Debt Ceiling Disaster Ahead

It is almost impossible to believe, but the hysteria surrounding the so-called “fiscal cliff” is being overshadowed by an even more pressing problem. Treasury Secretary Timothy Geithner has alerted Congress that the nation will once again hit the debt ceiling on Monday, but that his department can take “extraordinary measures” to keep paying the bills for another few months. For those keeping track, the debt ceiling was raised from $14.294 trillion in August 2011, to its current level of $16.394 trillion. Thus in the span of only sixteen months, an utterly irresponsible Obama administration has added a whopping $2.1 trillion to the national debt.

As bad as that is, the administration’s “solution” for out-of-control spending is even worse. As part of his fiscal cliff negotiations, the president and his minions have proposed doing away with Congress altogether when it comes to raising the debt ceiling, and giving the president unilateral power to raise it. “If the Congress in any way suggests they are going to tie negotiations to the debt ceiling and take us to the brink of default once again as part of a budget negotiation. … I will not play that game because we’ve got to break that habit before it starts,” Obama told CEOs at the Business Roundtable held earlier in December.

Perhaps a better habit to break would be the one where our narcissistic president tries to kick the constitutionally-mandated separation of powers to the curb whenever it impedes his transformative agenda. Or maybe he could wean himself off the urge to keep blowing through trillions of dollars in deficit spending in order to underwrite exponentially expanding government.

Yet if there were only one habit this president could break, rank hypocrisy would go to the top of the list. “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies…Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit,” said then-Senator Obama in 2006.

Presidential candidate Obama doubled down on that assertion in 2008. “The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion dollars for the first 42 presidents — number 43 added $4 trillion dollars by his lonesome, so that we now have over $9 trillion dollars of debt that we are going to have to pay back — $30,000 for every man, woman and child,” Obama said on July 3, 2008, at a campaign event in Fargo, N.D. “That’s irresponsible. It’s unpatriotic,” he added.

Five years later, $9 trillion of debt has mushroomed to over $16 trillion and as far as this president is currently concerned, patriotism and responsibility no longer matter.

House Speaker John Boehner (R-OH) and Obama have reportedly held talks on the subject. Shortly before negotiations between the two men collapsed, Boehner expressed a willingness to raise the debt ceiling in exchange for significant cuts in entitlement programs. Ironically, the last time the debt ceiling debacle played itself out in August 2011, Congress was unable to strike a deal, and the Budget Control Act of 2011 that emerged from the standoff is precisely what the current wrangling over the fiscal cliff is all about. Adding to that irony is the fact that one of the main the sticking points of those negotiations was the inability to reduce the ten-year deficit by $1.2 trillion, a number less than the consecutive one-year deficits of $1.3 trillion this administration rang up in 2010 and 2011. Adding to the insanity is the reality that one of the critical aspects of the current negotiations is finding a way to undo the “sequestration” that represents the only genuine spending cuts to come out of that impasse.

Thus, despite all the drama that occurred in 2011, including ratings agency Standard & Poor stripping the nation’s AAA bond rating because of fears the political class had no credible solution for reducing the debt, we are right back where we started, with one exception: the nation is $2.1 trillion deeper in debt than the last time.

Yet in order to run deficits, someone must be willing to lend the nation money. Most Americans assume the biggest “someone” is China or Japan. Most Americans are dead wrong. In 2009, foreign purchases of U.S. debt amounted to 6 percent of GDP. The current percentage has fallen by over eighty percent to 0.9 percent of GDP. So who’s picking up the slack? The Federal Reserve, which is buying a mind-blowing 61 percent of government debt issued by the Treasury Department. “The Fed is in effect subsidizing U.S. government spending and borrowing via expansion of its balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit,” wrote Lawrence Goodman, former Treasury official and current president of the Center for Financial Stability, last March.

The critical factor here is one that is rarely mentioned: the Fed is buying such large amounts of America’s debt because no one else wants it. Yet in the process of doing so, it becomes necessary to print money to make those purchases. Even the most economically illiterate politician knows that when you create more of something, each individual unit of that something is worth less. Thus Ben Bernanke, with the blessings of this president and his spendthrift Democratic Party, is debasing the currency in order to maintain the fiction that trillion-dollar-plus annual deficits and $16 trillion-plus of national debt — that the president wants unilateral power to raise as high as he can — don’t really matter.

