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Let’s Force Obama Into a Balanced Budget

By: Ned Ryun (Diary)  |  January 11th, 2013 at 07:25 AM  | 

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Let’s start with a simple question: If conservatives had a choice, would we choose to balance the budget now or follow Obama’s model of catastrophic debt instead? For conservatives, the answer is painfully obvious. And the quickest way to a balanced budget is to let the US government hit the debt ceiling. When we reach the debt limit we can only spend what we take in; quite a novel, radical idea in Washington. Of course, how the revenue gets spent gets complicated, but one thing is certain. Upon hitting the ceiling, the executive branch chooses how revenue is allocated. The US government would only default if the President ordered the Treasury Secretary to not pay our debts. It’s practically impossible. It’s less likely than seeing a fish ride a bicycle. CBO estimates the US government will take in $2.6 trillion this year. It costs approximately $220 billion to service the debt and prevent us from defaulting–just 8.5 percent of revenue. In other words, if we hit the debt ceiling, we still have plenty of money to pay the essential bills.

In fact, according to the CBO, we have enough to pay all “mandatory spending” (Medicare, Social Security, veterans benefits, debt payments, etc.) and defense spending, plus have more than $300 billion to use for “discretionary” spending. That’s right. Not only could we run all absolutely essential functions of government, we would still have $300 billion to spare.

Obama’s math doesn’t add up, yet the President and his buddies in the media have convinced people that the government will “default” if we hit the debt ceiling. They say our economy will tank. Explain this: How is a balanced budget bad for the economy? I mean, God forbid we only spend what we take in…

To President Obama and the media, nothing is more frightening than a balanced budget. Just listen to their rhetoric on the debt ceiling. It sounds like they’re talking about the Mayan Apocalypse. It would be “catastrophic,” “cataclysmic,” or worse.It’s almost comical, really.As conservatives, I think we can win the PR battle by fighting for this balanced budget. If President Obama is unwilling to negotiate and write a budget with real entitlement reform, I say we don’t negotiate with him either.Let’s hit the debt ceiling and force President Obama to immediately balance the budget.My intuition is, from there, President Obama might be willing to negotiate. I say we settle for nothing less than a budget which balances in 10 years. If Obama doesn’t want to talk, at least our kids will be saved from billions and trillions of debt.

Now, of course, the Left will counter that the debt ceiling just stops us from being able to pay our bills. They’re wrong–it’s much more than that. The debt ceiling, duly passed by Congress, is there to stop Washington from robbing future generations. It should be used as such.

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COMMENTS

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  • dfcord

    I can see your point. The debt limit doesn’t have to mean “default”, it might be able to be dealt with without defaulting on any agreement (other than the appropriated budget).

    As I understand it, the current US deficit spending is around $100B/month.

    The sequestration agreement proposes cuts which targets discretionary spending. The biggest cuts are to defense and domestic infrastructure. Large government contracts are discretionary. Dealing with a lack of government funding is written into these contracts (i.e. not a “default”). A lot of the budgeted funds are tied up in contracts that haven’t even been awarded yet (again, no “default”).

    While pulling these contracts would be very painful, I suspect we could stall reaching the debt limit for a couple of more months.

    The republicans can show they mean business by offsetting the upcoming $51B Sandy appropriation with offsetting cuts of $25.5B each to both the defense and domestic infrastructure budgets.

    • rbdwiggins

      According to the Supreme Court, “default” only applies to valid public debt, i.e., failure to pay “the holder of an annuity” (bondholders).

      The Court has ruled, Flemming v. Nestor, 363 U.S. 603 (1960), that entitlements and federal spending are not valid public debts.

      The Democrats can show they mean business by agreeing to pass a Balanced Budget Amendment and cut federal spending to match current tax receipts (Approximately $2.85 Trillion). Of course, that would necessarily kill the welfare state and put an end to the Democrat Party as we know it.

      • dfcord

        RDBWiggins,

        Please excuse an observation. You seem to be so eager to get out your talking points that sometimes you miss engaging the in discussion at hand.

