Maybe Washington can start paying invoices with $3 bills — because the "dramatic" agreement to "reduce the national debt" is as phony as a three dollar bill.
Weeks of nearly round-the-clock negotiations among the White House, House and Senate have led to an "historic" debt deal that consists almost entirely of fluff, doublespeak and empty promises.
The politicians involved get to claim victory, and presumably will be rewarded with votes and campaign donations from the special-interest groups that, pretty much across the board, were spared any pain. Young people of the United States once again are hammered. If the deal becomes law, the national debt will rise again dramatically, while there's no guarantee any cut will materialize — and the bill for this recklessness will be passed along to those under age 30.
Consider:
* The closest thing to a tangible "saving" in the agreement is $1 trillion in caps on discretionary programs, spread over 10 years. The new national-debt ceiling allows borrowing to rise by $2.4 trillion, with a plan to pay back less than half that amount over 10 years.
Get it? A huge surge in spending now is called a "spending cut," while actual cuts don't take effect for up to a decade. And that's setting aside that inflation means the present value of money spent today sharply exceeds the value of smaller cuts many years in the future.
* In December 2010, the White House and Congress agreed to $930 billion in fresh deficit spending, as the fourth stimulus plan enacted since the 2008 recession. When special-interest groups say they want a "second stimulus," remember, we've already had four. So $930 billion in extra borrowing right away is followed by a plan for about the same amount in savings years in the future. This is what Democrats and Republicans alike today are calling "fiscal discipline" or "draconian cuts." If you emptied your bank account today but declared you would become careful about money 10 years in the future, people would laugh at you.
* By projecting the only tangible savings — which aren't even specified, but are merely caps — into the future, the plan allows Congress to cancel them. In 2012 or any future year, Congress will say, "We can't have caps this year because of the [INSERT ANY WORD CHOSEN AT RANDOM] crisis. We are postponing action till next year." Rinse and repeat.
* The deal raises the federal borrowing ceiling by $2.4 trillion. This means Congress will immediately spend another $2.4 trillion. That basic point is being overlooked.
You've got a debt ceiling on your credit card. The ceiling is there for emergencies, and all responsible borrowers work to stay below their credit ceilings. Experience with the national debt ceiling, by contrast, shows that every dollar of available debt is always spent. Announced in doublespeak as a "savings" plan, this deal guarantees the national debt will rise another $2.4 trillion. The moment the deal becomes law, members of Congress from both parties will see an added $2.4 trillion in the cookie jar and begin raiding.
* A new "joint bipartisan committee" will be charged with identifying another $1.5 trillion in cuts. Doing nothing today, while appointing a committee that will make the tough decisions later, is one of Washington's worst traditions of pure phoniness.
The president, Speaker of the House and Senate Majority Leader just negotiated nearly round-the-clock for weeks and they couldn't even agree to cut programs that are transparent boondoggles. So bring in the special committee! This is total abdication of leadership by the president and both political parties.
* Will the bipartisan committee have the stones to impose cuts? Since January 2007, Congress has already been operating under Paygo rules, which specify no more deficit spending — unless waivers are issued. Waivers are always issued! The national debt has increased by $6.6 trillion since Paygo "discipline" was "imposed." Likely outcome: the bipartisan committee holds somber meetings and recommends cuts, then Congress issues waivers, citing the [INSERT ANY WORD CHOSEN AT RANDOM] crisis.
It's been a mere nine months since the last bipartisan deficit commission issued its recommendation, and those findings have been totally ignored by the White House and Congress. In a postmodern touch of humor, the last bipartisan deficit commission titled its findings "The Moment of Truth."
* Won't the proposed balanced-budget amendment fix the problem? Assuming such an amendment passed Congress, it must be ratified by three-fourths of the states. There's no chance of this — because the states love deficit spending! Nearly 40 percent of state and local government spending is financed by the federal government — Washington borrows, then ships money to the states. If a federal balanced budget amendment went into effect, the states would have to fund themselves, rather than rely on Washington for free cash (all the while denouncing "the big spenders" in D.C.).
Calling for a balanced-budget amendment is classic political delaying tactics, since even a successful amendment would require many years to ratify. Nothing stops Congress from balancing the budget right now.
* Congress continues to drive the nation deeper into debt when there are many problems but no national emergency, and before the Baby Boomer retire. Extra borrowing sure hasn't fixed the economy. Japan's example shows that undisciplined borrowing slows economic recovery by causing business to think the nation is going downhill, and thus to hoard cash rather than invest. That's precisely what is being observed in the United States right now.
* The worst aspect of the phony-as-a-$3-bill national debt deal is that the middle-aged men and women who run Washington are acting irresponsibly, then passing the problem along to their children. What kind of adult harms the future of his or her own offspring?
Deficit does not equal stimulus. A loss of tax receipts due to lowered incomes and lower tax rates does little to fill the gap in aggregate demand caused by unemployment and the overhang of household debt. The same is true of income maintenance, e.g. unemployment insurance and food stamps – spending which rises in a deep, prolonged recession, but can’t do much more than blunt the worst deflationary effects. These kinds of things account for most of the added deficit, and tarring them with the brush of failed ‘stimulus’ is just plain wrong.
If government spending is slashed in a way that further depresses aggregate demand while the economy remains in recession, the long-term result will be to aggravate, rather than alleviate, the burden of national debt.
