Daily Archives: October 18, 2013

Surprise! Debt-ceiling deal gives Obama a blank check: Loophole will allow government to spend WITHOUT LIMIT until February

By David Martosko

It’s the ultimate sweetheart deal for a free-spending federal government: Wednesday night’s debt deal didn’t actually raise the limit on America’s credit card, but instead removed it entirely until February 7, 2014.

Whether through legislative sleight-of-hand or something less sinister, the law of the land now permits the U.S. to run up new debts for 16 weeks without consequences, and forbids the Treasury Department from enforcing the debt limit that ordinarily keeps spending from spiraling out of control.

Some observers noted on Wednesday that when Congress burned the midnight oil to debate a deal that would save the U.S. from crashing through its existing $16.7 trillion debt ceiling and risking a credit default, there was no debate over exactly how far to raise it.

House and Senate negotiators only discussed how long the agreement would last.

The result has left the Treasury free to accumulate as much debt as it needs to until the deal expires, The Daily Caller noted on Thursday.

The Bipartisan Policy Center estimated that if the government had extended its debt ceiling in this fashion through the end of 2014, as one Republican proposal suggested, the federal government’s debt would have ballooned by $1.1 trillion.

At that rate, the national debt will likely grow by at least $282.5 billion on its own by the time Feb. 7 rolls around, bringing the total close to an even $17 trillion.

But there’s no guarantee it won’t grow even faster, especially if the legislative initiatives President Obama outlined Thursday morning were to cross the finish line by year’s end, as he demanded in his first public remarks since signing the debt-limit hike law shortly after midnight.

Obama said he wants Congress to give him a new budget deal, a 5-year farm bill and a comprehensive reform of America’s immigration laws, all before New Year’s Day.

Any one of those three could be a colossal budget-buster. Under ordinary circumstances, a hard-and-fast debt limit might serve as a check against runaway spending; but with no ceiling, Democrats could raid the Treasury to give the president what he wants, without fear of practical roadblocks getting in the way.

Republicans, too, could take advantage of the spending loophole. Senate Minority Leader Mitch McConnell demonstrated on Wednesday that he’s willing to accept expensive pot-sweeteners in exchange for a tidy solution to a messy problem.

When Obama signed the debt-bailout package into law, it included more than $2 billion in new spending for a dam project in McConnell’s home state of Kentucky, answering for some the thorny question of why the Senate’s top Republican would be so eager to make Democrats look good by negotiating a deal when tea party conservatives in the House were refusing to do so.

According to the conservative Heritage Foundation, Obama and Congress have already used the trick of ‘suspending’ the debt ceiling for a fixed period of time once before – running from February to May of this year.

That deal added $300 billion to the national debt in 102 days. The deal that went into effect Thursday covers 114 days.

The only requirement for that earlier agreement was that the Democrat-led Senate produce a formal budget for the first time since President Obama took office, which it did.

‘No savings were accomplished,’ says Heritage.

‘Suspending the debt is less transparent to the American people,’ the group explains, adding that ‘a calendar date is not nearly as scary to constituents as a figure in the trillions of dollars.’

The coming battles over a year-long federal budget, including Democrats’ demands for new taxes and an expected Republican push for spending cuts, could actually reduce deficit spending; but with no credit limit holding them back, lawmakers could see a perfect storm for committing to hundreds of billions in new earmarked projects calculated to please constituents back home.

The farm bill, too, is likely to rack up record spending on programs like food stamps, which fall under the Department of Agriculture’s budget: The Obama administration has already doubled the number of Americans receiving these entitlements since January 2009.

But immigration could require the biggest blank check of all.

While Obama and congressional liberals want to put 11 million illegal aliens on a path to citizenship, conservatives have consistently argued that the nation’s borders must first be secured. That, Democrats have countered, is simply too expensive to contemplate since it would likely involve building thousands of miles of new high-tech fences and staffing the Mexican border with thousands of guards whose salaries no one has contemplated yet.

Capitol Hill sources tell MailOnline that without a fixed debt ceiling over their heads, everyone in Congress might suddenly find it workable to give both parties what they want.

‘I can’t speak for the whole Republican caucus, of course,’ said a policy staffer to a conservative GOP House member, ‘but some of us want a border fence badly enough that we’ll look the other way if it adds a few hundred billion to the national debt.’

‘And once that’s in place, the biggest impediment to a citizenship path disappears.’

Since President Obama took office, new deficit spending has added about $43,000 to the national debt for every household in America.

That reflects a 60 per cent increase in the debt from where it sat on his first Inauguration Day, at $10.3 trillion.

At current rates of growth, Obama will leave office with national debts twice the size of those accumulated by all the previous U.S. presidents combined.

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Heavily In Debt Millennials Now Must Foot The Federal Deficit Bill Too

By Evan Feinberg

Millennials were born free, but everywhere we’re now in chains. The culprit is the skyrocketing national debt levels of the past decade, which have hurt young Americans and Millennials more than anyone else. We’re already facing enough personal debts as it is — and now we’re being asked to pay for everyone else’s.

Our debts start close to home. Today, the average college graduate is trying to pay down $35,200 in student loan debt. If that weren’t bad enough, we’re also looking at a job-market with near-record 16% unemployment rate for 18-29 year olds. That means we have more bills than ever — and fewer jobs to pay them off.

