America’s national debt hit $8.27 trillion in March 2006 when then-Sen. Barack Obama, D-Ill., called the national debt “a sign of leadership failure,” and promised to vote against raising the debt ceiling. Fast forward to today with the national debt at $14 trillion, a 70 percent increase in just four years.
What Obama has mostly done on this issue is make the problem worse. His 2010 budget deficit of $1.3 trillion accounted for one-fourth of the nearly $4 trillion he and the Democratic Congress have added to the national debt in the two years he has been president.
Obama’s view on this issue has certainly changed since 2006. He now sends out Austan Goolsbee, his chief economics adviser, to predict an economic calamity if the national debt ceiling is not hiked: “If we hit the debt ceiling, that’s essentially defaulting on our obligations, which is totally unprecedented in American history.”
Similarly, Obama’s Treasury Secretary, Timothy Geithner, warned of “catastrophic damage to the economy” if the debt ceiling is not raised. We suspect that what they really see as catastrophic is having to junk their current spending plan, which projects the national debt to explode to $26 trillion by the end of this decade.
Contrary to these Cassandra prophesies, refusing to lift the debt ceiling would not be a disaster. The Republican Congress refused to do it in 1995, insisting instead that President Bill Clinton agree to reduce federal outlays.
Clinton saw the light and the government survived just fine until the GOP relented and raised the ceiling in March 1996. The moral of that story is Obama, Goolsbee and Geithner should stop fear-mongering and become serious about working with the Republican House to reduce federal spending.
A great starting point would be the Republican Study Committee’s Spending Reduction Act, which lays out $2.5 trillion in cuts to be implemented between now and 2021. The committee’s proposal immediately rescinds $125 billion in previously authorized spending, then on Oct. 1 reduces discretionary federal spending to 2006 levels and implements a hard freeze until 2021.
Just those three decisions alone would save $2.3 trillion. Another $200 billion in savings would come from delaying all federal employee raises for five years and using attrition to reduce the government work force by 15 percent.
Even if Congress approved the Spending Reduction Act now and Obama signed it into law, it would not be sufficient by itself to pull the federal government out of the fiscal hole in which it is trapped. But putting the government’s financial house in order must start somewhere.
As the Spending Reduction Act sponsors observe, “We are all running together in a race against time. Unless Washington takes swift action to cut spending, we will chain our children to debt and rob them of the opportunity to reach for the American dream.”