Tag Archives: debt ceiling
Big Spenders in Washington—Not Tea Party— to Blame for Credit Downgrade
Originally posted at FreedomWorks.org.
Lots of finger pointing has occurred following the first-ever downgrade of the United States credit rating last week. Numerous political figures, including Sen. Kerry (D-Mass.) and the Obama administration’s former chief advisor David Axelrod, blame the Tea Party for the Standards and Poor’s (S&P) downgrading the U.S. credit rating from AAA to AA+. Some media talking heads have even dubbed it the “Tea Party Downgrade.” The truth, however, tells an entirely different story. Big spenders in Washington must face the facts that the American people have awoken and the party is over.
One day fiscal conservatives are being called “terrorists” and the next we’re being blamed for the country’s economic woes. These blame games are deliberate tactics to distract from the real issue at hand. Spendthrift politicians would much rather spread deceitful talking points than take responsibility for their actions. As columnist Jack Hunter says “it’s like blaming my bad 6th grade report card on report cards.” The failure of politicians to face economic reality is exactly why we’re in this fiscal mess in the first place.
Over the past century, we’ve faced growing deficits and mounting debt. The national debt has gone up nearly every year regardless of the political party in control. You cannot tell me with a straight face that the roughly three-year-old Tea Party is to blame for the credit downgrade. Our credit downgrade has been a long time coming. A few months ago, famed investor Jim Rogers said, “America should already be downgraded. It should have been downgraded years ago. These people, the rating agencies, have got it wrong for 10-15 years now. America is bankrupt”. He now says that our AA+ credit rating is still far higher than we deserve.
The Obama administration has the nerve to question the S&P’s math. The U.S. Treasury Department said that there was “no justifiable rationale” to downgrade the nation’s credit rating. Here’s a reality check: the United States is the largest debtor nation in the history of the world. Even the largest foreign holder of U.S. debt, China, says that we are “addicted to debt.” The communist country’s state-run news agency Xinhua stated in a commentary, “the U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.” Perhaps theChinese government should also follow its own sound advice.
The rating agency S&P warned us that we would be facing a credit downgrade unless Washington reduced deficit spending by $4 trillion over the next ten years. As the S&P explained in April, “while we’re mindful that the President and Congress are beginning to focus on some type of agreement and may possibly even have a broad understanding about the scale of a fiscal adjustment—roughly $4 trillion… We think—given the division of opinion between Democrats and Republicans—that will be very difficult to achieve over the next two years.” A $4 trillion cut or “fiscal adjustment” is barely anything when put into perspective. We face an over $1.6 trillion deficit this year alone.
The Obama administration actually rejected Tea Party backed legislation such asCut, Cap and Balance which included enough spending cuts to prevent a downgrade in our credit rating. They chose to ignore the warnings and instead pushed for a debt-ceiling hike with no substantial cuts. The Obama-Boehner debt-ceiling deal offers no actual cuts—it only means that spending may increase less fast later on. S&P downgraded the U.S. credit rating just three days after the Obama-Boehner compromise was signed into law.
The price of gold is skyrocketing while the Obama administration desperately searches for someone else to blame. But it is the Obama administration, not the Tea Party, that has added $4.3 trillion to the national debt. Our mission is to restore fiscal sanity to Washington. As Sen. Rand Paul (R-Ky.) says, blaming the Tea Party for the credit downgrade is “like blaming the fire fighters for the fire.”
Tea Party Stood Strong During Debt-Ceiling Debate
Well, we didn’t get everything we wanted that’s for sure. Did I expect to? Not so much. But I wanted to applaud all those who stood strong throughout the debate. “Conservative” organizations were calling us a bunch of purists who lived in a fantasy world for not supporting Boehner’s plan. Please.
Originally posted at Freedomworks.org.
The so-called historic debt-ceiling deal passed the Senate 74-26 yesterday and quickly landed on President Obama’s desk. He immediately signed the lousy compromise to raise the debt ceiling by $900 billion. The past few weeks have been filled with numerous lies and scare tactics. One of the most troubling aspects of the debt-ceiling debate fiasco is the definition of the word “cuts.” Washington’s fuzzy math calculator shows that things aren’t always what they seem.
The American people are told that the debt-ceiling deal will cut $917 billion in spending over a ten year period. What exactly are we cutting? Well, nothing really. The Congressional Budget Office (CBO) has a baseline that predicts what would happen over the next decade given current projections of taxation and spending. Government spending is going up at about 7 percent a year. Rather than cutting $917 billion from current amounts being spent, the compromise will just mean spending may increase less fast later on. As Cato Institute scholar Chris Edwards states, “spending isn’t being cut at all. The ‘cuts’ in the deal are only cuts from the CBO ‘baseline’, which is a Washington construct of ever-rising spending.”
