Wednesday, July 20, 2011
No More Washington Tricks
No More Washington Tricks
By Tony Blankley
In Atlanta, the teachers cheat on exams so the students don't have to. It doesn't raise the knowledge level of our children, but it gets the school system past the next exam -- even as the system continues its death spiral. We will know the spiral has reached its terminal station when there is full unionized teacher employment and complete student illiteracy.
Now, in this same spirit of treating the symptoms at the price of the patient soon dying, Moody's credit rating agency, according to Reuters, has proposed that the United States "eliminate its statutory limit on government debt to reduce uncertainty among bond holders."
It's true. Eliminating the legal requirement that limits debt issuance would assure (for a while) the continued issuance of debt -- a classic example of winning the battle and losing the war.
Moody's helpfully offers two alternative methods of inducing fiscal responsibility for the United States. One would use "Maastricht criteria ... which determines that the ratio of government debt to GDP should not exceed 60 percent." Moody's concedes that such a rule often is breached by the governments. To wit, Greece, Spain, Portugal, Italy, Ireland and others are approaching or exceeding 100 percent of debt to gross domestic product -- and are a growing threat to induce a global financial and economic crisis.
The other Moody's suggested alternative is to follow Chile's fiscal management of its social security system. But Chile has no social security problem, because it privatized it 30 years ago, so it is fiscally sound and popular. But the Democrats here in the U.S. would not permit that alternative. In fact, Moody's proposal is just another fiscal trick that wouldn't work. So what trick could we turn to avoid the current danger?
Unfortunately, with the exception of the House Republicans and some senators of both parties, most of Washington is looking for yet another trick that will get us by the current crisis.
No, let me be more precise. Senior elements both in the White House and the bipartisan Senate may be planning a trick not to avoid the Aug. 2 crisis, but to better politically exploit the possible chaos that would follow such a crisis.
This reminds me of the scene in the 1962 black comedy about the Cold War, "Dr. Strangelove," in which the lunatic German scientist starts calculating how he and a select group of male politicians and generals could survive the nuclear annihilation of both the U.S. and the Soviet Union by living in mine shafts with many sexy young women and a nuclear engine to provide the energy for such a luxurious, fast-breeding, molelike existence. Planning for political survival after a debt crisis is about as disreputable and foolish as Dr. Strangelove's mine shaft survival plan.
Now, as summer 2011 reaches its steamy zenith, it falls to the only group of Washington politicians still trying to actually fix the debt problem -- the House Republicans -- to deny those political nihilists (in both parties and in both branches) the realization of their truly abhorrent plans.
This is a moment for both principle and cool realism on the part of the House Republicans. The principled part requires them to still use the debt ceiling requirement to make real cuts in the deficit in the current fiscal year.
Here is the realism part: 1) Is Aug. 2 the real date? The truth is the American system is so big and complex that no one knows when and whether the borrowing runs out on any given day. 2) Could President Barack Obama use the actual tax revenues to pay interest, Social Security, Medicare and armed services salaries? He doubtlessly could, but Congress probably couldn't compel him to do so without a Supreme Court decision, which would take many months to gain. 3) Would fully rational international bond and equity markets react dangerously to Aug. 2 without the debt ceiling's being raised? No, but we do not have fully rational markets currently. Misleading headlines and unsupported rumors about unnamed bankers in Europe have driven world equity and bond markets careening all over the place in the past two years.
The reality that the House Republicans have to deal with is that between the words coming out of the executive branch and the mainstream media and the general nervousness of the markets, we cannot rely on rationality to win the day Aug. 2.
So here is my proposal for principle and realism. The House should pass a debt ceiling rising for 190 days that raises the ceiling by about $1 trillion. The president said he would not sign a short-term bill as long as 180 days. Give him something he could sign without contradicting himself.
Attach to it about $1 trillion in discretionary spending cuts as identified by the Vice President Joe Biden-led negotiations. That would get real cuts and wouldn't let Washington kick the can past the next election.
Then the House Ways and Means Committee should start hearings and markup on a general corporate tax reform that would lower rates and reduce or eliminate many credits, deductions and advanced schedules. That would take at least three months to negotiate but should yield both a more efficient system and more revenue (about $100 billion a year -- while lowering rates).
The Ways and Means Committee also should start hearings and markup on entitlement reforms -- Medicare, Social Security and Medicaid. Let Democrats and Republicans make their proposal hearings and markups open to the public.
Thus, we get past the current Aug. 2 crisis and do so with real cuts. And by next spring's budget season, we can have an honest debate during the presidential and congressional election cycle on the two parties' long-term solutions to debt and deficit. Let the electoral chips fall where they may.
To read another article by Tony Blankley, click here.
Posted by Brett at 11:36 AM