Cross-posted at AustinHess.com and
UncommonSenseBlog.com
by Austin Hess…
In the wake of the S&P downgrade, Rand Paul has called for Tim Geithner to
resign. The other day, Tony tweeted a link to a Reason post with Paul’s
press release on the subject:
RT @LibertyShovel: Rand Paul to Geithner: step down. Reason:
http://t.co/ffvBsXv
I retweeted it, prompting a facebook comment from a liberal old college
friend of mine:
Why would Geithner resign? The three biggest reasons for the downgrade S&P
outlined in their report (http://bit.ly/pfrs1x) are government spending, the
lack of new revenue and the fact that the debt ceiling has been used as a
bargaining chip for the first time ever. None of these is within the purview
of the Secretary of Treasury. Two of them are on Rand Paul.
My response is as follows:
As Rand Paul said in his press release, not only did Geithner assure us that
the downgrade wouldn’t happen as long as we raised the debt ceiling…
During his tenure at the Federal Reserve and as Treasury Secretary,
Secretary Geithner has had a direct role in the failure of the Fed to
diagnose and act on the housing crisis. He presided over bank bailouts, auto
bailouts and failed trillion-dollar stimulus plans.
Geithner is the last rat to jump the sinking ship of Obama’s (original)
economic team, and he has been an unmitigated disaster. He is Obama’s most
trusted economic advisor, and his advice has served his boss (and the
country) very poorly. Furthermore, I don’t think it is unreasonable to say
that, as a result of the first credit rating downgrade in US history, the
head of the Treasury department, which manages US debt instruments, should
resign. It is certainly within his purview.
Having said that, however, I don’t really care if Geithner resigns or not.
Believe me, nobody looks forward more than I do to the day that he returns
to the North Pole to make toy trains (high speed rail, of course) and help
Santa Claus cheat on his taxes. We need a Treasury Secretary that knows the
country’s assets from a hole in the ground (an increasingly difficult
proposition, I’ll admit), but I don’t think that will happen until Obama is
removed from office. Geithner is just carrying out Obama’s policies, and
anyone Obama appointed to replace him would probably be just as bad (though
it’s hard to imagine that anyone wouldn’t be an improvement). Getting
approved by the Senate would take time, and we don’t need any more
uncertainty in the markets than we already have. On the other hand, perhaps
Obama would pick somebody better, which would make him look less
economically clueless. I’m also against that. The more clueless Obama looks,
the easier he will be to beat.
Now, as for the reasons for the downgrade that you cited: I mostly agree
with the reasons, but not your characterizations. Obviously, tautologically,
if our spending exceeds our revenue we will accumulate debt. We have already
accumulated a dangerous amount of debt, and S&P has deemed that there is
little hope of a political solution to our mounting debt in the foreseeable
future. I agree with that assessment, though I think S&P still overestimates
our creditworthiness. We’re so far in Banana Republic territory I don’t
think there should be any “A’s” in our rating. But, as Democrats were so
quick to point out (in their rush to kill the messenger), S&P does have a
history of getting things wrong… namely their over-rating the
government-backed mortgage securities that led to the housing collapse.
Apparently they have a pattern of over-rating the US Government and the
products of its policies. Maybe they think the US is “Too Big To Fail,” but
we are failing.
You say that Rand Paul is responsible for two of the three cited reasons for
the downgrade. I assume you do not mean spending. After all, you can’t find
anyone in the Senate that wants to cut the budget more than Rand Paul (as
much, maybe). And he’s also only a freshman Senator in the minority party,
so he doesn’t have much control over how much gets spent. I assume you mean
the lack of revenue and the political squabbling over the debt ceiling deal.
Let’s take revenue, first. Nobody (not even Rand Paul) is against more
revenue for the government. What we are against is more taxation, and that’s
an important distinction. Democrats like to point out that tax revenues are
“historically low,” but that’s because Obama’s economy is historically bad.
