Posted by: theoptimisticconservative | August 3, 2011

Buck up, shipmates!

In strategic terms, here’s what just happened.  Obama tried to force battle on his terms, and Republicans refused the engagement.  No one has lost or won the big battle over “how the republic shall live,” because we haven’t had it yet.  Accepting battle on Obama’s terms was never a good idea.  Some thoughts:

1.  Rush Limbaugh has been right about something all along:  the 2 August date was an artificial construct.  It was never a date on which the US had to default on our debt service, nor was it a date on which government would have to grind to a halt.

2.  In outlining the case, it’s worth pointing this out one more time:  if federal spending had remained at the level of 2008, 8-2-2011 would have been just another day.  It was not necessary to add $3.7 trillion to the federal debt in the last 31 months.

Even taking reduced revenues into account – the product of a faltering economy – the cumulative annual shortfall in 2009, 2010, and 2011 need not have exceeded $2.5 trillion.

Of course, $2.5 trillion is a ridiculous number, but adding that amount to the total debt at the end of the Bush administration — $10.6 trillion – produces a sum of about $13.1 trillion, or about $1.2 trillion less than the debt ceiling of $14.294 trillion set by Congress in February 2010.  At the 2008-level spending rate, a debt ceiling of $14.294 trillion need not have been encountered until sometime in FY2013.  It’s because we spent faster than we were spending even during the Bush years that we encountered the debt ceiling in August of 2011.

3.  Obama’s policies, whatever their purposes were, are what precipitated the crisis deadline that just passed.  Much is made of the fact that the sheer size of our mandatory spending makes it a fiscal behemoth compared to discretionary spending, and that there have been natural increases on the mandatory side.  But there are reasons why that doesn’t parse as an excuse for the Obama deficits.  Here are a couple:

First, Obama has added to mandatory spending as well as to discretionary spending.  A spending gimmick in the Obamacare bill has already produced $105 billion in new mandatory spending in 2011 – about the same amount as the increase in Social Security benefits payments between 2010 and 2011, when Baby Boomers started turning 65.  That $105 billion is to be expended annually on a mandatory basis for the next 9 years.

(For his proposed 2012 budget, Obama has also reclassified certain types of spending from discretionary to mandatory: Pell grants and some transportation expenditures.  That accounting legerdemain moves about $68 billion onto the “untouchable” rolls of mandatory spending in FY2012.  Moreover, some of the stimulus funds have been funneled through Medicare and food stamp programs, beefing up expenditures by those programs beyond what demography and eligibility factors would dictate.  Not all of the increase in “mandatory spending” programs has been due to eligibility triggers in the American population.)

Second, however, the lion’s share of mandatory spending increases – the increases in Social Security and Medicare payouts due to demographic factors – was entirely predictable.  (Spending on welfare, unemployment, and food stamps was not quite as predictable, but certainly could have been foreseen with some accuracy given economic trends.)

With mandatory spending bound to increase by a largely predictable amount, and revenues declining, a president could have foregone the $787 billion stimulus package, and proposed net cuts in the spending he had control over.  That wouldn’t have prevented annual deficits, but it could have held them constant or reduced them instead of increasing them.  Obama and the Democratic Congress had that option from January 2009 to January 2011—but they didn’t use it.  If they had, it might have been possible to add even less than $2.5 trillion – the figure suggested by a continuation of the 2008 spending level – to the national debt.

4.  So much for the structural causes of the 8-2-2011 deadline.  Now for the handling of that deadline.  At no time prior to 8-2-2011 did the deadline have to become a threat hanging over our debt service, Social Security and Medicare payouts, or the operation of the military.  Sometime after the 8-2-2011 date such a crisis could have arisen, but nothing mandated it on 2 August.  How the funds on-hand were managed would have been up to the president.

In stage-managing the 2 August date, Obama (and the Senate Democrats) chose the option that invited a pitched battle at the deadline.  The point here is not whether Obama is a terrible person, it’s that if the battle had been fought over the 2 August deadline, it would have been fought on the terms he set up.

His handling of the debt-ceiling deadline is what defined the problem and set up the stakes and risks.  There never had to be a “crisis” on 2 August; objectively, the problem could have been defined differently.  It just wasn’t.

