Solving The Debt Ceiling & Deficit Crisis Incrementally

Failures in politics often have to do with lack of imagination. On the debt crisis front we have two apparently irreconcilalble positions:
1. We must raise the debt ceiling or the U.S. will suffer grave consequences (default).
2. We cannot afford to continue to borrow and spend, or the U.S. will face bankruptcy eventually.

The obvious solution to this dilemma has been put forward by the Republicans – raise the debt ceiling, but do so in a way that stops the flow of red ink. Any large debt ceiling increase should require a commensurately large change in spending direction. We should say NO to any large debt ceiling increase without:
1. Getting to a path to a balanced budget. WE do have a plan to get to a balanced budget. No, not the Ryan plan, which doesnt balance for decades, but a better one, the Republican Study Group plan. That should be laid on the table as the baseline budget. What makes it better than Ryan is it make more immediate spending reductions, one sure way to get to fiscal balance.
2. Immediate, real, significant spending cuts, requiring spending in FY2012 and beyond to be below 20% of GDP.
3. Defunding and repealing Obamacare and its mandates, taxes, bureacratic regulations, and spending.
4. New Congressional rules a la “Spend-go” that both forces Congress to cut 1-for-1 whenever they vote to spend more, and also protect taxpayers in the bargain, so that we do not force higher taxes as the ‘solution’ to the deficit. It is not.

The 4 points above – A real plan to get to balance; immediate spending cuts; defunding and repealing Obamacare; real rules for fiscal restraint – that is a bold and real approach towards real fiscal conservatism and cutting spending and deficits.

The failure of the Republicans in Congress to drive a better bargain on cutting spending has been due to their failure to push aggressively and BE BOLD in what they demand. The Republican leaders in Congress started too low, at $61 billion in cuts, and too willingly went below that to get the ‘bargain’ that was mostly hollow and double-counted cuts. As it stands today, FY2011 spends $200 billion more than FY2010 did. This is not turning the ship around, this is barely leaning on the wheel. So we need to ask for more and get more doen to cut the spending.

Yet we know the outcome of the above proposals. Obama’s highly partisan budget speech made clear that he will reject this Grand Bargain or even a much weaker set of requirements out of hand. This and any fiscally conservative approach will be rejected by the least fiscally responsible President in American history. Obama wants a blank check – a blank check written against an account that’s below empty. As such, he has built up the debate, with the help of his media minions, as one where, if the debt ceiling is NOT raised, then a calamity will hit the U.S. He wants to blame the Republicans for his own failure to come to terms with them.

As in the government shutdown ‘scare’, the Democrats are engaged more in a PR battle than a serious policy debate. For them, it is all about talking points for the 2012 election. For Republicans, falling into the trap of either letting the shutdown or crisis happen and getting the blame OR falling prey to enough worry that you cut a lousy deal – either error hurts Republicans politically. So how does the GOP stand its ground and at the same time NOT enable the President to create a ‘crisis’? How do we get out of the trap of this false choice?

The answer is simple: Pass small, incremental debt ceiling increases, and include in them a portion of the above 4 points. If we cannot drive a GRAND bargain with the Obama administration, drive small bargains:
– Raise the debt ceiling by $200 billion, combined with agreement on FY2012 budget and inclusion of at least $200 billion in spending cuts over the next 3 years. (Get near term cuts, not the bogus promise of future changes – that’s ‘my diet starts tomorrow’ wishful budget thinking)
– next $200 billion – Repeal a PART of Obamacare, perhaps allowing ANY state to opt out and delaying implementation one year to save hundreds of billions
– next $200 billion – Settle on the long-term path to balanced budget, with ‘spend-go’ rules and spending caps for FY2012 budget and beyond to lock it in as a reality.

Wait, but $200 billion will only last another few months, right? Right. Just like the CRs used to kick the can down the road a ways, and just as we were able to get CRs to include some spending cuts, this method allows us to make SOME budget gains and spending cuts as we hash out the matter. Pass this out of the House, challenge the Senate to do that same, and challenge the President – “We are raising the debt ceiling and doing it in a way that moves us towards fiscal responsibility.” It puts the onus back on the President. If he wants to reject fiscal prudence, let him be against the debt ceiling increase, any default is on his head. He passes the bill and we are back in 2 more months, asking the same question: How much spending cuts and fiscal responsibility can we put in to a short-term debt ceiling increase.

3 further negotiating points: Republicans failed to make sure the Senate was ‘on the hook’ in the prior budget negotiations; we should have required the Senate to pass their own version, then hash it out in conference; that would make the discussion much more 1on1 vs the 2 on 1 when the White House is in the room. People oppose a debt ceiling increase; the democrat demand it be done; fine, let THEM pass a bill out of the Senate FIRST. Beohner can simply point to the Senate and say “If this is a crisis, then Sen Reid should act like it’s one and do something.” Be tardy on it, and every time it comes up, point out that the Senate should act if its important.

Second, the House needs to pass a $1 trillion debt ceiling increase that includes a very STRONG amount of the above. Yes, pass a debt ceiling increase that repeals Obamacare and lay that on the table. Just because the President will push back does not mean it shouldn’t be offered. It will be a popular proposal. Passing much MORE of the spending reductions and budgetary restraints in the large bill will make it much easier to negotiate on a smaller bill.

Third, even if it was brave and solid policy, it was not politically savvy to lead with the Ryan plan and open a long-term discussion about entitlements, when (a) it takes a President to lead on this and (b) it takes the focus off Obamacare. We have a president who has a fundamental disagreement with us on how much we should spend, that disagreement adds up to trillions; so making any long-term ‘deal’ with him is futile. Leave Ryan and fixing entitlements aside, it won’t happen before 2013. Furthermore, it is a political opening for the Democrats to run their ‘Mediscare’ campaign. Instead, the GOP should have 2 goals – think about what smaller short-term gains can be made NOW in cutting spending, and think about 2012.

The worst thing that could be done would be to cave and allow the reckless spend-it-all policy to continue. At some point, the “setup” is such that pressure to do ‘something’ will build. Let the GOP lay the groundwork for a strong principled stand that we must end the fiscal recklessness, by passing a debt ceiling increase out of the House that is chock-full of the Republican spending cuts and fiscal responsibility; and when that ‘do something’ moment comes, let the GOP pass a small and incremental debt ceiling increase that includes more spending cuts.

The President will be forced to do something. If he wants to oppose even incremental steps of fiscal responsibility, let the default be on him.

The liberals have played ‘boil the frog’ on us for years. It’s time for us to start doing it back.