Fiscal Crisis 101
THE IMPENDING FISCAL CRISIS
Are you aware that the government faces two major spending crises in the next 60 days?
First, the 2011 budget is in crisis because the last Congress refused to pass a budget for this year, leaving it to the new Congress to resolve…and the current spending authorization expires March 4th. Without a budget in place, the federal government will have to shut down.
Secondly, it is estimated that we will reach the borrowing limit in our current debt ceiling in early March (the current ceiling is $14.3 Trillion). The debt ceiling can only be raised by an act of Congress. If it is not raised, then the government will begin to default on its obligations…much like what happens in your home when there is no money left in the bank or room on the credit cards.
To shut the government down over the budget fight could be a good option…to shut the government down over the debt crisis may do significant harm.
THE DEBT CRISIS
What are our options in dealing with the looming debt crisis?
There are three responses available to our new Congress and how they choose to move forward will be a good indicator of whether we will begin to act responsibly in dealing with federal spending.
First, Congress could simply add another trillion dollars to the current debt ceiling and avoid facing the debt issue.
Second, Congress could refuse to raise the debt ceiling and force the government to default on its financial obligations around the world.
Third, Congress can agree to raise the debt ceiling, but only after receiving binding new limits on federal spending.
If the Congress were to irresponsibly choose the first option, then the message from the November elections will have been lost. The second option moves the country into uncharted waters.
The third option is the most viable and could play out in a number of different scenarios, but the end game must include credible new spending cuts. This is our best hope.
THE BUDGET CRISIS
Is it possible that the government could be shut down by political disputes about federal spending?
The short answer is yes it is quite possible. The message sent by the people in the November election was stop the insane spending! The newly elected House of Representatives, with a conservative majority, heard and agrees that government spending must be curtailed. And the House…and only the House has the constitutional authority to authorize government spending.
Expect they will forward in February a spending bill to the Senate and the President that makes deep cuts in federal spending for the second half of 2011. Expect the liberals in the Senate to resist, but any additional spending they want will have to go back to the House for approval.
Before the government authority to spend expires March 4th, expect the spending showdown to result in either a good first step towards reining in federal spending…or a complete shutdown of the government until fiscal sanity is restored.
THE UPSIDE OF A GOVERNMENT SHUTDOWN
Could a government shutdown over spending priorities be good for the country?
The most recent example of a federal shutdown during a budget battle over spending priorities was 1995 when President Clinton vetoed the budget sent to him by Congress. Without budget authority, the government was shut down and 800,000 non essential federal employees were sent home.
The political fallout helped both the Democrat president and the Republican Congress in the 1996 elections and resulted in four straight years of balanced budgets without tax increases.
The recent history of government shutdowns indicates that a shutdown could be an important first step to restoring sane, responsible fiscal standards to our federal government and begin the process of lifting this horrible debt burden from the shoulders of future generations.
So, remember your history when the progressives begin gnashing their teeth and proclaiming the world will end if the mean old conservatives don’t buckle under and keep spending like, like,…well like liberals.
THE DOWNSIDE OF A GOVERNMENT SHUTDOWN
What is the downside to a government shutdown? There are those who believe that to willfully shutdown the federal government is an irresponsible act. They seem to hold that without the federal bureaucracy in place to order our daily lives America would grind to a halt.
It is true that there would be some inconveniences if the shutdown were to last for an extended period of time. But, if you’ve ever waited in line for a government service or tried to call a government office, you might wonder…how could a shutdown make it any worse?
The last federal shutdown in 1995 affected nearly 1 million government workers deemed “unessential. Essential workers were required to continue to report. So history would indicate that the essential work of government would go on even during a shutdown.
Makes you wonder why we’re paying all those “non-essential” workers? Just maybe the reason progressives fear a government shutdown is that Main Street might not even notice it.
DEFINING AND CUTTING EARMARKS
What are earmarks and why do politicians love them so much?
It seems that Senator Harry Reed and many of his colleagues take offense at the idea that earmarks should be banned.
Earmarks are the way that crafty politicians take care of friends back home with your tax dollars. The argument against banning them is that if Congress doesn’t define how those dollars are to be spent, the President will and that gives him too much power.
It may surprise you, but I agree…kinda. Congress should be specific about how appropriated money must be spent. The problem with earmarks is that powerful interests get them hidden in larger bills and they are never really scrutinized.
Every project should be openly debated and only those whose merits survive the public debate should be included in appropriation bills.
In other words Senator Reed earmarks ought to be exposed to the full light of day and not treated as a slush fund to benefit your friends back home.