The problems are too intractable to solve by merely throwing money at ‘special interests’, but the situation remains too dangerous for brute-force ‘fiscal discipline’, no matter how well intentioned. Any maybe it’s all too complex for representative democracy, as we now understand it.
So, are the rumors not true – the GWB era created 5-6 trillion dollars of the current 14 trillion? And the debt ceiling has been raised repeatedly in previous administrations, including those of Ronald Reagan and GWB.
Isn’t the bigger issue military spending? Totally off the books, in terms of accountability (cf. Peter DeFazio’s address to Congress a few weeks ago on that) – but more importanly, the one budget which has clearly outgrown its mandate.
Wikipedia on “military budget of the US”:
According to the Congressional Budget Office, defense spending grew 9% annually on average from fiscal year 2000"“2009.
The 2009 U.S. military budget accounts for approximately 40% of global arms spending and is over six times larger than the military budget of China …
“total abdication of leadership by the president and both political parties”
Which assumes they ever had “leadership” to begin with. Big assumption, Mr. Easterbrook!
hyperlux It is 7-8 Trillion. Obama has accounted for only 1.44 Trillion(as of when the numbers were published at the beginning of the year)
“You've got a debt ceiling on your credit card. The ceiling is there for emergencies, and all responsible borrowers work to stay below their credit ceilings. Experience with the national debt ceiling, by contrast, shows that every dollar of available debt is always spent.”
You got it!
“Weeks of nearly round-the-clock negotiations among the White House, House and Senate have led to an "historic" debt deal that consists almost entirely of fluff, doublespeak and empty promises.”
And your point is…?
This article is ‘right on’ – this ‘deal’ is a show hoax of political granstanding and brinksmanship which does nothing to solve any of our problems. They would have to pass a deal with spending cuts and revenue increases that would reduce our debt by $1 Trillion per year for the next ten years to make a correction useful enough to keep the country from going down the tubes. We need to be back at a pre-Bush debt and this would require pre-Bush tax rates and spending. Neither party has the guts to do this since their ‘real constituents’ would squeal with horror – and folks, the real constituents aren’t the middle class sheeple. Why don’t any of the media writers show a chart of the debt over the past 20 years so that people can see what is really happening? (ie the debt is rising exponentially like the buildup in a nuclear reactor that is about to blow).
hyperlux – It’s probably impossible to cut defense spending without damaging the finances of defense contractors, increasing unemployment, decreasing the flow of currency through the US economy, and sending the global economy into collapse.
Given the failure of representative democracy (TheCageNovel), and given the enormity of the US defense sector in the global economy (hyperlux), and given the well disciplined, well organized, and heavily armed nature of the US military, one could argue that the solution to the economic and political crises of the US in particular, and the world in general, is so obvious that there’s no need to state it.
Correct me if I’m wrong, but isn’t the “1 trillion dollar spending cut” only a reduction in the CBO baseline for spending? My understanding is that spending will continue to rise, hopefully, by 100 billion a year less (if you believe in the tooth fairy).
Congress must vote NO on this debt ceiling compromise!
If the package worked out through the debt ceiling negotiations with the Obama administration is passed, it means that the United States is sunk overnight, and the U.S. and the world goes into a Dark Age.
This agreement supersedes the authority of congress entirely, creating a super-congress, a group of 12 congressmen that will ram through massive austerity cuts, even if the rest of the Congress votes NO on the proposed cuts.
Lyndon LaRouche issued this urgent call. “We are in an emergency situation…What the press is saying is misleading. This is intended to be the Hitler Coup, right now. You’re going to see a lot of dead Americans piling up on the streets, and I mean it literally-unless we turn this thing around.”
Everybody needs to mobilize today, before this vote comes up, and call their congressmen, city councils, institutions, and stop this atrocity before we lose the United States!
The only line of defense we have to this coup is Glass Steagall, a bill in the congress right now (HR1489), which will put up a firewall between the US population and the toxic financial institutions–no more bailouts, no more budget cuts!
Call your Congressperson today and fight like hell! Don’t stand by and let Hitler’s Ermaechtigungsgesetz destroy the United States today!
Here is an emergency leaflet–get it out everywhere! http://www.larouchepac.com/node/18953
I could not agree with this article more. The result from this deal leads to nothing except more debt and more pain. We have already dug a grave, now this debt deal is the engraved tomb stone.
What a well written, realistic picture of where we are on debts and deficits as a country. Great job.
Yes, the first $1 trillion in “cuts” is reductions of planned future increases. The new Deficit Commission Du Jure is charged with making actual cuts, not just reducing the rate of increasing. When Ronald Reagan proposed his first budget, for FY82, establishment Washington spoke as if the world were ending — because the budget contained reductions of future increases, though hardly any actual cuts. To paraphrase Reagan, government spending isn’t the problem — the assumption that government spending must always rise is the problem.
aperebik – The Great Dark Age started when humans first learned to talk. Don’t panic. We never had anything worthwhile to look forward to to begin with. (To apocryphally quote that redoubtable foe of Nazi gangsters, Winston Churchill, the preposterous rule on prepositions is a rule up with which I will not put.) Our collective wisdom reached its nadir with the development of comment sections on web pages. We have no place to go but up, surely.
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