The president holds the high card if the crisis is defined on his terms.  Although there need not have been a threat to debt service, Social Security, and military pay, Obama had the discretion to make good on the implied threat.  He could also, by contrast, have issued assurances about what his priorities would be, in order to mitigate fear and uncertainty – but he didn’t.  In either case, he had the discretion to act on his own authority, at least within a timeframe of weeks.

The very fact that he cast the situation unnecessarily as a calendar-date crisis is an indicator of how he would have handled a post-2 August showdown.  But a perfect prognostication in that regard wasn’t necessary for Republicans to judge – probably correctly – that giving battle on his terms was a bad idea.

A number of people did want to see Obama’s “bluff” called:  they wanted to go past 2 August without a deal and see what he would do.  That would have been fighting the battle on his terms; we will never know if it was possible to win that battle, since it wasn’t fought.

But because it wasn’t fought, Obama was unable to steamroll the GOP on a tax-rate increase.  The point is also correct – and salient – that the big thing the Tea Party Republicans have done is change the debate.  Unlike every previous debt-ceiling negotiation, this one has not closed the books on the underlying issues regarding the size of government, for which the debt ceiling is a proxy.  The contingency built into the latest deal is real:  the Democrats will have to fight again to realize gains from this agreement.  That has never been the case before.  Yes, the Republicans have to fight again too.  But the outcome is not foreordained.

This is a tough time for the republic.  A whole lot of people who don’t care to think about government all the time are having to do just that.  Republicans, libertarians, conservatives, independents, low-information voters and former low-info-vos – millions of people who can never match the left in natural passion for “government” are having to spend time and effort on it, because the direction it’s going threatens to destroy our way of life.  If this summer doesn’t teach us the wisdom of keeping government small and not letting it acquire an ever-lengthening lease on us, nothing will.

But make no mistake, the campaign for smaller government continues.  It hasn’t been stopped.  In a sense it’s just getting started.  Of course the Democrats have unleashed the talking points about how this round went to their advantage, and Republicans will have no choice but to concede everything in the next scheduled confrontation.  That’s how they prosecute their campaign, and as long as their man is in the White House, they can’t be overridden on the definition of the crisis.  Don’t despair over that.  Obama defined the crisis this time, but he didn’t get the Republicans to accept battle on his terms.

It may not be “the end of the beginning” yet; but maybe it is.  People won’t agree in medias res on when the end of the beginning falls.  Churchill perceived the end of the beginning on 20 November 1942, when Hitler’s armies occupied most of Europe and roamed Western Russia, his navy was sinking allied shipping right and left, and his air force was successfully bombing targets in England and killing hundreds of civilians each month.  The bloody campaigns to recapture the territories of Southeast Asia and the Pacific islands had barely begun.

Few could imagine what victory would even look like, much less discern progress toward it.  Still, the US had just invaded North Africa, and Stalin had just launched a counteroffensive in Western Russia.  Conditions were grim, but was Churchill wrong to focus on the resources, plans, and hopes he did have, rather than what he didn’t, in characterizing the situation in that dark November?

If great fights could only be won by a series of uncontested victories, with no setbacks, no stalemates, and no periods when things look bleak, World War II would have been over by mid-1940.  We’re still in the fight, shipmates. It’s not over.  Don’t give up the ship.

J.E. Dyer’s articles have appeared at Hot Air’s Green Room, Commentary’s “contentions,Patheos, and The Weekly Standard online.


Responses

  1. If we had the kind of smaller government that’s being called for, WWII would indeed have been over much earlier……

    • Compared with today, we DID have a smaller government at the beginning of WW2 and some time afterwards as well.

      Are you claiming entitlements and subsidies won WW2?
      Or are you claiming we are at war right now? The “moral equivalent of war” perhaps?

      • I’m claiming a couple of things.
        1) the effort involved in fighting WWII resulted in an enlarged government (and the American people supported the increased size and scope) and the size of government didn’t contract afterwards.

        ftp://snde.rutgers.edu/Rutgers/wp/1998-01.pdf

        and

        2) the dramatic increase in national indebtedness starts with the Reagan admin and wildly spikes with the Bush/Cheney tax cuts/wars.

        see figures 1 & 3 on the link below.

        when you talk about entitlements, are you referring to the vast amount spent on veterans benefits?

  2. if you’re having trouble with the second link, here’s figure 3 again…….

    observe which administrations wildly outspend revenues.

    • If spending spiked during the Bush administration what did it do during Obama? The current level of spending is more than twice what it was during the Bush administration (which was bad enough). So, I guess that what we are dioing here is looking for term that describes much, much worse than Bush. Right?

