Let there be no mistake. The 112th Congress will convene on January 5th and there is no doubt what 
they believe is their number one priority, the main reason the people of America elected them in November of 2010. Everywhere you turn, there is the cry of ”reduce spending”. There is a battle about to begin in Washington and the main battleground will be centered around the spending habits of the federal government. The Sunday news shows were crowded with people yesterday and some early warning shots were fired, giving us some small clue as to what is about to happen. Talk of where to cut spending and whether to raise the debt ceiling or not abounded. As Congress prepares to return to Washington, the battle lines are being drawn out. Let’s take a look at some of them, from the Wall Street Journal.
An early test of how far Republicans are willing to go will come when Congress faces a vote on raising the U.S. debt limit. The current U.S. borrowing limit is $14.3 trillion, a mark that is expected to be reached by April or May. Before hitting the ceiling, Congress must vote to increase the nation’s borrowing capacity. Otherwise, the U.S. could be forced to default on its debt obligations.
“The impact on the economy would be catastrophic,” Mr. Goolsbee warned. “That would be a worse financial and economic crisis than anything we saw in 2008.” He added: “We shouldn’t even be discussing that — people would get the wrong idea.”
Sen. Lindsey Graham (R., S.C.) said on NBC’s “Meet the Press” that not raising the debt limit could result in a U.S. default that could be “very bad for the U.S. and the world at large.”
Still, he said an affirmative vote from him would be conditional. “I will not vote for the debt ceiling increase until I see a plan in place that will deal with our long-term debt obligations,” said Mr. Graham, who cited raising the retirement age as one way to tackle the problem. Mr. Graham also suggested that Republicans and Democrats explore bipartisan reforms in Social Security before raising the debt limit.
Sen.-elect Pat Toomey (R., Pa.) said the debt limit should be raised in small increments and in a way that is balanced and meaningful to reroute the nation’s current “fiscal train wreck.” Mr. Toomey, who appeared on “Meet the Press,” said Republicans don’t want to get rid of entitlements but instead want to reform them. On Social Security, for example, he suggested incentives to “give younger workers the opportunity to accumulate savings.”
Others, however, were adamantly opposed. Rep. Bachmann said that “I am not in favor of raising the debt ceiling.” Rep.-elect Mike Kelly (R, Pa.), also on “Face the Nation,” said that “raising the debt ceiling to me is absolutely irresponsible.”
I think it’s fairly obvious, the Republicans are not on the same page as someone like Mr. Goolsbee, who is Austan Goolsbee, the chairman of the Council of Economic Advisors. It also appears that there are differences of opinion within the GOP caucus. I don’t see how we can afford to default on our debt obligations, but at the same time, there does need to be a plan in place to address the amount of spending coming out of Washington.
Ignoring that fact will do nothing to help and will certainly do our country great harm. This is a problem that is not going to go away of it’s own accord, which tells me drastic measures may be in order.
So much of the time, when someone mentions cutting spending, they are asked where to start cutting. When Senator Tom Coburn starts laying out his list of waste and fraud, he is usually laughed at, as those on the left start informing all of us just how small of a percentage of federal spending he is talking about. My answer to that is so what if it is a small percentage. Do we not have to start somewhere? Have you ever heard of the phrase “you have to learn to walk before you can learn to run”? How about the one that says you have to be faithful in the small things before you can be faithful in the big things? If those apply to so many other areas, then why would they not apply here?
Consider how the new Republican majority in the House is going to proceed. One of the first measures they plan to introduce will make cuts to the budget of running the House of Representatives. While that will only cut about $25 million from the budget, it is one small step for the citizens of America. In other words, it’s a start. After this first step is completed, the GOP plans to start moving quickly to rescind some of the spending that has already been approved. Again, from the Wall Street Journal.
After that, however, Republicans in the House say they plan to move on to offer a far more sweeping package of “recissions,” or elimination of spending previously approved, that will aim to bring domestic spending back to where it was before Mr. Obama became president. The skirmish over that proposal for spending cuts, coupled with related fights over government regulation and health care, will set the battle lines for the next two years, as Washington returns to divided government.
Unlike its predecessors in the Republican Revolution of 1994, or among the Democrats who took charge of the House after the 2006 election, the new Republican majority doesn’t return to power with a long to-do list of legislative priorities. Instead, party members say they were elected with one big mandate: Cut spending. The details of that push will unfold in the weeks leading up to the March 4 deadline for Congress to fund the federal government and play out against a backdrop of mounting federal deficits.
Did you really read what that last paragraph said? The Republicans believe their number one mandate is to cut spending and that seems to be especially true of the new members of the House. Yes, there are other matter to attend to, such as border security and the effort to rein in the EPA, but the main focus of the Republicans, and therefore the House of Representatives, is going to be spending. Given the present fiscal condition of our country, I think that is as it should be.
To be sure, this is not going to be an easy fight. The Democrats still have control of the Senate, albeit by a small majority, and they also have President Obama living in the White House. It remains to be seen just how much they will be able to accomplish, especially if the President decides to wield his veto pen. Because of those facts of life, this battle is not going to be a short-lived or hit and run skirmish. I think it will reach beyond the 112th Congress, through the elections of 2012, and into the 113th Congress. We can win this battle, but we have to realize it is for the long haul and not necessarily what we see just around the corner.
