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Ceiling Our Fate?

Washington assumes we can withstand at least 18 more months of business as usual. Prognosis: Doubtful.

by
Tom Blumer

Bio

August 2, 2011 - 12:00 am

If the debt-ceiling drama which just transpired had occurred in 1995, I would be probably be applauding the deal just made. But this wasn’t an ordinary political tug of war. It wasn’t about what the country will look like ten or twenty years from now. It was about the near-term chances of America surviving as we know it. We’ve just lowered that likelihood.

Because of that, I find no solace in the fact that much of the left is apoplectic. The New York Times is screaming about “hostages.” The paper’s Paul Krugman is railing about President Barack Obama’s “abject surrender.” Joe Biden and Democratic Party congressmen are calling Tea Party patriots “terrorists.” Illinois stateocrat Dick Durbin frets that the deal is the death knell for Keynesian economics.

I find no encouragement in the claims of outfits like the Wall Street Journal and alleged center-right commentators that the deal is a “Tea Party Triumph” representing the biggest “cut” in spending since 1996 — and besides, “it’s the best we can do.” I remember July 27, when the Journal condescendingly referred to people who have given up their personal lives to save the country as “tea-party Hobbits,” while the Weekly Standard’s Bill Kristol snidely called those who objected to the House GOP’s growing timidity as “the pro-Obama right.” Yeah, these are our “friends.”

We’ve been heading for the mother of all crackups for nearly a decade.

In the wake of the 9/11 attacks, George W. Bush made a calculated decision to run up deficits then considered massive to avoid touching domestic programs and entitlements — even creating a new one in the case of prescription drugs — to buy time against leftist objections to the absolutely necessary war on terror. The Republican Congress took Bush’s posture as permission to open the earmark floodgates and totally surrendered the fiscal high ground. Largely as a result, Democrats took control of Congress. Bush’s post-9/11 decision may have temporarily saved the country from a terrorist scourge, and to be fair he was one good year away from balancing the budget when the Democrats took over. But it, along with congressional Republicans’ profligacy, also left an opening for a hardened radical posing as a fiscal moderate to siphon away enough relatively disengaged voters to take the White House.

Immediately upon taking office — even before then if you count TARP, which he enthusiastically supported as a candidate — Obama and the Democrat-controlled Congress stepped up government spending to levels not seen in human history. TARP and the Democrats’ overreach gave birth to the Tea Party movement, which in November 2010 overturned Nancy Pelosi’s majority in the largest House seat party switch since the late 1930s.

John Boehner may be getting standing ovations and lots of love from his party colleagues in Washington, and he has a boatload of semi-credible defenses — undermining from the Senate’s Gang of Six and Mitch McConnell, serial media misrepresentations about the status of negotiations, and of course, Barack Obama and Harry Reid. But the fact remains that he needed to do more, and didn’t.

Boehner and Republicans erroneously accepted the premise that the Congressional Budget Office’s baseline should be a starting point when considering future spending plans. It’s not, and it became totally useless on Friday with the government’s “revisionomics” announcement that the country’s economy is still smaller than it was before the recession began. At this point, what matters is the answer to one and only one question: Are we going to spend a lot less next year than we are going to spend this year? “No” is not an acceptable answer. As far as I can tell, Boehner has never even tried to keep a core promise contained in his party’s 2010 Pledge to America, namely: “With common-sense exceptions for seniors, veterans, and our troops, we will roll back government spending to pre-stimulus, pre-bailout levels.” Instead, we’re well on our way to establishing Barack Obama’s ever-higher baseline spending levels as the norm, while perhaps even jeopardizing national security.

In agreeing to this deal, Washington’s elites have just made a bet they had no right to make. It’s one thing — a very, very bad thing — to leave mountains of debt and trillions in obligations to future generations, semi-secure in the knowledge that American ingenuity, innovation, and effort will nevertheless make their world better than ours. After all, it has worked that way ever since World War II. It’s another much worse thing to literally bet that we can survive with Barack Obama’s breathtakingly irresponsible spending-on-steroids version of business as usual until late January 2013 — or, heaven forbid, 2017. Virtually nobody in Washington or the media elites, including center-right outlets which should know better, is asking whether we can. Either that, or they don’t dare bring it up.

In late April, I contended that America would become “Maxed Out” — i.e., that it would lose its ability to borrow or would only be able to do so at exorbitant interest rates — in about six years. It’s not unreasonable to believe that it’s now more like two or three. Friday’s GDP adjustments alone probably shaved off a year. The debt deal’s near-term savings are little more than a rounding error. Obama’s clear intent to not let anything get in the way of his regime of fear and fright is likely worth another two or three. His posture virtually ensures continued ratings agency skepticism, economic underachievement, anemic growth, lagging tax collections, and an unrelenting job-market nightmare until 2013 — possibly a few months earlier if the businesspeople, entrepreneurs, and investors who could be driving the economy but are currently, as Resorts International CEO Steve Wynn recently put it, “sitting on their thumbs” until Obama is gone, conclude that the next president will be a legitimate supporter of capitalism instead of its most diehard opponent.

The debt deal assumes we can spend the next 18 months driving headlong towards the cliff at 74 miles per hour instead of 75, and that we’ll still be able to put on the brakes in time before heading over it.

How can Washington’s establishment be so sure that we have that much time? They can’t be.

Along with having a decades-long career in accounting, finance, training and development, Tom Blumer has written for several national online publications primarily on business, economics, politics and media bias. He has had his own blog, BizzyBlog.com, since 2005, and has been a PJM contributor since 2008.
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