When Democrats had the majority in Congress until the end of last year, they refused to vote a budget for the year starting October 2010 until the end of September 2011. This allowed Obama, as in the previous two years, to create a yearly deficit of over 1.5 trillion dollars. This red ink amounts to 40% of the budget! As a reference: the Belgian deficit in 2010 was 4.1%, which is more than the 3% allowed by European budget rules. The Bush budget for 2007, the last year the Republicans were in charge in Congress: the shortfall was 6%. The total Federal debt in the USA grew obscenely under Obama and his fellow Democrats running Congress, and will equal the value of GNP (Gross National Product) before the end of Obama’s first term. 

Since early 2011 the Republicans have the majority in the House, one of the three power centers in the American Government, the others being the Senate and the Presidency. The voters ordered the Republicans to cut Federal spending. Today, the fight between Republicans and Democrats reaches a pinnacle. 

The Obama administration is allowed by Congress to spend money until the end of this week, not one day longer. The Republican House proposes to fund the government until the end of the fiscal year, if Obama agrees on meaningful cuts in spending. But, the Democrat controlled Senate and Obama refuse such reductions, while risking the partial shut down of government services. Bureaucrats can be sent home without pay, government buildings can be closed, and most of the payments by the government would stop. However, Postal Service would continue to work, Social Security checks would still be mailed, and all security operations and the military would act as always. The shut down would only affect about 40% of government services. The Democrats believe they can, with the help of the regime friendly press, blame Republicans for the shut down.

But, what is so incredibly dangerous the Republicans are asking before they want to give Obama more money? Only 73 billion in spending cuts until the end of September 2011. This is only 4% of the deficit, a drop in the bucket. The Democrats don’t want any cuts at all, but seem to come to the table in the last few days with a compromise of about 33 billion dollars, or about 2% of the deficit. The budget discussions go on already for several months, since the last election in November, but now a decision is forced upon Congress because the deadline is here. Yesterday, Tuesday, President Obama offered the Republicans his agreement to cut 73 billion dollars, but at the same time he refused to say where he would cut. The negotiations were immediately over. Obama still wrongly believes that people take his words for the truth. His proposal is not enough for the Republicans who want very specific cuts, like for example: the de-financing of ObamaCare, and a significant decrease of the power and money of the Federal Environmental Protection Agency (EPA), by withholding them the power to regulate and tax the production of CO2.

How important this situation may seem, it is only the foreplay to the big battle: the new budget for the year starting October 2011, ending September 2012.

Yesterday, the Republicans shot first in this enormous battle: in the House they proposed their budget and titled it ‘Path to Prosperity’. They plan to shrink the Federal budget with 6.2 trillion dollars over the next 10 years, and they lay out a strategy to completely wipe out the National debt. In their budget, government spending is capped at maximum 20% of GNP. (Belgium’s government spends about 50% of GNP) The ceilings in spending are firmly locked in laws. Income taxes for individuals and for corporations are maximum 25%, and the tax-system is greatly simplified, while at the same time loopholes will be closed, and exceptions will be abolished. Subsidies for so called ‘green’ energy (wind, ethanol, solar, etc.) will finally be nixed. These expensive energies will have to compete in the free market if this budget proposal becomes law. The examination by ‘Heritage Center for Data Analysis’ shows that this budget proposal would bring the unemployment rate down to about 4% by 2015. Today this rate stands close to 9%.

The Republicans are making a risky bet, because the most significant part of their budget proposal consists of completely reform the social programs: Medicare (government paying medical costs for the retirees), Medicaid (government paying medical costs for the poor), and Social Security (allowances for retirees). Remark: all people 55 years and older will continue to be served by the existing programs. Nothing will change for them. But for all the younger people big changes are planned. If the budget passes as is, the government will cease to be the insurer of the medical expenses and will stop paying medical costs. Every retiree will have the option to or not to buy a private insurance from a large pool of free market insurance companies. Under the new plan the government will pay the insurance company a fixed amount per month per insured retiree. This allowance will be enough to pay for a regular insurance, or it will be a discount on the premium for a more expensive insurance, if the retiree so chooses to buy such costlier insurance.

The time social security kicks in will change over the years, and not a penny will go to ObamaCare, a measure that will effectively kill the costly new social program.

The big question is: will Americans believe we can continue on the road as defined by the Democrats? The road to higher taxes. The future of still more bureaucrats inventing still more regulations, exploding mountains of debt and ever larger deficits. A road that will eventually cripple American power in the world, that will mean the bankruptcy of the government, the disappearance of all social services, and the destruction of the value of the dollar.

Or, will the Americans believe the Republicans and reward them with their votes in November 2012? Will they accept the logic that it is unsustainable for the government to keep spending year after year more than what the government takes in? Will the citizens choose for the free market with open competition among private corporations as being the best system to guarantee the maximum wealth for a maximum number of people?

Anyway, the lines for the elections of November 2012 are drawn in the sand. Both parties are assembling their troops, and the canons are positioned. America starts a very existential debate: how will it survive?