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Don't raise the debt limit - reform entitlement spending

By Tim Pawlenty
Friday, January 21, 2011; 12:00 PM

Five years ago, a freshman senator made a case against allowing the federal government to go deeper into debt.

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure," he said. "It is a sign that the U.S. government can't pay its own bills."

That was Sen. Barack Obama in 2006, when he stridently voted against raising the federal debt limit. Things have changed a lot since then - for starters, our debt has increased by almost $6 trillion - but as the saying goes, sometimes where you stand depends on where you sit.

As president, Obama now embodies the "leadership failure" he once decried. After growing the debt by $3.4 trillion since moving into the Oval Office, his administration now says we absolutely must raise the debt ceiling or risk "catastrophic" economic consequences.

But the Obama administration is offering a false choice between more debt and default. The chaos that unfolded when Greece risked default last summer can and should be avoided here without raising the debt limit this spring. There is a better option available.

Contrary to what many people are saying, when the national debt approaches the limit set by Congress, as it could by March, it will not mean that the federal government suddenly won't be able to pay its bills. In fact, the government has enough projected cash flow and other resources to pay its outside debt obligations on time and in full for much longer - at least several more months - than the administration has been letting on.

Default on such debt need not occur if Congress passes and the president signs a law directing the Treasury to sequence our spending and prioritize the payment of interest and principal on the debt, as well as other critical budget items such as the military.

Such a measure would mark only the beginning of the debate over our national debt limit. Simply guaranteeing that the government will pay its outside debts would not solve our fiscal crisis. But it would properly frame our fiscal challenge - as a choice not between more debt and default, but between more debt and responsible spending reductions that would ensure we don't trigger a default. And by signaling to world markets that the United States is serious about its fiscal situation, it would buy us time to restructure entitlement spending and end the Ponzi scheme being run by the federal government.

Washington insiders act as if this is impossible, but ordinary citizens who manage their personal finances every day know better. Americans have credit cards, and many have run up too much debt on them. But when individuals reach their credit limit, the bank doesn't just raise it. Congress, unfortunately, does.

When I was elected governor in 2002, Minnesota faced a historic budget deficit. Recognizing that taxes were too high already, we used priority budgeting to cut spending. From 1960 to 2002, state spending in Minnesota had increased by an average of 21 percent every two years. During my two terms in office, we lowered the growth of spending to about 1.5 percent per year.

It wasn't easy. We had government shutdowns, special legislative sessions, numerous lawsuits and one of the longest transit strikes in American history. It was a battle, but we changed the state's spending pattern dramatically.

Setting aside the false threat of defaulting on our debt payments, the upcoming debate over raising the debt limit is a similar moment for Washington. The solutions are obvious: Entitlement programs need to be dramatically reformed. Given no other choice, I believe a bipartisan consensus could be created around ideas such as means-testing the cost-of-living increase in Social Security benefits, capping and block-granting Medicaid payments to states, and moving Medicare to a more efficient, pay-for-performance model.

Refusing to raise the debt limit would force hard choices about discretionary spending, too. Washington should do what we did to reduce spending in Minnesota: Set some priorities, and then cut funding for just about everything else. While national defense is obviously a top priority, even the Pentagon needs to pursue greater efficiencies by using priority budgeting to ensure that our military remains the most capable and effective in a dangerous world. Any savings that are achieved from belt-tightening at the Pentagon should be reinvested toward the most important defense needs, not redirected to pay for runaway domestic spending.

Last year's midterm elections demonstrated that the public is eager to cut the deficit. But every program has an interest group that will fight hard to defend it. We can succeed only if lawmakers are given no other choice. That's why it is so important that we use the debt limit debate to force hard choices now.

We may have followed Greece into democracy, but that does not mean we should or will follow the Greeks to the brink of bankruptcy.

Tim Pawlenty served two terms as governor of Minnesota, from 2003 to 2010. He is the author of "Courage to Stand: An American Story."

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