By Steve Vaughan
It’s said that the definition of insanity is continuing to do the same thing over and over and expecting a different result.
I don’t want to call the new Republican majority in the House of Representatives crazy, but if the shoe fits…
There’s a fairly good chance that we’re headed for another government shut down in the next few weeks. Like the one in 1995, it will be precipitated by the Republican House unwilling to compromise and negotiate with a Democratic president over the budget.
The 1995 fiasco blunted the momentum of 1994’s GOP “revolution,” put then President Bill Clinton on the comeback trail and guaranteed that he’d be re-elected fairly easily in 1996. Although some Republicans are quick to say that Clinton was responsible for that government shut down, it’s a fact that Republicans took the blame.
They’ll take the blame this time too. One reason for that is that so many of them are willing to go on the cable and network chat shows and appear to be salivating at the prospect of shutting down the government.
Since Barack Obama is already better situated, in terms of job approval ratings, than Clinton was in early 1995 and because Republicans have no clear favorite to rally around for 2012, Obama’s re-election chances will greatly improve if Republicans force a show down.
The odd things is, Republicans seemed to recognize this oncoming train, but still failed to get out of the way.
After winning control of the House last November Republicans, including new Majority Leader Eric Cantor (R-7th), said they’d learned from the mistakes Republicans made the last time they were in the majority. Cantor, in particular, said he didn’t believe the Republicans had won a mandate for their philosophy, but instead had benefited from an electorate unhappy with the Democrats.
He said that the voters would be watching the GOP with a wary eye. All indications are that Cantor was right.
He and other Republican leaders swore that, once in office, their first priority would be job creation and getting the economy turned around.
But it’s not where Republicans have centered their efforts.
First, they launched a symbolic effort to repeal health care reform, although they knew they didn’t have the votes to pull that off. That’s okay, that was a campaign promise and they owed the Tea Party voters who’d put them into office at least that much.
But once that was done, did they go about their proclaimed mission of helping the economy and creating jobs?
No. They started filing a lot of bills on social issues. Concerned that the Hyde Amendment, which bans the use of federal funds for abortions, didn’t quite ban it enough they attempted to redefine the word “rape” in the federal code to preclude what’s often called “date rape.”
I can’t recall any Republican candidates running last year on the platform of redefining rape.
Just as they did in 1994, Republicans have filed a lot of bills dealing with abortion, guns and immigration. None of those are among the top items voters say they want to see addressed.
None of them was even very important for the Tea Party.
The one area where the new Republican House has tried to toe the Tea Party line is the one that may be about to get them in a lot of trouble with the rest of the country politically. That’s cutting spending.
The Tea Party, and thus the Republican Party, is very concerned about the federal budget deficit.
That’s not surprising. Any time we have a Democratic president and a deficit, Republicans become fiscally conservative and swear that debt will bring down the country.
That’s despite the fact that former Vice President Dick Cheney said, “the one thing we learned in the Reagan administration is that deficits don’t matter.” I assume what Cheney meant was “when we have a Republican president deficits don’t matter.”
Because they certainly didn’t matter to Republicans during Reagan’s presidency. Or George H.W. Bush’s. Or George W. Bush’s. In fact, deficits were so unimportant during the last administration that Congress let the president — for the first time in the nation’s history — cut taxes while we were at war.
But, since we now have a Democratic president, deficits matter again.
And the fact is that the deficit does matter. But it isn’t the only thing that matters. There’s nothing wrong with debt that builds infrastructure that we’ll need to be economically competitive in the future. There’s also nothing wrong with taking on debt temporarily to get the economy moving again. Republican Gov. Bob McDonnell’s has cited both those principles in pushing his $4 billion roads plan, largely paid for with debt.
After all, the best way to reduce the deficit is to grow the economy. That’s how Clinton — and a Republican Congress — created a surplus in the 1990s.
Thrift is a virtue in times of poor harvests. But there’s difference between thrift and eating your seed corn, which is just cheap, short sighted and ultimately counter productive.
That’s the case with the Republicans insistence on cutting $100 billion out of the rest of this fiscal year’s budget. They’ve decided to take it all out of discretionary domestic spending. That means deep cuts in programs like home hearing assistance and community block grants. It means scoring points with the Tea Party folks at the expense of the poorest and most vulnerable Americans.
That seems particularly mean-spirited when Republicans just got through fighting for the country’s top earners to keep the huge tax break Bush gave them in a time of war. Those are the same top earners who have seen their share of the nation’s wealth increase dramatically over the last 30 years. They not only expect other people’s kids to fight their wars, they aren’t even patriotic enough anymore to be willing to pay taxes to fund those wars.
Obama compromised with Republicans on the Bush tax cuts. He’s compromising too on spending cuts. He’s proposed a budget that will cut about $1 trillion out of the deficit in ten years. That proposal wasn’t made without making cuts unpopular with the president’s own constituency.
