Virginia Candidates React to Debt Ceiling Issue
By E M Barner | Tuesday, May 17th, 2011 | PoliticsOn Monday, the U.S. reached the debt limit previously set by Washington lawmakers. The Treasury Department is buying time by temporarily borrowing from federal employees pension funds to continue making interest payments on our debt. This measure, among others, will only carry the government until August 2nd.
The threat of reaching the debt ceiling has become a political football in Washington over the last few decades. Traditionally, the party in power talks about the need to honor our obligations and the minority party talks about the need to make responsible decisions to limit overspending. Inevitably, a debt limit increase is approved – usually in conjunction with other legislation.
That the U.S. has a debt ceiling at all is unusual. Most countries routinely increase debt levels without requiring lawmakers to approve an increase in the overall amount being borrowed.
The debt ceiling is typically explained as a sort of credit limit. Except, unlike your credit card limit, this one is set by the borrower – not the lender. Nevertheless, exceeding the limit puts the country in a dangerous financial situation, decreasing investor confidence in our ability to repay and likely driving interest rates on Treasury bonds up, which in turn reduces the availability of capitol for private borrowers.
Virginia Senate candidates have reacted strongly to the prospect of another increase in the debt limit.
Following House Speaker John Boehner, George Allen argued that Republicans should use the debt limit increase to obtain significant real cuts in federal spending. Boehner wants the cuts to be one-for-one: in other words, for every dollar the debt ceiling is increased, one dollar of federal spending would have to be cut over the next five years.
Tim Kaine has challenged Allen’s current position, arguing that Allen routinely voted to raise the debt ceiling when he was a Senator and never sought to tie those increases to commensurate reductions in spending.
Jaime Radtke says that Virginians she’s talking to don’t trust Washington to actually reduce spending and that the debt ceiling shouldn’t be raised. “When you are in a hole… stop digging,” she said in a press release yesterday.
E.W. Jackson, Chesapeake conservative and recently announced Senate candidate pledged never to vote to increase the debt ceiling and challenged his fellow Republican senate candidates to take the same pledge.
Simply opposing the debt ceiling increase, however, leaves serious questions unanswered. Candidates who categorically oppose the increase must provide a plan for how the U.S. should handle a situation where we are unable to borrow further and yet 40% of the budget relies on borrowed dollars. If we are unable to meet our obligations, where will we default first and what impact will that have on the economy. Some legislation has been introduced in the House, such as H.R. 1908, which attempts to govern how the Treasury would allocate funds in the event that Congress fails to pass an increase in the debt limit. Likewise, candidates who support increasing the debt limit should give voters real answers as to how their position deviates from business as usual in Washington and what they would do differently to ensure real long-term reductions in the overall federal debt burden.
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E M Barner, the blogger formerly known as DCH / De Civitate Hominis (“concerning the city of man”), writes from a Northern Virginia perspective. Barner has been active in Republican politics and policy since 1994 – as a grassroots volunteer, party leader, and professional.
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16 Responses to "Virginia Candidates React to Debt Ceiling Issue"
Not raising the debt ceiling is simply not a credible position. The fallout from US Government defaults would be catastrophic, global, and would undo the incredibly fragile recovery we’re currently experiencing.
Obviously we need to look at a plan to reduce our debt, but responsible people – should they find themselves in debt – don’t default, they work with their lenders to come up with a plan to pay it off.
Ultimately we need to put everything on the table: spending cuts, including defense; entitlement reforms; AND tax increases. It’s the only responsible way to deal with our current budget shortfall.
Evan,
Responsible people also stop borrowing when they find they have too much debt. Apparently reaching the debt ceiling wasn’t quite a catastrophy since we have reached it already.
If the U.S. defaults on its debt obligations it won’t be because the debt ceiling wasn’t raised, it will be because someone consciously decided to default. I do NOT mean that the ceiling inevitably gets raised, what I DO mean is that someone would have to decide not to pay interest on the debt so that they could keep spending money on all of the other things that they consider “necessary”. Someone would have to decide to keep writing checks to utilities for electrical power to keep the lights on in the capital, to fuel companies for fuel to keep government vehicles running, to doctors for medicare payments, etc, INSTEAD of paying interest on the debt. Just because we hit the debt ceiling and the Treasury runs out of accounting tricks doesn’t mean we default on the debt, it just means we can’t borrow anymore money and we have to operate on a cash basis, someone has to DECIDE to default on the debt with a clear intention to do so.
