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The Budget Debate Fraud
This article originally appeared in the Daily Capitalist.
The chaos that is our federal government never ceases to please. If you ask me what will happen, I will admit to not having a clue. I wrote a piece two weeks ago on this and my views haven’t changed (U.S. Default? Why Are We Surprised?“). The entire thing is a charade and thus my heart is with the Tea Party Caucus who are holding out for greater cuts and a balanced budget amendment. I have got to hand it to Boehner though for using the crisis to get Obama defeated in 2012 by causing the debt limit issue to come up again just before the elections. But let us not be fooled that the Republicans are actually cutting the deficit.
I listened to O’Reilly anchor Laura Ingram while I was doing my workout this afternoon, and she kept throwing back the argument to Tea Party Congressmen that, hey you’ve gotten what you can get, don’t risk another financial collapse. That is hyperbole. We, the U.S.A., have de facto already met the requirements for a credit downgrade, so it’s going to happen anyway because there are no real cuts proposed. Getting knocked down a minus tick on our rating another $43 billion per year of Treasury interest payments if rates shoot up 500 bps. That is not going to take us down. Yes, I know, it will impact other rates, etc., etc. It reminds me of the Panic of ’08 when Hank Paulson cried wolf and Ben Bernanke was kind enough to remind us that we had a Great Depression once. Those guys still don’t have a clue.
Ask yourself what will happen if they don’t truly cut spending? It will either be inflation or taxes that will result, probably both in my opinion. Either way it will cause long-term stagnation and permanent high unemployment. My vote: shut it down.
Before you think that the solution is for those nice people in D.C. to “just get along” read this from Cato which reveals that the cuts are just a mirage:
by Michael D. Tanner | Michael Tanner is a senior fellow at the Cato Institute
“It is clear we must enter an age of austerity,” House minority leader Nancy Pelosi mourned as she endorsed Harry Reid’s proposal for raising the debt ceiling. Austerity? Really?
The Reid plan would theoretically cut spending by $2.7 trillion over ten years. Even if that were true, it would still allow our national debt to increase by some $10 trillion over the next decade. But, of course, the $2.7 trillion figure is mostly fiction. About $1 trillion of the savings would come from the eventual end of the wars in Iraq and Afghanistan, savings that were going to occur anyway. Senator Reid might just as well have added another $1 trillion in savings by not invading Pakistan.
Another $400 billion comes not from cuts but from assuming reduced interest payments. And, of course, there are $40 billion in unspecified “program-integrity savings,” meaning the “waste, fraud, and abuse” that is the last refuge of every phony budget cutter. The plan rejects any changes to Medicare and Social Security, despite the fact that the unfunded liabilities from those two programs could run as high as $110 trillion. But those liabilities generally fall outside the ten-year budget window, so Reid — unlike our children and grandchildren — doesn’t have to worry about them.
That leaves about $1.2 trillion in discretionary and defense spending reductions over the next ten years. Let’s put that in perspective. This year the federal government will spend $3.8 trillion. Our deficit is roughly $1.6 trillion. Our national debt exceeds $14.3 trillion, not counting unfunded entitlement liabilities. We are talking about raising the debt ceiling to $16.9 trillion. This month alone the federal government will borrow $134 billion. Reid’s cuts would average roughly $120 billion per year.
This is austerity?
Of course, the House Republican plan as announced by Speaker John Boehner is only marginally more austere.
Boehner proposes a two-stage increase in the debt ceiling, with each stage accompanied by spending cuts. The first $1 trillion debt increase would be accompanied by $1.2 trillion in spending cuts over ten years, pretty much the same as Senator Reid’s plan. The big difference is that instead of Sen. Reid’s phony Iraq and Afghanistan savings, the speaker’s plan would appoint a commission — now there’s an exciting new idea — to propose $1.8 trillion in savings from entitlement programs. To be fair, Senator Reid would also appoint a commission — because that’s what Washington does — to recommend additional deficit reductions, presumably including entitlement changes. The difference is that the Boehner commission has teeth. If Congress rejects its recommendations, the president doesn’t get a second $1.6 trillion hike in the debt ceiling.
But $1.8 trillion in entitlement savings over ten years is still too small to encompass real structural reforms of the type envisioned by Rep. Paul Ryan and others. It is much more likely to simply be more tweaking around the edges, perhaps raising the eligibility age or changing the way the cost-of-living formula is calculated. True, changes such as these will have a real impact out beyond the ten-year budget window, but they fall far short of what is necessary to deal with the shortfalls to come.
