Debt Ceiling Negotiations Illustrate the Need for Cut, Cap, and Balance
After a 75 minute meeting on Sunday July 10, Republican leaders and President Obama have yet to come up with a plan to raise the debt ceiling, or more importantly, cut spending. The meeting comes just 48 hours after new unemployment numbers were released that showed an increase in unemployment from May to June. President Obama insists that tax increases must be in the table while fiscal conservatives are staking their ground by insisting on spending cuts without tax increases. Now is not the time to burden the taxpayers with more taxes. That is why it is imperative to tell your member of Congress to stop the over spending and sign the cut, cap, and balance pledge. Call the main switchboard of the Capitol at 202-224-3121.
With a $14.3 trillion debt, a projected deficit of $1.5 trillion, and unemployment at 9 percent (and climbing), Americans are well are of the impending financial crisis. On June 21, the Congressional Budget Office (CBO) issued it’s “CBO’s 2011 Long-Term Budget Outlook,” and confirmed the fears of many Americans, the country is broke. According to CBO, “With significantly lower revenues and higher outlays, debt held by the public would exceed 100 percent of GDP by 2021. After that, the growing imbalance between revenues and spending, combined with spiraling interest payments, would swiftly push debt to higher and higher levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2023 and would approach 190 percent in 2035.”
Spending cuts must be the top priority to get our fiscal house in order and CBO warns us if we don’t take action, “Growing debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates. Such a crisis would confront policymakers with extremely difficult choices. To restore investors’ confidence, policymakers would probably need to enact spending cuts or tax increases more drastic and painful than those that would have been necessary had the adjustments come sooner.”
Cut: The first item of business needs to be to cut spending. The federal budget is bloated with unnecessary and wasteful spending, and there are plenty of recommendations to cut spending.
Let’s start with the Congressional Budget Office (CBO), which detailed a number of spending cuts in its March 2011 report, “Reducing the Deficit: Spending and Revenue Options.“ The cuts are broken up into three categories: Mandatory - savings would total $29 billion in one year and $590 billion over five years; Discretionary (Defense) - savings would total $10 billion in one year and $178 billion over five years; and Discretionary (All Discretionary Activities Other Than Defense) - savings would total $13 billion in one year and $147 billion over five year. All told, savings would exceed $900 billion over five years.
Budget Committee Chairman Paul Ryan (R-Wisc.) offered his plan, “The Path to Prosperity: Restoring America’s Promise” which cuts $6 trillion in spending over the next decade.
Even President Obama offered some spending cuts. On February 14, 2011 President Obama released his fiscal year (FY) 2012 budget he estimated a total spending level for FY 2012 of $3.7 trillion and a deficit of $1.6 trillion. In conjunction with the budget, President Obama released his Fiscal Year 2012 Terminations, Reductions, and Savings list which outlines $33 billion in potential spending cuts. While there are some good recommendations to cut spending, the total amounts to less than one percent of the $3.7 trillion budget and it fails to address entitlement spending, which is projected to be 64 percent of the budget.
Last year the National Commission on Fiscal Reform and Integrity, a deficit reduction effort led by former White House chief of staff Erskine Bowles and former Republican Senate Whip Alan Simpson (R-Wy.), released a report on potential spending cuts.
Cap: It is imperative that spending be capped at 18 percent of gross domestic product. It is also critical that those caps are enforceable.
Balanced Budget Amendment: The Holy Grail of fiscal policy, a Balanced Budget Amendment (BBA) will force Congress to keep and maintain a balanced budget. The key to a BBA is to make sure that Congress will balance the budget with spending cuts rather than tax increase that is why any BBA should require a two-thirds vote in both chambers to raise taxes and a three-fifths vote in both chambers to raise the debt limit. And, any BBA should require the President submit a balanced budget to Congress each fiscal year.
America is going bankrupt and cut, cap, and balance is the way to get back to fiscal sanity. The Taxpayers Protection Alliance urges everybody to go to http://www.cutcapbalancepledge.com/index.php to sign the pledge.