The Corner

Dr. Barack and Mr. Obama on the Debt Ceiling

Barack Obama once had a lot of insightful things to say about the debt ceiling that transcended the usual political game of voting for debt-ceiling increases when your guy was president and against when he was not — and even some things that were quite blunt if not harsh about anyone who would be so reckless as not to address balancing the budget. According to Obama, raising the debt ceiling was a sign of leadership failure (“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure”), and a clear indication that the U.S. was simply incapable of paying what it already owes (“It is a sign that the U.S. government can’t pay its own bills”) — a fact that made us vulnerable to foreign pressures (“It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies”).

The problem, according to Obama, was that there was no end to the federal borrowing in sight, a pathology that had blinded us to what a trillion dollars really was: (“Over the past five years, our federal debt has increased by $3.5 trillion to $8.6 trillion. That is ‘trillion’ with a ‘T.’”) Worse still, the borrowed money from Social Security and Asia was only going to get worse in future budget year. (“That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the president’s budget will increase the debt by almost another $3.5 trillion.”)

But the worst thing about these mega-deficits was the interest costs in sustaining them. (“Numbers that large are sometimes hard to understand. Some people may wonder why they matter. Here is why: This year, the federal government will spend $220 billion on interest.”) That interest cost alone squeezed out other necessary items in the budget. (“That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. It is more money in one year than we are likely to spend to rebuild the devastated Gulf Coast in a way that honors the best of America.”)

And, according to Obama, the interest kept rising with no end in sight and with no end to the damage it did elsewhere in the budget. (“And the cost of our debt is one of the fastest growing expenses in the federal budget. This rising debt is a hidden domestic enemy, robbing our cities and states of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health-care reform; robbing our seniors of the retirement and health security they have counted on.”)

In other words, the failure to address the deficit showed a fundamental unseriousness about dealing with the nation’s problems. (“Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities. Instead, interest payments are a significant tax on all Americans — a debt tax that Washington doesn’t want to talk about. If Washington were serious about honest tax relief in this country, we would see an effort to reduce our national debt by returning to responsible fiscal policies.”)#more#

The only answer, given such a lack of leadership, according to Obama, was to demand that each dollar spent was matched by a dollar in revenue to pay for it — a responsibility that should fall heavily upon the Senate. (“But we are not doing that. Despite repeated efforts by Senators Conrad and Feingold, the Senate continues to reject a return to the commonsense Pay-go rules that used to apply. Previously, Pay-go rules applied both to increases in mandatory spending and to tax cuts. The Senate had to abide by the commonsense budgeting principle of balancing expenses and revenues. Unfortunately, the principle was abandoned, and now the demands of budget discipline apply only to spending.”)

Tax breaks — the result of the Bush tax cuts in income-tax rates on all Americans, were the culprit, and could only be addressed by fiscal discipline of one dollar raised for every dollar spent. (“As a result, tax breaks have not been paid for by reductions in Federal spending, and thus the only way to pay for them has been to increase our deficit to historically high levels and borrow more and more money. Now we have to pay for those tax breaks plus the cost of borrowing for them. Instead of reducing the deficit, as some people claimed, the fiscal policies of this administration and its allies in Congress will add more than $600 million in debt for each of the next five years. That is why I will once again cosponsor the Pay-go amendment and continue to hope that my colleagues will return to a smart rule that has worked in the past and can work again.”)

Worse still, according to Obama, we should have looked at history and learned that a single president over eight years could out-borrow all prior presidents in just two terms. (“Our debt also matters internationally. My friend, the ranking member of the Senate Budget Committee, likes to remind us that it took 42 presidents 224 years to run up only $1 trillion of foreign-held debt. This administration did more than that in just five years. Now, there is nothing wrong with borrowing from foreign countries. But we must remember that the more we depend on foreign nations to lend us money, the more our economic security is tied to the whims of foreign leaders whose interests might not be aligned with ours.”)

The staggering costs were why we could not have continued to bequeath debt to our children and, instead, needed “the buck stops here” presidential leadership to cease the insane borrowing. (“Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem.”)

In sum, borrowing $5 trillion over eight years was both irresponsible and unpatriotic. (“The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents — #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman, and child. That’s irresponsible. It’s unpatriotic.”)

And because addressing the debt to save our children was the chief task of any incoming president, drastic measures had to be taken almost immediately, mostly by getting our spending under control. (“And that’s why today I’m pledging to cut the deficit we inherited by half by the end of my first term in office. This will not be easy. It will require us to make difficult decisions and face challenges we’ve long neglected. But I refuse to leave our children with a debt that they cannot repay — and that means taking responsibility right now, in this administration, for getting our spending under control.”) Those pledges had to be repeated frequently to emphasize to the American people the seriousness of the crisis. (“And yesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office.”)

The problem was so serious, according to Obama, that every American should have known what the debt was, and the ticking time bomb that threatened us, and that was why the president took stock of the debt when he first came into office. (“I don’t know what the number was precisely”), and why he almost immediately promised to halve the deficit (“we don’t have to worry about [the debt] short term.”)

Victor Davis Hanson — NRO contributor Victor Davis Hanson is a senior fellow at the Hoover Institution and the author, most recently, of The Second World Wars: How the First Global Conflict Was Fought and Won.

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