Forbes: The Basics of Economic Reason
By Guest Post | Sunday, July 24th, 2011 | PolicyBy Congressman J. Randy Forbes
No nation, business, or individual can escape the pain of spending more than it makes. This is basic economic reason. If you spend more than you make, you go into debt. If you cannot pay your debts, you risk default. When you default, there are painful consequences. This is the first lesson we learn when creating a budget – you cannot pay out more than you take in. This is the principle that we teach our children when it comes to finances. This is the principle used by every successful business.
What Americans do not understand is why the federal government believes this principle of economic reason applies to everyone but the federal government.
The federal government is in the middle of a spending crisis. This year, the federal government will spend twice what it spent just ten years ago, and more than 40% of it is borrowed money. In the past two-and-a-half years alone, the government accumulated the same amount of debt that it took the United States 216 years to accumulate.
The federal government reached its current debt limit of $14.3 trillion on May 16 of this year. Treasury Secretary Timothy Geithner has indicated that he can keep the country out of default until August 2, at which point he will need to begin prioritizing payments to be made on the United States’ outstanding financial obligations.
Today, we are feeling the pain of past decisions. The national debt has become a cancer on our economy, choking job growth, threatening our national security, and hampering our global competitiveness. Attacking this cancer at its roots means cutting spending. If we do not, the United States will face a future that we do not recognize, and our children and grandchildren will shoulder the crushing burden of our debt.
Though the government has already wasted valuable time in confronting this fiscal crisis, it is still not too late to change course. Today, nobody can deny that Washington can no longer push the crisis under the rug. Changes and choices must be made. No longer can we afford to just borrow more, print more, or procrastinate with a “we’ll do it later” mentality. We cannot afford more procedural or accounting gimmicks that hold false promises about what Congress will do now or in the future to control spending.
It is time. Leaders in Washington must have the resolve to stand up and say the principles of economic reason apply to government, just as much as they apply to everyone else.
This week, the House of Representatives took an important step in that direction. The House passed, with my support, the Cut, Cap, and Balance Act (H.R. 2560). The legislation makes cuts and reforms to get our debt under control. It cuts $111 billion in FY2012 and it locks in those savings with enforceable caps on spending.
Because near-term spending cuts will not be enough without long term changes, the bill also forces Washington to live within its means through a Balanced Budget Amendment. Americans have seen how difficult it is for the Congress to withstand the pressures for more spending. The only way to guarantee responsible spending in the future is if the Constitution requires it.
While no plan may be perfect, the Cut, Cap, and Balance Act protects our seniors and veterans, ensures the debt limit is not raised without a credible plan for addressing our debt problem, and preserves our ability to protect and defend our nation. It is the plan that has been put forward for a vote. It is a plan that follows the basic economic principle that says we cannot spend more than we have.
And most of all, the Cut, Cap and Balance Act is a much-needed plan that will return the United States to the path of economic prosperity and freedom for which our Founding Fathers knew we were destined.
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14 Responses to "Forbes: The Basics of Economic Reason"
It is unequivocal truth that Congressman Forbes understands what is going on.
OT, but nowhere else to put it. Taxation Without Representation on deck.
Huffpo: “‘Super Congress’: Debt Ceiling Negotiators Aim To Create New Legislative Body”
Can’t post links.
“WASHINGTON — Debt ceiling negotiators think they’ve hit on a solution to address the debt ceiling impasse and the public’s unwillingness to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress.
This “Super Congress,” composed of members of both chambers and both parties, isn’t mentioned anywhere in the Constitution, but would be granted extraordinary new powers. Under a plan put forth by Senate Minority Leader Mitch McConnell (R-Ky.) and his counterpart Majority Leader Harry Reid (D-Nev.), legislation to lift the debt ceiling would be accompanied by the creation of a 12-member panel made up of 12 lawmakers — six from each chamber and six from each party.
Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote.”
Boehner allegedly a party to this.
I can remember arguments by the economists back during the debt draw down Clinton years that our society needed at least some debt because so much of the financial sector depended on it. Our gold plated debt was the standard upon which so many other debt instruments were tied to.
That was part of the argument for why we needed the Dubyah tax cuts. We got the cuts and we got the debt that goes along with it.
