Mitt’s Dilemma

By Patrick J. Buchanan

Last week’s Republican debate at Ames, Iowa, and the straw poll Saturday did more than sort out the Republican field for 2012.

They have given the nation a good close look at a Republican Party that no longer resembles the Bush-McCain model.

Consider. Michele Bachmann and Ron Paul, who garnered nearly 60 percent of the votes cast, were both among the two dozen House members who voted against the final bipartisan deal to raise the debt ceiling. Neither blanched at shutting down the U.S. government.

At the debate, every Republican onstage raised his or her hand when asked whether he or she would reject a budget deal in which $10 in spending cuts were offered for every dollar in higher taxes.

This is a party whose feet are set in concrete. The United States government will be downsized and tax rates will rise only over its cold dead body. This is Reaganism on steroids.

Bachmann’s victory was stunning.

Every other candidate had been in Iowa organizing before she ever got into the race seven weeks ago. Yet she emerged with nearly 5,000 votes, the largest total ever amassed in an Iowa straw poll, with the single exception of George W. Bush’s tsunami in 1999.

While virtually every candidate shares Bachmann’s social and economic conservatism, none matches her fire and passion. She both humiliated and eliminated Tim Pawlenty, a fellow Minnesotan who had been her governor when she was a state legislator.

She is now not only the favorite in the Iowa caucuses but also one of three front-tier candidates for the nomination.

Ron Paul, however, who ran only 150 votes behind Bachmann and doubled the vote of Pawlenty, has not received the attention or credit his tremendous showing deserves.

Four years ago, Paul, a libertarian legend, was winning every telephone poll taken after a GOP debate but failing to win, place or show in the primaries. He seemed to be campaigning simply to make his case, realizing that he had no chance of being nominated.

His views on foreign policy were regarded as aberrational by fellow candidates, such as Rudy Giuliani, when they were not being ignored.

In last week’s debate, Paul denounced U.S. intervention in wars that are none of America’s business, called for closing U.S. bases abroad and bringing our troops home, and squared off against former Sen. Rick Santorum on whether Iran represents a threat.

Santorum and Pawlenty supported confrontation with Iran. Yet both together did not come close to matching Paul’s vote tally.

The warfare state is now on the chopping block, thanks to the principled relentlessness of Ron Paul. And the GOP may soon become a house divided, for the anti-interventionists — after Iraq, Afghanistan and Libya — are stronger than they were in 1999, when the GOP House opposed Clinton’s war on Serbia.

The entry into the race of Gov. Rick Perry of Texas, the only mega-state that is reliably Republican in presidential elections, has produced another front-tier candidate and complicated the strategic plans of Mitt Romney.

Had Perry not gotten in, Romney might have held to his decision not to make a huge investment in Iowa, let Bachmann or Paul win the state, and then dispatch them in New Hampshire and go on to rout them in a 50-state battle, for which he is better-resourced than any other candidate. Today he faces a new situation.

With Perry going into Iowa, the caucuses, from Christmas on, will rivet the nation’s attention. If Romney is not there, he will be ignored for that month. And should Perry win Iowa, he would storm into New Hampshire and conceivably overwhelm Romney in his fortress state.

If he did, it would be all over for Mitt. For no GOP candidate ever has lost both the Iowa caucuses and the New Hampshire primary and won the nomination.

Should Bachmann prove to be a giant killer and defeat Perry in Iowa, she would be a formidable rival to Mitt in New Hampshire and a favorite to beat him in South Carolina.

There are two questions Mitt should be asking himself:

“Can I afford to cede Iowa to a tea party-values candidate like Perry or Bachmann and wait for them in New Hampshire? Can I take five months of pounding for ‘writing off Iowa’ and refusing to get out of my backyard and do battle in Middle America?”

Yet the entry of Perry and straw poll are not all bad news for Mitt. Pawlenty, who appealed to the same Republicans, is gone. And still in Iowa are Bachmann, Paul, Santorum and Perry, all of whom will be competing for the same social conservative-tea party base.

Which leaves a huge opening for Mitt.

Does he head for Iowa, confront Bachmann and Perry, and win, in which case he is the nominee? Or does he wait for Bachmann or Perry to come into New Hampshire on the momentum of an Iowa victory and try to stop them there?

