What the (Bleep) Just Happened? (17 page)

The Chinese are keenly interested in gaining as much economic leverage over the United States as possible as they grow their own economy. And we are helping them do it by paying them about $1 billion a week in interest. The International Monetary Fund predicts that the Chinese economy will overtake the American economy as the world’s biggest by 2016. Its state-managed capitalism, currency manipulation, and favorable trade balance give China major economic advantages, but its huge U.S. debt holdings means it increasingly has us by the cojones.

Not to be outdone by its former cold war frenemy, Russia has gotten in on the U.S. debt game, holding about $110 billion of our debt, which it also sees as an opportunity to squeeze us on various geostrategic and economic issues. By 2020, all foreign official holdings of U.S. Treasury securities will be a whopping 19 percent of the GDP of the rest of the world. It’s all seemingly stable now, but by 2020, will the rest of the world want to sink one-fifth of its GDP into America? Will we still be such an attractive deal? Unlikely. The only thing that might save us is that many other nations are in worse shape. Still, today the United States is increasingly the dependent beggar, a hulking, limping version of a Dickensian street moppet.

If Obama’s Debt Dance of the Seven Veils were to be successful, however, he needed to at least pretend he was interested in debt reduction. He needed a big, splashy show, something that would distract the American people from the reality of his blowout spending and ginormous debt. So he did what he usually does when he is surrounded inescapably by the truth: he punted responsibility to other people. In early 2010, Obama commissioned a bipartisan group of eighteen former public officials and experts to examine ways to get the national debt down to about 3 percent of GDP by 2015. Chaired by former Republican senator Alan Simpson and Clinton White House chief of staff Erskine Bowles, the National Commission on Fiscal Responsibility and Reform spent months wrangling with spending and entitlement issues, and in November 2010 they issued their draft report, backed by only eleven of the eighteen members, short of the fourteen-member supermajority it needed for full endorsement.

Put simply, the group proposed capping federal spending at 21 percent of GDP, down from Obama’s new high baseline of 25 percent, but up from the historical average of 18 to 19 percent. It suggested lowering all marginal tax rates in exchange for eliminating most loopholes and deductions (including on mortgage interest), imposing a gas tax, raising the retirement age for Social Security, cutting Medicare and Medicaid costs, and slashing farm subsidies and spending on everything from defense to the government travel budget. And like Jimmy Carter’s put-on-a-sweater proposal of the late 1970s, Simpson-Bowles recommended that all members of Congress shave off all of their head and body hair to make a giant blanket to keep Americans warm in the winter. I know it wasn’t exactly lambs’ wool, but the Bowles crowd thought it could help lower heating costs.

Predictably, almost everybody in Washington freaked out. Conservatives would not abide nearly $1 trillion in new taxes, and the leftists would not go for massive restructuring of their beloved redistributionist programs. The only person in the nation’s capital without an opinion? The president, from whom we got crickets and tumbleweeds. He thanked the commission members for their service and then promptly blew off their recommendations. He barreled forth with new spending proposals, including those now-infamous 2012 and 2013 budgets that clocked in at $3.8 trillion each. His cavalier disregard of his own commission’s proposals reinforced once again that he was the Chief Kook, leading his band of leftists on their mission to TNT the federal balance sheet. When Obama flipped the bird to the Simpson-Bowles recommendations, it was like a guy being told to change his diet because of high cholesterol who promptly leaves the doctor’s office and goes out to eat two pizzas, four cheeseburgers, a bucket of KFC, eight packs of bacon, six tacos, and a block of Velveeta and washes it all down with the grease left over from cooking it all.

On the heels of the pointless exercise of Bowles-Simpson came yet another battle over spending and the debt that once again set everyone in Washington running around with their hair aflame. In late 2010 it was clear that the national debt was flying headlong into the previously set debt ceiling of $14.3 trillion. While they still controlled big majorities in the lame-duck congressional session, the Democrats easily could have given Obama the clean debt-ceiling hike he requested. Senate Majority Leader Harry Reid, however, had other political plans: he wanted to wait on the debt-ceiling issue until after the Republicans gained control of the House in January 2011, so they would be forced to have some ownership over any debt-ceiling increase.

