Debt Ceiling

                The government of the United States of America spends too much.  This fact is shown by the fact that our nation will once again hit the debt ceiling this week.  Our debt is the main reason why the United States is no longer among the ten most economically free nations.

                President Ronald Reagan understood the cause of our debt:  “The problem is not that people are taxed too little; the problem is that government spends too much.”

                Amy Payne at The Heritage Foundation published a very good post about the debt ceiling in The Foundry.  “It is timely that the Congressional Budget Office (CBO) put out new numbers on America’s financial situation this week.  By the end of the week, we’ll be hitting the debt ceiling again.

                “The CBO’s report, which dropped the bombshell that Obamacare is projected to push 2.3 million people out of the workforce, is chock full of other disheartening information. 

                “For starters, `The nation’s fiscal situation is much worse today than when President Obama first took office,’ says Romina Boccia, Heritage’s Grover M. Hermann Fellow.

                “The outlook on the debt is somber.  Entitlement spending continues to grow on autopilot, and `Washington’s failure to handle the problem responsibly means a higher tax burden and a slower economy for younger generations,’ Boccia explains.

                “The debt drags down the economy…."

                Stephen Moore, chief economistat The Heritage Foundation, is also concerned about the debt of our nation:  “The Washington press corps was all atwitter yesterday with the news that the budget deficit is shrinking and the red ink will hit a seven-year low of $514 billion this year and $478 billion next year.

                “Wait.  This is progress?  Half-trillion-dollar deficits would have been unthinkable a decade ago; now they are cheered as progress.  We are living in an Obama era of diminished expectations.

                “But what hasn’t been advertised is the disgraceful longer-term outlook for our fiscal future, which took a turn for the worse.  And Obamacare is the main culprit.  In the long run, the budget deficit will be slightly more than $1.5 trillion WORSE than previously estimated.  In 2015, the deficit starts exploding again – to $912 billion in 2020, and then above $1 trillion annually from 2022 until the end of days….

                “By the way, one of the biggest ballooning expenses is interest on the debt, which rises from about $250 billion a year now to more than $800 billion in a decade….

                “Meanwhile, the debt burden gets worse, not better.  Our debt as a share of national output skyrockets from 72 percent to just shy of 80 percent of GDP within a decade.  Obamacare contributes to this thanks to the massive costs of Medicaid expansion and driving an expected 2 million people from the workforce.  The budget deal that relaxed the budget caps and sequestration also has ratcheted up spending in every future year.”

                An ad from The Heritage Foundation asked a very important question, a question that we should think about as we ponder the debt of our nation:  “If your house was flooded, would you raise the ceiling or pump out the water?”  I would pump out the water, and I believe that we need to stop raising the debt ceiling and start pumping out the water.  Since the entitlement programs are causing the debt to skyrocket, we must bring them under control.  We cannot continue to spend money that we do not have!

Compromise

After spending many weeks of debate and intensive personal negotiations, a compromise was made to raise the debt ceiling and end our current debt crisis. The drama of the past few weeks put the economy of our nation at risk and concerned Americans and people worldwide.

Compromise has been defined as a settlement between two individuals or groups where each side agrees to give up part of what he/she demands. The compromise about the debt ceiling has left both sides unsatisfied, and the fight over fiscal responsibility will continue. The more I study the situation, the more I realize that the current bill does not do much at all in solving our fiscal crisis.

Americans are disappointed because the debate over the debt limit was more about what was good for politicians than about what was good for the nation. Americans are disappointed because we are saddled with a broken government that refuses to fix itself. Americans are disappointed because the Budget Control Act does not solve the fiscal problems of America.

In a letter to conservatives, Edwin J. Feulner, President of The Heritage Foundation, outlined several elements of the current bill that he considers to be unacceptable:

1) There is no reassurance that this plan will "protect our nation's AAA credit rating." A statement from Moody's last Friday said that "neither the Boehner nor Reid proposals would restore our solid credit footing. This plan did not improve upon those. Economists from Barclays Capital in London said of the deal: `Overall, our first impression is that the agreement by itself is unlikely to be sufficient to cause S&P to remove the U.S. from being on ratings watch for possible downgrade.'" There is still a possibility that a downgrade will take place.

