$290 Billion Of Proposed Spending "Cuts" Result From Excel-Reffing Lower Interest Payments

Tyler Durden's picture


Last night, we already expressed our amusement at the fact $130 billion of Obama's proposed "savings" would come from the change in the CPI calculation to a "Chained CPI" - a rough analogue would be using GRPN accounting to represent EPS as net of all costs and expenses and make it equal to revenue (we said rough; a more fine tuned explanation can be found here). What comes next: Chained Employment? Think of the cost savings (offset by spending on brand new whips of course). Today, we are just as amused at the other key component of the spending cut proposal namely that $290 billion of the savings would come from lower interest payments. And this is where one's Excel refs out, because the interest payment on Treasurys, at least in a non-banana republic, one set to see 120 debt/GDP in 3-4 years, is a function of fiscal decisions (central-planning notwithstanding), and to make the idiotic assumption that one can control interest rates for 10 years (central-planning notwithstanding), just shows what a total farce this whole exercise has become, and also shows that nobody in the administration, or the GOP for that matter, has even modeled out the resultant budget pro forma for the proposed tax hikes and budget "savings" as that would blow up said excel model immediately.

To summarize the spending components proposed by Obama:

  • $400 billion from health programs
  • $200 billion from mandatory spending
  • $200 billion from other programs of which $100 billion from defense
  • $130 billion from Chained CPI
  • $290 billion from "Interest Savings"

And what makes this plan absolutely insane, is that the offset is increased near-term spending to the tune of $80 billion. In other words: a spending cut plan some time in the future, offset by more spending now.

Bottom line: we are getting a mini "kick the can down the road" worst case outcome, which will need a new Fiscal Cliff just to deal with the outcome of not resolving this Fiscal Cliff in as little as 12 months.

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Tue, 12/18/2012 - 11:46 | 3074737 Fips_OnTheSpot
Fips_OnTheSpot's picture


Tue, 12/18/2012 - 11:46 | 3074738 fuu
fuu's picture

Does any of this plan stop the Beard from printing $16,000/second?

Tue, 12/18/2012 - 11:54 | 3074768 Cognitive Dissonance
Cognitive Dissonance's picture

Yes. He stops printing $16,000/second and begins printing $24,000/second on 01-01-2013.

<Problem solved......again.>

Tue, 12/18/2012 - 12:18 | 3074864 fuu
fuu's picture

$85,000,000,000/30/24/60/60 = $32,793/second after 1/1/13.

What's a decent starting salary every second among friends?

Tue, 12/18/2012 - 12:51 | 3075023 Cognitive Dissonance
Cognitive Dissonance's picture


Soon we'll just be moving decimal points...........daily?

Tue, 12/18/2012 - 13:22 | 3075142 fuu
fuu's picture

No, we have Plan C now, Plan B lasted less than 8 hours.

Tue, 12/18/2012 - 14:41 | 3075404 XitSam
XitSam's picture

Gee, I've heard this song before ... maybe in Greece.

Tue, 12/18/2012 - 15:01 | 3075476 fuu
fuu's picture

It's working out for them now though, they just got upgraded. Maybe good times re here again!

Tue, 12/18/2012 - 11:54 | 3074739 thedrickster
thedrickster's picture

Circular references bitchez, iteration = 13.

Thumbs down....guess someone is tired of "bitchez"?

Tue, 12/18/2012 - 11:48 | 3074740 LongSoupLine
LongSoupLine's picture

In other good news, I have stopped drinking by putting soda labels over my fucking beer.

Tue, 12/18/2012 - 11:48 | 3074751 eaglerock
eaglerock's picture

I tell my wife that when beer is on sale, the more I drink the more money I save.  Sounds like the same thing here.

Tue, 12/18/2012 - 11:53 | 3074765 adr
adr's picture

You can buy a case of beer for less than a case of Coke. 12 pack of Pabst was $3.99 at my grocery store.

