The debt ceiling debate

As soon as the election of 2010 started, you had to know this was going to happen...

The national debt, which was already bad, is starting to get out of control.  The Obama/Pelosi "stimulus" package did nothing more than to throw away several billion dollars in funds and produced *ahem* higher unemployment (well, not really, but it didn't perform as promised and unemployment is conservatively at 9.2% today, double what it was during the heyday of the Bush administration).

The "Obamacare" health care overhaul was passed.  This was a very bad piece of legislation by most people's counts and the greatest government encroachment on the US healthcare system in our history.  Applauded by people on the Left, demonized by people on the Right, and controversial all around.

And a very vocal group of average citizens, empowered by fear over the economy and the government's seemingly unbridled approach to spending and power grabs over the private sector, rose up and enabled the largest takeover of Congress in the history of our nation.  The Democrats, who have controlled this spending spree and power grab binge, are no completely longer in power but still control the Senate and the White House... and now in Washington the debate has become a war, over the "debt ceiling."

So what does this mean?  (in case you haven't watched FoxNews or CNN in the last month)

The US Federal Government, by law, has a credit limit... and on August 2nd the Federal Government will have essentially maxed out it's several trillion dollar credit card.  The debate in Congress is surrounding the conditions that conservative, Tea Party enabled Republicans are putting on Obama to increase his card limit (actually, Congress's since it is Constitutionally speaking the Congress's authority to spend).

This is a big deal, because the Federal Government has a number of key obligations that have to be met, and honestly if the debt limit is not increased these will be the ONLY things that the Federal Government can fund:

• Social Security
• Medicare/Medicaid
• By law, guaranteed entitlement programs
• Paying the interest on the national debt
• Essential keeping the lights on for the government (paying congressmen, paying the light bill at the White House, etc.)

And honestly, based on current "revenues" (taxes collected) and current spending, these would be the only things that the government could fund.  Everything else, non-essential (like those pork barrel road projects on 285 this weekend), goes away.  

Or... the apocalyptic version... the entitlement spending is too much to handle without yanking out Uncle Sam's AMEX, the government defaults on portions of it's debt, foreign creditors freak out... demand payment... interest rates go up, causing more foreclosures and runaway inflation... and well, your imagination can go on and on.

So - this is a big deal, because one thing we know about the Federal Government is that they have an addiction to spending increases.  This is out of their league, even Republicans if we are honest. 

So, each party has come up with their proposals to cut $4 trillion from the Federal budget over the next 10 years.  To put this in perspective, the federal government is projected to spend $3.8 trillion this year alone, so a $400 billion cut in spending is equal to just over 10% of cuts.  Cisco, who just announced a restructuring because they aren't meeting Wall Street expectations, is cutting over 14% of its workforce.  Therefore, these cuts to an agreeably bloated beyond imagination Federal bureaucracy is still much less than what a US corporation is planning to incur.  

The "how" is where we're getting hung up.  From my perspective, conservatives (who I agree most with) want to cut what we'll call "REAL spending" - and drop the expense column in the federal budget so we can work with a lower spending threshold.  

Liberals, whom I agree with some but not all of their proposals, want to decrease spending by taking away a so-called "spending" measure known as the "Bush Tax Cuts."  In other words, they want to raise taxes.  Now, I agree in principle that "revenues" (aka - taxes) need to be increased, but in a down economy where we need people *with* money investing in job creating ventures rather than taxed is this such a great idea?  I also don't equate a "tax cut" with "spending" because spending assumes that you have the money and the money is really the property of the citizen -- not the government.  But, I will concur with them that the government needs to find ways to get more money in so that they don't have to borrow so much, but if we're going to cut $400 billion, let's actually cut $400 billion versus creating a tax increase and calling it a "spending cut," okay?  

Regardless, we do need to do something and unlike 2004 and 2009, one party doesn't wield unbridled control of the Federal lawmaking machine - so let's do something that we haven't done in a while... 

Compromise.  

So - here are my thoughts:

1.) Conservatives, we are going to have to accept some military spending cuts.  Sorry.  Do we need to be the world's policeman and spend billion of dollars in crazy powerful "boom boom" equipment from Lockheed, Northrup, and Boeing to make sure that we have the "biggest and baddest" everything?  Perhaps it's time to think about rationalizing our military strategy rather than just having the coolest toys on the block?

2.) Conservatives, we need to find a way to bring money into the government... I do not agree that the marginal income tax rates should be increased.  Screwing the rich is screwing investment... this is a last resort.  Acceptable (now know that I'm more moderate than some of you) tax increases IMHO would include:

• Raising the gas tax, cigarette tax, and alcohol tax.
• Imposing a small (1 to 5%) tariff or tariff increase on goods imported into the U.S (so your German built BMW costs $41,000 vs. $40,000... big whoop).  Perhaps a tax on "foreign outsourced" headcount (same - 1 to 5%) can be imposed on businesses for the Indian call-centers, SE Asia factories, etc.  If it's small enough, it will disincent US businesses from choosing foreign labor pools over domestic when staffing up but not disincent them enough to shut down those call centers and thus avoid the tax.  I am all for free trade, but we have to make sure that we get a fair playing field in this country. 
• Raising the Passport fees.
• You get the idea.  Don't increase income taxes!  "Optional" taxes are on the table. 

3.) Liberals, cutting entitlement programs by 1 to 2 percent (or even 10%) is not going to starve children or kill old people.  Perhaps, all it will do is empower some newly unemployed government workers to start a charity, create a charity, and use their passions to do good without the beaurocratic overhead.  We need to stop thinking in terms of "I spend money... so problems will go away."  This is a fallacy that we have chased for over 80 years and I think we should know by now that it does not work that way.  Throwing money at problems doesn't create solutions... in some cases it just throws money away.  So - stop demonizing us for wanting to chip away at entitlement spending... Clinton cut welfare and the end of the world didn't happen.  I think we're safe to cut money from a few of your pet programs too. 

Those are my initial thoughts.  Fortunately (or not) we have a lot of self-interested people with pet programs and elections on the line debating this issue right now... and we'll get a solution.  

The fact that there's an election in 2012 demands that... or someone's getting blamed.  That could be interesting.  

But I believe we'll get one.. and each side will take credit for doing something.  

And each side will blame the other for forcing them to abandon their "principles."  

It's going to be fun :-)