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BOROWSKI: Fiscal cliff could have been avoided
Raising debt ceiling prolongs problem
Question of the Day
@Text.rag.dropcap.FG:It’s never polite to say “I told you so,” but the fact is the current chaos surrounding the “fiscal cliff” would have been avoided if Congress had listened to the dire warnings of the grass-roots freedom movement during the debt-ceiling debate in the summer of 2011.
A broad coalition of fiscal conservatives urged Congress to pass the fiscally responsible Cut, Cap and Balance Act (CCB) instead of the Beltway’s preferred Budget Control Act (BCA). The Beltway didn’t listen, and now we are facing the prospect of losing even the modest savings promised under the BCA.
We also face another downgrade of U.S. credit early next year if lawmakers continue to raise the debt limit as needed to finance their everlasting spending spree.
I hate to say it, but we predicted all of this.
Two years ago, folks in the Tea Party movement urged Congress not to pass a “clean” debt-ceiling increase, but rather to start getting our government’s fiscal house in order. We championed the three-part CCB that included a debt-ceiling hike in exchange for substantial spending cuts, enforceable caps on future spending, and a strong Balanced Budget Amendment to the U.S. Constitution that requires a supermajority to raise taxes and puts a limit on spending. The CCB was publicly endorsed by more than 250,000 grass-roots activists, 110 U.S. representatives, 40 U.S. senators, 10 governors and five presidential candidates.
Nevertheless, the House GOP leadership had to be dragged into even considering the CCB, and then was quick to give up on it after it passed the House. Even though Senate Majority Leader Harry Reid tabled it, the CCB was still “alive” from a parliamentary standpoint and was supported by 66 percent of voters. The Washington establishment was determined to dismiss and ignore the CCB, calling it “dead” even though the Democrats had essentially presented no alternative plans for avoiding a debt downgrade.
Instead of waiting for Senate leadership or the president to make a counterproposal, House Speaker John A. Boehner began pushing the flawed BCA that raised the debt ceiling and created the ill-fated supercommittee. We warned that the BCA was a typical Washington establishment cop-out that would likely raise taxes and lower the United States’ triple-A credit rating.
The 12-member supercommittee, tasked with coming up with a plan to reduce the deficit by $1.2 trillion over the next 10 years, failed to reach a deficit-reduction agreement by its deadline. As a result, automatic, across-the-board sequester spending “cuts” will take effect starting on Jan. 1. The stated purpose of the sequester was to pressure the supercommittee to come up with a bipartisan deal, but the committee’s congressional members still couldn’t agree on even the most modest “cuts” to the bloated federal budget.
With the failure of the supercommittee and many members of Congress wishing to reverse the sequester savings, we may end up with zero cuts and steep tax increases.
To gain leverage in the bipartisan fiscal cliff talks with Mr. Obama, Mr. Boehner has introduced a bill that extends all current tax rates for everyone except those earning more than $1 million a year. However, it is unlikely that Mr. Boehner’s “Plan B” will get signed into law because of the president’s rock-ribbed determination to secure bigger tax hikes.
In the current fiscal cliff negotiations, the Boehner plan would bring our national debt up to $23 trillion, instead of $24 trillion, over the next 10 years — if all the spending “cuts” come to fruition. These are all promised “cuts” and absolutely nothing is stopping a future Congress from disregarding them. What are the chances that all of these pledged “cuts” will materialize in 10 years’ time? Slim to none, if history is any guide.
Without a strong BBA to bind future Congresses, there’s no guarantee promised savings will materialize.
Of all the plans being discussed at the time, only CCB would have preserved our government’s triple-A credit rating by stabilizing the debt as a share of our economy.
Sure enough, following the enactment of the BCA, Standard & Poor’s (S&P) lowered the United States’ long-term credit rating from AAA to AA+, explaining: “The [act] falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”
The debt ceiling has been raised 10 times in just the past decade with both parties playing political games. With Round 2 of the debt-ceiling fight just around the corner, let’s hope that Congress and the president have learned their lesson. This entire fiscal cliff-debt ceiling fiasco would have been avoided if we had enacted the Cut, Cap and Balance Act.
We told you so.
It’s not too late, though. Let’s go ahead with the promised sequester savings, extend the current tax rates for one year and start a serious discussion about fundamental tax reform heading into the New Year.
Julie Borowski is a policy analyst at FreedomWorks.
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