Budgets and debt ceilings

I am so frustrated by the crowd in Washington. First, we have the people who traditionally wanted to be known as the Party of Fiscal Responsibility.  Once they got control over both houses of Congress and the White House, they switched. They weren’t Tax and Spend Democrats but they were Cut Taxes and Spend Republicans, which is even worse. Suddenly they lose that control and it’s back to the old rhetoric of debt for our children and grandchildren and live within our means like families have to do.

Let me tell you something. Families borrow money too. In fact, that’s one of the problems that got us into our current mess, too much debt by families. But I have to say, debt in and of itself is not a bad thing, and if you need to borrow more to keep from having to pay higher interest on your existing debt, and your creditors are only too happy to let you, I say go for it. As long as you do something to raise income and cut spending (both really). If you want to use the typical family as a model, when they hit a rough patch, they do cut spending, but they also try to do something to increase income, too. The other employed members inquire about raises, or they get part time jobs, or they do temporary or contract work. They don’t fold their arms and insist that they only thing they can do is cut, cut, cut. And for Texas Republicans, let me point out that they dip into savings, too when it’s really important.

Then we have the Democrats. Ugh, where do I start. No, you don’t have to keep giving in to Republican demands. The Republicans were never going to sign on to Health Care reform. We’d have all been better off if you had told them “forget you” early on and just went with the public option instead of this intrusive individual mandate. I don’t want the individual mandate to be constitutionally permissible and I would prefer the public option anyway. Seems to me that the public option is going to be better for price controls anyway.

But I digress. Debt ceilings. No one is even considering the idea of paying back any debt yet. For the foreseeable future, we’re still running deficits; right now the question is how big those deficits are going to be. Okay, fine. So we’ve got over $14 trillion in debt already, if we’re going to have to pay interest on it for the foreseeable future, the responsible thing to do is to make dad-gum sure that we pay the lowest interest we can. There is no sense at all in even threatening to hit the debt ceiling because even if nothing else happens, our credit is going to be downgraded and we ARE going to pay more interest on any new debt we take in, including rolling over the debt obligations we already have. The stupidity of the Republicans in playing chicken with the debt ceiling is mind-boggling. So much for Fiscal Responsibility.

So what would it take to pay down some of that $14 trillion in debt? Budget surpluses. Yes. As long as you are spending more than you take in, you have to increase the debt. If you balance the budget, spend just what you take in, you don’t have any money left over to pay down any debt. The ONLY way you can pay down debt is if you have more revenue than expenditures. Period. The math isn’t even complicated. There is no way we’re ever going to see surpluses again without raising some new revenue somewhere. Can’t be done. Anyone who tells you that they want to cut debt without raising taxes probably also has a bridge to sell or water rights in Death Valley he’s not using.

I grew up in South Dakota in the 70s and 80s. I cut my political teeth on huge deficits and mounting national debt and all around me heard about fiscal responsibility. I was shocked in the late 90s when the federal government actually started running a surplus. Shocked! I was further mind-boggled when a Republican President and a Republican Congress then decided not to pay down the debt and instead cut taxes.

I’m no longer boggled when Republicans not only don’t want to do the fiscally responsible thing or when they would rather try their hardest to do the most irresponsible thing possible. I am still disappointed. Especially when they still spew the old familiar anti-debt tune. I mean spew it again. Not “still.” Once again they spew the old familiar anti-debt tune that they had hidden in the back of their album caddies during the Bush years.

Fourth of July Weekend–Saturday

As tempting as it might be to spend time on Sarah Palin’s and Michelle Bachman’s less than stellar understanding of Revolutionary War Era history (ironic considering their Tea Party affiliations), I’m actually here to opine on the Austin American-Statesman’s Opinion pages today.
In the letters we have several opinions on the Texas Legislature’s attempts to outlaw airport pat-down searches by the TSA, mostly related to traits of the legislators supporting the measure–“A precondition is that [they, legislators] be able to exercise sound judgment”–and qualities that seem lacking, “integrity, a sense of reality, and an ability to be incisive on key issues…think for themselves.” For me, I like legistlators who think for themselves instead of blindly following whatever foolishness spouted by their supposed electoral majority. Just because an idea is popular with the public (and I admit, I have sympathy for the idea, if not the implementation) doesn’t mean it’s a good idea. On the other hand, you know what is popular with the public and is also a good idea? JOBS! Not budget cutting, especially if that means laying off more competition for whatever jobs are in the system already. Most Republicans seem to think that the message of the 2010 elections was cutting government spending, when I think it was really about reducing unemployment.

