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.
Obama’s comments might hold a droplet of water if the wealthy assembled their own jets in their driveways, from Bel Air to Palm Beach. Instead, approximately 120,000 largely uionized employees at general-aviation manufacturing companies produce these planes. As the “Jobs President” browbeats this sector, he further jeopardizes those positions.
“We are perplexed over recent comments and actions questioning the value of corporate aircraft,” International Association of Machinists president R. Thomas Buffenbarger and General Aviation Manufacturers Association CEO Peter J. Bunce wrote President Obama in a June 29 labor-management letter. “During the severe economic downturn in 2008, ill-informed criticism of corporate jets and business aviation exacerbated the challenges facing our industry,” they added. “More than 20,000 highly skilled IAM members were laid off . . . We are very concerned that the rhetoric coming from some in your Administration will lead to similar economic difficulties.”
Obama repeatedly has attacked the accelerated-depreciation treatment given to corporate aircraft — never mind that it was part of his vaunted $814 billion “stimulus.” Rather than use his very own legislation as a Weapon of Class Destruction, Obama should aid the entire economy by expanding this narrow provision so that all businesses may write off purchases immediately — whether for executive jets or for shovels.
Instead, Obama fires at the rich in the air, while Reid torpedoes them in the water. He told colleagues on July 6, “Millionaires, billionaires, oil companies, and the owners of yachts and jets don’t need special tax breaks the rest of Americans don’t get.”
Does Reid really want to sail into that tempest again?
When Americans read Daddy Bush’s lips in October 1990, he imposed a 10 percent “luxury tax” on $100,000-plus yachts, perhaps to prove that he could lash fellow plutocrats. Instead, he and Congress (including Reid) clobbered blue-collar yacht builders. As the Cato Institute’s Michael Tanner recalls, billionaires bought their boats in Barbados, Bush’s get-tough tax sank American yacht sales by 70 percent, and U.S. vessel makers scuttled 25,000 employees. In 1993, after the tax generated little revenue amid the shipwreck it created, Congress overwhelmingly killed it.
Reid now aches to make that mistake again.
Finally, a spectacular oversight plagues Democrats and Republicans alike. As Sen. Tom Coburn (R. Okla.) and Rep. David Schweikert (R. Ariz.) observe, some $703 billion in forgotten funds languish in untouched accounts across the federal budget. When Congress authorizes, say, $1 billion for a program, an unspent $250 million, for instance, just sits there. These coins between the cushions of the national sofa exceed TARP’s original $700 billion budget! Schweikert’s Forgotten Funds Act would apply this dusty money to debt reduction. Why on Earth is this massive sum not on the table?
Washington can generate revenues for immediate debt reduction without increasing taxes:
Some $1 trillion in profits languish among the foreign subsidiaries of U.S. corporations. Repatriating this potential growth capital, perhaps at a temporary, 10 percent Welcome Home tax rate (versus America’s sky-high 35 percent corporate tax) would pump $100 billion into debt elimination and $900 billion into private-sector innovation and job creation.
Washington owns 48 percent of Arizona and 84.5 percent of Nevada. What if it sold a quarter of this property? Selling parcels of the federal estate would generate revenue and decrease the cost of mismanaging far more land than Washington can handle. Should visitors expect a geothermal power plant 100 feet from Yellowstone’s Old Faithful geyser, as Greenpeace predictably will huff and puff?
While developing natural resources on some non-sensitive lands makes sense, why not let governors convert some federal property into state parks? Why not sell some federal acreage for vacation cabins or fly-fishing retreats — neither of which involves oil derricks?
Wouldn’t it be nice if Democrats abandoned their galactic deception and hateful class-warfare? What a wonderful world it would be if Republicans were less timid about proposing deep budget cuts, agency closures, and revenues that did not impose tax hikes on this wheezing economy. Imagine what an attractive debt-reduction deal America might enjoy if Democrats were honest and Republicans were courageous.
— New York commentator Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.