      Oh, and before I forget, WWII had nothing to do with the entitlement spending that is driving us to ruin. That claim would have to be hung squarely on FDR’s neck.

      rafa

      • —If spending spiked during the Bush administration what did it do during Obama?—

        wadda you mean IF?

        Bush doubled the deficit from 6 to 12 trillion….that’s where things went to hell, rafa.

        Bush took a surplus projected to wipe out the debt….. and psssed it away.

        • First of all, please don’t make the assumption that I am a Republican Party hack or a Bush fan. I am neither. I will not defend the Bush spending spree at all but that doesn’t mean that I will condone Reid/Pelosi/Obama’s spending or accept your rather typical and by now quite boring dodge of shinning the light on Bush in a rather weak effort to throw a shadow over the Obama asinine expectation that spending at twice the rate of Bush, our problems will be solved.

          So, I’ll ask you again in case you missed it the first time: If you so openly criticize Bush for squandering the reserves created by a Republican Congress then what is it that you think of Obama and the until recent Democrat Congress for doing much worse than that. Please hear me out in order to avoid us both wasting our time in silly little roundabout arguments.

          My question is not about Bush and I only used him because you sort of set him up as a baseline of comparison (blog speak for “dodge”).

          My question is really directed at finding out your opinion not of Bush but of the Democratic Congress and the Obama administration’s penchant for thinking that a bigger, fatter and much less efficient government is the answer to anything requiring a higher intellect that the intellect needed to clean stables or that spending more than we take in is the best way to correct a tremendous and rather unsustainable deficit or that raising taxes, passing more regulations, helping unions and printing money is the smart way to fix a sagging and ailing economy.

          I await your answer to that specific and, in my opinion, clear question; but, after your previous, I admit that I am not really too eager for that answer.

          Rafa

          • short-term, yeah, I’m willing to go with the spending spree at the beginning of the Obama presidency, given the recession.

            long-term, deficits above a fraction of GDP are corrosive and I’m in favor of a better balance brought about by spending less and taxing more.

            love that you can posit a penchant for “a bigger, fatter and much less efficient government” and ask me whether I favor such.

            that your idea of how to pose a fair and reasonable question?

            • Yes. It reflects reality so, why would it not be a fair and reasonable question?

              But, as I suspected yesterday, you dodged, weaved and avoided a direct answer with yet another non sequitur. I’m starting to suspect that you are either a pre-programmed blog-writing ping pong ball or Debbie Wasserman Schultz in drag and, frankly, I don’t have the time or desire to engage with either.

              rafa

              • fell free to break off our engagement, rafa.

                I’ve got my sights set on a different girl anyway.

  3. Treatments like these (fuster’s) are ultimately a bait-and-switch form of argument. World War II didn’t bring on the programs that have increased the most and cost the most.

    It did leave us with a large (for the time) debt, which has never been paid off but has instead grown. But that’s not the same thing as government programs growing. We can also make the point that FDR started the Keynesian deficit-spending practice well before the US entered WWII. The war increased our national debt, but certainly didn’t alter our mindset about living in debt. That mindset was altered beween Coolidge and Hoover, and was given a big jumpstart in the 8 years before 1941.

    Social Security was implemented before WWII and had nothing to do with the war. The alphabet list of regulatory agencies got their big start under Wilson and took off like a rocket under FDR. These agencies have done yeoman work for nearly 100 years suppressing US productivity, first with a light hand and more recently with a very heavy one. That has in turn been a systemic factor suppressing tax revenues. Agriculture subsidies go back to Wilson as well, had nothing to do with WWII, and are a costly legacy distortion of the ag market, one that spends to maintain an artificial set of conditions instead of standing aside and letting revenues be created by the natural forces of the market.

    Federal welfare was expanded dramatically with LBJ’s Great Society legislation. Medicare was implemented in 1967. Neither had anything to do with WWII.

    The US military was expanded in WWII and has been maintained at a much higher level since 1945 than before 1941. But military expenditures as a share of GDP have remained much, much lower than in WWII, even during Vietnam. They are at historic lows today.

    Entitlements and regulation, on the other hand, have continued to increase versus GDP. Our economic size-of-government problem has not been brought on by maintaining a standing armed force and forward engagement posture — doing so simply doesn’t cost enough to be the culprit. The problematic fiscal burden is the money going to domestic programs, coupled with the systemic suppression of revenues caused by regulation and government tinkering with markets.