It’s no different than a household, you can claim that you can’t afford to pay your mortgage payments because you run out of cash and max out your credit cards, all the while continuing to pay for your daughter’s ballet lessons, but you are the one who decides where the money goes, you are the one who decides that your daughter’s ballet lessons are more important than your house payments.
As long as the government’s tax revenues (2.16 trillion dollars in 2010) are higher than the interest payments on the national debt (414 billion dollars in 2010, or about one FIFTH of tax revenues) the government can, if it so chooses, avoid defaulting on the debt, even if it is operating on a cash basis. All they have to do is out the check in the right envelope when they are paying their bills.
Saying the government will default on its debt obligations in August is just, whatever, crapola and the usual silly television theater.
“Candidates who categorically oppose the increase must provide a plan for how the U.S. should handle a situation where we are unable to borrow further and yet 40% of the budget relies on borrowed dollars…Likewise, candidates who support increasing the debt limit should give voters real answers as to how their position deviates from business as usual in Washington and what they would do differently to ensure real long-term reductions in the overall federal debt burden.”
This is a false choice, and it illustrates the cognitive dissonance that characterizes establishment political groupthink. It is based on the presumption that we will be able to continue to borrow indefinitely, and that the choices of whether to borrow, and how much to borrow, will always be ours to make. This is also a classic example of the wrong kind of American exceptionalism: the belief that we are special, the world loves us, and we can do any damned stupid, irresponsible and unsustainable thing we want to ad infinitum.
People describe the fiscal bus as headed towards a cliff. In fact, the front wheels of the bus have already gone over the edge. We have already crossed the event horizon for a monetary catastrophe; there is no going back, turning the steering wheel doesn’t do anything anymore. Neither does hitting the brakes.
QE2 will end as scheduled in June. The markets are already pricing it in. The resultant withdrawal of liquidity (free money) is already having an effect on stocks; the bond market is next. Fed dot gov is overextended and cannot meet its obligations, obligations it handed out like candy to garner support and get people elected. Social Security, Medicare, Medicaid, the never ending global war on terror, the never ending and now global war on drugs…the classic implementation of the welfare/warfare state, big government personified, and the antithesis of personal liberty.
A majority of adults now either work for the government or receive some kind of government subsidy. How will they vote? How will they react to the ending of transfer payments? The only question for the establishment political system is: how do we pander to them one more time and get ourselves elected?
My own opinion is that we should have faced a government shutdown on Monday and forced all sides to play their hand now without risking a real government default on the debt. Then we could have played Russian Roulette with an empty and now things will be strung out until August 2nd when the gun we will be playing with will have all of the cylinders containing live ammo.
How about a compromise? If Congress can not come up with an agreement by July 5th (one day after we celebrate the birth of our nation) the government shuts down. Congress would then have a full month left to then deal with the problems they created by playing brinkmanship without their actions resulting in true suicide.
Clearly, since our tax revenues are at an all time low as a percentage of GDP, and expenditures near an all time high, we need more revenue and less expenditures, without putting the recovery in jeopardy. Simply relying on cuts, and leaving defense and Medicare off the table, is absurd. To get both revenue and expenses down to 20% of GDP, a ten year plan is required, and so is growth and development in our economy.
Frankly, it is time for moderates on both sides to shut out the radicals and get to work, and Presidential leadership must assert itself at the appropriate time. This is important for all of us; don’t let the zealots keep us from our national interest.
Mike,
Of course tax revenue is down, the government is 28% of GDP. It only took Obama one-year to increase government spending 25%, why 10 to get it down?
Is that for your Cowboy poetry?
Well John, both republicans and democrats acknowledged that given the Great Recession, federal spending was absolutely required. It is easy to forget that we looked into the abyss, but moved away because of the bailout and the stimulus. Neither was perfect, but no credible economist would disagree. The question now is how fast to return to the Clinton/republican Congress that brought us pay go and a surplus. Great Britain enforced extreme austerity and is back in recession. We can do better, gradually reducing expenditures, increasing revenue, with a goal of expenditures/revenue after 10 years of 20% of GNP. It will take guts and political couragek, but it can be done.
Mike,
I totally agree with you. If I have one disappointment about the TEA party so far it is that the movement has not embraced moderate Democrats to cut defense and other Republican sacred cows. Yes, we need to cut all the stuff that Republicans want to cut, medicare spending and all the rest, but we also need to cut things that Republicans don’t want to touch to avoid raising taxes. TEA doesn’t stand for “Tax me just a little more to avoid defense cuts”.
