Shutdown, Obamacare, and Default
Washington is in the midst of a critical debate over the future of Obamacare – a debate so critical President Obama and Harry Reid were willing to shutdown the government for fear the debate would lead to the unraveling of their unworkable law. At the same time, discussions about the debt limit are taking place.
The Heritage Foundation and other conservatives have explained that U.S. has much more tax revenue coming in on a daily basis than it has to pay each day on interest payments; this means the U.S. has the financial means to cover its debt obligations without incurring more debt. Heritage notes:
The Obama Administration argues that failure to raise the debt limit would lead to a default on federal debts, causing unacceptable harm to the economy. But the President has ample discretion to prioritize debt payments and avoid default. The President has failed to address the more fundamental risk of default: unconstrained increases in entitlement spending.
Heritage is not alone in this assessment. Politico reports on Goldman’s assessment of the Treasury’s position on prioritization:
The Treasury’s position on prioritization is that its systems are designed to pay all obligations as they are due, and do not allow the Treasury to set a priority of payments to pay some obligations and not others. Considering that the Treasury makes around 4 million payments per day, this is not hard to believe. Even if full prioritization across all payments were possible, it seems unlikely to work smoothly in practice. …
[W]e would expect that if it became necessary, the Treasury would still find a way to separate principal and interest payments from the rest. It is worth noting that those principal and interest payments, unlike other Treasury payments, are made through the Fedwire system, which could allow easier segregation from other outlays.
The default-on-our-debt talking point is just Washington spin.
The Left and those in the federal government sympathetic to their arguments resent conservatives identifying out-of-control spending, and specifically entitlement spending, as the source of the problems we face with the debt limit. Some of them absurdly argue that there’s just no place to cut spending. Just think of the recent remark by Rep. Nancy Pelosi (D-CA) 15%, the House Minority Leader:
The cupboard is bare. There’s no more cuts to make. It’s really important that people understand that. We all want to reduce the deficit.
Well, Nancy, as long as you continue to believe that Obamacare is a “dream come true,” and Obamacare spending continues, the deficit and our nation’s debt are going nowhere but up.
Conservatives, on the other hand, maintain that President Obama and congressional Democrats should not be allowed insist on raising the debt ceiling without corresponding entitlement spending cuts and especially without tackling the problem of Obamacare.
Recall, Obamacare will have extremely adverse effects on our economy in the years to come, and it means massive amounts of new entitlement spending. Heritage notes:
Obamacare is the single biggest factor driving the growth in mandatory health care spending over the next decade. Obamacare’s exchange subsidies and Medicaid expansion are projected to account for 53 percent of the increase in health care spending through 2023. This means Obamacare’s spending accounts for more than even the aging population and excess health care cost growth.
Congress and the President should agree to put the U.S. on a strong fiscal footing for the next generation by reforming the major entitlement programs, replacing Obamacare with fiscally sound health care reform, and ensuring that all U.S. financial obligations are honored.
America would not be dealing with a debt crisis of this magnitude if Congress and the President would rein in entitlement spending. And, contrary to the belief of Nancy Pelosi and her ilk, there is plenty of room to cut spending – starting with Obamacare.