Calling the Bluff on The Debt Ceiling

by Roland Hulme

Can America solve its financial crisis?

For the last few weeks, all eyes have been on the posturing between Republicans and Democrats over the much touted "debt ceiling." It's a little understood political issue; but that hasn't stopped pundits from both the right and left jumping on it to suit their own ends.

Essentially, the "debt ceiling" is the limit to what the United States is allowed to borrow. It's essentially like a credit card limit; except one the government has the limit to raise or lower it (wouldn't it be nice if we all had that power?)

Currently, the United States has borrowed so much money that we've reached our current "debt ceiling" of $14.3 trillion. In order to pay our bills and keep the government running, we need to raise that limit - Obama is pushing for another two trillion dollars.

Tea Party activists have rightly pointed out that this is quickly throwing America into insolvency. The government is already running at an annual deficit of two trillion dollars per year. They are calling for no raise on the debt limit until government sorts out it's massive spending/income mismatch so the nation doesn't need to keep sinking deeper and deeper into a pit of debt.

It's an admirable proposition; but an impractical one. If you look at the U.S. government budget, you're faced with an inconvenient truth: Currently there is no way to balance the budget. I did the math a while ago and discovered that even the most radical of spending cuts - eliminating the US Military, for example - wouldn't bring our budget under control.

Which makes the posturing from the Republicans on the issue rings resolutely hollow. Threatening to hold the country hostage to secure a couple of trillion worth of savings over the next ten years neatly ignores the fact that such radical cuts are chickenfeed. Last year, the Republicans fought to carve $100 billion from the federal budget through brutal cuts.

Their "savings" barely match the amount that gets "improperly spent" each and every year (i.e. the money nobody has any clue where it goes.) A hundred billion doesn't even pay half the interest on the U.S. federal debt.

Unless this nation's willing to slash its military budget by 90% (which would still leave it spending more on defense than any country on Earth) or scrap social security and medicare overnight, or some other absurd, inconceivable savings idea, the budget will never be balanced under the current economic climate.

Besides, the debt ceiling is a moot point. As a very wise friend of mine told me today; the debt ceiling debate isn't about spending, it's about paying. The spending has already been done. This is the awkward call to the credit card company to raise your limit. Republicans are a year too late to start their budget shrinking.

And anyway, the Republicans shouldn't feel so smug about fighting to derail Obama's debt deal. Their party is the king of oblivious spending. Ronald Reagan - the man who swept this country into its current economic crisis - raised the debt ceiling by 200%, through 17 separate hikes of the debt limit. President Bush raised it four times, adding another four billion to the debt ceiling.

In comparison, Obama's projections are actually quite conservative; yet again making him more of a moderate Republican than most card-carrying members of the GOP.

The fact is, making small cuts in spending or raising the borrowing limit is never going to get us out of this mess. Only one thing can save the American economy; as it did during President Clinton's presidency: An economic boom.

If America can get producing again, and raise everybody's income, then tax revenue might just lift enough to balance the budget. It's the only way this problem will ever come close to being solved (and that's ignoring the Ponzi schemes that are the military budget, medicare and social security.)

Republicans and Democrats need to stop worrying about political posturing, and start thinking about the long term; how there's going to lift this country out of a recession and make sure America isn't foreclosed on.