Tue, 12/18/2012 - 12:01 | 3074791 Osmium
Osmium's picture

How in the hell do you get a down vote for reporting the price of beer versus the price of coke?  WTF?

Tue, 12/18/2012 - 12:05 | 3074820 Fips_OnTheSpot
Fips_OnTheSpot's picture

it's the CNBC junk-algo ;)

Tue, 12/18/2012 - 12:45 | 3074984 Nobody For President
Nobody For President's picture

Probably  because he called Pabst 'Beer'.

Pabst is canned watery horse piss, not beer - about as close to real beer as FERNS are to real money.

Tue, 12/18/2012 - 12:18 | 3074866 prains
prains's picture

the jokes on you Pabst is not beer

Tue, 12/18/2012 - 12:27 | 3074906 Intoxicologist
Intoxicologist's picture

Yeah, but it'll get ya drunk. 5% ABV,

Beats those watered down tourist beers.

Tue, 12/18/2012 - 13:13 | 3075112 CPL
CPL's picture

I wouldn't pay more than 4 bucks of Pabst either.  

You could brew your own for about the same price and still make out like a champ.  Not as convenient, but it'll have a flavor that you'll love and all visitors will suffer though...or maybe you've got the knack of it and you'll make more friends.  ;)

Tue, 12/18/2012 - 11:49 | 3074753 francis_sawyer
francis_sawyer's picture

You'd better get approval from Bloomberg for that first...

Tue, 12/18/2012 - 12:02 | 3074800 Anusocracy
Anusocracy's picture

I put a beer label on my Bundaberg Root Beer.

It comes in a stubbie.

Tue, 12/18/2012 - 11:48 | 3074741 cxl9
cxl9's picture

They should simply pass $10T in spending cuts over the next 10 years, all of it occuring in year 10, declare victory and go home.

Tue, 12/18/2012 - 11:50 | 3074755 Zer0head
Zer0head's picture

essentially that is what they are proposing but with only $1T over 10 years much of that coming from Enronesque accounting

Tue, 12/18/2012 - 13:47 | 3075213 youngman
youngman's picture

What is amazing to me is that there are people in meeting rooms thinking this stuff up..."how do we show a cut in spending that is really not a cut in spending".....just amazing...these people really think the rest of the world is just going to suck it up and take our crap.....I don´t think so...and I used to think it was years away...this is blatent in your face stuffing and I think the spit it out moment is coming soon...this year soon....we are not changing anything..we are not learning anything..so jump ship they will...

Tue, 12/18/2012 - 12:20 | 3074871 SheepDog-One
SheepDog-One's picture

Right...why not just have Boner report that unicorn farts have been bottled and all our problems are over? Same as anything else theyre saying.

Tue, 12/18/2012 - 11:48 | 3074744 BullsNBeers
BullsNBeers's picture

When you don't like the results, change the formula.


Fri, 12/21/2012 - 00:54 | 3074819 Cthonic
Cthonic's picture


Tue, 12/18/2012 - 11:48 | 3074745 NEOSERF
NEOSERF's picture

Clearly this game can, will and has to to some degree continue for years because quite frankly the alternative as stated daily here on ZH is not an option for most politicians.  I expect everything we see in Europe and China in terms of lying and false optimism to continue which means 2013 should be another year of 12% gains....

Tue, 12/18/2012 - 11:57 | 3074779 Boilermaker
Boilermaker's picture

Well, this site, and a good portion of the people here continue to try to apply legitimate rules to an obviously illegitimate scenario.

If you can't simply admit that it's a rigged piece-of-shit then you'll never get past trying rationalize this bullshit.

Geez, they just flat out ass fuck the SPX up another 10 handles thus far in a straight up fashion.


Tue, 12/18/2012 - 12:08 | 3074824 gjp
gjp's picture

Sad, but so very true.  There are no rules.

