Debt Ceiling Increased – the Wins and Opportunities of the Bill

The House and Senate have voted to increase the debt ceiling.  The bill that passed was definitely a compromise. Before I get into the wins and opportunities of the bill, let me just take a second to clarify what is worst about the outcome of this bill and what the democrats stood for in this debate.

The saddest thing about this deal is that we could have saved trillions of dollars against the baseline by simply freezing our budget. Instead, they assume about a 7.5% annual budget increase and their “cuts” are against the 7.5 increase baseline.  As my father said once, “you can never ‘save’ money when you are spending it.”  If you buy a $100 sweater for $75, you did not save $25, you spent $75.  You may have paid $25 less than the proposed value, but you still spent $75.  The United States may have ‘saved’ a few trillion dollars in this debt deal, but they are still spending many more trillions!

The democrats did not support balancing the budget, they wanted to increase the debt limit with no restrictions. People may think I am mean because I am a republican who wants big budget cuts, but I’d rather be mean than reckless.  Democrats ASSUME that we will always be able to borrow money, but would you borrow to someone that owed over $14 trillion and was borrowing roughly $100 billion more every month?  Do you really feel like someone in that much debt is going to pay off their debt?

The reason our credit rating is potentially going down is because we are not a great investment and it does not appear that we are going to pay our debts back.  Our economy grew 0.4% last quarter.  That is not the kind of return you are looking for as an investor.  Russia’s leader called the United States a parasite on the world economy today.  If countries stop borrowing to us, we’ll either have to stop paying for medicare and social security, because we will not be able to afford it, or we’ll have to print money and have massive inflation.  I feel the RESPONSIBLE thing to do is to make the tough decisions now, to avoid a crisis tomorrow.  Wouldn’t you rather see someone get 90% of medicare for the rest of their life than 100% for two years and then 0% afterwards?  I am not mean, I care about those people that are relying on a promise that may not be kept.

Hopefully this debt deal is a really small step in the right direction.  Below are some of the wins and opportunities of the bill.

Major Wins:

• America did not default on paying the bills.
• There were no tax increases.
• President Obama did not get a blank check.
• There are some measures in place to look for more cuts.
• There will be a vote for a balanced budget amendment (which was previously tabled by Senate democrats).

Major Opportunities:

• The cuts weren’t large enough – from what I read, there will only be $7 billion in cuts in 2012 and $3 billion in cuts in 2013 (less than 0.1% of the budget).  I could cut that in the blink of an eye and no one would even notice!
• The debt ceiling increase was one of the largest, if not, the largest in United States history.
• President Obama will not have to talk about it again before the next election because of the large increase to the ceiling.
• Spending is still increasing, as was explained earlier.
• There was no transformation on the way Washington works or views taxation and spending.
• We are still the laughing stock of the world (seriously think about watching this from the outside – we are a smart nation who has elected leaders that do not believe in having a balanced budget, despite massive debt!).  They are looking at us like I look at Greece!

The Tea Party did some great things to make this an issue.  The Republicans were in a tough spot and because of their commitment to their beliefs, the democrats knew they had to give in if they were ever going to pass a bill.  So, it was the convictions and principals of  the tea party candidates that made this a better deal, not their politics.  The deal is not even close to perfect, but I hope all of the attention on the debt ceiling puts pressure on candidates in the fall of 2012 to pledge that they will balance the budget.

Spending Cuts in Washington – It Has to Hurt

Really…are we still talking about the spending in Washington?  I know it is more complex than this, but essentially we are spending more than we are earning.  There is fear of a government shut down in early March because we are running out of money because Democrats aren’t willing to make tough cuts to the budget.

On February 5, 2010, I wrote an article with a catchy name, “House Raises Debt Limit” that discussed how Congress raised their debt limit to $14.3 trillion (only a year later, Democrats want to increase it again).  When Congress voted for it last year, every Republican in the House and Senate voted not to increase the debt limit in addition to the 30 Democrats in the House that didn’t want to raise the debt limit.

The Democrats had an entire year to figure out a budget that would not cause a shut down, but they refused to do so.  Instead, they decided to make Republicans offer budget cuts and then attack them for being mean or unfair.

In 2001, our debt was $5.1 trillion – in just 10 years, our government has essentially tripled our debt.  President Obama’s response – a spending freeze.  When he first got into office, he ran a massive deficit and now he wants to freeze the spending at a level that adds $trillions to our debt every year.

Looking at our budget, 63% of our budget is Medicare, Social Security, and Defense.  Even if our government cut all discretionary spending, with the increases in Medicare and Social Security alone, by 2020 we’d still have a $600 billion annual budget shortfall.

The government has to attack all areas, but no one wants to make cuts.  Agriculture wants to keep up their subsidies, Education always says they need more money, Social Security doesn’t want to stop paying people, and the list goes on.  Spending cuts are not going to be easy – you know we are going down the right path when the spending cuts hurt because to get down to where we need to be, it is going to have to hurt!