Making matters worse, both Reid and Boehner are using the time-honored Washington dodge of “baseline budgeting,” meaning that the proposed cuts are not actual reductions in spending from year to year, but cuts from projected future increases. Thus, under both the Reid and Boehner plans, actual federal spending will continue to rise.
With the clock running out, we are now down to fifth- or sixth-best options. But let’s not pretend that this is austerity.
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<--Bond prices skyrocket during panics
<--Bonds will crash if ratings decline
The Cosmic Joke is that bond prices are going to skyrocket if there is no deal made over the next few days.
Witness the downgrade of JGB's, yet those yields have been pounded and now sit at 20-year lows!!
http://www.wallstreetbear.com/board/view.php?topic=84319&post=300426
Anyone can look at a 50-year chart of U.S. Treasuries and stare slack-jawed in amazement at the incredible collapse in bond yields since 1982:
http://www.wallstreetbear.com/board/view.php?topic=84315&post=300407
Any austerity talk just means more hard times for avg people. The gov't will continue to ship cash around the world on pallets and we'll still be ruled by multi-gazillionaires. Of course you can always vote for someone like that michelle chick that lives on farm subsidies, talks to god, and who's husband runs a place that tries to convert gays into hetro. Wow. Really? Boy there are some stupid motherfuckers in the US.
Bring on default....it will be transitory. It will definitely bang the banksters a bit....
Put the blame where it belongs...
All right. It's all my fault. And why not? Really! I haven't done shit to make this world a better place. Well, I rescued a kitten once. No, really, it's pretty much been all about me. Since I have a fundamentally narcissistic outlook, I naturally suppose most people are as selfish as I am, so I take the blame and compound it by 300 million self-absorbed, ego-sops, and that's why we're in the mess we're in. There is no Other. It's all mirrors, this blame-someone-else bullshit. If we really didn't want what we have for a political system, we'd have revolted long ago. I don't want a revolution, I just want a medical marijuana dispensary nearby, and free porn videos.
I would gladly trade the Beamer, McMansion on the fifth fairway, 34 year old blond trophy wife (currrent third one as well as the previous two) and Rolex President for world peace and social justice for all.
Not!
A little sarcasm there.. but look, you cannot confuse ethical free market pursuit of profit enabled happiness with the blatant fraud and theft perpetrated by the financial and political elite and their enablers (lobbyists, unions, socialist special interests).
Place the blame where it belongs.
Stop making sense!
"to propose $1.8 trillion in savings from entitlement programs..." and that's the whole point of this engineered financial melt down which began: to destroy social spending in favor of bankster entitlements and wars of foreign aggression.....
"The reasons for the problem is simple, the world traded socialism for laissez faire free markets"
"When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed."
-Ayn Rand
Laissez faire free markets were always eventually interfered with by liberal minded misguided sloth filled dependent children vs. rugged individualism which in it's very rawness is freedom and our Forefathers understood this.
The best the liberal sloth filled minds in this day and age can do is destroy themselves. As we witness one liberal egalitarian clown after another liberal egalitarian clown do the dance to the contrary tune of the what is truly good for the American people which is live within your means.
The Democrats are politically posturing....Quite revealing quite disturbing. And for those who can't quite wrap their minds around that type of thinking it's because your sane.
All the blame lies with the liberals/Democrats. OK. Got it. I guess I'll move along.
Not at all RR...Republicans whom have the marginal idea that borrowing beyond the capacity to pay back are just as responsible.
I'm not concerned about social change as is the liberal mind who says...Inequality is the ultimate evil.
I'm about individual change.....A rugged individualist I am. This is the basic difference.
OK. I'll take your word for it. Wasn't easy looking past the jargon and sound bites:
Yep, it's those damn Republicrats, errr, I mean. . . Democans. . . uhhh, you know who I mean. It's really hard to tell 'em apart.
dually
Interesting set of comments. We are quick to set blame, placing it on the criminality of banksters, the whores of DC, Boomers or Gen X whiners. Unfortunately, we are so ignorant of Classical liberalism and sound economics that we continue to find blame in some group we are not a part of.
