Created on Thursday, 28 March 2013 00:10 Published Date Hits: 2743
The first week of 2013 saw John Boehner, speaker of the U.S. House of Representatives, decrying his capitulation to avoid the “fiscal cliff.” For months, Sunday morning political talk shows had been parroting President Obama about the dire consequences to America’s middle class, our military, our nation’s infrastructure, and the European Union if American did not increase its debt limit.
Who doubted that moderate Republicans led by John Boehner would cave? They had racked up much of the debt they were decrying. Congressional Republicans and Democrats have shown the same lack of willingness to rescind the debt-financed subsidies or programs they have created.
With both sides equally promoting welfare in its various forms, the end was known before the votes were tallied. The stock market strengthened as the media-generated fiscal cliff and/or Obama’s 2 percent spending cuts (sequestration) approached.
Included in the extension of the debt limit on our already $16 trillion debt was extending the Bush-era tax income cuts to 98.5 percent of the population (but raising the payroll and investment taxes on all of the population). Our leaders also gave $4 million in “green” tax incentives to buy battery powered motorcycles and $59 million to algae growers.
And they gave $70 million in tax breaks to NASCAR, $222 million in tax rebates to rum distillers because it only causes “buzzed” driving, an additional $331 million for railroad owners to maintain tracks they may not own, and $430 million to encourage Hollywood to make movies.
These vital national interests were pikers, barely a billion dollars in increased debt transferred to middle class taxpayers in return for increasing the debt limit for old expenditures. The total two year new debt acquisition in the name of debt payment was $100,000,000,000. Much of this went to support Sen. Jon Tester’s and Sen. Max Baucus’ favorite charities: Chinese and Spanish wind mill manufacturers. The net amount (10-year estimate) added to our debt while originally seeking to finance our debt was $300,000,000,000.
The new taxes amounted to 1 percent of the GDP and the new spending amounted to 3 percent of GDP. Republicans offered no amendments to strike any of the new spending. But Speaker Boehner did say, OK, but just this one last time. You guys cut something or we will “sequester” in March.
We ”sequestered” March 1, triggering automatic 2 percent budget reductions. That comes to $45 billion for the balance of this fiscal year or $81 billion for two full years. According to President Obama, this is “dire” and “Armageddon.”
The press has had a field day fear mongering. “Fewer food inspectors causing health risk concerns.” “Fewer airport security personnel will cause long waits and fewer flights.” “Beartooth Pass snow plowing delayed one week costing gateway communities $10 million.”
Should the press not be asking, “Mr. President, not a single subsidy to any foreign or domestic industry, nor has any foreign aid to any foreign country, has been reduced. Only services to American citizens. Is this by design, Mr. President?”
Wisconsin Gov. Scott Walker, a Republican, faced a $3 billion deficit. He made structural changes to the collective bargaining rules, state employee retirement and health contributions, and went with bonus pay for performance. These structural changes transformed the Wisconsin $3 billion deficit to a $300 million surplus and lowered the property taxes that fund Wisconsin schools. Yes, it created political upheaval, but voters supported Walker.
Neighboring Illinois has the worst budget deficit of any state: $44 billion, the same amount as the fiscal year sequester. Gov. Pat Quinn, a Democrat, demonstrating his presidential qualities, advanced the idea of borrowing the money to pay for his deficit.
Someone advised that to do so without structural changes, like Wisconsin’s, he would owe the old principal and the interest and still have to service the new debt. Proving he is not presidential material, Quinn dropped his idea. Instead, showing he could be like bipartisan U.S. Senate leadership, Quinn raised personal income taxes 67 percent and corporate income taxes 46 percent. Illinois has $8 billion in bills due but not payable and still has a $44 billion deficit.
Congress and Obama could have chosen to emulate either Walker or Quinn. They chose Quinn. If, without smoke and mirrors, the sequester actually saves $81 billion, the savings will be consumed in exactly three weeks since our debt continues to grow by $3.9 billion per day. Barring further extensions of the debt limit, we will again be out of money on May 18 and face a government “shutdown.” The financial markets are so sure of a Republican capitulation the Dow has again cracked 14,000.
Brad Molnar of Laurel served two terms on the Montana Public Service Commission.