“Don’t Believe The Debt Ceiling Hype”
In a back and forth with WaPo’s Greg Sargent this morning — and with several self-styled conservatives on Twitter last evening (one of whom has, predictably, threatened to block me, ostensibly for violating some Twitter rule I care little about, but mostly because I’ve been pointing out his sneering, brash, almost adamant calls for surrender) — I’ve been pointing to a piece in Forbes by Jeff Dorfman that underscores the theatricality (and dishonestly) over the looming “default” showdown.
Most troubling to me is how many on the right have accepted the necessity of a raise in the debt limit to avoid default — cues they’ve taken from Boehner himself and other GOP establishment types who, like Obama and the Democrats, seem invested in this myth that failure to increase the amount of future spending available, the US won’t be able to “pay its bills.” This is, not surprisingly, false: what a debt limit denial does is force the government to prioritize spending, and as Dorfman shows in his piece, the government can indeed run on a balanced budget if lawmakers and the President are forced to make cuts.
Of course, to most of you this isn’t news. But it bears repeating because, as I’ve repeatedly found in my Twitter exchanges (which have proven nastiest with establicans on the GOP side), not only will many on the right refuse to listen to the reality of denying a debt limit increase, but they actively embrace the demonstrably and constitutionally false premise of imminent default, a move that in fact aids in Obama and the progressives’ own desired end game: a removal of the debt limit altogether in a move that removes House majority authority over spending.
Sargent notes that the House would retain its spending authority. But that wouldn’t apply to monies handed over to bureaucracies, whose growth and reach promises to institute regulations and new de facto (and revenue enhancing) laws.
As much as the politicians and news media have tried to convince you that the world will end without a debt ceiling increase, it is simply not true. The federal debt ceiling sets a legal limit for how much money the federal government can borrow. In other words, it places an upper limit on the national debt. It is like the credit limit on the government’s gold card.
Reaching the debt ceiling does not mean that the government will default on the outstanding government debt. In fact, the U.S. Constitution forbids defaulting on the debt (14th Amendment, Section 4), so the government is not allowed to default even if it wanted to.
In reality, if the debt ceiling is not raised in the next two weeks, the government will actually have to prioritize its expenses and keep its monthly, weekly, and daily spending under the revenue the government collects. In simple terms, the government would have to spend an amount less than or equal to what it earns. Just like ordinary Americans have to do in their everyday lives.
Once the reality of what hitting the debt ceiling means is understood, the important question is: can the government actually live with a balanced budget?
Dorfman argues that of course it can — though naturally some cuts would need to be made. But Social Security is paid by law. Leaving us with enough funding to run the government with modest cuts that take us back to 2003 levels in spending:
The federal government estimates it will collect almost $3 trillion in revenue for the fiscal year that runs from October 1, 2013 until September 30, 2014. Below I demonstrate one possible way the federal government could institute some priorities and spend only the amount it receives in revenue. (All the numbers I use to construct the balanced budget below can be found here.)
To begin with, the interest on the national debt must be paid. I will budget $240 billion for that. The White House is guessing a little lower, but interest rates have been rising, so I will play it safe. Next, social security payments should run about $860 billion. Place that as the second priority and we already have spent $1.1 trillion of the $3 trillion we have.
Holding Medicare spending to about its fiscal year 2013 total and making some small cuts to Medicaid and other health spending would keep health care spending by the government to $860 billion. This does not include additional spending for the Affordable Care Act, but we need to prioritize and I am making it a lower priority than the health spending we have already been incurring. Also, there is no need for extra spending for the Affordable Care Act before January 1 since the coverage does not start until then. So as long as the debt ceiling is raised before then, there is no problem.
Veteran’s benefits will cost another $140 billion if we leave it unchanged. Department of Justice programs and general government functions add another $83 billion if their spending levels are held roughly constant. We can save some money by cutting science funding to $10 billion and international affairs spending to $13 billion which is enough to operate the State Department and embassies, but not pay foreign aid. This takes total spending to $2.2 trillion.
Cutting spending on conservation programs in half and paying only for agricultural research programs (no more farm subsidies) would cost $25 billion. Some moderate cuts to transportation spending bring it to $90 billion. Slicing education spending in half would reduce it to about $40 billion. The total for annual spending is now $2.36 trillion.
Retirement programs for federal employees add $137 billion to our spending. Cutting welfare programs back to basically food security programs (food stamps, WIC, the school lunch program) and housing assistance programs will leave federal welfare spending at $150 billion. Total spending has risen to $2.65 trillion.
That leaves only about $300 billion for defense spending. However, employee contributions to the retirement plan and some miscellaneous offsets that the government does not count as part of the $3 trillion in revenue expected next fiscal year bring in $90 billion per year. That means we can spend about $400 billion on defense and still have a balanced budget. This would reduce military spending back to 2003 levels, before we were fighting wars in the Middle East. Not a small cut, but probably feasible.
Most people will probably complain about one or more of the cuts proposed here. That is to be expected. If you didn’t notice, NASA and the Departments of Commerce and Energy were completely eliminated. Deep cuts were made to some other departments (Education, EPA, Agriculture, and HUD). Welfare spending was reduced. However, the point was not to propose a budget that people loved, but to show that a balanced budget was not completely beyond reason.