Upon Mitt’s decision may hang his five-year investment in winning the office his father failed to win.

Who’s Really Downgrading America?

By Patrick J. Buchanan

The decision by Standard & Poor’s to strip the United States of its AAA credit rating, for the first time, has triggered a barrage of catcalls against the umpire from the press box and Obamaites.

S&P, we are reminded, was giving A ratings to banks like Lehman Brothers, whose books were stuffed with suspect subprime paper, right up to the day Lehman Brothers fell over dead.

Moreover, S&P made a $2 trillion error in its assessment of U.S. debt and used political criteria in making its downgrade.

All of which may be true. But none of which is relevant.

This downgrade is deeply deserved. For no one really believes the United States is going to pay its creditors back the $14 trillion it owes them, or the $21 trillion it will owe them at decade’s end, with dollars of the same value as those that the United States is borrowing today.

In the last year alone, the U.S. dollar has lost 30 percent of its value against the Swiss franc.

A Swiss citizen who exchanged francs for $100,000 in dollars in June 2010 to buy one-year T-bills, then cashed those T-bills in this June, would have gotten back $100,000 in U.S. dollars. But those dollars would now be worth 30 percent less in Swiss francs.

On “Meet the Press,” Alan Greenspan insisted that the United States is not going to default. Why not? Because our debt is denominated in dollars, and we can print dollars to pay off our creditors. Which is pretty much what Chairman Ben Bernanke and the Fed have been doing.

With the dollar down 5 to 10 percent this year alone against the world’s more respected currencies, we are engaged in what the Romans called coin-clipping — official stealing from citizens and foreigners.

Why are the Chinese so upset?

Because they are sitting on more than $1 trillion in U.S. bonds and Treasury bills bought with dollars we paid them for Chinese-made goods, while the purchasing power of the dollars that those bonds and T-bills represent withers away every week.

“I believe this is, without question, the ‘Tea Party downgrade,'” says Sen. John Kerry.

How so? Because the Tea Party blocked the big deal President Obama sought to cut with House Speaker John Boehner to resolve the deficit-debt crisis.

The president, we are told, was prepared to accept $3 trillion in reduced future spending for entitlements like Social Security, Medicare and Medicaid, but the Tea Party caucus refused to let Boehner agree even to $1 trillion in “revenue enhancement.”

But here, a question arises: If the president believes entitlement reform is essential to get America’s deficit-debt crisis under control, why does he need Tea Party cover to do his duty?

He doesn’t. Tea Party intransigence on taxes is not the reason for Obama’s failure to cut spending. It is his excuse.

Indeed, if Obama announced tomorrow that he was going to cut future spending on entitlements by $3 trillion to restore our AAA credit rating, he would have the full support of the Tea Party.

His opposition would come from Kerry’s colleagues in the Senate and Nancy Pelosi’s in the House.

To see how absurd it is to blame Tea Party Republicans for the downgrading of America’s debt, imagine this scenario: Rep. Ron Paul is speaker of the House, Sen. Rand Paul is majority leader, and Rep. Paul Ryan is president of the United States.

Does anyone doubt this trio would restore the U.S credit rating in a New York minute? Every sacred cow in the federal pasture, from food stamps to foreign aid, would be hanging in the meat locker.

The American people have come to like the president, but a majority is coming to believe he is simply not the decisive president we need to lead us out of the morass in which he found the country and from which he has failed to extricate us.

“He made it worse!” is shaping up as the GOP slogan for 2012.

If Obama wishes to restore the AAA rating of his country, he might consider two separate and bold steps, both consistent with his professed beliefs.

First, tell the Republicans that if they will not agree to revenue enhancement, he will nonetheless do his duty and pare back spending in the entitlement programs. He would get instant GOP support.

Following this, he could go to the Republicans and tell them that if they agree to eliminate the clutter in the tax code — exemptions, loopholes, deductions — he will agree to cut tax rates for individuals and corporations alike, to make America more competitive.

Again, he would have the support of Republicans and the Tea Party. It might even advance his re-election prospects, if he could get renominated by his own party, which would rebel at both reforms because they would mean a suspension of the politics of tax and spend.

