Conservative Political Commentary

...usually with an attempt at historical and economic context

Monday, July 18, 2011

Krauthammer On Target about 2012 Budget Cuts; Will Obama Allow Default?

U.S. Treasury Dept. building (Dreamstime.com)
Where are we on the debt-ceiling negotiations? Do we need to raise the debt ceiling? What if there is a default? Will the military get paid? Will Social Security and disability checks, and veterans’ benefit checks go out?

We are faced with a weird combination of actual danger and fear mongering. There are some facts to be considered when following the “negotiations,” which increasingly look like a stalemated process, but which, as August 2 nears, are likely to end in some kind of agreement to raise the debt ceiling. Conservatives can only hope that the GOP leaders can manage to assert their House majority power and hold firm on (1) real cuts and (2) no tax increases.

One way of addressing this is the “cut, cap and balance” legislation the House Republicans are uniting behind. It addresses the issues of the day and offers a mechanism to bring spending under control for the longer term.

I think GOP should consider the advice of Charles Krauthammer, and require substantial cuts in the 2012 fiscal year. The president wants everything to happen after the 2012 elections, giving him an election-year pass on these issues. Also, Mr. Krauthammer suggests, wisely, I think, that the GOP should point out the president’s way of framing all his arguments, that only he is the one trying to resolve the issue, while his opponents are only seeking to help billionaires and special interests, and further their own political interests. If the president is so serious about budget cuts, where was he in the last two years? Along with the congressional Democrats, who presented no budget at all, he was very busy not presenting a budget that might cut spending, knowing full well that a serious, extended agreement on the debt ceiling was needed. Now, he’s suddenly the hero of the hour?


Social Security checks’ status in the event of default represents a curious issue. Mr. Obama, cynically using seniors’ and veterans’ checks as a bargaining chip in the negotiations, says August checks may not go out if default happens. This contradicts his Office of Management and Budget Director’s statement that the Social Security Trust Fund is solvent through 2037, so no discussion is needed. However, this is untrue. As pointed out, again by Charles Krauthammer, as well as others (Gary North, for example), the Social Security Trust Fund has no tangible assets. It has been raided and spent by the politicians for decades. What it has are non-negotiable government bonds (IOU’s). It’s not only not solvent through 2037, it’s barely, if at all, solvent now.

In fact, the big three programs, Social Security, Medicare, and Medicaid, are a ticking financial time bomb, representing unfunded obligations of tens of trillions of dollars. Yet the Democrats have no desire to deal with this.

It has been said that military and Social Security checks, etc. for August will go out unless either President Obama or Treasury Secretary Timothy Geithner issues orders to stop them. If there is any real possibility of them not going out, then the Administration needs to get its priorities in order. And they ought to apologize for lying to us about the solvency of the Social Security Trust Fund. Rep. Allen West views Obama’s threat as “sad, pathetic, and fear mongering” (video via CNS News):



Of course there are other consequences if default happens: Markets will respond negatively, America’s creditors may be ready to cash in, etc. The world’s safest investments, U.S. Treasury bonds, may be seen as not so safe after all. Anyway, a default would be bad. How bad, we’ll have to wait and see, if it happens.

A few points to remember:

1. Even though G. W. Bush over-spent, his deficits pale in comparison to what the Obama regime has added to our debt.


2. Obama has never been serious, and is not now serious about spending cuts. He still wants a trillion-dollar tax increase (in addition to what we’re scheduled to get under Obamacare). He wants any spending cuts that are agreed to, to happen in the out years, well past election day.


3. He constantly says the Republicans are only interested in political posturing, when what they are trying to do is the thing they were elected to do. Obama is the one who wants smooth sailing into the 2012 elections. He wants to blame the GOP for anything that goes wrong, and he steadfastly refuses to show actual leadership on anything to do with the debt or budget. He threatens to veto “cut, cap and balance” if the Congress passes it. His strategy is to stir up class warfare.


4. As has been pointed out numerous times, even if Obama could take all the money from all the rich, it wouldn’t even begin to solve the problem.

If “cut, cap, and balance” somehow passes both houses of Congress and lands on Obama’s desk, the GOP should not offer any further deals. In fact, they shouldn’t anyway. Let Obama deal with the default. It will be his choice. Sen. Mitch McConnell is right about one thing: these problems cannot be adequately dealt with while Obama is still in office. But Republicans need to stand strong if they are serious about spending cuts. Otherwise, it’s just more of the same tax-and-spend and the Republicans will be weakened as a result of caving.
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2 comments:

Maggie Thornton said...

Excellent commentary on this important issue. I agree with Krauthammer on most, but I don't understand why he thinks the Balanced Budget Amendment is not a good idea. The fact that Dems will oppose it doesn't mean it shouldn't happen. The BBA is the most important issue to keep this from happening in the future.

The questions are, who can 'honestly' oppose a balanced budge amendment, and when they do, can we honestly assess why they oppose it? Of course, we can. The BBA removes power from the government and gives it back to the people.

The CBO (I believe it is the CBO) has a guideline of how to handle a government shut-down. It is the precedent for making payments in such an event. It recommends nothing of what Obama is telling the people about SS checks.

We have to remember that we certainly have the funds to continue paying interest, the military, SS and Medicare. The problem comes when the shut-down lingers on. Assuming a fix is finally arrived at, it shouldn't be a problem, other than the markets.
I'd rather the problem (a market meltdown) be now, rather than 5 years from now.

This morning as I listenws to Geithner on Fox Sunday, he makes an absolute fool of himself, indicating that he is shocked that it is taking so long to solve the issue, saying that the necessity for raising the debt limit has been known for a very long time.

What HAS been known for a very long time is that spending was causing the need to raise the debt limit. The issue is spending, not the debt limit.

Thanks for visiting my place. I really appreciate it!

Maggie@MaggiesNotebook
http://maggiesnotebook.com

Eddie Howell said...

Ms. Thornton,

Thank you very much for the comment. I don't know about Krauthammer's objection to the Balanced Budget Amendment either. Maybe because the Administration doesn't care about the Constitution?

Maybe the GOP, having passed plans, the Democrats having none, should just say take it or leave it.

We appear to be on our way to bankruptcy/default at some point anyway, if Obama's policies continue.

You are exactly right, the problem is spending.