That last point [my emphasis] is important to highlight for a number of reasons: first, because it gives lie to the myth of a “budget default” that BOTH parties have and will continue to use as leverage to demand increases in (at the very least potential) deficit spending. But second, it speaks to what our “representatives” are truly about: because things would of necessity be cut, the Republicans fear that they will be blamed for any pain felt by those cuts, even as the “draconian” impact of the sequester cuts — the “law of the land!”, incidentally, that Obama is demanding be refigured as part of any “deal,” — were negligible in terms of public perception, and even as we know that Americans overwhelmingly WANT cuts in spending that lead to a balanced budget.
Or, to put it another way, this is about incumbent discomfort over media coverage that will highlight the suffering of those whose welfare benefits are pared back — and the GOP establishment hasn’t the requisite principles to articulate why exactly these cuts have become necessary in the face of a recalcitrant President who won’t compromise and who insists on ever more deficit spending, even as the dollar falls, taxes rise, jobs disappear, median income plummets, and the cost of fuel (and so of commodities, electricity, and generally living expenses) rises.
I’ve written this before — and I posed it to the GOP boosters who keep insisting the Cruz/Lee strategy was “destined to fail” — but the clear “end game,” for those prepared to follow the bouncing budgetary ball, is this: Should the GOP hold firm (and if Obama is going to reject Susan Collins, it isn’t interested in accepting even the most obvious surrender attempts, believing, with good reason, that the GOP will eventually cave to all its demands, provided he leaves them a fig leaf to claim some sort of victory), there are three possible scenarios that can play out:
1) The President, realizing that a failure to compromise will force him to prioritize spending should a debt limit increase not be granted, will concede the one-year universal waiver on the individual mandate — a waiver he’s already granted to constituents, special interests, and cronies in what amounts to a change in the law as passed; the GOP holds the rhetorical upper hand here, as Obama’s entire propaganda presidency is built around notions of “everybody having skin in the game,” “fairness,” and “social justice.” Giving waivers to some but not to others is the action of a despot, not a President.
2) Obama can choose to allow the debt ceiling to be reached, then either choose to default — and it would be a choice, which in addition to shaking world markets would lead to a widespread populist uprising and is clearly an impeachable offense under the 14th amendment — or be forced to prioritize spending. Now, there is no doubt he would try to make Americans suffer, but that strategy has already backfired, showing what a petulant President and a petulant federal Leviathan is willing to do in order to break the will of the people. And so if he uses monies to fund implementation of ObamaCare while refusing to, say, pay veteran’s benefits, he risks another enormous backlash. And there’s only so long the media can pretend what we are all witnessing is the work of fringe crazies who wish for a return of KKK prominence and the end to any kind of social safety net.
3) Obama can either rely on liberal law professors and a host of leftist “intellectuals” to argue that section 4 of the 14th amendment demands he ignore the House and unilaterally raise the debt ceiling — an “interpretation” of that section that is completely at odds with legislative history and originalist intent — or he can direct Lew to default, causing a potential meltdown of worldwide financial markets. Cloward-Piven realized.
Of course, this would probably end poorly, because it would end, my guess is, in some kind of civic uprising.
Both options 2 and 3 are on their face unconstitutional and therefore impeachable offenses. Leaving the most rational choice option 1, while the most likely choice the first move in option 3: a claim that to stave off “default” the President is protecting the “full faith and credit” of the US by “paying its bills” when the GOP won’t let him do so otherwise.
As I noted before, such an argument is constitutionally dishonest and seeks to conflate appropriations with authorization.
In an exchange in the comments to Dorfman’s piece, this is made clear, as Dorfman answers a critic, whose argument I will include here along with Dorfman’s response:
Dorfman doesn’t seem to grasp that what he is proposing completely flouts the rule of law. The Congress has already authorized and appropriated expenditures at the current level. The President has already signed these into law. Dorfman proposes to ignore all that and to focus on an arbitrary debt ceiling. So, he wants the government to stiff contractors who have already started work, employees who have, in good faith, accepted job offers, local governments who have already started work on federally funded projects, and otherwise inflict massive harm to individuals and groups all to achieve an arbitrary budget goal.
And how is this supposed to work? In Dorfman’s dystopian fantasy, the President would ignore prior Congressional mandates and prioritize spending.
The Constitution does not grant the President that power.
The Supreme Court has ruled twice that the President doesn’t have that power EVEN IF THE CONGRESS DELEGATES IT TO HIM.
Google Clinton v. City of New York, 524 U.S. 417 (1998)
So, Dorfman’s scheme is illegal from the git-go.
A failure to raise the debt ceiling would mean that the government would have to pay bills in the order in which they arrive, using revenue as it comes in, and many bills would simply not get paid. The flow of revenue is inconsistent, so there could be no reliable planning by government or contractors, or beneficiaries of Social Security and other programs.
Finally, Dorfman seems to have some twisted idea of how the economy and government work. He seems to think that cutting federal spending is a worthwhile goal in itself, not matter what the effect on employment and economic growth.
