Senate Fiddles While Our Fiscal House Burns

The same week the Senate – for the third year in a row – refuses to take up and adopt a budget resolution, Moody’s Rating Service issued a report that repeats its negative outlook for US debt. The irony couldn’t be more tangible. Faced with a fiscal crisis of historic proportions, as evidenced by the unprecedented downgrade of the debt outlook, the leadership of the United States Senate has chosen to do nothing. Good thing we have elections coming.

Here’s the key paragraph in the Moody’s report:

The rating outlook is negative. Structural fundamentals, political stability, and post-crisis economic prospects support a AAA rating. However, the outlook was changed to negative in August 2011 because of the risks of a continued rise in federal government debt ratios over the mediumterm, despite the passage of the Budget Control Act, which will result in some deficit reduction over the next decade. Without further deficit reduction measures, the rating could be placed on review for downgrade sometime in the coming year. Uncertainty over the government’s fiscal position next year and beyond because of the expiration of some tax provisions and the coming into force of spending caps means that any outlook change will most likely not occur until sometime in 2013.

Just to repeat, “downgrade in the coming year” absent action. Why is this downgrade out there? Moody’s identifies three specific debt challenges:

  • “The continuing effects of the recent financial crisis and recession on government debt and fiscal flexibility
  • Effects of rising government debt on investor confidence, particularly foreign, and on ease of future government access to finance
  • Social Security and Medicare programs that face serious long-term financing problems”

There’s nothing we can do about the first challenge. Only time will heal the scars of the financial meltdown that occurred back in 2008. But we can do something about how much debt we take on in the future, and that is to do something about the long-term structural deficits. The problem is spending, and the solution will have to bring spending under control. That’s what the Penny Plan is designed to do. Bring spending under control by reducing spending just one percent per year.

Instead of adopting something reasonable and commonsense like the Penny Plan, the Senate, for third year in a row, has refused to take on this challenge and do something – anything – about our fiscal crisis. Instead, the current – emphasis on current — leadership of that body spends its time attacking anybody who does put forward a plan.

There’s an election this fall, and the leadership of the Senate is in play. The Penny Plan has been endorsed by dozens of members in both the House and the Senate. It will be a key part of many elections this fall. And it will emerge stronger on the other end, as voters reject the approach of the “Do-Nothing Senate” and support those candidates courageous enough to put forward a reasonable plan to get our federal spending under control.

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