That’s why he, like Clinton, is going to emerge from the battle of the budget looking like the sober adult, while Republicans, as they did in 1995, run the risk of looking like spoiled children.
Or worse.
Some Republicans are actually proposing a fight with the president over extending the country’s debt capacity later this spring. If that happened, the country might have to default on some of its debt.
China, which holds a lot of our debt, doesn’t need to worry. If what Republicans have done and are doing at the state level is any indication, China will get their money. Federal retirees and employees and Social Security recipients will be the ones left holding the bag. That, to some Republicans on the Tea Party fringe, seems like a good idea.
To the rest of us, that seems like an all-too-familiar insanity.
Cross posted at Virginia Pundit
VIVIAN J. PAIGE | All Politics is Local 
Why would the country have to default on its debt? If one stops borrowing more money, does that automatically mean one stops paying off his debts?
We are close to half way through FY11, and the government is running a deficit. We also have to roll-over old issues. Like corporations, the government has to finance current assets (think taxes receivable). They don’t do it with commercial paper though. Treasury shows their auction schedule online. If they didn’t need the money to finance government, they wouldn’t be scheduling auctions.
The larger issue is that Treasuries are used as a risk free interest rate in a lot of financial calculations. If investors think that politics trumps the full faith and credit of the US, that’s not good for US capital markets.
It’s not quite that simple. The debt continues to grow because of accumulating interest. If you don’t raise the ceiling that creates a problem because that additional debt is unauthorized. Also, no one, neither Obama nor the Republicans, is proposing a budget in which we will be in a posture of actually paying down our debt anytime soon.
Please. The interest on the debt for FY2010 was $196B. Our total receipts were $2,333B. So the interest on the debt was 8.4% of receipts. Interest and principal might be 10-12% of receipts.
The problem is not interest on the debt, but overspending.
That only happens if we have a balanced budget, and even then, a balanced budget isn’t even truly balanced because of how government accounting works. If we don’t raise the debt ceiling, we default on our debt, even with a “balanced” budget.
I have to agree with you on this one Steve, I think it all really boils down to this;
If the GOP had a chance to bring unemployment down to 5% by working with the President, they wouldn’t do it just because it would ensure his re-election. They and the Tea Party care more about defeating Obama than they do about helping the country and that is very, very sad.
Just as an anecdotal piece of evidence, Karen Hurd, the former chair of the Hampton Roads Tea Party, told me she would not use and suggests no one uses Richmond Sunlight because it is run by a “leftist.” It was quite possibly the dumbest thing I’ve ever seen her say, and I’ve seen her say and do some pretty dumb things.
Thanks for the laugh, Max. I really needed that 😉
“If we don’t raise the debt ceiling, we default on our debt, even with a ‘balanced’ budget.”
Why is that? Why can the federal government not make debt payments of 12% of its revenues if we don’t raise the debt ceiling? It just makes no sense.
“If the GOP had a chance to bring unemployment down to 5% by working with the President”
How was that? The DEMOCRATS controlled the House and Senate for TWO YEARS, including a nearly filibuster-proof 59 seats in the Senate. (Sens. Snow and Collins of Maine could usually be counted on to vote with the Democrats.)
What were the Democrats unable to do because of the Republicans?
You have to look at how our budget is structured which is totally asinine. If we were using generally accepted corporate accounting standards we would have defaulted a long time ago. The simplest way to explain it is by saying that we are working on the FY2012 budget right now, the 2011 budget is already done (not really, but for arguments sake lets say it is because under normal circumstances it would be). If we balance the 2012 budget and don’t raise the debt ceiling we default because the 2011 budget has a huge deficit. Even if we cut massive amounts of spending right now, some borrowing has already been locked in because the government doesn’t just borrow money on a second by second basis as it needs it.
Another thing to take into account is that right now government spends 1/4 dollars of our GDP, if they balanced the budget, unemployment would skyrocket in the short term and so tax revenues would decline dramatically. You can argue that government is too big, and I’d agree with you, but you must then recognize that cutting it will send tens or hundreds of thousands to the unemployment line.
As for what you say about Democrats, I was merely making saying that in theory, if the GOP could work with the President to make progress, they wouldn’t do it. Their entire strategy is for him to fail regardless of whether or not he has a good idea. Both parties do it, so its not just a GOP problem, but an American problem.
So Congress passes a law requiring the Treasury to pay debt obligations first, and we don’t default.
“if they balanced the budget, unemployment would skyrocket in the short term and so tax revenues would decline dramatically”
That simply makes no sense. First, where does the government get the money it borrows? Those lenders will have to find somewhere else to put their money — like investing in businesses. Second, even two jobs were lost for every government job cut, there would still be a net gain to the government. Last, a huge portion of government spending is paying people to NOT WORK. Cut that, and people WILL work to feed themselves and their families — and tax revenues will come in.
