“To raise or not to raise, that is the question” according to some when it comes to the National Debt Limit. Others are asking if taxes should also be raised, as well as others asking how much should be cut from government spending. While each of these items (and countless others) can be an article in themselves, I want to give you three quick thoughts on the current debate in Washington.
1) Why is the President involved? I understand that the Republicans (who head the House of Representatives) and the Democrats (who head the Senate) have drawn lines in the sand and are doing their best not to be the first to cross when it comes to negotiations, the President nor the Vice President should be involved playing the role of mediator. Federal spending falls under the responsibility of the Congress, with the President only having the bully pulpit and the power of the veto at his disposal. Having him sit at the table is an abdication of power by the Congress to the Executive branch. This is definitely clear by one Republican proposal to allow the President to decide how much to raise the debt limit. The Democrats and Republicans in Congress need to regain control of this issue and take it back to the Capitol Building and do their job.
2) The proposed Balanced Budget Amendment is a mistake, and should not be a part of the negotiations. For starters, it will be very difficult for any debt level increase to pass both sides of Congress as it is. Adding in a Constitutional Amendment (which will require a two-thirds vote) will make any agreement next to impossible to pass. But even with the debt limit portion of the legislation aside, the Federal Government would not be better off with a balanced budget amendment. Each prior proposal contained the same basic language; proposed budget expenditures would have to be balanced against proposed budget revenues – unless Congress chooses to waive the requirement (for whatever reason they choose).
The economic decline of 2009 is an example of why the balanced budget amendment would be worthless. The Federal government had to do debt-spending since tax revenues were obviously less than from the year prior. It was the same for 2010. If there was a balanced budget amendment in place, the government would have needed to cut spending and/or raise taxes to cover the projected deficit in order to be compliant with the law. Their other option would have been to waive the balanced budget requirement, which would have allowed them not to only miss their projected spending-to-revenue projections, but they could also increase spending without any negative ramifications.
During times of a strong economy (when tax revenues are much higher), the Federal government spending can increase as long as they project increased revenues. However, the spending mindset should be just the opposite. The Federal government should hold spending steady (or actually decrease) during these periods, with the added tax revenues going towards the national debt or be returned to the tax payers either through refund checks or a lowered tax rate. Spending shouldn’t increase in line with revenue increases simply because there is money left in the wallet, but that would be allowed under the language of the balanced budget amendment.
3) Lastly, the President is wrong when it comes to Social Security. This week, he stated that if the debt ceiling isn’t raised, Social Security checks might not be mailed to those in need. The Social Security Trust Fund is not a part of the national debt. It will be in the future if changes to the program (either outlays or tax levels) aren’t made, but as of right now, the program is solvent. The only reason why checks would not be sent out is if the President chooses to close down the office where the checks are mailed from. This is his choice, of course, though there is enough “wiggle room” for the Fed to operate in to keep most of the government functions running for months following the August 2nd estimated deadline.
In closing, I hope that the Democrats and Republicans alike put aside the childish playground nonsense and get to work and resolve this issue. Whatever compromises are made by the two sides, government spending has to be decreased, and it needs to be serious cuts in programs in the near-term, and not spread out over the next decade. The games have to come to an end.