The reasons for the problem is simple, the world traded socialism for laissez faire free markets. We adopted taxes and fractional reserve banking for sound money. We spent the entire accumulated wealth of the world on government directed socialism for a better, more egalitarian world.
Now, when the bill can no longer be paid, we question the efficiency of government, welfare, education, regulation,war, politicians and the "sudden" appearance of debt beyond out ability to pay.
We have been mislead and lied to and now we are mad because we were to stupid to question authority. We failed to educate ourselves. We invested in retirement plans and are now worried about whether they will be available- we failed to do due diligence and ignored the obvious risk of our financial system.
So, the question is, "what do we do now?" I suggest you do what is necessary to live the life you want to live- emphasis on food, clothing and shelter. Stop trusting or putting faith in your government- they are not interested in your survival. Some things will be worse than you imagined and others will be better than you could believe possible. Remember, people want to live and raise their children in peace in prosperity. Black markets will develop in proportion to tax levels and price controls. Government will always transition to greater degrees of tyranny. The debt ceiling will be raised, but the dollar will fall. Buy barbarous relics- they are the only money with value.
Finally, please stop whinning, no one cares.
"We have been mislead and lied to and now we are mad because we were to stupid to question authority. We failed to educate ourselves. We invested in retirement plans and are now worried about whether they will be available- we failed to do due diligence and ignored the obvious risk of our financial system."
How did we fail to do due diligence? If I remember correctly there was no check box on my withholding form that said please make no SS contributions from my earnings. We can all accept the fact that our 401K's were a gamble, said so right on the form, the statements, the website, but SS is supposed to be a sure thing. It never should have been touched for anything but SS. They fucked us. Plain and simple. Sorry for the potty mouth.
Size of government is the real 800 lb Entitlement Program politicians don't want to touch.
If we just froze spending at current levels, no cuts, the CBO would score it as a $9.5 Trillion savings. Inflation and Attrition of government hiring will take care of the rest.
If we then cut 400 billion with actual cuts on top of that from the redundant multiplicity of programs, $400 billion/yr as Colburn has suggested we do, it'd be another +4+ Trillion more for $13.5 Trillion in real savings.
That's all low hanging fruit. If we can't do that, we can't do anything. Some states, which must balance their budgets, are doing that and turning billions of deficits into surpluses.
Big government = less money, less freedom.
nicely put (i would have used heavier language).. my sentiments exactly
It is the fact that it was reasonably and "nicely" put that makes it effective. It's a technique that we could all learn from. Calling other groups names, using diversionary names for the politicians/bankers/plutocrats/etc. is not useful. If you are familiar with my comments for the last 2 years you'll note that I always use the actual names of the individual being addressed. About the only inflammatory name I'll use is "banksters", and that is pretty mainstream. The variations of "Obama", "Boehner", and any other person, serve only to pigeon-hole the speaker and reduce the validity of a comment. It is simply not useful.
Yes, I will try to write only reasonable and nicely put comments. i will also try not to call peolple names, or say "fuck" all the time. I do have one burning question, though. Why does Zerohedge make me want to look at porn?
I never said that profanity was not useful. It certainly serves as a vivid punctuation mark!
Instead of wracking our brains over the mess we're in consider how we got here -- as follows: ". . . . Today the Tavistock Institute operates a $6 Billion a year network of Foundations in the U.S., all of it funded by U.S. taxpayers' money. Ten major institutions are under its direct control, with 400 subsidiaries, and 3000 other study groups and think tanks which originate many types of programs to increase the control of the World Order over the American people. The Stanford Research Institute, adjoining the Hoover Institution, is a $150 million a year operation with 3300 employees. It carries on program surveillance for Bechtel, Kaiser, and 400 other companies, and extensive intelligence operations for the CIA. It is the largest institution on the West Coast promoting mind control and the behavioral sciences.. . ."
It's the bankster led secret societies read the rest at: http://educate-yourself.org/nwo/nwotavistockbestkeptsecret.shtml
We could make a serious dent in government spending by de-funding these Tavistock taxpayer funded organizations including the CIA, and while we're doing that we would be doing ourselves and the following generations a great service.
Seems to this overthehill soul that getting Ron Paul elected president is a big step in the right direction. The current debt ceiling charade is typical of the orchestrations of the secret societies running the government.
So it's not a generational thing, but rather an overall failure of all generations to recognize how we're all being played by the SS overlords . . .