As for the S&P downgrade, again, the only surprise is it didn’t come sooner.

The Day of the Hobbits

By Patrick J. Buchanan

Mocked by The Wall Street Journal and Sen. John McCain as the little people of the “Lord of the Rings” books, the tea party “Hobbits” are indeed returning to Middle Earth — to nail the coonskin to the wall.

As even the Journal concedes, the final deal to raise the debt ceiling, worked out by Sen. Mitch McConnell and Barack Obama, backed by Speaker John Boehner, is “The Triumph of the Tea Party.”

The Hobbits demanded that the GOP do battle over the debt ceiling, that it not raise the ceiling without equal spending cuts, that the party accept no taxes.

They got it all. The deal cuts spending by $900 billion and raises the debt ceiling an equal amount. It mandates further cuts of $1.5 trillion, to be agreed on by Thanksgiving by a congressional commission of 12, and for those cuts to be voted up or down.

If the commission fails to agree — seven votes are needed — cuts of $1.2 trillion must be made, half from defense. Any Medicare cuts are restricted to providers, not beneficiaries.

What did liberals get? Nothing.

What did Obama get?

He demanded a “clean” debt-ceiling hike. When the GOP said no, he demanded a “balanced approach” — tax hikes commensurate with spending cuts. Again, the GOP said no. Again, he capitulated.

Obama was tossed one crumb in his appeal that he not be forced to fight the tea party again in his re-election year. Democrats surrendered on substance and yielded on policy for “peace in our time.”

Ronald Reagan demanded 18 increases in the debt ceiling in eight years, one every six months. He got them all. Obama asked for a two-year truce and, in return, accepted what the head of the Black Caucus calls a “Satan sandwich.”

The mainstream media claim that tea party intransigence lost the GOP the propaganda war. But if the left believes that, why would they be afraid of a re-enactment of their victory in 2012?

Some in the tea party were willing to go over the cliff and take the federal government with them. But liberals have lost the stomach for such a fight. Listening to the cable blow-by-blow, have you noticed?

There are no liberals anymore. They have changed their name. They are all “progressives” now.

When the right was in ill repute in post-Goldwater days, never did it abandon its birth name, “conservatives.”

Yet, in celebrating, Republicans and the tea party true believers need to know: This country is not out of the woods. Far from it.

Standard & Poor’s has looked at the deal, less than $3 trillion in cuts over 10 years of budgets already bumping up against $4 trillion a year, and concluded: The U.S. government has failed.

An S&P downgrade of our triple-A bond rating may be at hand.

And last week came news that, instead of the anticipated 1.8 percent growth in the second quarter of 2011, growth came in at 1.4 percent. More shocking, the first quarter’s 1.9 percent growth was revised downward to 0.4 percent.

Thus, in the first half of 2011, America grew at an annual rate of less than 1 percent — not enough to create the jobs needed for those entering the workforce, let alone for the 16 percent of workers now unemployed or underemployed.

This anemic January-to-July figure means that growth in fiscal year 2012, which begins in October, will be lower than projected, as will the tax revenues flowing into the Treasury.

Bottom line: Despite the debt-ceiling battle that convulsed this city, the final deal will achieve neither the deficit nor debt reduction we thought. Notwithstanding the tea party victory, we continue drifting toward the falls.

And as that happy warrior of the political battlefield, Ron Paul, reminds us, we are inevitably going over — into default.

Only that default will not take the dramatic form of a U.S. refusal to redeem T-bills or halt interest payments on Treasury bonds.

We Americans are not going the Argentine route.

Rather, we will, as we are doing today, slowly destroy the value of our dollar as an international medium of exchange. Unlike Greece, which cannot print euros to pay debts, we can print dollars to service ours.

Beijing will be made to accept dollars of a purchasing power far less than that of the dollars they lent to us. We are going to cheat them.

Already this year, the dollar has lost 30 percent of its value against the Swiss franc and plunged against the yen and Canadian dollar. And in The Wall Street Journal, Harvard economist Martin Feldstein celebrates the news that the dollar is slowly dying, for it means that U.S. exports are that much cheaper for foreigners to buy.

