Debt Ceiling __ The Focus Should Be On The Debt and Not The Deficits

Ten days ago I proposed a plan for the Republicans to solve the deficit problem by refusing to raise the debt ceiling and dump the deficit problem in Obama’s lap. I thought it was a pretty good plan. I did get some support from my readers but you would have to describe it as less than overwhelming.

 Not to worry my friends. The crazy old man on the shore of the Sea of Happiness has not run out of ideas just yet. I’ve given the subject more thought and I came to the conclusion that I should have focused on the debt and not on the deficits. And sure enough, the crazy old man   has come up with another plan to save America and maybe even the world.

Like most of my plans to solve the world’s most complex problems, this plan is very simple. Under this plan our children in Washington will never again have to worry themselves over the debt limit. Also, they can put to bed this insane idea of a balanced budget amendment, which is a foolish game they are playing and according to Plubius Huldah it is unconstitutional.

 I am proposing that this plan be put forward by one of our Tea party conservatives in the House as the National Debt Act of 2011. Here is an outline of the plan:

National Debt Act of 2011

  • The current debate is centered around reducing expenditures (if you believe in fairy tales) over ten or twelve years. Obviously these children have some growing up to do and we are going to have to give them a little time to do that. So, for now we will raise the debt ceiling by $2 trillion (the Republicans can try to get what ever spending cuts they can negotiate). This new debt ceiling is fixed for all of fiscal year 2012. In fiscal year 2013, the debt ceiling will be raised again by $1 trillion. Every year there after the National Debt must be reduced by $500 billion until such time as the debt is reduced to 50% (the experts could come with a better target)  of the GDP.

 

  • In cases of extreme national emergency or war, The debt ceiling can be raised by approval 75% of the duly elected members of the House and the Senate. In the case of war, it must be a war declared by Congress and not police actions or kinetic actions or any other kind of military action. Once the national emergency was over,  the government would have reduce the by $500 billion each year there after until the target percentage of GDP was reached again.

 

  • This Act can only be revoked by approval of 75% of the duly elected members of the House and the Senate.

If this Act could be passed in the next couple weeks, Timmy Geithner could relax, President Obama could look forward to spending another $2 trillion in his last year as President, there would be no more threats of lowering America’s credit rating and, our boys and girls in Washington would have two years to mature into adults. Because come fiscal 2014, there will be no more laying awake at night thinking of new ways to spend our money. It will be all about reducing spending and increasing revenues (there are ways to increase revenues that don’t involve raising taxes).

Okay. Even this crazy old man knows that no one in Congress is going to take this idea  seriously (a deal has probably already been agreed to by the powers that be). But think about it. Wouldn’t it be better to focus on the DEBT instead of the DEFICITS?

Well, that’s what I’m thinking. What are your thoughts?

26 thoughts on “Debt Ceiling __ The Focus Should Be On The Debt and Not The Deficits

  1. Yes it would, but you are right that there is no way that Congress will do it. I am afraid that we many not even get a reduction in the deficits!

  2. A very, very interesting concept.

    You acknowledge first that the debt ceiling must be raised to address the immediate crisis but then establish a mechanism to at first stop and then reverse debt growth.

    Right minded thinking!

    I agree the debt ceiling must be raised and agree 100% with your sentiments, but respectfully disagree with your fundamental premise.

    I believe we should first attack deficits, then debt.

    Deficit spending in 2010 was 10.9% of GDP. That is economically harmful. Economists suggest that 2.6% is optimum and even beneficial. But we are way, way above that.

    Cut deficits back to 2.6% of GDP and we take a giant step toward economic recovery.

    The other big problem… the percent of GDP the government spends, at 28%, is taking so much out of the economy that it is more an impediment to economic recovery than a help.

    Economists say about 18.6% of GDP is optimum for government spending. We are approaching Greek-like GDP government spending levels. That is scary.

    Deficits are driving debt growth far more than interest payments on the debt are driving it right now. We must get deficits under control before we stand a chance to manage debt.

    Your approach encompasses the deficit and would do the trick if it worked, but it ignores the significance of the deficits and their roll in the economic health of a nation.

    Because of that your approach, once debt is required to go down, will require such austere cuts that it will collapse the government under the weight of its own ginormous spending.

    We may not like it, but government spending serves a significant and necessary roll in a nation’s economic health and if it collapses so will the private economy along with it.

    1. I’m afraid we’ll have to agree to disagree on this one, AZ. I don’t share your view on the role of government spending on the nation’s economic health. However, The National Debt Act as I have proposed would not prevent our government from from reducing the debt as a percentage of GDP to something lower than the 50% target. Let’s say it was reduced to 305 of GDP. That would essentially give the Congress and the President a very large line of credit that if they must, they could use in times of normal economic downturns to screw things up as they have in the past or to spend on some other pet projects at will until they reach the maximum debt allowed of 50% percent of the GDP.

      1. Fundamentally you and I are on the same page.

        We both know the big government spends to much and because of that we’ve reached the crossroads where government spending threatens the economic security of the United States.

        We also agree that overspending must stop and that the national debt gets reeled in.

        I think we agree more than we disagree. We are just discussing details.

        Democrat and Republican politicians in DC haven’t got to that point yet.

  3. We are focusing too much on budget deficits while the real problem – unsupportable debt – is hardly mentioned.

    Good post! Good idea. I’ll write your name in for President in 2012.

    1. Here my reasoning that deficits are a greater enemy than our $14.345 trillion dollar national debt…

      Last calendar year’s real deficit was $1.701 trillion.

