03.18.2011 0

Enough is Enough

By Robert Romano

Once again, Congress has passed a short-term continuing resolution, this time with $6 billion of cuts over three weeks, which would bring the total of cuts passed this year to $10 billion. The reason for the stop-gap measure is because Harry Reid’s Senate has not passed the House-passed measure that funds the government through the end of the fiscal year and cuts $61 billion.

Although cutting $61 billion is only the beginning of the work that must be done, at least the House has begun that work.  Which is more than one can say about the Senate.

In fact, the Senate under Reid’s watch has not passed anything that funds the government through the remainder of the fiscal year.  As a result, that body has yet to address the mounting fiscal catastrophe facing the nation, with an ever-growing $14.1 trillion national debt, and a $1.645 trillion budget deficit for this year alone.

Obviously, more needs to be done to cut spending and bring the nation’s fiscal house into order, but if the Senate cannot even bring itself to cut a measly $61 billion — which would only reduce the deficit by 3.7 percent — how will it ever begin to balance the budget?

Similarly, how will the Senate ever be able to rein in out-of-control so-called “mandatory” spending? That accounts for over $2.1 trillion of the entire $3.5 trillion budget, and includes Social Security, Medicare, and Medicaid.  And it is spending that is completely on automatic pilot, that is allocated and disbursed without any vote in Congress.

There is no question that the nation is on an unsustainable trajectory.  As the $14.1 trillion national debt grows and likely exceeds the size of the entire economy this year, it becomes harder and harder to borrow money.  Why? Because in addition to needing to borrow additional moneys every year to fund the deficit, the government also needs to constantly refinance existing debt.

The larger the national debt becomes, the harder it becomes to refinance it.  And the harder it becomes to refinance, the more likely the nation’s central bank is to simply print the money to be lent to the government.  This is what Adam Smith called a “pretended payment” on public debts in The Wealth of Nations.

In fact, Pimco reports that in 2009, 80 percent of treasuries were purchased by the Federal Reserve, and in 2010, it had to buy 70 percent.  That’s just money essentially being printed to sustain what everyone knows is unsustainable as the demand for U.S. debt plummets.

That is probably why the Treasury has floated the idea of “ultra-long” 40-, 50-, or 100-year bonds — to put the bill as far off into the future as possible.

Because the government never really has any intention of paying these debts back.  It does not contemplate it.  It cannot even foresee how it would begin to do that — because it cannot politically bring itself to make the spending cuts necessary to even come close to making paying down the debt possible.

Again, $61 billion of cuts made by the House-passed continuing resolution would only reduce the deficit by 3.7 percent.  Heck, it would only reduce the budget itself by about 1.7 percent.  But what does Senate Majority Leader Harry Reid have to say about it? He called the cuts “draconian.”

And the American people are calling this debate pathetic.  Who’s he kidding? It’s time for Majority Leader Reid to stop insisting that Congress spend the nation into the grave — and to do his job.  Enough is enough.

Robert Romano is the Senior Editor of Americans for Limited Government.

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