With such burdens, it’s hard for us to plan for the future. But our personal debt problems pale in comparison to the one that politicians are foisting upon us with out-of-control spending in Washington. The national debt, which now clocks in at nearly $17 trillion, continues to grow.

And just like our student loans, we’re going to be stuck with paying the bill.

Unfortunately, paying down these debts becomes harder with every passing day. Our debt to gross domestic product ratio now exceeds 100% — which means our government has produced more debt than the entire American economy produces useful commodities each year. Politically easy proposals such as “taxing the rich” can’t fix this crisis — even taking every last penny of the one percent’s money won’t put a dent in our debt. The U.S. can pay off its debts, but it’s going to take significant to government spending.

Clearly, our elected officials need to make some tough decisions. But they had an opportunity to do just that with the debt ceiling.

Lawmakers once again failed to avoid the complacency that has made continued debt ceiling increases the status quo. Inaction by our elected leaders is at the root of the problem. Passing the buck works great for re-election campaigns, but only at the cost of a bright future for my peers, my children, and every future generation thereafter.

That’s why Millennials need to take a stand. At a bare minimum, we need to demand dollar for dollar cuts as a condition for raising the debt ceiling again in January. That’s right: for every new dollar our government wants to spend, they should also find another dollar to cut or save. Good thing there are no shortage of options.

Major entitlement spending consumed nearly half of the entire federal budget in 2012, and will grow to nearly two-thirds of budget in the next decade. Trustees for both Social Security and Medicare admitted that neither program will survive past 2033 without changes. Only 18% of young Americans actually believe they will receive Social Security benefits. Serious entitlement reform is a necessity, and simply raising the Social Security eligibility age by two years could save $148 billion. The program will collapse without serious reform; the only missing ingredient is political courage.

Fraud, redundancy, and wasteful spending across government agencies are costing taxpayers billions of dollars every year. In light of the recent shutdown, perhaps it’s not such a bad idea to figure out just now “non-essential” some of the federal government really is. Just reforming and reducing the massive federal workforce would save another $150 billion.

Additionally, the federal government owns vast amounts of land west of the Mississippi river — land that’s valued between $500 billion to $1 trillion according to the Congressional Research Service. Selling that land for private use would bring huge financial windfalls that could be used to responsibly pay down federal deficits, and provide untold economic growth. On top of that, the government spends more than $8 billion a year just maintaining 70,000 vacant buildings and properties.

The list of possible changes goes on. Now we just need for our elected officials to have the courage to make these hard choices and stop kicking the can down the road no matter what. It’s time for politicians in Washington to put the next generation before the next election.

Evan Feinberg is the President of Generation Opportunity.

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The scary new chapter of America’s 223-year love affair with debt

By Matt Phillips

America might have too much debt for its system to cope with.

No, not the financial system. Sure, at $16.7 trillion, the US government has a lot of debt. But despite what you might hear, America is not bankrupt, any more than a homeowner with a mortgage is bankrupt. In fact, thanks to healthy buying from Japan, China and the US Federal Reserve—not to mention a worldwide scramble by investors in search of safe places to put money—the US can easily and cheaply borrow any money it needs to meet its obligations.

No, the system we’re talking about is not the financial system—it’s the democratic system. Maybe America’s awesome ability to take on debt is actually weakening the country’s willingness to pay it back. And maybe that’s why the nation’s hard-won reputation as a near-pristine borrower is starting to crumble in what may be an unsettling new chapter of America’s 223-year relationship with government debt.

Ability and willingness

First things first. A country’s reputation as a borrower is largely built on two things: ability to pay debts, and willingness to pay.

As we said above, the US has the ability to pay. But willingness? That’s a political issue.

Defaults by countries that were perfectly able to pay their debts have a long and rich history. A study of almost 170 government defaults dating back to the Napoleonic era showed almost 40% took place when economic growth was strong. That suggests that at least some were driven by politics rather than economics. “Many of these seemingly inexcusable defaults occurred when political upheavals brought new coalitions to power that favored default for opportunistic or ideological reasons,” the authors of the paper wrote.

There’s been just such an upheaval in the US, where a hardline Republican coalition—the Tea Party—gained influence after Barack Obama’s 2008 election. Brinkmanship driven by the Tea Partiers has repeatedly pushed the US closer to default than many would have ever thought possible. The last showdown, in the summer of 2011, prompted rating agency Standard & Poor’s to strip the US of its AAA rating. Fitch threatened to do the same this week, just before Republican leaders relented and allowed Congress to push through a bill to raise the debt ceiling and reopen the government.

For the record it’s only a small—albeit vocal—minority of Americans who don’t seem to recognize the obligation to repay debts the US has incurred throughout its history. When the Pew Research Center queried people during the US debt fight in the summer of 2011, some 23% of respondents said lawmakers who shared their political views—whatever those were—shouldn’t cave into pressure from the other side, even if it meant defaulting on the debt. A separate set of polling on attitudes toward default seems to put levels of support for default somewhere between 10% and 20%.

But with or without public support, the US seems to have embarked on a new path in its fiscal history that seem to threaten its cherished reputation as a borrower. “The repeated brinkmanship over raising the debt ceiling … dents confidence in the effectiveness of the U.S. government and political institutions, and in the coherence and credibility of economic policy,” wrote analysts with Fitch.

How did we get here? To figure that out, we have to take a look at America’s history as a debtor.

Blame the Dutch……… Read more: Here

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