Another letter proposed a solution to unemployment. It involved issuing Job Bonds, on the model of World War II’s War Bonds and using the proceeds to create jobs building and rebuilding infrastructure. Functionally, he’s just re-invented the American Recovery and Reinvestment Act (Obama’s Stimulus bill). The difference is in marketing the borrowed money specifically as job creation and marketing it specifically to Americans, employed and unemployed alike, as opposed to the usual, every-day borrow-from-China government debt. I don’t know, the Republicans don’t seem to be very much into borrowing money to help unemployed people these days. Tax breaks for the rich and unnecessary wars, yes, but helping the unemployed and other poor people, no. Maybe this kind of marketing would make it easier to sell. I wouldn’t bet on it.

On that note, Senator John Cornyn is editorializing on the idea of a Balanced Budget amendment to the Constitution again. From a senator’s viewpoint, calling for a Constitutional Amendment is a great way to look tough on an issue without having to really do anything about it. It’s such an arduous process that there’s very little likelihood that anything will happen, so you don’t have to really worry about the consequences of your proposal and when it fails, there are plenty of other people to blame. He’s right that all the facts and opinions he cites in his piece haven’t changed the world view of the Democrats. He doesn’t mention that the same can be said of the Republicans.

He is probably also right that a Constitutional Amendment is necessary to change the behavior of Congress, Democrats and Republicans alike, though I’m not convinced it’s a good idea to outlaw deficit spending completely. He trots out the old chestnut about families and small businesses having to live within their means. In the long run he’s right, but sometimes even small businesses and families have to borrow money to make ends meet. It’s not most people’s preference, and needs to be done with great care, but it is a valid, and potentially even viable, option. Taking it completely off the table  for use by the federal government seems like a bad idea. I would also point out that when times are tight, borrowing money to invest in something that will generate income (like a business expansion, more education, etc.) can be a very good idea. That’s how a lot of small businesses come into being in the first place. Again, this is the basic idea behind the Recovery Act.

And finally, once you start talking about government debt, you have to talk about social security. The quote from the letter I’m responding to is a statement that the Social Security trust fund “is nothing but a pile of IOUs”. Okay, sure, though the term we usually use is “government bonds backed by the full faith and credit of the United States.” But, of course, that terminology doesn’t invoke the flimsiness the letter writer wants. I wish people wouldn’t do that. If they keep implying that US government debt is not going to be repaid, people will quit buying it. And we’re going to need them to continue to do so for the foreseeable future. Even the Republicans, for all their deficit rhetoric, still can’t propose a balanced budget (gosh, good think we don’t have a balanced budget amendment, huh?). Or perhaps just as bad, they still buy it, but demand a greater interest rate to offset the newly percieved risk. If we’re going to keep borrowing money, we should do what we can to keep the interest rates low. Bad mouthing our creditworthiness (and threatening not to raise the debt ceiling too, by the way) so that it will be even more expensive to keep borrowing doesn’t seem like “fiscal responsibility” to me.

That said, borrowing from the Social Security Trust Fund is a problem, not because the IOUs aren’t worth anything, but because when we need to access that money (to make Social Security payments beyond what we’re bringing in from payroll taxes) it’s going to have to come out of general tax revenue. Without a budget surplus to draw from, meeting these obligations is going to require spending cuts elsewhere or increased taxes, or even MORE debt. In 2001, what did the “party of fiscal responsibility” do with our budget surplus? Did they start paying down the “crushing” debt that we were “passing down to our children and grandchildren?” No they did not. Did they redeem any of the “IOUs” in the Social Security Trust Fund? No they did not. They cut taxes. I don’t believe the Republicans have any intention of ever paying down the national debt, fiscal responsibility rhetoric notwithstanding.