Capt Jim Kinney USN (ret)
www.inspireandignite.com
Are you aware that the government faces two major spending crises in the next 60 days?
First, the 2011 budget is in crisis because the last Congress refused to pass a budget for this year, leaving it to the new Congress to resolve…and the current spending authorization expires March 4th. Without a budget in place, the federal government will have to shut down.
Secondly, it is estimated that we will reach the borrowing limit in our current debt ceiling in early March (the current ceiling is $14.3 Trillion). The debt ceiling can only be raised by an act of Congress. If it is not raised, then the government will begin to default on its obligations…much like what happens in your home when there is no money left in the bank or room on the credit cards.
To shut the government down over the budget fight could be a good option…to shut the government down over the debt crisis may do significant harm.
THE DEBT CRISIS
What are our options in dealing with the looming debt crisis?
There are three responses available to our new Congress and how they choose to move forward will be a good indicator of whether we will begin to act responsibly in dealing with federal spending.
First, Congress could simply add another trillion dollars to the current debt ceiling and avoid facing the debt issue.
Second, Congress could refuse to raise the debt ceiling and force the government to default on its financial obligations around the world.
Third, Congress can agree to raise the debt ceiling, but only after receiving binding new limits on federal spending.
If the Congress were to irresponsibly choose the first option, then the message from the November elections will have been lost. The second option moves the country into uncharted waters.
The third option is the most viable and could play out in a number of different scenarios, but the end game must include credible new spending cuts. This is our best hope.
THE BUDGET CRISIS
Is it possible that the government could be shut down by political disputes about federal spending?
The short answer is yes it is quite possible. The message sent by the people in the November election was stop the insane spending! The newly elected House of Representatives, with a conservative majority, heard and agrees that government spending must be curtailed. And the House…and only the House has the constitutional authority to authorize government spending.
Expect they will forward in February a spending bill to the Senate and the President that makes deep cuts in federal spending for the second half of 2011. Expect the liberals in the Senate to resist, but any additional spending they want will have to go back to the House for approval.
Before the government authority to spend expires March 4th, expect the spending showdown to result in either a good first step towards reining in federal spending…or a complete shutdown of the government until fiscal sanity is restored.
THE UPSIDE OF A GOVERNMENT SHUTDOWN
Could a government shutdown over spending priorities be good for the country?
The most recent example of a federal shutdown during a budget battle over spending priorities was 1995 when President Clinton vetoed the budget sent to him by Congress. Without budget authority, the government was shut down and 800,000 non essential federal employees were sent home.
The political fallout helped both the Democrat president and the Republican Congress in the 1996 elections and resulted in four straight years of balanced budgets without tax increases.
The recent history of government shutdowns indicates that a shutdown could be an important first step to restoring sane, responsible fiscal standards to our federal government and begin the process of lifting this horrible debt burden from the shoulders of future generations.
So, remember your history when the progressives begin gnashing their teeth and proclaiming the world will end if the mean old conservatives don’t buckle under and keep spending like, like,…well like liberals.
THE DOWNSIDE OF A GOVERNMENT SHUTDOWN
What is the downside to a government shutdown? There are those who believe that to willfully shutdown the federal government is an irresponsible act. They seem to hold that without the federal bureaucracy in place to order our daily lives America would grind to a halt.
It is true that there would be some inconveniences if the shutdown were to last for an extended period of time. But, if you’ve ever waited in line for a government service or tried to call a government office, you might wonder…how could a shutdown make it any worse?
The last federal shutdown in 1995 affected nearly 1 million government workers deemed “unessential. Essential workers were required to continue to report. So history would indicate that the essential work of government would go on even during a shutdown.
Makes you wonder why we’re paying all those “non-essential” workers? Just maybe the reason progressives fear a government shutdown is that Main Street might not even notice it.
DEFINING AND CUTTING EARMARKS
What are earmarks and why do politicians love them so much?
It seems that Senator Harry Reed and many of his colleagues take offense at the idea that earmarks should be banned.
Earmarks are the way that crafty politicians take care of friends back home with your tax dollars. The argument against banning them is that if Congress doesn’t define how those dollars are to be spent, the President will and that gives him too much power.
It may surprise you, but I agree…kinda. Congress should be specific about how appropriated money must be spent. The problem with earmarks is that powerful interests get them hidden in larger bills and they are never really scrutinized.
Every project should be openly debated and only those whose merits survive the public debate should be included in appropriation bills.
In other words Senator Reed earmarks ought to be exposed to the full light of day and not treated as a slush fund to benefit your friends back home.
Capt Jim Kinney USN (ret)
www.inspireandignite.com
