A little sanity needs to be inserted to the conversation regarding the government shutdown and the debt limit. Let’s begin by eliminating one easy distraction: the government shutdown is not an actual “shutdown.” It’s a temporary minimization of government. The people furloughed (or temporarily laid-off) during this time will be paid their full salary for missed time (a benefit only enjoyed by those working in government.) The farce of a shutdown begins with the facts that government still operates and that it still has plenty of resources to appropriate funding to satisfy all necessary U.S. obligations.
That is to say that the “shutdown” is purely a symbolic gesture.
The big issue, and the larger fight to be had by any measure is regarding the debt limit – Whether or not Congress will raise it, and if so by how much? According to most people connected to the issue the U.S. Treasury is expected to “run out of money” by October 17, 2013.
To put it truthfully, the U.S. government will not “run out of money” if the debt limit is not raised. Tax revenues will continue to arrive at the Treasury almost everyday; and the total tax collections for the year are expected to be between 2.5 and 2.7 trillion dollars. That money can be spent without raising the debt limit. So it is utter nonsense to think that the Treasury will go broke without adding more debt.
However, not raising the debt limit will force Congress and the President to spend less money than Barrack Obama’s most recent budget proposed (note: this budget, along with every other Obama budget, has not been approved by Congress). Not raising the debt limit will force a balanced U.S. budget, which represents a decrease in spending of about $700 billion to $1 trillion per fiscal year. In such an instance, (a central government that lives within its means), there is no reason for the Treasury to issue additional new debt.
Here’s the heart of the problem: the U.S. government is big, fat, and so sloppy that it can’t run on a balanced budget even without the Affordable Care Act. Not raising the debt limit will automatically defund the ACA, along with a lot of other pork barrel spending programs.
This is exactly what America needs. (See: The Fiscal Cliff We Need for more information.) But again, the problem in Congress is that courage is a rare commodity, and that doesn’t go over well with a leader that is a tyrant.
Now I don’t know about you, but I vividly remember the government shutdown during the Clinton years (Reagan had a record eight government shutdowns during his tenure.) In any of these cases, and specifically with the Clinton shutdown, our national monuments were not barricaded.—And by the way, who paid those people to barricade the monuments if the government has no money?
Also recall the last time President Obama didn’t get what he wanted (he wanted to avoid spending cuts known as “sequester” that took effect earlier this year) his justice department released criminals and illegal immigrants with violent criminal records because they “couldn’t afford detainment and processing.”
When Obama loses politically – he punishes the population. That is not the definition of a leader. It’s the definition of a tyrant, the likes of which we haven’t seen since Woodrow Wilson.
The American Market is in complete disarray under the management of a paralyzed, corrupt, and punitive government. If the Republicans had any guts or conviction they would hold tight and not raise the debt limit without a complete budget overhaul that puts pro-growth policies and fiscal responsibility above all else.
It’s time to gut the pig that Washington DC is, and trim the fat of a bloated central government.
Let’s put this debate into proper context…
Just five years into Barack Obama’s eight year presidential term he has spent the total of America’s GDP, a whopping 17 trillion dollars – approximately 10 trillion dollars from tax revenues collected plus an additional 7 trillion dollars from an increase in national debt. If the White House’s budget forecast is correct, 8 trillion dollars of tax revenues will be collected by the Treasury in his final three years as president. That is to say without any additional new debt Barack Obama will have spent 25 trillion dollars in his two term presidential tenure, an extraordinary amount in the very least.
So I ask: How much is enough? How much more shall he get to spend as president with nothing to show for it but meager results and failed promises?
It’s time to call a spade a shovel.
Obama is a below average performer, a below average investor in the American economy. Let his green energy program serve as proof positive of that. Add to it, if you will, the extremely poor and amateurish launch of the healthcare exchanges. It was a bona-fide failure, an embarrassment by any professional measure – especially when considering the amount of time and resources at the president’s disposal prior to launch.
The question is not whether or not Obama will have more money to blow for the remainder of his presidency; it’s about how much more debt does he deserve?
As mentioned, no less than $8 trillion more will flow into the Treasury’s coffers during the rest of the Obama administration. That’s our money!—and we should demand a better return on investment than his track record has produced.
We the Taxpayers of America are government’s largest investors. And while yes, for some reason that government cannot live within its means, it must borrow a trillion dollars per year to cover numerous failed programs it has employed. The lenders, like China and Japan, will indeed get their money back plus interest.
But what about us – What do We the People get for our substantial investment?
Social Security is bankrupt and Medicare is failing, and nothing has been done to fix them. The collapse of the financial markets in 2008 was a government driven disaster, bred and fed by Congress, Fannie Mae and Freddie Mac, and misguided presidents. Like the aforementioned social programs, even the affordable housing Act (CRA) got off to a good start before it completely collapsed the financial markets some thirty years later.
If the launch of the government healthcare exchanges is any indication of the ACA’s long-term future (which I truly believe it is) America is in big trouble unless that program can be drastically altered before its tentacles get too deep. Government programs don’t get better or more solvent over time. History has proven this time and again.
That said, the opposition should be proposing major and legitimate changes and eliminations to the healthcare law in exchange for extremely limited funding. Zero funding appears to be a losing cause. There simply isn’t enough leadership and support for it in Congress. Add to this that President Obama has already acknowledged several problems with the law, one can only deduce there is plenty of room to compromise.
For instance, the best item that can be found in the new healthcare law is coverage for preexisting conditions. Everyone in America likes that option. So how about we crawl before we walk and fund that portion of the ACA. In other words, fund persons with preexisting conditions in dire need of healthcare services. The tax penalties received from young people who don’t buy healthcare insurance can be used to pay for preexisting subsidies. This would give time to the exchanges to get their act together, and it will also provide time and history to measure the success of the program before jumping into the whole thing head first.
In exchange for that healthcare integration, and drastic revisions and eliminations to the ACA, Republicans should then raise the debt limit by some defined number, let’s say, another $1 trillion. But it would be capped there. That would give President Obama a $333 billion deficit each year for the remaining years of his presidency (not to mention the right to spend the $8 trillion he receives in tax revenues.)
Hey, there’s no such thing as a free lunch. Nobody is 100% satisfied in a world with compromise. But it’s necessary to move ahead.
Besides, if Republicans can get something really good for the additional debt they give up then they won’t look like such losers in the eyes of their base and peripheral independents. Democrats would get a budget with initial ACA funding, and for the most part, could claim victory for that.
Now more than ever it’s about minimizing the downside and protecting your flank – with government and investing.
More drama will follow and it will surely affect markets.
Stay tuned…