With the rhetoric really starting to ramp up now concerning the debt crisis, there is one thing we can all be sure of. The American people will come out on the short end of the stick. As far as I’m concerned, Boehner has completely blown this issue. Once again he is allowing Obama to dictate the argument and skew the debate. The headlines are centered around the stale old ‘tax the rich’ scheme. There is no excuse for allowing this to regress into another debate about how to raise government revenue. In fact, the GOP never even had to open negotiations on this issue period. There was nothing to gain and everything to lose.
After all, let’s remember this is called the DEBT crisis. Not the ‘how much more should we spend beyond our means and how to pay for it’ crisis. Why aren’t people screaming from the rooftop “Hey, is anybody even going to propose something resembling a plan dealing with the debt?”. Again, no one is even talking about dealing with the DEBT. All we are hearing about is how much more of a DEFICIT to add to that DEBT over the next ten years. It’s like an alcoholic who already has a 4.0 alcohol blood level and is on his death-bed and can’t decide whether to drink another 12 pack or go for a whole case.
Even at the high-end of the proposals being floated, they’re talking about $4 trillion over ten years when we spend potentially $40 trillion. We’ll never reach $40 trillion in spending because the system will implode long before that anyway.
When it comes to dealing with issues such as this, you can usually count on one thing. The wrong premise. When you get the premise wrong and subsequently ask the wrong questions, you have no chance of ever getting to the right answer. Everything that follows a bad premise is then wrong. This is where we are with the debt issue.
The question being asked is how do we pay for the our massive, bloated federal government that has become overly intrusive in virtually every facet of our daily lives? Do we raise revenue? Do we cut spending? Do we do a combination of both? And all the politicians are trying to find an angle in there somewhere to come out ahead.
This is where Obama keeps taking Boehner to the woodshed. He’s allowing the debate to focus on raising revenue from the rich. History shows us it won’t work. Crunching the budget numbers shows us it won’t work. It’s merely symbolism and fits the administration agenda of being anti-business, anti-capitalism and anti-success.
Default is the fear factor being touted as the motivator to reach some sort of groundbreaking compromise to save the country. Defaulting on our debt can only happen if Obama wants it to. As I said earlier, the GOP never even had to open negotiations. Simply stand firm and tell Obama no more adding to the DEBT. He’s already got options on how to get around that anyway if a hard cap were set. Meeting Constitutional terms would possibly be challenged, but that would come much later anyway. In the short-term, he would still find ‘magical’ sources of revenue. But they could have put the ball firmly in his court.
At that point, theoretically Obama would have to slash and cut dramatically to meet actual government revenue coming in. I say Obama but it’s really the House since they control the revenue and decide what gets funded. However, Obama has veto power and essentially ultimately has the say on what stays and goes. What would not go under Obama or the House would be the servicing of the debt. Paying the interest. Don’t do that and the world financial markets really do implode and global chaos ensues. Not. Gonna. Happen.
Geithner can use it as a stick to poke us and threaten us, but no way does that happen. Even the big spenders addicted to power know where their bread is buttered and they aren’t going to willingly allow that. No, this entire debate is centered on shifting the power base within government. Both sides are simply going after the proposal that best suits their political agendas. Really, just business as usual in Washington. Continually increasing government revenue and thus its corresponding power is what’s at stake. Who gets a bigger piece of that pie is the prize.
There will be a day when their negligence in addressing the underlying fundamental issues will finally break the bank. But that day is not today. A ‘no’ vote on raising the debt limit won’t trigger that day either despite the proclamation that it would. It would, however, trigger some immediate forced austerity on the American people. Government programs would face huge cuts and that would affect the citizens no doubt. That is not at all politically palatable. Not with an election next year.
Both the left and right seem to believe they can force the other side to bear the burden of the blame for that type of fallout. Obviously, one side will lose. I used to think that neither side would really risk that loss. Now, I’m not so sure. They seem to be in the NFL mode and oblivious to the ramifications. Both the owners and players look like spoiled rich kids in the NFL debate regardless of the resolution. They seem to have forgotten the fallout from MLB cancelling the World Series.
I believed the lessons from that equate to the debt issue and that both sides would surely cave with some grandiose compromise and just raise the debt limit as expected all along. Now, nothing would surprise me. Incumbents from both side will crash and burn in 2012 if they allow a ‘default’. Again, there is no fear of truly defaulting on our debt obligations. Not yet. But even a symbolic default would create some very turbulent turmoil in the short-term.
It all could have been avoided by being proactive. Enacting a bi-partisan plan to meet a balanced budget would be seen in a far different light. The effective results would be similar in the program cuts and the austerity measures placed upon the American people. Yet, it wouldn’t be seen as a desperation move in response to exceeding our debt limit. It would be seen as a long-term plan on dealing with our finances responsibly. It would take the fear factor off the table and prevent the fallout that we experience should they not reach an agreement.
Without question, many politicians would still crash and burn accordingly for shutting off the government handout machine. That’s inevitable anyway. But for right now, it has to be voluntarily. They would need to step up to the plate and do the right thing and suffer permanent career damage accordingly. How many do you know that are willing to do that? So instead, we’ll take the ugly route and deal with things reactively and with fewer and fewer options as we go along.
This prophecy is somewhat self-fulfilling. The issue of our debt will resolve itself. It has to. It is unsustainable. It won’t go away. It won’t fix itself no matter how long we try to ignore it. That’s exactly what is happening in Washington today. Not a damn thing. Just semantics and window dressing. The time for proactively solving is quickly running out. None of the reactive solutions will be pleasant. If we get to that point, not only do the American people lose, the politicians will also lose in the form of their precious power. Yet, they can’t seem to see the forest for the trees. Is anyone surprised?
At some point, the debate has to finally turn to how to deal with reducing the actual debt, not just playing with deficit numbers. The deficit is more pressing to a politician because it can result in a more immediate fallout as in their re-election outlook. The debt is simply someone else’s problem to deal with down the road. You need look no further than Harry Reid of Nevada to see that a politician can survive hugely detrimental long-term debt policies and still get re-elected. Posterity will have people asking just what in the world the citizens of Nevada were thinking.
One would think the majority of Americans that care already have staked an opinion on this issue. If you haven’t, just remember that government spending is just as dynamic as your own checkbook. Decisions on what to spend and where are made on an ever fluctuating basis based on the realities of your finances. A budget is a great tool, but is still just a guideline to follow on what gets dispersed where. Should the debt limit not be raised, the effect is just as you would do if your credit card were declined. You re-evaluate and re-prioritize your spending. You do not immediately go into bankruptcy because your VISA got denied. Nor will our government automatically default on our debt obligations. That will remain at the top of the priority list for where the money will be spent.
Obama will then either pursue his creative financing options on how to bypass Congressional authority or he will enact the spending cuts that we urgently need to undertake to start getting our financial house in order. Your guess is as good as mine on which way he will go.