Deficit Issues Take Center Stage in D.C.

Deficit Issues Take Center Stage In D.C.

Recent current event discussions have revolved around the looming budget deficit on the international, national and state levels. In the past week, the activities in D.C. have been particularly interesting in their attempts to address the deficit. As one commentator noted,

"The problem is that the debt is like a cancer. The bigger it grows the more threatening it is. Pretty soon it consumes its host (think interest expense)...

Yes, the US can go longer than we might think, but there is a limit. I think that limit will come before the middle of this decade. Perhaps as early as 2013, if the new incoming President and Congress do not deal with the deficit in a realistic manner. Then Bang! , we have our own Greek moment. I want to avoid that."

Read John Mauldin's recent post on the "Plight of the Working Class" here. Keep this possible "BANG!" in mind while watching these issues in the news:

1. Government shutdown looming

The President and Republican leaders appear to be unable to avoid the politics of politics in reaching a budget deal. Interestingly, I just received a fundraising request letter from President Obama (truth moment -- I am a member of the Sierra Club, who must assume that I support the National Democratic National Committee, along with various left-leaning organizations which seem to mysteriously keep getting my name and mailing address). Of interest is one of the President's statements,

"We will never win the future if we're buried under a mountain of debt. All across the country, families sacrifice to live within their means. You deserve a government that does the same, and you're going to see the federal government take responsibility for its deficits by investing in those things that strengthen our country and cutting those that don't"

Interestingly, this quote could come from any moderate Republican or Democrat and even most tea party supporters. Unfortunately, agreeing on rhetoric is not same as getting a bill passed. Tomorrow (Wednesday) is the deadline to agree to a compromise plan to keep government operating. Otherwise, the US House seems likely to take action on another short-term budget fix, leaving the Senate and the President to decide if they want to avoid a shut-down.

2. Wisconsin Representative Paul Ryan introduces long-term budget Proposal.

In the midst of the shut-down drama, the US House budget Chair (Ryan (R) Wisconsin) has proposed a sweeping budget reform bill -- cutting $6.2 TRILLION. As articulated by Ryan,

"For too long Washington has not been honest with the American people," he said. "Washington has been making empty promises."

The federal government's current fiscal trajectory "is simply not sustainable," he warned, saying it will lead to an "economic collapse" and a "diminished future." In contrast, "our goal here is to leave our children and our grandchildren with a debt-free nation," he said. It is a "moral imperative."

Ryan proposes a radical overhaul of the Medicare and Medicaid entitlement programs. To simplify dramatically, the Medicare proposal will not affect any one's eligibility if they are age 55 or older, but thereafter the program will be converted to a system that reimburses seniors based on their ability to pay. The Medicare proposal for the disabled and poor will be converted to State Control at the local level.

This proposal will certainly create a strong dialogue on the need for long-term restructuring. Too often, politicians use scare tactics to get elected -- such as agitating the Senior voting base into the belief that their medicare or social security will be taken away. Given the current climate of concern over deficits, Congressman Ryan's timing is perfect to initiate a serious dialog.

3. Walz' "gotcha" gamesmanship backfires.

Last Friday, our own Congressman Walz entered into the budget game with an attempted surprise amendment to withhold Congressional pay during a government shutdown. Unfortunately for Walz, just days earlier the Obama Administration had written a letter to the Senate labeling this action as "patently unconstitutional." A Washington Post article summarized it well describing the Walz waltz as follows: "In Surprise for Democrats, procedural move on no pay bill backfires."

As I've said many times, Tim Walz is no Blue Dog (Conservative Democrat). His recent (and historical) voting record and consistent tendency towards "causes" rather than "results" earn him a "time to pack" label.

That's all for now -- certainly happy that spring has finally arrived! Have a great week.

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