Hello debt ceiling, my old friend
In the midst of the politically-generated blind panic surrounding the “fiscal cliff” – in which a $3.5 trillion government that doesn’t have a budget, and spends a trillion dollars more than it takes in every year, agonizes over how much more money it should seize from the two percent of the population that already carries half of our tax burden, with an eye toward reducing the annual deficit by ten percent – Treasury Secretary Tim Geithner piped up to announce that Washington would slam into the “debt ceiling” a bit ahead of schedule. Four days from now, to be exact.
What happened to all those confident prediction that we had enough room on Uncle Sam’s credit cards to last until February? For that matter, where did those predictions come from? I remember some projections that anticipated hitting the debt ceiling before the November elections. Most estimates over the past year anticipated a crisis before New Years’ Day… and that turns out to be what we’re getting. How come it was so hard to predict such a crucial accounting event?
Oh, right: no budget. The federal government lives like a madcap heiress on a perpetual shopping spree, flitting from one boutique to the next until a stone-faced shopkeeper delicately informs her that MasterCard has declined to pay for her latest pile of expensive purchases. She conducts her “financial planning” in a blind panic at the checkout counter, and it mostly consists of angry cell phone calls to Daddy, demanding an immediate increase in her allowance… and dressing him down as a greedy old S.O.B. if he expresses the slightest reluctance to comply.
Here’s Geithner’s explanation for the sudden proximity of the sugar-glass debt ceiling: “Under normal circumstances, that amount of headroom would last approximately two months. However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures.”
Got that, America? The dreaded “fiscal cliff” – that terrifying Grand Canyon of automated, draconian spending cuts and agonizing tax increases – would slow down the madcap debt accumulation of the U.S. government enough to let it carry on for another two months.
And these jokers in Washington love to talk about “deficit reduction” in terms of ten-year plans! ”I’ll stop spending your money so rashly, Daddy, really I will! I’ve got a ten-year plan to spend only thirty percent more than you give me, assuming any emergencies don’t come up, like a special sale price on that positively dreamy single-payer health care system I’ve always wanted. But I need two trillion dollars from you right now, and if you don’t hand it over, you must hate me and want me to die!”
One of the few people in Washington who accurately predicted a year-end collision with the debt ceiling, as far back as June, was recently-purged House Budget Committee member Tim Huelskamp (R-KS). ”Today’s warning is proof that it is time for a real solution, not another D.C. deal,” Huelskamp said, after reading Geithner’s letter to Congress (which really should have been sent postage-due, to achieve the proper dramatic effect.)
“Years of deal after deal have left taxpayers with only more spending and more borrowing – and not any real fiscal responsibility,” Huelskamp continued. ”Clearly, Washington has a Big-Government spending problem, and politicians on both sides of the aisle have contributed to the resulting mountains of debt. With the eyes of many focused on the ‘fiscal cliff,’ even worse would be the fiscal abyss of raising the debt limit without fundamental spending reductions and entitlement reforms. As we saw with the Budget Control Act of 2011, such an outcome would likely cause a further downgrade of our credit rating and another trillion-dollar-plus bill to our children and grandchildren.”
Speaking of the Budget Control Act, soon there won’t be enough left of it for a proper burial. We’ll have to use dental records to identify its remains. Much of what is happening now was part of the allegedly unthinkable last-ditch sado-masochistic fiscal punishment system built into the Act, in the highly unlikely event that the carefully-selected bipartisan deficit-cutting Super Committee ran afoul of some kryptonite, and couldn’t find a way to reduce the ten-year deficit by$1.2 trillion. That’s roughly what the annual deficit for 2011 turned out to be… and the Super Committee couldn’t cut that much over a decade. And now one of Washington’s most urgent priorities is to disable the last remaining vestige of fiscal discipline from the Act, the “sequestration” spending cuts. Once that’s gone, in what sense will the months of high drama leading up to the Budget Control Act have resulted in any “control” of the budget? It’s funny how we hear all this wailing about draconian spending cuts, but we never end up with any dead dragons.
The arrival of the debt ceiling should put fiscally responsible Republicans back in the fiscal cliff game. Personally, I’m in favor of offering Democrats a deal in which the debt ceiling would be raised to $17 trillion and then fixed in place forever, in exchange for the tax cuts they’ve been portraying as the key to fiscal health. A fixed, absolute debt ceiling is probably the only way we’ll ever see a real “spending cut” – and even then, it would be only the first step toward fiscal sanity. Cutting up Uncle Sam’s credit cards won’t pay off the gigantic bills he’s already run up, but at least the problem wouldn’t get any worse, and Washington would swiftly have to grow accustomed to writing a real budget, in which more spending here means something must be cut there.
Don’t underestimate the power of such an altered mental framework. President Obama was either astonishingly disconnected and arrogant to schedule a lavish Hawaiian vacation during the fiscal cliff showdown, or he set the whole thing up as a stunt so he could “dramatically” return to Washington at the end of this week. Either way, his little dramatic production will cost taxpayers over $4 million in travel expenses. That is literally nothing to a government that shovels a trillion dollars of borrowed money into its furnace every year. Washington spends more than $4 million every minute of every hour of every day… and over a million of it is borrowed money. Slam the brakes on borrowing, and suddenly a million bucks might start looking important to the aristocracy.
When the Democrats freak out and howl that locking the debt ceiling in place is unthinkable, offer them a balanced budget amendment with firm spending caps instead, as a “concession.” Never stop reminding the public of everything Obama and his Party said during the Budget Control Act debate of 2011, versus the reality of how it all worked out. That’s how you negotiate the Chicago way, Republicans. The debt ceiling should be your friend – the one time socialist greed and irresponsibility is actually forced to pause and justify itself to the public. No wonder Obama wants to get rid of it, and grant himself unlimited power to spend America into oblivion without further congressional involvement.
Of course, the real “debt ceiling” is not a legislative construct – it’s the day when it becomes impossible to print and borrow enough money to sustain those trillion-dollar deficits. It’s coming soon, and its arrival will be heralded by a massive increase in debt financing costs, which might very well devour half of our current discretionary federal spending overnight. On the other side of that lies the real “fiscal cliff.” You won’t believe how far down it goes.