As the amount of government debt increases each year, Congress has increased the limit. It is an historical fact the debt limit goes up, 10 times in the last 10 years. In the past, sometimes raising the limit was a routine and perfunctory increase and at other times, there was some opposition and political maneuvering.
A failure to raise the debt ceiling has never happened and would result in the government being unable to fund all the spending which it is required by prior acts of Congress. If there can be no more borrowing, the government must cancel or delay some spending, a situation sometimes referred as a partial government shut down.
The problem, of course, is not the debt limit. The problem is the underlying spending and revenue regime done by the government necessitates the increase. The government’s only covers about 60 percent of its operating budget by taxes. It has to borrow about 40 cents of every dollar it spends. It is a mathematical and economic certainly this cannot be sustained.
The amount of the debt and its trajectory should be of great concern. It continues to grow, about $4 billion a day. Interest on the debt must, of course be paid. Currently low interest rates have masked that problem but when the interest rates turn, and they will, it will place more burden on the finances of the government.
President Obama has presided over the largest run up in debt in American history. There is not even a close second or third by that matter. When Mr. Obama was sworn into office the total debt was $10.625 trillion. As of this week, it stood at $16.431 trillion. (There is a very tiny amount of obligations not subject to the limit, thus the total amount is over the statutory limit). That is quite a jump in less than 4 years even with the recession.
It is hard to contemplate the magnitude and it is not going to get better. Red ink, deficits, and negative accounts as far as realistically anyone can project. The total debt will surpass $17 trillion before the end of the year. What happens when demand for the debt ebbs, decreases, stops-be it from the Mid-east, China, Japan, our own citizens? Oh, boy, that would be a mess.
If the debt increase is not sustainable, there must be some action to at least curb its growth, how can it done?
Congress just passed legislation for the most part settled the differences on tax rates that have dominated the political discussion, really, since Mr. Obama took office. As a result the federal government can expect about an additional $60 billion a year or about 15 days of deficit spending. In the latest round of conflict resolution, there were no new spending reductions and what was in place in the form of the Budget sequester was delayed, neither party having the fortitude to allow or insist on the previously agreed reductions. However, it was clear at no time did the President champion any spending reductions.
So there it is. Liberals refuse to address the spending issue. Mr. Obama says he is not even going to discuss or negotiate the debt limit. Mr. Obama either believes the amount of debt is not a problem, is willing to take the risk that it will not hurt the country on his watch or does not care as long as the largesse of the government and a growing reliance on it continues. I do not know which one it is but any of them are feckless and dangerous policy.
Mr. Obama says he wants a balanced approached to deficit reduction. He got his revenue increases, albeit inconsequential. He got the evil wealthy. If Mr. Obama is sincere about reducing any, and I mean any, spending programs, show some specifics. I mean, where is the beef? Show me the money! Since entitlement programs, which comprise the bulk of all federal spending, are off the table, according to the Democrat Leadership, what is on the table? Inquiring minds need to know.
Conservative Republicans have a different philosophy, although generally when it has involved actual reductions in spending, there has not all that much difference between the parties at times. However, that notion has now changed after the tax increases enacted at the end of the year. Republicans are contemplating using the debt limit as a leverage point to get the liberals to enact or at least address spending. Normally, I would not support this kind of tactic on the debt limit but I understand the frustration of the conservatives. Taxes have gone up, now where is the spending cut to balance the equation, to balance the approach? Good question.
What do they have to do to bring things more into whack? How do they get the liberals and the ultra-liberal Obama to follow up on their rhetoric? Perhaps, the Democrats just ought to say what we mostly know, and that is they have in intention, no intention whatsoever to do anything. If they do, then let us see it. If not, then the debt limit will be quite a tussle.