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Inside a Bad Debt Deal

Tuesday October 27th, 2015   •   Posted by Craig Eyermann at 10:15pm PDT   •  

36893589_S In 2011, U.S. House of Representatives Speaker John Boehner realized the most significant achievement of his entire career in the U.S. Congress when he reached a deal with the White House to restrain the growth of U.S. government spending: the Budget Control Act of 2011.

Here, using the leverage of the threat of not increasing the nation’s statutory debt ceiling, which would force the U.S. government to immediately balance its budget with the increased risk of defaulting on its scheduled debt payments, the Speaker was able to compel President Obama to back off his preferred policy of greater spending without any constraints.

As a result, the U.S. government’s spending has grown at a much slower pace than its revenues have as the U.S. economy has slowly recovered, which has helped the U.S. economy avoid having its national debt otherwise spiral out of control in the same way that Greece’s and Puerto Rico’s have in recent years. While the national debt has continued to grow, it has done so much more slowly than it would have otherwise as a result of the achievement.

That deal however has never been popular with the big-money interests that benefit from government spending, many of which are not just among the Speaker’s biggest financial contributors, but are also major contributors to other established members of the current leadership of the House of Representatives.

On September 25, 2015, after coming under increasing fire by members of his own party as they became increasingly suspicious that he was about to reverse the achievement of the Budget Control Act at his backers’ behest, John Boehner announced his resignation from both the Speakership and from the Congress, which would take effect on October 30, 2015.

In doing so, he avoided the situation where he was at great risk of being involuntarily removed as Speaker, while also retaining his power to act for a long enough time to undo the only effective legislation to ever meaningfully limit the growth of U.S. government spending in the modern era.

Reuters describes the deal that Speaker Boehner was so desperate to strike before giving up his power:

A U.S. budget and debt ceiling deal headed toward quick action in Congress on Tuesday as lawmakers rushed to avert yet another fiscal standoff, which threatened to push the federal government into an unprecedented default early next month.

House Speaker John Boehner told fellow Republicans he was clearing the way for a vote on Wednesday on the double-barreled measure, which would bust strict spending caps by $80 billion over the next two years in order to pump up defense and domestic programs. It also would extend the Treasury Department’s borrowing authority until March 2017.

Business Insider provides more details:

  • It would raise spending levels in equal amounts in defense and nondefense areas and avert a potential government shutdown in December. Those spending increases would be offset through spending cuts.
  • It would tackle a glitch that could leave many seniors with Medicare premium hikes next year.
  • The accord would cut spending on Medicare and Social Security disability benefits. Beneficiaries of the Social Security disability system face steep cuts next year unless Congress acts, as the fund is set to run dry. A source familiar with the negotiations told Business Insider that the deal would include “long-term entitlement reforms” to the Social Security disability program. The source said it would save $168 billion in long-term spending.
  • Attached to the deal would be separate legislation to raise the nation’s debt limit well past the 2016 election, through March 2017. The Treasury has warned that Congress needs to raise the debt ceiling by November 3 to avoid a potential first-ever default.

Meanwhile, Daniel Mitchell describes what advocates of reasonable government spending growth restraint will get:

Well, if you peruse the agreement, it’s apparent they don’t get anything. Sure, there are some promises of future restraint. But if the 2013 deal and the current agreement are any indication, those promises don’t mean much.

The deal has a handful of back-door revenue increases, including an assumption that the IRS will be more aggressive in squeezing money out of taxpayers. And there are some budget gimmicks, along with some tinkering with entitlement programs, especially the fraud-riddled disability program, that ostensibly will lead to some modest savings.

The net result is that we have a pact that leads to guaranteed spending increases over the nest few years, combined with some nickel-and-dime proposals that will probably offset each other in the future.

So the bad news – assuming the goal is enforceable spending restraint – is that policy has moved in the wrong direction.

The main difference between a statesman and a politician is that a statesman will always adhere to sound principles in seeking to move policies in the right direction, even as they engage in political maneuvering, while a politician has no such guiding compass—for them, it’s all about the maneuvering. Soon to be former-Speaker Boehner is a politician.

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October 2015