I am conflicted on whether the debt ceiling should be raised or not. I know it would really be bad if we reach or pass the debt ceiling and the U.S. defaults on its debt obligations but we need to reduce spending to solve the debt issue instead of continuing to raise the debt ceiling. But, Pat Toomey may have the right idea, raising the debt ceiling a small increment and to start cutting spending at the same time. I wonder by how much the debt ceiling was raised the last time? As long as the Republicans stick to the reason they were sent to Washington – which is to make spending cuts – even if it is in small bits as you mentioned, I think the American people will realize that this is a start to solving the debt issue.
Good post, LD!
I have mixed feelings about this as well, Teresa. I do not think we can afford to continually raise the debt ceiling without taking positive and meaningful action to correct the situation. At the same time, the United States can not afford to default on it’s obligations. That should not be an option.
I have an overwhelming sense of hopelessness when I see the GOP promising to take on government spending.
There is an itching by the right to start a third party. The democrats are going to do everything to make that happen because when it does it will split the GOP and give the Democrats unprecedented power.
Turn out the lights….the parties over…..The progressives are so emboldened these days they are no longer even hiding their agenda anymore.
I am curious, Doomed. Why do you feel hopeless because the GOP is making a promise to go after government spending? Do you believe it is a hopeless cause?
What better way to guarantee an outcome than to predict apocalypse for failure to act? If you do act, then “the Republicans aren’t sincere about cutting spending”, if you don’t act, the “the Republicans have destroyed the world!” If this one act is the most important thing in the history of the universe, then we need a better mechanism for preventing it than 435 people voting on it. If not, they need to kill the hyperbole.
If not increasing the debt limit is so catastrophic, the only solution I see that would be responsible is to say we will only raise the limit if we can get an equivalent monetary number of spending cuts. If we need to raise it a trillion, then I want to see 1 trillion in cuts immediately. Not in the future, not in a year. Now.
Anytime someone starts spouting off that something has to be done now or suffer the consequences, red flags start waving in my head. It’s hard for me to trust anyone who is doing that.
As for your idea that we raise the debt ceiling only if we lower spending by the same amount, that sounds like a good way to get this show on the road.
The government has shut down before…….Newt did it. The world did not end.
This is once again the left proclaim CRISIS…….CATASTROPHE…..NEVER let a good crisis go to waste.
This could be easily solved…..find a PAST budget in which the outlays matches the current income and adopt that budget verbatim.
Problem solved..It would put a lot of pressure on congress to get their house in order rather then just borrow and kick the can down the road till the road turns into a gigantic cliff with no more road.
However remember something that Dick Cheney once said and EVERY member of congress believes………..
“Deficits don’t matter”
With that mind set….mindless spending, borrowing and can kicking is not a problem for them…….they just laugh at us behind closed doors.
If we continue kicking the can down the road, we are going to fall right off the cliff. I just do not think we can afford to keep doing that.
Good post Larry. I always hope to hear something intelligent from Michelle Bachmann but she just continues to disappoint. Allowing the debt limit to expire and thereby permitting our country to default on debt obligations is about the stupidest idea I’ve ever heard and no responsible and knowledgeable person can possibly accept this is rational, intelligent governing (I guess I know where that puts Mike Kelly). There are places to draw the line in the sand. This is NOT one of them. Newt shut down the government not by failing to raise the debt ceiling but by failing to pass a spending bill to fund daily government operations. Huge difference.
Even Pat Toomey’s idea of incremental raises strikes me as wrong. Global credit markets operate on confidence. When there is a global crisis of any kind investors turn to US Treasuries for safety. When you start dangling the risk of default out there then investors get skittish, sell US Treasuries sending interest rates higher, and the cost of funding our debt rises. It’s terrific to hear the GOP talk about cutting spending but if at the same time they scare the hell out of credit markets then the cost of paying off our debt will balloon and more than offset any savings from spending cuts. This isn’t hyperbole — it’s a fact!
Thanks, Mike. As I mentioned in my reply to Teresa, I worry about America defaulting on it’s obligations. No matter the reason, that isn’t a good thing and I don’t think it is something we should consider.
Anyone who thinks this problem can be solved quickly is more than a little naive. We have been on this road for so long, we can not expect to just wave a magic wand and tell it to be gone. A plan needs to be formulated and then worked and as I mentioned in the post, it will not be finished in two or three years. We have to get in it for the long haul.
It seems to me that the Left and the MSM want to define the agenda as being how much to raise the debt limit instead what what can we do right away to keep from exceeding the debt limit. I have a list:
1. Cut every government department 20 to 25%.
2. Start raising the age for retirement in small increments now.
3. FICA tax is paid on 100% of earned income
4. Cancel ObamaCare
5. Cancel the Food Safety Modernization Act
6. Cancel Dodd-Frank and start over again.
7. Close the Department of Education
8. Review the closing of other departments.
Its not all that hard
Wow Jim! A little harsh don’t you think? It’s a great idea if the intention is to send our country into an extremely deep prolonged recession with massive unemployment. Maybe something a little bit more subtle would be a better place to start?
