cross-posted from the Oregon Tenth Amendment Center

Did we just have a Tea Party downgrade?

Of course the Mainstream Media (who like to call upon the government in general, and the Federal govt specifically, to solve every issue in Society) will tell you that the Tea party, with their intransigence towards any sort of tax increase, have caused the debt of the United States to be downgraded. I would ask any person who buys that mantra over to my personal bridge in New York (I’ll make you a great deal, and you can charge tolls to people who cross to pay for it). Seriously though, I have one thing to say… 16.7 trillion. That number does not even include unfunded liabilities! Some countries have been called basket cases for much less in debt relative to revenue.


The thread of truth behind the ridiculous assertion…

S&P (the ratings agency that downgraded us) specifically mentioned the debt debate and the reluctance/refusal to entertain any tax increases as a part of the solution – with this quote:
“Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.”

Given the association of the Tea party with the Republican party ( clearly, with the recent deal in D.C. this is a false impression), some may say that this is a Tea party downgrade; but if you read the whole story it becomes clear that we have simply been so profligate as to make ourselves unable to merit an AAA rating.

The truth of why we are going to continue to get worse:

We have been living in a Keynesian fantasy world for the last 50-60 years. Anyone who looks at America’s spending vs. revenue for the last 100 years will see a change that has occurred. We spend until we reach the debt ceiling, then we raise the debt limit. Any serious look at our treatment of the debt ceiling harkens to the old Bugs Bunny cartoon where Bugs draws a line in the sand… it gets stepped over… and then another line… followed by walking past it. Our debt limit has been and still is today no limit at all. It is simply an exercise in parliamentary procedure, to give the impression that our political “servants” are really minding the store (while they clearly are not)!

No nation can spend like our govt. has been spending and continue to be prosperous. When all our debt is included such as promises made, but not funded (as any business has to that takes on such fiduciary responsibilities). Our Debt to GDP is more than 8 to 1 – that’s 800%! YES, 8 times the numbers that is routinely bandied about. Contrary to popular belief, though, the threat not to raise the debt ceiling yet again was not a threat to force default, but rather a threat to force spending cuts. Fact is that we currently have plenty of revenue (2.2 trillion) to pay for our debt service (~400 billion/year), plus Medicare, Medicaid and Social Security (~300 billion/year right now). So, default would only have happened if the administration had chosen NOT to pay our bills. What a refusal to increase the debt ceiling would have done would be to have forced the administration to cut trillions in unnecessary and unconstitutional programs and balance the budget! We have to do this at some time, and now is better than later – because the longer we wait the more unsustainable our Ponzi Scheme programs become.

Currently, we spend 140% of our revenue; and these programs are not temporary events like WW2, they are permanent peacetime spending. We cannot spend like that in perpetuity! Even in the fantasy world of D.C., where “we” simply print what “we” want to spend, we are impoverishing ourselves and eliminating any reason to invest in America, because the money created in this fashion saps the value from money already created, and risks hyperinflation.

What about Social Security, Medicare, Medicaid?

It is unavoidable that these programs must change, because they are based upon a pyramid scheme model. They are unsustainable under anything other than a continuously accelerating population growth. Our leaders over-promised and under-saved. These programs made the false promise that you did not have to save for your future, and thus… people didn’t (and to their everlasting shame, no one in D.C. did either). They spent until they got to retirement, and now there is nothing there for them to retire on. I feel for these people! They have been the victims of wholesale legal plunder, where they now have nowhere to turn but government!

What needs to happen first is to stop digging. Stop making these unkeepable promises and discontinue these programs! Grandfather the people who are financially dependant upon these programs and call them what they are (Welfare). If we leave these programs in place, our future can never be secure. Our politics will always be rife with generational political battles pitting the old vs. the poor, and the sick vs. the healthy. These programs give the govt. cover to legislate in areas that are none of their business, and cause every aspect of our lives to be governed by D.C! The longer we wait to make the changes, the more difficult and painfull they will be. If we stop digging now and be honest with ourselves, we could still allow our Seniors the ability to retire with some dignity, as well as to allow our children to save for their own futures.

What did the “deal” really resolve?

So… after all the angst and hand wringing on both sides in D.C., the final solution (that even the Republican wonder-boy, Paul Ryan, signed onto) was to increase the debt ceiling with cuts in spending that didn’t exceed the planned increases already in the books (or in other words, no cuts at all). That’s right, after such a long, drawn-out battle – we had NO cuts. The spending goes up every year for the next 10 years, and we are told it is a cut because it goes up at a slower rate than before. If I was a debt holder of the U.S. before this debate, I would now be convinced that America had no interest in cutting spending. When asked why he voted for it, Rep Ryan’s answer was that it was the best deal we could get, and we should be happy to have the pretend cuts that are in place. B freaking S – the best deal was no deal. No deal doesn’t require 60 votes in the Senate, and no deal does not require a President’s signature.

The house not penning a deal was the best we could’ve hoped for, but instead we got a front row seat to the King of broken promises. Also, taxes cannot reasonably go much higher, and why should they? Less than 50% of Americans pay taxes…. so why should those of us who are pulling the wagon allow more people to get in and use bull whips on us? This downgrade was because it is obvious that American politicians are congenitally unable to stop spending. They tax with one hand and spend with two.

Now, what we are left with is a debt “limit” of 16.7 trillion dollars, an unfunded liabilities number of (last I checked) 115 trillion, and a ticking debt timebomb. It will never be as “easy” to get our fiscal house in order as it is today, any check of the future Medicare/Medicaid/Social Security schedules will tell you that, and soon the possibility will be lost. America has passed Her last chance of gradual changes and no-pain solutions. If we wait any longer, we will be past the point of non-lethal solutions. Since I have children, I am really hoping we don’t get to that point. We lost this argument to the media and D.C. spendthrifts, but there will be another debt ceiling debate in a couple of years (maybe even before the anointed one leaves office). Lets have all our arguments in order when that happens!
It may be our last chance.

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