Editor’s Note: This article is particularly timely considering statements by President Obama at a news conference yesterday (Thursday, June 29, 2011). For a transcript click here, for video, click here.
This post is a conglomeration of thoughts around a common theme: Current Congressional talks re raising the debt ceiling. The title includes a quote attributed to Abraham Lincoln, a man who was certainly plagued by tragedy in both his public and his personal life, and, consequently, one uniquely qualified to serve as an example to all of us in these trying times. With his example in mind, I offer the following not-so-random observations for your consideration.
In February of this year, the President’s chief economic adviser, Austan Goolsbee — (BTW, what WERE his parents thinking when they stuck him with that moniker?) — cautioned Congress against “playing chicken” with raising the debt ceiling. A couple of months later, Bloomberg Businessweek used Goolsbee’s comment to fashion a very striking cover for its April issue. The gist of the cover article is that anyone opposed to raising the debt ceiling is a wild-eyed radical content to see the country fall off a cliff1 Editor’s Note: It seems some no small coincidence that Bloomberg Businessweek published an article in early February entitled “The Tea Party: Playing Chicken with the Debt“. What’s needed, the writer opines, is an extension, followed by a “centrist” compromise on deficit reduction — translated, for those of us who don’t speak “Politician” — tax increases.
What struck me most about the piece was not the article itself, but a visual that accompanied it (See below, right; click the image to see the full view).
The text inside the black circles at the ends of the graph have me scratching my head. On the far left, the writer seems to be complaining that Congress only raises the debt limit a little bit at a time, “guaranteeing that the Treasury Department will have to ask for another increase before long.” Meaning what? Congress should give the Treasury Department a blank check?
On the other end of the graph, the writer notes that “political gamesmanship has done nothing to keep the nation’s debt from soaring.” HUH? This from someone who advocates yet another debt ceiling increase?
Looks like the definition of INSANITY to me — Doing the same thing over and over and expecting different results.
I have to ask, why is it called a “debt ceiling” anyway? The only “ceilings” it has anything in common with are the retractable ones that cover a number of sports stadiums. If we must stick with the architectural theme, judging from the looks of the Businessweek graph, a more apt name would be “debt escalator.”
Before I move on, there WAS one very funny paragraph in the Businessweek “playing chicken” cover story. Apparently, in a recent poll, 46 percent responded that they did not want Congress to raise the debt limit. The pollsters then attempted to explain to the people taking part in the poll the consequences of raising versus not raising the debt limit. When the respondents were re-polled, the percentage opposed to raising the debt limit actually increased to 62%. The Businessweek writer expressed dismay that so many members of the public have a “to-hell-with-it” attitude about “destroying the full faith and credit of the United States,” calling it “frightening.” Which brings to mind another chicken — Chicken Little2 Editor’s Note: Some fun background found at the Wikipedia “Henny Penny” article..
Congress’s track record in raising the debt ceiling is less similar to “playing chicken” than it is to a bully drawing a line in the sand and then daring someone to step over it. At least, it’s similar to how Bugs Bunny and Yosemite Sam play that game.
The media has portrayed the two sides in the debt ceiling negotiations in all-or-nothing terms. The Republicans, the story goes, insist on erasing the deficit exclusively through spending cuts while the Democrats prefer to increase available revenue to (ostensibly) pay down the debt, mostly through steep tax increases. But that description of the debate is, at best, inaccurate, and at its worst, intentionally disingenuous. Here’s why.
- How many times would the media have the Republicans play the sucker before they realize they’ve been had? A recent study concluded that, since 1947, whenever tax increases have been approved in exchange for promises of future spending cuts, no spending cuts ever materialized and, in fact, spending actually increased. Dan Mitchell’s adaptation of a classic Peanuts cartoon, and his explanation of it, makes this point beautifully:
“Every year, if my aging memory is correct, Lucy would ask Charlie Brown if he wanted to kick the football. At first, Charlie was skeptical. But Lucy always managed to trick him into giving it a try. And the inevitable result was Charlie Brown lying on his back wondering why he had been so foolish.
“In the Washington version of this cartoon, Democrats hypnotize gullible Republicans with ostensibly sincere promises of future spending restraint. Republicans eventually acquiesce, naively assuming that Democrats will be their new best-friends-forever in the fight against big government.
Needless to say, that’s not the way the story ends.”
The same is obviously true with raising the national debt ceiling. That’s why, as the Businessweek writer noted, so-called “political gamesmanship” regarding the debt ceiling has done nothing to keep the debt from rising.
- Like most problems, long-term deficit reduction is not an either-or situation so much as a question of priorities. What was the primary driver that got us into our present debt situation, a failure to tax people enough (i.e., a revenue problem) or a propensity to spend like drunken sailors (i.e., a spending problem)? Most thinking people would, I think, choose B — a spending problem. In light of that fact, doesn’t common sense dictate that spending be brought under control BEFORE tax increases are even considered? Milton Friedman was correct when he observed that, “government will spend whatever the tax system will raise, plus as much more as it can get away with.” As noted above, unless spending cuts precede tax hikes, they aren’t likely to occur at all.
- In pushing tax hikes, Democrats assert the “rich” don’t pay their fair share of income taxes at present. How fair is it, though, for only half the population to pay federal income taxes at all?
At some point, fairness and justice part ways. Fairness is a relative term. Justice is not. The focus should be on each citizen paying in taxes what is just rather than what appears fair in the opinion of his neighbor. Until everyone has some skin in the game, a just and equitable tax system is unattainable.
- The President’s position is that targeted tax increases for “millionaires and billionaires” are necessary for long-term debt reduction. In fact, as the video linked below demonstrates, taking 100 percent of everything the “rich” makes in a year would not even pay for the annual shortfall anticipated in the President’s budget for 2011. That’s right. All the “rich” make and all they possess, if it were taken from them and used to cover government spending, would not cover the shortfall the U.S. incurs in a single year. We’re borrowing NOW to cover that shortfall and all the shortfalls in budgets projected to come. That’s why Congress has been asked to raise the debt ceiling — so the borrowing can continue. Does that sound like a good idea to you?
Bloomberg Businessweek cover April 13, 2011, title story “Washington Plays Chicken Little with the Debt”
“Playing Chicken With the Debt” graphic, Bloomberg Businessweek
Charlie Brown and Lucy cartoon, Daniel J. Mitchell, found in the article “Tax Increases Will Lead to More Spending, Not Lower Deficits”
“Eat the Rich” video: Bill Whittle mentioned in the blogger IowaHawk; his site can be found here.
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