01.17.2013 1

Why the debt ceiling is the only way

By Robert Romano — There are a great many politicians and pundits in Washington, D.C. arguing that the debt ceiling should not be used to extract spending cuts from the Obama Administration. It is on them that the onus falls to show that the conventional budget “process,” such as it is, in Washington, D.C. can be used to achieve, for example, a balanced budget within ten years.

So, would the traditional appropriations process produce a better or worse outcome spending-wise than using the debt ceiling and/or the continuing resolution to cut spending? In short, if the U.S. Senate were to again start passing budgets for the first time in many years — would it even produce any net reductions in overall spending?

When have spending cuts ever been achieved?

According to data from the Office of Management and Budget (OMB), since 1976, the only years discretionary spending budgeting authority was reduced were in 2012, 2011, 2010, 1996, 1995, 1994, 1993, 1992, and 1986. Just 24 percent of the time.

At least three of those years (2010-2012) were in years when Congress was budgeting by continuing resolution, not appropriations. Much of the recent decrease was “stimulus” spending expiring. But there were also reductions in budget authority achieved in the March 2011 continuing resolution, and during the sequester that passed in August 2011.

It should also be noted that the nominally balanced budgets of the late-1990’s, although the debt was still increasing at the time, were achieved under the threat of government shutdowns.

As far as mandatory spending goes, the only year that was ever cut since 1962 when OMB began tracking that category of spending was in 2010. That decrease came because TARP was being repaid, the so-called “other commerce and housing credit” going down by $65 billion, and deposit insurance decreasing by $32 billion.

In other words, mandatory spending decreased for the first time in a generation not because of any action Congress had taken per se, but because many emergency programs from the financial crisis were being wound down.

Every other year, it increased as the spending operated on autopilot. Because of that, except for 2010, overall spending — i.e. mandatory plus discretionary — has increased every year since 1965.

So, in the past fifty years, with virtually no reductions to the overall budget whatsoever, every single year since 1957 the national debt has always increased. We never pay it down, let alone pay it off, and at this rate, we never will.

Time to act

For those interested in getting the nation’s fiscal house in order sometime before we experience a Soviet-like collapse, it would appear time that we consider more unconventional means.

The reason to use leverage on must-pass votes like the debt ceiling or a continuing resolution to get real spending cuts is because the normal process has failed so catastrophically to produce such outcomes historically.  And in the future it likely will not produce the end result that gets us off the road to insolvency.

Adding to the urgency, when Democrats ever regain the House majority, their very first order of business will undoubtedly be to eliminate the debt ceiling all together.

Unconstitutional or not — Art. 1, Sec. 8 of the Constitution says the Congress has power to borrow money, and Art. 1, Sec. 7 says all bills raising revenue (and that includes debt) must originate in the House — that is what they will do. And then using the debt ceiling to achieve spending cuts will simply become a thing of the past.

So, the upcoming vote to increase the $16.394 trillion debt ceiling may in fact be the last stand the House of Representatives ever takes on the issue.

What power of the purse?

Because of baseline budgeting, Congress already does not get to vote on about 60 percent of the budget — the so-called “mandatory” spending which includes Social Security, Medicare, Medicaid, unemployment, food stamps and every other untouchable program.

The only time Congress has any say, really, on whether to finance these programs or not is the periodic vote on the debt ceiling. Otherwise, when was the last time Congress voted on the Social Security budget? Or the Medicare budget?

If Republicans want to touch those, they would need 60 seats in the Senate to change law regarding the eligibility requirements for these programs. Except Republicans have never had a filibuster-proof majority in the Senate. Ever. Not once in the 96 years since Rule 22 was adopted.

And if that’s what the GOP is holding out for to actually rein in spending, it seems likely the Treasury will go bankrupt before then. Especially at the rate the debt is growing disproportionately larger than the economy: nearly 10 percent annual growth in the national debt versus roughly 4 percent nominal economic growth.

So, now is the time to take a stand. It may be the last chance House Republicans have to use the debt ceiling anyway. On that count, Americans for Limited Government prefers they go for everything: entitlement reform, balance the budget within ten years, fix the tax system, defund Obamacare, and roll back EPA regulations classifying water and CO2 as pollutants under the Clean Air Act and the Clean Water Act.

And include the “Full Faith and Credit Act,” which would prioritize payments to our creditors, Social Security, Medicare, defense, and veterans’ benefits should the debt ceiling be reached. There’s more than enough revenue to meet essential obligations, and no need for a default. Even then, if the White House’s estimate of $2.8 trillion of revenue for 2013 is anywhere near correct, there would be as much as $600 billion left over afterward to pay for other items.

Or Congress could just kick the can and lose the only meaningful leverage it has to cut spending not if, but when Democrats reclaim the House majority, as they eventually will.

And then members will lose the only power they had to address the rapidly growing $2.2 trillion mandatory spending budget — and the means to balance the budget.

Last chance

To underscore this point, if Republicans fail to use the debt ceiling this time to achieve something significant, they may not have a majority in the House in two years as the American people lose faith they can or ever will get the budget under control. The message here is to use it, or lose it.

One potential approach is to tie the “Full Faith and Credit Act” to a shorter extension of the debt ceiling and prepare for the real fight later in the year. It would be a good idea to get the threat of default off the table on the debt ceiling question anyway, especially since there is more than enough revenue to pay our creditors.

But there is no reason that members should not also in the very least insist that the budget be balanced within ten years as well. It is common sense that we cannot forever steal from our children and grandchildren.

While there are also a great many representatives and senators up on Capitol Hill that care deeply about this issue, one does not get nearly the sense of urgency that will be necessary to take care of the debt problem before it is too late.  That is, not yet.

The few tools the American people have left to fight legislatively will be disappearing before their eyes in the very near future. And Republicans do not yet appear to have a united front on this issue. They had two years to pass the “Full Faith and Credit Act” and to take Obama’s default threat off the table. They could have tied it to the original debt ceiling battle. Or the continuing resolution that came afterward. Or the tax deal after that.

Instead it languished in the House Ways and Means Committee. They couldn’t even get that done.

Obama probably does not believe for a single second that Republicans ever intend to balance the budget. That is because right now they look like a paper tiger. There is still time, but it will take a united front from House Republicans and a real willingness to let the debt ceiling be reached in order for their leverage to work.

That is, while they still have any leverage at all.

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

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