Thursday, July 14, 2011

Debt ceilings for dummies.

I thought this was an apropos thing to talk about today given some lively and misinformed discussion on some of my friend's FB pages, as well as the ongoing political fiasco playing out on the news outlets and the talking head shows.

I'm starting to realize that most people don't really understand what the debt ceiling is and how it works.

Apparently, a lot of people think raising the debt ceiling is akin to raising the limit on your credit card.  It gives you more money you don't have to buy more stuff you don't need and go deeper into debt.  However, that's not exactly accurate.  Raising the debt ceiling is kind of like raising your credit card limit, only it's not so you can go out and buy more stuff, it's because you already went $100 over your limit and you don't want to get stuck with over the limit fees and have your account frozen when you can't make a payment, so you have them raise the limit just enough to cover what was already on there, and then you start making the tough household budget decisions necessary to pay that limit back down in the future.

That, in an overly-simplified nutshell, is what raising the debt ceiling means.

Also, in historical context, raising the debt ceiling is not a huge issue.  It has been raised something like 22 times in the last two decades and 14 times under GW Bush alone.  There have been debt ceiling limit raising bills that have passed that consisted of one sentence.  They basically said "This bill would approve increasing the limit of the budget, as detailed in paragraph yadda yadda, subset blah blah blah, line 14, to $X.xx trillion dollars."  And that was it, signed, passed, debt ceiling raised.  That's what the 1994 debt ceiling increase consisted of, for example, one sentence.

The problem with our current debt ceiling debate is twofold.

First, the Republicans have, for obvious strategic reasons, chosen to make the debt ceiling issue out to be a huge deal now, when it hasn't been the 22 other times it was raised over the last 20 years.  Obviously, they are doing it so that they can play off the ignorance of the average voter as to what, exactly, the debt ceiling is, so as to paint Obama as a reckless spender who just wants to increase our debt rather than stop his out of control spending or work on a real budget-balancing solution.  That's why I wanted to spell out, as simply as I could, what exactly raising the debt ceiling means.  It's not about handing the president or anyone else in our government more money to spend, it's about paying for the stuff we've already bought.

Second, the Republicans are also tying the debt ceiling legislation in with the 2012 budget.  This further muddies the discussion, because it continues the Republican strategy of equating raising the debt ceiling with giving the president and the government more money to spend recklessly.  It also allows the Republicans to play hardball with the Democrats by saying if the Dems don't agree to all of the Reps demands, they won't sign the bill to raise the debt ceiling and America will default on it's debt for the first time in our nation's history.  Something that is expressly prohibited in our constitution, in fact.

Now, if you know me, you know how I feel about what needs to be done to reign in our budget problems.

A lot of our current deficit is a result of bailout bills and war spending.  So, first off, end the wars.  Bring our soldiers home as quickly and safely as possible.  We did what we set out to do, we got Bin Laden, we disrupted Al Quaeda and put the terrorist world on notice that we don't fuck around when they mess with us, we even went a long way towards helping to plant the seeds of democracy and empowerment of the people in regions that have been historically ruled by tyrants and oppressive regimes.  We've done a lot, we've spent a lot, let's bring the soldiers and that money back here where it belongs.  If we want to keep up our military spending, I would suggest opening some of the hundreds of bases that were closed across the country under Clinton.  I know that in the area I live, the closing of the air force base resulted in a huge economic downturn that has only gotten worse every year since.  Opening those bases would create jobs, bring money back to struggling local economies, provide training and experience to young men and women out of high school, as well as prepare them for college with the GI Bill.  If we're gonna spend the money, spend it here.  The best part is, it wouldn't even cost half of what the wars overseas are costing us.  BUDGET SAVINGS!

Second, all those companies who got their asses saved by our two bailout bills, they're all doing great now.  Better than ever even in almost every case, so hey, we bailed you out when you were struggling, it's time to repay the favor!  That's right, multinational corporations and global banks and finance houses, it's time to pay a little more in taxes to help cover the cost of that fat double-down of bailout money that you all used to buy out failing banks and businesses, pad your portfolios, give yourselves huge bonuses and, I suspect, break at least some into $100 bills so you could have a nice stack next to your toilets to wipe your asses with.  Just those two things alone would put hundreds of billions of dollars a year towards paying down our deficit.

Now, lest you think I'm just some left-leaning shill (hint: I am), I do also think we need to make sensible cuts to some other programs that are unnecessary, have bloated our government, and cost more money than they save.  You know I support regulation, you know that I think it's essential to preserving not only a fair market, but also basic public well-being.  However, there is common sense regulation, and then there is arbitrary regulation that only serves to punish small business, stifle job growth and encourage companies to take their business elsewhere.  It's a cold game, and unfortunately, if you can do the same thing in Texas for half the cost of doing it in California, why would you ever do it in California?  For that matter, if you can do it for 1/8th the cost in India, why would you do it in America?  So, it's time for some regulatory reform.  Let's stick to the common sense regulations that we need to keep the playing field level, to protect Americans and keep everybody coloring inside the lines, but let's deal away with all the punitive red tape that just serves to give regulatory agencies something to do to justify their continued existence.  At the same time though, we need to get tough with companies who ship jobs and profits overseas to avoid paying taxes and to save on costs.  We need to impose steep tax penalties on American companies that don't employ at least 60% of their workforce within the United States.  We need to assess tariffs on profits made overseas then sent back here to America.  Close the loopholes, tighten the belt, and then I think you will miraculously start seeing companies opening factories back up in America!

Also, let's start enforcing a 1 for 1 policy with our imports and exports.  What that means is, for every dollar we spend importing goods from another country, they have to spend a dollar importing goods from us.  If not, tariffs will be imposed.  If we're going to be a global economy, we need to extend fair market practices beyond our borders.

If we just did the things I listed right here, we would generate enough money to pay down our deficit within two presidential terms, if not even sooner.  All of that, and you wouldn't even have to touch social security, medicare, unemployment benefits, welfare or any other programs that help the poor and have been proven over and over to keep crime rates low, and isn't that just more taxpayer savings?

So, ok, all ideological rhetoric aside, it's pretty clear that the only way to really solve our current budget problems in a timely and logical manner is through a combination of tax increases AND spending cuts.  It's household budgeting 101 - if you are spending more than you make you either A)  Stop spending money on anything, sell off everything you own, and use it all to pay off your debt. B)  Get another job to make enough money to continue your lifestyle as is, or C)  Get rid of the stuff you don't need and maybe work a couple overtime shifts until you get your finances back in order, then stick to a sensible budget from there on out.  Hey, if we dumbasses in the middle class can handle that decision every day, surely you brainiacs we elected to run our country can figure it out like adults, right?

Never mind, I forgot who I was talking to.  Carry on like idiots, we'll settle all this in November. ;)

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