Team Obama’s debt-limit negotiating position is fueled by a central non sequitur, a core myth, and a spectacular oversight. Correcting these deficiencies would help Democrats and Republicans drain America’s Olympic pool of red ink without drowning the economy in tax hikes.
First, the idea that the federal debt ceiling must be raised in order to lower federal indebtedness is the logical equivalent of a high-speed train derailment. Responsible consumers awash in debt do not beg credit-card companies to hike their borrowing limits. Instead, they freeze their credit thresholds and pay their debts, ideally until their finances are back in the black.
Obama’s insistence on raising the debt limit is like saying, “You are right, MasterCard. I am tapped. So, I will forgo theater tickets and skip my annual ski trip. Now, please raise my limit by $5,000.” MasterCard’s customer-service representative would explode into laughter.
Congress should not hike the debt limit, period. The staggering sum of $14.3 trillion should remain the Everest of U.S. financial irresponsibility from which Uncle Sam must descend. This will be arduous but far healthier than climbing into ever-more-vertiginous debt and triggering an all-consuming avalanche of unpayable bills.
Furthermore, the notion that leaving the debt limit intact will trigger default is another monstrous lie designed to bamboozle the American public and cow Republicans into retreat. As with a credit card, default means neglecting one’s bills rather than respecting a debt cap. If Visa refuses to augment a customer’s credit line, default occurs only if he stops making minimum payments. Indeed, as his balance drops, his credit rating improves.
America must do this.
For Fiscal Year 2011, Treasury expects $2.23 trillion in revenues, from which it must pay bond holders $213 billion in interest. As Sen. Pat Toomey (R., Pa.) explains, if Treasury can manage this, America will not default.
Meanwhile, Democrats pollute the proceedings with the core myth that the wealthy do not pay their fair share of taxes. These marina-dwelling slackers, their argument goes, devour caviar while the American worker toils to keep Washington operating. This narrative capsizes reality, and leading Democrats know it. Yet they bellow otherwise:
“Pay up,” Sen. Frank Lautenberg (D., N.J.) demanded last week. “Don’t let the fat cats sit there purring nicely while they watch events unfold.”
Senate Democratic leader Harry Reid of Nevada sponsored a resolution on “the Sense of the Senate on Shared Sacrifice.” It demanded that Americans who earn more than $1 million annually “make a more meaningful contribution to the deficit-reduction effort.”
Lautenberg and Reid are savvy enough to recognize their own words as demagoguery.
According to an April 2009 Congressional Budget Office report, in 2006 (the most recent data available) the top 1 percent of taxpayers made at least $332,300 annually and paid 28.3 percent of all federal taxes. The top 10 percent (earning $98,100 or more) paid 55.4 percent of all federal taxes. Meanwhile, the bottom 60 percent of taxpayers earned up to $47,399. They paid 14 percent of all federal taxes.
Regarding effective federal tax rates, CBO reported April 4 that in 2007, all taxpayers averaged a 20.4 percent tax rate. However, the top 1 percent effectively paid 29.5 percent, and the top 10 percent paid 26.7 percent. The bottom 20 percent of taxpayers paid an effective rate of just 4 percent.
So, the notion that the evil rich are paying less than their “fair share” is yet another lie that infects this debate. If it is insufficient that the top 10 percent pay 70 cents of each federal tax dollar, what would suffice — 80 cents? 95? 100?
Obama’s contribution to this deceit is an obsession with company aircraft.
“The debt ceiling should not be something that is used as a gun against the heads of the American people to extract tax breaks for corporate-jet owners,” Obama said July 6, deploying both class-warfare rhetoric and firearms imagery that Democrats denounced after Jared Lee Loughner’s alleged shootings of Rep. Gabrielle Giffords (D., Ariz.) and 19 others in Tucson last January.