The Debate Over the National Debt Ceiling

Is John Boehner Really Serious About Negotiating on the Debt Ceiling Increase?

Once again, the country is faced with another “do or die” must pass financial bill to raise the National Debt Ceiling. Now that the Obama administration and the Congress have run up the nation’s national debt close to the current $14.3 debt limit, we are experiencing another clash between Congressional Republicans and the Obama administration.

On May 11, House GOP Whip Kevin McCarthy announced that there would be exactly zero Republican votes for a “clean” Debt Reduction bill (one with no other riders). Republicans are demanding very significant budget cuts in the trillions of dollars, but it’s not clear how they intend to get these cuts into the debt limit increase legislation. For a party that boasted it would cut the 2010 budget by $100 Billion, and then settled for a measly $38 Billion of cuts, most of which were gimmicks or unspent funds amounting to almost zero in real cuts, not much can be expected to come out of the current debate.

This week, a big show is going on in Washington with President Obama calling in all of the Republican and Democrat senators for negotiations on the debt ceiling increase. Democrats are fighting to maintain most of the current spending levels and their solution to the debt crisis is more taxes. Republicans propose larger budget cuts and seem to be adamant against any tax increases.

Many, if not most, of the nation’s economists and financial leaders constantly express the view that a financial Armageddon will ensue if the debt ceiling is not raised immediately. They claim that if the U.S. Treasury is forced to default on its required payments to U.S. Treasury bondholders, massive selling of U.S. bonds would occur, almost immediately, thus raising interest rates almost overnight. This would then lead to even lower housing prices and a severe reduction in economic activity which would lead to another major recession.

According to administration sources, a failure to increase the debt ceiling will force the government to cut payments to vital programs and, about the August time frame, would be forced to default on its bond debt obligations. I do not believe that would be necessary, but who am I to argue with the superior intellects of President Obama and Treasury Secretary Timothy Geitner. The government currently has an income of over $2 Trillion per year, and with that income can decide which of the most important debts should be paid first. Just like a family whose debts exceed its income, the family might choose to continue to pay the mortgage while stopping payments on its credit cards until it can get its finances in order.

Given the immense importance of a debt ceiling increase to the Obama administration, I would ask the Republican leadership in the House to include a number of riders in the Debt Ceiling increase bill, and to refuse final passage of the bill if these riders are not included Among those I would suggest the following:

  • Add a rider to reduce the authority and power of the National Labor Relations Board (NRLB) to dictate to American companies just where they can or cannot expand based upon labor union desires. (The NRLB recently sued Boeing for wanting to expand to a non right to work state) 
  • Add a rider to kill the self enacting appropriations (automatic funding) of most of the key functions of ObamaCare, as proposed by Representative Steve King. 
  • Add a rider to eliminate all taxpayer funded payments for abortions in any federally funded programs, including ObamaCare. 
  • Add a rider to eliminate all funding for the National Endowment for the Arts and for National Public Radio.  
  • Add a rider to prevent the Environmental Protection Agency (EPA) to reverse its ruling declaring carbon dioxide as a dangerous greenhouse gas, and to request a comprehensive ruling on this subject from Congress.

However, all that said, I believe that John Boehner and the Republicans will cave in once again. Here’s what I think will happen after the dust settles during the current debt ceiling debate:

  • A new debt ceiling bill will be passed, raising the debt ceiling to around $15.5 Trillion dollars. 
  • That should allow the present government continue its profligate spending for another 7 months, or so getting us to another debt limit crisis by early 2012. 
  • It will not be a clean debt ceiling bill but will contain a few insignificant riders, probably in the form of Congressional resolutions recommending that the next budget contain some serious cuts.

Once again, I expect the new Republican House led by John Boehner to squander its power and leverage by basically acquiescing to President Obama’s wishes for an immediate debt ceiling increase without getting anything substantial in return. I hope I am wrong in this assessment, but that’s the way I see it. Speaker John Boehner may be talking tough right now, but in the end he will cave in as he has done in the past.

 

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