News Column

The U.S. Debt Challenge

March 18, 2011

Harper Elliot--HispanicBusiness

Credit card spending. Extravagant homes. Extra cars. Through the easy-living years of the 1990s' economy, Americans made a habit of living above their means--borrowing and borrowing so they could continue buying and buying.

Considering the average household debt (excluding mortgage payments) is around $10,000, you see consumers who are quick to choose what to buy but who have a much more difficult time choosing where to cut.

Such is the case of the current U.S. Congress, which features five new Hispanic legislators--all Republicans--who were swept into office during the November election GOP landslide. With the Senate still in Democratic hands, the conventional wisdom calls for a legislative stalemate in the run up to the 2012 presidential election. After all, the challenge is less about finding out what to cut than it is a matter of getting the political will from both parties to pull the trigger and drastically reform the big-ticket items that need to be cut. Social Security, Medicare and Medicaid, and military spending have all ballooned the national debt in recent decades.

Of the five new Hispanics in Congress, all but one are from non-Hispanic majority districts. And every single one campaigned on a message of limiting government spending.

Freshman Representative Jaime Herrera Beutler, a Republican who won an open seat in Washington state, calls the national debt "the most immediate issue this Congress must deal with."

The debt is her focus, Rep. Herrera Beutler says, reflecting a priority that came up repeatedly throughout her southwest Washington campaign. The issue was front and center in Texas as well, where Rep. Francisco Canseco, a former banker, won a seat in Congress.

"American families who have reached the limit on their credit don't get to simply vote themselves a higher credit limit," Rep. Canseco says. "They sit down and prioritize their spending to live within their means. The federal government should do the same thing."

Once in charge of the House, these new Republicans were proud to point to one of their first votes--a 5-percent cut to congressional office budgets.

"This move saved tens of millions of taxpayer dollars, but equally important, it demonstrated that Congress can no longer pretend it lives in a different economic reality than the rest of America," Rep. Beutler says.

Democrats labeled the vote nothing more than posturing.

"That vote was their way of saying 'We're going to make cuts,' " says Rep. Xavier Becerra, D-Calif., a member of President Obama's National Commission on Fiscal Responsibility and Reform.

Rep. Becerra said the early action from House Republicans--focusing on repealing the health-care law and passing a symbolic spending cut--showed a failure to address the real economic issue of the day: jobs. "That vote eliminated jobs," Rep. Becerra says of the 5 percent cut.

The national commission Becerra and other private- and public-sector figures sat on last year ended up with less-than surprising results--the entitlement programs need to be reined in or the debt will only grow.

Similarly, the Bipartisan Policy Center released a deficit-reduction plan last year calling for raising the Social Security retirement age, charging wealthy seniors more for Medicare and limiting popular tax deductions for home loan interest.

As the country crawls out of recession, the candidates of 2010 are now working to turn campaign economic rhetoric into reality.

Republicans, like newly elected Sen. Marco Rubio of Florida, even said what House Republicans did--pledging to cut spending by $32 billion from the 2011 budget--was not nearly enough.

Sen. Rubio and 10 other GOP senators wrote House Speaker John Boehner to call for cuts of at least $100 billion.

"The American people expect at least this level--which is just one-fifteenth of the FY2011 budget deficit," Sen. Rubio's letter said.

Sen. Rubio, like many of his new Congressional colleagues who won in November, put the bottom line issue of the deficit at the top of his talking points.

"He outlined real solutions to fundamentally tackle our national debt crisis, which has created uncertainty for businesses and stood in the way of job creation," says Sen. Rubio spokesman Alex Burgos.

The Rubio plan called for nixing stimulus spending and putting unused money toward the national debt, a tactic that he said would save taxpayers $300 billion. He wants a constitutional amendment to require Congress to balance the budget, and he says the congressional practice of earmarking money for district-directed projects should be a thing of the past.

Taxpayers should be allowed to direct 10 percent of their tax payments to the national debt, he said, proposing Congress match those payments dollar for dollar with federal funds cut from elsewhere in the budget. In short, Sen. Rubio said everything except for defense spending should be on the chopping block.

But would a new Florida senator really vote for a budget that slashed the funding for NASA or left the Florida Everglades vulnerable because of a lack of tourist-friendly parks funding?

Would an Iowan vote for a budget curtailing farm subsidies? Or a New Yorker for one ending federal assistance through homeland-security grants?

Such are the real political calculations ahead as lawmakers look at piecemeal ways to balance a budget and reduce the debt.

Inevitably the question comes back to how lawmakers plan to reform Social Security. An active senior citizen voting constituency has been known to make politicians nervous before. But the people retiring in 2037--the year Social Security is expected to be flat broke by government estimates-- are voters now too, and they are starting to think about their own children.

The U.S. government currently borrows 40 cents of every dollar it spends. At the rate of current spending, interest on the debt will cost $1 trillion by 2020.

Momentarily, put aside the issue of how future generations will be saddled with our national debt and you see the national security concerns against an economy built so heavily on borrowed money. What if China stops buying American treasury bills and starts trying to collect? The weakening dollar will become a laughing stock. Only so much money can be printed without runaway inflation.

"At the end of the day, we simply have to stop spending money we don't have and sending the bill to our children and grandchildren," Rep. Canseco says.

Rep. Herrera Beuller points to the more immediate concerns. "If we don't take action to stop our overspending now, we will kill jobs today and destroy opportunities for future generations," she says.

While lawmakers in both parties focus on the challenge of the debt, they will have another eye on the election calendar, when both parties will use the stage of a presidential election to sell themselves as the best stewards of the national economy.

"Attacking is one thing; governing is quite different," say Rep. Henry Cuellar, D-Texas, a senior member of the moderate coalition of Democrats known as Blue Dogs. "We need to make sure the fiscal responsibility message goes to swing voters so we are not being tagged as anti-business."

To Reps. Cuellar and Becerra, the success Hispanic candidates had as Republicans carrying an anti-spending message in the 2010 midterm elections was almost expected.

"The electorate came out anti-incumbent. There were more Democrats in office," Rep. Cuellar says.

And the new Hispanic Republicans prove something else, Rep. Becerra says: "Latino candidates come from every stripe. We are not monolithic."



Source: HispanicBusiness.com (c) 2011. All rights reserved.


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters