November 30, 2012
The Washington Post was so upset over President Obama’s latest budget proposal to Republican congressional leaders that it used a front page editorial to complain to readers. While the article included several comments from Republicans warning of the dangers of President Obama’s not yielding to their demands. It added the additional assertion that the deadlock is occurring:
“with time running out for policymakers to agree on a plan to prevent more than $500 billion in tax increases and spending cuts that could rattle the economy.”
This statement grossly misrepresents the reality, since the time will run out “to prevent more than $500 billion in tax increases and spending cuts” more than a year from now. We don’t see all of these tax increases and spending cuts on January 1, as the article would lead readers to believe. They would only take place over the course of a full year if Congress and President Obama never reached a deal. For this reason, there is not much reason for concern that the failure to reach a deal by January 1 “could rattle the economy.”
The article also asserted, with no supporting evidence, that:
“simply canceling the changes [the tax increases and spending cuts scheduled for January 1], however, risks undermining confidence in the nation’s ability to manage its rising debt.”
If the paper has evidence for this claim then it should have presented it. The low interest rates on U.S. government debt suggests that the financial markets are not very concerned about the nation’s ability to manage its rising debt.
The piece also complains about President Obama’s plan to change the structure under which Congress approves the debt ceiling so that it would require a two-thirds vote to prevent the ceiling from being increased. It told readers:
“this change would also deprive Congress of its historic authority over federal borrowing.”
Actually Congress would continue to have complete authority over federal borrowing. It can either appropriate less spending or impose more taxes, just as was always the case. The change in rules on the debt ceiling really has more to do with Congress’s ability to default on its commitments, since the issue with the debt ceiling is whether the country will pay the bills that Congress has opted to run up. No other country in the world has this sort of restriction on debt.
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