While the government wrangles over a whopping $30 billion in spending cuts for the 2011 budget (with fiscal 2011 already half way over), which threaten to shut down the government yet which we all know will be successfully addressed in the 11th hour, with a compromise of sorts confirming once again that both parties are incapable of dealing with the relentless climb in US government debt (and oh so eager to turn their back on campaign promises when faced with reality), which unfortunately is the only fuel driving the US economy, the GOP's Paul Ryan is expected to announce a whopper of a 2012 budget, one which trims a record $4 trillion in spending over the next 10 years. What this means is that the GOP is about do away with Obama's health care "revolution" and things are about to go back to the way they were. Not only that, but any hopes the Fed may have had that congressionally-mandated fiscal stimuli will take over the central bank's monetary boosts, can be put to rest, meaning that very soon the Chairman et al will be back to the drawing board debating just how much more cash needs to be injected in the economy next time around (as a rough guideline, we expect it will be about 75% of the next debt ceiling increase). And while we expect the current government shutdown crisis will be resolved within a few weeks on the back of promises of massive cuts over the next decade, which will never happen, the only thing to watch for is how big the debt ceiling increase will be when announced some time over the next 3-4 weeks. Everything else is smoke and mirrors.
The head of the House Budget Committee, Rep. Paul Ryan, says President Barack Obama is "punting on the budget and not doing a thing to prevent a debt crisis."
Ryan tells "Fox News Sunday" that GOP budget-writers are looking at cutting $4 trillion-plus in spending over the next decade. That's more than even what the president's deficit commission recommended.
Ryan is talking about spending caps and long-term belt-tightening for the Medicare and Medicaid health programs. He wants older people who are wealthy to pay more out of pocket for their health care.
The GOP plan for the budget year that begins Oct. 1 is coming out Tuesday.
And while the government haggles over numbers both too big and too small to matter, here is William Buckler's appropriate summation of where we stand, courtesy of the latest edition of his Privateer newsletter:
The latest proof that the financial authorities will literally do “whatever is necessary” to keep the markets from keeling over has led to a HUGE rebound on global stock markets in the second half of March. The proof that the US government will give no more than the most cursory lip service to any talk of lowering their deficit spending makes this rebound more dangerous the higher it goes.
President Obama is putting pressure on both the Republican and Democratic leaders of Congress to “make a deal” on a proposal to “cut” $US 30 Billion from the deficit in order to finalise a 2011 budget.
That $US 30 Billion includes the $10 Billion which has already been cut to keep the government “in funds” - until April 8. To put this in perspective, the Fed’s QE2 program is monetising just under $US 30 Billion of Treasury debt paper - EVERY WEEK.
No QE3? (and yes, there will be a modest delay between QE2 and QE3 - after all 2011 is following the 2010 script. To the penny.)