But they do matter. According to the Congressional Budget Office (CBO) American taxpayers will pony up $5 trillion in interest payments on the debt over the next decade. Yet Obama, in all his class-warfare glory, has convinced substantial numbers of uninformed Americans that taxing the “rich” would solve our problems. Not even close. According to the Joint Committee on Taxation, the proposed tax increase would raise only $68 billion, by shifting the top tax bracket from the Bush era rate of 35 percent, up to 39.6 percent. Based on a projected budget of $3.6 trillion for 2013, that would run the government for less than a week. And that’s a “projected” budget, because the Democratically controlled Senate has ignored its legal obligation to enact a budget, for the last three years and counting.

With regard to the fiscal cliff, part of the fear the president is attempting to instill in Americans is that, barring a deal, taxes on everyone will be raised. Geithner, much as he did the last time, is engaging in a similar kind of fear-mongering concerning the debt ceiling, contending he’s got approximately a two-month window to keep the nation solvent. Yet he further hedges his bet to goose the fiscal cliff negotiations. “Under normal circumstances, that amount of headroom would last approximately two months. However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures,” he contended.

As an article in the New York Post points out, people of all income levels are “shocked” by how much more they will pay in taxes without a fiscal cliff deal. What’s even more shocking is how oblivious they are to the reality that raising the debt ceiling guarantees the middle class will be the next target for tax increases, no matter what happens with regard to the fiscal cliff. That would be the same middle class currently infatuated with big government spending, even as a majority of them remain completely reluctant to pay for it.

Unpleasant as it may be, the debt ceiling is the last vestige of negotiating power fiscally responsible government officials have to contain the spendaholic madness that is leading us to disaster. If Republicans fail to use it to extract genuine spending cuts from this administration, America’s descent into Third World-ism is a done deal. No entity, be it an individual, or greatest nation on earth, can continue to spend more than it takes in. Kicking the proverbial can down the road from August 2011 until today solved absolutely nothing. The same kind of negotiations that raised the debt ceiling from $14 trillion to $16 trillion are now aimed at raising it to…$17 or $18 trillion? Will another column written sixteen months from today be discussing a debt ceiling of…$20 trillion? Only if it remains possible to print and borrow enough money to sustain the fantasy indefinitely. It doesn’t.

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  • poptoy1949

    This is an extremely well written article that touches all bases equally and with justification. There is one outlying piece that was not touched on enough. That is my opinion. That outlying piece is that Obama wants to control the Debt Ceiling without the permission of Congress. Yes this is true as it has been mentioned many times in the media. Does this not tell anyone something? This so called President wants total control of the Government and if he does not get it he is willing to destroy it. He will do just that even if he does get control. Everyone should be able to visualize this based on his past actions. With,or without, a debt ceiling deal this country is in for a lot of hard times if one thing is not done. What is that…..CUT THE DAMNED SPENDING. "GOD I pray that you help this country in any way you see fit. Amen"

    • RedWhiteAndJew

      It is clear to me that Hussein wants to control the government because he wants to destroy it. Every economic action of his can be explained by the Cloward-Piven Strategy, if you but exchange its proposed implementation from below, with poor entitlement seekers breaking the government's back with debt, to an executive entitlement seeker trying to do the same thing.

      It is one of the ironies of the last election, that some of the more immature of the MSM used the homophonic names of Romney's old company Bain Capital, with the villian Bane in the last Batman movie. If anyone is like Bane, it is Hussein: redistribution, with the intent to blow the whole thing up, in the end.

  • pierce

    The way I see it, Barack Obama has brought this crisis on himself. He has been unwilling to moderate his own position. It was his responsibility from the very beginning to submit a budget, which he did not do. Furthermore he kept pointing the finger at John Boehner, and other Republicans in the House, chiding them, almost mocking them, to come up with a plan, which, for all intent was dead on arrival at the White House.
    Wake up America, our fearless, intrepid leader has brought this crisis on himself.
    So Main Stream Media report it the way it really is. BLAME BHO, no one else.