But you have to explain to me why you think it’s okay to put FICA tax on every dollar but not okay to cancel Bush tax cuts on the wealthiest Americans? This idea alone is a substantially higher tax (6.2%) on a much broader base of earners than the much maligned idea of letting the tax cuts expire (a 4% increase) on those with incomes above $250,000 or $500,000 or $1 million as was suggested toward the end. Not to mention that businesses match FICA contributions so you’re going to get a huge tax increase on business. Is this really a good idea?
A little more subtle than what, Mike. Is there something wrong with concentrating on cutting cost instead of assuming we have to raise the debt ceiling? If in the end the debt ceiling must be raised, fine , we have to raise it; but that shouldn’t necessarily be the primary focus of 112th Congress going in.
You are right that employers have to pay as well and it wasn’t my intent to raise the FICA tax on emplyers. But I do think that it is wrong for high income earners to pay a lower percentage of their income in FICA tax than lower income earners.
I agree with you, Jim, at least on the spending cut and regulation side. Government spending and regulation has been shown over and over again to slow economic growth, with limited exceptions. The spending cuts you propose will aid economic growth, which is a critical way to reduce deficits.
I think you are right, Jim. They are trying to shape the debate over these issues to their liking. If they are successful, half the battle will lost.
Less public debt is a good idea but the GOP will get their nose just as bloody in the press as Newt did in 1995 when the government shutdown.
I have no doubt you are correct, Harrison. This is especially true if we continue to allow the Democrats to frame the debate over this issue.
Plenty of places to make cuts. The government is growing-unnecessarily. Republicans don’t have the numbers to do anything about it though. They’ll vote for the increase and we’ll be back to business as usual. And we’ll have the same sky is falling argument next year.
I sincerely hope you are wrong.
Two comments:
1) The $14 trillion debt includes intragovernmental debt, which is the amount that the social security and other trust funds were raided to pay for other government priorities. It’s a figure that only has accounting significance. The critical thing is how much the government can borrow that it has to pay interest on.
2) The government is projected to be well over $1 trillion in the red in fiscal 2011 (again). With the exception of the end of WWII, I am not aware of federal spending going down $0.01. I’d be impressed if the increase to the debt ceiling was limited to $900 billion this year. That would mean spending cuts of well over $100 billion. Good luck with getting $100.
You do not appear to be hopeful that the GOP will be successful in their bid to cut spending.
LD: I am not very optimistic, to be true, but the debt ceiling is a different matter. If we need to raise the debt ceiling by $1 trillion or more to fund current budgetary obligations, I don’t see how the Republicans can muster that large of spending reductions that quickly. I make the point about spending never going down for a reason. Even when Republicans have run the show (both under Clinton and Bush), spending has grown. I would be impressed to see $100 billion in cuts – it would be a peacetime record – but still would require the debt ceiling to go way up.
My apologies for an omitted detail – our publicly held debt is around $9 trillion. That means around $5 trillion of entitlement dollars meant to be kept in a “lockbox” is gone. Can you imagine if we had kept real assets instead of spending it all? We wouldn’t be having a national debt debate right now, as increased future entitlement spending for the large baby boom generation would be (more or less) covered.
Let me see if I understand you correctly, Ted. Are you saying our $14 trillion of debt is broken down into $9 trillion in publicly held debt with $5 trillion coming out of the trust funds? Your analogy brings the expression “rob Peter to pay Paul” to mind. Pretty soon, Peter is going to be completely broke.
You got it. Right now social security is paying out more than it takes in (largely due to high unemployment), so there isn’t excess social security money to add to the trust fund. All we are adding now is publicly held debt, which will run over 40% of the budget. That’s a danger zone in world credit markets.
I particularly like the suggestion to kill of the Dept of Ed. It spends massively, and has failed in even greater proportions. The POTUS did promise to kill off under-performing or wasteful programs. That department is a prefect example.
I would have to agree, Matt. The Department of Education would be a great place to start cutting spending.
Let us not forget that Obama raised spending a trillion bucks and then froze the budget….now suddenly we cant cut a trillion bucks from the deficit after everyone just got a huge budget increase?
Smoke and mirrors folks….smoke and mirrors.
Here are Obama’s thoughts on the debt limit in 2006, when he voted against increasing the ceiling:
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure.
It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
I am glad to see that at least so far the Republicans seem to understand what they were sent to Washington to do, the question is can they actually do it? As you said this is going to be a long battle and it wan’t be finished at the end of this Congress, it is going to take many years to bring down the spending. We are going to have to do it in little steps, but those little steps add up over time. We can’t continue to spend money that we don’t have and it is about time that someone stood up and put an end to it!
We will soon see if the Republicans will stand up and be counted, Steve. I know the President still has his veto power and the Democrats still have control of the Senate, but I think it is very important that the Republicans do not roll over and play dead. They can begin to take a stand and even if the job isn’t finished for several years, they can at least slow the process and begin to get things under control. One thing for sure, if they don’t start somewhere, nothing will be accomplished.