Nonetheless, the bill serves as a stake in the ground for conservatives and fiscal hawks as they prepare for a major showdown over raising the debt ceiling, which will take place at some point in the next few months. A proposal by Sen. Rand Paul, Kentucky Republican, to cut $500 billion in one year alone, is another.
All of these measures are the first chess moves in a year that will be dominated by attempts from both Obama and Republicans to make real progress on reducing the nation’s $14 trillion debt and the $1.3 trillion annual deficit, while also trying to avoid absorbing politically damaging attacks from the other side.
None of the players in Washington, of course, have yet to come anywhere close to touching the thing that will drive the nation off a fiscal cliff in the next decade or two if nothing is done: entitlement spending on Medicare, Medicaid and Social Security.
If year to year spending is not restrained and no plan to solve the problem with long term unfunded obligations is laid out and implemented, interest on the debt will begin to swallow up much of the annual federal budget. The nation’s ability to finance defense would be constrained to the point of rendering it a second tier world power, or worse, and domestic spending would be so squeezed that the negative consequences are hard to foresee.
The other significant risk is a debt crisis in the nearer term future if creditors lose faith in the country’s ability to pay back its bond obligations.
Other cuts in the Jordan proposal include putting the $45 billion remaining in the stimulus toward deficit reduction, eliminating federal control of mortgage giants Fannie Mae and Freddie Mac to the tune of $30 billion in savings, and clawing back $16 billion currently scheduled to go toward helping state governments pay for Medicaid recipients.
There are clear cut significant costs to such a proposal. Getting rid of the $6 billion or so in stimulus that is reserved for state governments in the upcoming fiscal year, along with the $16 billion in state Medicaid payments, would compound what is already set to be the worst year of fiscal problems yet in this economic downturn for state governments. They face their biggest deficits of the recession already because stimulus money has for the most part run out, and are in the process now of figuring out what services they will have to cut.
But Jordan said Wednesday that the nation must endure short term pain of its own choosing to avoid long term pain that it is far more serious and beyond its control.
“Unless we begin to cut spending immediately, massive tax hikes or national bankruptcy will rob people of the chance to reach for the American Dream,” he said.
Jordan’s co-sponsor on the bill is Rep. Scott Garrett of New Jersey, who chairs the RSC’s budget and spending task force. And Jordan will be joined at a Capitol Hill press conference by other RSC members: Rep. Jeff Flake of Arizona, Rep. John Campbell of California, Rep. Tom McClintock of California, among others.