What actually happened last week on the debt ceiling? Did John Boehner and the Republicans cave to President Obama and the Democrats? Or did they wisely re-sequence the whole fiscal debate?
There are three big deadlines that face the nation's fiscal health in the next five months or so. In order, they are first, the debt ceiling, second the postponed sequester and third, the expiration of the Continuing Resolution.
These terms are not familiar to many, in part because they're complicated and in part because the policymakers prefer to be the only parties who understand them, and the more the public is confused and in the dark, the more latitude they have in making policy.
Hitting the debt ceiling means that the federal government has borrowed as much as it is permitted by Congress to borrow. That amount has skyrocketed during the Obama years, although it began its sharp rise during the Bush years. In George W. Bush's eight years, it went from just under 6 trillion to about 10 trillion. In Barack Obama's four years, it has gone from about 10 trillion to over 16 trillion. That's an obviously unsustainable path of increase — and more than double George Bush's rate. No wonder that the increase that Congress approved in 2011 was reached so quickly.
When will the debt ceiling be reached? That depends on statistics from the US Treasury Department, and Treasury Secretary Geithner says that the limit was reached about December 31, and conveniently just after the Presidential election. But because money comes into the federal government at a faster rate at this time of year, there's still enough to cover interest and other expenses as they become due. That will no longer be the case in another four weeks or so, and if nothing were done about it, some bills would need to be left unpaid, at least temporarily. Who gets to decide which bills get paid and which ones get deferred? Why the Executive branch, meaning the President and his cabinet departments. Would they possibly play politics with which ones get paid and which ones don't? You can count on it — just like a school board facing a budget shortfall . They always threaten the most popular programs, so that taxpayers accept a tax increase as the inevitable cost of continuing those programs. You can count on the same kind of demagoguery from the Obama administration. It already started with their saying that not raising the debt ceiling risks default on our sovereign debt, putting the full faith and credit of the United States in play. That's nonsense, and the President and his treasury secretary know it — but it's useful rhetoric with which to frighten the American people into supporting higher taxes, which of course Democrats like to euphemize as revenue.
As it stood at the beginning of last week, the debt ceiling would have been the first deadline reached — and probably the hardest to negotiate.
The sequester is the set of harsh cuts imposed as result of the inability of the foolishly-named Super Committee last summer to reach a deal. They were thought to be such heavy-handed and arbitrary cuts that the Super Committee would work out fairer and better cuts, but it didn't turn out that way. Those cuts come into play on March 1. There's some advantage in letting them happen. First, the worst effects they produce don't occur immediately.
Second, they truly do lower spending, which absolutely must be the number one goal of all of these measures. Once those lower levels of spending are set, they constitute current law. A new and higher budget would be required for even partial restoration — thus forcing the hand of Harry Reid's irresponsible Senate finally to enact a budget The threat to escrow Senators' salaries if a budget is not passed just adds a little common sense pressure, since merely obeying the law doesn't seem to be a sufficient incentive for the Senate to do its work. A budget is one of the clear requirements to return us to fiscal sanity.
The continuing resolution's expiration on March 27th means that, in the absence of a new budget, the government will need to start a partial shutdown or slowdown in spending. And this adds to the pressure on the Senate to pass a budget.
This week's house vote to extend the debt ceiling limit to a date in May rather than to a new dollar level takes the debt ceiling debate out of the first position in the time sequence and puts it in the last — which is where it logically should be. Now the House and Senate can work out a budget first, which then eliminates the need for a Continuing Resolution extension, and once a budget is in place, attention can properly turn to the debt limit. It's not the political loss for Republicans that some pundits have posited. Many of my best friends in the conservative movement have harshly criticized it. But it's actually a win for fiscal sanity.
(Colin Hanna is President of Let Freedom Ring, USA and a regular commentator on American Radio Journal. Find him on the web at www.letfreedomringusa.com.)