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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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The fraud is not that the cuts are not large enough to provide real austerity, the fraud is that the debt can never be paid and the principal will always grow, no matter how much you cut. The fraud is in trying to get people to buy into austerity, as you are doing in your column.
PEOPLE DON'T WANT AUSTERITY, THEY WANT JUSTICE!
Consider that the whole system is corrupt. The banks are corrupt, the regulators are corrupt, the politicians are corrupt. Consider the trillions of dollars that have been given to banks who have then turned around and paid themselves bonuses even larger than before the crisis. Consider that nobody has been brought to justice except for that scapegoat, Madoff.
Have you ever heard of a perpetuity? Consider a principal value of $1000 that pays $40 interest each year. If the market rate of interest is 4% this "perpetuity" can go on paying $40 forever. The principal never erodes. Now look at the national debt as a sort of perpetuity for the top 0.1%, who get the interest on that debt. This debt can only increase. Thus, the effect is to increase the amount of interest received by the top 0.1%. All cutting entitlements does is enable the payout to recipients to be deflected into paying the interest on the national debt--given that the principal can never be reduced. Thus, the amount cut from entitlements goes directly to the top 0.1%.
It figures that you would quote from the Cato Institute--a right-wing proganda mill that does the bidding of the top 0.1%. The owners of this country are the only ones who really want austerity imposed on the rest of us. Let's go for justice instead.
JUSTICE, NOT AUSTERITY!
I think Madoff is the bankers version of Jesus Christ..
Actually, it's going to require both. And that'll take Civil War.
The Republican "plans" really are austerity. Let's not forget that.
You might want to go back and actually read the article you are commenting on.
Nothing being done does not constitute austerity.
The entire economics profession is a FRAUD!!!! The idiots at the Tea Party don't really understand what a balanced budget means -- the end of the welfare state, stock market crash, crime, rampant looting and total social chaos!!! Fuck 'em, hope Obama fights them tooth and nail.
Balanced budget? How about an ever-shrinking Federal budget? The end of the "welfare" state? Bring it on! What do you care, you live in Canada?!
Social Chaos is gonna occur no matter what.
An armed society is a polite society, my Taurus P99 .40S&W sez so.
Obamatron is in over his nappy head.
"The entire economics profession is a FRAUD!!!!"
After a truism...its followed by...
"The idiots at the Tea Party don't really understand what a balanced budget means -- the end of the welfare state, stock market crash, crime, rampant looting and total social chaos!!! Fuck 'em, hope Obama fights them tooth and nail."
We've finally gotten down to brass tacks.
The end of the welfare state...good or bad Leo? Stock market crash?...if the fundamentals are there explain why that would happen unless your first statement is true..."its a fraud". Crime?...when or where has crime ever been eradicated by more legislation or more debt issuance for social servies to appease the criminal element?...isn't that like ransom or tribute to the less fortunate so that other more fortunate, more well connected, social facists can continue on pillaging labor?
And the cherry on top..."social chaos"...as if currency debasement through ever increasing debt issuance does not lead to social chaos.
You're a weird bird Leo.
http://www.youtube.com/watch?v=kr8-E8may2Y&NR=1
Leo, all them extra goobermint workers that are employed by the fake money do not make your life miserable with regulations, they make mine. You really wouldn't need your gym membership or your yoga if you tried an honest day's work out on my farm. Screw all the FIRE economy parasites. What exactly is your problem with the market pricing everyone's value accordingly?
If Leo doesn't want to work on your farm, Elmer, he can come and work on mine. Maybe you know the answer to this question- why, after fighting my machinery, worrying about the weather, dealing with Federal Land Management dip-shits, getting sunburned/greasy/sneezy/dogtired/frustrated etc, I finally get the hay up, and a quick calculation tells me I made about 2.34/hr, Why, I ask, do I feel so victorious? Well, you know how to make a little money farming. Start with a lot.
