Bold Colors: Finally...someone explains the debt ceiling debate!

Finally...someone explains the debt ceiling debate!

Today I am pleased to share a guest post from our friends at the Medina Tea Party Patriots.

Amy and Jeff have done the hard work of analyzing the nuts and bolts details surrounding the debt ceiling in light of the fact that the government was expected to hit the $14.294 trillion debt ceiling yesterday. They've managed to cut through a lot of the spin and have cited reputable sources in their research. I encourage you to visit their website and subscribe to their e-mail list to keep up on legislative issues in Ohio and nationally. I am grateful to them for giving me permission to post their report here today:

The debt ceiling debate takes center stage
With the report that the government is expected to hit the $14.294 trillion debt ceiling today, we can assume that part of Congressman Renacci’s town hall tomorrow will focus on this critical issue.

In the past, we’ve expressed our opposition to raising the debt ceiling and our support for the Full Faith and Credit Act. We would like to share with you part of our research, so you can understand our reasons for the positions we’ve taken. When it comes to important debates like these, we ask that you do your own due diligence by looking at all sides of the issues to see what is most fiscally responsible for our nation

Debunking the dire consequences of Congress not taking action

According to the Reason Foundation, a non-partisan public policy research organization, the 2011 fiscal year revenue outweighs the net interest payments. [1]

“If Congress refuses to raise the debt ceiling, the federal government will still have more than enough money to fully service the debt. This year, for instance, about 6.1 percent of all projected federal expenditures will go to interest on the debt, and tax revenue is projected to cover about 60.1 percent of all government expenditures. With roughly 10 times more income than needed to honor its debt obligations, why would the government ever default?

Let’s sum it up: As long as the government continues to pay interest on the debt, then it technically is not in default. With tax revenues expected to be $2.2 trillion, interest payments amount to roughly $300 billion—this would still leave $1.9 trillion in revenues to pay for the government's most important priorities. For instance, lawmakers could decide to honor the promises made to people benefiting from entitlement spending, such as Social Security, Medicare, and Medicaid. In that case, even after paying for all of the entitlement spending, the Treasury would still have $300 billion left.”

In Heritage Foundation’s recent article, “Myth-Busting the Debt Ceiling,” they add to the argument, stating that dire predictions by the Left, who are claiming “double-dip recessions” and “worse financial crisis,” are not true. [2]:

“On the issue of the whether to raise the debt ceiling—allowing the government to borrow and spend even more money—President Barack Obama has resorted to dire predictions about what could happen if Congress does not take action. The Hill reports:

If investors around the world thought that the full faith and credit of the United States was not being backed up, if they thought that we might renege on our IOUs, it could unravel the entire financial system,” Obama said at a town hall meeting hosted by CBS last week but released Sunday.

“We could have a worse recession than we already had, a worse financial crisis than we already had.”

And, likewise, U.S. Treasury Secretary Timothy Geithner warned that if Congress does not raise the debt limit, the U.S. economy would likely enter a “double-dip recession” and added, “A default would inflict catastrophic, far-reaching damage on our nation’s economy, significantly reducing growth, and increasing unemployment.”

But Heritage Foundation Vice President of Domestic and Economic Policy David S. Addington notes that those dire predictions just aren’t true. In discussing J.D. Foster’s paper “Congress Has Time and Options on Debt Limit,” Addington writes:

As Dr. Foster’s paper demonstrated, there will not be a default on the Federal debt when the Treasury reaches the statutory limit on its borrowing of $14.294 trillion. The Treasury just will not be able to borrow any more money. The Treasury would still pay debts that come due, putting off temporarily payment of less important obligations as necessary to pay the maturing debt.”

Even the Republican Study Committee’s policy briefing on the debt limit proves we can continue to make payments on the debt. [3]

“However, the Treasury Department will receive more than sufficient revenue during the remainder of fiscal year 2011, $1.114 trillion between April and September 2011, to continue making payments on the debt with only roughly $105 billion in interest costs projected over the same period.”

