Beware the Ides of March

By Mimikatz

Not just a miserable failure, a profligate miserable failure.

Next week, before it leaves on its Saint Patrick’s Day recess, Congress has one bit of unpleasantness to attend to.  It must raise the debt ceiling, the statutory limit on the amount of public debt the government may legally accumulate, for the fourth time in Bush’s presidency.  We are over the debt limit right now, and the government has about run out of pension payments and other funds from which it can borrow to avoid having to default on payment obligations.  The debt ceiling has to be raised again because the public debt has risen by an astounding 40% since George W. Bush took office.

Although resort to the accounting gimmicks used by Secretary Snow has been common,  it should be noted that when Clinton’s treasury secretary, Robert Rubin, used such tactics in 1996, when Congress refused to raise the debt ceiling, Republican reaction was somewhat different. 

Back then, some lawmakers in the Republican-controlled House of Representatives called for Rubin's impeachment, saying his action usurped the powers of Congress. But in 2002, when the Bush administration was about to hit the $5.95 trillion debt limit it inherited from President Bill Clinton, then-Treasury Secretary Paul O'Neill employed Rubin's tactic to buy time until Congress raised the debt ceiling to $6.4 trillion in June.

Alas, that limit lasted just 11 months. In May 2003, Congress authorized borrowing of $7.4 trillion. In November 2004, lawmakers upped the credit ante to $8.184 trillion. Now, Snow says the limit must be raised yet again to protect "the 'full faith and credit' of the United States."

The need to raise the debt ceiling for the fourth time in George Bush’s presidency is just the latest reminder of the incredible profiligacy of this Administration, something the Democrats hope to highlight when the matter comes up for a vote.  By contrast, at the end of Bill Clinton’s last fiscal year (September, 2001) the cumulative U.S. public debt stood at $5.807 trillion.   It had grown approximately $1.396 trillion during Clinton’s 8 years in office, less than the amount it grew during the one-term administration of the first George Bush.  And lest we forget how this problem starte, when Ronald Reagan took office the debt ceiling was just $1 trillion.

Enter George W. Bush.  In the four and a half years of the Bush Presidency, he and the Republican Congress have added $2.463 trillion to the debt, bringing it to almost  $8,270,900,000, 000, an increase of 40% in less than five years.  The current debt ceiling is $8.184 trillion.  There is talk of raising it to  $9.65 trillion, even though President Bush promised to halve the budget deficit (the yearly contribution to the cumulative debt) by one half by the time he leaves office.   And the culprit?

The Iraq War, now costing $4-5 billion a month, is one factor.  But the main factor is tax cuts, according to the Congressional Budget Office.   In fact, last year the cost of Bush’s tax cuts was three times the increase in all domestic spending, including entitlements.  And although the new Medicare drug benefit will raise spending this year, Congress is poised to enact yet more tax cuts.

That we spend more than we take in is the major cause of not only our staggering cumulative debt, but our trade imbalance as well.  And it is the need to finance our public and private spending with foreign borrowing that has left the world awash in dollars that they increasingly want to convert to harder assets, such as U.S. companies. Continued profligacy will lead to more attempts by foreign entities to buy U.S. assets.  With no interest in Washington in addressing the cumulative debt, the day of reckoning will eventually come, with a falling dollar, rising interest rates and a slowing economy, all of which will lower our living standards.  But when is anyone's guess, and that is the crux of the problem.

Comments

[emptywheel]

Well, look on the bright side. If Bush bankrupts the country then it will get a lot harder for the American Empire to conquer the rest of the world. Not impossible, mind you, but harder.

[Mimikatz]

The Democrats do intend to make a stand on this issue.

"Reid said he was dissatisfied with top Republicans who have indicated the Senate would likely take up legislation to boost the limit just before lawmakers leave for a weeklong St. Patrick's Day recess.
'That's not acceptable to us. We're going to talk about this debt, because of what the president has done to put us in the situation where this country is being required to borrow money right and left,' Reid said."

snip

"Democrats will attempt to add a number of amendments to the debt-limit legislation, he said, likely including a measure that would restore 'pay-as-you-go'r pay-go, budget rules. Such rules require lawmakers to offset increases in entitlement spending as well as tax cuts elsewhere in the budget, rendering the measures revenue-neutral.

"Democrats contend such rules played a key role in helping to restrain the growth of the budget in the 1990s. Republicans have opposed applying pay-go rules to tax cuts."

Considering that the last budget bill passed by only 2 votes in the House, and the electoral picture for the GOP has deteriorated since then, there may be some room for the Dems to maneuver. If the Dems are going to be able to do anything more than a mopping up when they take power, there really needs to be some attention to the cumulative debt and the GOP's fiscal irresponsibility.

[eric]

Goldang that "Borrow And Spend" Republican party!

[emptypockets]

what happens if Congress doesn't raise the debt limit?

(I am daydreaming of a Dem filibuster, where a united minority party takes a firm stand against the financially irresponsible caucus that controls the government. what are the consequences?)

[John Casper]

pockets, good question. I think if the filibuster goes on long enough, it halts all government spending. IIRC the first people to scream are those who don't get their Social Security checks. I'm not sure about this, though.

[jonnybutter]

what happens if Congress doesn't raise the debt limit?

Of course they will have to do it, but dragging the process out is a good thing. I mean, WTF? I'd call this an important issue to highlight, to put it mildly. As the song says (and as EW suggests), 'Money Changes Everything'. Notwithstanding what the polls say on any given day, I can see issues 'de-compartmentalizing' themselves in a hurry in the next few years; compartmentalizing is a kind of a luxury.

