People can argue over the fairness or accuracy of the S&P downgrade until they’re blue in the face, but what no one disputes is the size and scope of a massive debt burden that really does threaten to destabilize America’s ability to make good on its obligations. The Club for Growth supported the “Cut, Cap, and Balance” legislation because it was the only plan proposed that actually balanced the budget and forced Congress to live within its means. The plan passed by Congress is typical — it puts the hard work off until later, something that Congress has done time and time again.
During the debt debate, I was often reminded of the old 1980s TV commercial for the Fram Oil Filter. The auto mechanic selling the filter would look into the camera and say, “You can pay me now, or you can pay me later,” and paying later is always more expensive and more painful. We’re at the same moment now: We can either do the hard work today of cutting spending and implementing pro-growth policies, putting America on a sustainable fiscal path, or we can put it off until it becomes even more expensive and more painful. Most folks don’t need Standard & Poor’s to explain that.
— Chris Chocola is president of the Club for Growth.
The S&P downgrade is fair. The Bush and Obama administrations both share blame for expanding entitlements, adding new spending programs, and doing little to suppress the debt. The Bush tax-rate cuts did encourage investment and expanded federal revenue — a plus for his presidency. And Bush did try to privatize part of Social Security. But as FDR accurately said almost 75 years ago, “Those [Social Security] taxes were never a problem of economics. They are politics all the way through.” And as long as politicians are allowed to seek votes by handing out federal cash, the national debt will sharply increase. S&P is sending a message to the U.S., and we can restore our credit with better fiscal policy.
Is that likely? Maybe. We have a precedent with the federal-spending restraints after World War I. From 1916 to 1920, because of that war, the U.S. national debt increased almost 20-fold, from $1.2 billion to $24.3 billion. During the1920s, however, Andrew Mellon, secretary of the Treasury under Presidents Harding and Coolidge, helped cut federal spending to the point that the U.S. had federal-budget surpluses every year of the 1920s. Therefore, the U.S. negotiated the war debt on terms of low interest rates. The U.S. was such a good credit risk that it survived a 20-fold jump in the national debt with steady low interest rates on the debt intact.
The European debt and the downgrades on that continent have been a wake-up call to the U.S. With fiscal restraint, possibly a balanced-budget amendment, and more politicians who care about their country more than about buying votes, the U.S. can restore its AAA rating by 2013.
— Burton Folsom blogs at BurtFolsom.com and is a professor of history at Hillsdale College. His latest book is New Deal or Raw Deal?