But to go on- subsistence is a whole 'nother economy. Somehow, (if there is no loan involved), one can get by, because the basic calculus is one of calories, not dollars. Then hard work is its own reward, a zen meditation, and keeps one out of trouble all at once. After all, what else is one going to do? But if independence is shifting one's personal economy from dollars to calories, then how will lazy, incompetent, and morally bankrupt individuals live? In a calorie economy, they don't. The fuckers starve to death, or end up at the end of a rope. That's why they have to force us all to live in a dollar economy.
I say, let the default happen. The sooner the dollar dies, and all fiat dies with it, the faster darwinism can clear out the dry rot. Here is economics I can understand. 2000 calories in every day to equal 2000 out. 1500 will make you skinny. 900 will make you a living skeleton. 700 will make you dead in 60 days, max. In the calorie economy, there is NO deficit spending.
I spaded up an eigth of an acre section of the garden this spring, Thoreau style, and planted various beans, squash and cucumbers. I figure I burned about 4,000 calories a day. Dropped pounds despite my tremendous intake that week...
And I hope the military honors their oaths as to domestic enemies and takes the muslim out with one clean shot.
Come on Leo, enlighten us.
From your post I'd say you must be sucking on the government tit, or just trying to cause a stir.
CNBC pole........does the us deserve downgrade.
http://www.cnbc.com/id/43933282
It is the people who constitute the basis of Government credit. Why then cannot the people have benefit of their own gilt-edge credit by receiving non-interest bearing currency-instead of bankers receiving the benefit of the people's credit in interest-bearing bonds.
Thomas Edison
It's all to sidetrack the American Sheeple from the bank fraud of historical porpotions,with the blessing of the puppets from the White House and senate.
The Bankster is your ENEMY,and he is paying for the side show.
It's nice to see some common sense about the Banksters. They are laughing their ass off at this.
The most frustrating thing I hear from baby boomers is, "Oh, it won't happen until after I'm dead." People say a lot subconsciously. What they're actually saying with that inane comment is: "please god (Ben), let's kick this can down a the road a little more until after I die. I love my comfortable, snooty lifestyle and don't want to give it up. The kids? Screw the kids. They'll make out alright, somehow." Then they teach us to live just like they did, to value the same vapid, soul crushing - society debasing materialism and status-consciousness that they espoused that got us into this mess in the first place. So how the hell are we supposed to make out alright? The answer will be to go our own path, but we won't be getting any help from the boomers, who have nothing but their fingers crossed that all will stay the same just while they are alive with no thought as to what will occur to their future generations, or how to prepare them for it.
My Daughter and Son will be covered via Golden parachutes.
When the U S Government Shuts Down......
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/07/when-governme...
OT: Hilarious 2 Min Vid
Upside Down.....
http://www.youtube.com/watch?v=W0Uju3tYS2s
Note to the Tea Party....
We are not amused.
Signed the people.
These PHUCKIN' A-Holes need to be drug around the cobblestone streets and stoned by citizens.
Oh if you've voted DEMOCRAT OR REPUBLICAN THE LAST 20 YEARS, YOU'RE AN IDIOT.
PLEASE DO US ALL A FAVOR AND KICK YOUR OWN ASS!
Have a Nice Day :-)
Hey Sparky,
Until I see you driving a vehicle bearing a plate that reads ZH while screaming "I am Sparky!", with one of these A-Holes attached to it...
PLEASE DO US A FAVOR AND SHUT THE FUCK UP!
Signed,
Not Impressed by Your Outrage or Your Anonymous Bravado
Uhhh... you're lookin' kinda anonymous too there, Flatt-Rader.
Flat 'broke' trader you seem cranky. I suggest more prunes
I know I know...Flat 'tire' Trader "You kids get off my lawn' duly noted, now please run along for the early bird special. Its getting late
They sound like my girlfriend who insists that buying something on sale is "saving money".
How can you afford not to buy it?