It scares both Republicans and Progressives that the TEA party might start making deals with Blue Dog Democrats, that’s why Progressives keep trying to associate the TEA party with conservative social issues and the Republicans are happy to let them do it.
Mike,
Oh, I just read the rest of what you wrote, nevermind what I said about agreeing with you //grin//. Yes, I agree with what you said about putting defense on the table, etc, but I don’t agree with raising taxes to make up the difference. Austerity is absolutely necessary, lots of it, right now. Better a little more recession now than worse later. Americans already pay more than enough in taxes. We don’t have a revenue problem, we have a spending problem.
“The question now is how fast to return to the Clinton/republican Congress that brought us pay go and a surplus.”
False premise, which will lead to a false solution that is guaranteed to fail. First of all, the so-called “surplus” wasn’t a surplus at all. There still was a significant deficit when you count Social Security and Medicare NPV, not to mention the ongoing raiding of the also so-called “trust fund” that allowed liars in Congress to claim a surplus. No surplus. It’s a myth, but a comfortable one for most and that is why it gets repeated so often.
Second, the deficit fell for one simple reason: Faux economic growth, fueled by the tech bubble and Greenscam’s easy money Fed. As soon as people realized the tech bubble was unsustainable, it burst, and took tax revenues with it. That is what forced Greenscam to lower interest rates still more, giving us the housing bubble. That brings us to today, doesn’t it?
Look at a chart of the ten-year: it tells you everything you need to know.
http://research.stlouisfed.org/fred2/graph/?id=GS10,
It’s over. No more bubbles = No more tax revenue growth. The only alternative is to shred the tax- and regulatory-state, unleash the creative American spirit, attract capital, and turn America back into a growth engine. Anyone interested?
I didn’t think so.
“If I have one disappointment about the TEA party so far it is that the movement has not embraced moderate Democrats to cut defense and other Republican sacred cows.”
I’m Tea Party. Slash military spending. Get us out of Iraq and Afghanistan. Bring the troops home: today, right now. NOW.
Temporary, you make a lot of sense. However, to a large degree, I think you are wrong on the Tea Party and defense. The same sensible arguement you make over a little austerity now compared to dire consequences eventually if nothing is done applies to defense as well. In fact, our fiscal situation is a greater threat to our national security than anything. There are many Tea Partiers that realize that defense must be on the table.
The best course probably would be to make across the board cuts in a way that is less likely to do economic damage. Even if that means muliple rounds of it and a small raising of the debt ceiling is raised.
However, the “moderates” have PROVEN themselves incapable of doing what is necessary. If that wasn’t the case, you wouldn’t even have the Tea Party. People wouldn’t be looking for people like Jamie Radtke if former electeds governed responsibly. That is just the facts. Apparently only those labled as “radicals” have the guts and the moral compass to fix our national budget. These “radicals” were in a way created by the “moderates” that refused to do their jobs.
In short, don’t raise the debt ceiling. We can’t count on Congress to control themselves with a new debt ceiling beckoning to them.
Well, I certainly accept the view that austerity is required; the point is, when to apply it, and to what. Clearly, increased revenues must be in the mix, as well as reductions in expenditures and cancellation of tax credits. Further, extreme enforced austerity will put us back into recession, and most centrist, business oriented republicans know this. It took a decade to reverse the surpluses of Clinton/Republican Congress pay go, and it will take at least a decade to reverse this debacle created by the Bush policies. The gang of five is on the right track and this consideration will test our institutions and our claim to be “the worst democracy in the world except for all the others.”
I have always looked to BD as a highly credible conservative voice in Virginia. But as someone who regularly reads the Virginia blogs, I couldn’t help but notice what was written by another blogger about BD refusing to cover what she says may well be the most credible challenger to George Allen, Virginia businessman Tim Donner. Is there a particular reason why you have written nothing about this guy? I checked his website out and he seems to really have some gravitas, without all the baggage of Allen.(I even watched a video on his site specifically about the debt ceiling…so he obviously has something to say on the subject.) I also went to check out the Bishop’s website and couldn’t even find one. I have heard he’s been seen at numerous Allen events and now he’s running against his old buddy? There’s something fishy about that. I’ve already looked at Radtke’s website and came away rather unimpressed. Nice lady. Not US Senate material.
Is there something about Donner or his candidacy that I’m not aware of that is leading you to ignore him? Or does this blog have some sort of agenda? If so, I’m just not interested in reading you guys anymore. So what’s the deal??
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