Obama Owns the Debt-Ceiling Fiasco

By KARL ROVE

President Barack Obama and Congress face a mess if the federal government hits the debt ceiling Aug. 2. The Bipartisan Policy Center, a Washington think tank, projects that the government will receive $172 billion in revenues between Aug. 3 and Aug. 31, but it is on the hook to spend $306 billion, leaving a shortfall of $134 billion.

On Tuesday, Mr. Obama told Scott Pelley of CBS News that "there may simply not be the money in the coffers" to issue Social Security, veterans and disability checks after Aug. 3.

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Not so. The $172 billion in revenues collected over the rest of the month can pay the $29 billion interest charges on the national debt, Social Security benefits ($49 billion), Medicaid and Medicare ($50 billion), active duty military pay ($2.9 billion), Department of Defense vendors ($31.7 billion), IRS refunds ($3.9 billion), and about a quarter of the $12.8 billion in unemployment checks due that month.

There will, however, be no cash for highway construction, no checks for federal workers or retirees, no agriculture payments, no open national parks. Interest rates are also likely to rise if U.S. debt is downgraded, adding massively to the deficit and further damaging the economy. This would be a disaster with no political winners.

The president wants a $2.4 trillion debt-ceiling increase to get him past next year's election—and the deal he's proposing is based on promised future cuts paired with substantial tax increases on households earning more than $250,000 a year.

House Speaker John Boehner proposed matching a debt-ceiling hike with substantial spending cuts. The Congressional Budget Office estimates federal spending at $46.1 trillion over the next 10 years, a dramatic escalation from projections before Mr. Obama took office. Mr. Boehner's modest proposal was to trim that back 5.2% over the decade, but the president balked.

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Associated Press

Yet the $4 trillion in deficit reduction that Mr. Obama talks about is shy on details. No one who's attended his frequent negotiating sessions knows what his proposal really is.

The president has made a bipartisan agreement even more difficult by declaring certain spending off-limits to cuts. Mr. Obama's "untouchable" list includes his $1 trillion health-care reform, $128 billion in unspent stimulus funds, education and training outlays, his $53 billion high-speed rail proposal, spending on "green" jobs and student loans, and virtually any structural changes to entitlements except further squeezing payments to doctors, hospitals and health-care professionals.

Mr. Obama has offered no evidence since becoming president that he wants to restrain the upward trajectory of government spending. He does want higher taxes to pay for significantly higher federal spending. But he wants Republicans to deliver the tax increases, since Democrats couldn't pass them last year despite controlling both chambers of Congress.

Republicans have wisely declined. Demanding the GOP vote for immediate tax increases that would be offset by vague, future tax cuts conjures up images of Charlie Brown, Lucy and the football. The tax increases would be real—the future tax rate cuts would be imaginary. And Mr. Obama has opposed any serious spending enforcement mechanisms, such as a balanced budget amendment or hard caps on spending.

His tone also hasn't helped achieve a comprehensive agreement. The president's two most recent press conferences, in which he accused the GOP of foot-dragging, convinced Republicans that he was interested in scoring political points and attracting independents, not facilitating a deal. Convening high-profile White House meetings without offering substantive concrete proposals and then having his aides leak madly (and inaccurately) to the press afterward further squandered trust.

There's still time for a deal, but it could come after the Aug. 2 deadline, and after much damage has been done to America's financial standing. Then the key political question will become who gets the blame. By then, it should be obvious that the man who promised to transcend petty politics and legislative gridlock made things worse.

Washington is dysfunctional. And to paraphrase the president's senior adviser, David Plouffe, Mr. Obama owns the dysfunction. The president has not only governed as a liberal—he's governed as an incompetent liberal, thereby reminding voters that electing a Republican Congress and president next year is the only way to change direction.

Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.