Whenever the establishment left and right agrees on something, expect a big assault on our democracy. That is the case with the emerging consensus that the debt ceiling should be dumped—for two years at least—in any deal that replaces House Speaker John Boehner’s ill-fated Plan B so that spending hawks can’t later hold the economy hostage to extract cuts. But there are few external market checks on America’s profligacy. Without strong internal political checks, it might well spend itself into oblivion.
America’s total $16 trillion accumulated debt represents 100 percent of the GDP. Add in its $85-plus trillion in unfunded pension and health care liabilities and the debt shoots up to 550 percent—only marginally better than France. Every man, woman and child in America is currently on the hook for $190,000.
But the Obama administration obviously doesn’t give a hoot. Otherwise, its plan to avert the fiscal cliff would have included serious spending cuts and entitlement reform, not primarily a scheme to raise taxes on households making over $250,000 which would at best raiseabout $40 billion per year—around what Washington borrows every week.
As if that were not outrageous enough, the administration also demanded in its fiscal cliff package that Congress forever forfeit its constitutionally given debt authority. (This authority was already considerably weakened during World War I. At that time, Congress gave up its authority to approve debt issuance for specific projects. It started pre-approving instead a lump sum loan amount so that the president could raise money quickly to fund the war effort.) House Speaker John Boehner (appropriately) laughed at Obama’s suggestion at first. However, later he whispered in the president’s ear that he would be willing to lift the ceiling, which will expire in February, for a year if he went along with his Plan B. But with the collapse of that plan, it is likely that Obama will try and write in a two-year extension in whatever deal he works out with Congress now—and take away the only tool that Republicans have to enforce any spending discipline.