, investment has petered out, energy exploration has about ceased, employment has stagnated, productivity has plummeted, and consumer confidence is lower than ever. It is quite a record.
Obama can blame Bush, as churlish and childish as that is, but he has not begun to address the feasibility of the United States borrowing forty cents of every dollar spent by his government. It is already unsustainable – either the currency has to be inflated or the government has to default. The howls from official Washington as to the nation’s fate if the debt ceiling is not raised before August 2 are both ironic and vapid: an economy that needs to borrow 40% of its revenue to meet its obligations has already collapsed; it is just awaiting the official day of reckoning.
This is readily understandable to anyone with the slightest comprehension of home economics – meaning, almost everyone. A family that annually earns $60,000 but spends $100,000 cannot long endure their fiscal position. Something has to give –income has to be raised, spending has to be reduced, or default (personal bankruptcy) ensues. The average family cannot resort to the fiction of “raising their debt limit.” Their limit is what they can rationally afford. But government operates on different premises (even in a different universe), and the levers of government have too long been used by those (i.e., politicians) who see their primary role as taking money from one group of people and handing it over to another group of people. It is a bi-partisan disgrace that Obama has perfected. He might even win re-election, Heaven forefend, because he has created an entire class of people – recipients of government money (or said another way, people given money that others worked for) who now constitute a majority of the nation. That’s right – more than half the society receives some form of money from the government, and they will undoubtedly vote for the candidate who promises to keep OPM’s money flowing towards them by seizing it from the productive and the successful. That is scandalous.
Note how the ruling class is petrified by the prospect of the debt ceiling not being raised. The fear-mongering has naturally evolved into outright lies – that government will default on August 3, the bond market will collapse, the world economy will collapse, etc. But the government will take in $172 billion in August – so the debt service of $29 billion can easily be paid, Social Security and Medicare in the amount of $70 billion can easily be paid, and even funding the military can continue. Vital services will continue. But faced with the prospect of living within our means, government has to do what every family has to do: prioritize its spending. So, quickly, eliminate funding for public broadcasting and the arts, close down the Departments of Energy, Commerce, Agriculture, Education, HHS and Interior (and see who notices), impound congressional and executive branch salaries (their mismanagement does not warrant what they are being paid anyway), end that August staple – Congressional trips abroad, and cease the funding of the myriad research projects that are unnecessary boondoggles. Prioritize ! Whatever cannot be afforded should not be spent with borrowed money. Perhaps the bond markets will respond favorably to fiscal sanity and stability, and perhaps the “experts” who predict doom are as wrong about this as they have been about the other fiscal crises of the last decade. Yes – keep the national parks and museums open. In any event, they generate revenue and can pay for themselves, and they always become the only symbol of personal hardship to the citizen so the vampires in DC can continue to suction their life blood from the people.
The rebellion brewing in American is a real one, and the Tea Party just scratches the surface. Obama and his minions have made America into a nation of invalids, whiners, children, and schemers, all hogs at the national trough, all dependent on Big Government for their every need and want. And they see the role of government as wealth re-distribution; hence the disgust for the “rich” who don’t pay their “fair share” in taxes. But the peril of democracy is that 51% of the population can vote to commandeer the income of the other 49% – legally – and that is the election that is before us.
Well, what is “fair”? The Democrats focus on one aspect of taxation – federal income tax – where in fact less than 10% of the population generates 90% of the revenue. But, we should broaden our analysis. I did a little calculation – as should you. If we add together federal income taxes, state income taxes, Social Security and Medicare payroll deductions, real property taxes, sales taxes, gasoline taxes ($.14 per gallon in New Jersey, a bargain compared to New York’s $.50 per gallon) and miscellaneous other taxes, I am likely paying more than 60% of every dollar earned to the government. Is it “fair” to have government confiscate roughly 2/3 of my income? When what we have confiscated exceeds what we keep from the fruit of our labor, we have crossed the line from citizen to slave. The colonists rebelled against Britain when the tax rate reached 20%; Yosef in Egypt lost the favor of the Egyptian population when he imposed a 20% tax on their crops. The American welfare state has tripled that snatch, and Obama’s drive to transform the United States into a European, socialist, cradle-to-grave entitlement society (yes, as his father dreamed) is proceeding apace.
If the Republicans cave in and agree to raise taxes, not only will Obama win re-election but the Republican Party also would have proven themselves – again – to be craven, purposeless “tax collectors for the welfare state,” and would no longer have any reason to exist. They do not control the levers of government, but they do have veto power over any action. Obama thinks he has the Republicans at the brink – but in fact the precipice goes both ways. The government this year will spend $3.6 billion and take in only $2.4 billion. That cannot endure. The spending from the year of the vaunted “stimulus” (really just money paid out to keep union employees, Democrat voters all, paid) has not diminished measurably. It is as if that bloated figure became the new baseline. If every dollar was seized from every billionaire in American, it would not run the government for more than a month.
The pressure will be intense to return to business as usual, and the invective heaped already on Eric Cantor has been vociferous and scurrilous. But he and his colleagues, if they hold firm, will reap the rewards of pulling the US back from the brink of financial ruin. Short-term pain will reap long-term gain, and the American dream can be reborn again.