July 17, 2011

Lifting the Debt Ceiling

Washington gridlock is alive and well as evidenced by the inability of Democrats and Republicans to agree on lifting the debt ceiling. This is a recurring drama in Washington. State governments must have a balanced budget, but the federal government can borrow money when it needs to, but only up to a certain point, after which Congress must approve further borrowing.

This gives the ax-grinders of the day momentary leverage to force attention on whatever issue is biting their ass. In every case, a deal was struck, and it will be no different this time. It's a hell of a way to run a railroad, but no one seems interested in changing their positions enough to avoid such train wrecks in the future. Truth is the ax-grinders like it like this.

You hear a lot of talk about "Cap, Cut and Balance" from Republicans. Better to think of this proposal as "Crap, Crud, and Baloney." Here's the bottom line difference between states and the central government. When natural disasters hit a state, who comes to the rescue? When the homeland is under threat, who raises (and pays for) the defense of the homeland? When an aging population requires more medical care, who pays for it?

Some fiscal needs can neither be predicted nor controlled. You have to be able to find the money to deal with the unexpected in life. Any homeowner knows this. The furnace goes out or the car breaks down, you find the money to fix it. That might mean taking money from your kid's college fund or it might require getting as loan from the bank. The federal government is no different. State governments can pretend to live within their means and can afford the "luxury" of balanced budgets because the federal government is always there to bail them out.

This is the lunacy behind the idea of requiring the federal government to operate like state governments. How do you deal right now with a Katrina or a 9/11 if your hands are tied by a balanced budget requirement? You have to wonder if the people pushing this idea have a clue as to how things really work or are they cynically pushing for an idea they know is stupid but will gain them temporary advantage? Fools or knaves? Take your pick.

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