In bad economic times, revenue drops; in good ones, it rises, both in real
terms and as a percent of GDP. The important point, though, is that since
World War 2, revenues have been 18% of GDP on average, no matter what the
tax rates are. That’s because lowering tax rates tend to spur economic
growth whereas raising them tends to suppress it. What Rand Paul (and I)
would like to do is grow the economy by rolling back the regulatory state
(which is a drag on the economy with trillions in compliance costs and a far
amount in enforcement costs to the government as well) and lowering taxes
(and yes, eliminating loopholes and broadening the tax base. I’d prefer a
flat tax). Democrats want to increase revenue by taking a larger piece of a
smaller pie. We want a smaller piece of a larger pie. In the end, though, as
the GDP grows, the dollar amount of the governments 18% cut grows, and
revenues go up.
On spending, the 18% historical limit on revenue is (or ought to be) a limit
on spending as well. You can’t squeeze blood from a stone, and so if you
want to balance the budget and stop accumulating debt, you have to adjust
spending downwards to what you can realistically expect in terms of revenue.
So, we need to cut spending down to 18% of GDP, or, ideally, lower so that
we can begin to pay down the debt. That is what the Tea Party wants to do,
and what we are trying to browbeat establishment Republicans into doing.
Democrats, though, are fighting every step of the way. To them, every dollar
of federal spending is sacred, including those that we weren’t spending last
year, and even attempts to roll back spending to what it was a few years ago
is “extreme.” When did simple math become racist, by the way?
Finally, as to the political impasse, this is not the first time an increase
in the debt ceiling has been a political football. Take this quote from the
debate on the debt ceiling increase from 2006:
The fact that we are here today to debate raising America’s debt limit is
a sign of leadership failure. It is a sign that the U.S. Government can’t
pay its own bills. It is a sign that we now depend on ongoing financial
assistance from foreign countries to finance our Government’s reckless
fiscal policies. … Increasing America’s debt weakens us domestically and
internationally. Leadership means that “the buck stops here.” Instead,
Washington is shifting the burden of bad choices today onto the backs of our
children and grandchildren. America has a debt problem and a failure of
leadership. Americans deserve better.
I’m sure you’ve heard that quote before, but if you haven’t, it is a quote
by a freshman Democratic Senator named Barack Obama. And its one of the few
quotes of his that I agree with, though he obviously didn’t mean it. He,
Biden, Reid, and other Democratic Senators who’s heads have been exploding
about the importance of raising the debt ceiling in 2011 (and how “extreme”
Republicans that opposed it are) ALL voted against the debt ceiling increase
in 2006, proving unequivocally that they are petty partisan hacks,
hypocrites, and liars.
Their demagoguery in this debt ceiling debate would have been breathtaking
had I not already come to expect it from them. It has been nothing but a
series of lies and distortions, in which they have been aided and abetted by
the ministers of truth in the media.
In the first place, there was never any threat of a default. Nobody would
let that happen. Furthermore, on a monthly basis, we take in more than
enough money to service our debt and to pay for all of our defense budget
and entitlement payments and then some. If we had come up against the debt
ceiling, none of those functions would have been disturbed. We just couldn’t
accumulate any more debt, which would mean massive and immediate (and
admittedly, potentially disruptive- though not as much as a default)
spending cuts and a partial government shutdown (and I wouldn’t shed too
many tears over immediate massive cuts).
However, Obama repeatedly and blatantly lied about this and the implications
if a deal wasn’t reached by his arbitrary deadline. The most egregious
example was his loathsome attempt to scare Granny by saying he wasn’t sure
he’d be able to send out social security checks despite the fact that he was
legally obligated to do so (and had been explicitly instructed to do so by
Congress) and had the funds for it. Obama was (and is) more full of shit
than the colostomy bags of the old people he was trying to frighten.
Democrats like to act like it was Republicans that were being intransigent
in the debate, but even if that were true you would have to admit that
Democrats were as well. Obama, while offering no plan of his own, threatened
to veto any Republican proposal that made it through the Senate. Senate
Democrats (who, by the way, haven’t passed a budget in going on 900 days, in
dereliction of their duty) acted like Republicans were wasting everyone’s
time by putting forward plans that “wouldn’t pass the Senate,” absolving
themselves of responsibility despite the fact that it was their own
intransigence that was reason they wouldn’t pass (the plans would pass if
they would vote for them). The only plans that came out of the Senate were
full of budgetary gimmicks that didn’t actually cut anything (they just
promised to slow the rate of growth and make cuts in “the future.”). The
reason that Democrats wouldn’t go along with Republican plans was because
they wanted to raise taxes. Perhaps you can explain to me why Republicans
were intransigent for insisting on a debt deal with spending cuts and
without tax increases, but Democrats were not intransigent for insisting on
a debt deal without spending cuts and with tax increases.