Interestig stuff ...is there any deviant behaviour (research into mind control etc) that Govt does not fund?
Though i agree with you where i diverge violently is in your means of achieving change. You think voting for Ron Paul is the answrer (presumably the Texans that vote for him too were hoping that!). Why do you trust some voting system with candidates who say wat you want to hear and who are massively on the hook to parasite companies just to fund their campaign?
There's more questions in that political process than there are answers i assure you.
Rather than trust in a sack of crap and the most openly corrupt voting process in the World, why not make policies yourself that you can control the outcome?
You want to defund Govt on secret societies. Why trust a politician? Why not reduce all the risk by YOU defunding Govt? Namely stop paying your taxes. It beats paying them and having no control at all where it is spent
Stop paying the wages of these deviants and parasites... Zero Taxes = Zero Govt
They already spend twice as much as they take in in taxes. What difference would it make if tax receipts dropped to zero.
Feel free to organize a "Tax Strike!"
The fact that new securities are being created this very weekend to profit from the uncertainty clearly points to the very rot at the core of our financial casino [system].....
I just watched the Senate table the stupid bill. Then Reid and minority leader fussed like whiny babies.
Fook it. I cashed out the silver and moved into Gold for the weekend.
I'll let that do the talking and we will see how the Nation is come Monday morning. I expect the first circut breaker to be hit within seconds. after opening.
I expect Gold and Silver to take off big.
I expect Anything to do with the full faith and credit to be damaged.
And God help us all when millions of very angry people form a critical mass.
Take care of your families, watch your neighbors and friends and do what you can. The train stops here.
My guess the Walmart Super Centers will be the first flash point at midnight on the last day of this month all across the United States when hundreds of food stamps in each and every store does not work at midnight.
Station yourselves dutifully at the local Walmart on that fateful date, with your cell phones! Gotta document this historic event for YouTube. The looting and burning of a WalMart will wake the masses from their stupor in front of the tube, unless the NFL is up and running, of course.
Will some one please explain -
If we default would not our economy become liquid over nite as dollars come home. With the massive deflation in the real estate sector we have experienced, this would be welcomed... for a while.
I am The Chief
No matter what, we will see international hyperinflation, flight from the dollar into assets. But it will only be overseas and on an global scale, not domestically. We will see domestic deflation, if the FED can vacume up all the excess dollars as they come in.
No debt based equity that is not immediately liquid will benefit.
You want to hold assets that can be sold quickly, without agent. physical Metals, physical cash, even selected stocks.
66, I don't believe you have an understanding of how the monetary system works...
Liquidity is NOT the problem, solvency is!
As long as you don't mind paying $1,000 for a gallon of gas.
Over 20 years ago, the countries in Central Europe (Poland, Czech, Slovak), converted from communism to capitalism. It was very painful process, but it was done, and the countries prospered.
It was a joke in Poland at that time, that some folks need to undergo a very painful surgery of cutting off their snout from the trough. It worked for them. Poland also has a clause in their new constitution, limiting their national debt to 60% of their GDP. It is painful and difficult for them, every year they need to cut budget to meet this consttitutional requirement, but it works. They were the only country in Europe to escape the 2008 recession.
How about if we try the same here, on our good, ol' USA?
I'll plead ignorance here, but what is Poland's political structure? If it's not the same as the U. S. what guarantee do we have that a Constitutional Balanced Budget Amendment would even work? Has not that revered document been ignored at the convenience of the very people elected to uphold it?
And this charade, you think everyone in power knows what they're doing, that this is all part of a grand scheme on the part of "banksters" and people in gov't to bring down the system? Naive Libertarians.
You know I have never heard anyone address the work of Satan in any discussions, other than "Chairsatan", as if he were impersonating Ben Bernanke. You guys are already halfway duped.
It is Satan who has the grand scheme. He wants to rob, kill and destroy. He wants to bring down nations, bring in his own messiah, as the greatest world conqueror, with no human father, born of a virgin and who, rising to power is resurrected through WW.
You really should move your anger away from people and agst powers in the heavens.
you fail christard. Got fight or Flight?
The only meanignful bible quote is Mathew 21:12. Thats all you need to know.