I have a bit of a problem being lectured by a Congressman for whom debt and deficit was public policy just three short years ago as a republican President ran up trillions in debt and cut taxes as well. So where was the Congressman’s concern then? He and his party needed to bail out the major banks with a trillion dollars or the fiscal world as we know would have come to an end. These guys have incredibly short memories, acting as if recovery from the debacle they created by their asinine fiscal policies could be changed with a snap of ones fingers. That said, the other side says cuts and increases in revenue, over a reasonable period of time, to ensure growth in GDP is the answer. They are correct.
I appreciate Representative Forbes votes and agree with a number of them. However, on this subject, he seems to be hypocritical.
At the beginning of the Bush presidency, the United States debt limit was $5.95 trillion with a promise to pay off the debt in 10 years, Bush increased the debt to $9.815 trillion by the end of his term. Forbes voted Yea on the following without initiating meaningful cuts.
S. 2578 (2002), HJ Res 51 (2003), S. 2986 (2004), H. J. Res. 47 (2006), and H. J. Res. 43 (2007).
When Bush was in office, Forbes viewed increasing the debt limit as vital to keeping America’s economy running. Now, it’s nothing more than a political pawn.
When it comes to banking and finance, Forbes stood by legislation or lack there of that gave investment banking leverage in the area of 30 to one. Allowing Credit Default Swaps permitted multiple insurance policies on a single loan.
Isn’t it ironic that Forbes sign off on five debt limit increases with no strings and now demands stringent terms.
Maybe it is just about who has the White House and not what is good for the economy.
“Today, nobody can deny that Washington can no longer push the crisis under the rug. Changes and choices must be made. No longer can we afford to just borrow more, print more, or procrastinate with a “we’ll do it later” mentality. We cannot afford more procedural or accounting gimmicks that hold false promises about what Congress will do now or in the future to control spending.”
And 10 years ago, it was ok?
As Congressman Forbes is acutely aware, our friends and enemies are closely watching the dynamics of these debt discussions. By observing the public tirades, hesitation, risk aversion and duplicity that Obama displays as the looming debt pressure mounts, they are crafting and fine tuning their next moves against us both in the UN and abroad. The weaknesses Obama displays is going to be exploited by the Chinese and other hostile governments as Obama tries to again, outsource leadership to gain political advantage at the expense of our country.
A leadership vacuum will always be replaced by chaos until a stronger and more structured force or political system establishes order and stability. We are in a chaos phase now, and I just hope we don’t have to sacrifice our freedoms to regain order and stability.
Tim J:
What you fail to recognize is resolving the cause. Failure to regulate Wall Street investment banking, lending limits, derivatives, and SEC enforcement. No accountability has directed toward those that closed their eyes and perpetrated the problem. Moreover, they are still in control and worth hundreds of millions while globally hundreds of millions are unemployed, not to mention the millions of foreclosures.
Wally, I don’t understand what you are talking about relative to the context of my comment which is about our enemies and friends exploiting Obama’s lack of leadership.
I guess I misunderstood your intent. While we are focusing on spending and debt ceiling, the cause of our predicament (investment banking) are still unscathed. As a matter of fact, the consolidation of investment banking survivors has even strengthened their position and influence. All the talk of a small business development surge and increasing jobs through governmental fiscal responsibility misses the point. I only have to point to the influential positions former executive employees of firms such as Goldman Sachs, Lehman Marcus, and AIG now hold on governmental committees and executive positions after walking away with billions in their pockets.
As for leadership, the success is equally incumbent upon those who are willing to be led.
Why does Randy want to cut our military spending and harm Virginia’s jobs, security and future? Or does he choose to cut spending for the other states and leave Virginia in the top five for all federal spening dollars?
Can’t have it both ways there Congressman… You seem to be hypocritical on this subject as pointed out my most of the comments made above mine.
Yes, the republican shift from “deficits don’t matter” to our debt will undermine the future of civilization took just three short years accompanied by their surrender to the tea party. Those left espousing this ideology is shrinking daily, but their resolve in Congress is stopping an agreement. So now, the only way to forge a solution is for democrats and RHINOs to find a compromise to leave the tea party republicans sitting on the sidelines. I sure hope this will get done soon.
“RHINOs”?
Soory!
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