I agree completely with everything you said in the first papagraph.
Our better angels have not devolved to D.C. They've migrated who knows where.
But I really can't blame them for their M.O. since most if not all of the human beans I know cannot stand the truth when it comes to serious matters, but mention the most trivial thing you can think about like gay men should have the right to get married ( I think they should be just as miserable as most other married peeps) and watch the storm.
This country cannot be governed. Congress would better to simply quit their jobs, after they vote to divide the nation into Californica, Arizona, New Mexico, and Colorado into one country (that should merge with Mexico) and Jew Nork and Jew Nersey, and the rest of the eastern seaboard into another country, and the rest into about a dozen other countries. They can then all have their own POTUSES, Dictators (that would really straighten out Florida and Californica in a hearbeat), or Benevolent Monarchs, witches or whatever other form of self-governance they choose.
Time to upset the applecart because the most insane thing is to continue with the same methods that do not give you the results you seek, n'est ce pas?
Politicians' austerity is laity's spendthrift.
Agreed it is a fraud because they are politicians and not economists. These are all political 'adjustments' to economy because thats all they know how to do. And as far as downgrades go from clueless ratings agencies, well I would have to ask them what the rating is for Japan. They have far more debt than the US and now they are the third ranked economy.
A trillion here, a trillion there. These so-called negotiations will not make a dent. The next ten to twenty years will be defined by an enormous demographic shift. As the first wave of the baby boom generation has finally hit the age of 65, most of the 77 million of us will now start to become net takers instead of net contributors. For the next 19 years, 10,000 boomers will be achieving retirement age each day. It going to take 2 workers to support each retiree. Corporate America planned for this long ago by phasing out the old traditional retirement plans and replacing them with 401K's and IRA's. Now state and local governments are facing insolvency due to under-funded pensions and poor planning. The current debate in Congress concerning deficits and debt ceilings are a short term smoke screen which does not address the true demographic problems they know exist but refuse to acknowledge. The amount of unfunded liabilities which are promised to the boomers is a staggering number. The estimates range from a low of $53 Trillion to a high of $202 Trillion over the next 20 years. Lets see the Federal Reserve print that up!
We boomers were lucky. We were the most healthy, educated and privileged generation ever born. Our youth was spent virtually worry free. Our college educations were inexpensive, gas was cheap, jobs were plentiful and our futures were bright. We were the "Hippies" of the late 1960's and early 70's. Love was free and drugs were cheap (Or was it the other way around). Then the 1980's rolled around and we became "Yuppies". We began to believe that success was our birthright. We bought our BMW's and wore our V-neck sweaters. We turned conspicuous consumption into an art form. Hell, even Newsweek Magazine gave us our own year (1984). We were so busy clamoring to the top of the corporate ladder we forgot to develop any job or management skills which would lay a foundation for future generations to flourish.
Then as we aged, we hit our peak spending and borrowing years in the 1990's, we went a bit middle age crazy. We splurged on second homes and McMansions. We thought fuel would be relatively cheap forever and bought gas guzzling SUV's. We also padded our financial statements and maxed out our credit cards trying to "keep up with the Jones's". Some of our brethren became bank CEO's and leading politicians, whose unethical and irresponsible behavior has been a reflection of our entire generation. We didn't want the party to end and they just tried to prolong it for us. We wanted it all and never learned nor cared for moderation.
And now in the Autumn of our lives it looks like we are going to get it all (of course in devalued dollars). We will leave those coming up behind us with nothing but debt, austerity and a lower standard of living. We will be reigning in our spending and hoping to save so we can offset future inflation. The malls, our cathedrals of consumption, will be ghosts towns compared to what they were, with "30%-70% off" signs decorating their stores windows. We will be net sellers of equities and mutual funds soon, not net buyers. Therefore, trade accordingly. It was fun while it lasted but now the piper must be paid. You know the old saying; the longer the party the bigger the hangover. Well, this hangover may last 25-30 years until the last of my generation are dead, either through natural causes or intergenerational warfare.
