Not How Much, But How Soon

Posted By Elgin Hushbeck

As the debt ceiling talks continue one thing is becoming clear: conservatives hold all the cards.   When you sort through all the rhetoric and posturing, the core of each side comes down to this.   Liberals want more spending, a larger government, and the higher taxes to pay for it, as this allows them to help more people. In short, they see government as the solution.   Conservatives want less spending, a smaller government, and lower taxes, with ideally a balanced budget, because this would result in more freedom, and greater prosperity for everyone.   In short, they see government as the problem.

While I come down solidly on the greater freedom and more prosperity side, that is not my point here.  As for those who high mindedly criticize both sides for not just “putting politics aside and doing what is in the best interests of the country,” I would ask just what would be these hypothetical “best interests”?  Just where is the middle ground between those who believe  that our problems are because government is too small and is not doing enough, on the one hand, and those who believe that our government is so large that it is stifling economic growth and limiting freedom?  Where is the middle ground between government is the solution, and government is the problem? Should we just leave everything where it is?  If so how does that apply to the debt ceiling?

While politics certainly is playing a huge role, how could it be any different?  Yet politics it is not at the core of the problem.  At the core are fundamentally different views of our current problems and thus fundamentally different beliefs as to how best solve them.  Thus even if asking politicians to put politics aside was not akin to asking for unicorns to pull your carriage, if they did, it still would not get you very far. The same fundamental divisions would still be there.

So the current situation is that Congresses and Presidents have for decades made far more commitments than the government has revenues.  This has been easy for politicians. They get the political benefit of “bringing home the bacon,” while the costs are often pushed off into the future.  This is not a new problem, but has in fact been the norm since at least WWII. Before now it was much easier to ignore and get around.  The Federal government could raise taxes or close loopholes; inflation and prosperity moved people into higher tax brackets; the cost of promises could be pushed off onto the states;  and the government could just borrow money.  But the resistance to higher taxes and the size of the debt have both grown, and the states are themselves in trouble.  With the current economic problems, and the heretofore unprecedented deficits, things have come to a head over the debt ceiling.

This is why conservatives hold all the cards.  Ideally conservatives want a smaller government that lives within it means.  If no agreement is reached to raise the debt ceiling these goals will be reached as soon as the debt ceiling is reached.  The Federal government will not have the money to spend and so would become smaller overnight, and the budget would by default be balanced.

There are in fact many who argue this is the approach that we should take and polls show that a large majority of people oppose raising the debt ceiling.  Still even though this would get them where they want to go very quickly, many conservatives believe that this would be needlessly painful. Therefore they would support raising the debt ceiling as long as it clearly and decisively moved the government towards getting spending under control.

Liberals, on the other hand, since they want a larger government that can do even more, seek an increase in the debt ceiling that will allow them to continue to expand government.  Their only bargaining chip is that to fail to do raise the debt ceiling would cause the government to default, which would bring economic disaster.  While it is true that if the government defaulted it would have severe economic consequences, it is false that failing to raise the debt ceiling would cause the government to default.  It wouldn’t.

Federal revenues are more than sufficient to service our debt.  The Government would not be able to meet all of its current obligations, but that is different than not servicing the debt.  It just means that the government would have to do what an awful lot of Americans have had to do in recent years:  prioritize, and get by with a lot less.

This is perhaps why there is such strong opposition to raising the debt ceiling among the public. Since the economic downturn, the Federal government has been living high on the hog. Washington has been awash in money, which is why the deficit is now ten times larger than just a few years ago.   So ultimately the liberal position is a very weak one, and in fact untenable.

Conservatives can simply refuse to raise the debt ceiling, and they get what they want.  Or they can negotiate real and significant cuts to reduce the size of government in a more controlled fashion. But either way they win.  In fact there is only one way that they can lose.

So far I have referred to conservatives and liberals, not Republicans and Democrats.  There is a reason for this.  While conservatives want a smaller government, not all Republicans do.  Some Republicans are just as happy to make unfunded promises and spend tax dollars as any liberal, though they may hide behind the fig leaf that they create slower growth. This is why often in the past the “cuts” in government were at best only reductions in the rate of increase.

This is also the reason for the anger at the Tea Party, for they are a disruptive force.  They will not settle for the traditional phony compromises of the past, compromises that looked good on paper by using accounting gimmicks and by promising huge cuts in future years, cuts that never actually materialized and thus were ultimately meaningless.

As things look now, the Republican leadership is acting like conservatives.  Unless they blink, they will either achieve their goals in August, or they will negotiate a more orderly transition to their goals at a later date.  So really, they are, or at least should be, negotiating how soon they reach their goal of a smaller government that lives within it means; that is really what is under discussion.

Jul 13th, 2011

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