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Opening Arguments

Sand, meet line

If Republicans and Democrats sit together at the State of the Union address, consider it one more sign of End Times. If they're all more civil and polite, they'll just reach more bipartisan consensus, and that's usually not a good thing:

The Congress must allow the country to borrow more to avoid a debt default that would wreak havoc on financial markets and imperil the U.S. economy, Democratic and Republican lawmakers said on Sunday.

Threatening not to raise the $14.3 trillion debt ceiling -- the amount of debt the country is legally allowed to issue -- is "like playing with fire," Democratic Senator Charles Schumer said on NBC's "Meet the Press."

 

"If we didn't renew the debt ceiling ... We might permanently threaten confidence of the credit markets in the dollar, which could create a recession worse than the one we have now or even a depression," he said.

 

Republican Senator Tom Coburn also predicted a dire outcome if lawmakers were unable to reach an agreement to put the country's fiscal house in order.

It's dismaying how many Republican members of Congress and supposedly conservative pundits agree that of course they have to raise the debt limit to avoid catastrophic default and the Americans who disagree -- an asonishing 71 percent -- simply do not understand the complexities of the situation. But agreeing to increase the limit again is the coward's way out, no matter how many meaningless concessions are given on spending cuts. Caving on the debt ceiling reveals the mindset that gurantees the concessions won't be honored.

Chris Christie and Tim Pawlenty have the better argument. Refusing to raise the ceiling will not inevitably lead to default if lawmakers simply exercise the spending restraint they have been unwilling to show before:

WALLACE: Back in 2005, you allowed the government of Minnesota to shut down for nine days because of a disagreement with the Democratic legislature about taxes and spending. Should congressional Republicans take the same tough stance when it comes to raising the debt limit and federal spending?

PAWLENTY: Well, what I've learned, Chris, after eight years of doing in a very liberal place -- I love my state, but it's liberal in terms of spending and government -- is you've got to draw some lines in the sands. ...

And as to the federal government, they should not raise the debt ceiling. I believe they should pass legislation, allow them to sequence the spending as the revenues come in to make sure they don't default, and then have the debate about what other spending can be reduced.

Comments

tim zank
Mon, 01/17/2011 - 12:16pm

They had better pay attention to us 71%. Not raising the debt ceiling will have absolutely no worse consequences and one decidely HUGE benefit, that being a "stick in the spokes" of the money presses.

The vast majority is seriously honked off as was evidenced by Nov 2nd, but Republicans had better not back-pedal either because whether you're a dem or repub, there is NO seat safe anymore.

Doug
Mon, 01/17/2011 - 12:48pm

Time for House Republicans to stop being so coy about what spending they propose to cut and by how much.

For my part, I think we should have let the Clinton tax structure be reinstated, stop spending money on Iraq & Afghanistan, and cut agricultural subsidies. Not sure where that leaves us in terms of a gap, but I'd also be in favor of a good shake down of the Social Security Disability system - my (admittedly tangential) contacts with SSD makes me think it's in awful shape; clogged with applicants who don't need it and not terribly responsive to the applicants who clearly do.

I also suspect that the V.A. and other government programs purchasing pharmaceuticals are paying too much. They should leverage their purchasing power to negotiate much lower prices. If we want to subsidize pharmaceutical R&D in some fashion, do it through grants and not by paying bloated prices on certain products.

My two cents.

William Larsen
Mon, 01/17/2011 - 8:51pm

The media and politicians like to say how not raising the debt limit will be catastrophic and the government would default. This is not true. By law, the national debt has first dibs on all federal general revenues. The current general revenue is more than enough to pay the interest on the national debt, so there is no possible way or reason for the Treasury to miss an interest payment or pay debt in full when a treasury note matures.

Both Social Security and Medicare have dedicated tax revenues and even if their dedicated tax revenues and trust fund were not enough to pay full benefits, this is not a default. In Flemming v Nestor, the U.S. Supreme Court ruled that no one has a gauranteed right Social Security and that congress reserved the right to alter, abolish, change or repeal any section of the Social Security Act. Medicare was constructed using the same language.

I hope the congress finally has the guts to not raise the debt limit. This will then require congress to decide what to cut and pretty fast.

Based on current budget for 2011, paying the interest on the national debt and current defense budget requires a 81% cut in all other general budget expenses. If defense is included, we need to cut 70% across the board.

gadfly
Tue, 01/18/2011 - 1:56am

Every stone that you turn over in government budgets finds waste, and SSD is no worse than the huge agencies such as the Dept of Education and the Environmental Protection Agency . . .and God help us, the Agriculture Department.