Dorfman is lending his creds as an economist to a destructive movement, the Republican campaign against the US government itself. They are trying to use budget hostage taking to get measures that they couldn’t otherwise get through Congress. It is shameful that Dorfman is providing an academic gloss to this extortion.
To which obfuscatory piffle Dorfman replies [my emphasis]:
Let me correct you.
First, since the Congress has not passed a budget or continuing resolution for the new budget year, most spending has not been authorized, therefore it does not need to be spent. Entitlements are authorized, but we can cover all that with incoming revenue.
Second, if the president has no authority to act except by following Congress, then why has he decided to legalize illegal immigrants who were brought here as children, not prosecute marijuana cases in states that legalize it, arbitrarily change the Affordable Care Act whenever he feels like it, and on and on. President Obama clearly believes as the chief executive he has the right to set priorities for government action. He can do the same thing with spending. President Obama does not agree with you.
Third, I assume that Congress would decide on the budget cuts to balance the budget, not the President, but either could work.
Fourth, I am not saying this should be done, just that it can be done and that the President is lying when he claims failing to raise the debt ceiling forces a default.
Fifth, cutting government spending is indeed a worthwhile goal and would, in fact, benefit both economic growth and employment. The economy was much better when government spending was a much smaller share of GDP.
Finally, why are the Republicans practicing extortion when they try to get what they want while Democrats are not when they block those bills and refuse to budget from their position at all. Republicans have been compromising; it is Democrats who have refused to play nice (or play at all).
You forget that without a budget deal, Congress has not authorized all the spending. Only entitlements and military pay at this point. We can cover those costs with incoming revenue, so no default. Also, I think most economists would only use default for not paying our debt (bonds and bond interest). If doctors have to wait to get their Medicare claims processed, for example, that is not a default.
The pressure to “cut a deal” is being driven by a GOP establishment who fears immediate political backlash, overdetermined in their minds by a liberal press and skewed polls, more than it fears its constituencies or the long-term impact of runaway debt, constant deficit spending, and entitlement programs whose trustees keep telling us can’t be maintained.
Greg Sargent’s “fix” is to grant the President to push for a dissolution of debt limits altogether. Which, as I’ve suggested here and elsewhere is the same as granting the executive legislative spending power, removing the check on spending by a majority House insofar as the President can spend through his agencies and create law never passed by Congress or given appropriations by the House. He replies to me that it was Mitch McConnell’s idea, making the frequent mistake of confusing conservatives with lifelong GOP operatives and climbers who care more about deals than they do about the effects of those deals.
This move is, Sargent’s protestations aside, the creation of a King, though the left likes to use the “parliamentary” model it pushes to disguise what it actually wants: less messy adversarial government, more complete government freedom to centralize, control, and dictate, and an end, in essence, to the constitutional system of separation of powers in every way but the most cosmetic. Sadly, the “pragmatic” GOPers have spent more time essentially arguing those points with progressives than they have ever done anything of substance to defund, delay, or repeal ObamaCare.
They call this “smart” fighting. I call it the rationalizations of those who fear the fight and who lash out at those of us in their camp who don’t — and find their unwillingness to join a sign of capitulation, something we who have supported the Republican Party in the past have come to expect as part of the status quo, particularly under the current leadership.
To which I say no thanks.
So. Go ahead and ban me on Twitter for calling you out on your sneering, “nuanced” attempts to convince me that fighting isn’t necessary — at least not if the “victory” is pre-ordained. And go ahead a keep pushing the absurd argument that the opening conditions of a negotiation — defund — could not have been settled upon as delay, particularly given the risible state of the exchanges and their coding failures, which are systemic and, not surprisingly, part of the way bureaucracies handle complex issues: by fucking them up so badly that they cause even ardent supporters to momentarily express consternation.
The truth is — and I believe many of the GOP “pragmatists” who went after (and continue to go after) Cruz , Lee, and the TEA Party now see this, but they are mired in a defensive posture, guarding the barricades of their egos — had the GOP stuck together, Obama would have still shown himself to be the petulant boy king he is, and the argument that the real “fairness” being pushed here belongs to the GOP, in an effort to prevent implementation of a law despised by 68% of the country, could have and would have made it past, over, and around the MSM gatekeepers.
That they went another way is a shame they’ll be forced to live with. But better to live with the shame than admit to having once again agreed among themselves that this fight was yet another hill not to die on.
Elect more Republicans, we’re told. Which amounts to this: “shut up, Hobbits; get stuffed, base; we need a big tent, and we’ll never get one so long as while you’re in it, you continue to act as if you have some equal say in how it’s run. That’s Karl Rove’s job.
“Now. Be quiet and get your asses in line.”
Thanks, but I’ll pass. When I see progressives and GOP boosters agreeing on nearly anything, I grow dubious of the motivations of both. This of course means I’ll never get my “Colin Powell Republican’s Bi-Partisan For It’s Own Sake” card; but it also means I’ve never voted for Obama, and I won’t let the progressives control the narrative, then pretend that narrative control is some feature of fate, inevitable and preordained, never to be breached or reversed or torn down and replaced.