The Needed Debt Ceiling Compromise

View 793 Tuesday, October 08, 2013

“Transparency and the rule of law will be the touchstones of this presidency.”

President Barack Obama, January 31, 2009

 

Christians to Beirut. Alawites to the grave.

Syrian Freedom Fighters

 

What we have now is all we will ever have.

Conservationist motto

I was going to get my flu shot this week, but the flu struck first; Saturday night I noticed a developing sore throat, and although I got through Sunday with its four panels and a book signing – hoping I wasn’t contagious – I was pretty miserable yesterday driving home. I hope I won’t be incoherent this week, but no guarantees.

The President opened his speech by saying that raising the debt ceiling doesn’t increase the debt – at least that is what I heard when I listened to today’s speech, and others seem to believe they heard that too. This is certainly not a true statement – the whole point of raising the debt ceiling is to allow the government to borrow more money – and I am not able to comprehend what he thought he was saying. He also said that he would negotiate but he wouldn’t concede anything: in essence he would accept unconditional surrender. The matter of a possible American default is too great to be subject to negotiation. It would be a disaster.

I do have a guess as to what he thought he was saying: that passing a “clean” continuing resolution doesn’t increase spending. He may even believe that, but it is not true. The budget baseline is a 4% increase spending levels, and thus giving a government department an unchanged budget would be a cut; continuing resolutions have a built in increase. That is one reason bunny inspectors get raises.

The President says that default on the debt would be an unmitigated disaster. We presume that is true. But default is not inevitable, even with no rise in the debt ceiling.

The National Debt can be serviced without borrowing more money. The revenue of the United States is much higher than the cost of debt service. The House has already passed, and the Senate ignored (and the White House threatened to veto) a money bill originating in the House that directs the Treasurer to pay the obligations of the United States before paying anything else. The United States does not have to borrow money to avoid default.

Of course that would produce widespread cuts in everything else whether needed or not, which is what is negotiable: if we are to borrow more money, for what purpose shall we borrow it? If the purpose is to try to ease us out of this critical financial situation, that can be negotiated.

If I were in the House what I would say is: “We will raise the debt ceiling, but only under the condition that we begin to wind down the deficit financing of the government in peace time. We borrowed too much money, so much that it will take decades to pay it off, but we must begin that process rather than continue to borrow more without addressing the problem.

“There are many ways to proceed, but we will begin with this one: in the past, continuing resolutions were actually an increase of about 4% in spending on each and every department and enterprise of the government. That will cease. Henceforth the baseline will be a 1% decrease in the budget. There can be some exceptions, but each must be specific: the general resolution is that each and every department of the United States will get 1% less money than it got last year. Any exceptions must be in a separate bill.

“That is every program including entitlements: 1% less next year than last. Of course that will be hard on many people, and we will consider exceptions, but no blanket exceptions. They must be specific. By specific I mean, for example, that if we want to except Veteran programs – and we should – it is to be done program at a time, not as a blanket exemption to the entire department. The same will be true of all departments – agriculture shall spend 1% less next year than last. If there are programs that some interest groups want exempted, such as subsidies to turn corn into alcohol, those must be defended publicly – and subject in that debate to having their budgets decreased, not increased.”

I am sure a better speech can be made, including by me when I don’t have a headache and sinuses filled with cotton wool, but that gets the idea across: Yes, we will increase the budget ceiling to avoid a crisis, but accompanying that is a turnaround in the vector of public spending: it is no longer set to increase but to decrease, and every increase must be justified.

Everyone can live on 99% of what they get now. Most government departments can also. Turn the vector to a 1% yearly decrease in government spending, and economic growth will allow us to pay off this debt in two generations. Allow it to continue as it does, and default will be inevitable – not this December, but one not so many years away.

Were I Speaker I would have the House pass a bill making the budget base reflect a 1% annual decrease, and include in that bill an exemption to servicing the national debt. Doubtless other specific exemptions will be put forward – but that’s what compromise and negotiation is all about. The House can pass such a bill, guaranteeing that the United States will not default. If the President vetoes that it is his business. It is the task of the House to assure the financial survival of the United States. The Constitution says so.