Debt Ceiling Increase – Fourth-and-Inches and They Punted


Imagine your team is in the super bowl with seconds remaining, the ball on the opponent’s 20-yard line, and your top running back was just stopped on third down. He could not advance the ball one inch! You are trailing by a field goal, and so, decision time is here. Do you kick the field goal, or do you go for the touchdown? These are the only practical choices. You would not punt…never! However, that is what President Obama and Congress did; they punted major decisions into the sunset!

As Senator Ayette said on the floor of the Senate:

“Many of the cuts are in the out years [beyond 2015], and you know what happens in Washington when the cuts are in the out years? Unfortunately, our history has been that they don’t get done. That’s why I’m concerned about the $917 billion claim in reductions, which is not a reduction in spending.”

Government will remain large, and will grow. These so-called savings do not address Social Security and Medicare. Social Security’s cash to pay full benefits runs short in 2036, and Medicare won’t have sufficient funds to pay full benefits starting in 2024. But, most of all, government debt will continue to rise, and the debt ceiling will keep climbing. Meanwhile, the journey to a balanced budget is filled with land mines, enabling government to continue to spend recklessly.

How can these folks claim they achieved savings? Real savings can come only when they tackle main spending drivers such as entitlement programs and the government’s size. These politicians are asserting savings from a “baseline budget.” Over the next ten years, spending and borrowing are projected to rise from present levels, not fall!

Shortly, we will know whether rating agencies will accept these platitudes as a serious attempt to stop the government’s spending addiction. I would expect some agencies will downgrade government debt, which will hike interest costs. And so the government will need more borrowing to feed its spending habit.

As consumers continue to lower debt and build savings, they won’t spend and the economy is likely to remain stagnant for several months. The key question is this: Will businesses invest heavily in this toxic economic environment with elections looming?

The agreement to raise the debt ceiling reminds me of a definition of a “deal” I heard a few years ago: A deal is a debt enhancing act of lunacy that leaves you depressed, empty, anxious, and lonely!

(C) 2011, Michel A. Bell.

Michel A. Bell

Michel A. Bell is a former senior business executive, author of seven books — including his first children's book published in 2022 — speaker, and adjunct professor of business administration at Briercrest College and Seminary. Michel is a Fellow of the Chartered Certified Accountants (UK), holds a Masters of Science in management degree from Massachusetts Institute of Technology and a Doctor of Business Administration honoris causa from Briercrest College and Seminary. He is founder and president of Managing God's Money™ and Stewarding God's Resources.

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