( Thanks to Martin Earley for his presentation - Opposing Ratification of the UN Convention on the Rights of the Child. More information on this important issue is provided in the packet P . - pwc )
----------Tom asked me to talk a little about whether we should oppose raising the debt ceiling.
What is the debt ceiling?1
- Annual deficits contribute to the overall national debt.
- Treasury finances this debt by issuing bonds.
- The ceiling acts as a check on overall debt.
- Treasury cannot issue debt above the ceiling without authorization by Congress.
- If Congress doesn't raise the debt ceiling, it cannot spend more than its revenue.
The mood of the country is against raising the debt ceiling:2
- An NBC/Wall Street Journal Poll showed that people opposed raising the ceiling by a 62 to 32 percent margin.
- A Reuters poll showed 71% opposition and 17% support.
On Friday I received a heads-up from Freedomworks.3 P
In early April they commissioned a LuntzGlobal poll in fourteen battleground swing states:
And backing up this bold action, voters were decisively against raising the debt limit:
They were asked, Do you support or oppose raising the Debt Ceiling above the current $14.3 trillion?4
- 71% of the swing voters and 83% of the Tea Party opposed raising the debt ceiling.
FreedomWorks is for reducing Federal spending to 18% of GDP and taking at most 10 years to do it.
If you look in the packet at the CBO graph on page ____ you see average revenue from 1971 to 2010 has been around this 18% figure.P
In order to see how things actually stand, I split off the CBO's imaginary projections from the real data.
- Looking at 2010 we see outlays at 24% GNP and revenues at 15%.
- This figures out to be expenditures of 3.5 Trillion and revenues of 2.2 Trillion.
- That's a yearly deficit of 1.3 trillion.
- Not raising the debt ceiling means the government would have to reduce its expenditures nearly 40%. 5
I don't know if people are aware of the consequences of failing to raise the debt limit.
In the coming debt ceiling crisis,
the problem is there would be no money to fund nearly half the government.
And the treasury isn't authorized to borrow more money.2
The consequences are so dire that Speaker John Boehner and even Paul Ryan have said that there is no question we must eventually raise the debt ceiling.
I don't think this has to be done immediately after the limit is reached.
The Economist states there are a number of steps Treasury can take which could tide the government over.6
This means the mandatory programs perhaps would not be touched until, say, September.
- Social Security should still function because it is funded by its own source of income.
- The mandatory programs Medicare and Medicaid would be affected first.
- Followed by programs such as ag subsidies, food stamps, pensions, & veterans benefits.
- Last would be interest on the national debt.2
It is taken for granted that a failure to raise the debt ceiling would force the United States to default on its Treasury debt. But this is not quite true.
What is default?7
Default results from failure by the Treasury to pay principal or interest on its debt.
In fact, the debt ceiling doesn't bar either of these duties.
Treasury can roll over maturing issues so long as the overall stock of outstanding debt doesn’t rise.
And the tax revenue is more than enough to cover the monthly interest payments.
On this point Sen. Pat Toomey wrote an op-ed in the WSJ which I included in the packet.P
- He argued that the debt ceiling can be frozen without risking default.
- It is a matter of merely prioritizing the debt so that interest is paid first.
- He then introduced Senate Bill 163 - the Full Faith and Credit Act.P
- His bill would "require that the Government prioritize all obligations on the debt held by the public in the event that the debt limit is reached ".
- Unfortunately, Sen. Toomey's bill was tabled on March 1 by a party-line 52-47 vote.8
Treasury Secretary Geitner has told Congress that failure to immediately raise the debt limit would cause default and "have catastrophic economic consequences for the United States." 9
This is false.
The goal of the Full Faith and Credit Act is to take the issue of "default" off the table.
Congress could then focus on cutting spending, enacting reforms and lowering the deficit - immune from any of Geitner's hysterics.10
The Constituton gives the House the primary responsibility for the budget.
All taxing and spending originate there.
The debt limit cannot be raised without the approval of the People's House.
Not raising the debt ceiling, gives Speaker Boehner tremendous leverage in his budget battle with the Reid-Schumer Senate.
The debt ceiling ought not be raised any time soon.
Thank you
-- Peter Cooper
- Fret Ceiling - What is the debt ceiling, and does the United States really need one?
- Why are People Opposed to Raising the Debt Ceiling?
- FreedomWorks - Americans to Congress: Be Bold on the Budget
- LuntzGlobal - The Language of the Debt Ceiling (PDF) - Question 25, Page 16
- Preliminary Analysis of the President's Budget for 2012 - March, 2011
Congressional Budget Office (CBO) - Budget Projections
14.5 trillion GNP for 2010 : Expenditures: 3.456 trillion Revenues: 2.163 trillion Deficit: 1.294 trillion Percent Deficit: 37% - Dancing on the ceiling - Talk of America defaulting on its debt is just that
- The debt ceiling and default
- Motion to Table Toomey-Vitter Amdt. No. 112 As Modified
- Doubling Down on Debt Hysteria
Toomey v. Geithner - Issue Brief: The Full Faith and Credit Act