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History and Consequences

With all of the information that is available, the public remains confused. It may have to do with the sources of their information, but the latest polling data says that 47 percent of Americans say their greater concern is that raising the debt limit would lead to higher government spending and make the national debt bigger, while 42 percent say their greater concern is that not raising the limit would force the tea party factiongovernment into default and hurt the economy. Additionally, 74 percent of Republicans and GOP-leaning independents who agree with the tea party faction of the party say their bigger concern is that raising the debt limit would result in more spending, compared to 58 percent of those who do not agree with the faction.

According to the Congressional Research Service, the debt ceiling has been raised 74 times since March 1962, and 10 of those times have occurred since 2001. Theoretically, the debt ceiling limit is supposed to help Congress control spending. In practice, the debt limit has been ineffective in controlling spending and deficits because politicians and reality remain as strangers to one another. History shows that it has been that way for quite a while.

The fact is that the debt ceiling doesn’t regulate anything, believe it or not. The Budget Control Act of 1974 created a process that requires Congress to vote on aggregate levels of spending, revenue and deficits every year. That makes the debt limit redundant.

Five years after the 1974 Budget Act passage, a combination of a failure to increase the debt limit in time and a breakdown of Treasury’s machines for printing checks caused a two-week technical default and a short term failure for the government to meet its obligations. That raised interest rates by six-tenths of a percentage point. Over time, that percentage hike translated into billions of dollars in increased interest payments on the nation’s debt, which became a cost passed on to taxpayers.

In other words, default increases the debt service which increases the deficit.

FDR signs Social Security Act of 1935President Franklin Delano Roosevelt (FDR) questioned the meaning of a legal debt limit, according to Time Magazine on January 20, 1941. The president “hinted that there should be no legal limit.” In its coverage of the FDR’s budget for the fiscal year 1941-42, Time noted, “Last July’s Democratic platform made no mention of that fiscal dodo, that old museum piece: a balanced budget. Franklin Roosevelt held to precedent—he didn’t mention it, either.” The Newark News remarked, “Like the budgets of Mr. Average Citizen, it was full of unjustifiable errors of judgment, of expenses borne out of habit, of big installments still being paid on past mistakes.”

FDR signed the first Social Security Act into law in 1935. Thirty years later, that part of FDR’s New Deal became part of the President Lyndon Baines Johnson’s (LBJ) Great Society and established Medicare when LBJ signed the Social Security Act of 1965 into law.

Only half of Americans 65 and older had any health insurance at the time. The bill LBJ signed also created Medicaid, the public health insurance program that today covers over 60 million people, including one in three children, eightLBJ signs Social Security Act of 1965 million people with disabilities and nearly six million low-income seniors. Each state administers its own Medicaid program. Republicans have scorned the entitlement programs of the Great Society ever since, now more so than ever.

Here is how we pay for those programs. Social Security and Medicare entitlements are paid for by the FICA [Federal Insurance Contributions Act] tax. The rate is 7.65 percent of our pre-deduction [gross] earnings. 6.2 percent goes for OASDI [Old-Age, Survivors, and Disability Insurance]. 1.45 percent goes for Medicare. The Social Security system pays for old-age, survivors, and disability. Hospital insurance is funded by Medicare. Income tax funds the government. It is called revenue and is a separate and different issue. Republican rhetoric obfuscates that point.

About Tommy Mack

Tommy Mack began his career in broadcasting and is a US Army graduate of the Defense Information School. He worked in Army Public and Command Information and earned a BS in Liberal Studies from the State University of New York, Albany. A marketing communications executive, Tommy became a business management consultant for a major international consulting company and its affiliates before establishing Tommy Mack Organization, a business consulting practice specializing in organization and communications management. A professional writer and blogger, he writes about politics, business, and culture.
  • Clavos

    You say that the intransigence of Republicans in the House imperils, among other things, Boehner’s job as speaker. I say, no loss there.

    Also, in your subhead you note that a default would…”flush the US economy back into the toilet of recession.”

    With unemployment above 9 percent (the official number — counting “discouraged” workers, some put the actual number north of 16 percent) and the economy at a virtual standstill, we haven’t emerged from the first one yet.

