How to Achieve a Balanced Budget Right Now

The Wall Street Journal editorial page notes today that Republicans will try to force votes today on a balanced-budget amendment to the Constitution, but that like all such efforts since the 1930s, it is unlikely to succeed.  And even if it did pass, it is no sure thing that three-fourths of the states would ratify it, since many may assume that a balanced federal budget will entail lower federal subventions to the states—especially big-spending states like New York and California, but even some red states that are net receivers of federal tax dollars.  And it would take a while for ratification anyway.

There’s another way to achieve the goal of a balanced budget amendment right away: don’t pass an increase in the debt ceiling.  Government will have to live within its means right now.  In other words, the debt ceiling is a balanced budget tool–a powerful one.  The constant talk of a default is rank demagoguery of the first order: there will be plenty of tax revenue arriving to service our debt obligations.  Obama’s claim that Social Security checks might not go out is very interesting, no?  If that were to happen (and there is considerable doubt about whether the Social Security Administration’s doomsday check-writing computers could even be stopped from sending checks and automatic deposits—where, oh where, is a Y2K bug when you need it?), it would expose the fiction that Social Security has a “trust find,” and would make it clear that Social Security funds have been fully raided for other spending.  Does Obama really want to go there?  Or cut off pay for our troops overseas, rather than cut back the welfare state?  Or advocate raising taxes sufficiently to pay for the gap?  I know this is Obama’s preferred method, but there isn’t even a majority among Democrats for this option; this is why Obama is trying to force Republicans into their old mode as tax collectors for the welfare state.  Time to say No once and for all.

It is a high-risk strategy, to be sure.  Markets may wobble badly.  Republicans may get blamed for the ensuing calamity and uncertainty.  That risk might be the least bad outcome, though.  Giving in on the debt ceiling will split and demoralize the Republican Party, just as President George H.W. Bush’s reversal on his “no new taxes” pledge did in 1990.  What are they here for, if not to halt the crisis Obama has deliberately created?  As John points out below, Republicans should not be taken in by the media meme that Obama is winning the public relations war on the debt ceiling issue: Obama’s approval ratings continue a slow steady slide.

And here’s the speech every Republican should make as they vote against a debt ceiling increase:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It 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.

Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion.  That is “trillion” with a “T.” That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.

Numbers that large are sometimes hard to understand. Some people may wonder why they matter. Here is why: This year, the Federal Government will spend $220 billion on interest. That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. It is more money in one year than we are likely to spend to rebuild the devastated gulf coast in a way that honors the best of America.

And the cost of our debt is one of the fastest growing expenses in the Federal budget. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.

Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.

Who said this?  Sen. Barack Obama, on the Senate floor in 2006.  Let us now follow Sen. Obama’s fine example.