2) Our national security will be put at risk. "If all [defense cuts] are imposed, we will have a trillion dollars less than we need to protect our nation and defend its interests."

3) There will be more tax hikes. President Obama reassured his liberal base that more tax hikes will come from the special committee.

4) Conservatives believe that "Congress should balance its budget year-in and year-out," and they missed a good "opportunity to drive spending down toward a balanced budget." This debt compromise "does little to advance the cause of a balanced budget amendment to the Constitution. Not all balanced budget amendments are created equal. We need an amendment with proper taxpayer protections so that Congress can't simply hike taxes to balance the budget."

5) Americans want their representatives to stop ducking responsibility and "make the tough choices to reform entitlements. The special committee of half-Democrats and half-Republicans will probably not do much to solve the situation.

These elements of the debt plan are not the only problems with it. "Conservatives put up a good fight for the non-defense spending cuts needed to reduce the size and cost of government. While Senate Democrats sat on their hands for 800-plus days, doing nothing, House conservatives introduced and passed the Ryan budget plan and the Cut, Cap, and Balance Act, each of which was a step in the right direction."

Even though conservatives are disappointed with the debt deal, they can feel good about what they accomplished. The biggest change made was "progress we made changing the dialogue in Washington. Just as with the Ryan budget plan, we are talking in terms of spending cuts for a smaller, less costly government, not spending increases. Popular opinion is with the conservative philosophy of limited government."

Although conservatives made progress, we have to realize and admit that "this debt increase was the highest in history. This is not surprising, given the record spending increases and deficits we've witnessed over the past two years." Any sane person realizes that our nation cannot continue to spend more than we take in. If we stay on the same course, we will not be able to stay creditworthy, create jobs or grow our economy.

Feulner stated that we must continue to pursue entitlement reform and revenue-neutral tax reform while at the same time maintaining a strong military in order to defend America. In order to do all these things, Washington must "get serious about spending and regulation.
The Heritage Foundation did what Congress should have done but failed to do when they published a plan called "Saving the American Dream: The heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity." [savingthedream.org/?...] It covers tax reform, health care and Medicaid, Medicare, Social Security, and government spending, and it tells how it will affect millennials, families, low-income workers, entrepreneurs, baby boomers, and retirees. This plan is said to be able to "fix the debt, cut spending, and restore prosperity."

As conservatives we can feel good about the "ground we have gained," but we must not stop fighting for the fiscal salvation of our nation. We apparently had to make a compromise at this point, but the battle will go on.

Debt Crisis

My oldest son called me a night or two ago to tell me how upset he was at "my" Congress. I reminded him that I voted for only one member of Congress, Representative Don Young, and I told him that I didn't claim any responsibility for either Senator Begich or Murkowski. He didn't accept my reasons for why I'm not responsible for what Congress is doing and told me that he was blaming me anyway - probably because I am so conservative.

My son was really angry and expressed thoughts similar to those of many Americans: None of us care if any of the politicians are re-elected, but we do care about the national economy and our own personal financial situations. We want our representatives to take care of the business they were elected to do and stop thinking about their own futures. We think the politicians on both sides of the aisle are acting childish and petulant in not coming to an agreement that will be best for the United States of America. He made the statement that we should "lock them in a room" and not let them out until they come to an agreement.

As I write this post, the media is reporting that an agreement has been reached between Speaker of the House John Boehner, Senate Majority Leader Harry Reid, and President Obama; however, the Senate and the House of Representatives still need to vote on the matter and either or both could vote "no" on passing it.

The agreement apparently has two "steps" to it. The first step would raise the debt ceiling immediately by almost $1 billion and cut federal spending by a slightly larger amount over a decade.

The second step would involve the creation of a new bipartisan congressional committee - six Democrats and six Republicans, three of each from the Senate and three of each from the House - that would have until November to recommend $1.8 trillion or more in deficit spending. Their target is supposed to be benefit programs such as Medicare, Medicaid and Social Security or making changes in the tax code. New deficit cuts would allow for another increase in the debt ceiling. If the committee failed to reach the target of $1.8 trillion or Congress failed to approve the recommendations of the committee, it would automatically trigger a congressional vote on a constitutional amendment to balance the budget. If the amendment failed to pass Congress, spending cuts totaling $1.2 trillion would automatically take place, and the debt ceiling would rise by the same amount. The automatic cuts would not include Social Security, Medicaid or food stamps.