      Interest payments on the national debt last year was $413 billion.

      The deficit was over FOUR TIMES than the interest payments on our national debt.

      And about half the interest payment was paper shuffling interest payments of the government to itself for money borrowed from itself. Those include the Social Security and Medicare Trust funds among other things.

      Deficits are growing the national debt far more than any other factor.

      That is why the deficit must be tackled immediately.

      Any deal that does not immediately cut $250 billion or more in real money from next year’s deficit will be ineffective.

      The ballyhooed $4 trillion in cuts 12 years down the line that you will hear talked about on CNN is just hot air if it doesn’t contain substantial real cuts in deficits now.

      1. The $4 trillion over 12 years is a bad joke. In truth I fear the only way that will get the attention of these children is a total collapse of our economy. There is nothing serious being talked about now in those hallowed halls and I don’t believe it will happen in the next few weeks. They are all still playing politics.

  4. I say keep a low profile and give the DEMS nothing for election fodder. We must have a super majority and the President to correct this mess. One more year will not kill us. But stir up the opposition could be deadly to us. They are looking for anything to use against us. Stealth is what we need to do IMHO. Keep our eye on the target and forget the weeds this year.

  5. Democrats are spenders, not earners. They can’t be trusted with a dollar. And Obama’s more of a Marxist than a Democrat. He can be trusted even less than the rest of the Jackasses. Put Washington on an allowance & unchain the private sector.

  6. I missed Obama’s press conference today but caught up on the details after I got back from the swimming pool. His arrogance in that press conference was that of a tyrant. Disgusting. “Time to eat our peas”? I’d like to see HIM eat some damn peas instead of barbecue.

    Right now, Obama is trying to play hardball with the debt ceiling, using it to increase federal spending (Stupid idea!) and dump the blame for a failed debt ceiling or higher taxes onto the GOP. The GOP must not let him do this! But, above all, the GOP must not cave, particularly on the matter of any tax increases. Hell, ObamaKare has all those taxes built in and due to activate in a few short years.

  7. I’m not sure how one can deal with debt and not with deficits. Today’s deficits are tomorrow’s debt, right? The interest on the debt adds to today’s deficit, right? If we stop deficit spending, we don’t increase the debt.

    My question, and the question we all should be shouting from the rooftops, is this: What has all of the spending between the beginning of the Pelosi/Reid congress in 2007 bought us that is so important that we can’t live without it? There actually was a budget in 2006, and it was decreasing deficit spending (the deficits coming down after the mild recession Bush inherited, and the slam the country and the economy took after 9/11). Why is it impossible to believe that we can’t go back to that number?

    Furthermore, how in the world did a budget with a one-off (supposedly) stimulus package become part of a baseline budget? THAT, my friends, is why we can’t give the Dems one more dime. Nothing is temporary with them. Everything is forever in government expansion… unless there’s a really ballsy move by someone (think Reagan). We can’t do a thing until there’s someone in the White House who will sign a bill that trims government back, a bill produced by a majority Republican party in the House and Senate.

      1. The information they need about our credit rating is not exactly secret. And continuing to pile up deficits isn’t going to make them say to themselves, “Well, they have a higher credit limit but must be credit worthy despite the deficit spending with no end in sight.” My point is that it’s all linked and I’m guessing than anyone with money or having to do with financial markets understands that the choice of whether or not to go the way of Greece will be made by voters in the fall of 2012. We re-elect Obama, and the whole thing will collapse. We elect someone committed to cutting government and everyone who matters will understand that we’re changing track. They’re not fools… they know how our system works and that one house of Congress does not give “cutters” the power they need. The best we can do is not cut a bad deal and keep the heat on Obama and the Dems.

      2. I understand and agree with what your saying about the deficits and the need to cut spending. But, I would bet that my plan would do more to cut spending much faster that what will likely be passed out of this Congress.

  8. Great minds think alike! You know I’m with you on someone actually addressing our debt. This fear mongering about default is a complete fabrication. No way do we default if the debt limit isn’t raised unless Obama wants to commit absolute political suicide.

    I will part ways with you on raising the debt limit at all. It’s absolutely unnecessary. To have that premise means you believe that the federal government is the centerpiece of our economy. That is the sales pitch of the left. They have been working for decades to tie government dependency to our economic success.

    I don’t believe wealth transfer programs contribute to growing the wealth of our economy at all. If retaining the debt limit at it’s current level forces austerity measures, so be it. In fact. I categorize them in the same category as other Keynesian style policies such as stimulus and bailouts. They don’t result in growth.

    Of course it would be painful for the dependent ones who have their lifelines reduced or cut off. Devastating for some. But those people aren’t the drivers of the economy. Sure they spend their welfare style handouts. But that isn’t a boost to the economy as the left likes to advertise, it’s merely redistribution of wealth.

    Again, if we concede that government spending is integral to growth or even just economic stability, how do we ever justify reducing spending?

    Besides, who really believes that any Congress no matter what party is in charge will voluntarily do the right thing? Balance the budget and then reduce it? Then take on actually paying down the debt principle? The Cubs will win the World Series first before that ever happens.

    My two cents anyway.

    1. Actually it pained me to no end to propose raising the debt ceiling. But I figured our fearless leaders are going to end up kicking the can down the road anyway. At least my plan puts an end to kicking the can in 2014, which is far better than anything we are likely to see come out of this Congress and this President.
      Thanks for the thoughtful comment, 5etester. Come back any time.

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