Reagan vs Obama On The Debt Ceiling Debate

Tuesday, July 19, 2011

Here we go again. It's a debate that happens again and again in congress when we get into debt. Raising the debt limit for the country. Raising the debt ceiling can be important and I wanted to look at the differences and similarities regarding the debt ceiling back throughout the Reagan administration. Perhaps you saw President Obama mention Reagan's debt limit increases in order to justify why he needs congress to raise the debt limit yet again. There's one quote from recent debt talks that I'd like to address. Start by reading about the breaking down of the debt limit discussion.

"Would Ronald Reagan be sitting here," he reportedly asked. "I've reached my limit. This may bring my presidency down, but I will not yield on this." - President Obama

Let's start with the facts. True, Ronald Reagan did raise the debt limit several times throughout his presidency. However, he also criticized BOTH Republicans and Democrats for playing games with the debt ceiling increase. Just as the modern Congress uses earmark, "pork barrel", special interest spending measures hidden in bills to get special favors for their districts etc. the same games were played back in the 80's. Some things never change.

Take the following entries from President Reagan's diary, notice that both Republicans and Democrats are criticized here:

Feb 5, 1981

"Lots of phone calls - Sen Robert Byrd is playing games with bill to raise the debt ceiling. Has held vote over until tomorrow."

Notice that this was less than 1 month after Ronald Reagan took office. Don't think for a second that this was only a problem with the Democrats:

November 3, 1983

"Met with Conservative Republican Senators who are playing games trying to come up with amendments to the debt ceiling bill. We must have that bill or government checks will start bouncing."

Are you starting to understand? These debates are nothing new and Congress using what should be simple bills to pass horrible aspects of legislation seems never ending. Just wait until I get to the criticism from Liberal groups about Reagan raising taxes. That too was because of a game played with the debt limit. I'll get to that in a bit. Here's another example:

May 11, 1987

"Dem's are playing game hoping to trap me into tax increase. We have to have an extension on the debt ceiling by May 28 or face default."

Remember this one because it becomes important. It was the Democrats using the debt ceiling debate to force tax increases on Reagan. That way future Democrats could criticize Reagan as a tax increaser. Also, any agreement to tax increases other than the debt ceiling were for specific purposes.

The Highway Revenue Act of 1982 for example which raised the gas tax from 4 to 9 cents and was set to expire after 5 years. The additional revenue from that gas tax was supposed to be specifically used to fix roads. However, those who criticize Reagan for his tax increases which are for the most part very specific like the example I've just given. They tend to forget that before any of these tax increases went into effect Reagan passed one of the biggest tax decreases in history but spread it out over 3 years because it's the only way Congress would go along with it. This in part explains the recession of 1982, when Democrats were accusing Reagan's economic policies of being a failure, as the complete tax cuts didn't take effect until 1983 and the economy was booming by 1984.

Economic Recovery Tax Act of 1981

Individual income tax reductions. Reduced marginal tax rates 23 percent over three years; reduced maximum rate to 50 percent and maximum capital gains rate to 20 percent; indexed income tax brackets, personal exemption and standard deduction for inflation beginning in 1985; and provided new deduction for two-earner married couples.

Capital cost recovery provisions. Replaced facts and circumstances and the Asset Depreciation Range guidelines with Accelerated Cost Recovery System. Faster write-off of capital expenditures under simplified rules. Most equipment written off over 5 years, structures over 15 years. Allowed liberalized safe-harbor leasing rules, which effectively allowed companies to sell tax losses.

Savings incentives. Extended eligibility for IRA's to include active participants in employer pension plans. Increased Keogh annual contribution limit to $15,000.
Estate and gift tax provisions. Permitted unlimited marital deduction: increased estate credit to exempt from tax all estates of $600,000 or less; and reduced maximum estate tax rate from 70 to 50 percent.

Accelerated corporated estimated tax payments and tightened rules on tax straddles with mark-to-market rule.