Obama, meanwhile, seemed to suffer from self-afflicted debt-ceiling amnesia. In 2006, then senator Obama condemned the debt-ceiling increase Bush had requested in an operatic display of self-righteousness: “The fact that we are here today,” he intoned, “is a sign that the U.S. government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies....
Increasing America’s debt weakens us domestically and internationally....
America has a debt problem and a failure of leadership. Americans deserve better.” (Emphasis added.)

Savor the irony: Senator Obama was urging Congress not to vote for an increase that would have raised the debt limit to $9 trillion, while he has presided over a debt extravaganza that forced a new debt ceiling of $16.7 trillion. In 2007 and 2008, when the Senate voted to hike the limit by $850 billion and $800 billion, respectively, Obama didn’t even bother to vote. Of course, he voted in a flash for TARP, which added $700 billion to the debt. In 2011, he was asking for a clean hike pushing the debt limit to nearly $17 trillion with no conditions and no questions asked.

“Failure of leadership,” “reckless fiscal policies,” “Americans deserve better.” These words were spoken by a man who complained about Bush-era spending levels and then quadrupled them, who expressed grave concern about the Bush-level national debt and then blew it up by over $5 trillion. He told us that he worried about “the burden of debt” and then created a monstrous new health care entitlement that will add trillions to that debt. This is a man who scored political points by bashing Bush’s “failure of leadership” but whose own spending explosion is sold as a necessary “investment.”

When asked in 2011 about his 2006 vote against raising the debt ceiling, Obama took sanctimony to a new level: “I think that it’s important to understand the vantage point of a senator versus the vantage point of a … president.... As president, you start realizing, ‘You know what? We—we can’t play around with this stuff. This is the full faith and credit of the United States.’ And so that was just an example of a new senator, you know, making what is a political vote as opposed to doing what was important for the country. And I’m the first one to acknowledge that.”

Isn’t that special? He made a “political” vote just to stick it to Bush in 2006. It’s also gratifying to see that he makes a distinction between being president and being a senator. As a senator, he could hide behind ninety-nine others. As president, the buck is supposed to stop with him, although one would never know it, given how much blame shifting he has done over the years.

Meanwhile, during this period of political air hockey, the major credit agencies, such as Standard & Poor’s, Moody’s, and Fitch, were warning that if the United States didn’t move to begin reducing deficit spending, a credit downgrade of the nation’s debt might occur. This set off a furious debate over whether the ceiling should be raised yet again to accommodate even more destructive spending and, if so, by how much. As the negotiations with the House GOP leadership grew contentious, Obama alternated between paternalistic condescension, telling the debt negotiators to “eat their peas,” and petulant childishness, as he warned House Majority Leader Eric Cantor not to “call his bluff.” He threatened to take his case to the American people, which he did repeatedly to no avail. Most polling showed that the majority of Americans didn’t want the debt ceiling lifted, and certainly not without deep accompanying spending cuts.

Obama and his troops flashed the impending doom card, predicting “catastrophe” and “default” if the ceiling were not raised, despite the fact that the government had more than enough revenue coming in every month to cover debt service as well as essential services such as defense. Obama took the lies to a despicable new level when he said that he could not “guarantee that [Social Security] checks go out.” He knew that under law, Social Security payments must be made and that the government had enough money every month to cover them. Of course, the truth has never slowed down the kooks, so onward they went, screaming about possible “default” and scaring Grandma even as they knew that default was never a possibility.

While the Democrats were drumming up drama over the debt ceiling, House Republicans were actually doing something proactive to bring the debt down. They proposed and passed legislation known as Cut, Cap, and Balance, which would have cut federal spending dramatically, capped spending at roughly 18 percent of GDP, and added a requirement that all future budgets be balanced via a balanced-budget amendment (BBA) to the Constitution. When it got to the Senate, Reid immediately tabled it, refusing even to allow it an up or down vote. However, instead of fighting for Cut, Cap, and Balance—the only plan that would have dealt effectively with spending and debt and probably satisfied the ratings agencies about their seriousness of purpose—the Republicans caved and agreed to go back to the drawing board.

