SIZE DOES NOT MATTER,By Louise Annarino,January 3,2012
Well, it is January 3rd. and the bills have all been mailed out. As usual, I overdid Christmas. I tried to raise my debt ceiling, but Target and Visa said, “What nerve you have. You bought gifts on the credit we extended to you; and, we expect you to honor your debts. If you don’t pay what you owe, we will ruin your credit.” Actually, I did not really act so irresponsibly; nor did I have that conversation with my creditors. I am simply illustrating what it means to raise the debt ceiling. It confuses us because on first hearing the phrase, we think it means seeking a higher limit on our credit line so we can make new purchases. But that is not really the way government finance works.
Congress passes a law to create program which costs X amount of dollars,and then authorizes a spending bill to implement the program. It must be certain that sufficient funds exist to pay for the program, because this new programs create new debt. The congressional budget office or CBO scores the bill. President Obama has made it a practice to only seek legislative action scored to stay within the current budget. Previously, we have gotten into trouble because congress, among other bills, authorized a war without raising the funds to pay for it.It was the first time in our history we did not raise a war tax. Instead, congress cut taxes to record lows, when it needed more taxes not less to pay the billions the war would cost.
To cover this up, the war expenses were not included within the federal budget, so the war costs would not appear to create,and later increase, a budget deficit. The cost was hidden in the Pentagon budget,which is why the Pentagon repeatedly returned to congress asking for military spending increases to cover the costs. Who could turn down such a request for “our brave soldiers in the field”? When President Obama took office, he corrected this accounting trick. Some in congress now use this seeming jump in budget deficit as a ruse to attack entitlement programs, calling Obama a socialist/welfare president,destroying our grandchildren’s futures. No, war does that.
When a newly passed bill’s debt comes due, if insufficient funds are in the treasury to pay the debt, Treasury issues bonds to raise funds to pay the debt, asking congress to raise the debt ceiling. Since congress approved the debt, congress should pay the debt to maintain the “full faith and credit” of the United States. Congress should raise the debt ceiling. This sensible approach had not been seriously questioned until Obama became president.Throwing the country into default has always simply been unacceptable.
President Obama sought to increase taxes, AND raise the debt ceiling, AND cut program costs.This is the so-called “Grand Bargain” which Rep. Boehner at first agreed to 18 months ago, but backed away from when he could not find the enough votes in his party to assure its passage. Instead, congress passed a sequestration bill which brought us to what some called a fiscal cliff. For weeks, Obama sought Boehner’s support and leadership efforts in congress to make a new grand bargain. Again, Boehner could not, or would not do so. Instead Boehner agreed to a reduced increase in taxes, and is holding out on raising the debt ceiling as a bargaining tool to force Obama’s hand and reduce government spending; not by making smart and balanced cuts, but by eliminating or starving government programs previously authorized by congress,and relied upon by our citizens: social security, medicare,medicaid. Now, Boehner tells us he will no longer deal directly with Obama, abdicating his House leadership role as representative of, and intermediary for his party.
We know suggested cuts to these programs are meant to cripple them and make them unpopular by making them useless, making it easier to eliminate them altogether. Raising the income cap on earnings for social security would increase FICA revenue and strengthen the program. Raising the retirement age would make it useless to many of our hardest working citizens, many who will die before receiving any benefits, or receive fewer years of coverage. Changing the cost of living formula would hurt older citizens in ways unimaginable to those who need not choose between buying a chicken or filling a prescription.
We all know our country is in a tough spot. Refusing to raise the debt ceiling would only make our situation worse, and it would leave a long-term, and totally unnecessary blot on the full faith and credit of the United States. Our economy is rebounding,slowly but surely. We cannot afford a congress which is willing to forsake recovery and economic growth under a mistaken belief that the size of the government matters more than the wisdom,purpose and good faith of the government.
annarino writes 