Tom Donohue: End Debt Ceiling Fights By Controlling Spending

By Tom Donohue | Published on 01.29.2013 4:47 p.m.

The simplest way to prevent endless fights over increases to the debt ceiling is to reach an agreement on spending. Easier said than done.

While both sides appear committed to preventing a default of the U.S. government, they have yet to address what’s driving the endless debt increases in the first place — overspending.

Our debts and deficits are piling up fast. In fact, we’ve already blown through the last $2.1 trillion debt ceiling increase in just 17 months. How much longer can we keep this up before the house of cards collapses?

Some folks say we can tax our way out of this problem. Not possible. Ending all the upper-income tax cuts would pay for just nine days of annual spending. Nine days. You could confiscate 100 percent of the earnings of couples making more than $1 million and still not come anywhere close to solving our deficit problem. The recent fiscal cliff deal pairs major tax hikes with virtually no spending cuts. No amount of new revenue or higher taxes can solve our fiscal challenges without real spending controls.

So it’s time to face reality. The entitlement programs written and designed for an earlier era must be revised. According to the Congressional Budget Office, virtually 100 percent of the projected increase in budget deficits over the next 75 years comes from rising Social Security, Medicare, Medicaid and other mandatory spending. If left unchecked, this spending soon will consume every dollar the federal government collects, leaving nothing for education, national defense or other essential programs.

Let me point out that we’re not talking about cuts in absolute terms — we’re simply talking about slowing the rate of increase. This can be achieved with reasonable adjustments phased in over a number of years.

Let’s face another reality — we need to raise the debt ceiling. Even suggesting that we could default is playing with fire. Businesses would be more reluctant to hire and invest. Our AAA credit rating would be at risk. An actual default would be a disaster, destroying the full faith and credit of the United States, spiking interest rates and creating massive economic uncertainty.

Congress and the president must use a short-term extension of the debt ceiling to negotiate spending cuts and entitlement reform that will restore fiscal balance and put us on a sounder financial footing. It’s no exaggeration to say that the country’s economic future depends on it.

— Tom Donohue is president and CEO of the U.S. Chamber of Commerce. The opinions expressed are his own.

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» AN50 on 01.29.13 @ 09:16 PM

Dream on Tom, dream on. More than half the country does not believe you. They think money comes from a printing press and as long as you can buy ink and paper you have all the money you need. Washington is full of fairy dust dealers and the majority of the voters believe in magic. The president is the king fairy dust dealer. He not only doesn’t believe you he really believes that we can print our way to wealth while robbing the successful! Just take money from rich people and print the rest and we will all live in a Marxist fairyland happily ever after.

The only way this problem will be solved is the way it always gets solved when more than half a country’s population has indulged in fantasy, with total and absolute collapse. At some point and its damned close now, we will tip the scales, owe more than we are worth or have the ability to pay and then it’s over Tom. The country will collapse; poverty and mayhem will replace our fairyland fantasy and then and only then Tom will what you say be realized. Always a day late and a dollar short.

» lou segal on 01.30.13 @ 04:09 AM

Correction - we already lost our AAA rating.

» TheTruthLiesInTheContradictions on 01.30.13 @ 01:01 PM

The wars continue to expand from Afghanistan to Iraq to Libya to Syria to Somalia to Pakistan to North Korea to Mali and no fiscal accountability for it. And these idiots continue to direct attention to the american people as the responsible for the waste.

Now military drills are being conducted in the major cities of the US and a concerted effort to unarm the population is underway. The militray assets are alraedy in place in all the major cities.

As long as those responsible for the global fiscal crisis remain in control a recovery remains an impossibility.

» Coastal Local on 01.30.13 @ 02:19 PM

Agreed TruthInLies,
Dodd, Frank and Waters along with the democrat party are still in charge and we will remain as is until they are defeated.

» jayarr on 01.30.13 @ 03:20 PM

One thing most people don’t consider in criticizing the federal government debt is that, unlike state and local gevernment - or you, the consumer! - the feds have no capital budgeting capability (accrual accounting). When you buy a house or take out a loan for a major, long-term improvement, you don’t count it as “debt” for the year or month that you take out the loan. The duration of debt, ideally, corresponds to the life of the underlying investment. Not so with Uncle Sam, who effectively measures his debt on a cash-accounting basis.

