The only thing falling faster than the dollar and the hopes of unemployed Americans this winter is the snow in Washington DC. The capital is now in the grips of its third blizzard in two weeks, this one expected to rival the famed Knickerbocker snowstorm of 1922 which shut the entire city down for a week. With 30 inches predicted and if the cold temperatures hold up we might get lucky and see federal offices still closed as the coming work-week starts.
Based on President Obama's proposed budget, every day we manage to keep the federal government completely shut down we save $10 billion, so if we can somehow keep the city closed for about 4 months of the coming year we could balance the federal budget, assuming there's any tax revenue left after back-door taxes and excessive regulation finish destroying the small businesses which make up 70% of our economy.
There's a certain ironic balance to the image of Washington buried under a blizzard of snow considering how they have buried the country under a blizzard of worthless paper in the form of bad debt and devalued money issued by the federal reserve. Perhaps it's cosmic vengeance for taking a nation which was an economic powerhouse only a few years ago and putting it so far in debt that economists are now predicting that our debt exceeds our ability to ever repay it and that the amount we will need to borrow to finance that debt actually exceeds the lending capacity of the financial resources of the entire world. All assuming anyone will lend us money when our national credit rating is downgraded.
Sadly we can't depend on winter to last forever and despite its extraordinary level of corruption and inefficiency, the DC government does have enough snowplows to eventually clear the streets, so business as usual will begin again in DC before long and our rights and our fortunes will once again be at the mercy of irresponsible legislators and out of control bureaucrats.
In addressing the risk that our national credit worthiness will be downgraded, Moody's Investment Services emphasized that the problem is not discretionary spending but entitlements, pointing out that "the combination of the medical programmes and social security is the most important threat to the triple-A rating over the long term."
When the snow ends and the government goes back to work, President Obama is going to have to face a reality which is going to be very unpleasant for the leader of a political movement based on handing out entitlements to every constituency. He's going to have to admit that not only can he not pass or justify a massive new spending program like national health care, but he is going to have to look seriously at cutting the benefits of already existing programs like Social Security and Medicare. Cutting those costs which make up over two thirds of the budget are the only possible way to get the debt situation under control and that debt now poses so great a threat to the economy that it cannot be ignored.
At this point, obligations to these programs have reached a level where even if the President were to cut 100% of discretionary spending the amount due for Medicare and Social Security alone would consume the entire projected government revenue in 2011. That means that it is effectively impossible to balance the budget without cutting these programs which now make up over 70% of the total budget. The experts at Moody's can see this, but it's not a reality that Obama or the Democrats in Congress are likely to embrace.
Representative Paul Ryan (R-WI) has now proposed a bill sponsored by five other House Republicans which would solve this problem for President Obama. It cuts the corporate tax rate to spur economic growth, moves many medicare and medicaid services into the hands of private insurance plans, raises the retirement age gradually to 70 and reduces the growth of social security benefits while allowing some social security investment to be privatized. It's a smart and forward looking plan which would address the critical budgetary crisis in an effective way.
The question is whether President Obama will listen to Congressional Republicans like Ryan and Hensaerling or will he and Congressional Democrats just pretend their proposals do not exist as they did with Republican ideas for health care reform. If Obama seriously believes in bipartisanship and is listening to the warnings coming from the international financial community and his own OMB director, he should take a hard look at Ryan's bill. It's pretty close to a life preserver for a drowning man. It's clear that the Democratic leadership in Congress wants to carry on business as usual, live in denial and pretend they can get away without making hard decisions. That leaves the burden of responsibility with President Obama. If he works with Republicans and it fails he can always blame them and if it succeeds he can get most of the credit.
Failing an outbreak of genuine bipartisanship and an alliance between Congressional Republicans and the President, we're lucky that the gurus of global warming are so laughably wrong. When this year's extraordinary snowfall turns into the fimbulwinter and DC is under a glacier, that might be the only hope we have left of stopping the mad spending.