The President has just signed a bill hiking the debt ceiling of the United States, literally on the day the nation was scheduled to run out of cash. A lot of people were pretty worried that the government would have to reduce spending by over 40% in a real hurry and that such a shock could prove devastating to the economy. Worse still would be the political ramifications of justifying who gets paid and who does not. It has been a raucous debate in which both sides stuck to their principles while unprincipled, usually ignorant people in the middle yelled "compromise!" loudly and often.
As a libertarian, I generally side with the Tea Party and certainly did so in this debate. We have been called terrorists, jihadis, hostage takers, and a host of other vile names from the Left who, ironically, refuse to apply those same terms to many radical Islamists. In the end, the Tea Party "won" this deal, as no tax increases are included and $2.4 trillion in cuts are planned. Leftists are freaking out about this for multiple reasons, but the largest ones seem to be that it will be ruinous to the economy and that it legitimizes "hostage taking."
Based on that, one might think that the size of the federal government is about to be reduced significantly, regulations thrown out the window, and a libertarian paradise established. But is that what we are getting?
No, as Chris Edwards at Cato has shown:
This is the deal. You'll notice that after this year, government spending always goes up. "Cuts" is a term that does not employ common meaning. When someone in the government complains about "cuts", what they mean is that spending will not increase by as much as that person wanted. Almost never does "cuts" mean "next year, we will spend less than we did this year." The 2012 budget is one of the few rare examples where the number will actually decrease, in this case by less than a single percent.
Look at that chart again and then look back at the rhetoric fired upon the Tea Party. We had to hold up a debt ceiling hike in order to get the Left to agree not to a cut in government but merely a slowing down of its growth. And the Tea Party had to drag them, kicking and screaming, the whole damn time to get the above result. Apparently, doing anything to defend the concept of limited government is going to be treated as a vile assault by the American Left.
Supposedly, there will be $2 trillion in these "cuts" (aka less spending growth, not actual reductions in spending) over the next decade, but nearly all of this is back loaded towards the end of the decade. For starters, those "cuts" equal only on average $200 billion per year (our deficit this year was nearly 900 percent more than that). But the bigger problem is that this Congress cannot hold the Congress 8 years from now to these promises. So these wildly inadequate "cuts" will most likely not happen, as Congressmen a decade from now are not likely to suddenly become moral, righteous men and women who will do the right thing even if it means taking a political hit. Spending is popular with those who receive the money; that's why Washington does it, not because it is in any way good for the economy.
Meanwhile, our current debt of $14,300,000,000,000.00 is may now grow another $2.5 trillion, which is expected to happen in January 2013 or roughly 17 months from now. In all the screaming about the Tea Party hostage tactics, I don't think you'll find a single mention of those numbers. During the debates, only the Tea Party was willing to bring these numbers up. This debt is the problem, not the debt ceiling! There will come a day, not too long from now, in which the market will impose a debt ceiling upon us and no law made by Congress will be able to fix it. That day will come when the world flat out doesn't have enough money to lend to the United States to pay our debt. As is, we're consuming 2% of the world's GDP to pay for our annual debt. As the entitlement programs fail, that number will get worse. Look at Europe if you think this isn't a problem.
Tea Partiers had to bring us to the brink of imminent disaster in order to get the Left to reduce the speed at which we are flying towards the market debt ceiling. How, exactly, are we going to reform ourselves to prevent this longer term (but not that much longer) and far worse disaster from hitting us?
The short term problem has been averted, yes, but in the process it has been proven this country is incapable of dealing with a gargantuan debt problem that will crush us in the next few decades. If those who see this problem have to fight an extremely bitter debate and be labeled as terrorists in order to win only a slowing down of our march to destruction, there is little hope for our future indeed.