It appears that the current debt crisis may be over for now, and both liberals and conservatives can claim that they won. The budget battle is apparently over until after the 2012 elections, but fiscal problems will continue as long as Americans rely so heavily on the federal government and as long as the government borrows nearly half of every dollar it spends. The entitlement programs have been off the table for now, but they will consume our entire budget in future years unless they are trimmed. There is still much work to do on the fiscal problems of our nation, but for now it appears that we can all breathe a sign of relief.

Cut, Cap, Balance

The worldwide debt crisis has been much in the news in recent months, and the debate about raising the United States debt ceiling has been loud, raucous, and not settled yet. It is no secret that our huge government debt was caused by our elected officials in Washington, D.C. - both Republicans and Democrats - who deliberately made and passed bills that put our nation's fiscal health in danger. Our nation now owes at least $14.3 trillion. Our elected leaders are borrowing about forty cents of every dollar they spend. We cannot continue on the path that we are currently traveling.

I have been watching the issues closely and reading as much about it as I possibly could, but I still do not understand much about our problems. I have noticed that liberals are adamant about the need to raise the debt ceiling so that we can even more money and go even further in debt while conservatives are opposed to raising the debt ceiling without cutting the deficit and capping future spending. A coalition made up of conservatives and libertarians put forth a plan to stop this out of control spending. Their stated goal is to keep Congress from raising the debt ceiling unless they also cut, cap, and balance federal spending. The U.S. House of Representatives passed the "cut, cap, and balance" deficit reduction plan on Tuesday, July 19, 2011, by a bipartisan vote of 234-190 (229 Republicans and 5 Democrats voted for it). The U.S. Senate voted on Friday, July 22, 2011, to "table" or kill the House Republican proposal by a vote of 51-46 along party lines. Senate Majority Leader Harry proclaimed Cut, Cap, and Balance to be dead.

What is Cut, Cap, and Balance? Why are liberals so opposed to it? H.R. 2560, The Cut, Cap, and Balance Act, is basically just what it says. Cut the deficit immediately. The deficit last year alone was $1.6 trillion and must be halved for this year. Cap the spending. The historical rate of federal spending - before the Obama Administration - was 18% of GDP or less. In order to protect our nation from out of control politicians, we must put a cap on spending at the historical level. Balance the budget. We must pass a Balance Budget Amendment because we cannot trust politicians from either party. We know from the actions of politicians in the past - Republicans during the Bush Administration and Democrats in the Obama Administration - that we cannot trust them to spend our money wisely. Simply stated, Cut, Cap, and Balance is an effort to restrict and control politicians while saving and strengthening our freedoms. If it were made law, Americans would again be free to prosper and thrive.

Why are liberals so opposed to cutting our deficit, capping our spending, and balancing our budget when the majority of Americans are supportive of doing so? I do not know why. I cannot understand their unwillingness to do so. It appears that liberal/progressive Democrats are being irresponsible about our debt: the Senate has not passed a budget for over 800 days, and neither President Obama nor the Senate has come up with a plan to solve our fiscal problems.

President Obama called for a "balanced" plan, and stated that he wanted a "shared sacrifice." Yet, when the House put forth such a plan, he said that he would veto Cut, Cap and Balance if it were passed by the Senate.

Fox News.com reported the following statement from Senator John Cornyn (R-Texas): "The Democrat-led Senate's failure to both produce a budget and pass the Cut, Cap, and Balance Act of 2011 underscores the Democrats' irresponsible commitment to the status quo. While the President and Senator Reid refuse to produce a plan to deal with our debt crisis, Republicans will keep working to meet the nation's fiscal challenges."

John Boehner (R-Ohio), Speaker of the House, was reported as saying, "Senate Democrats have defied the will of the American people who overwhelmingly support real spending cuts, caps on future spending, and a balanced budget to create a better environment for private-sector job growth.
"Republicans are standing with the American people and, as I've said before, will not pass a bill that fails to cut spending by more than it increases the debt limit, restrain future spending, or that raises taxes on families and job creators."