One wonders what men like Douglas MacArthur and Dwight D. Eisenhower would think of a 21st century America whose elites rejoice in the news that the U.S. dollar is less valued and less respected in the world than in the America they fought to defend.

Is a Tea Party Triumph at Hand?

By Patrick J. Buchanan

They were called “terrorists,” “fanatics” and “unpatriotic.”

Yet the principled resistance of the Tea Party Caucus in the House has put their leader right across the table from Barack Obama to negotiate the final terms of armistice in the debt-ceiling battle of 2011.

Today is July 22. On this day, it was said, either Congress will have voted to raise the debt ceiling, or the markets will have panicked and America will be on the road to default on Aug. 2.

House leaders John Boehner and Eric Cantor are, as of this writing, sitting with Obama negotiating terms. And yesterday, the stock market surged in anticipation they were close to an agreement. If Boehner and Cantor are dealing from strength, it is thanks to the Tea Party‘s rejection of previous deals.

The caucus held Boehner’s feet to the fire, and Boehner is the stronger for it.

And so, today, it is Democrats who are in rebellion. For Obama has reportedly signed on to specific and real reductions, $3 trillion worth, that include cuts in future costs of Social Security, Medicare and Medicaid.

America’s hirsute welfare state may be about to get a haircut.

“Who dares, wins,” is the motto of the Special Air Service, the Brits’ answer to America’s Navy SEALs. While no final deal has been cut, House Republicans have made significant gains.

They passed “Cut, Cap and Balance,” a Tea Party plan to cut federal spending to 20 percent of gross domestic product, cap federal programs and secure a vote on a Balanced Budget Amendment to the Constitution.

Second, Obama has offered to put budget cuts upfront to get a debt-ceiling increase. This would be insurance against what happened to Ronald Reagan, where tax hikes agreed to were enacted and the budget cuts lost somewhere along the trail.

Third, the president has apparently agreed to tax reform, whereby a host of deductions, exemptions and tax credits would be discarded from the code by the GOP in return for tax rate reductions for businesses and individuals.

This is Reaganism.

Indeed, this writer was with Reagan at the Tokyo Economic Summit of 1986 when word came that Sen. Bob Packwood and the finance committee were about to agree to cut the top tax rate to 28 percent, in return for eliminating tax deductions and tax breaks for business and individuals. The reaction of Air Force One, without seeing the precise terms of the deal, was, “Go for it!”

Obama’s proposal appears to contain a non-performance clause, however. If no deal on tax reform is reached, at the end of 2012, the Bush tax cuts will not be extended for high-end earners. That would be a defeat for the Tea Party, the GOP and the country.

Still, there remains no question which way America and Europe are going — indeed, are being forced to go by the irresponsibility of a generation of political leaders. Consider.

Obama has moved in months from an expansive budget that could not get a single vote in the Senate to negotiating with a Republican House whose leaders’ feet are being held to the fire by Tea Party true believers.

When the discussion is of $3 trillion in budget cuts and reducing tax rates, in return for giving up tax loopholes, Big Government is in retreat and a conservative hour may be at hand.

In Albany, Gov. Andrew Cuomo, son of liberal lion Mario, has just gotten an agreement from state employees to give up increases in pay raises and pension hikes they had already won, to save union jobs.

In Minnesota, Gov. Mark Dayton, a Democrat who shut down the government to force the GOP to agree to tax increases, has raised a white flag and accepted the Republican “no new taxes” position.

“Trust but verify” was Reagan’s watchword in negotiating arms control with the Soviet Union. The principle should surely apply to any deal that Boehner cuts.

We are 10 days from the day of reckoning. On Aug. 2, the U.S. Government, as of now, will have no legal authority to borrow, and tax revenue will fall sharply below what the U.S. Government needs to meet its obligations.

To avoid a partial shutdown of the government and a rattling of the stock and bond markets, for which the GOP will be blamed, the House should agree to a short-term extension of the debt ceiling.

And for every month increase in that debt ceiling, the House should impose a cost of $110 billion in hard budget cuts.

As we have seen from Obama’s repeated retreats, he needs an increase in the debt ceiling now, as does the country. He will have to accept any increase the House gives him, or veto it and risk a plunge in the markets, which would assume either a U.S. debt default or a U.S. debt downgrade.