Hey Stiler, I dig Jesus. And really, a well-placed and thoughtful Biblical quote, or a stanza or two from Milton can be both relevant and stimulating. But somehow the 10-cent tract style is off-putting. I'm not saying you should quell the fire in your belly, I'm just suggesting you work to give it a bit more eloquence.
If there is a grand being of total evil and maelevolence, it would be the first to deny its existence. No-one has to believe in it. We're talkin' way behind the scenes. But if real people behave in such a way as to give ever more credence to the existence of such a creature, why do we need it? They are proof enough that evil needs no mastermind when human greed, incompetence and moral corruption work so very well on their own. Welcome to hell, my boy! The thermostat can only be turned up!
"You know I have never heard anyone address the work of Satan" NO FUCKING SHIT IDIOT. Tooth fairy flat earth fuck. Keep clicking your heels together and the king of the jews will be by soon to save you.
Wow. Some people are just trophies of the Devil. Man, he takes PRIDE in you, bud.
So you don't beieve in a literal hell?
No, I dont believe in YOU sheeple.
God does not need your fear... the ELITE do., same ones who brainwashed you with the idea there are phantom consequences and invisible lords... meanwhile, you continue to pay tribute in taxes to the State.
Hell on Earth maybe, and we may live long enough to see it.
Take your religious drivel elsewhere....
How about taxing the Mega-Billion Dollar Bonuses Wall Street Bankers handed themselves from the last two Bush/Barry Bailouts? This would be my starting point...do they seriously believe ANYONE would "tighten their belt"..."share the pain"...etc if the very Bankers who caused this keep receiving Billions from the Fed Wide-Open Window? What I see "on the ground" is that Americans are ready and willing to take cuts as long as it is "Fair & Balanced.".
Shut er down. Really? Thats the best the baggers can do?
Read Chapters 25 & 26:
"The Creature From Jekyll Island, a Second Look at the Federal System",
5th Ed., G. Edward Griffin, ISBN: 978-0-912986-45-6
No: first "er". Then, you and the rest of the parasites.
The end of Extend and Pretend seems very near.
4T in real cuts (now exposed as truly impossible politically) wouldn't alleviate the problem as the US debt would still grow by 10T over the next ten years. Whatever happens, we know it will be a solution that solves nothing. So does the world.
The US debt and currency problem is now exposed as inexorable and incurable.
1. Slow growth at best now and into the foreseeable future. Nowhere near enough to produce the revenue needed.
2. Populace and corporations unwilling to accept larger tax burden.
3. Populace addicted welfare payments (social security, medicare).
4. State and local government already at the break point.
5. Debt now beyond the point of paydown unless 1 through 4 were different.
6. The US debt catch-22 now exposed to the world through the very public self immolation of the debt ceiling controversy. The cat, as it were, is no longer in a Schrodingerian limbo (quantum mechanical state of both existing and not existing simultaneously). The cat exists and all see it as a cat.
6. Europe in a similar state of Schrodingerian collapse (ie collapse of plausible deniability or uncertainty).
7. Japan still in Schrodingerian state but not much longer.
8. China in one helluva fix but having the hammer of an extremely large army that will enforce martial law brutally and effectively.
There is no place to hide for holders of the major global currencies. The markets will respond to the end of Extend and Pretend by repricing fundamental assets - bonds down, stocks flat to sl. higher, gold and silver higher, energy assets higher, arable land higher. There is, however, not enough arable land, oil, gold and silver to absorb more than a sliver of incremental buying.
This is a gargantuan dilemma for institutional fund managers. As individuals, we can move ahead of the pack - but as institutions, that keyhole is very small indeed. Their relative performance fee model, however, allows for the delusion to be carried on much further than it would otherwise be - and accounts for the passivity to date. How much longer those whose money they manage remain quiescent is difficult to imagine.
How will the US government respond? I wish I knew. I do not think it will be pretty. Felix Zulauf thinks it will be increasingly fascist.
It's corporate lobbyists that are holding this thing up... not the brain dead politicians..
Like they are gonna get reelected? Not even with a warchest equal to the national debt are these idiots getting re elected.
Not sure anyone is still reading this thread, but these are excellent observations. Many around here wondering about why money goes to $, bonds, etc. The issue is that there is no where to go.
Completely agree. The collective brain power of ZHers is well above that of mere mortal economic sites. It is obvious by the quality of discourse between members. Now if we could just put everyones mensa-like economic quotients to work for finding solutions. Hmmmm.......