By Bill Wilson – It is time for congressional Republican leaders, including House Speaker John Boehner, to play hardball on the debt ceiling.
The only way House Republicans’ leverage on the debt ceiling will work is if they’re willing to not increase the debt ceiling. Because, if they are unwilling to go that far, they will achieve exactly zero concessions in exchange for their votes.
That is why Americans for Limited Government is supporting Senator Jim DeMint and House Republican Study Committee Chairman Jim Jordan’s “Cut, Cap, and Balance” Pledge. All members of Congress should be taking this pledge.
Basically, there should be no increase in the nation’s $14.294 trillion borrowing limit unless there are hundreds of billions of immediate spending cuts, statutory spending caps of no more than 18 percent of the Gross Domestic Product, and a balanced budget amendment with strong tax and spending limitations.
Unless all of that is done, the American people will have no assurance that the debt ceiling will not just need to be increased again, again, and again in the future.
The state of the nation’s finances is indeed dire. Right now, we can only meet our financing obligations with a printing press. According to Pimco, in 2009 the Federal Reserve had to buy 80 percent of U.S. treasuries, and 70 percent of them in 2010. This is the “pretended payment” on sovereign debt that economist Adam Smith warned against in The Wealth of Nations.
Smith wrote, “The honour of a state is surely very poorly provided for, when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick of this kind, so easily seen through, and at the same time so extremely pernicious.”
Such a trick, however, will not work for long. By 2021, the debt will exceed $26 trillion, raising the likelihood that the debt is already becoming too large to refinance, let alone be repaid. Is the Fed just going to keep printing money to pay all of that debt?
The only way to avoid a catastrophic default is to kick the borrowing habit, plain and simple. The federal government cannot borrow new money without Congress’ authorization to increase the debt ceiling. That is why it is the only leverage in existence House Republicans can use.
But it will not work unless they actually use it. If the White House senses that House Republicans will ultimately raise the debt ceiling without any concessions, then it will not make any concessions.
The best way for House Speaker John Boehner, Senate Majority Leader Mitch McConnell, House Majority Leader Eric Cantor, and House Majority Whip Kevin McCarthy to save the nation from eventual insolvency is to call the Obama Administration’s bluff.
Democrats are betting that Republicans are too afraid to not increase the debt ceiling. The best way they can change that dynamic is to take the “Cut, Cap, and Balance” Pledge, an unequivocal statement that the debt ceiling will not be raised without far-reaching concessions being met.
The sovereign debt crisis is coming to America. One need only look at Europe to see what is in store for the nation should this generation of leaders fail to rein in this Leviathan. The question is whether Speaker Boehner, and other Republican leaders in Congress are willing to do anything about it — while there is still a chance.
Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.
