The Debt Ceiling: A Punch List

The Top 10 list of why the debt ceiling debate was a big joke (and this is no joke):

1. The train wreck in Washington, disguised as the debt ceiling debate, was only about posturing and how much should be cut. But no one debated what should be cut. The what is hard to find. How much spending did Congress really cut? $21 billion in 2012. And $42 billion in 2013. Not even a blip. Where is the other $900 billion going to come from? Much of it is expectations of defense cuts as the wars in Iraq and Afghanistan wind down which should happen anyway. After all, those wars are 10 years old. They should be over 10 years from now.

2. A $1 trillion tax cut last December – the extension of the Bush tax cuts for two years – took a couple days and led to a lot of bipartisan congratulatory back slapping and talk of a new era of cooperation.

3. A $1 trillion spending cut – actually $917 billion – took months of bitter acrimony, almost led to a national default, worldwide angst, and exposed the most dysfunctional government on the planet.

4. Congress agreed to raise the debt ceiling by $917 billion only if accompanied by $917 billion in budget cuts. That sounds like any additional spending must equal the budget cuts. The difference is that the debt ceiling increase covers eight or nine months while the budget cuts are spread out over 10 years. The entire debate was not about spending cuts. It was about marketing and branding for the next Presidential election.

5. This Congress acted more like a parliamentary government with four large political factions: Tea Party Republicans on the far right, moderate Republicans, moderate Democrats, and far left Democrats. Usually, the moderate middle is large enough to cut a deal. This time, the Tea Party and the far left were large enough to cause a logjam, and ironically, for different reasons, effectively joined forces refusing to compromise. They were like war time allies who fight together because, “The enemy of your enemy is my ally.”

6. Sarah Palin popularized bridges in Alaska. This year, just before the debt ceiling debate, Tea Party members in Minnesota, South Carolina, Wisconsin, and Mississippi quietly sought and received federal money for bridge construction and repair in the name of “economic development” (formerly called earmarks or pork), cashed their checks, and then began blasting Washington for “out of control government spending” and opposing an increase in the debt ceiling. Washington is the only city in the world where you can reward yourself by publicly criticizing what you do.

7. In 2001, the US spent $200 billion interest on $6 trillion in debt. In 2011, the US will spend only $200 billion interest on $14 trillion in debt because interest rates are lower. A mere 1% increase in interest rates could cost more than $100 billion per year. When the smoke clears, the cuts might only cover the increased interest cost.

8. Is the debt ceiling to become a political football from this time forward? Are Congress and the President destined to spend half of every year fighting over increases in the debt ceiling? Will there be payback when a Republican is in the White House?

9. Keynesian economics said that government spending can create growth. It worked in the Great Depression and lessened the pain in other recessions. Congress just did the opposite. It reduced government spending on the theory that less spending will create growth. Does that mean that the economy grows both when the government spends more and when the government spends less?

10. Oh Boy! ANOTHER new commission to figure out how to reduce the deficit. How will this budget commission – what, number 17? – be different? It has “triggers” that will implement “across the board cuts” if the commission can’t agree on an overall plan to cut another $1.5 trillion. What’s higher? Congress’ 14% approval rating or the percentage who think this commission will find the magic answers?

11. Health care costs have more than doubled over the past 10 years and are projected to double over the next 10 years. The government pays 50% of the national health care bill already. 80 million baby boomers are standing in line to join Social Security and Medicare over the next 20 years. If Congress cannot agree on an approach to a budget until hours before a potential calamity, how can it plan a budget ten or twenty years in advance?

OK, that was 11, not 10. Regardless of your political stripes, this is scary, isn’t it?