U.S. Credit Downgrade:Another Obama First!

Ben Johnson,The White House Watch

Three years ago,many well-meaning Americans suspended concerns about Barack
Obama’s experience,judgment,and associations in order to vote for an
“historic”president. To paraphrase H.L. Mencken,they got one —good and hard. Friday
night,for the first time in history,Standard &Poor’s downgraded
the U.S. credit rating from AAA to AA+. The United States earned the top rating
the moment such rankings began in 1917 —which means we maintained our AAA rating
through the Great Depression,stagflation,malaise,and the 1982 recession. Thirty
months of Barack Obama,and it is gone for the first time in history. Change we
can believe in!

The retrogression is neither surprising nor is it the only “historic”first
The One has perpetrated against the United States. Obama cajoled Congress for
weeks that it had to pass a debt ceiling compromise by August 2 to avoid just
this occasion. But as Rep. Tom McClintock,R-CA,pointed
out
,“The purported cuts,even if realized,are far below the $4 trillion
deficit reduction that credit rating agencies have warned is necessary to
preserve the Triple-A credit rating of the United States government.”S&P
used precisely this language in its statement
about downgrading the United States,saying the resultant cuts fall “short of the
amount that we believe is necessary to stabilize the general government debt
burden by the middle of the decade.”It faults political gridlock and the lack of
“containment”of entitlements. The same administration experts who insisted GOP
sellouts on the debt compromise would stave off Friday’s downgrade also insisted
passing a stimulus plan
would hold unemployment below eight percent
.

Even less surprising is the fact that the Obama administration actually
believed its rhetoric could stop the inevitable. When Standard &Poor’s began
hinting at its actions,anonymous officials began a whisper campaign that the
agency’s math was off. Jake Tapper reported
Friday evening,“Because of the pushback,the Obama administration is preparing
for the downgrade but is not 100% positive it’s going to happen,officials said.
And if the downgrade does happen,officials are not sure when it will
happen.”S&P downgraded the U.S. hours later. Choosing talk over action has
consequences,at home and abroad.

The consequences of his actions are unknown and foreboding. The new credit
rating may cause inflated interest rates to trickle down to states and
localities,or make all borrowing rates rise.

Economic growth would shrink the importance of the national debt —but such
growth is not expected as long as Obama is president. Economists expert growth
in debt,and its attendant economic disintegration,in the years to come. Under
most estimates,debt would amount to 88
percent of GDP
in ten years. S&P warns under its pessimistic
scenario,debt will reach
101 percent
of GDP in 2021. (AFP news service reported on Wednesday,that
U.S. borrowing topped
100 percent of GDP
.) Carmen Reinhart of the Peterson Institute for
International Economics testified
before the House Budget Committee in March that growth begins to slow noticeably
once debt crosses the 90 percent threshold. The European Central Bank suggested
negative impacts begin at the 70-to-80 percent level. Even the adoption of the
debt compromise spooked the stock market,causing a decline for nine out of the
past ten sessions,a streak not seen since
1978
when Jimmy Carter was president.

The other two ratings agencies,Moody’s Investors Service and Fitch
Ratings,are not likely to follow suit…at least,not
yet
. However,Moody’s has warned
the ratio would have to come down to 73 percent by 2015 “to ensure that the
long-run fiscal trajectory remains compatible with a AAA rating.”For its
part,S&P warned “a higher public debt trajectory than we currently assume
could lead us to lower the long-term rating again,”to AA,putting us on par with
such economic powerhouses as Spain
and Qatar
.

You Wanted Obama to Make History? He Has

This slide toward mediocrity is only the latest of a string of historic
firsts in Obama’s presidency. Yes,Obama was the first black president. He has
been called the first….

Read
more
.

The Budget Control Act Of 2011 Violates Constitutional Order

Herbert W. Titus and William J. Olson,FloydReports.com

 

In a Constitutional Republic of the sort that we thought we had,the process
by which laws are made is at least as important as the laws that are enacted.
Our Constitution prescribes that law-making process in some detail,but those who
voted for the “Budget Control Act of 2011″(“BCA 2011″) were wholly unconcerned
about trampling upon required constitutional processes on the way to the nirvana
of “bi-partisan consensus “to avert a supposed crisis. At least two titles of
the bill now being rushed through Congress are unconstitutional.