        However, I’m not one to pass up to opportunity to learn something new. For example, did you notice that in the ruling from Flemming v. Nestor, there is no mention of “debt” or “default”.
        http://supreme.justia.com/cases/federal/us/363/603/case.html

        I can understand how one might use this precedent in an attempt to make the case you want to make, but if this is the sum-total of what you have, I suggest the case has not been made yet.

        Furthermore, it is beside the point. If the government reneges on a contract or otherwise breaks a promise and then it is in “default” by definition of the term. The fact that the government can default on promises without legal consequence doesn’t change what happened.

        It is the Republicans who are saying a strict adherence to a balanced budget is what is best for the country. If the Republicans truly believe that, then I would expect them to act on that belief.

        • rbdwiggins

          “If the government reneges on a contract or otherwise breaks a promise and then it is in “default” by definition of the term“.

          That simply isn’t so just because you say it is. Valid public debt has a specific definition. The Supreme Court recognizes it as the accrued property rights of the holder of an annuity (bondholder), and those rights are protected by the Fourteenth Amendment. Regarding the federal government: Default can only occur as the result of non-payment of the annuity to the bondholders.

          As far as everyone else is concerned: Anything Congress promises can also be taken away. It may not be fair, but it’s just a broken promise.

          As a point of fact: Congressional Democrats have blocked every attempt to pass a Balanced Budget Amendment.

          • dfcord

            This has gone past the point of ridiculousness…
            de·fault

            (d-fôlt)

            n.

            1. Failure to perform a task or fulfill an obligation,
            especially failure to meet a financial obligation: in
            default on a loan.
            http://www.thefreedictionary.com/default
            Breaking a promise is breaking a promise regardless of what the Supreme Court or the 14th Amendment says.
            Again, the fact that the U.S. Government can legally do whatever it wants in this area doesn’t change the simple, common definition of terms.
            I understand you are laser beamed focused on justifying what you want to have happen to the point of claiming your way is the only way.
            But it simply isn’t the case.

          • rbdwiggins

            Denial won’t change the facts. The common definition of default is irrelevant, because the federal government plays under different rules than the common man.

  • fwfd13

    The GOP is as afraid of political pain as the Dems. The GOP will fold, and in six months we’ll do this entire dance again, if only because of Obama’s unwillingness to ram something long term down spineless republicans throats.

  • rosenstern

    I think this is the right way to change the current popular mindset. When expenses get ahead of revenues for businesses, senior business leaders establish departmental budget cut targets. This is often accompanied by corporate measures like stock re-purchase programs to make the stock price more attractive. Curiously absent from our government budgeting process are percentage decrease targets by department. Leave it to the departments to cut their budgets by the desired amount but as the government body responsible for initiative revenue bills, have the House explicitly identify cuts on a departmental level over the next 10 years. We control the House, we believe in balanced budget, let’s quit blaming everyone else, take responsibility and show America a responsible path forward.

  • BA Cyclone

    I definitely agree we shouldn’t be “negotiating” with the President. We should keep any negotiations in the legislative branch. He can vote with his pen on the bill that gets sent to his desk.

    And challenge the silly no-brained conflation of “default” with running against the debt limit. It needs to be a 2-line response summarizing what you posted here. There is no way for us to default unless the President chooses not to pay our debt service or the people who are getting benefits. We have enough money in receipts to pay for all those things for a LONG TIME. It’s “everything else” that is the problem.

  • wgsampson

    What if the House Republicans man-up and balance the budget – just like every American family has to do. Then they can simply say, “We have a balanced budget, so we don’t need to raise the debt ceiling or pass any continuing resolutions.” Then, they focus all their attention on Harry Reid. I would like to see them trot out a Harry Reid clock (like the national debt clock), except it would add up all the money the taxpayers have paid Harry since he last did his job and passed a budget (any budget).

    • danilaw

      I like the Harry Reid clock.