Why does everyone seem to believe the myth that "boomers" were all like this? And what was so magical about Jan. 1, 1946? It's conceivable that most "boomers" have tried to live life within their means, particularly those who were lucky enough to not live in major cities. And were they all really picketing in the streets in favor of Medicare? Uh, no, not even a significant percentage.
Remembering that the "boomers" did not invent social security, and were not old enough to use MasterCharge, makes it difficult to honestly put blame on an entire "generation" (whatever that means) for the current dilemma. There's more than enough blame to go around.
"Baby Boom" was nothing but an advertising strategy aimed at the parents of "boomers" that became well-practiced by the time "boomers" had any cash of their own to spend.
Unfortunately, the "boomers" seem to have become the scapegoat (and thus the equivalent of the "aristocracy" of the French Revolution). Where will the guillotines be located?
alaricbalth,
Well, if racism or sexism aren‘t enough of a diversion, then how about age-ism?
The cause of the problems is NOT found by generalizing about astrological birth dates, nor by the equivalent methodology of generalizing about generational birth dates.
Nor is the solution or any reasoned understanding of the problems to be found by promoting inter-generational warfare.
I suspect even if all the “old people” were liquidated, the problem of finance, debts, wars, concentration of wealth, environmental destruction, abuse of human rights, and the misdirected and maladjusted economic and political system would continue. Younger Napoleons and Younger versions of GWBush solve nothing.
The only way anything will ever get changed for the better requires understanding what’s wrong about the present situation, the present corporatocracy.
The wealth of the world is sucked upward, not downward. The elite concentration of wealth and power has never been greater. The economic problems are not caused by the crumbs thrown to the masses, or to the elderly, or those on “welfare”. Those crumbs are more than paid for, in one way or another, by the lower ranks, and the crumbs are more often promised than actually delivered. The wars are not fought to protect the interests of the poor, but to the benefit of an elite few. The laws are not designed to divest the wealthy of their riches, nor to take away corporate power, but to further enrich them, and solidify their power.
The whole arrangement has been heavily reliant on a divide-and-conquer strategy from the beginning. Ask the native Americans how the continent was conquered. Of course the crumbs are parceled out inequitably. How better to promote diversionary infighting?
Maybe, just maybe, we should all be giving fewer excuses, and more attention to the trillion$ handed out to financial racketeers and global militarists.
Federal Reserve handed out $16 TRILLION to banksters (i.e. themselves)
http://www.marketoracle.co.uk/Article29506.html
Mideast wars cost $7 trillion
http://www.infowars.net/articles/february2008/290208Iraq.htm
Through 2035, Social Security completely pays for itself out of payroll taxes and previous loans to the US Government. Solvent,, that is, unless the US Government defaults on its loan from SocSec.
Why would the US default? Why, to be able to reimburse financial racketeers for their derivatives gambling losses and other bad investments. And to pay for global militarism.
Yes quite right, and at present the Boomers run said corportocray/kleptocracy/I might be a millionaire but I sure as hell better get my SSI checkacracy/how dare you question the standardacracy/I'm gonna put my my parents in a medicaid facility after I hide every last cent of their moneyinistas.
It is the boomer generation who is the divisive element in todays society. In my opinion Goldman Sacs is simply a manifestation of the best the Boom has to offer. The intergenerational war is happening but it the younger generations future being liquidated. Under the perverse idea of: 'lets invest in the elderly they have our whole lives ahead of them.' The source of the problem is not a mystery. What is mysterious is where the greatest idealists of the last centery have scuttled off to right when we need their leadership and insight. Where is the voice in the wilderness. But please go on I'm sure some Native American needs more patronizing bullshit from an over indulged Boomer.
PS All that money you note above being given away recklessly. Seems it was all done by people from the Boomer generation. I'm feeling like a native these days.