    Reagan’s tax policies increased revenues dramatically. His deregulatory actions amplified the effect. Government spending was the problem during the Reagan years. It’s the spending that we shouldn’t copy, not the tax policies. Reagan shares some of the blame for the spending, but his budget proposal in every year he was in office was for a balanced budget.

    Congress — split between a narrowly Republican Senate and a Democratic House for some of his administration, held entirely by Democrats for the rest of it — added significantly to his domestic spending proposals, and since the president doesn’t have a line-item veto, Reagan would have had to reject budgets entirely to avoid the increases for domestic programs. He never judged that standoff to be worth entering on.

    He could certainly have been wrong in that judgment. A lot of people thought so at the time. It wasn’t the Democrats who thought so, however. Their complaint was that he was underfunding domestic programs.

    The deficits of the Reagan years were laughable, of course, in comparison to the deficits of the Bush II years, which are a giggle-fest compared to the deficits of the Obama years.

    So, which president increased the national debt by the greatest percentage in his first 3 years in office? That’s right, Abraham Lincoln. The national debt increased by over 1000% between his inaugural and mid-1863.

    Which president increased debt by the greatest percentage in his first 3 years, while not fighting a war? That’s right, FDR. He bumped up the national debt by nearly 68% by mid-1935. We’ve never looked back.

    • Back in the day, when some of us posted at the old NR site, there was a guy (gal?) who called him or herself Bottoms. OK, it could have been his/her real last name or just the moniker used back then. Fuster reminds me of that individual. Loves to make outrageous and often imbecilic statements, seldom based on facts, just because he or she loved the attention that it gave her from all the others.

      In my opinion it wasn’t worth the effort then and it doesn’t seem to be worth the effort now. It’s all about the disruption and certainly not about the truth or, much less, the validity or lack thereof of the points being made.

      Also, as you well know, I don’t mind admitting that I loath leftists, liberals and socialists, but I repeat myself… And, also, that contrary to some of my fellow “conservative extremists” and “Hostage takers” I have no qualms whatsoever in saying so publicly. I am just not PC enough to care much about whether this is acceptable behavior or not. I dislike them so intensely because they are either way to stupid to argue with, especially in light of the demonstrable failures of that system both here and everywhere else, a system that only serves to create servile attitudes or they are totally dishonest in the hopes of being able to “earn” a place at the master’s table.

      I have also found that it is easy to be brave and forward over the Internet but that, in the end, it really proves nothing.

      You will be the judge if I’m out of order here.

      Rafa

  4. The WWII thing was a bit light-hearted, opticon , and was suggested by your concluding graph. Indeed FDR was expanding the gov’t wildly pre-war.

    That was his response to the crisis brought on by the Great Depression. The even more dramatic crisis of WWII expanded the government further.
    The first crisis found the electorate very supportive of expansion and the second crisis cemented the support.

    The electorate’s response to the Cold War and the red-baiting at home deepened the idea that Big Government was needed to protect us from the Big Red Machine of the Soviets.

    _”Reagan’s tax policies increased revenues dramatically. “-

    Funny, but as long as Reagan dramatically, and very deliberately, outspent revenues and piled up expenses, he piled up debts.

    (Talk about bait-and-switch, Kid)

  5. Everyone can quote figures and statistics. Understanding them is a rather different matter. In this respect Dicken’s Mr. Micawber had something of an advantage over the Opticon. Debt isn’t the problem. The problem is debt relative to the ability of the economy to service that debt. If you are unemployed and in debt in the sum of $1,000 you have trouble on your hands. If you have a good job and have a $100K mortgage you are laughing.

