Some have called August 2 “Financial D-Day.” That is the date, according to Treasury Secretary Geithner, by which either Congress raises the debt ceiling or some government disbursements will cease.
Multiple proposals have been floated for budgetary reforms to be made in exchange for raising the debt ceiling. A partial list includes: Rep. Paul Ryan’s (R-WI) plan to add $4.4 trillion less to the national debt than current trends project; the GOP “Cut, Cap, and Balance” plan, which aims for $6 trillion of future spending cuts; and the so-called “Gang of Six” Plan that proposes $3.7 trillion less debt than now projected.
Whatever compromise is eventually adopted, you should be aware that the national debt will continue to grow and that the vast majority of promised spending cuts will be scheduled for after the next election, when those promises can easily be forgotten. None of the proposed reforms would reduce debt; they would merely increase it less than now planned.
Also, notice how fishy the numbers seem to be. For example, the press release for the GOP “Cut, Cap, and Balance” stipulated $111 billion of spending cuts in Fiscal Year 2012 and to cut next year’s projected $1.1-trillion deficit in half. This is the best they can do?
Democrats resist spending cuts, but massive cuts are imperative. Last year, the U.S. Treasury incurred $3.3 trillion of new debt to finance the government’s on-budget and off-budget spending. This $3.3-trillion deficit cannot be closed with taxes. The total income of Americans above the $250,000 threshold that President Obama uses to designate “rich Americans” amounts to approximately $1.4 trillion. If the government taxed it all, we would still be around $2 trillion short. There literally is no other way to close the deficit than to slash federal spending drastically.