When $8.81 Trillion Isn’t Enough

March 5th, 2006 - by admin

The Progress Report – 2006-03-05 09:12:47


Treasury officials have told Senate aides that without an increase in the nation’s $8.18 trillion debt limit, the government “would default on obligations for the first time in history sometime during the week of March 20.” The Senate will have to take up the issue soon since “federal default is considered unimaginable because it would rattle bond markets, force interest rates higher and shake the economy.”

The debt limit increase to around $9 trillion would be the fourth increase in five years. “I don’t think the leadership wants to have any debate on this, and I think the reason is pretty clear,” Finance Committee ranking member Max Baucus (D-MT) told Congress Daily, “It’s embarrassing.”

To avoid an extended debate, the leadership is set to vote on the issue as close to the March 17 recess as possible. Finance Committee chairman Sen. Chuck Grassley (R-IA) has admitted he wants the debt limit increased “with the least debate” possible. “I would like to see a bill on any Thursday night just prior to a recess,” he said. The New York Times warned the Senate bill may “be put to a voice vote, so that no individual would have to go on record as approving the measure. The American people deserve better.”

“The American dream begins with saving money and that should begin on the very first day of work,” Vice President Cheney said yesterday. “Yet a lot of American families live paycheck to paycheck…and this underscores one of our fundamental obligations in Washington: to be good stewards of the taxpayer’s dollar.”

But as Bloomberg columnist John M. Berry said, “The reality is that taxes and spending are badly out of whack, and hardly anyone — certainly neither President George W. Bush nor Vice President Richard Cheney — wants to admit it.” Cheney, after all, once claimed, “Deficits don’t matter.”

The $5.6 trillion projected ten-year surplus, accumulated as part of what American Progress Senior Fellow Gene Sperling describes as “the rainy day savings of the 1990s,” is gone. “The outlook for the federal budget over the next decade continues to be bright,” the Congressional Budget Office (CBO) wrote in January 2001. “Such large surpluses would be sufficient by 2006 to pay off all debt held by the public that will be available for redemption.”

The current national debt stands at $8,269,768,312,946.41.

The Center on Budget and Policy Priorities pegged the cost of permanently extending the Bush tax cuts and the Alternative Minimum Tax at $3.3 trillion over ten years. This figure includes $486 billion in interest payments for servicing the debt. (By comparison, Bush’s 2007 defense spending request is $439 billion.)

To put this into perspective: over the next ten years $917 billion of these tax cuts will go to just the wealthiest 1 percent of families (those earning more than $400,000 in today’s dollars).

Rather than face up to the fiscal challenges facing the country, the administration continues to urge Congress “to make the Bush tax cuts permanent.”

Even a “budget hawk” like Sen. John McCain (R-AZ) is caught up in the tax-cutting frenzy. Last month, McCain voted in favor of extending tax cuts on dividends and capital gains. Yet in May 2001, when the fiscal picture was rosier, McCain voted “no” because he was “very concerned about the deficit.” (Bush still claims: “You cut taxes and the tax revenues increase.”)

“I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us at the expense of middle-class Americans who need tax relief,” McCain said at the time. (More on why the tax cuts fail to spur economic growth.)

The Bush administration continues to bypass standard congressional budget procedures with its reliance on “emergency” spending bills. “In theory, emergency spending bills are for one-time, unforeseeable calamities,” the New York Times reported. “In practice, Mr. Bush has financed the entire war in Iraq, as well as the war in Afghanistan” by labeling the ongoing conflicts as emergencies.

“Emergency spending on natural disasters has shot up as well” because Congress does not set aside a “rainy day fund” to cover disaster spending. Senate Budget Committee Chairman Judd Gregg (R-NH) has called these tactics “irresponsible” and “unrealistic.” Gregg told CongressDaily, “Essentially what [members of the administration are] saying is, ‘Everything else in the government is going to be subject to severe limitations in spending, but the area that we’re interested in is going to have no budget process at all, it’s simply going to be done outside the budget process through emergencies.'” Added Gregg, “I don’t think they have any credibility on budgets.”

“Foreign entities own a little more than 53 percent of the US federal debt in publicly traded world markets,” ABC News reported last month. In contrast, only “1 percent of all active corporations that filed taxes in 2002” are foreign-owned.

While there is nothing inherently wrong with foreigners buying our debt (foreign central banks have kept interest rates low), a “disorderly situation would occur if foreign money dried up suddenly when the United States still needed it. Then the adjustment in American savings might happen involuntarily. Interest rates would rise sharply, and the dollar could fall abruptly. This could induce a sharp economic contraction, even stagflation.”

If we continue to live at the mercy of the main financiers of our debt — whether it’s Japan, China, the United Kingdom, or “Caribbean Banking Centers” — we could find ourselves on “on increasingly thin ice.”

