President Obama addressed the nation during prime time Monday night to try and read his way into the hearts of the American people. At one point during the 15-minute speech, the President estimated that most Americans didn't know what a "debt ceiling" was. While keeping to this assumption, he laid out a series of sound-bytes that he also hoped would also catch the unwashed masses ill-informed.
The problem for the President, is that more Americans have been following the debt debates that he thought. And many are aware that he hasn't ponied up his version of a plan to deal with the crisis. They are aware that it has been over 800 days since he has made even a marginal attempt to have a budget approved. They know that the GOP has produced and passed in the House, a budget and a comprehensive plan to raise the debt ceiling, control future spending, and work towards a balanced budget amendment. All while the Democrats have sat back and wrinkled their noses at whatever the GOP introduces.
Say what you will about the politics of the left and the right. Whether you are a jet-setting hedge fund manager or an unemployed union auto-mechanic, you see who is actually making an effort to avert disaster.
Now, with a week left before the August 2nd deadline, Sen. Harry Reid introduced a bill proposing 2.7 trillion in spending cuts in exchange for a 2.4 trillion raise in the debt ceiling. According to Reid, this plan fits "all GOP requirements" in that it cuts spending at a level higher than the proposed borrowing allowance, and it does not raise taxes. However, the plan uses an accounting trick to mis-represent 1 trillion of those savings that aren't savings at all.
Reid includes 1 trillion dollars in "savings" obtained by drawing down the war efforts in Iraq and Afghanistan. However, these expenses were never budgeted or requested. Therefore, they are not cutting anything from future spending. This makes the revised 1.7 trillion in cuts much less than the proposed 2.4 trillion debt ceiling increase. And that is why it won't pass.
We've seen the Democrats pull this before. They've used phony accounting to trick Speaker Boehner into accepting smaller cuts than he asked for although they looked like more on paper.
So, with Cut, Cap & Balance dead on the Senate floor after Reid refused to even allow debate on it, Boehner has tried to cobble together a smaller version that averts immediate crisis, and gives the parties breathing room for about 6 months to tackle the issue again with more targeted cuts tied to subsequent debt hikes. Many Republicans and fiscal conservative groups are against the new plan because it doesn't cut enough, and even the President has threatened to veto it because it brings this issue up again before his reelection bid next year.
So, now Boehner is reportedly going back to the drawing board to try again.
This all become a sick game of "Mother, may I?" with the GOP making all the moves and Obama sitting atop his perch casting disapproval at everything coming his way. While time ticks down,it is no longer the threat of default (which Obama still threatens seniors with while privately assuring banks we will not) the real danger now is the potential loss of the U.S.A.'s AAA credit rating. If this happens, interest rates and the cost of borrowing will rise, and the US dollar will slip from it's current status as the most dependable currency in the World.
Obama knows that Cut, Cap & Balance will solve the issue, but fears the cuts will anger his entitlement-dependent base, and doesn't extract enough blood from the rich in the form of tax increases. To be honest, CC&B is a 100% political win for the GOP if it were ever passed. And that is why the Senate squashed it immediately after the House passed it. Despite how fiscally sound it is, the Obama base would run him out of office for caving.
There is no way the GOP can win. The ceiling MUST be raised to meet the interest and mandatory spending requirements. They have to realize that. People who think we can let the clock expire and force the President to start slashing are dreaming. But, the Democrats will never pass a cut-only bill (unless Harry Reid's sneaky trick had worked). You can point the finger at either party for being intransigent and be half right either way, but this still gets us nowhere.
Only a bill that includes some kind of revenues will pass the Senate, and only a bill that gets us past the 2012 election will earn Obama's signature. My suggestion is we give in on select tax exemptions that accomplish both. Even though they won't make a significant impact, the political points they score for the Dems will likely get them to pass it. For instance, Obama has blasted the corporate jet exemption in every speech since this debate became mainstream. Although it won't produce enough revenue to pay for anything, he'll get to claim victory on his favorite talking point. Hedge-fund managers paying a lesser marginal tax rate than me IS ridiculous and could be corrected. Both the debt hike and spending cuts need to exceed 2 trillion dollars to get through 2012.
2012 exposes 23 Democratic Senators to reelection campaigns and the Tea Party gets a crack at them that they didn't get in 2010. Contrast that with only 10 Republicans up for reelection, and we have an opportunity to control both houses of Congress. Even if we don't win the White House, the Presidential veto is the only thing that could halt most fiscal reform. But, a Balanced Budget Amendment is immune to the Veto-er in Chief. He can't veto it.
A Balanced Budget Amendment will likely garner support from those Democrat Senators who have gone on record as supporting it in the past (those that remain in the Senate after the 2012, at least). It has a very real chance of being ratified by the States, which would force future budgets to address deficit spending by law. No more partisan rancor over debt ceilings. The only caveat I can see, is that it must include some sort of provision to borrow in the event of a national emergency (read: WAR).
Give in on select exemptions and this battle is a Draw. You'll never get the fiscal reform we need with Obama in the White House. Set yourself up as the adults in this room and make your push for 2012. Even though he gets his debt hike this time, Obama knows better than to pick this fight again.
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