It appears to me that liberal/progressive Democrats are using smoke and mirrors in order to withstand the control of Cut, Cap, and Balance. Republicans who are not conservatives (RINOs) are sabotaging efforts to stabilize our fiscal situation. The situation has to be faced as soon as possible. The longer we allow the President and Congress to freely throw our money around, the worse the situation will become. If we don't get the borrowing and spending under control now, we will lose our ability to borrow anything or at least have a worse credit rating to deal with.

Financial Problems

I have spent much time trying to understand the financial situation of our nation, but I admit I find it very confusing. I do not know if it is in the best interest of our nation to raise the debt limit or not, but I expect that it is not. I don't know how to bring the governmental spending under control, but I can plainly see that it is necessary. I don't know how to solve the problem of taking care of our elderly, sick, and incapacitated citizens, but I believe that our current entitlement programs must be changed in order that our nation can remain free.

The battle between conservatives in the House of Representatives and liberals/progressives in the Senate and the White House continues day after day. The previous Congress failed to make a budget for FY2011 - one of their main duties. The House of Representatives is working hard to get a budget passed, but the Senate and White House refuse to face the reality that our nation is spending more money than we have.

This morning's newspaper featured a report that Standard & Poor (S&P) sent a warning to national leaders. S&P kept the AAA rating on federal government debt but changed its outlook from stable to negative. This change shows that the ratings agency is doubtful about Washington's ability to take the necessary steps to cut spending and pay debt.

According to the article by Kevin Hall at McClatchy Newspapers, S&P analysts noted the following in their credit report: "The negative outlook on our rating on the U.S. sovereign signals that we believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years." They also commented: "The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist until at least after national elections in 2012."

Hall called the action by S&P a "surprise." I find this comment naïve because financial analysts have been warning about such a move. Hall explained that the action "raises the prospect that the United States could be deemed less creditworthy, which would raise the cost of borrowing for government, business and taxpayers alike."

The warning from S&P "sent stocks plunging Monday and crystallized the threat that mounting federal budget deficits and national debt pose to the U.S. financial system and the American way of life."

The same newspaper carried an article by Steven Thomma, also of McClatchy Newspapers, about a national McClatchy-Marist poll. Thomma wrote, "Alarmed by rising national debt and increasingly downbeat about their country's course, Americans are clear about how they want to attack the government's runway budget deficits: raise taxes on the wealthy and keep hands off of Medicare and Medicaid.
"At the same time, they say that the government should not raise the legal debt ceiling, which the government must do soon to borrow more money, despite warnings that failing to do so would force the government into default, credit markets into turmoil and the economy into a tailspin."

The American public seems to be as confused as our leaders. I saw last night a chart showing that 97.30 of federal income taxes are paid by the top 50 percent of taxpayers. In fact, the bottom 50 percent of taxpayers pay only 2.7 percent of the total income taxes. Approximately, 45 percent of workers with income do not pay any income taxes after deductions and some end up receiving more money back from the feds than they actually paid. Many of these same people think that the rich should be paying more taxes plus the social security (FICA) benefits of the poorer workers.

Americans would probably understand the situation much better if Congress, the White House, and the media would give us the truth. This morning I received a letter from The Foundry, published by The Heritage Foundation, signed by Bill Beach, the director of the Center for Data Analysis. The letter is "An Open Letter to Paul Krugman," and it is very direct.

Beach wrote, "Over the past two weeks, you have relentlessly engaged in dishonest, deceptive and factually incorrect critiques of Heritage's recent analysis of the Ryan budget plan, and they need to be addressed. With all of the work good people of every political stripe need to be doing in Washington today, the last thing we all have time for is correcting your typically contrived commentary. But when The New York Times gives you such a platform to spread distortions, they necessitate a response." Beach then proceeded to list each claim and debunk them. I personally was pleased to have someone step forward and force a liberal to face the real truth. You can see the full letter here . I believe that the folks at Heritage Foundation can be trusted to give us the truth. I encourage you to go to AskHeritage.org and become a member. Heritage is a conservative think tank that helps members of Congress work through the problems of government. I believe that they are worthy of our donations.

The financial situation of this nation is critical and needs to be corrected. I believe that this correction will not take place until Americans - all of us - are willing to "bite the bullet" and face the situation directly. Americans need to become educated about the situation and force our representatives in Congress to do the right thing!