The President’s budget shows what happens when the right wing pushes budget cuts under the guise of “deficit reduction.”

On the revenue side, the budget proposals would extend tax cuts for the wealthy at a cost of $1.7 trillion.

On spending, the budget proposes $36 billion in Medicare cuts, $276 million in cuts to the Centers for Disease Control, a 3.8 percent cut to the Department of Education, and nearly $600 million in cuts to science and technology programs. Read the Center for American Progress analysis of the Bush budget here.

Under the Radar


Four new polls show historic lows for President Bush, with his approval rating below 40 percent in each survey. According to the LA Times/Bloomberg poll released today, only 34 percent approve of Bush’s handling of the Iraq war and just 44 percent approve of his job on the war on terrorism; the Quinnipiac poll puts Bush’s job approval on the war on terrorism at only 39 percent.

Similarly, despite Bush’s denials of a possible civil war in Iraq, a FOX News poll finds 81 percent of the American public who think a civil war in Iraq is likely. 52 percent do not find Bush “honest and trustworthy,” tying November’s worst-ever mark in the CNN/USA Today/Gallup poll.

With numbers like these, it’s no wonder that traditional Bush allies are distancing themselves.


The National Journal reports that two classified intelligence briefs delivered directly to President Bush prior to the Iraq war “cast doubt on key public assertions made by the president, Vice President Cheney, and other administration officials as justifications for invading Iraq.”

The first report, delivered to Bush in October 2002, stated that the Energy Department and the State Department’s Bureau of Intelligence and Research believed that Iraq’s aluminum tubes were “intended for conventional weapons,” a view contradicting Bush’s statement that the aluminum tubes were being used to enrich nuclear weapons.

A second report informed Bush that “US intelligence agencies unanimously agreed that it was unlikely that Saddam would try to attack the United States — except if ‘ongoing military operations risked the imminent demise of his regime.'” This report contradicts claims by administration officials at the time that Iraq was a “grave and gathering threat.”


Responding to new video in which President Bush is warned about the likely severity of Hurricane Katrina, the White House “suddenly sent around a transcript that it previously said didn’t exist, from a conference call on the following day.”

The transcript includes a second-hand account of Bush’s activities from ex-FEMA director Michael Brown “describing the president as engaged, watching TV and asking questions.”

For months, the White House had said it couldn’t turn over the transcript to congressional investigators, “with officials initially telling Capitol Hill that someone at FEMA or Homeland Security forgot to push the button on a tape recorder.” On Wednesday morning, however, when it was apparently determined that making the transcript public would help politically, the White House “unexpectedly e-mailed the transcript to Newsweek…— initially without explaining that it was the missing transcript.”

• The Senate overwhelmingly passed legislation to renew “the sweeping antiterror law known as the USA Patriot Act.” Sen. Russ Feingold (D-WI), one of ten senators to vote against the bill, said, “This fight is not over, Mr. President. … I am convinced that in the end, the government will respond to the people, as it should.”

Attorney General Gonzales said yesterday “that the administration is not conducting any warrantless domestic surveillance programs beyond the one that President Bush has acknowledged,” contradicting claims by the NSA whistleblower who helped expose the first program.

• After furor grew over the reclassification of National Archives documents, Allen Weinstein, the nation’s chief archivist, announced a “moratorium” on the process until an audit can be completed to determine which records should be secret.

• “Four years after the Taliban were ousted from power by the American military, their presence [in Afghanistan] is bigger and more menacing than ever,” the NYT reports.

• Rep. Duncan Hunter (R-CA), chairman of the House Armed Services Committee, said yesterday that “Dubai cannot be trusted” to manage U.S. ports. He vowed to scuttle the Dubai Ports World deal and push legislation to block a second Dubai company’s efforts to acquire two US plants that manufacture precision components for military aircraft and tank engines.

• The Homeland Security inspector general’s office “says it can’t widely distribute electronic announcements of new watchdog reports” because “the department lacks capacity to create a mass email list.” DHS spokesperson: “We don’t have a fix at this point.”

• Former FEMA director Michael Brown this morning called for Homeland Security Secretary Michael Chertoff’s dismissal. Meanwhile, lawmakers on Capitol Hill are calling for an independent commission to investigate the Katrina response, in light of the new Katrina tapes.

• “Worried about arsenic in your bottled water, mercury in your fish or pesticides in your vegetables?” These are “among hundreds of different warnings” that could disappear under a conservative bill “moving toward House approval.”

• A Senate committee yesterday “rejected a bipartisan proposal to establish an independent office to oversee the enforcement of congressional ethics and lobbying laws,” marking the second bipartisan buckling on ethics reform this week.

• And finally: A Clemson University student newspaper is raffling off an AK-47 to “start a discussion about the Second Amendment.” What could go wrong?

What did we miss? Let us know on the blog.