The Current Debt and Budgetary Impasse

by Mario Rizzo

One of the most important, but frequently ignored, aspects of the current negotiations about raising the debt ceiling is the lack of credible commitment on each side.

The problem has two aspects. One is clearly analyzed by Michael McConnell in today’s Wall Street Journal.  (Perhaps also here.) What exactly is “on the table”? The president or the GOP says “I propose X in budget cuts.” Are specific reductions being proposed or just general goals to be worked out later? Is the base-line current spending or is it current budgetary authority (that is, the current planned rate of increase)? If the president suggests revenue “enhancements,” how specific are these? Are they increases in marginal rates or elimination of specific “loopholes”? We just don’t know for sure.  

The second aspect is how enforceable would be such agreements under the current gun? The devil is in the details, as people often say. They cannot be worked out now but, equally important, the lack of consensus that exists now will exist later on. So what happens if nothing happens later on? Is the debt ceiling increase rescinded? Oh boy, if that were to happen.

Republicans have complained with good reason that the revenue enhancement ideas put forth by Obama and Co. are much more specific than expenditure reduction “proposals.” (I would add this is probably true of the expenditure reduction proposals of each side!)

The upshot is: The public doesn’t know what is on or off the table with any reasonable degree of specificity. I imagine that the parties themselves don’t know. There is no reasonable enforcement mechanism for whatever the negotiators come up with.

My guess is that there will be some kind of debt ceiling increase with the real budgetary differences papered over once again. The system is broken and the public will be the real sufferer. Not that most don’t deserve it. For the real culprit, Americans need only look in the mirror.


6 thoughts on “The Current Debt and Budgetary Impasse

  1. Mario-
    The historic pattern is for spending cuts to be reversed while tax increases tend to be more durable. This long-term difference on the spending and revenue sides of the budget suggests that promises of big cuts in spending should be taken by more than a pinch of salt.

  2. The question is: what, substantively, is going to be done right here and now? We hear a lot of talk about deficit reduction of X trillion dollars “over 10 years.” The projected deficit for the COMING year is over 1.5 trillion. By how much is THAT going to be cut? If not much, then perhaps there will be enough rebels in the House to prevent a raising of the debt ceiling. Then, after paying the interest on the debt, the remaining federal income will need to be prioritized. Which is exactly what should have been happening all along.

  3. I’ve now learned that “pinch of salt” is a British metaphor and the American version is “grain of salt”. A pinch or grain of salt might not be as bad for health as thought. There is a controversy about this. A study just came out saying there is no connection between salt intake and heart attacks, though it is linked to high blood pressure.

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