In fact, however, Republicans were not intransigent. As I mentioned, they
actually put forth plans. They were willing to compromise. Hell, none of us
wants to raise the debt ceiling. That’s a compromise in itself, because we
recognize that we’re not going to be able to balance the budget overnight
(especially with Obama and Reid around). But then Obama comes around with
the absurd negotiation position: “I know you don’t want to raise the debt
ceiling or raise taxes, but if we’re gonna raise the debt ceiling we also
have to raise taxes.”
The Republican Cut Cap and Balance plan was a compromise in that it was a
list of concessions that we would settle for in exchange for agreeing to
raise the debt ceiling and allowing Obama (who is on pace to spend more than
all his predecessors combined) to keep on spending. The plan actually
addressed the structural problems that led to the S&P downgrade. It would
have cut current spending levels, capped future spending at a sustainable
level with regard to historical revenues as a percent of GDP, and stopped
the accumulation of debt with a Balanced Budget Amendment to the
Constitution that would have forced politicians to do what they should
already be doing anyway, thus ameliorating the political impasse S&P cited
as a reason for the downgrade.
Of course, that reasonable plan was rejected by the Democrats, and the deal
we got is a shit sandwich, but it’s just about as good as can reasonably be
expected from Democrats. Now we have an unaccountable “Super-Committee,”
which, after it inevitably fails to reach a solution, will trigger automatic
cuts to Defense (the primary and one of the few legitimate purpose of
government in the first place).
And what is our reward for compromising? Even though we got little out of
the deal, and basically acquiesced to the Democrats? Everyone from Obama to
Biden to the New York times is calling us “hostage takers” (with our guns to
the head of the American people) to “terrorists.” What ever happened to the
New Tone(™) of Civility® in Public Discourse© after Tuscon (which,
apparently, they still think was political)? Again, they expose themselves
to be contemptible hacks, hypocrites, and liars.
My own horse-faced horse’s ass of a Senator got in on the act (after
lamenting that the media reports our positions at all) in a more civil but
equally absurd way by parroting David Axelrod’s talking points about the S&P
downgrade being the “Tea Party Downgrade.”
As Rand Paul said, blaming the Tea Party for the downgrade is like blaming
firemen for the fire they are trying to put out. We want massive spending
cuts and to begin paying down the debt with our revenues, which would
increase under our preferred free market economic policies. Those are
exactly the policy prescriptions that would have kept S&P from downgrading
us, as they outlined in their report.
It is the Democrats that want to keep spending us into oblivion and continue
the same policies that led to the downgrade. It’s bewindering. I generally
try to avoid questioning people’s motives and keep in mind Hanlon’s razor:
Never attribute to malice that which is adequately explained by stupidity.
…but the Democrats' complete disregard for the basic math of the situation
makes me question whether anyone really can be that stupid. Maybe it’s a
strategy, a flip-side to the Republican “Starve the Beast” strategy (let’s
call it, “Whet the Beast’s Appetite”), wherein the Democrats plan on
spending and accumulating debt to the brink of bankruptcy as a pretext to
enact more draconian confiscatory taxes than they’d otherwise be able to get
away with, to further “fundamentally transform” the country to suit their
collectivist redistributionist vision. I’ll be generous and call Obama just “maliciously stupid.”
Whatever their motives, the Democrats have made clear that they will never
attempt to address our spending and debt problem. Therefore, the only way to
address the political impasse that S&P cited in their explanation of the
downgrade is to remove Democrats from office. No real progress will be made
while Democrats control the Senate and the White House, and that is why we
are going to take them over in 2012.
To extend Rand Paul’s firemen analogy (Haha, I guess that makes the
Democrats arsonists?) with some Billy Joel lyrics: We didn’t start the fire.
But we’re damn sure going to put it out, no matter what dirty names the
arsonists call us.