    • Cassandra

      He has brought this crisis on himself and on us and we will the ones paying for it, Obama is an egotistic scoundrel following "The dream from my father" to the hilt.He wants to make America poorer and us in the process. It is all written in his book and when i read it I finally understood where Barrak Hussein was coming from. Our upbringing mark us for ever and few escape it.

    • Mary Sue

      That's because this is what he wants, above all else. This is why I think if a deal is struck it will have the same effect literally as going off the fiscal cliff. He will redistribute the wealth any way he can.

    • objectivefactsmatter

      "The way I see it, Barack Obama has brought this crisis on himself. He has been unwilling to moderate his own position."

      The way I see it, he even negotiates like a Muslim.

  • cedarhill

    Oh My! And the Sun may not rise on January 1. And Obama's greens fees come due on Dec. 31st. We should all thank Tiny Tim Turbo Tax Totaller for finding his abacus in time to scare folks again. That's why the Left is making all those "Ho-ho-ho"s about now.

    Guess what? The world will NOT end on Jan 1 if the rates go up. Even for a year or more. Same with spending. You're heading into recession. The balloon can't take much more air. Have fun enjoying the Obama-Geithner-Bernanke calendar end of our times.

    • gerry

      We have lots of of fun and we will have more when the people will realise and face the cold reality

  • Asher

    Going over the cliff is the final nail in the coffin for America…the Left wants it! They haven't done one thing to help this country, totally the opposite…while they re-distribute the wealth of working, tax paying Americans, so that it will ensure their re-election by the useful idiots they are giving freebies to.

  • Jesse

    Two of the 3 pillars of our Constitutional system were either weakened (Federal Court system has become an extension of both Parties) or removed (17th Amendment: Senators removed as State's representation in Washington becoming extension of both Parties) which has resulted in the 3rd pillar–our President–being, essentially, the head of the Party with a national title.

    The Republicans played their part but half-heartedly as they wanted to uphold the Constitution in some form as a republic. The Democrats, on the other hand, more quickly disabused themselves of the farce of our practically being any longer a republic and–for expediency and power–ran directly to the interest groups to implement national democracy (think "French Revolution"): THE system the Founders most feared: direct rule of the majority.

    We're not "going back" anytime soon to the heart of our Constitutional system, the wave upon which our liberties arose. Wipeout, anyone?

  • Smitty

    What has happened to the rule of law in this country? Obama proposes that Congress be merely bypassed, and without the consent of the voters? Does this not smack of totalitarianism? In other words, one man can circumvent those representatives we have voted for and to whom we have placed our trust to run OUR government in an efficient manner? Where are the Republicans on this? Hiding under their couches?

  • tagalog

    What's the point of having a debt ceiling if Congress just raises it whenever spending approaches it?

    Why not reduce the spending? if we're not going to reduce spending, what the hell is the purpose of a debt ceiling?

    • objectivefactsmatter

      "If we're not going to reduce spending, what the hell is the purpose of a debt ceiling?"

      That's what 0'Bama said.

  • davarino

    Thanks Republican party for allowing the Democrats to do whatever they want.

  • Stuart MacLean

    Here's an 'article' written 129 years ago;

    "The United States of America cannot make its shadow legal tender for debts payable in (paper) money without ultimately bringing upon their foreign commerce and their home industry a catastrophe, which will be the more overwhelming the longer the day of wrath puts off its coming." ….. "Good money must have an intrinsic value" – founder of Annapolis and former Secretary of the Navy George Bancroft – 1884

    • AnOrdinaryMan

      This is why Andrew Jackson didn't trust the Bank of the United States; and closed it down towards the end of his presidency. Andrew Jackson, were he alive today and Speaker of the House, wouldn't negotiate with Obama AT ALL.