Stopping the spending cycle
Since 1940, Congress has raised the debt ceiling 98 times, and over the last 10 years, the debt limit amount has more than doubled, going from $6.4 billion to $14.3 billion. [4] It seems Congress’ solution to the debt ceiling issue is to raise the limit, so they can continue to spend more of our money. The reality is it’s time to stop this out-of-control cycle. If we don’t do it now, then we are doing exactly what the Republicans in the House said that they refused to do – just kicking the can down the road.

Standing with the majority of Americans
In poll after poll, the results are clear - an overwhelming majority of our country wants Congress to vote against raising the debt limit:

§ Zogby: 60% of all voters, 88% of Republicans and 61% of Independents oppose raising debt ceiling. [5]

§ Reuters/Ipsos: 71% of those surveyed oppose raising debt ceiling, while 18% support an increase. [6]

§ CBS News/New York Times: 63% Americans oppose raising debt limit, while 27% support raising it. [7]

§ Exclusive poll conducted for The Hill: 62% of likely voters oppose raising debt ceiling. [8]

§ Gallup: Americans oppose raising debt ceiling, 47% to 19%. [9]

Supporting the Full Faith and Credit Act
In his article, “The Truth about the Debt Ceiling and Default,” Senator Pat Toomy points out: [10]

“[A]s the Congressional Research Service has noted, the Treasury Secretary [Timothy Geithner] himself has the discretion to decide which bills to pay first in the event that a cash flow shortage occurs. Thus, it is he who would have to consciously, and needlessly, choose to default on our debt if the debt ceiling is not promptly raised upon reaching it. It takes a lot of chutzpah to preemptively blame congressional Republicans for a default only he could cause.”

Knowing that the responsibility lies at the hands of the Treasury Secretary, Republicans need to go on the offensive and pass the Full Faith and Credit Act, which requires that the government prioritize all obligations on the debt held by the public in the event that the debt limit is reached. In doing this, they ensure that our debt is paid and they remove the default issue as a manipulation tool, which the Left can use to scare the Republicans in to compromise.

The Full Faith and Credit Act has been introduced in the Senate (S. 163) and House (H.R. 421). The House bill has 94 co-sponsors. As of Monday, May 16^th, Congressman Renacci has not signed onto the bill yet. [11]

Voicing our concerns
Whatever your views are on raising the debt limit, Congressman Renacci is providing all of us a forum to hear our opinions. Let’s not waste this opportunity.

Town hall for Congressman Jim Renacci
Date/time: Tuesday, May 17^th from 6:30 PM to 8:00 PM
Location: John C. Myers Convocation Center at Ashland University, which is located on Claremont Avenue. Town hall will be in Heritage Room.
Map: http://www.ashland.edu/campus-map
More information: Visit http://renacci.house.gov/.

Finding the right solution

The Heritage Foundation has created an excellent report called, “Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity.” Being one of the premiere conservative think tanks, the Heritage Foundation has helped shape the policy and ideas of many conservatives. We encourage you to read, “Saving the American Dream:” http://www.heritage.org/Research/Reports/2011/05/Saving-the-American-Dream-The-Heritage-Plan-to-Fix-the-Debt-Cut-Spending-and-Restore-Prosperity.

Index of resources:
[1] Reason Foundation: “The Truth about the Debt Ceiling”:
http://reason.com/archives/2011/02/03/the-truth-about-the-debt-ceili/print
[2] Heritage Foundation: “Myth-Busting the Debt Ceiling”:
http://blog.heritage.org/?p=59649
[3] RSC Policy Brief: The National Debt and the Debt Limit:

http://rsc.jordan.house.gov/UploadedFiles/RSC_Policy_Brief_Debt_Limit.pdf

[4] Office of Management and Budget: Historical Table 7.3:

http://www.whitehouse.gov/omb/budget/Historicals