February 3, 2010
"But understand-understand if we don't take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery-all of which would have an even worse effect on our job growth and family incomes." -President Barack Obama, State of the Union Address, January 27, 2010
This week, the President unveiled an FY 2011 budget proposal that drives spending to a record $3.8 trillion, pushes the deficit to a record $1.6 trillion, and raises taxes by more than $2 trillion by 2020. While the President has been blaming his predecessor and touting his new-found commitment to fiscal responsibility, he is encouraging Congress to pass a $1.9 trillion increase in the national debt limit that the House will consider today. The increase will allow the President to continue to borrow and spend enough to keep up with the record pace of his budget.
The Fiscal Situation and the Democrats' Proposal
- On Thursday, January 28, 2009, the Senate passed a $1.9 trillion or 15.3 percent debt increase by a vote of 60-39, raising the statutory limit to $14.294 trillion without any Republican support.
- The national debt subject to the statutory limit is currently at $12.349 trillion or 84 percent of Gross Domestic Product. The current share of the debt is $40,016 for every man, woman, and child in the U.S.
- Democrats raised the debt limit from $11.315 trillion to $12.104 when they passed their failed trillion dollar "stimulus" bill almost one year ago, then raised the debt limit again in December by $290 billion, from $12.104 trillion to $12.394 trillion.
- According to reports, the $1.9 trillion increase would allow Democrats to keep spending and borrowing until after November, avoiding another politically painful vote on the debt until after Election Day.
- $1.9 trillion would be the largest one-time increase in the debt limit in history.
- Since Democrats took control of Congress in January 2007, the debt limit has been raised by Congress five times and the national debt (the combined public debt and debt held in government accounts) has increased by 42.4 percent or $3.68 trillion.
- Democrats enacted a debt increase in February 2009, promising that borrowing another trillion dollars would create jobs "immediately" and unemployment would not rise above 8 percent. However, there were still 85,000 job losses last month and unemployment is currently at 10 percent.
- This would be the third time that President Obama will have increased the debt limit since being inaugurated.
- Under the President's budget, the national debt will soar from $9.961 trillion at the beginning of 2009 when President Obama took office to more than $25.77 trillion in 2020-an increase of 147 percent.Over the next ten years, annual deficits average $917 billion every year under the President's budget.
The PAYGO Farce
- The legislation also includes a statutory version of the Democrats' often waived PAYGO rule, which requires that bills providing tax relief or new mandatory spending must be offset by new tax increases or mandatory spending reductions.
- The requirement that direct spending be offset with tax increases encourages tax increases in lieu of fiscal discipline.
- PAYGO requirements put in place by the Democrats in 2007 have done nothing to curb the record growth in spending, deficits, and debt since they took over.
- The bill would exempt any spending designated as "emergency," allowing Congress to bypass the law at any time
- The Senate-passed PAYGO would only apply to new direct spending, exempting nearly 40 percent of all federal spending.
- The bill is full of gimmicks and loopholes. It exempts a number of policies from PAYGO requirements, including a 5‐year extension of the "doc fix," a 2‐year extension of 2009 death tax law, and a 2‐year extension of the patch for the Alternative Minimum Tax (AMT). It also exempts a permanent extension of 2001 and 2003 tax relief for single taxpayers earning less than $200,000 and married couples earning less than $250,000-essentially guaranteeing that rates will go up for everyone above that level, many of whom are small businesses, as an offset for more spending.
For additional information, contact:
The House Republican Conference Policy Office