Thursday, August 4, 2011

A deal, a compromise, or a solution?

The Debt Ceiling Misnomer

A deal, a compromise, or a solution?

Even though out of the office and somewhat secluded over the past week, I couldn’t escape the issue which consumed the media reports, the talk shows, and print media for the past month—the debt ceiling debate. Much of the media focused on the impending catastrophic ramifications of defaulting on our debt repayment and/or budget obligations. While these are very, very serious consequences to consider and are worthy of immediate action, the underlying foundational causes leading to the problem received far less attention. The real problem is excessive federal government spending.

We cannot believe that simply raising the debt limit, allowing the government to borrow more money—will solve the foundational problem, either short term or long term. To simply increase the debt ceiling or raise revenue by way of higher taxes, is not the answer, but only a formula to saddle our children and grandchildren with a burden which will last long after we are gone. Let’s be honest, what occurred was a ‘deal’, a ‘compromise’, not a solution.

In the political world you will hear, ‘it was the best deal we could get’, ‘everybody has to give some, all have to compromise’, ‘if nobody likes it, it is probably the best we could do’, and ‘I didn’t like it but we had to pass something’, and so on. I fully understand the necessity of compromise in the governance of the affairs of the nation, but when the political compromise is more about politics and less about governance—it makes deals instead of putting in place long term solutions.

The problem, the issue is very simple. We are spending more than we are taking in, deficit spending. Accumulated deficit spending requires borrowing in large amounts, trillions of dollars. As a family we understand the burden of debt, the albatross it creates, and the necessity of sound financial practices. Our families need to balance their budget, and now the federal government’s failure to balance its budget may well mean taking more from the family budget. That is not right, we deserve better.

While much has been made of China owning and controlling us as a result of their owning so much of the US debt instruments, the largest owner of our debt is us. The Social Security Trust Fund and the Treasury own by far the greatest portion of the debt, and as such have the most to lose. So the big losers of the president and congress ‘kicking the can down the road’ are us. You can’t rob the money out of the Social Security Trust Fund, replace it with IOUs, and hope to meet those obligations into the future.

At one time one of most secure investments we could make was US Treasuries, because it was backed by the full and good faith of the US Government. Today, that confidence has been shaken. This is true not only in the bond market, but as evidenced by the downturn in the overall market—accentuated by a one day 500 point plus drop in the DOW. This drop wipes out the year’s entire gains in just one day. This weakness in the markets reflects the public’s view of the ineffective federal governing policies. The people want solutions not a deal.

While the deal, the compromise may contain some worthy components—most are off in the distance, sometime in the future. Very little of the passed agreement affects current spending, with most of the spending cuts occurring later in the 10 year period. Unfortunately, past history documents few of these future, contingent cuts from ever coming to fruition.

The Balanced Budget Amendment is necessary, and must be passed as soon as possible. Unfortunately, in the best case scenario, its enactment and benefits will be many years down the road. Putting in place a 12 member congressional commission to guide the process to putting our financial house in order—leaves me thinking we will get more of the same. Balancing spending cuts with future debt ceiling increases leave open huge opportunities to play games—equating a spending cut with a decrease in the proposed/requested increase. Government spending will continue to grow.

That’s government as usual, what we have come to expect. We cannot allow that to happen.

A government demonstrating trustworthy stewardship, providing the necessary services for the people it governs is a blessing. A government’s failure to be wise financial stewards is a heavy burden to the family, and the children and grandchildren to come.

Now that the debt ceiling legislation has passed, we must call on our congressional delegation to pursue implementation that will best address the real problems with real solutions. While the entitlement programs make up an overwhelming portion of the federal budget, the current legislation failed to address those issues. We must address the real issues of appropriate spending levels within our means. We must require our delegation to stand up for these common sense solutions. Many speak of taking the common sense values of North Dakota to Washington, now is the time to unapologetically represent these solid family values.

As our congressional delegation is back in North Dakota for a recess—talk to them—share you views.


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