Government could be trimmed by 50% and only the rent-seeking contractors and researchers would miss out.

Doug
Tue, 01/18/2011 - 3:03pm

We represent something close to 45% of the world's military expenditures. Perhaps we're not in such mortal peril that this is necessary. If we could somehow protect ourselves by outspending the next highest country by a margin of 2-to-1, we could save ourselves about $450 billion per year.

tim zank
Tue, 01/18/2011 - 3:19pm

Doug I don't have any problem taking a scalpel to the military budget as well as 1,000's of other things. I don't doubt we could whack 1/3 of the expenses in the military without jeopardizing national security.

Kevin Knuth
Tue, 01/18/2011 - 5:01pm

I hate when Zank and I agree.

I know a company that sells a product in the marketplace- they also have a "military version"

The general product sells for $95. The military version costs exactly $12 MORE to produce- and sells for $12,000- and that is because they are the LOW BIDDER!

Phil Marx
Tue, 01/18/2011 - 11:37pm

But Kevin, those $12 versions could fall apart at any time.

The military pays a higher price because they demand higher quality.

http://hamptonroads.com/2008/02/military-contractors-fail-yet-get-more-contracts

William Larsen
Wed, 01/19/2011 - 2:56am

I think you are all missing the point, 10%, 30% 50% small cuts are not going to do it. It may stay of the day of reckoning a year or to, allows us to dig a deeper hole to bury ourselves in, but you need to think a lot larger cut. The Deficit last year was over $1.6 Trillion. General revenues after paying the interest on the debt was $1.467 Trillion.

You need to think much larger 80%. Do you want to keep the ship afloat or go down with it? We need to begin ejecting everything now!

Kevin Knuth
Wed, 01/19/2011 - 11:09am

Phil- the $12 version is just a small upgrade from the commercial version. It should sell for $100. But the Government is willing to pay $12k- it is the SAME UNIT- just one resistor is different! that is all!!

And folks wonder why we spend so much on defense!

Phil Marx
Wed, 01/19/2011 - 11:52am

Kevin,

I was joking. The article I cited makes the point that even though we pay outlandish prices for equipment, we still do not hold the makers to a higher standard of performance.

A serious question for you though, as I do believe you are polically quite astute:

Can you give any reasonable explanation for why our government continues to engage in such seemingly irrational behavior. It appears as though this has been standard practice for quite some time, so any purely partisan explanation will not suffice.

William Larsen
Wed, 01/19/2011 - 12:36pm

Why do such simple things cost so much? Take the toilet seat on a bomber. The cost was very high. When it comes to military design of equipment, personnel are a second thought. They want to pack as much punch arms and equipment into the constrained volume as possible. They also want the time aloft to be as much as possible. This means there is a tradeoff between weight and space. To fly longer, requires more fuel, more lift, larger wings, larger engines, etc. A vicious circled that killed the nuclear powered plane.

An injection mold may cost $45K to $100K depending on the complexity of the tooling. If you only plan to make 1000 parts, the tooling cost alone will be between $450 and $1,000 a piece. Then you have to add in design time and it could be minimal, but you have to get approval which could take the most time. Then you have design changes where something the part was built around was changed and now it must change again. If tooling was already purchased, you get new tooling.

An electronic circuit board can be very expensive based on the complexity and chips used. Most electronics are protected from EMP, but not all. The size of the equipment will determine the ultimate cost. Comparing a commercially available part with a military part can be sometimes difficult to distinguish. Take bearings for example. A car manufacturer may accept the probability of a bad bearing getting into part. The risk of down time for a car is not life threatening, may inconvience the driver, but in military equipment, down time could mean death and defeat. So to safe guard (insure) that this is minimized, great expense goes into developing, researching the testing, inspection of military equipment.

I have seen lots of waste in the Navy. During an overhaul, valves and parts were literally tossed because they were not needed on the ship, but quite possibly used on another ship. No one coordinates this. Each ship has a budget for parts and each ship only has so much space so a decision is made what to get rid of.

As for defense and expenditures. The itemized defense budget lists everything that is purchased down to cruise missiles to ships. The overhaul the ship I was on went through a $75 million overhaul in 1979. Ships upgrade electronics, weapons, power plants about very 20 years. The life span of a ship is about 40 years, but the class of ship I was on lasted less than 30 before it became outdated.

Then there is military pay which accounts for 15% of the budget. Fuel probably accounts for another 10%. Training using live fire probably is another 5%.

Having worked for a defense contractor, I know there is a real push by management push product through. Those with expensive materials charge a markup of 15% on material alone. You buy the material, it comes in, they want you to make

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