[Mimikatz]

If the debt ceiling isn't raised, the Treasury can't sell any more debt instruments, such as T-bills and bonds, and while it can do things like raid the federal pension fund, that only goes so far.

Because it is a must-pass bill, there is a rich opportunity for riders. At the same time, some embattled GOP'ers may want to tack some kind of pay-go or other language to point to even as they raise the ceiling.

The problem is that the House leadership has insisted that tax bills have to be exempted from the pay-go rules. Thus, once the budget bill is passed (assuming one can be passed this year), while increases in spending must be offset by spending cuts or new revenue, tax cuts do not have to be offset. That has been a major problem. And while many Dems voted for the first Bush tax cut, that has not been the case of late.

Because of its implications for the future, boring old budget and tax bills are really a cutting issue, right up ther with the war and executive power. And many seniors who lived through the Depression and WWII as children, are horrified at the dissipation of the society they built and the debt being passed to their grandchildren. This is a major issue with them, along with health care.

[jonnybutter]

many seniors who lived through the Depression and WWII as children, are horrified at the dissipation of the society they built and the debt being passed to their grandchildren.

I was chatting with my dad recently, who is one of those seniors, and we somehow got onto the 1960s and the phrase 'Never trust anyone under 30'. I suggested that it be changed to 'Never trust anyone under 60'. Of course I didn't mean it literally, but that got a good laugh out of him.

You really hit the nail, Mimikatz. This is just anecdotal of course, but my 80-year-old dad voted for Nixon (once) and Reagan (at least once) and he thinks Bush and Cheney belong in jail. Seniors vote. Could be an interesting November, notwithstanding the gerrymandering, etc.

[Monzie]

I'm short of 80, but I remember the men who knocked at out kitchen door in the '40s asking for supper. We'll be back to that soon.

[Reuben]

Can someone clue me in as to how we have 8 TRILLION in debt but somehow we're not bankrupt? I mean, that's a huge fricking number! And there's only 295 million of us!

[0hio]

Try this link,
ftp://ftp.publicdebt.treas.gov/opd/opdds2006n3.pdf

Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt
For the Fiscal Years Ended September 30, 2005 and 2004
(Dollars in Millions)
Note 3. Intragovernmental Debt Holdings

At the bottom part of the page you'll discover this,

As of September 30, 2004:
Civil Service Retirement and Disability Fund
$631,749 GAS Securities
$111 Marketable Treasury Securities
$631,860 Total

Federal Disability Insurance Trust Fund
$182,769 GAS Securities
$30 Marketable Treasury Securities
$182,799 Total
The marketable securities held by the Civil Service Retirement and Disability Fund and the Federal Disability
Insurance Trust Fund were called on February 15, 2005. The proceeds were rolled over as investments in GAS
securities.

GAS securities are non-marketable special issue bonds that earn interest which is paid in additional GAS securities. IOW, IOUs paying interest in IOUs.

[0hio]

All (100%) of the 150 plus trust accounts have GAS securities instead of marketable US Treasury bonds. Therefore, be it known, John Snow is a profound liar.

42% of our national debt is under the heading of Intragovernmental Holdings.

Debt we owe ourselves because we are stupid and ignorant.

Think about this:

We (taxpayers) paid taxes (money) as required.

The money was invested in US Treasury bonds.

The money was subsequently spent by Congress.

In 1985 Secretary of Treasury Baker and Congress disinvested social security by selling the marketable bonds.

The money from the sale was spent by Congress.

Government Account Series securities (GAS) were used to re-place the marketable US Treasury bonds.

It worked so well Congress used the same approach with the other 150 trust accounts. IOW, Congress has spent every penny and Treasury has issued GAS securities for the money.

If you don't do your research you can work for the NYT or WAPO.

[Paul Lyon]

Of course, the debt isn't the most important problem, the balance of payments deficit, which was over $700 billion last year, and is unlikely to be less this year, is a more serious matter. A run on the dollar will sink the U.S. economy: only if the dollar declines slowly, esp. against the yuan and the yen, will there be a chance to avoid a major recession. Altho Japan and China have an obvious interest in preventing a rapid decline in the dollar against the yuan and the yen, their policy on this matter may not be sustainable.

[R]

Nice article. One question, if you don't mind and if you have this information - can you please list the amount of debt at the beginning of each administration (starting with Carter), or possibly tell me where to find it? It might help me with my discussions with my "conservative" friends.

[John Casper]

R, good question. IMPOSTOR, a relatively new book by a Reagan appointee, Bruce Bartlett, may contain that info you seek, because he is calling Bush the "impostor."
http://www.amazon.com/gp/product/0385518277/002-0450346-6655241?v=glance&n=283155

[Dave Fourputt]

Bush is spending like a drunken sailor on Domestic Socialist programs and you liberals are upset?

Me confuzed.

[R]

To: John Casper,

John,

Thank you for your advice. I'll check out that book. It can be difficult living in a red state - having facts that I can use in conversations helps, and I think it will be really helpful having a source of information who worked for Reagan.

[Mimikatz]

Here is the link to the year by year debt statistics and the up-to-the-minute-a-couple-of-days-ago debt figure.

The spending is not all on "Domestic Social programs", but includes war and defense and subsidies to industries such as energy and farming. Spending has increased, but revenue has decreased more due to the tax cuts. They do not stimulate growth and do not pay for themselves. They are a massive transfer of wealth to the top 1-5% from the rest of us.

[Mimikatz]

Here is an interesting graph comparing military v. domestic spending in the various administrations over the last 30 or so years. If you click their main page, today's essay is on how tax cuts do not pay for themselves.

[R]

To: Mimikatz

Thanks for the link. It will come in handy!