  • http://handyfilm.blogspot.com/ handyguy

    The GOP is devouring itself. Boehner allows himself to be the prisoner of the fringiest fringe members of his party.

    By the way, although jobs are being added way too slowly, they are being added, and the economy is growing, also slowly. A recession is defined as two quarters of shrinking GDP. The recession ended many months ago. Like the recession of the early 1980s, this one has been followed by a long slow slog of a recovery.

    The worst possible time to be playing chicken with a debt default.

  • Clavos

    So it’s not officially a recession and jobs “are being added.” Unfortunately, since the unemployment figures continue to rise, jobs are obviously being subtracted faster than they are added.

    And I’m sure the millions of unemployed (including the “discouraged workers” the government won’t even admit to) are all comforted by the fact that “jobs are being added.”

    And they’re printing money; inflation is rearing its ugly head, but hey, “the recession ended many months ago.”

    Sure it did.

  • http://handyfilm.blogspot.com/ handyguy

    A recession ending doesn’t mean instantaneous sunshine, lollipops and rainbows.

    Like myself, you are old enough to remember the 1981-82 recession, which the most recent one resembled. The recession started in July 1981 and ended in Nov 1982. But high unemployment continued for many months. It was over 10% from Sept 1982 through June 1983. It was 9.2%, same as now, in Sept 1983. It didn’t fall below 8% until Feb 1984 — 15 months after the recession ended.

    And our current inflation [3.6% in May] seems pretty tame compared to the early 80s. [14.8% in Mar 1980!]

    Anyhow, recession and high unemployment are not identical in terms of time and shouldn’t be used interchangeably.

  • Baronius

    Tommy, I was expecting a different article today. I thought you’d write about the President walking out of the budget talks. I remember when Cantor and Kyl walked out of the talks, you had a pretty lengthy article about it. You said that Boehner was a failure. Apparently, when President Obama walks out of the budget talks, it compels you to write another article saying that Boehner is a failure. At least you’re consistent. A more partisan person would harp on which party was walking out, but you’re so objective that you don’t let the theatrics distract you from denouncing Boehner.

  • http://tmackorg.com/ Tommy Mack

    My dear Cardinal Baronius, once again you have misread me and objected to your own misreading. I fail to find the denunciation to which you refer. You will find the word “failure” twice, neither time referring to the Speaker. I referred to Boehner four times: 1) “. . . the deficit conundrum that confronts House Speaker John Boehner.” 2) “At a recent press conference Boehner said,” 3)” Mr. Boehner was a teenager when . . .” and 4) “which threatens Boehner’s speakership.”

    Let me make my position abundantly clear. When members of congress are sworn into office, they take an oath: “I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.”

    The partisan Congressional Republicans I have referred to deserve to be impeached for breaching that oath to support and defend Article 14 section 4, as do Democrat members who insist on default as an option for the United States. There is no partisanship in that.

    Tommy

  • http://handyfilm.blogspot.com/ handyguy

    Baronius accepts the words of the brazen partisan Eric Cantor as gospel truth. Dems at the meeting say he is exaggerating, to put it mildly.

    According to biographer Jonathan Alter, among others, Obama’s style is to say, “That’s it,” and move on to the next appointment. This abruptness apparently applies even to meetings with his own staff — and is only slightly more curt in style than other presidents have been.

    But if the prez got annoyed with the utterly annoying Cantor, who can blame him? Eric is brown-nosing the Tea Party shamelessly as he vies for the speakership.

  • Baronius

    Tommy, you’re right that Kyl and especially Cantor took the brunt of criticism in this article (and in the last one), rather than Boehner. The President goes practically unmentioned. That seems like a logical inconsistency.

    A similar inconsistency occurs on the first page, where you say that the debt limit is meaningless, then cite an example of the debt limit causing calamity, followed by a story about FDR that deprecates the debt limit. Which is it?

  • Baronius

    Handy, you claim to want to be objective. Every bit of news we hear from these negotiations is coming from one side or another. For all either of us know, they’re having ice cream parties. I do know that the rumored $2.4T became the rumored $2T, and I think it’s now the rumored $1.6T, and as these things are typically spread out over 10 years, we’re probably looking at an average $160 billion per year, most of it weighted to the late 2010′s. In other words, pocket change. I don’t think there have been any official statements made.