Now, let's get back to the debt ceiling debate. Obama wants to pretend that after using the former Democrat controlled congress to pass trillions of dollars worth of new spending, (over 1 trillion for stimulus with omnibus earmarks, health care, etc), he supports cutting spending as part of a compromise. Do you think he'd pretend to support the same if the Republicans hadn't taken the house majority thanks to the tea party movement?

Now we have former president Bill Clinton saying that Obama should just go around congress using the 14th amendment to avoid default. This is one of the most bogus arguments attempting to make the case that the president has the authority to increase the debt limit without congress using the 14th amendment to the Constitution, let's see if you agree:

U.S. Constitution, Amendment 14, section 4:

"The validity of the public debt fo the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void."

I'd say the print I've highlighted is the base of Clintons argument:

"The validity of the public debt shall not be questioned."

Fair enough but he has a problem. The very next part of the U.S. Constitution states:

U.S. Constitution, Amendment 14, section 5:

"The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article"

Notice it says the Congress, not the president, has the power to enforce the 14th amendment through legislation. Therefore, Bill Clintons argument is wrong. If he were right then Ronald Reagan would have had no need to worry about the games being played by Congress in the 80's. I'm not all that surprised that a liberal ex-president doesn't understand the Constitution and hopes that you don't either. He forget another provision in the Constitution that also denies Obama the right to increase the debt limit without Congress:

U.S. Constitution, Amendment 10:

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people"

At first you may not see how this amendment applies but I'll explain. The government only has the authority to do what the Constitution gives it the power to do. Meaning the government is supposed to maintain limited power only gaining the powers the Constitution grants it. The government doesn't start out with all the power and is then limited by the constitution. It starts out with no power and then is only supposed to be allowed to follow the guidelines provided by powers granted by the Constitution itself. As I showed you with Amendment 14, the Constitution gives Congress the responsibility of handling the debt issues, not the president. Therefore Bill Clinton is wrong and Obama has no authority to increase the debt limit without the consent of the Congress. Nice try progressives.

Now let's continue with the problem's Ronald Reagan was having with the Congress.

July 10, 1987

"Discussed how to deal with Congress efforts to cut defense budget to ribbons. They're planning to add things as amendments to Debt limit bill which I must sign or create a world wide financial panic."

Follow this and the next few quotes because I have a theory to consider. You'll understand in a moment but I don't want to get ahead of myself so let these next few quotes sink in and remember that the Liberals love to criticize Reagan as a tax increaser, even using it in a new ad about the debt limit debate.

July 21, 1987

"Debt ceiling will be an important item with what the Dems are attempting to do to it. Then the same individuals are trying to make our catastrophic illness proposal into a budget busting expanded program which will actually impose costs on senior citizens."

July 22, 1987

"Debt limit & Dem. games main subject of 1st meeting. Then Catastrophic Health program & here too they are distorting it to be a costly budget buster."

Here are some details as to what he's talking about.

"President Reagan, ending more than two months of Administration bickering, today endorsed a Medicare catastrophic illness plan to give 30 million elderly Americans "that last full measure of security" against the grim choice of bankruptcy or death.

Under the plan, the government would cover all hospital and doctor expenses under Medicare after a patient had paid $2,000 out of his own pocket"

This provided care specifically for elderly Americans to avoid going broke because of a catastrophic diagnosis. What's funny is how at the time the criticism was about how we couldn't afford it. You would swear that this article was written about the health care debate with Obama. The article is from March 9, 1987 yet it says things such as:

"A government program that would really save the elderly from catastrophic health care bills, however, would mean adding another open-ended entitlement program to the red-inked federal budget"

"almost any hospitalization or long illness can be a financial disaster for the 37 million Americans who have no health insurance at all. Now that the issue of catastrophic medical costs is on the national agenda, it will be politically difficult to limit any new programs just to the elderly."

"It may be tempting to make political capital out of catastrophic health insurance, but the nation will pay a price for it--one way or another. Congress still has time to explore other possibilities--such as broadening private coverage and sterner controls on costs--before it gets any deeper into the entitlement morass"

Hard to believe this is from a 24 year old article, huh? How little we seem to learn. The debt limit debate is very much the same. It's the same political games being played by the politicians that are no different from the games played in the past.

