The real debt ceiling ‘catastrophe’

It is to be expected that a number of members of Congress—especially many of the newly-elected—will have great difficulty voting for a debt limit increase, as well they should. But they must learn from the 1995 debt ceiling vote when Republicans were accused of shutting down the government which aided Clinton’s re-election the following year. Republicans should do nothing that President Obama can use in his re-election bid, so they must handle the debt-ceiling issue with great care.

But choices and opportunities abound for Republicans. They can challenge Democrats to join with them in achieving specific reductions in each appropriation category so that deficit spending can be reduced to zero before the new debt ceiling is reached. Paul Ryan’s Budget Committee has the reins in its hands on this one, with the power to set spending targets that provide a “glide path” to a balanced budget. (They should be key players in deciding how much the debt limit should be increased.)

One spending arena filled with savings potential is the 185 means-tested “entitlement” programs, including Medicaid, which expend nearly a trillion dollars each year (neither Social Security nor Medicare is in this category). If the House began a very serious review and evaluation (oversight) of each of these programs, many could be eliminated, cut, consolidated and/or reoriented. The House could vote to devolve the surviving programs to states and local governments (several governors are already calling for greater state control and flexibility in Medicaid) with finite block grants and no “strings” (federal regulations) a la the 1996 Federal Welfare Reform (welfare costs were cut in half as “workfare” until the Obama Administration came along, rehired thousands of public employees and changed the program through Executive Orders). The Senate Democrats would be hard-pressed to simply set on a bill of such magnitude without a vote.

House Republican leaders have long since announced their intentions to restore “discretionary” spending to 2008 levels. Whether that is $60 billion or $100 billion, they should decide on a number and get on with the hearings—program by program—that will determine what to cut, consolidate or terminate. There are plenty of low-hanging fruit for the defunding crusade.           

The “cut and grow majority” pledge of the Republicans in the House is absolutely essential and on target given the recently released 2011 Index of Economic Freedom (Heritage Foundation and The Wall Street Journal), in which the United States ranking has fallen again. The United States simply must cut its spending—and size of government—in order to stoke the boiler of economic growth on which future solvency and balanced budgets depend. 

The Index data confirm that “countries with the highest levels of government spending had growth rates 4.5 points lower, on average, than countries where government spending was under control.” Government size and national economic growth rates are inversely correlated. Seeking the optimal size of government is essential to a robust economic recovery. And, as the Index confirms, it is economic growth that lifts people out of poverty and improves health, education, security and personal freedom—the very objectives Democrats in Congress claim as their agenda. 

The act of raising the debt ceiling is a confession of fiscal failure by the Obama-Reid-Pelosi regime. But the GOP would be wise to avoid making this particular issue their Waterloo and hand President Obama an easy and unnecessary political victory. Instead, Republicans in the House must challenge their Democrat counterparts to join in their fiscal reforms so this becomes the final debt limit increase vote of their career. Anything else would be a catastrophe.

Lewis K. Uhler is founder and president of the National Tax Limitation Committee and co-author of the book Red State Uprising: How to Take Back America. www.limittaxes.org.