One of the key requirements for a successful economy is
honoring contracts.[i] The uncertainty inherent in a society that is
careless about contracts leads directly to refusal to risk wealth. So I’m
concerned when I see the president’s cavalier treatment of contracts.
Contract, Word clipart |
The president postures on a pro-contract argument when he
insists we must raise the debt ceiling so that we don’t default on our debts.
And he insists we must not allow Congress to control the funding of Obamacare—it’s
a matter of principle. Yet he, himself, is arbitrary and capricious about any
sort of contract keeping.
We’ll get to the fun part eventually—the long list of
government shutdown consequences. But first let’s take a look at debt repayment
integrity.
If you have a list of bills you pay, because of contracts
you’ve made (home mortgage, car payment, electric bill, etc.), and you find
yourself suddenly with a reduction in income, does that mean you will default?
Only if you don’t pay the bills.
Normally, during your search for additional income (better
job, second job, etc.), you’re prioritizing. If you’re living in your dream
home, you might put it on the market and downsize. If you’re driving a luxury
car, you might sell it or trade it in for something that fits in the budget. If
you’ve already economized to the limit in those areas, you’ll do whatever you
can to meet those debt deadlines and economize on something more elastic
(entertainment, clothing, travel, even food).
Lower income means less spending. But except in sudden dire
circumstances, it doesn’t automatically mean you default on your contracts.
A debt ceiling rise is not even a lower income; it’s more
like reaching your limit on a credit card. You don’t threaten to default on
your mortgage if your credit card company says you’ve spent enough without
repayment so they’re not going to grant you additional credit. What happens in
real life is you cut back your spending and begin paying off the credit card
bill. That’s how you keep your credit rating good and make it possible to get a
comparable or higher credit limit later. You prove yourself to be a good risk.
But the president is equating a refusal to raise the debt
ceiling limit with a failure to pay our debts and the resultant downgrading of
the nation’s credit rating. He’s used this tactic the last several times the
debt ceiling has been raised—and twice during this presidency the credit rating
was downgraded even though the debt ceiling was raised (August 2011 by S&P
and April 2012 by Egan-Jones—both agencies suffered government investigations
in retaliation). The reason for the downgrades? There’s no effort to cut
spending; the increasing debt can’t go on endlessly, so there’s a risk of creditors
not getting repaid.
The point here is, the president is willing to threaten
default on contracts if he doesn’t get his way.
That is exactly what we’re seeing in response to the
continuing resolution battle as well—the situation that has led to the current
partial federal government shutdown.
Quick definition: a continuing resolution is a temporary
short-term response to the lack of a budget. The resolution is to continue government
services at the most recent base budget plus annual increase. We have not had a
budget since Harry Reid took over in the Senate (January 2007); continuing
resolutions have been misused in lieu of actual efforts to pass a budget.
Budget bills, however, always start in the House, so we can't completely blame the Senate. However, we didn’t
get a budget in the years Nancy Pelosi ruled the House (also from January 2007). We
started getting budgets from the House after the 2010 midterms gave the
majority back to Republicans—but the Senate has never put to a vote any House
budget bill. (Note: while the president doesn’t get to create a budget, he
can submit suggested budgets, which he has sometimes done. However, his budgets
have been rejected unanimously in the Senate, including every member of his own
party. Maybe because they’re ridiculously unworkable.)
This month the continuing resolution battle coincided with
the implementation of Obamacare.
What has Obama done relative to the Obamacare “law”? He has,
without any adjustment to the bill from Congress, extra-legally exempted or postponed
implementation for big businesses, favored unions and any crony that has
lobbied for exemption (his own family is, of course, exempt, while Congress is
not). He has failed to get equipment in place to allow the remaining small
businesses and individuals to comply. In other words, keeping the contract is
much less important to him than wielding the power.
It is becoming ever clearer that the president is free and
easy about contract keeping, whenever he sees an opportunity to exert power
instead. The pain he is inflicting on the US people during the shutdown has a
couple of purposes. Ostensibly, it is to point out how much we all need the
federal government. In reality, it is to exert unchecked power. And he’s very
willing to break contracts while exerting power.
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