Now let's get back to the debate over the debt limit, I had to go off track to address that health care article because it related to the Reagan quote I used and it need an explanation. Remember the last quote I used was:

July 22, 1987

"Debt limit & Dem. games main subject of 1st meeting. Then Catastrophic Health program & here too they are distorting it to be a costly budget buster."

Now that you understand what he was talking about here we can move on. This is where it gets very important that you pay attention.

September 22, 1987

"a very disturbing meeting with Jim Miller, OMB [office of management and budget], Will Ball, Cap Weinberger, Jim Baker & of course our staff. The subject was the bill to extend the debt ceiling which expires tomorrow. They have loaded that simple bill with a cut in Defense so great we'd have to kick 400,000 out of the service. I'd have to agree to billion's in new taxes & on & on. Jim Baker says if I veto we could conceivably have a world crisis financially because we'd be defaulting on $24 Billion worth of bonds. I have to come up with a decision on - do I sign or do I veto. Everything in me cries out veto."


The Congress, controlled by Democrats, loaded a debt limit increase with Billions in new taxes, (think of it as what in today's context we refer to as "pork" spending), as well as a bunch of other horrible things that Reagan disagreed with in order to force him to sign or default.

All of a sudden the Democrats using Reagan in their new ads don't look so credible. Remember how much the Democrats of today and groups like MoveOn.org etc. like to criticize Conservatives labelling Reagan as a tax increaser. Well this bill being referred to above to increase the debt limit is why. It wasn't that Reagan supported tax increases and didn't fight hard against them, it's that the Democrats forced this on him in 1987 and then decided to shift blame and use it against his legacy in the future.

As you can see the above quote is from September 22, and here's what he wrote 2 days later:

September 24, 1987

"I have decided to sign the debt extension bill but with a hard statement to the effect that it's probably the worst legislation ever sent to me. But I must sign to keep us from defaulting on $24 Billion worth of Bonds."

September 26, 1987

"Did my radio show on Dem. blackmail in connection with debt limit extension."

Maybe we should ask Bill Clinton why Reagan didn't just increase the debt limit without congress using the 14th amendment, oh wait that's right, I already took care of that issue, nevermind. Don't you think if the president actually had that authority Reagan would have had a damn good reason to use it here?

Remember how I said that I had a theory? Reagan signed that bill in September of 1987. October 19, 1987 is known as "Black Monday" due to a significant market dive. Wikipedia presents several theories as to the causes of Black Monday. I'm not saying this legislation was so much of a direct cause but I think it's safe to say that it couldn't have helped, just saying.

There's another point I'd like to use here in closing. Reagan signed legislation he was completely against over $24 Billion dollars in 1987. We used to think $24 Billion in default would be catastrophic. Now because of our spending and programs like stimulus making 24 Billion look like chump change we have truly dug a hole we can't get out of. Obama as well as many others in Congress have neither the brains, nor the balls to do what must be done. As for the rest of us there are still too many Americans who simply don't have the stomachs for it.

We don't need a new debt limit to know we are already in default, do you really think that the rest of the world, including those who hold our bonds, (like China), have any confidence in being paid back by the cowards who run our country? We did this to ourselves.

We allowed ourselves to forget or to simply never learn about what history could teach us. How we've face these issues before yet we keep electing the same jackasses who fail to acknowledge it. Fixing this will require sacrifices that no politicians will make, and unfortunately many Americans can't seem to stomach it much either.

Everyone claims to care about the children yet we refuse to sacrifice in the present to save their future. When I was younger I used to hear older people talk about how they're glad they are old because they pity our generation's future outlook. Unfortunately, I feel the same way about our children's future if we don't change our ways, and fast. I didn't even get to become old before I felt that way. Do you really care about the children's future as so many bleeding heart liberals claim to? Then how can you not understand these points? I've never written anything that I found to be all that complicated or confusing. If you're so damn smart and you can piece together 2,000 page pieces of legislation with a bunch of your corrupt friends, then why can't you understand the simple reality presented in a blog such as this?