  • http://handyfilm.blogspot.com/ handyguy

    No doubt there is plenty of spin and posturing on both sides. But it would be out of character for Pres. Obama to “storm” out of anything; he’s known for being cool, even-tempered. His ‘testiness’ could well have been premeditated, for effect.

    And Cantor seems to be relishing a sort of ‘bad cop’ bulldog role, now even saying “no deal is possible.” There’s a reasonable negotiating stance for you.

    The fact remains that debt ceiling increases have been routine for decades. [As has been repeated often this past week, the 4 top Republicans between them voted a total of 19 times in favor of raising the debt ceiling during the Bush administration.] The only reason this one is different is the newly inflexible ideological stance of the GOP, sparked by its most extreme members.

  • Clavos

    [Obama]…known for being cool, even-tempered.

    Mostly, he’s just boring, and is being tuned out. As James Taranto notes in his WSJ column today, “The World’s Greatest Orator is almost always uninspiring, condescending, self-aggrandizing, peevish and grim.”

    Taranto goes on to quote The New York Post’s Michael Goodwin on Obama’s much-ballyhooed “centrism:”

    The biggest media myth is that he is a centrist. Oh, please. It’s a theory without evidence, for there is not a single example on domestic issues where he voluntarily staked out a spot in the American middle.
    Sure, on occasion, Obama will be to the right of the far, far left, but that is not the center. That just means he’s not Michael Moore.

  • zingzing

    “Mostly, he’s just boring, and is being tuned out.”

    when did you spend time with him? you see the public image he wants you to see. that’s all you have any hope of knowing. james taranto has his opinion, but he also has a hairy butthole. there are those who would not see eye to eye with either. as for goodwin, i can’t really name a domestic issue where he’s been far enough to the left to appease the left or far enough to the right to appease the right. that’s not a very good combination, but it certainly isn’t anything like what goodwin (he of the new york post, a fucking murdoch rag that should only be used as kindling or toilet paper,) has to say. don’t fucking quote the new york post. ever. it’s not a newspaper. it’s a tabloid. and those aren’t opinions. they’re lies.

  • http://tmackorg.com/ Tommy Mack

    It is kind of like citing Wikipedia as a source.

    Tommy

  • Baronius

    I keep thinking of the analogy of a compulsive gambler. You give him money a dozen times maybe, but eventually you’ve got to say “no more”. He’ll tell you that the problem isn’t his gambling; the problem is the guys who are going to break his legs if he doesn’t come up with ten grand by tomorrow. He’s right, but he’s wrong.

    I’m not singling out our current President in this analogy. In fact, I’ll say this in support of him: he’s allowed Congress to take the lead in budgeting, as they’re supposed to. The results were unprecedentedly bad, though. But again: either party, House, Senate, or White House, ever since the expansion of Medicare a dozen years or so ago there hasn’t been any sense of restraint.

    I heard a comment on the radio today that I liked. Someone said that a good definition of bankruptcy is when you’re borrowing money without a plan to pay it off. That’s where we are. The problem for the gambler, or for us, may be the next payment, but the real problem is in our thinking.

  • Baronius

    Let me just take another run at the numbers: we’re taking in somewhere in the neighborhood of $2.2T, and spending in the neighborhood of $3.6T. If you’re earning $22,000 a year and spending $36,000 a year, and you’re carrying $142,000 debt, someone’s got to step in and tell you that you’re overdrawn.

  • http://tmackorg.com/ Tommy Mack

    The President of the United States is legally bound to uphold the Constitution. The office is not required to have the congress approve much more than presidential appointments. Senate Minority leader McConnell, one of the Republicans complicit in the economic disaster created in the previous administration, knows this. At the end of this tedious episode the President can raise the debt ceiling and order the Treasury to pay US obligations and let congress try to override the authority of the presidency in court.

    The House majority leader has made himself vulnerable. In his vanity and self-absorption, he appears to have forgotten that just because he was elected 10 years ago from a middle-class white Republican district, he does not necessarily have a safe seat. His constituency may be conservative but that does not mean that they are stupid. Their Representative is not working for them and their best interests. He seems to be working for himself and his own interests, taking the 7th District that elected him for granted.

    Mr. Cantor’s short-sighted ignorance of history and its consequences, coupled with ideological intransigence is self-serving at best. His tea party sycophants remind me of the Student for Democratic Society (SDS) when I was in college, 1968. The SDS excelled at organizing rallies and disrupting meetings on campus to protest. They succeeded in making noise and drawing attention to themselves. But they were ineffective in student government and were easy to walk around and blow-off. After the Nixon landslide in 1972, they pretty much disappeared. The Honorable Mr. Cantor wouldn’t know about this. He was only 9 when President Nixon began his second term.

    Tommy

  • Baronius

    President Obama was 11.

    So what.

  • Clavos

    The office is not required to have the congress approve much more than presidential appointments.

    really?

    What about declaring war??

    Budgets?

    Treaties?

  • Clavos

    when did you spend time with him?

    Non sequitur, zing. I’ve listened to plenty of his speeches.

    He’s boring and full of himself.

  • http://handyfilm.blogspot.com/ handyguy

    1. The debt ceiling increase should be a separate issue from future spending. Period.

    2. FY12 starts on Oct 1. That budget is the appropriate frame for debates on spending and taxes. It’s not like it’s so far away.

    3. Suddenly putting on the spending brakes now, in the middle of a sluggish recovery, could have devastating economic consequences. The bigger spending cuts shouldn’t kick in until 2013 or later

    4. Without significant cuts in defense and entitlements, deficit reduction is impossible. With those cuts plus appropriate revenue increases, it can be done. This is how it happened in 1993-2000, when we successfully moved from deficit to surplus spending.

    The ‘mother of all grand bargains’ would require both Dems and the GOP to show some political cojones. I think Obama was serious about the $4 trillion deal; Boehner should be smart enough to take it.

    5. The left has been peeved at Obama for many reasons. [See any of Realist's many articles from the last two years.]

    One of them is his post-2010-elections focus on deficit reduction. Tim Geithner is a major proponent of this.

    You can continue to repeat this nonsense propaganda that the president only wants to spend like a drunken sailor and impose gigantic tax increases. Those are lies. Bunk. Without substance. Unsupported by facts. Baloney. Horse puckey. Prove it or stop saying it.

  • Baronius

    Who said that? I didn’t. Clavos didn’t. Me, Clavos, and the straw man are the only ones here.

  • zingzing

    he’s the president, clavos. one of the most powerful persons on the planet. gotta have an ego to even want to be in that position.

    but you (probably deliberately) miss my point. you know him through his speeches, which are orchestrated to give off an image that isn’t a complete (or maybe even accurate) picture. you do not know the man. you do not know if he is boring. in fact, how you perceive him probably says more about you than it does him. you disagree with him politically. that’s your image. he could be any number of things and you’d place your political opinion on him. simple as that. amazing how this “boring” man galvanized millions of voters, isn’t it? he certainly didn’t bore some people.

    besides, your opinion of him doesn’t matter one little bit to those that disagree with that opinion. in fact, if you don’t like it, it’s probable that he’s doing something right.

    or… “haters gonna hate.” wake me when you say something surprising.

  • Clavos

    Okay, zing, I give up — you’re right; I don’t know the man.

    HIS EFFING SPEECHES ARE BOOOORRRRIIIINNNGGG!!!

    Better?

    And yes, he did “galvanize” millions of american voters, once again proving the truth of H.L. Mencken’s famous observation that, “Nobody ever went broke underestimating the intelligence of the American public.”

    Oh, and I forgot to mention earlier that his demeanor when giving those boring speeches is condescending.

  • http://handyfilm.blogspot.com/ handyguy

    This is all subjective obviously. But many, many of us, not just liberals, have been deeply stirred by his speeches…more frequently during the campaign than since, but still.

    I even seem to remember once upon a time [like say, 2007], Clavos himself toying with the idea of liking Obama, and praising his rhetorical style. Now he can’t think of enough nasty insults to repeat about the prez. Whatever.