      • checkmate2012

        Me too! The symbolism describes the just say no Senate on getting serious about the debt, way more than chatter! It’s not the R’s, it’s the The Reid.

    • commonsenseobserver

      Great idea.

  • http://mattfleming.com mattfleming

    “And the quickest way to a balanced budget is to let the US government hit the debt ceiling. When we reach the debt limit we can only spend what we take in”

    This statement seems to illustrate a fundamental misunderstanding about the debt ceiling. The debt ceiling simply doesn’t do what you’re stating.. congress can still pass bills that will add to the debt. You seem to at least understand (from the last paragraph) what it really does; however you couch the true impact of not raising the ceiling within the frame of being a “Left” argument.

    I realize this is an opinion piece, but it would have been a more worthwhile read if you had said why you think ‘not extending the debt ceiling’ is more than just stopping the ability to pay our bills.

    • rbdwiggins

      Do you really think that a congress which refused to raise the debt ceiling would vote to authorize any new federal spending or authorize the Treasury to increase the public debt by issuing any new bonds? Spending beyond the valid public debt would necessarily have to be prioritized.

      You can’t solve a debt problem with more debt. Only real federal spending cuts and sustainable economic growth, accompanied with a dramatic decrease in the size and scope of the federal bureaucracy, will solve our debt problem.

      • fromthesidelines

        Those laws have already been passed. As a consequence, the total debt owed to US creditors will rise regardless of whether the debt limit is increased.

        Suppose Congress authorizes a road is built. Suppose you are hired to build the road. You build it. You send the Government an invoice. If at this point, the government decides to not pay your invoice, that does not magically mean we no longer owe you for the road. We owe you money. Our debt to you, the road builder, has gone up.

        That’s why the debt ceiling does not prevent the total debt from increasing. All it does is shift to whom the debt is owed. We can borrow money from investors to pay for the road, and hence owe the investors. Or, we can not pay for the services rendered, and so in effect, borrow money from you, the road builder. Either way, the debt goes up. We borrow the money from someone.

        Passing laws to build roads, and then later passing laws to deny payment for the roads that were built, does not magically limit our debt. It just shifts the debt from investors (who are more than happy to take the risk), to road builders (who had no intention of doing the work for free, and had every reason to expect getting paid on time.)

        • rbdwiggins

          You are grossly misinformed.

          Payment for road construction previously authorized by congress is not valid public debt. Even entitlements like Social Security benefits are not valid public debt. According to the Supreme Court, except to “the holder of an annuity” (bondholder), there are “no accrued property rights.”

          The Fourteenth Amendment ensures the validity of the debt and protects the property rights of the bondholders.

          Payment of Social Security benefits, or in your example, payment for previously authorized road construction, are subject to prioritization and must be paid, or not, out of current tax receipts once the debt limit is reached.

          Valid public debt only goes up with the issuance of new bonds which must be authorized by congress.

          • fromthesidelines

            Its a false equivalency. Of course, unpaid social security payments is not debt. But, unpaid invoices for services rendered is definitely debt. When I invoice a customer, and that customer doesn’t pay me, that customer owes me. That doesn’t magically change just b/c the customer is the US Gov. Does your business do work for the US gov? When you invoice them, do you not record a receivable on your balance sheet? And does the gov not record a payable on their balance sheet?

            The point is — not paying people is not paying people. Call it what you want. When someone owes me money, I call it debt.

          • rbdwiggins

            Anything Congress promises, it can also take away. You are only guaranteed protection if it is a right that is protected by the US Constitution, or subsequent Amendments to the Constitution.

            It may not be fair, but valid public debt has a specific definition, and the accrued property rights of bondholder are protected by the Fourteenth Amendment.

          • fromthesidelines

            I understand your point. Actually, I don’t think our comments are mutually exclusive.

            If your principal point is that 14th Amendment only affords protection to bondholders, and not other creditors — ok, even if that were the case, I still don’t think that this is inconsistent with my original comment.

            I was simply pointing out — limiting the debt ceiling does not inherently limit the debt. It just limits treasury debt, and so shifts debt that will arise from laws already passed to other creditors.