The GOP is particularly sensitive to calls from the leftist “elites” to “compromise.” The assumption is that compromise for the sake of compromise is an inherently good thing. The truth is that compromise usually leads to a bad deal with unintended and disastrous consequences.

When the Democrats controlled the White House and both houses of Congress from January 2009 to January 2011, they not only refused to compromise with Republicans, they mocked the very idea of compromise by barring the GOP from meetings, debate, and offering amendments to key legislation. They railroaded Republicans every which way but loose. Their idea of “compromise” was no compromise at all.

When it came time to do the debt-ceiling deal, the Republicans should have pressed the idea that it was now the Democrats’ turn to compromise. During the negotiations, Obama and the Democrats masterfully spun their position as a compromise between tax hikes and spending cuts. I’ll give you spending cuts, they offered, if you give me tax increases. That was exactly the
wrong
formulation, and the GOP should have turned it around and demanded a
real
compromise: in exchange for giving the Democrats the debt-ceiling increase they wanted, the Republicans should have demanded passage of Cut, Cap, and Balance. Period.

It should not have been an exchange about spending cuts versus tax increases. It should have been a debt level hike in exchange for policies that would have prevented the country from getting into the same crisis again in less than a year. The Democrats would have recoiled from that compromise because they wanted to be able to continue to put the gun to our heads. Every year or so, we will have another debt-ceiling crisis, and every year or so the GOP will have to cave in on tax hikes and illusory spending “cuts.” It’s about time that the Republicans reach down into the black pit that is Nonna Nancy Patricia D’Alesandro Pelosi’s purse and pull their gonads out, so they can strap them back on and tell that Baltimore street woman, “No,
grazie
!”

Cut, Cap, and Balance would have put an end to that cycle of Democratic extortion, which is why Reid torpedoed it while calling it “the worst piece of legislation” in history. The Republicans made a huge strategic mistake by going wobbly. Is anyone running strategy for the Republicans? Anyone? Bueller?

The resulting debt-ceiling agreement was yet another budgetary hot mess. In exchange for the largest debt increase in history—$2.5 trillion—Congress agreed to cut spending by a measly $6.67 billion in 2012. Since the government spends $3 million
per minute
, it blew through that amount of “savings” in the first thirty-seven hours of the new borrowing authority. Most of the Boehner “savings” were back-loaded in the out-years, meaning that they, like the caps on discretionary spending worth roughly $900 billion over ten years, were meaningless because they’d likely disappear down the road. The deal boosted the debt ceiling over fourteen months but the spending “cuts” were to be phased in over ten years. At one point, Obama dramatically threatened to veto over the “cuts,” which was amusing since the deal truly cut just about nothing. The debt deal put us on a trajectory to incur $7.8 trillion in more debt over ten years, even given the unrealistic projections of economic growth and revenue. The negotiators also did what they always do: they punted the tougher additional spending-cut decisions to the congressional “supercommittee.” Even Simpson and Bowles, the chairs of Obama’s defunct deficit commission, called it “a crisis merely postponed.” In fact, the debt crisis ended up being postponed by a mere three months; by the last week of 2011, Obama was back to request
another $1.2 trillion
debt hike.

Boehner tried to put lipstick on the debt deal pig by making two pronouncements. First, since the GOP only controlled one-half of one-third of the government, this was the best deal they could get at the moment. Second, he made a contradictory statement. He chirped that he had gotten “98 percent” of what he had wanted. That statement, of course, undermined the first; if you only control an itty-bitty portion of the government, how then could you say that you got 98 percent of what you had wanted? Again: Bueller? Besides, didn’t John Boehner used to work in a blue-collar bar? Isn’t that part of his Horatio Alger story? If so, then why doesn’t he stop crying in front of cameras and start doing shots of Crown Royal, throwing bar stools, and kicking some liberal ass?