Debt Ceiling “SLIM” Plan
The Obama and Democrat plan for America’s debt is that there should be no debt ceiling and that they should be able to spend as much of your money as they want. Republican talking points say that they would like to use the debt ceiling as a mechanism to force spending cuts, specifically $1 in cuts for every $1 in debt ceiling increase. The problem is that Republicans don’t have the political will to make it through this fight, because their position presents an all or nothing proposition that won’t survive the bully pulpit or the crooked media “referees”. What’s needed is a plan that can deliver results while severely limiting the opportunity for demagoguery. The plan also has to be decoupled from the actual budget process, because linking them actually creates the list of items to be demagogued.
The Debt Ceiling “SLIM” (Start Limiting Increases Monthly) Plan is an approach that slowly reduces debt ceiling increases over time in a predictable and regular fashion. There is no cliff and no shock change possible with this plan. The plan provides the monthly debt ceiling increases for each month over a period of 10 years, with the increase for each month decreasing by a fixed percentage, say 2.5%, each month. Treasure has already indicated that they have the ability to be flexible for a period of 3 months, even if the debt ceiling isn’t raised on time, so there should be no problem planning for month-to-month increases. The plan needs to be implemented by one Bill that originates in the House, and that Bill covers all of the planned increases for 10 years.
This year’s budget deficit is expected to be approximately $1T, which is $83.33B every month. The SLIM Plan increases the debt ceiling by $83.33B for the first month, but, for the second month, the increases is 2.5% less than the first month, or $81.25B. For the third month, the debt ceiling is increased 2.5% less than month two, or $79.22B, and so on. For the first year, the increases are:
- $83.33B – First Month
- $63.07B – 12th Month
The increases for the year total $873.30B, or $126.70B less than is currently planned to be spent. Over a period of years, this has a dramatic effect on lowering the increases, with the monthly rolled-up numbers presented yearly at:
- $873.30B – First year
- $56.71B – Tenth year
This is a reasonable plan that does not require negotiation with The White House or with Democrats. Pass the Bill in the House (it has to be an absolutely clean bill), and make it well known that this is the best deal that they will get. Then, let the President and Democrats decide whether or not they will sacrifice America’s credit rating by defaulting on the debt. They will have to justify why endless high debt increases are necessary, and they will look foolish in doing so. The President asked for a predictable long-term plan, and that’s what this is. He also says that his Tax Increases reduced the debt, and if that’s so, then the debt ceiling doesn’t have to be continually increased by $1T each year.
The comments that I’d like to see for this post are what are the best opportunities for Democrats and the Media to demagogue this plan? Also, if there are any market experts, what will the reaction from Wall Street be for this Plan? What will Rick Santelli say? How will Bond Trader react. What will Credit Rating agencies say? My guess is that it would go over pretty well.