Debt Ceiling Deal Does Nearly Nothing
NEW YORK — There is plenty to dislike about the recently enacted bipartisan deal to cut spending and reduce the national debt. For starters, it neither cuts spending, nor reduces the national debt. After weeks of federal hand-wringing, taxpayers should hope that our masters in Washington become serious about slashing spending. If not, this republic will implode, not eventually on “the children,” but soon atop today’s struggling adults.
“The budget deal doesn’t cut federal spending at all,” Cato Institute analyst Chris Edwards explains. “The ‘cuts’ in the deal are only cuts from the Congressional Budget Office’s ‘baseline,’ which is a Washington construct of ever-rising spending…The federal government will still run a deficit of $1 trillion next year. This deal will ‘cut’ the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent.”
Edwards observes that Washington’s “cuts” rarely reduce anything. President Obama, for instance, proposed boosting the Corporation for Public Broadcasting from $432 million this year to $451 million in FY 2012. However, handing CPB $441 million would constitute a $10 million “cut” In Washington versus a $9 million increase in the real-world.
Thus, as Edwards vividly illustrates at Cato’s downsizinggovernment.org website, these budget “cuts” actually raise federal discretionary spending non-stop for the next 10 years — from $1.04 trillion in Fiscal Year 2012 to $1.23 trillion in FY 2021.
As for red ink, Washington just extended the federal credit card’s limit from $14.3 trillion to $16.7 trillion. In 2021, the national debt is expected to reach $22 trillion — a figure 54 percent above $14.3 trillion. What debt reduction?
Washington refuses to learn what millions of overextended Americans recognize daily: One cannot escape debt by tunneling ever deeper into it.
Fitch, Moody’s, and Standard & Poor’s monitor all of this and are weighing whether or not to scrap America’s sterling AAA credit rating. A debt downgrade would hammer national prestige, hike interest rates, and heap short-term agony on an already achy nation. However, such a startling development may supply the face-down-in-the-gutter moment that Washington’s bipartisan spendaholics desperately need to hit rock bottom, grow up, and enter rehab. Everything else has failed during the Bush-Obama era of the ever-expanding state.
Meanwhile, the Select Committee that will spring from the debt deal may generate some good news amid these shadows. As it seeks at least $1.5 trillion in spending cuts by November 23, it should act boldly to improve America’s fiscal outlook:
•A staggering $703 billion in allocated but unspent revenues languish in federal accounts. Several Republicans have sponsored bills to shift this K2 of cash from dust collection to debt reduction. I have addressed these forgotten funds so often that my computer keyboard hurts. Will the Select Committee finally listen?
•The Catalog of Federal Domestic Assistance includes the People’s Garden Grant Program, Appalachian Development Highway System, and 2,182 other federal subsidy programs. Many of these should be terminated rather than trimmed, so they never return to menace taxpayers.
•The Select Committee should padlock entire departments (Agriculture, Education, and Housing, for starters), privatize other agencies (FAA, National Weather Service, NPR), and devolve many more to the states via block grants (Medicaid, Food Stamps).
•The Select Committee should raise and index the Social Security eligibility age from 67 to 68 for those born in the 1960s, 69 for children of the ’70s, etc. Medicare’s age-65 threshold similarly should be modernized for these cohorts. Old-age benefits should reflect life expectancy today, not in the 1930s and ’60s, when they were concocted.
“We are less than three years away from where Greece had its debt crisis as to where they were from debt to GDP,” former U.S. Comptroller General David Walker told CNBC Tuesday. “We are not exempt from a debt crisis,” he added. “We have serious interest rate risk. We have serious currency risk. We have serious inflation risk over time. If it happens, it will be sudden, and it will be very painful.”