  • pierce

    It is 3PM Friday and Barack, Harry, and Joe are still blaming this impasse on the Republicans stubbornness to back down on their principals good government, and somewhat responsible money management. That is 3PM Friday before the country falls into a fiscal abyss, on Dec 31, 2013. Do they know how to swim. we know they know how to spend $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$. G D Demonocrats.

  • poetcomic1

    Zero is such a perfect nickname. If he just keeps adding zeros.

    • objectivefactsmatter

      "Zero is such a perfect nickname. If he just keeps adding zeros."

      He can add as many zeroes as he wants, but he'll be just as worthless.

  • JacksonPearson

    The only disaster this country should be focused on and fixing, is to commit to a balanced budget. Because a continued policy of trillion dollar Keynesian economics is fatal.

  • MIRV

    I wonder how long it will be before Australia has a problem with boat people from the US?

    • Stephen_Brady

      When we start landing with our guns …

    • Mary Sue

      More like "When I was Your Age, it was Mexicans who snuck into America to get the decent paying jobs!"

  • Cordell Wan

    If you think Jeffery`s story is incredible…, 1 week ago my brother's girlfriend basically made $7724 sitting there eleven hours a week in their apartment and the're classmate's sister-in-law`s neighbour did this for six months and errned more than $7724 part time from their laptop. apply the instructions at this address …….. BIT40.ℂOℳ

  • retired

    about time America woke up!

  • Thomas Wells

    Obama will start up the band and crank up the printing press. Buy your wheel barrels now, while you can afford to.

  • FPF

    " I will not play that game because we’ve got to break that habit before it starts" Indeed we need to break the leftists' habit of uncontrollable spending of other people's money, and break it hard so it will never creep back!!!

    • objectivefactsmatter

      " I will not play that game because we’ve got to break that habit before it starts"

      Doesn't he remind you of someone by the name of Abbas?

      Abu 0"Bama. Just stand up there and act like a victim when you're the one at the center of all the root problems. Typical Islamic supremacist.

  • Len_Powder

    "I will not play that game because we’ve got to break that habit before it starts,” Obama told CEOs at the Business Roundtable held earlier in December."

    I find it astonishing and very troubling that there are CEOs in the country that even want to listen to this man's propaganda and lies. They are supposed to be the "elite", educated and intelligent, not like the rabble which voted for Obama. But, it appears that they are no more intelligent than the rabble and perhaps even more stupid.

  • Len_Powder

    With the prospect of tax revenues declining, despite tax increases that even the Republicans will agree to, because of slower economic growth, and spending increasing over the remainder of Obama's term, it doesn't take even a 10 year old much effort to predict the inevitable consequences. But our "leaders" in Washington don't seem to have the intelligence of the 10 year old. I thought we would never see a President more incompetent and dangerous than Jimmy Carter but Obama makes Carter seem rational and reasonable.

  • Anamah

    Malicious ideas to destroy our nation and our children life. Unbelievable hard Democrat obsession so malignant and selfish, without any kind of compassion for this society. Both can work against everything we respect and love and destroy it for ever. Ungrateful cowards

    • objectivefactsmatter

      "Ungrateful cowards"

      Ungrateful unthinking delusional cowards.

  • zaynab

    Obama equates not raising the debt ceiling with defaulting on our debts. The only reason there is a risk of defaulting on our debts are that his policies are anti-growth and he spends too much. Stop funding multimillion dollar studies of homosexuality in Vietnam, stop funding Pakistan when it harbors Bin Laden and riots against us when we take him out. Use the billions you are funding Egypt with to pay off the debt. Stop shutting down coal and taxing our revenue produces to death and blocking oil development.

  • Tanstaafl

    How's that second term working out for ya?

  • John Stone

    One way of thinking about it is that this is the normal outcome of a social theocracy. The social sciences consist of a bunch of well educated people who do not really have a role outside of their specialty. Natural vanity encourages the development of elitist sentiment. Eventually they come to see themselves as a superior version of conventional society, and so they end up rejecting the culture they live in. As the really do not have superior skills at running a society, they come to see themselves as a moral elite. In the end it is not really all that different from a religion.

    • Ageofreason

      Good insightful comment, John. Why these people have abandoned us is critically important. It will help us to turn the tide.