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Robert Robb tells us that Obama likes his government supersized!!! He says Obama wants to keep government spending at 23% of the GDP.
Thinking about the unthinkable: Not increasing the debt limit By ROBERT ROBB Thu, Dec 06 2012 4:51 PM I’ve been having irresponsible thoughts. Or at least I’ve been thinking more favorably about something I have previously denounced as irresponsible: not increasing the federal debt limit. There is no good end in sight for the non-negotiations to avoid the fiscal cliff. And the impasse goes far deeper than the question that preoccupies the public discussion about whether to increase the tax rates on the affluent. The tax rate issue is a matter of firmly-held principle and important political symbology on both sides. But it’s not the heart of the impasse. According to President Obama’s own budget staff, increasing the top two rates to 36 percent and 39.6 percent would only raise $442 billion over ten years, or only about a fifth of the $1.6 trillion in tax increases Obama is demanding. Obama’s own budget actually proposes to raise significantly more -- $750 billion – through the approach proposed by Republicans in the non-negotiations: limiting the deductions of the affluent. In addition to reinstating the limits that existed prior to the Bush tax cuts, Obama’s budget proposed capping the value of all itemized deductions for the top-two tax rates at 28 percent. So, as politically important as the rate issue is, resolving it would only reveal an even bigger – and probably irreconcilable – divide. What Obama is really trying to do is to force Republicans to finance – through higher taxes and increased borrowing – the size of the federal government Obama thinks appropriate. And Obama likes his government supersized. Obama’s budget proposes locking in federal spending at 23 percent of Gross Domestic Product, an unprecedented level since the end of World War II. Obama has proposed no constraints that would bring spending below that level and consistently dismisses as non-starters any such proposals by others. Obama likes to cite the Clinton economy in support of his positions. But federal spending as a percentage of GDP was just 18 percent at the end of Bill Clinton’s tenure. The difference between Obama-level spending and Clinton-level spending is more than $700 billion a year. The Simpson-Bowles debt commission recommended that federal spending be brought down to 21 percent of GDP. The difference between Obama-level spending and Simpson-Bowles level spending is around $300 billion a year. Republicans in the House undoubtedly won’t, and shouldn’t, agree to finance Obama-level spending. After all, they were elected in 2010 to put a brake on Obama’s spending and were returned to power this election. But where and when to draw the line is substantively and politically dicey. Obama clearly intends to push Republicans to the edge of every cliff – the expiration of the Bush tax cuts and sequestration; maxing out the debt limit – counting on them to blink at the end. At no point will Republicans have the upper hand politically. But blink each time, and they end up financing Obama-level spending. So, perhaps it’s time to think about the unthinkable: not increasing the debt limit. This does not have to mean default. Existing debt can be rolled over under the current limit. Servicing the debt only costs around $250 billion a year, which could be made a priority. What it would mean is that ongoing spending would have to be on a pay-as-you-go basis. Spending would have to be reduced from $3.6 trillion to around $2.8 trillion. That’s a huge cut. But spending as a percentage of GDP would be close to the 18 percent it was under Clinton. In fact, if the Clinton spending discipline of limiting growth in outlays to around 3 percent a year had been maintained during the profligate presidencies of George W. Bush and Obama, that’s about what the size of the federal budget would be today. Not increasing the debt ceiling would be shock therapy for the country, with uncertain economic and political ramifications. A more gradual decline in spending as a percentage of GDP, such as proposed in Paul Ryan’s budget or by the Simpson-Bowles commission, would be infinitely preferable and more responsible. But if the only choices are financing Obama-level spending or shock therapy, then at least some thought has to be given to shock therapy. |