Thursday, April 28, 2011

Another Fake Debate: Raising the Debt Ceiling

Time Magazine used the word “zoom” with respect to the “public debt” in a 1941 article and said, “The President questioned the meaning of a legal debt limit, hinted that there should be no legal limit.” There were only newspapers, magazines, movie theatre newsreels and radio to report that the 1940 Democratic platform “made no mention of that fiscal dodo, that old museum piece: a balanced budget. Franklin Roosevelt held to precedent—he didn't mention it, either.”

Bear in mind that the idea of a federal budget was relatively new. Up until 1921, the president did not have much of anything to do with hashing out budget, other approving or disapproving it as the head of his political party. The Budget and Accounting Act of 1921 created the U.S. General Accounting Office (GAO) as part of the Legislative Branch. Its job was to audit federal books and prevent fraud. In the Executive Branch, the 1921 legislation created the Bureau of Budget to coordinate budget submissions by various departments and agencies.

Former Treasury Department economist Bruce Bartlett wrote in Forbes, “Deficits primarily resulted from wars, and strenuous efforts were always made to pay them off as soon as possible afterward. On those occasions when the Treasury needed to sell bonds, each individual bond issue had to be specifically authorized by Congress.”

The federal budget is actually on automatic pilot, anyway. The reality is that neither Congress nor the presidents have anything so say about it. “If you take all the earmarks, unnecessary weapons systems, waste, fraud and abuse and everything else you can think of that deserves to be cut, it still adds up to drops in the ocean compared to Social Security and Medicare,” Bartlett says. “As long as those programs are off limits the president's budget will continue to decline as a matter of political and economic importance.”

As to the meaning of the debt ceiling that President Roosevelt questioned, since March 1962 the debt ceiling has been raised 74 times. According to the Congressional Research Service, 10 of those times have occurred since 2001. Theoretically, the debt ceiling limit is supposed to help Congress control spending. However, in reality, the debt limit is ineffective in controlling spending and deficits. Politicians and reality continue to be strangers to one another.

Here is where the appearance of a showdown gets legs. “Administration officials say even GOP firebrands won’t risk a national default and an international financial meltdown,” according to Politico. “There is a growing sense among all parties that President Barack Obama won’t be able to extend the credit limit without making significant new concessions to congressional Republicans.”

Democrats have leverage, however. “There are obviously divisions in the GOP among the leaders and the people pursuing their dumb notions of linking [cuts] to the debt vote,” said Representative Barney Frank (D-MA). Speaker John Boehner (R-OH) has repeatedly said the limit needs to be raised. Representative Eric Cantor (R-VA), Boehner’s number 2 in the House, is keeping with his alliance with tea party conservatives and taking taken a tougher line. But that’s all it is – a line.

Conservative strategists are warning that the GOP should not push the debt ceiling debate too close to the breaking point. According to the Huffington Post, “If there is a vote on raising the debt ceiling and it fails, there will be a significant market reaction,” said Tony Fratto, a former Treasury and White House official in the Bush administration. “Investors already believe that Congress doesn’t understand the financial markets. A failure to raise the debt ceiling will confirm this to them."

The country is already sour on congress. Gallup reports, “Congress' approval is at 17%, essentially unchanged from last month's 18%, and identical to where it was just after last November's midterm congressional elections. The current rating is just four percentage points above the all-time low of 13% from December.”

Gallup also reports that neither the budget nor unemployment is Americans' top overall concern. “That distinction belongs to the economy, by a significant margin over any other issue. The economy has placed first or second on the list each month since February 2008.” Even so their polling shows that “Independents and Republicans are both twice as likely as Democrats to say the budget is the most important problem. In turn, Republicans are less likely than Democrats and independents to view unemployment as the top problem.”

Pew Research March survey found that 34% of Americans said the economic issue they found most worrisome was “the job situation,” followed by rising prices (28%) and then the budget deficit (24%). The survey also said, “The number citing the deficit as their top economy worry had increased from 19% in December. Concern over rising prices increased even more dramatically -- from 15% in December to 28% in March.”

Pew Research also found that with respect to Obama’s handling of the federal budget deficit, 33% approved and 59% disapproved. However, when asked whether the GOP or President Obama has the better approach on the deficit, “most Americans (52%) say there is not much difference between the two sides -- and Republicans have lost ground on this measure, among their own base, since November.”

Not surprisingly the New York Times/CBS poll finds pretty much the same results. Of Barack Obama’s handling the federal budget deficit, 33% approve and 59% disapprove. Of the way the Republicans in Congress are handling the federal budget deficit, 27% approve and 63% disapprove. As to the way Congress is handling its job, 16% approve and 75% disapprove. Congress beats the president in disapproval.

H.L. Menken said, “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” The recent House Republican habit of creating fake debates and backing losing legislation would seem to confirm Menken’s observation. However, its Barney Frank who calls the raising the deficit ceiling debate best. “In the end, the Republicans are not going to be able to withstand the pressure from the business community, the guys who finance their campaigns. … In the end, they have to do this.” Posturing about the debt ceiling is another fake debate.

Article first published as Another Fake Debate: Raising the Debt Ceiling on Technorati.

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