Deficit Monster Won't Be Slain Anytime Soon

Posted: Jul 19, 2011 3:44 PM

WASHINGTON -- There have been many attempts to slay the deficit monster that lurks in the appropriations committee rooms of Congress, only to see it return to life more menacing than ever.

This week, an army of determined budget warriors, sent here by a fed-up electorate last year, are going to try to kill the budget behemoth once and for all.

The deficit monster has withstood many attacks in the past, surviving Gramm-Rudman-Hollings in the 1980s, the pay-go rule in the 1990s that required commensurate tax increases or budget cuts to offset higher spending, and a number of budget-cutting bills that failed in one way or another to drive a stake through its heart.

But this time the deficit hawks say it's all-out war. They are armed to the teeth with a battery of lethal weapons: caps on future spending, preventing any further rise in the debt ceiling to shut down large sections of the government, and that old standby, an iron-clad balanced budget amendment to the Constitution.

President Obama and the Democrats on Capitol Hill -- the champions of big government -- are putting up a fierce fight, and they have a lot of weapons at their disposal, too.

Let's look at each of these plans and see what their chances are.

-- The so-called "cut, cap and balance" plan offered by House Republicans would immediately cut a paltry $111 billion from the fiscal 2012 budget, exempting Social Security, Medicare and defense; set statutory spending caps over 10 years, perhaps at 18 percent of the nation's gross domestic product, down sharply from the current 24 percent; and a constitutional amendment to force Congress to balance its budget every year, which would require ratification by three-fourths of the 50 states.

Supporters say all three would have to be approved before they would vote to raise the debt limit. But the plan's chances of passing the Democrat-run Senate are zero. And even if it did, Obama said Monday that he would veto it.

-- There are those in the House who say that no matter what is brought before them to cut the deficit, they will not vote to raise the debt limit under any circumstances. There have been weeks of bitter debate over the consequences of this action, with opponents saying it would lead to an unprecedented default on our debts and plunge the economy into a recession, and proponents insisting that it would do no such thing.

But after writing checks for interest payments on the federal debt and paying for entitlements, defense and other critical programs, we would still have to forgo funding for many programs, from veterans to homeland security to cancer research to food and drug safety. It's unlikely Congress will want to do that.

-- Then there's the 600-page bill offered by Republican Sen. Tom Coburn of Oklahoma, who made a name for himself as "Dr. No" by blocking hundreds of pork-barrel spending earmarks. His plan would yield $9 trillion in savings over 10 years through spending cuts, deep entitlement reforms and eliminating a laundry list of tax breaks.

This is probably the most ambitious plan before Congress, but it has flaws. Getting rid of tax loopholes is certainly a worthy goal, but only if you use those revenue increases to correspondingly lower corporate and individual tax rates to get the U.S. economy growing again.

The biggest part of the government's deficit troubles, next to the explosion in Social Security and Medicare costs, is weak economic growth, which has flattened revenues and ballooned the deficits. We have a huge spending problem that needs to be curtailed, but we also have an anemic growth rate that is limping along at less than 2 percent when it should be growing at more than 5 percent. Both have fed the debt monster.

-- Then there is the compromise plan cooked up in the Senate by Republican Minority Leader Mitch McConnell to allow Obama to increase the debt ceiling in three installments for a total of $2.5 trillion. Congress would vote on a resolution of disapproval, but even if both houses disapproved of his actions, he would exercise his veto.

McConnell's plan would cut $1.5 trillion over 10 years and create a 12-member committee to produce a package of reforms by year's end that would cut trillions from entitlements.

The Republicans would be able to blame Obama for worsening the debt (it's risen $3 trillion under his presidency), America would keep its AAA credit rating, and the government would pay its bills.

This plan, too, has flaws. First, $1.5 trillion isn't going to make much of a dent in excessive discretionary spending. Second, does anyone seriously expect Congress to cut Social Security and Medicare benefits in an election year? Don't hold your breath.

Somewhere in these proposals there lies a combination of ideas that could significantly curb spending, but it hasn't been put together yet. The monster deficit cannot be slain without deep, permanent spending cuts and strong economic growth that pounds unemployment down to below 6 percent, which isn't on the horizon under this president.

Sad to say, but the deficit monster will likely survive this year's budget battle until America votes to change the country's direction in the 2012 election.