This tournament is not over, but it was Tea Party hardball that got the GOP to the finals.

The Long Retreat of Liberalism

By Patrick J. Buchanan

Though President Obama has run rings about the Republican Party in the debt-ceiling debate, that party can yet emerge victorious, if it will stick to its guns.

Clearly, the Republican strategy was not thought through, when the party chose the debt ceiling as the legislative terrain on which to fight its fiscal war.

The president had wanted a clean debt-ceiling increase, but he seized the GOP challenge with alacrity. He invited House Speaker John Boehner and Majority Leader Eric Cantor down to the White House and reportedly offered $3 trillion in spending cuts for $1 trillion in fresh revenue, in a historic “big deal” to cut the deficit.

However, the cuts the president offered were, while attractive, gauzy. But the revenues — closing “loopholes” and ending “tax breaks for the rich” — were hard and specific. Had Boehner accepted the deal, he would not have survived as speaker. Fully 235 GOP House members signed a pledge in 2010 not to vote for any tax increase.

Thus, every day Boehner and Cantor departed the White House, having refused to accept “the deal of the century,” the message that went out to the nation was that Republican intransigence, a refusal to compromise, was blocking historic deficit reduction.

Using the White House bully pulpit, Obama portrayed himself as bending over backward to do a fair deal and being forced, if the GOP continued to balk, to stop mailing out Social Security checks.

Fed Chairman Ben Bernanke warned of a U.S. default on its debts if there were no deal. Moody’s and Standard & Poor’s warned that the United States was imperiling its AAA credit rating. The big media painted the GOP as a party led by reasonable men who were hostage to fanatics being pandered to by Cantor.

Why did Boehner refuse the Obama temptation?

Had he accepted the deal, his party in the House would have split asunder. Half would have voted “no.” To force its passage, Boehner would have had to collude with Minority Leader Steny Hoyer, against scores in his own caucus, to get Democratic votes.

Though House Republicans have been mussed up in the last two weeks, the White House “negotiations” now appear at an end, and a liberated Republican House is about to pass its own deficit-reduction plan.

“Cut, cap and balance” calls for cuts in federal spending to 20 percent of gross domestic product, a cap on federal programs and the enactment of a Balanced Budget Amendment to the Constitution, which would crush federal spending to 18 percent of the economy from today’s 25.

While this may clear the House, it stands little chance in the Senate. But it puts the party on the offensive. It will eat up the clock. It will put the GOP on record as to where it stands and provide the Tea Party Caucus a chance to vote its convictions.

But if the GOP House plan dies in the Senate, how does the GOP win? Again, by simply standing its ground on taxes, and waiting.

This weekend, Democrats and Republicans, Congress and the White House agreed the debt ceiling will be raised, and Obama accepted the reality that he will not be getting any new revenue.

This means that, at the end of this process, Obama will sign a debt-ceiling increase that involves $2 trillion or $1.5 trillion or $1 trillion in spending cuts, with no new taxes and no new revenues.

And that is a victory for whom, and a defeat for whom?

Republicans may have been beaten up for most of July, but come August, Democrats will be asking Barack Obama what exactly he and they got for agreeing to serious cuts in social spending, while the Republican right compromised on nothing and gave up nothing.

Obama won the public relations battle, but the Republicans, if they hold firm on no revenue enhancement and no new taxes, are fated to win the war. And not just this one.

For, from Greece to Ireland to Portugal to Italy, from California to Wisconsin to New Jersey to New York, the crisis of the West is a crisis of liberalism.

Deficits and debts that threaten to wipe out bondholders and banks, destroy currencies, bring down governments and bankrupt nations are everywhere forcing reductions in government payrolls and rollbacks in government programs.

Across the West, the public sector is under siege.

And parties of the left, be they liberal, socialist or Marxist, depend on the public sector increasing its employees, increasing its beneficiaries, increasing its share of the national wealth.

That is what they do. That is how they grow. And that is how they reach and retain power.

Bottom line. Parties of the left are on this earth to grow the government. But the West has entered a period where its economic survival and the prevention of financial collapse mandate constant and deep cuts in the size and sweep of government.

