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Obama blows up the bridge
Posted By Patrick J. Buchanan On 04/14/2011 @ 12:00 am In Commentary | Comments Disabled
“Rather than building bridges, he’s poisoning wells,” said Rep. Paul Ryan, after listening to Barack Obama’s scathing attack on his deficit-reduction plan as a shredding of America’s social contract with the elderly and poor.
Ryan is right. Yet, with Obama’s partisan savagery, virtually calling the GOP plan immoral, we have clarity.
There will be no grand bipartisan bargain on taxes and spending.
The two parties on Capitol Hill and the president will not be coming together to solve the gravest financial and fiscal crisis America has faced since the Great Depression. Between them today is a high wall and a deep ditch.
The heart of the Ryan plan is to turn Medicaid into block grants to the states, so each can decide for itself how best to use the funds, and to convert Medicare into a program where the U.S. government would provide citizens with the funds and freedom to chose whatever health insurance they wished to buy.
Obama denounced both.
But if the Republican Medicare and Medicaid proposals are dead on arrival in Harry Reid’s Senate and Obama’s White House, Obama’s plan to raise taxes is equally lifeless.
On MSNBC’s “Morning Joe,” this writer asked Grover Norquist of Americans for Tax Reform exactly how many GOP members of the House had taken his pledge not to raise taxes.
His response: “The commitment that 235 Republican members of the House and 40 Republicans in the Senate have signed is the Taxpayer Protection Pledge – it says no raising taxes. So, taxes are off the table.”
Seems clear. But if virtually every GOP member of the House and 40 GOP senators have signed a pledge not to raise taxes, how can they dishonor that pledge?
How could they agree to raise the top U.S. income tax rate back up to the 40 percent of the Bill Clinton era, as Obama demands, then go home and tell voters they had no choice, that to get a deal with Reid and Obama they had to let the government take a larger share of the income of American citizens?
Put bluntly, a vote by a Republican House to raise taxes as part of a big budget deal would be an act of collective suicide by the party of Speaker John Boehner.
And the Democrats?
With the exception of the civil rights acts of the 1960s, no programs are more hallowed in party mythology than Medicare, Medicaid and Social Security.
Are Democrats, after the “shellacking” of 2010, going to go home and tell their constituents they voted to cut Medicaid benefits?
Are they going to tell the old folks of the Greatest Generation and the Silent Generation and the retiring baby boomers that Medicare in the future will not be as generous as it has been in the past, that we are going to have to start rationing their health care?
The new Republican governors – Scott Walker in Wisconsin, John Kasich in Ohio, Chris Christie in New Jersey, Tom Corbett in Pennsylvania – all have resisted raising taxes, as has Andrew Cuomo, Democrat of New York, who enjoys remarkably high poll numbers for the times we live in.
The praise these governors are receiving, even when embattled, has also steeled the spine of congressional Republicans against any tax increase.
But if Democrats are not going to do even minor surgery on Medicare and Medicaid and Republicans are not going to raise taxes, there is no hope of big budget deal to cut a deficit now running at 11 percent of gross domestic product.
And that raises another question.
How long can the Federal Reserve continue financing these deficits?
China, choking on U.S. debt, is reportedly beginning to divest itself of U.S. bonds. Japan will need to sell U.S. bonds to get hard currency to repair the damage from the earthquake and tsunami. And the Fed is about to end its QE2 monthly purchases of $100 billion in U.S. bonds.
Where is the Fed going to borrow the $125 billion a month to finance this year’s deficit of $1.65 trillion, and another of comparable size in 2012?
Bill Gross’ Pimco, the world’s largest bond fund, has sold all his U.S. bonds and begun to short U.S. debt. Pimco is betting that the value of U.S. Treasury bonds will begin to fall.
We may be about to enter a maelstrom.
No big budget deal is brokered. The deficit endures, and another looms in 2012. To finance them, the Fed borrows at the rate of $30 billion a week wherever it can.
But as countries begin to choke on U.S. debt, the market starts to dry up. To attract investors, the Fed must raise interest rates, which sends bond prices sinking and forces interest rates up across the economy.
With interest rates rising, gas prices rising and inflation rising, the squeeze is on, and there is talk of a double-dip recession.
And if that happens, Obama is toast. But, then, so are we.
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