It’s important to remember that these are promised “cuts” and nothing is stopping a future Congress from simply disregarding them. Discretionary spending “cuts” against a bloated CBO baseline are essentially meaningless since Congress can force the federal agency to increase its “baseline” spending. As Sen. Rand Paul (R-Ky.) says, “if we froze spending, if we didn’t spend any more money next year than we did this year and we did it for ten years, Washington would count that as a $9.5 trillion cut. Why? Because we’re going to add $9.5 trillion to the debt over the next ten years. So when they tell you that they’re going to cut $1 trillion, it’s from proposed increases in the debt. It isn’t meaningful.”
In the real world, cutting spending and increasing spending at a slightly slower rate in the future are two very different things. Washington is still going to spend more next year than we did this year. As any financial planner will tell you, anyone who is in massive debt shouldn’t increase their spending at all—let alone promise to increase their current level spending less fast over an extended period of time. This kind of reckless behavior is why our AAA credit rating is likely to drop in the near future. The chart below shows how total spending under the debt deal will change if all of the spending “cuts” come to fruition:
If you’re anything like me, you’re disappointed in the debt deal but didn’t have too high expectations to begin with. The debt ceiling deal surely doesn’t go far enough to curtail government spending but we have reasons to be optimistic. Just a couple months ago, President Obama was expecting to get a simple debt ceiling increase with no strings attached which had been the standard procedure in Washington for some time. We didn’t let that happen. We stood by our principles by calling out Speaker Boehner when he was wrong.
The Tea Party has begun to change the debate in Washington which is no easy task. We have made it known that we will put up a fight every time they attempt to raise the debt ceiling. We have tons of work to do but we have to take it one step at a time. The next phase is changing out more Congressmen next election cycle. The reality is we won’t be able to get our major policy changes without a fiscally conservative President and Senate. We need more elected representatives like Justin Amash, Ron Paul, Rand Paul and Mike Lee who take their oath to uphold the Constitution seriously.
Washington needs real solutions to get its fiscal house in order. One modest plan is the Rep. Connie Mack’s “Penny Plan” that would balance the federal budget by cutting spending by one percent each year for six consecutive fiscal years. The far from radical plan would require government to cut just one penny out of every dollar it spends. Unlike the debt-ceiling deal, the penny plan would cut real spending—not anticipated spending off a phony baseline.
The Tea Party drove the debt-ceiling debate. Even though we face a Democratic-controlled Senate and White House, the Tea Party was a central player who managed to control the narrative. Even Sen. McConnell (R-Ky.) admits that Congress wouldn’t have had such a debt-ceiling debate without the Tea Party. Now it’s time to push for real spending cuts while helping to elect fiscal conservatives who can make it happen.
Principles over Compromises: Oppose Speaker Boehner’s Debt-Ceiling Plan
Originally posted at FreedomWorks.org.
With the Obama administration’s phony debt-limit deadline just five days away, all eyes remain fixed on the ongoing debate in Washington. Per usual, nearly all members of the party in power support raising the debt ceiling with no strings attached while most in the minority party do not. The debt ceiling has been raised ten times in just the past decade with both parties playing political games. The Republican Party fell to minority status in 2006 after all but two Republican senators voted for raising the debt ceiling—every single Democratic senator voted against the debt hike. The sad truth is that most politicians care more about being loyal to their party’s leadership rather than standing on principle.
Earlier this week, Speaker Boehner released his compromised debt-ceiling plan which violates the Cut, Cap and Balance Pledge because it neither cuts, caps nor balances federal spending. To put it mildly, his sell-out plan does nothing to address our long-term fiscal problems. FreedomWorks has never been afraid to break with Republican leadership when they are wrong. During the Bush administration, we stood strong against TARP, the auto-bailouts, Medicare Part D, Bush’s “stimulus” package and so forth. And today we’re making a principled stance against Speaker Boehner’s debt-ceiling plan.
We’re not going to throw in the towel. Unfortunately, some so-called fiscal conservatives claim that the Boehner plan is simply the “best we can do.” Just because the Democrats happen to control the Senate and the White House isn’t a good enough reason to wave the white flag of surrender. As Ron Paul says, “let it not be said that no one cared, that no one objected once it’s realized that our wealth and liberty are in jeopardy. Let it not be said that we did nothing.”
Many economists agree that an economic collapse is on the horizon if we do not put up a fight to rein in out-of-control spending. It’s an absurd notion to think that a vote against Boehner’s bill is a vote for President Obama’s “plan”. Those who criticize our principled position have fallen for the White House’s scare tactics. The apocalypse isn’t going to happen on August 2nd even if we don’t raise the debt ceiling.