For the left, this is going to be a long decade.

An Establishment in Panic

By Patrick J. Buchanan

By refusing to accept tax increases in a deal to raise the debt ceiling, Republicans are behaving like “fanatics,” writes David Brooks of The New York Times.

Anti-tax Republicans “have no sense of moral decency,” he adds.

They are “willing to stain their nation’s honor” to “worship their idol.” If this “deal of the century” goes down, as he calls the Barack Obama offer, “Republican fanaticism” will be the cause.

“The GOP has become a cult” that has replaced reason with “feverish” and “cockamamie beliefs,” writes Richard Cohen of The Washington Post. The Republican “presidential field (is) a virtual political Jonestown,” the Guyana site where more than 900 followers of the Peoples Temple drank the Kool-Aid that Rev. Jim Jones mixed for them.

Does anyone think this an appropriate description of such mild-mannered men as Mitt Romney, Tim Pawlenty and Jon Huntsman?

“The GOP‘s Hezbollah Wing Is Now Fully in Control,” screams The New Republic over a recent lead editorial.

Other columnists charge the GOP with holding America “hostage” by refusing to accept tax hikes to avert a default on the debt.

What to make of this hysteria?

The Establishment is in a panic. It has been jolted awake to the realization that the GOP House, if it can summon the courage to use it, is holding a weapon that could enable it to bridle forever the federal monster that consumes 25 percent of gross domestic product.

To bully and blackmail the GOP into surrendering the weapon and betraying its principles and signing on to new taxes, that establishment has unleashed rhetoric more befitting a war on terror than a political dispute.

For how, exactly, are Republicans threatening the republic?

The House has not said it will not raise the debt ceiling. It must and will. It has not said it will not accept budget cuts. It has indicated a willingness to accept the budget cuts agreed to in the Biden negotiations.

Where the GOP has stood its ground is on tax increases.

Is fanaticism behind this stance? Does this manifest insanity? How does this imperil the nation’s honor and future?

Behind the GOP opposition to tax hikes is the party’s word given to the country that elected it in 2010, its political principles, its traditional view of what not to do when the nation is in a slump, and party history.

Fully 235 Republican House members signed a 2010 pledge not to raise taxes. And by giving their word they were rewarded with victory.

Should they now dishonor that pledge, what would differentiate them from George H.W. Bush, who famously promised in 1988: “Read my lips! No new taxes!” then went back on his word and took the party down to defeat with him?

Second, the GOP is the party of small government and low taxes.

Why would it agree to raise taxes on the private productive sector when federal spending, now at a peacetime record of 25 percent of GDP, is the problem?

Third, America is in a slump, with 9 percent of the workforce unemployed, another 7 percent underemployed and the economy growing at a tepid 1.8 percent.

What school of economic thought — Keynesian, supply-side or monetarist — says raising taxes in a slumping economy is the recipe for a return to prosperity? There is no such school.

Why, when the whole country is talking about the need to create jobs, would Congress raise taxes on a private productive sector that employs six in seven Americans and is the creator of real jobs?

In 1982, President Reagan agreed to the same deal being offered the party today: three dollars in spending cuts for every dollar in tax increases to which he assented. As he ruefully told this writer more than once, he was lied to. He got one dollar in spending cuts for every three in tax increases.

What of the charge that the Republican House is holding America hostage, blackmailing the nation with a suicidal threat to throw us all into national default if it does not get its way?

This smear is the precise opposite of the truth.

The Republican Party has not said it will refuse to raise the debt ceiling. It has an obligation to do so, and will.

The House has simply said it will not accept new taxes on a nation whose fiscal crisis comes from overspending.

If the GOP keeps its word, raises the debt ceiling and accepts budget cuts agreed to in the Biden negotiations, the only people who can prevent the debt ceiling’s being raised are Senate Democrats or Obama, in which case, they, not the GOP, will have thrown the nation into default.

It is the establishment that is resorting to extortion, saying, in effect, to the House GOP: Give us the new taxes we demand, or Obama will veto the debt ceiling and we will all blame you for the default.

They’re bluffing.

The GOP should stand its ground — and fix bayonets.

Is a U.S. Default Inevitable?

