Notes and Asides – July 11, 2011

Posted by By at 11 July, at 11 : 58 AM Print

Ladies and Gentlemen, Senator Toomey has the floor. There is a very scary game of chicken going on down in Washington, one that is both totally unnecessary and potentially devastatingly expensive.

For the past several months the White House, through POTUS and every conceivable surrogate, has been pushing the idea that we are on the verge of default.  The assumption is that if we hit the debt limit of $14.3 Trillion and cannot borrow additional funds we will no longer be able to pay the interest on the issued debt.

Hogwash.

We have more than enough cash flow to meet debt service – it is the other 90% of the budget that will have to be slashed until a debt deal is met.  In fact, as Senator Toomey noted back in February in a letter to Sec. Geithner, “the Treasury has had to manage the nation’s finances on four separate occasions when the debt ceiling was reached. In each of these instances, in 1985, 1995-1996, 2002 and 2003, the Department prioritized certain payments – including debt service.”

Sen. Toomey has the Constitution on his side (the 14th amendment provides that the legally issued debt be honored) and has introduced the “Full Faith and Credit Act” to codify this as well.  Quite simply, it assures holders of US debt that we will always pay our obligations first during debt debates.

Such an act of leadership is just what we need to show why we have been the world’s greatest credit risk since 1789.  And it would go a long way to assuage the fears of an investor class rendered skittish by the political brinksmanship on both sides.

Budget fallout, round 1. The political euphoria felt by many a Republican – understandable given the political will it takes to actually cut spending in real dollars – should be wearing off by now.  If it isn’t, the reality of what those cuts mean should accelerate the process – even though they were necessary.

The first and most readily identifiable hit came from higher education.  Over the past 10 days the headlines have been what we would expect – tuition increases, lost jobs, and shifting resources.  Pitt, Penn State and Temple all announced tuition hikes.  Penn State is cutting back on Ag extension.  The SSHE is still facing a large tuition gap.

These are expected outcomes, if unfortunate realities – a fact that the GOP should remember when discussing the budget in the future.  This was a budget we had to have, not one we relish, and a tone of triumphalism is not wise when the cuts start to hit.

Title IX. I am not a huge fan with the radical interpretation of Title IX (forcing the creation of opportunities based on a gender mix ratio rather than based on demand for those opportunities).  But it is hard to argue with some of the results.

Consider women’s soccer, after all.  In the last 12 years woman’s soccer in the US has reached parity with the world, something men’s soccer is seemingly incapable of doing.  It is no coincidence that this rise paralleled the expansion of women’s soccer as a result of being a Title IX add on sport (low facilities costs) – it is likely the cause of said rise.  These expanded opportunities extended the careers of the very best female players and became an excellent feeder program for a national team.  The result?  Even a rigged match can’t stop the US Women.

Fair share. I am so sick of the phrase “we want everyone to pay their fair share” when it is uttered by someone seeking to make the system, well, LESS fair.

Fair by almost any definition pays no attention to the concept “ability to pay” – “fair” means an equal amount.  If you want to make it an equal proportion, OK – that means a flat tax.  An equal share per capita?  Take the budget and divide by 315 Million and then each of us owes that (about $11,800 a person).

The fact is we aren’t interested in “fair”.  After all, is it fair to tax saved money (that was already taxed) because the owner died?  Is it fair to tax income from wise investments when we don’t allow deductions for unwise ones?  Is it fair that the top 1% of wage earners pay 37% of the income taxes?  Is it fair that the bottom third pays no taxes at all (when they are among the largest consumers of benefits)?

Of course not.  That doesn’t mean its wrong – but its got nothing to do with “fair.”  Politicians don’t want anyone to pay their “fair share,” they want someone else to pay their constituents’ share.

Ok, maybe that is too callous.  But the fact is the Democrats are demonizing people paying the most in taxes and the Republicans are defending industries that make the most money.  Neither side is virginal or worried about fairness.

The Democrats want money to spend and feel that the greater the “progressiveness” (read: the higher the taxes on the top brackets) the more “fair” the code.  The Republicans want less spending and feel that the flatter the rates (the smallest gaps between highest and lowest brackets) the more “fair” the code.

In a Republic, one might expect a compromise.  You know, so that the politicians “pay their fair share” of political pain…

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- who has written 77 posts for Rock The Capital
Scott Paterno is an accomplished policy analyst and political consultant based in Hershey, PA. Mr. Paterno, never one to sit still, has practiced law, run for a house seat, and worked as lobbyist in Harrisburg and Washington. Paterno is Vice Chairman of the Sustainable Energy Fund and is currently pursuing a master’s degree in Political Science. He is happily married with three children. - Email scottp

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