The S&P Downgrade and the Upcoming Debt Ceiling Vote

April 20, 2011 at 5:19pm

The S&P downgrade of America's credit worthiness and its admonishment of the Obama deficits is a sober warning that if Congress and the Administration does not get our fiscal house back in order, we will inevitably be facing a catastrophic financial crisis.

The fact is, we are not going to close the deficit and move towards a balanced budget unless we follow the policies that foster the economic growth necessary to create jobs.The first and most immediate step would be to employ the policies that encourage investment, create jobs, and reward innovation and entrepreneurship -- exactly the opposite of the Obama anti-jobs policies.

The more people we can move from the welfare rolls onto payrolls will decrease the need for tax-payer funded welfare, food stamps and unemployment compensation.  Getting back toward 4 percent unemployment would be the biggest factor in reducing the deficit and balancing the budget.

The second step is to lower the cost of entitlements, not by squeezing the current systems through rationing, reduced benefits and cost controls the president proposes, but by fundamental structural reforms that would deliver better results at lower costs.These are the two steps necessary to restore the confidence necessary to regain the S&P rating.

On entitlement reforms, Paul Ryan has offer his “Path to Prosperity” budget plan which stands in stark contrast to the 2012 budget proposed by the White House earlier this year.  Unlike Ryan’s plan, President Obama’s budget proposal ignored entitlement spending, which encompasses the largest share of the federal budget.  Doing nothing to address the structural gaps in entitlement spending is no longer an option.

I agree with Senator Marco Rubio who called the vote on raising the debt ceiling a “defining moment in American history” and that “this may be our last chance to force Washington to tackle the central economic issue of our time.”The Republicans should not agree to vote for raising the debt ceiling without getting very significant changes in the current spending trajectory.

One option is for Congress to move towards a 21st  Century personal Medicare system that would allow seniors to choose, on a voluntary basis, a more personal system with greater options for better care

.Similarly, the Congress could block grant Medicaid, the second biggest health entitlement after Medicare, to allow states to design better care for the poor that fits the unique needs of their populations. This option would allow the fifty states to develop new and better approaches to get higher quality care at dramatically lowest costs.