The sophisticated elites would tell you that I'm the one who's a crazy right wing conservative tea party lunatic. Who do you think makes more sense?

"we have to pass the bill so you can find out what is in it?" - Nancy Pelosi


CharlieB said...

very well written, bradon

Anonymous said...

sounds a little one sided. Blaming the democrats for the reagan era, but not putting the republicans out there today.

Brandon Edsall said...

It's not one sided. I showed a quote above showing that Republicans played games with the debt ceiling also. Republicans under Bush 43 get no pass from me but they paid a heavy political price for becoming big spenders, losing the Congress in the '06 election and not gaining it back until the '10 elections. Not to mention losing the presidential election of '08 deservedly so.

However, Obama's spending has by far outpaced all previous presidents including Bush and his Republican Congress. Furthermore, Obama's spending was largely done with a Democrat controlled Congress which he had majorities in both houses for most of his spending. I criticized the stimulus packages of both Bush and Obama because anyone who knows anything about economics know stimulus packages always fail.

Bush started the bailouts, stimulus, and massive spending programs and the Republicans paid a heavy political price for it.

Obama has taken it to the next level and his massive spending has predictably failed, outpacing the average Bush debt more than 3 times over.

The Republicans have only controlled the House of Representatives again for the last 7 months and that's the only real reason that we're even talking seriously about spending cuts. That's not being one sided, it's being accurate. Obama has been allowed to spend plenty thanks to the previous Democrat majorities and that spending has failed as socialist policies always do and will. You don't have to like the facts but you also can't change them.

Ioannis said...

Interesting. Since it is the GOP that is blackmailing us now. But of course you aren't one-sided, you are on the Democratic side also, right? :)

Kelly said...

Loannis, it isn't the GOP that is blackmailing us. How is 'quit spending money we don't have' blackmail? I am incredulous at Carney, Reid, Obama, et al saying that GOP and TEA partiers are 'holding America hostage' when it is THEY who control 2/3 of the Legislature. Ridiculous. Well done article, Brandon.

Brandon Edsall said...

It's not blackmail to demand a cut in spending and the size of government which the voters clearly asked for in the mid-term elections of '10. Obama got his massive spending programs and was able to spend as much money on failed so-called economic plans as he wanted during the first 2 years in office with the dems in control of the entire presidency and the congress.

The only reason he's talking about compromise is because he has no choice since the country has largely turned on his failed agenda. I'm not in the tank for Republicans but my conservatism obviously makes me lean toward smaller government and fiscal responsability. That isn't the message of modern day democrats. I've said repeatedly that I didn't vote for either McCain or Obama.

If I was in the tank as some partisan Republican hack who thinks the Republicans are never wrong then I would've voted for McCain and wouldn't have shown you how Reagan criticized Republicans as well as Democrats. The problem is that too many Americans from the Republicans and Democrats do fall into the one-sided argument under the false assumption that their party can do no wrong and it's always someone else's fault.

I no longer play that game. The fact of the matter is that in the 80's the Democrats were the bigger problem for Reagan because they controlled Congress. Unlike Obama though, Reagan didn't have 2 years of supermajorities to push through an agenda that nobody wanted. The tanking of Obama in the polls and general popularity shouldn't surprise anyone. You can't ignore a majority of americans and fail to deliver on promises of a better economy etc and expect to stay popular.

The real problem isn't my arguments, it's the true partisans like a few of the short comments above that make every excuse to justify failed policies of Obama simply because it is so hard for some people to accept that they were wrong about him. I can relate, I truly believed that Bush 43 was a Conservative for a long time but I woke up, it's time for Democrats to do the same.

Anonymous said...

When the congress appropriates future spending, they have to pay the bills when they come due. They know how much money we will have, and whether the appropriation will take us over that limit. TAX REDUCTION is SPENDING. the Debt limit must be raised in order to pay our bills, period.

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