            And worse still, if you are correct — these other creditors have lesser protection under the Constitution. The government can default on, for example, unpaid contracts without legal recourse.

            Well, maybe that’s the case. That would be shame, but you might be right. Thanks for the viewpoint. Its given me something to noodle on.

          • fromthesidelines

            This raises an interesting possibility.. and, I’m actually amazed no one has mentioned it yet.

            If contracts are not valid public debt, so not are subject to the debt limit nor the 14th amendment, then.. why would we stop payment on anything?

            The Treasury Dept can simply sell futures contracts on t-bills, and use those funds to finance whatever it needs.

            Investors would purchase future t-bills, at a discount to the price they believe those t-bills will sell for once they are issued, which is essentially a function of what they believe future inflation will be. If that t-bill is issued at above that price, the investor is in the money. Else, they lose.

            Derivatives are just contracts. If the government can freely default on contracts, and debt obligations that result from entering into contracts are not limited by the debt limit, or Congress in general, then the Treasury can sell as many derivatives as they wish.

          • rbdwiggins

            The Treasury can’t issue new bonds without congressional authorization. I can’t picture a world in which Congress gives up its constitutional power under Article I, Section 8, and authorizes Treasury to create a sub-prime market for government bonds that is not subject to the debt limit.

          • fromthesidelines

            (calling it a “sub-prime” market is a little bit of a misappropriation of the term, but that aside). Futures contracts are not new bonds. They are contracts to purchase bonds in the future. If Congress never authorizes the issuance of those bonds, the Treasury defaults on the contracts, which — according to your interpretation of the 14th amendment — it is fully able to do without legal recourse. Its entirely consistent with the Constitution, both article 8 and the 14th, as without Congressional approval, no new bonds are ever issued. Investors that buy the futures take the risk.

            The more I think about it, I really can’t see how this hasn’t come up yet. Unless, of course, your interpretation of the 14th is incorrect :)

            In any case, I’ll leave it there, I don’t want to be guilty of threadjacking for what could probably be a very interesting side conversation. Thanks again for sharing your view, and engaging me in thoughtful conversation.

  • rbdwiggins

    Should congressional Republicans decide to hold firm on the debt ceiling, I hope they’re prepared to engage in a lengthy battle with the Obama Administration over the Fourteenth Amendment. One that is likely to reach constitutional-crisis proportions, because contrary to what many on the left contend, the Fourteenth Amendment is not a blank check to increase the public debt.

  • danilaw

    What is really comical is fighting balance battles about the debt ceiling, when you’ve already approved spending. That’s like racking up credit card bills and then fighting over whether to sign the check.

    If you want to cut spending, cut spending.
    “But the Dem senate hasn’t managed a budget since 2009″

    So? Man up. Don’t approve continuing resolutions. Don’t approve appropriation bills.

    Harry Reid is indeed too chicken to approve a budget. But do you know when the last real, proper, budget was approved? 1997 under Newt. The rest have been a maze of continuing resolutions and appropriations and defense funding bills and other half-measures.

    Conservatives should sit tight and demand a real budget when it is budget time.

    That is a clean honest approach that is easily explained to the people.

    What about the troops? Sign a real balanced budget. What about social security? Sign a real balanced budget. Etc.

    Anything else is just passing the buck and political cowardice.. There is no need for a balanced budget amendment. There only requires courage of conviction to do the job that the constitution mandates is the job of the House and Senate.

    Will the country be destroyed slowly by accumulated debt? Act now. Don’t wait until the bleeding gets worse. But act at the point when congress is supposed to act: when they come to ask for a rubber-stamped continuing resolution or similar bill.

    And say “No. The role of congress is to pass a budget. And this time, it will be a balanced budget.”

    Go to the people on that – a straight fight, and a fight that can be explained to the public in black and white terms.

    .

  • keepcoolwithcoolidge

    If people are going to take us seriously about balancing the budget, we need to offer specifics.