Thought of the Day: From Fiscal Cliff to Debt Ceiling
A crisis seems to be the only thing that gets the attention of those in Washington. And certainly Democrats have proved better than Republicans in passing legislation during such periods of acute pressure. In fact, it would seem that they prefer such periods, as it detracts attention from having to focus on the cause of our problems and longer term solutions that can involve some short term pain.
A statutory debt ceiling has been in effect since 1917, when Congress passed the Second Liberty Bond Act. It is supposed to act as a governor on both the executive and legislative branches of government. In many respects, the concept of a debt ceiling desired by Congress is ironic. Congress is responsible for spending. The President can use his office to promote favored policies, but the actual purse strings are controlled by Congress. The fact that this statute even exists is an admission that members of Congress are akin to alcoholics faced with an open bar, or a thief with a newly discovered pocket book. There are many who suggest, with a certain level of rationality, that we should do away with the debt ceiling. If our representatives in Washington were reasonable and sober individuals, I would agree. However, doing away with the debt ceiling will certainly not lead to fiscal prudence.
Our federal debt, which is now knocking on the ceiling of its limit ($16.4 trillion), has increased more than six times the growth rate of the economy over the past four years, while federal spending has increased three and a half times GDP growth. Obama having inherited the Presidency more than a year into recession, some of that increase in debt is understandable. The old concept (a quaintly dated one) stated that during periods of surplus deficits would be paid down; so that in times of need the nation would have a surplus to draw upon. But we are almost three and a half years into economic recovery, yet debt has been increasing at about $1 trillion per year. How would we handle another 9/11 or another credit crisis like that of 2007-2008?
The debate over the increase in the debt ceiling, which the White House would naturally prefer to avoid, will be held, and it should be. Fiscally conservative Congressional members from both parties will demand it, or they should. Spending is out of hand. No matter whether you come from the right or the left, common sense says we cannot continue on this path.
The understandably emotional response to the “Sandy Aid” Bill is a case in point. New York, New Jersey and Connecticut Congressional delegations from both parties are shocked, shocked that the Bill did not sail through Congress as the final grains of sand were being drained from 2012’s hourglass. Senator Chuck Schumer and Governor Chris Christie could have won Oscars for performances that included teary-eyed appeals and acerbic blame. Of the $60.5 billion, about $9 billion would be monies spent over the next two years on projects directly related to Sandy. No mention was made of the fact that the $60.4 billion aid package was laden with pork, including $600 million to the EPA for climate control, $300 million for Amtrak, of which $30 million is to repair tracks damaged during the storm and the rest for operating expenses, and $150 million to Alaskan fisheries.
My feelings towards Congress remind me of the final exchange between Attorney Joseph Welch and Senator Joseph McCarthy. Mr. Welch finally says, “You have done enough. Have you no decency, sir? At long last, have you left no decency?” What in the world is it in the DNA of a Congressional man or woman to take advantage of the hurt involving so many people devastated by Hurricane Sandy by loading up a relief package with so much pork that it causes such an impasse? What is a fiscally righteous Congressman to do in such a case? Just go along? Moody’s repeated their rating of AA on U.S. debt, with a “negative outlook.” If the government truly wants to increase revenues they must encourage policies that support economic growth, not higher taxes or increased regulation, both of which act as inhibitors to growth.
Watching Congress lurch from crisis to crisis is reminiscent of the 1993 Bill Murray movie, “Ground Hog Day,” or it is like being consigned to Dante’s third circle of Purgatory and having to endure storms for eternity. It is like watching Sisyphus condemned to eternally push a boulder up a hill, only to watch it roll back down. We are, it would seem, doomed to watch hedonistic members of Congress play out their roles, satisfying no one while the country spends its way into oblivion. The man in the White House watches with great amusement as he implements his program of dividing the nation and redistributing wealth, as we advance toward the welfare society of his dreams. By nature I am a positive person, but it is difficult to be so today.
Interesting, but unsurprising in these days when the phrase “long term” conjures memories of a distant and foreign past, stocks liked the “cliff” deal, rising 2.5% on the first trading day of the year. I don’t understand it, but there it is.
The debt ceiling imbroglio, which will reach the boiling point in two months, is only one more chapter in this sad saga that is our national government.