As promised, an analysis of the outcome of the debt debate! Obama got his debt ceiling hike, and Republicans got their cuts….or did they?
I want to put a few things in perspective before I start throwing the words billion and trillion around like confetti. Consider this:
A million seconds ago, it was July 22, 2011. A billion seconds ago, it was 1979. A trillion seconds constitutes a little less than 32,000 years ago. Our current debt sits at over 14 trillion. Wrap your head around that!
Ok, let’s dig in:
– President Obama and the Democrats in Congress get an immediate hike in the debt ceiling, which already sits at around 14.3 trillion dollars. Total hike in the debt ceiling will total 2.1 trillion dollars.
– The Republicans were granted approximately 1 trillion in spending cuts over the course of 10 years.
– A committee will be put in place to determine the second set of cuts, or
“deficit reduction measures” to mirror the total increase in the debt ceiling. If an agreement cannot be reached by December 23rd, 2011, measures would be in place to trigger cuts to Defense, and payments to Medicare providers (This is KEY. More on this later.).
First of all, while the President gets his debt ceiling hike almost immediately, the so-called “cuts” trickle in over the course of several years. Future Congresses do not have to adhere to this plan. Let’s be real- Congress doesn’t exactly hold a stellar record in the realm of spending cuts. Keep in mind- these cuts are not cuts. Remember Baseline Budgeting? They are reductions in FUTURE overspending. That’s all.
Secondly, this “super committee” paints a sketchy picture. This isn’t simply an advisory committee. This group’s recommendations are binding in one way or another, whether through the direct implementation of their suggestions, or the Defense and Medicare Provider cuts that would result from refusal of the suggestions. In other words, 12 members will wield an awful lot of power. Seems like I’ve seen this in history before…this committee of 12 idea…was it the French Revolution? Oh that’s right, the Comité de salut public; the Committee of Public Safety, or Committee of 12. That went well, if I remember correctly. BONUS FEATURE: if you voted against the bill, you will NOT be chosen to sit on the committee. That’s convenient. So, let me get this straight- those members of Congress who felt this bill simply wasn’t serious enough about the debt issue aren’t going to have a say in a committee what is supposed to help tackle the debt issue?
The thing to remember here is that this committee is supposed to find over a trillion in “deficit reduction.” It doesn’t say that they are supposed to come up with over a trillion in spending cuts. There’s a big, fat difference. Deficit reduction can mean spending cuts, but it can also mean new revenue (taxes). President Obama himself subscribes to the false premise that the deficit can be reduced by making the “rich pay their fair share.” Golly, those dirty rotten rich- how dare they live out the American dream. I don’t know about any of you people out there, but I’m thanking my lucky stars the CEO of the company I work for is rich. He signs that pesky little piece of paper otherwise known as my paycheck, but oh well. Moving on.
By the by, the Congressional Budget Office scored the debt deal as “workable” not because the cuts balance out the budget, but because it is counting on the revenue from sunset of the Bush tax cuts. Simultaneously, the Obama Healthcare Plan is set to enact quite a chunk of new taxes. Combined, this will constitute the largest tax hike in American history. EVER. Naturally, the CBO didn’t score what this new “revenue” is going to do to the economy overall. But I’ve digressed.
In the sake of ending this on a moderately positive note, I’ll admit we did do something unprecedented in terms of how Washington works. Thanks to the Tea Party, we demanded a prerequisite for a debt ceiling increase for the first time ever. That’s a small victory, I suppose- but when you break down the non-existent (thanks to baseline budgeting) cuts, it does not amount to much.
No sooner did the ink dry from the president’s signature on the bill did we hear a speech of crisis averted; of disaster escaped….and how NOW we can finally get on to (among other things) that darn unemployment issue. I’ve never really understood it when a politician talks about “creating jobs.” Washington doesn’t create jobs. Washington taxes jobs. Washington needs to get out of the way so the private sector can create jobs!
So very few in Washington seem to be looking ahead to the perfect storm on the horizon. It will come. The question is: is there time to avert it?
(If you’re interested in more on the subject, please click the “Resources” tab for more information.)