The government gets the money from the FED who just prints it or from China. Neither of those would invest their money elsewhere in the US if we stopped borrowing. China might invest some, but it wouldn’t make a big impact.
If the Treasury passed a law simply saying that, we would still go bankrupt because of the 5 trillion in intra-governmental debt, 2.5 trillion of which being social security, that would have to be paid back immediately leaving no revenue left over to pay debt to other creditors. Yeah that’s nitpicking your words, but be careful what you ask for because it might come true.
You act like there are actually jobs waiting for people on welfare, there aren’t. Real unemployment is hovering around 20%, so you are wrong if you think everyone on welfare could magically get a job if they wanted to.
As for your statement;
“even two jobs were lost for every government job cut, there would still be a net gain to the government.”
I don’t understand what you are trying to say, but ff the government cuts two jobs, two people are unemployed. Even if there were jobs out there, it wouldn’t happen overnight. The “free” market may be great and all, but it doesn’t operate instantaneously. The market will not pick up where the government left off overnight. It just doesn’t work like that.
Cutting welfare and other benefits would also have a massive negative short term effect on economy as all that money won’t magically be taken up and used efficiently by the private sector. Maybe in 6 months to a year things will improve dramatically, but in the interim the government will have greatly reduced tax revenues which again would contribute to a default.
You are trying to oversimplify a massively complex problem. It took us decades to get here, there is no simple answer.
“we would still go bankrupt because of the 5 trillion in intra-governmental debt, 2.5 trillion of which being social security, that would have to be paid back immediately”
Why would that money need to be paid back immediately. If we don’t raise the debt ceiling, I won’t go demanding my Social Security payments back. Will you?
The way social security works is that your payroll taxes go to pay beneficiaries and then any extra money is sent to the general fund. Most people think that they go to the Social Security Trust fund, but that is hardly the case.
The fund gets credited with government securities equal to the amount of excess payroll taxes. These are nothing more than government IOU’s and cannot be used to pay benefits. Right now we owe the trust fund 2.5 trillion, so when anyone says social security has a massive surplus, it is actually a massive debt because the so-called surplus is denominated in government IOU’s.
That debt, along with other trust funds and money owed to the Federal Reserve, makes up our intra-governmental debt.
You’re entirely correct there, Max, but none of that intragovernmental debt would need to be repaid immediately if we don’t raise the debt ceiling. In fact, it doesn’t have to be repaid at all, ever.
Just as an anecdotal piece of evidence, Karen Hurd, the former chair of the Hampton Roads Tea Party, told me she would not use and suggests no one uses Richmond Sunlight because it is run by a “leftist.” It was quite possibly the dumbest thing I’ve ever seen her say, and I’ve seen her say and do some pretty dumb things.
Ha! Over four years of running Richmond Sunlight, and that’s the first time anybody has ever said anything like that, to my knowledge. (Honestly, I’ve got a tough time imagining how I’d make it partisan. Secretly change the words in some legislation? Delete legislation that I oppose?) If she wants to limit herself to the General Assembly’s site, that’s her business, but she might be careful—I’ll bet some of the folks who run that site are “lefists,” too!
The really funny thing is that the Hampton Roads Tea Party links to Richmond Sunlight on every page on their site, so apparently Ms. Hurd hasn’t spread the word very far. 🙂
I said almost exactly the same thing about how you could possibly make it partisan. I consider my self a pragmatic libertarian and ever time Karen Hurd says something I’m reminded why I can’t stand the Tea Party almost as much as I can’t stand the Republican Party.
Sir, we are never going to solve this trillion dollar deficit if we don’t cut funding for the Corporation for Public Broadcasting, Americorps and foreign aid (you hear that Israel and Egypt). If we need to furlough government employees to demonstrate this point, so be it. Qu’ils mangent de la brioche! For spice I’d add to that: on their fat government salaries. But I don’t know how that translates into French. =)
CPB: $422M
Foreign Aid: $55.2B
Americorps: $5.7B
The total for those three is $61.4B. Our deficit is $1645.1B for FY11. You have $1583.7B to go.
For other spending amounts, look to the second link. Simply put, most of our spending is in Welfare — either direct aid or medical aid: $1370B. That is where the budget must be cut.
Warren: I agree that entitlements would have to be on th table to make any meaningful dent in the deficit.
Neither the president nor the House Republicans are addressing that though.
They are suggesting various levels of cuts in “domestic discretionary spending.” There isn’t enough money there to balance the budget.
I continue to think the best way to balance the budget is to get the economy moving again. Given out political cutlure growing our way out of the budget hole is more likely than either cutting or taxing our way out.