First,the “Debt Ceiling Disapproval Process”in BCA 2011 Title III
unconstitutionally upends the legislative process.

The
Constitution’s Article I,Section 8,Clause 2
vests in Congress the power “to
borrow Money on the credit of the United States.”As two of America’s leading
constitutionalists,St. George Tucker and Joseph Story,observed,the power to
borrow money is “inseparably connected”with that of “raising a
revenue.”Thus,from the founding of the American republic through 1917,Congress
—vested with the power “to lay and collect taxes,duties and imposts,”—kept a
tight rein on borrowing,and authorized each individual debt issuance
separately.

To provide more flexibility to finance the United States involvement in World
War I,Congress established an aggregate limit,or ceiling,on the total amount of
bonds that could be issued. This gave birth to the congressional practice of
setting a limit on all federal debt. While Congress no longer approved each
individual debt issuance,it determined the upper limit above which borrowing was
not permitted. Thus,on February 12,2010,Congress set a debt ceiling of $14.294
trillion,which President Obama signed into law.

However,a different approach was used when BCA 2011 was signed into law on
August 2,2011. Title III of the Act reads the “Debt Ceiling Disapproval
Process.”Under this title Congress has transferred to the President the power to
“determine”that the debt ceiling is too low,and that further borrowing is
required to meet existing commitments,”subject only to congressional
“disapproval.”For the first time in American history the power to borrow money
on the credit of the United States has been disconnected from the power to raise
revenue. What St. George Tucker and Joseph Story stated were inseparable powers
have now by statute been separated.

Under the new process established by this bill,if the President determines,no
later than December 31,2011,that the nation’s debt is within $100 billion of the
existing debt limit and that further borrowing is required to meet existing
commitments,the debt limit automatically increases. The President need only to
certify to Congress that he has made the required determination. Once the
President acts,the Secretary of the Treasury may borrow $900 billion “subject to
the enactment of a joint resolution of disapproval enacted”by Congress.

But this is not all. Title III also provides that if Congress fails to
disapprove the debt ceiling increase in the amount of $900 billion,the President
may again certify to Congress that he has determined that the debt subject to
the new ceiling is within $100 billion and that further borrowing is required to
meet existing commitments. So the Secretary of Treasury is authorized to borrow
another $1.2 trillion. Indeed,the Secretary may borrow even more —up to $1.5
trillion if a proposed balanced budget amendment has been submitted to the
states for ratification. As was true of the first round of ceiling raising and
borrowing,the President and Secretary of the Treasury are constrained only by
the possibility of a congressional resolution of disapproval which,itself,is
subject to veto by the President.

By giving the President the authority to increase the debt ceiling and to
determine that borrowing is necessary to meet the nation’s commitments,this
bill….

Read more.

