The Democrats have been particularly irresponsible in their handling of this issue. (For the record: I publicly criticized Republicans for their overspending during the Bush-Hastert years, and I opposed both the Bush stimulus plan and Bush’s Big Bailout.) As other commentators have observed, despite controlling both houses of Congress during President Obama’s first two years in office, the Democrats (in defiance of the law) failed to pass a budget that funded their ambitious spending plans. President Obama himself proposed a budget earlier this year that was so out-of-touch that the Democrat-controlled Senate rejected it 97–0. Since then, the president has not proposed a single specific spending cut. In fact, at his press conference on July 11, President Obama announced, “I’d rather be talking about … new [spending] programs” than deficit reduction.
On July 13, the president angrily told Republicans, “This [his willingness to scuttle any deal] may bring my presidency down, but I won’t yield.”
One would hope that, instead of couching this in terms of re-election prospects, the president of the United States would spare the American people a wrenching economic upheaval.
Obama knows that no president can spend funds that Congress has not raised by taxes or authorized the Treasury to borrow. As president, he should have in place contingency plans with clearly defined priorities (e.g., interest on the national debt so there is no default; Social Security, defense, whatever) for deciding what federal spending would be continued or discontinued if Congress said “Enough!” to runaway spending and refused to raise the debt ceiling. Whenever the debt-ceiling issue is temporarily patched over in the coming days or weeks, Congress should hold hearings to ferret out the truth. Did President Obama have a contingency plan in place? If he didn’t, he was derelict in duty; if he did, his plan could prove useful in identifying what federal spending is nonessential. And was cutting off Social Security payments really near the top of his list, as the president implied when he raised the prospect of those checks not going out on August 3, or was that a cynical attempt to scare senior citizens?
Another unseemly aspect of this ongoing drama is how the administration managed to postpone “Financial D-Day” to August 2, even though the debt ceiling was first reached in May. Secretary Geithner tapped the retirement funds of federal employees. Naturally, those funds (over $100 billion) will have to be repaid. As he did by tapping into the Strategic Petroleum Reserve, the president’s administration has misused important reserves set aside for future needs for (in my view) political advantage.
Bottom line: Whatever deal is struck now will not solve our long-term fiscal problems. The ongoing political maneuvering has given us glimpses of how sick our political system is.