Budget Failure Drives Debt Ceiling Fight

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Everyone has been riveted by the political theater of the debt-ceiling negotiations, complete with presidential snit-fits. But the debt ceiling itself is really a false issue.

Beneath the question of the debt ceiling there is, of course, the deeper question of the proper size of government. But in political and economic terms, this question is supposed to be confronted on a more concrete level. There is political institution that is supposed to quantify the size of government, its levels of spending and taxation, and the amount of debt it is permitted to take on. That institution is called the federal budget. And thanks to Senate Democrats, we don't have one.

When we have a budget, a debt ceiling increase is usually a relatively minor political issue. The approved level of debt follows as a simple matter of accounting from decisions that both houses of Congress have already negotiated and approved. But none of this has been negotiated in Congress yet, and that is why there is suddenly so much riding on the debt ceiling debate.

Remember that House Republicans passed a budget in April. The Democrats who control the Senate, however, haven't passed one in about two years. The federal government has been moving forward on ad-hoc continuing resolutions. As for the president, early this year he proposed a budget so unrealistic his own party voted it down, then followed up by giving a speech with a budget outline so vague that the Congressional Budget Office refused to evaluate it.

No wonder the debt ceiling negotiations are so fraught. Having evaded the responsibility of actually producing a federal budget, the Democrats have been forced to compress the entire debate over the balance of spending and taxes into a three-week emergency session with an ominously looming deadline. Behind all of the president's patronizing talk about eating our peas and doing our homework, what Obama is attempting here is the equivalent of last-minute cramming.

We can also see why Republicans are so reluctant to strike a bargain. Without an actual budget, the Democrats' promises of big spending cuts in return for a debt limit increase are vaporous. Republicans have been double-crossed in these deals before, quite recently. Remember the deal on a continuing resolution, where billions in spending cuts turned out to be mere millions, a rounding error in the federal budget? So without a real budget, all that Republicans have is a verbal promise, which, as they say, is worth the paper it's printed on.

Without a budget, what President Obama is asking for with a debt limit increase is the authority to borrow to cover some as-yet-unknown level of future spending. I think you can see what the Tea Party types are responding to when they oppose any such increase. They sense that what Obama is seeking is government by blank check.

The danger here is much more substantial than the very slim prospect that the Treasury is going to default on interest payments on August 3. The real issue is that our government has no plan for how much it is going to tax and spend over the next decade, over the next two years, over the next year, or even over the next six months. There is an old adage in Congress that if you can't budget, you can't govern. By that standard, America is currently ungoverned.

There's another old saying that captures something of the same idea: if you fail to plan, you plan to fail. If you fail to budget, do you plan to default?

What is most frightening is that President Obama does not seem to have any appreciation of this issue. The most revealing thing he said recently was a throwaway line, which was supposed to be some kind of self-deprecating humor, about how the average person probably isn't following the debt ceiling debate. In fact, I know a lot of ordinary people who are following it. Where do you think all of that Tea Party pressure is coming from? But the bigger point is that there is one group that is most definitely following debt and budget issues closely: the big economic decision-makers. So it's no wonder that the economy has flat-lined, and these people aren't lending or hiring. They are realizing that there is no plan.

Why isn't there a plan? There is a reason the Democrats have not produced a budget. They can't produce it because they can't bring themselves to face the facts that a realistic budget would force them to confront. Obama and the Democrats came into office in 2009 hoping to transform America into a paradise of European-style, cradle-to-grave welfare benefits. They did this just at the moment, unbeknownst to them, when the Great Recession was about to expose the economic unsustainability of the welfare state. Thus, Obama shoved through a massive new health-care entitlement, just at the point when it was becoming obvious that Congress would have to rein in the growth of these entitlements to keep America from going the way of Greece.

Then, in the 2010 mid-term election, the Democrats received a historic rebuke that put the House of Representatives, which is the primary budgeting arm of the government, into the hands of the party that opposed an expansion in the size of government. New budget negotiations this year would require that Obama and the Democrats confront the consequences of this election, recognize the political obstacle to their dreams, and drastically scale back their welfare-state ambitions. But they couldn't do that, because that would involve acknowledging and accepting that their welfare-state dream is dead.

So ignore everything else in this kabuki-theater political performance. The absence of a budget is the real issue, and it tells you what is really going on. Writing and passing a budget would force Obama and the Democrats to confront the economic and political unsustainability of their welfare-state vision. It might even force them to confront the moral defects of a system that feeds the producers to the parasites. So instead they have refused to create a budget, allowing spending to plow forward on autopilot and asking for a blank-check increase in the debt limit so they can keep borrowing to pay for it all.

They have no plan for how to sustain the welfare state over the long term, yet they can't give it up, so their only alternative is to drive blindly ahead. This is the part of the debt ceiling fight that really ought to alarm the markets.

Robert Tracinski is senior writer for The Federalist and editor of The Tracinski Letter.

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