Ben Franklin should have been ostracized by the Founders because he was "too old".
Obama and Geithner are insightful because they are younger than Kucinich or Ron Paul. I suppose Justin Bieber and GaGa are even more insightful.
The soldiers, police, and prison guards of the empire according to the "generations" believers, must all belong to that "bad" older generation.
Get a grip. We are all being played, young and old, by an empire led by an elite few, who gather power from the global corporations they head. Only an elite few of "boomers"(and others) are running the show. A 'revolution" based on not getting your share of the empire's scraps isn't going to fix anything.
We need a Ben Franklin BUT he must be from your generation! The very reason I mentioned a 'voice in the wilderness.' Is it you!?! Please get on with it we are waiting. Until then I think I will rely on myself. I never said my generation was more insightful just more realistic. We fully understand We will get nothing even though we are dutifuly paying in to the system. And quite frankly I'm fine with that. What your generation needs to be fine with is not getting all theirs either. Sorry David Crosby no third liver transplant. By compromising on this very point we can save this Republic. And turn our attention to the real enemies as you have identified above the Native American's ....joking
PS I have a great deal of respect for the old. I don't think Boomers are old just generally self serving and profligate. Except you of course.
PPS. This revolution should be Inspired by the Boomers
Managed by my generation and
executed by todays 20yr olds
But the Boomers are AWOL or on their way to Canada
You are fucked. Find a way to deal with it.
Not that they'll notice with their faces pasted to an iCrap of some sort. Boy, that Angry Birds sure is fun! Maybe texting and driving will kill off the lesser genetically proficient of them, and damn the collateral damage.
Agreed
So potential solution, posited by the generation immeadiatly following Boomer dubachery.
Kill yourself save America save the world
Turn malls into long term care facilities run by the Tea Party health care volunteer division
Invest in an alternative energy system utilizing Boomer hot air and methane expulsions to fuel America
Stop whinning and fix it
Don't trust anyone over 60
Move to France
Give Peas a chance
Learn something from your parents who grew up during the Great Depression
Whatever just stop spending money you don't have
I say shoot yourself its more proactive. Or let intergenerational war clean it up. Then the next two generations can fix it. The Boomer Idealist has morphed in the Boomer Idealog soon to be the Boomer Tyrant sucking every last resource up for their bennifit. Regardless I just hope every Boomer remembers who will be changing their diapears, cleaning their cathaters, and filling their feeding tubes. Welcome to the Boom - bust
Hey Junior,
Right back at you.
Boo Fucking Hoo.
Cathater removed
problem fixed
I win
You don't win. You lose. You have no future.
LMAO. Thanks.
We boomers were lucky. We were the most healthy, educated and privileged generation ever born. Our youth was spent virtually worry free. Our college educations were inexpensive, gas was cheap, jobs were plentiful and our futures were bright.
I guess you missed that whole cold war nuclear, Civil Defense drill thing as well as the Vietnam War. For those who came back whole from that, after they wiped off the spit of their grateful nation, they found the economy wasn't so hot in the 70s.
You guys still had it better than your kids. 3 wars, several 'police actions' or whatever they are calling em now a days. The cost of everything in real terms going up while pay is in effect going down. College education is not only more expensive, but it's nearly useless with massive outsourcing.
Oh yeah, and the biggest economic collapse since the depression.... The 60's and 70's are looking better everyday from where I'm standing.
This isn't Fight Club...it's Whine Club.
Point well taken. I do remember hiding under my desk for fear of the red menace. It's nothing compared to these times, with the constant barrage of fear briefings from Homeland Security.
ALL True.
But I'd like to see that 70% off sale for this before it all explodes
http://www.thesupercars.org/bugatti/bugatti-veyron/
AlaricBalth,
Great comment.
DavidC
Thanks David. If nothing else its food for thought. We have some serious structural issues which are being ignored. The solution is not going to be pleasant.