June 2, 2011

Some Notions Of Who Is Wrong On The Debt Fight

The short answer in this debt fight is - everyone.  The real issue is the type and degree of wrongness. 

From the perspective of the GOP, there's a flaw in their basic approach to managing the debt.  They have decided to tie increases in the debt ceiling to matched cuts in spending.  On the surface of that, the approach is sensible.  They are concerned about the debt.  But think about the basic logic problem with that approach.  If you cut spending enough, there's no need to raise the debt ceiling.  Let's assume however, that it's just not possible to cut enough right now and that a temporary cap increase is necessary, as America reaches the top of the bell curve in the debt, and later the debt ceiling can start to be lowered.

Okay, has it EVER been lowered?  And if if that's a viable option, where is it in the GOP talking points?  Why not offer a dollar for dollar debt limit increase with spending cuts that also has a window attached to it?  Two years it has to be below where it is today.  Sure, it's an additional condition but you don't start at an interim point and negotiate down.  You start at your best case.  No increase.  Then you step back to what I've suggested and then to 1 for 1 cuts to ceiling ONLY if you need to do so.

Why aren't the GOP doing that? Or why aren't the GOP tying the debt ceiling to the passing of a constitutional amendment prior to the end of 2012? Perhaps their motivation is to some extent political.  Perhaps they want to box in President Obama into a corner.  If he gets his debt ceiling increase and they get their spending cuts, they can point to what they've accomplished and still point to Obama's additional $5+ trillion in debt during his term.  That's fair, but it is also political.  Their motivations aren't 100% pure.  If they were, they would back Paul Ryan's version or some variation of it.

But at least the GOP are facing in the right direction.  If the Democrats won't budge on entitlements unless the GOP considers tax hikes.  The GOP should do a quick reality check on that idea with their constituencies, and come back with the resounding 'no' they'll hear.  The reality is that entitlements must be addressed.  There is an insolvency issue on the not too distant horizon.  And the solvency issue is all the worse because the funds that were not sustainable regardless, are the target of government financial raids.  The Obama White House is currently raiding federal employee pension funds to mitigate the debt ceiling problem.  It's not the first time, entitlements have been invaded - it's the same slippery slope as the Social Security trust fund.

Tax hikes simply cannot solve the problem.  They don't even address the real problem, which is the government's (mostly Democrats) addiction to spending.  They simply don't understand that taxes don't need to be increased, spending needs to be cut.  Throwing class warfare into the equation by saying we'll only tax the rich only muddies the already dirty waters.  The rich can move their income sources and production offshore.  And taxation itself is a slippery slope.  The government is out of control, they can't constrain themselves and they need rules imposed on themselves.  The GOP are trying to head in the right direction.  It's a first step.  They are wrong for not taking two or three steps.  The Democrats are not willing to walk that way at all.  They are wrong, more wrong, than the GOP.

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