    The financial regulation painstakingly put in place after WWII to avoid a repetition of the great depression began to be dismantled by right-wing ideologues under Regan, and continued under subsequent administrations of both persuasions. Oversight was replaced by “light-touch” and self-regulation. The banker friends (and bank-rollers) of the Republican Party successfully sold to gullible politicians with short memories the mantra that self-interest and market self-adjustment would ensure against the greed and stupidity that caused the great depression. The good times would roll forever while the bankers, through derivative instruments, turned debt into mega debt while they skimmed a fat percentage from each dizzy stage of the notional profits they were generating. A vertiable perpetual-motion machine. And it all came crashing down under hapless GWB. We (the taxpayers – the bankers kept their bonuses) were left with all this debt – and an economy no longer big enough to service it, and poor old Obama to try to clean up the mess with the fringe-right far more interested in destroying Obama than in helping the economy grow us out of our indebetdness. GWBs two trillion-dollar wars didn’t help either (nor did they do much for US security). As for the shibboleth of health-care reform being responsible – Unlike our war of choice in Iraq where much of the money went straight down the plughole, healthcare reform will mostly displace existing costs within the domestic economy. Some health consumers will be able to obtain treatment from more cost-effective sources than ERs. Others will be able to access treatment at an earlier, more cheaply treatable stage. Debt and productivity-destroying morbidity should eventually drop to levels closer to those in other advanced democracies. Healthcare reform will only cost extra real money in providing care to the small minority of people (and their children) who are not receiving proper and timely treatment under the present system. This is not to say that we need to take a good hard look (and a scalpel) to entitlements. For example, should taxpayers be paying gold-plated pensions to former uniform-wearing desk-jockeys in the prime of their working-lives? Do we need a new generation of dog-fighter war-planes to re-fight the air-battles of WWII when already wars are being fought from over the horizon with drones?

    I should remark on the reference to Vietnam. Vietnam was paid for by the inflation of the 1980s – and the distruction of wealth that ensued from that inflation. There is no such thing as a “free” war (Leaving aside all those people whose lives were destroyed and ruined by that misbegotten and futile adventure)

    • I’ll bet that you don’t have the slightest idea how funny you are, in the late Professor Irwin Corey manner, regurgitating this laundry list of leftist fairy tales as though you’ve come up with something new and profound that none of us has ever heard before. Deregulation of banking, for instance. You don’t suppose that the establishment of the FDIC removed some of the moral hazard in banking, do you? Since the government now has a program to reimburse everyone that’s lost money to a failing bank, why pay any attention to a bank’s balance sheet? Let the government do it. Banks are just another business, like pizza parlors or hair salons. Only when Godfather’s kicks the bucket the government (your buddies) doesn’t bail them out. But intellectual innocents such as yourself buy the Bernanke-Geithner prospectus that without a huge portion of my grandchildren’s income going to keep the banks solvent life as we know it will come to an end. Isn’t that why the federal reserve was established? In 1913. They’ve done a great job . Derivatives, of course, are just another name for insurance. Cancel the policy on your house, if it’s paid for, you don’t really need it. Oh, and use the money you’ve saved to get some education in economics.

      • Usually I ignore sillyness, but I will make an exception for you.

        Moral hazard worked brilliantly to stave off the the economic melt-down that happened at the twilight of the GWB (remember him?) years.

        Of course, moral hazard doesn’t work too well when both the customers and dealers are banks, the favoured customers of those banks, the inversment arms of the same banks, and the directors of both. The rules which erected walls between investment banking and retail-banking don’t go back to 1913. They go back to the 1950s and were dismantled under Reagan.

        Insurance works fine as an instrument for spreading risk and protecting the owners of tangible and intangible assets from catastrophic loss. It didn’t work so well as a device for gambling, and as a mechanism for extracting transaction-fees from notional gains in the value of volitile assets sold to people who couldn’t afford those assets.

        I see that S&P, the people who gave Lehman Bros an AAA rating up to the morning it went belly-up has reduced US bond ratings to AA+…………..

        • Ah, GWB, the secular anti-christ behind the curtain of every leftist tragedy. But couldn’t other persons and events have had an influence on our sad situation? Couldn’t genius Nancy Pelosi’s assumption of the #3 position in American government have rattled the economy? Or maybe the I-35W bridge collapse in Minneapolis, that catastrophe could have so shook our faith in the national infrastructure that investment went into hibernation. No doubt the death of Anna Nicole Smith produced a spiritual depression that spiraled into a financial downturn. So, it isn’t JUST the fault of GWB.

  6. That’s the spirit, Opticon. War will be needed to change mandatory spending and war it is. War for the long haul. Here is one advantage: One conservative in war is worth 10 liberals.

    • which wars did you study to come up with that 10/1 lib/con idea, Meg?

    • Do I detect a little bit of irony here?

      • for you

  7. The peanut gallery has spoken
    of all their causes token;
    but people, they have woken.

    • your poesy, it be broken

      Meg, leave it to Sully.

  8. “War will be needed to change mandatory spending and war it is.”

    ???

    I hope not, Megatron. I hope not.


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