With a “compromise” on the debt standoff possibly happening early this week, it is useful to look back to see how we got here in the first place. The current debt crisis did not happen overnight; its roots can be traced back to when the housing market bubble burst back in 2007. The reckless lending practices of the government sponsored enterprises known as Freddie Mac and Fannie Mae unleashed turmoil on the markets in 2008, which led to TARP and massive borrowing by the federal government. This, in part, paved the way for the election of the most liberal president ever – the worst possible outcome for a country drowning in debt.
When the Obama Administration took the reins of power in Washington in early 2009, spending predictably increased to unprecedented levels. All told, the failed stimulus cost American taxpayers $278,000 per job created. With 9.2 percent unemployment, the stimulus only raised the debt and did not produce the jobs that were promised.
With all of its spending, the Obama Administration has added $4 trillion to the national debt and pushed us once again to the brink of the debt ceiling. The reason America has a debt ceiling in the first place is to keep spending in check. Having been raised 98 times since 1940, obviously the debt ceiling is more like a glass roof that continues to get shattered because of the federal government’s profligate spending habits.
Which brings us to today’s debt ceiling deal. America’s spending problem continues under this plan thanks to failed leadership on both sides of the aisle. The budget baseline in this “deal” already assumes that $10 trillion will be added to the debt over the next ten years. Subtract the $2.5 trillion the plan cuts and America will still see a net increase of $7 trillion added to the debt. A $2.5 trillion cut is like using a Band-Aid when a tourniquet is needed to stop the hemorrhaging of America’s $14 trillion debt. America continues on the path to a downgrade by the credit agencies because this so-called compromise does not cut nearly enough. The agencies want $4 trillion in immediate cuts; this plan does not even scratch the surface and just kicks the can down the road for future generations to deal with.
The debt deal also includes a “super-committee” to recommend future cuts. Appointing yet another Washington committee on the debt to figure out what we already know – that America has a fatal spending problem – is nothing more than the continuation of the failed business as usual. What’s worse, this committee could end up opening a backdoor to tax increases by letting the Bush tax cuts expire. Our catastrophic $14 trillion debt is not the result of a revenue problem, but of a spending problem.
The most shocking aspect of this whole debt drama is the way President Obama has handled it. He has not led at all, choosing instead to engage in childish finger pointing and pouting. With all the politicking and campaigning he has been busy with, it looks like he does not want to talk about real debt solutions. The future of our nation is at stake, and President Obama just wants this debate to be over so it doesn’t affect his reelection.
We cannot as Americans let the politicians in Washington continue to play games with our nation’s future. We have to force our leaders into fiscal sanity. If this is the best plan that our divided government can pass, we must use this opportunity to rally all Americans to enact a Balance Budget Amendment in the coming months. Real budget reform must be achieved. Not the same old smoke and mirrors.