By: Amy Lutz
So it is well past August 2nd, and the United States government appears to still be functioning (if you can call it that). Washington has yet to go up in flames (emphasis on the yet) as was predicted by President Obama and his fellow politicians on the hill, right and left. This new sense of manufactured hope made famous by our current Commander in Chief is mostly due to the passage of the Budget Control Act of 2011 and subsequent increase in the debt ceiling. Moderate and establishment congressmen from both sides are celebrating the passage of the act as a sign of progress towards reducing the federal deficit, but many on the conservative right say not so fast. Although the media is portraying this bill as a Tea Party victory, staunch conservatives in the House and Senate fear this bill is more of a band-aid as opposed to a permanent solution.
The Budget Control Act of 2011 is set to raise the debt ceiling to $2.4 trillion in exchange for an equal amount of deficit reduction over the next ten years. The debt limit was immediately increased by $400 billion and President Obama was granted the right to raise the limit by $500 billion dollars initially followed by another increase of $1.2-1.5 trillion. The latter two expansions are subject to a congressional motion of disapproval. The Act creates the Joint Select Committee on Deficit Reduction (aptly referred to as the “Super Committee”), a collaboration of 12 Congressmen equally divided between both houses and both parties in Congress. The Super Committee will have the responsibility of determining where the $1.5 trillion worth of spending reductions will be distributed. If Congress cannot come up with a deficit reduction bill equal to at least $1.2 trillion by November 23rd, the debt ceiling may still be raised but the increase would be in exchange for automatic spending cuts distributed evenly between security and non-security spending. Lastly, Congress must vote on a Balanced Budget Amendment by the end of 2011, but it is not required to pass.
Now that the bill has been discussed, passed and signed, it’s all smooth sailing from now on, right? I think not. In actuality, although the bill could have been drastically worse, I do not believe it goes far enough to solve our nation’s financial crisis. Here’s how I see it: I recently bought a Red Chrysler Pacifica and took out a loan to pay for it. Every month, I pay a set amount of money for my car and in a few years, I will have reimbursed the bank in full, plus interest. The logical thing for anyone in my situation to do is to simply pay the payment every month until my car is paid off and avoid spending frivolously so I have enough money saved up to keep on track with my car payments. Unfortunately, that is not how the United States Government would see it. Analogously, if I were the US Government, I would borrow thousands of dollars from my parents and spend it on chrome embellishments for my car, several pairs of fuzzy dice, and thousands of new car smelling air fresheners all while avoiding my car payments for several months. When the bank finally comes to collect for my overdue payments, I would promise my parents that instead of spending $5000 per month, I would only spend $4500 and continue to drive myself into debt, albeit at a slightly slower pace. Then, when I inevitably find that I can no longer control my debt, I would simply request more money from my parents and leave them with the tab from my irresponsible fiscal behavior, just like the American people will eventually be left with the responsibility of paying for the government’s out of control spending.
If it was not made clear by the above analogy, this debt ceiling bill does little to solve our spending problem in Washington. We need drastic cuts, not small spending reductions, and certainly not tax hikes (or “revenue increases” as they are now called). In addition, the concept of a “Super Committee” is not the most comforting. Although its powers are limited, the committee will be given increased power over both houses of Congress and is immune to amendments or a filibuster. I thought we were trying to decrease the government’s power, not enhance it. As far as a Balanced Budget Amendment goes, I’m fully in support of the concept. Unfortunately, the Budget Control Act does little to assure that the states will have the opportunity of making this amendment a reality. It simply calls for a vote and does not base the increase in the debt ceiling on the passage of a balanced budget amendment. We do not need a hollow promise of a discussion, we need action. We need a balanced budget amendment. If states are able to function with a balanced budget, the federal government should continue in the same vein.
Although the White House secretly told executives from top banks that a credit default would not be possible, in the public arena, many politicians warned of an impending economic Armageddon if the debt ceiling was not raised. Now that the Budget Control Act has been passed, it seems like the opposite has occurred. Immediately after President Obama signed the Act, the market dropped 265.87 points (2.19%) and fell below 12,000. A few days later, we received another shock to our economy when S&P downgraded our credit rating from AAA to AA+. I hope that increased interest rates were what President Obama wanted for his 50th birthday, because that’s exactly what this country has to look forward to.
In summary, things are not looking very bright for this nation economically and when the Budget Control Act inevitably fails to stabilize our government, this administration and others will need someone to blame. Luckily, the media has that covered. Immediately after the bill became law, newspapers and media outlets heralded it as a “Tea Party victory.” Unfortunately for MSNBC and the New York Times, the facts tell a slightly different story. Many of the congressmen who voted against the bill are staunch conservatives and members of the Tea Party Caucus. The lengthy list of dissenters includes Michele Bachmann, Rand Paul, Ron Paul, Marco Rubio, Jim DeMint, and Jason Chaffetz. Even Republicans who voted for the bill such as Allen West and Paul Ryan admit that it is “far from perfect” and is nothing more than the best deal they could have gotten under the circumstances. According to a recent Gallup poll, among Democrats, 58% approve of the bill and 28% disapprove. Among Republicans, 25% approve and 64% disapprove. So much for a Tea Party Victory I suppose. In fact, although the Budget Control Act does include spending reductions, it seems to cater more to the whims of the left than the right. It is no more than a band-aid for our ever increasing deficit and spending problems in Washington and it’s not enough. We are going to need drastic, painful cuts if we are to ever regain stability and our AAA credit rating. Just like I need to curb my spending to keep track of my car payments, the US Government must become fiscally disciplined and begin to attack the monstrous deficit head on while avoiding tax hikes and preventing taxpayers from paying for Washington’s mistakes.