  • zingzing

    “HIS EFFING SPEECHES ARE BOOOORRRRIIIINNNGGG!!!”

    they’re presidential speeches. what do you want, a conan o’brien monologue? this is so damn transparent, clavos. bush was jaw-dropping stupid. clinton was smarmy. bush the former was an annoying robot. reagan was most likely suffering from alzheimer’s.

    i don’t find obama’s speeches particularly boring, for what they are. he’s got a wit when the moment asks for it. but a presidential address to the entirety of the american people is not the time or the place for such things.

    “Oh, and I forgot to mention earlier that his demeanor when giving those boring speeches is condescending.”

    i don’t find that to be so. but if he seems like he wants to make you feel stupid, maybe he just doesn’t agree with you. what may seem obviously true to him does not to you, so you get condescension. it’s more likely disagreement, but you, for some reason, choose to take offense.

    your use of mencken up there is condescending. although, i guess if you believe the nonsense spewed by the right, you’re fitting right into that quote from my end.

    really, i don’t see what the point is. you don’t like the guy’s politics. so you say he’s boring? one would think that such a fascist socialist communist dictator type would hold your interest. but he BORES you? oh, heavens. it’s too awful to bear…

    i’m afraid you’ll just have to take it like a man.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Unfortunately, zinger’s diatribe can’t be taken seriously. He’s one of the multitude that Mencken was referencing. Consequently, he’s limited in his response to nothing other than denial.

    Happy argumentation, guys.

  • zingzing

    see, clavos, that’s how you do condescension. you utterly dismiss something while clearly not having bothered to get the point. that’s good stuff. roger’s ability to go from point a to wherever the fuck he thinks he can get a insult in is a true gift. of course, if he had any dignity, he’d shit in the bathroom, but that’s not for roger, no…

  • Clavos

    ‘s okay, zing. i obviously got your goat, so I’m happy.

  • http://handyfilm.blogspot.com/ handyguy

    Gloating about how successful you are at being obnoxious…that’s truly edifying. Ugh.

  • Clavos

    So sorry I don’t measure up to your lofty standards, handy…

  • zingzing

    nah, clavos, you didn’t get close to my goat. roger certainly did, but that’s all the sniveling little… ahem. anyway. your bit on obama being boring just needed pointing out. after all the ridiculous, hyperbolic attacks on obama, it was actually kinda nice to see one so laughably opposing of the mock horror and macabre predictions of america’s demise we see so commonly from the right. the man who wants to destroy america is boring. you guys need to make up your damn mind.

  • Clavos

    Sorry, zing, but you’ve confused me with someone else; your boy’s not out to destroy america, he’s out to turn it into a progressive democracy, which would be ok except fully half the people don’t want that and the other half want to be nurtured and coddled by ol’ uncle sammy.

    Me, I find him boring and lately he seems like he really doesn’t know how to run the ol’ ship of state, but hey, who cares, he’s a progressive, right?

  • zingzing

    “he’s out to turn it into a progressive democracy, which would be ok except fully half the people don’t want that and the other half want to be nurtured and coddled by ol’ uncle sammy.”

    there’s no full “half the people” of america who give a shit. how many people really vote in elections? 40%, if that? i know there’s plenty of kids and people not old enough to vote, but really, half the people in america don’t care enough about politics to get off their ass and vote. there’s more people who couldn’t give two fucks than there are that hate the idea of a “progressive democracy,” whatever that means.

    and if you think “the other half” (aka, i’m supposing, progressives,) want to be nurtured and coddled by the gov’t, you don’t know what the other half want. generalizations are useful, but notoriously faulty.

    “Me, I find him boring and lately he seems like he really doesn’t know how to run the ol’ ship of state, but hey, who cares, he’s a progressive, right?”

    yep. that’s right. everything is just that simple. (that’s sarcastic.)

    when’s the last time you thought any president knew “how to run the ol’ ship of state?” especially, if it’s only “lately,” when did you think obama did?

    as for “my boy,” i probably disagree with him as often (“often” is the key word) as you do, if on the opposite end of the question. he’s not doing enough, and he’s giving half measures in order to appease the right wing of america politics. but that’s politics. he’s no dictator. i understand that.