By Patrick J. Buchanan

As President Bush prepared to invade Iraq in September 2002, the head of his economic policy council, Lawrence Lindsey publicly estimated such a war could cost $100 billion to $200 billion.

Lindsey had committed candor, and the stunned Bushites came down on him with both feet.

“Baloney,” said Donald Rumsfeld. The likely cost would be $60 billion, said Mitch Daniels of the Office of Management and Budget. We can finance the war with Iraqi oil, said Paul Wolfowitz.

By year’s end, Lindsey was gone, back, in Ronald Reagan’s phrase, “testing the magic of the marketplace.”

And the cost of the Iraq War? It has passed $1 trillion.

So Lindsey is worth listening to. And he is now saying that the Obamaites may be wildly underestimating the deficits America is going to run in this decade. Here is why.

The average rate of interest the Fed has had to pay to borrow for the last two decades has been 5.7 percent. However, President Obama is projecting the cost of money at only 2.5 percent.

A return to the normal Fed rate would, by 2020, add $4.9 trillion to the cumulative deficit, says Lindsey, more than twice the $2 trillion in savings being discussed in Joe Biden’s debt-ceiling deal.

Second, Obama is estimating growth in 2012, 2013 and 2014 at 4, 4.5 and 4.1 percent. But the normal rate for a mature economy recovering from recession is 2.5 percent.

Hence, if we return to a normal rate of growth, rather than rise to Obama’s projected rate, says Lindsey, that would add $700 billion to the deficit over the next three years and $4 trillion by 2020.

Taken together, a U.S. return to a normal rate of growth of 2.5 percent, higher than today, and a normal rate of interest for the Fed could add as much as $9 trillion to the deficits between now and 2020.

New taxes on millionaires and billionaires who ride around in corporate jets can’t cover a tenth of 1 percent of these deficits.

Writes Lindsey, “Only serious long-term spending reduction in the entitlement area can begin to address the nation’s deficit and debt problems.”

His conclusion is logical, but seems impossible to achieve when both parties are talking of taking Medicare and Social Security off the table. Which makes his final point all the more compelling:

“Under current government policies and economic projections, (bondholders) should be far more concerned about a return of their principal in 10 years than about any short-term delay in interest payments in August.”

Lindsey is saying that the probability of U.S. bonds losing face value through inflation or default is high, given the size of the deficits we will be running and the improbability that any deficit-reduction plan now out there can significantly reduce them.

Standard & Poor’s and Moody’s are already talking of downgrading U.S. debt if the debt ceiling is not raised by early August.

Is America then headed for an inevitable default?

One Chinese economist is already accusing us of defaulting, as the Fed’s flooding of the world with dollars has seen the dollar lose 10 percent of its value against other currencies in the last year.

Holding $1 trillion in U.S. debt, China has watched the purchasing power of that U.S. paper plummet. Understandably, Beijing fears that if we ever pay back all they have lent us, it will be in U.S. dollars of far lesser value.

What should House Republicans do?

Stick to their principles and convictions.

For the cause of the deficit-debt crisis has been the explosion in federal spending under Barack Obama to the largest share of the U.S. economy since the climactic years of World War II.

Administrations of both parties contributed to this rise in the federal share of gross domestic product. But the GOP committed itself in 2010 to rein it in, without raising taxes. On that pledge the GOP triumphed and should keep its commitment.

First, because it is a solemn undertaking with a nation disgusted with politicians who say one thing and do another. Second, because our fiscal crisis, like Europe’s, is a result of too much government, not too little revenue. Third, because there is no credible school of economic thought that says raising taxes on the productive sector when one in six workers is unemployed or underemployed is the way to prosperity.

Under Obama these past two years, the nation relied on the U.S. government to pull us out of the ditch. But Obama’s $787 billion stimulus, his three deficits of 10 percent of GDP, and Ben Bernanke’s tripling of Fed assets by buying the bad paper of big banks and $600 billion in U.S. debt all failed.

For Republicans to agree now to a tax increases that would violate their principles, their promises to the voters and their basic philosophy — and be icing on the cake of Obama’s debt-ceiling increase — would be politically suicidal.

Indeed, were the Republican Party to do this, it would raise the question of why we need a Republican Party.