The Boehner plan will bring our national debt up to $23 trillion (instead of $24 trillion) over the next ten years—if all the spending cuts come to fruition. According to the Congressional Budget Office (CBO), the Speaker’s proposal will allegedly cut $917 billion over the next decade—which is less than this year’s budget deficit alone. But as Cato Institute scholar Chris Edwards mentions, “the ‘cuts’ in the Boehner plan are only cuts from the CBO baseline, which is an assumed path of constantly rising spending. If Congress wanted to, it could require CBO to increase its ‘baseline’ spending by, say, $5 trillion over the next decade. Then Boehner could claim that he was ‘cutting’ spending by $5.9 trillion, even though his plan hadn’t changed. You can see that discretionary ‘cuts’ against baselines don’t mean anything.”
We should also remember that these are promised cuts and absolutely nothing is stopping a future Congress from disregarding them. What are the chances that all of these pledged cuts will materialize in ten years’ time? Slim to none if history is any indication. As the famous quote from Tyron Edward goes, “compromise is but the sacrifice of one right or good in the hope of retaining another—too often ending in the loss of both.”
Let us remember what happened in the 1980’s. President Reagan reluctantly agreed to a debt ceiling hike in exchange for spending cuts and no tax increases in 1987. The Democrats didn’t quite hold up their end of the deal. Instead of the promised spending cuts, all we got was massive tax hikes. We should not repeat history by falling for the same shenanigans over and over again.
It’s time to draw a line in the sand. On which side do you stand: principles or compromises?
No Debt Ceiling Hike without Cut, Cap and Balance
I think this is a good plan given the political circumstances. No raising the debt ceiling unless some miraculous great deal is reached. Unlikely but worth striving to get some cuts, caps and a balanced budget. Ron Paul is the first presidential candidate to sign the “Cut, Cap and Balance” pledge.
Originally posted at FreedomWorks.org.
Treasury Secretary Timothy Geithner warns that America is just 40 days away from Armageddon. Don’t let the scare tactics fool you. Even if the debt ceiling is not raised, the U.S. will not necessarily default on its debt on August 2. It’s difficult to understand how anyone would still see Geithner as an authority on the economy due to his previous gaffes on everything from the “stimulus” to the Dodd-Frank financial overhaul law.
Most credible economists will tell you that keeping the debt ceiling at its current level will not be the end of the world. St. Lawrence University economics Professor Steve Horwitz says that “people imagine a doomsday scenario where we’ve maxed out the credit card and have nothing in the bank account, when in reality we have plenty of tax revenue to pay off interest on our debt.” Even if Congress does not raise the debt ceiling, the federal government still has enough money to ensure that bond holders are paid in full.
Despite our official national debt approaching $14.4 trillion, many in Washington want to simply raise the debt ceiling limit without any spending cuts or reforms. Federal Reserve chairman Ben Bernanke is urging to keep the debt ceiling vote separate from spending cuts debates while claiming that not raising the debt limit would “create fundamental doubts about the creditworthiness of the United States and damage the special role of the dollar.” The truth is that the Federal Reserve running the printing presses on overtime does far more to destroy the value of the dollar. Any economic credibility that Ben Bernanke may have once had has long gone out the window.
We should not be in this position in the first place. A recent FreedomWorks poll conducted by Frank Luntz concluded that 7 in 10 Americans in key swing states strongly oppose any increase in the debt limit. It’s absurd that our national debt has reached $14.3 trillion let alone that we’re discussing raising the debt ceiling for the 74th time since 1962. The debt limit has gone from less than $1 trillion in the 1980’s to nearly $14.3 trillion. Just seven years ago, Congress raised the debt ceiling to $6.4 trillion, which means the U.S. debt has doubled in less than a decade.
The goal is to get us to a point where spending never exceeds the established debt ceiling. It would be inexcusable for Washington to raise the debt ceiling without changing its spending habits. When will we say: enough is enough? In the Wall Street Journal, the presidents of various limited government groups Colin Hanna, Chris Chocola and Ken Blackwell write that “Republicans in the Bush years and Democrats in the Obama years have proven that we cannot trust them when it comes to spending.“ It’s past time to break the debt ceiling cycle. The continuous cycle of lawmakers increasing the debt limit as needed to finance their everlasting spending spree must end.
We need a responsible approach to the debt ceiling. The “Cut, Cap and Balance” pledge, which is championed by fiscally conservative groups and members of Congress, states that the signer will oppose any “clean” debt ceiling limit increase. These signers pledge to not raise the debt limit without substantial cuts in spending, enforceable spending caps and a congressional passage of a Balanced Budget Amendment to the U.S. Constitution that includes a spending limitation and a super-majority to raise taxes.
Now is not the time to raise the debt ceiling unless all three of these minimum necessary preconditions are met. Vice President Joe Biden has a series of meetings with congressional leaders in efforts to reach a deal on raising the debt ceiling. If the compromise includes only phony cuts—which is very plausible—lawmakers must reject it on principle. The pledge will help to ensure that representatives stand their ground in the debate ceiling fight. No debt limit hike without cuts, caps and balancing the budget. I urge you to sign the “Cut, Cap and Balance” pledge and encourage your representatives to do the same.