State of the Union: Mammoth Government is the New Normal

State of the Union: Mammoth Government is the New
Normal

January 27th, 2011

Ben Johnson, FloydReports.com

In his 2011
State of the Union Address
, Barack Obama gave himself five more years of
trillion-dollar deficit spending, a $678 billion income tax hike, a Social
Security tax increase, and the permanent extension of ObamaCare – and he gave
Republicans medical malpractice reform and a joke about a salmon.
Since his inauguration, the president has gone on a two-year spending orgy
unrivaled since the days of Lyndon Johnson or FDR. Faced with a national
backlash against towering debt, he has come up with a “compromise”: Americans
should accept the big government expansion he has forced down their throats and
move on. This follows the president’s familiar pattern of forcing through costly
and unpopular measures, then promising “discipline” after the fact.
The most reported aspect of the speech was Obama’s pledge to freeze
discretionary, non-military spending at their current levels – exempting such
major programs as Social Security, Medicare, Medicaid, and Homeland
Security.
At the risk of stating the obvious, which perhaps no one has yet stated,
there is no “savings.” As President Obama would say, “Let’s be
clear”: Savings is when you reduce the amount of money you are spending. The
president’s proposal is to spend the same amount of money. The only “savings”
would come from the fact that inflation
unleashed by deficit
spending
and quantitative
easing
will devalue the dollar – but this is hardly a cause for cheer.
History shows that spending freezes rarely freeze anything. The most
ambitious attempt was the 1985 Gramm-Rudman-Hollings Act, which attempted to
control deficit spending by future Congresses, but many of the same politicians
who voted for the bill decided they would not abide by its terms the next year.
Deficits continued to mount. To give a more recent example, last year Congress
approved slightly more
than half
of the whopping $11.5 billion in spending cuts Obama requested
last year.
The amount of the budget actually affected is rather modest, indeed. It would
apply to approximately
12 percent of the budget
. Alec Phillips, an analyst with Goldman Sachs,
estimates that if every Congress for the next five years holds to current
levels, it would “save” $200 billion. The New York Times noted its
higher estimate of “$250 billion in savings over 10 years would be less than 3
percent of the roughly $9 trillion in additional deficits the government is
expected to accumulate
over that time.” Obama’s plan would cost
half-a-trillion dollars more
than returning
to 2008 spending levels
, as proposed by the most moderate Republicans. Sen.
Rand Paul has proposed a half-a-trillion
dollar spending cut
this year, which includes cutting food stamps
and eliminating the Corporation for Public Broadcasting and the National
Endowment for the Arts. Ohio Congressman Jim Jordan and Senator Jim DeMint
introduced a bill to cut
$2.5 trillion
over ten years, eliminating the aforementioned programs as
well as Amtrak and the president’s “high-speed rail” and rolling back spending
to 2006 levels. Obama’s freeze is small beer in its own terms and hypocritical
when paired with his calls for new spending.
The State of the Union made only passing reference to the greatest budgetary
crisis facing us: out of control entitlements (and most of his “solutions” are
bad ideas; see below). “Mandatory” spending alone exceeds projected federal
revenues – the amount of money the government took in all year. If we eliminated
100 percent of discretionary spending – privatized the Post Office, dismantled
the military, and fired every federal prosecutor and judge – we would still run a
deficit
.
Nonetheless, the president instructed us, “The final step to winning the
future is to make sure we aren’t buried under a mountain of debt.” As though we
are not already buried under a mountain of debt. As though this were not a
mountain of his own making. As though it were not one he wished to greatly
enlarge
.
What Obama intends to freeze is big government. His proposal to hold-the-line
comes after he jacked
up federal spending by 84 percent
. After inflating the federal government
beyond the free market’s carrying capacity, he now wishes to maintain the status
quo.
As usual Sen. Jeff Sessions, R-AL, had the best analysis of Obama’s spending
freeze, calling it “a plan for deficit preservation.” The day
after the State of the Union speech, the Congressional Budget Office (CBO)
predicted the deficit for 2011 will be….
Read
more
.

Don’t Raise the Limit on Obama’s Credit Card

Don’t Raise the Limit on Obama’s Credit Card

January 6th, 2011

Floyd and Mary Beth Brown, FloydReports.com

Fear-mongering works – why not try again? This must be the thinking behind Obama’s latest attempts to manipulate the new Congress. Austan Goolsbee, chairman of the U.S. Council of Economic Advisers, trotted out before the cameras this week to threaten the Republican Congress, saying that if they don’t raise the limit on the USA’s debt ceiling, the “impact on the economy would be catastrophic.”

Goolsbee spun the new lines cooked up in the White House communications office on ABC’s This Week: “If we get to the point where we damage the full faith and credit of the United States, that would be the first default in history caused purely by insanity.”

The real insanity is to continue to roll up debts we have no hope of paying. Goolsbee’s comments are part of a coordinated preemptive plan to blame the new Tea Party Republicans as the economy sputters. When fear reaches high levels, people don’t think clearly, and this is exactly what Obama is counting on.

The current legal limit on borrowing is $14.3 trillion, and unless the new Republican Congress adopts Obama’s proposed higher limit, across-the-board spending cuts will result. How tragic: If the debt ceiling doesn’t pass, politicians will actually have to begin budgeting like adults in Washington.

This is a big test for candidates supported by Tea Party and anti-spending activists. Will they hold to their pledges to rein in government spending? Or, will they adopt the ways of Washington and blink because of Democratic attempts to vilify and marginalize them with their dire threats?

America has only two choices: Stop the insane overspending, or dramatically raise taxes to pay for the free-spending lawmakers’ excesses. There are some great alternatives to raising the debt ceiling. Congress should hold votes to eliminate farm subsidies, abolish the Department of Education, close the Department of Housing and Urban Development (HUD), shut down the Department of Energy, repeal ObamaCare, and bring our troops home from places like Japan and Europe.

Read more.

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