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Budget Debate Fraud Part 2
This article originally appeared in the Daily Capitalist.
This is the fun stuff about politics. Basically our politicians are being forced to do something they don’t want to do and our job is to cut through the obfuscation to see how they are doing exactly the opposite of what they say they are doing.It is fairly obvious that despite what they are saying publicly, they aren’t making significant cuts to the budget. And S&P and Moody’s know this. Which means that we’ll see our gilt-edged credit rating (a curious term since there is nothing really golden about our national debt) be cut anyway. Please see the comment below on CDS rates on Treasurys.
$917 billion in cuts over 10 years. 2012 spending is capped at $1.043 trillion, $44 billion, or 4.2%, below the CBO March baseline of $1.087 trillion. 2013 spending is capped at $1.047 trillion, $62 billion, or 5.6% below the CBO March baseline of $1.109 trillion.
Then there is this bipartisan committee of politicians who will wrangle over how to cut another $1.5 trillion. If they can’t agree by January 1, 2013, cuts will be automatic across the board, one-half from defense and one-half from discretionary spending. Social Security, Medicare, and Medicaid won’t be cut. The debt limit would be increased dollar-for-dollar by the amount of the cuts.
They promise to have a vote on a balanced budget amendment by year-end.
Will the Bush tax cuts be allowed to expire? Yes, at least that is what Obama says will happen. I believe him.
This morning, David Stockman, Reagan's budget director, saw it this way:
… [H]ow do you like the “compromise” $917 billion Stage I spending cut? Let’s see, that’s about one-half of one-percent of the CBO baseline of $200 trillion in GDP for the same 10-years–but the problem seems to be a deficit that is 10% of GDP or 20X the cut! Also, the only thing it really does is cut $20 billion in FY 2012—the only year that is enforceable or about 1.5% of the $1.3 trillion minimum deficit for the coming year.
The usual players are stepping up to the microphones. The Republican presidential candidates are trashing it, saying they aren’t real cuts and that we can’t cut defense. The House Progressive Caucus (75 members) rejected it as well. They want more taxes and wish to cut defense. Will Boehner survive this budget legislation? Probably, but he’s going to run into a brick wall with many Republicans, especially the Tea Party Caucus.
I think this bill will pass. There are no real cuts here; it just cuts back future spending increases. It accomplishes very little other than to get the debt limit raised and stave off the inevitable for another day. But that day isn’t going away.
By the way, according to this note in the Wall Street Journal, we already have a de facto rating cut:
One-year CDS were quoted Monday at 0.45 percentage point, down from 0.75 percentage point Friday and a move equivalent to a drop of €30,000 in the cost of protecting €10 million ($14.4 million) of U.S. government debt, according to Markit. … Monday’s CDS levels now imply a credit rating of double-A on U.S. Treasurys, lower than their current triple-A rating and consistent with what some ratings companies believe is more appropriate for U.S. sovereign debt. Standard & Poor’s, for example, has threatened to cut the U.S. credit rating if Congress doesn’t produce viable austerity measures that will fix the U.S. deficit over the long term.
As I have been saying, the rating cut will come anyway, yet what have we accomplished?
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Commander has a point; I don't see any accountability any time soon.
Germany got fixed after WW2. They felt pain and then prospered until Ireland/Greece killed them and the G-20.
Too many rich people sure mess things up. In other words, the 400 US top 1% do nothing except fight and rape the world with some magic Ponzi scheme. How can even Warren Buffet believe that unemployment will be under 8% next year? WTF planet is he living on!
Any Average Joe could fix everything in a week while Congress takes months to spend everything dry, and hopes you'll Vote Them In AGAIN!
We are turning Greek bitchez. Waiting to sell my gold crowns at 1950. Not a penny less.
show n no go...blow job on a noodle...or was it a poodle...that is the essence of congressional debate... on US credit. Our money n your problem...never complain never explain. Until someone pulls the plug. Now then, do we have a candidate who would dare do that?
They want to do it, but, not for the reasons we would like to imagine. They are more interested in the political outcomes than the financial outcomes of these debt battles.
Many economists and financial leaders have tried to highlight the absurdity of a debt ceiling which has been raised 79 times. They’re missing the point. The purpose of the debt ceiling is not to limit debt. It is primarily to give politicians an opportunity to come to the bargaining table and battle for political power in the public eye. It’s kind of like starting a fight in the high school auditorium as an incentive for everyone to attend the assembly. Most politicians see it as a political opportunity, not a problem. Few if any of them really give a damn what it means to the personal finances of you and me.
Bring on the term limits.
It's time to put an end to career office holders, and eliminate life-long pensions and healthcare for the same. Many of these clowns have lived in the system of bureaucracy for so long, they've lost touch with reality. They are no longer in it to serve the people, only to game the system for political favor, benefits, sex, and ego.
If the presidency can have term limits, so can the rest of the elected officials. Compared to today's career politicians, I have much more respect for mechanics, first-time drug users, waste refuse workers, illegal immigrants, school bus drivers, wait staff and porters.
who was it that said once you open the treasury (like a feeding trough), it's all over? Oink, oink! And the less the citizenry get the more likely they are to thrash and slash. Slashing one another not the debt. Greed. America wants the party to go on.
I understand that Social Security and MEDICAID would not be cut in the event that the super congress couldn't get more savings, but Medicare IS on the chopping block. Is that what you read too?
Now we know what Obama's 2012 platform will be, "Spending cuts tried! Didn't work! Now it's time for "Revenue Enhancements"
The gov't is simply pushing the problem into the future instead of dealing with real issue, our cocaine-like spending habit. It's easier and in some case more politicly profitable to keep pushing off the hard decisions on their watch. The issue they face is that the same old math is not working any more and the rating agencies can no longer ignore the fundamentals and their financial models. Downgrade may be avoided today but will be here tomorrow and sooner than we all think
JacksPain
http://www.networthprotect.com
The whole debate was a fraud. It was all just for show and to get what they wanted. An unconstitutional Super Congress and no cuts. It is so they all covered their asses with their people "saying had to vote for it at last minute to avoid a default". It was all just fraud and a play with the actors as the elected officials.
But... but... but our representatives were voted in to stop this madness. Don't worry you now have Super Representatives to fight injustice thoughout our lands. Phew... I feel better knowing this.
I totally agree... RATE CUT COMMETH.
Move over Greece, you have company, austerity for the alumni of america.
USA's credit rating will not change. Regardless of what you may believe about S&P and Moody's come to Jesus ratings on European sovereign debt, they are in the pockets of US banksters and the Fed. They are all show and no go regarding US credit.
...They are all show and no go regarding US credit...
I agree.
All I can say is $1.15 trillion Da Gong...