» AN50 on 01.31.13 @ 02:12 PM

Jayarr, what people, both right and left, need to realize is you don’t get something from nothing. On the right you have those who erroneously believe banks make wealth and on the left you have those who believe its made by a printing press. That is the real problem.

» jayarr on 01.31.13 @ 02:52 PM

If we could only stop sniff-testing every comment, observation, analysis and suggestion for whether it came from “left” or “right”, and approached things empirically .... maybe we could get closer to a solution. As it stands now, the primary litmus test for either “side” is whether what is suggested squares with their philosophical ideology or model. In western medicine, “top down” reasoning was abandoned in favor of empirical testing by the ancient Greeks (Menodotus, et al); when will other disciplines follow suit?

» AN50 on 02.02.13 @ 05:22 PM

Jayarr, that sniff test is often used as a filter, just to cut through the miles of baloney and obfuscating crap. I use it all the time. However I agree that few people really think things through.

For example, I have tried to get my friends on the right to at least acknowledge that just propping up all economic activity whether consuming or producing is short sighted. Equally I have tried to get lefties to see there is little difference between the hated Wall Street banksters, looters and pirates and the massive corrupt government they love, looting the economy just as much.

Neither side seems interested. To damned much invested in partisanship to see we are bankrupting our economy not so much because we love to tax and spend, but for the reason we tax and spend, we don’t want to acknowledge that we are living way beyond our means, we don’t earn what we take home. We are either gambling and looting the privates sector on Wall Street or looting and pillaging through onerous taxation and entitlements through the government but it’s the same damned disease and no one wants to see it.

We have grown far too comfortable just pointing fingers at the “other” guy rather than taking a good long look in the mirror. If you look at what has been going on the last 5 decades, it’s easy to see the trend. We went from a net energy exporter to net importer, net auto exporter to net importer. Manufacturing, the bulwark of wealth generation in any economy has shrunk from a high of 33% of GDP in 1980 to less than 9% today. Our trade is chronically negative for 4 decades now. Tell me how you grow wealth when you are constantly shipping it offshore year after year, decade after decade. The only thing more horrendous than our government’s phenomenal debt at $16.7 trillion is the private debt at $38 trillion.

We have spent the last two generations, the last 4 decades, borrowing what ever prosperity we have. The right says we must allow the looters and pirates free reign to pillage our national wealth while the left says we should allow the government equal access to looting and pillaging. How about we quit friggen gambling, sucking like giant parasites and get our asses back to friggen work producing? We don’t need anymore middle men, lawyers, politicians, environmentalists, pundits, sociologists, clerks, accountants, financial advisors, bankers, brokers and all the rest of the superfluous services that rely on a surplus of wealth being made that we aren’t friggen making. We need people who produce, make more value than they consume, at least make what we consume and if we want to grow wealth make enough surplus to sell offshore.

Anyway, that’s my rant. Partisan it ain’t. Like it or not it’s based on history and fact. We can devolve into stupid arguments over style and details but essentially it changes nothing.

» lou segal on 02.03.13 @ 02:32 AM

Jayarr, the deficit spending by our Fed govt would hardly qualify as capital expenditures, at least not what we understand it to be pursuant to Gap accounting.

The $1 trillion of federal deficits is primarily spending for ordinary expenses like current entitlements, unemployment insurance and discretionary expenditures incurred in the current year. Also, any business in the private sector cannot deficit spend even if it is for capital expenses. There must be sufficient debt service coverage for their long term debt and they need to show a profit as well as positive cash flow. They also must be careful not to have excessive debt compared to the equity in the business.

Govt doesn’t exercise any of the fiscal discipline a business must adhere to. They get to print money out of thin air to finance the public debt and then leave the problem for our children’s generation. Tell me a business in the private sector that can get away with this? If they tried to run a business in this manner, it would be in Chapter 11 in a nanosecond.

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Tom Donohue: End Debt Ceiling Fights By Controlling Spending

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