Last week, Sen. Ted Cruz accused Senate Democrats of doing nothing to scale down the federal debt but everything to increase spending on government programs. Cruz made this remark during a Senate Budget Committee hearing, and following Chairwoman Patty Murray’s offer of a motion to form a conference committee with the House, as a way of resolving competing budget proposals.
Sen. Cruz has refused to support a conference committee motion unless it includes instructions for conference members should an agreement that would bust the current $16.7 trillion debt ceiling not be reached. Due to increased revenues in 2013, the Treasury is not expected to default on the current debt until late this year or early next year. Cruz told his colleagues on the panel: “If you think it’s OK that Senate Democrats want to borrow more while doing nothing, nada, zilch on the debt . . . then you should welcome this motion. I would suggest that is irresponsible.”
Newsmax noted, however, that even some Republicans are disenchanted with Cruz’s effort to block the conference committee on the budget. These GOP legislators believe he is dismantling the Senate’s regular order of working together with the House to hammer out differences on budget matters. Sens. John McCain of Arizona and Susan Collins of Maine have tried to persuade the “minority in the minority” to drop their opposition. And, according to The Hill, Democrats have said that if Congress doesn’t raise the debt ceiling by Fall, the government will likely default on its loans. Murray warned that Congress, in essence, has just one month to act due to congressional recess for the entire month of August.
The official line out of the White House is that an increase is desired and it’s not negotiable. When the next debt ceiling battle takes place the administration wants a no strings attached increase. Sen. Max Baucus (D-MT)) agrees. Baucus told reporters at a press breakfast that he frankly thinks “that’s good policy. … But I’m also enough of a realist to know that this is a big country – you’ve got 535 members of congress, it’s a democracy, different members of the House and Senate have different ideas on that subject. We are the Congress after all.”
U.S. News & World reports:
“Baucus wasn’t speaking without some level of self-interest. He also said that, like House Ways and Means Committee Chairman Dave Camp, R-Mich., with whom he was appearing, he sees the debt ceiling negotiation as a helpful lever to ratchet up pressure to overhaul the tax code. Tax reform happens to be the retiring Montana senator’s top legislative priority.
The good news for progressives, such as it is, is that Baucus thinks the path out of this includes new revenues from tax reform. He has met, he said, with every one of his senate colleagues to get their views. ‘So during these meetings, I find that this senator on the other side of the aisle, he can see a path toward more revenue,’ Baucus said. ‘And I’ve found that a couple, three times here. And I believe there’s going to have to be a compromise on that question.’ As a result, he said, “when we get closer to D-day, whenever it is, September, October, we’re going to be in a pretty good position to know what works and doesn’t work.’”
Perhaps due to all of the scandals surrounding the Obama administration or maybe because of the meager signs of improvement in the economy, Americans’ economic concerns have receded. But, the reality is that the economy has been mired in a slow growth recovery ever since the end of the last recession. It continues to remain in what Lance Roberts of StreetTalkLive describes as an “induced ‘coma’ due to the massive financial assistance from the federal government in the forms of bailouts, financial supports, bond buying programs and suppressed interest rates which limit productive investment and growth.”
The Heritage Foundation agrees that optimism is not warranted. The deficit picture has improved a little due to the “fiscal cliff” tax hikes and slashes to discretionary spending under the Budget Control Act. But, the U.S. is still dealing with a huge amount of debt and this upshift in the economy is not sustainable. Absent real reform, it’s on schedule to get considerably worse.
How much worse? The Heritage Foundation reports:
“If no other changes are made, national debt will increase from $11 trillion in 2012 to $19 trillion in 2023. Debt subject to the legal limit — which includes money owed to federal trust funds such as Social Security’s — will swell by $9 trillion, reaching $25 trillion after a decade, notes budget analyst Alison Fraser.
When the debt rises like that, government has no choice but to pay more and more of our tax dollars just to cover the interest on it.
We throw around these terms so much, it’s easy to lose sight of how much $1 trillion is. That’s 12 zeroes. If you paid $1 a second, with no interest, it would take about 32,000 years to pay down just $1 trillion of our national debt. Yet the total amount is much, much higher than that — and primed to climb even more.
It’s easy to shrug off such giant numbers, but we shouldn’t. Such massive deficits have real-world consequences that can prove harmful. For now, the economy is enjoying low interest rates, but we can’t expect that to remain the case under a sharply increased national debt.
Interest rates likely would spike, slowing the economy.”
So, many families won’t be able to get mortgage loans or car loans. Starting a business would be all but impossible for many Americans.
Other ways a soaring national debt can affect all of us adversely:
• Personal income would suffer, for example. A study by the International Monetary Fund shows that the drag on the economy the debt creates could cause families to lose up to $11,000 every year.
• Higher inflation. The government, through the Federal Reserve, could to try to reduce the debt by creating more currency. But inflating the money supply can’t help but weaken economic growth.
• Inflation has been low for so long that most Americans forget how costly it is to live in a high-inflation economy. A rapidly escalating debt could remind them quickly.
• It also can mean bad news for Medicare, Medicaid and Social Security. These massive programs are the main reasons that debt is growing by leaps and bounds. Yet Congress still hasn’t taken the steps necessary to make these programs affordable and sustainable. Such a head-in-the-sand mentality can only jeopardize benefits for those who need them the most.
(Courtesy: The Heritage Foundation)
The current level of spending increases is untenable. In 2012, the Treasury collected $2.4 trillion in taxes, but the federal government spent $3.5 trillion. As Phoenix Capital Research points out, the federal government has merely subsidized a weak economic recovery via food stamps and other social program, while the private sector lags, with the primary sources of employment coming in the form of temporary or part-time jobs.