Tue, 12/18/2012 - 12:17 | 3074861 Winston Churchill
Winston Churchill's picture

Never have been.

The only thing different is they don't even bother to hide the fact anymore.

Tue, 12/18/2012 - 11:48 | 3074746 buzzsaw99
buzzsaw99's picture

A whole $100B (over ten years?) from defense. Whoopie!

Tue, 12/18/2012 - 11:48 | 3074747 surf0766
surf0766's picture

When does the mass selling of the dollar begin? That is what I want to know.

Tue, 12/18/2012 - 11:56 | 3074774 madcows
madcows's picture

Sell into what?  You see, it's an international FED Bank screwjob.  They've fucked us 7 ways since Sunday.  Every central bank in every nation except Iceland is printing.  They've collectively decided monetize the debt.  No one can sell dollars and buy Eurotrash because the Euro is printing as well.  They're doing it every where... and somehow holding down PM's.  There is nowhere you can go.

Tue, 12/18/2012 - 12:03 | 3074807 thedrickster
thedrickster's picture

I vote for breaking the SNB.

Tue, 12/18/2012 - 11:48 | 3074749 SheepDog-One
SheepDog-One's picture

Dude....bail? Dude.. Bail? - YouTube

Tue, 12/18/2012 - 11:50 | 3074754 Lendo
Lendo's picture

Great article.  I can't wait the hear the bullshit spouted by CNBC when I workout this morning. 

Tue, 12/18/2012 - 11:52 | 3074759 adr
adr's picture

You mean how Obama promised to cut the deficit in half by the end of his first term. Yet continued to increase the yearly deficit every single year.

So we can hope that $290 billion in cuts will only end up being $960 billion in spending increases over ten years.


Yes, one doctor wanted to cut off your right arm, the other doctor wanted to cut off your left. They compromised and cut off both, along with both legs for good measure. Your lawyer claims you are better off with the compromise because you no longer need to worry about walking or feeding yourself.

Tue, 12/18/2012 - 13:50 | 3075229 youngman
youngman's picture

no its more like they compromise and cut neither sick arm off.....and you end up dying....you could have lived had they cut off your arms....

Tue, 12/18/2012 - 11:52 | 3074762 SheepDog-One
SheepDog-One's picture

Why go thru all this tedious boring 'numbers' stuff, just announce that the debt cliff has been paved over with unicorn farts and pixie dust and the media and americans would cheer! 

Tue, 12/18/2012 - 11:52 | 3074763 unrulian
unrulian's picture

Dude....you workout to CNBC?

That's like......

Tue, 12/18/2012 - 12:24 | 3074895 viahj
viahj's picture

makes sense to me, angst is a great workout motivator

Tue, 12/18/2012 - 12:29 | 3074910 Lendo
Lendo's picture

eggsackery.  It's on when I use the stair machine.

Tue, 12/18/2012 - 11:53 | 3074766 Boilermaker
Boilermaker's picture

Yea, that's all interesting and everything...

Now, can we get back to blatantly ASS SLAMMING the market higher?


Tue, 12/18/2012 - 11:56 | 3074772 buzzsaw99
buzzsaw99's picture

You didn't think they would let the lowest volume month of the year go by without taking full advantage did you?

Tue, 12/18/2012 - 12:00 | 3074789 SheepDog-One
SheepDog-One's picture

Yea and I wonder where the 'end of year panic selling due to increased taxes coming' is, huh weird. Nope, markets can now ONLY go higher no matter what....debt cliff no longer even a concern and all they have to do is say someone is more optimistic about something.

Tue, 12/18/2012 - 12:02 | 3074799 Boilermaker
Boilermaker's picture

Sorry, I can't respond.  I have a fucking pop-up ad to wrestle with virtually every god damn time now.

Tue, 12/18/2012 - 12:02 | 3074798 madcows
madcows's picture

They can't hide from reality.  They can try to fool the audience, but that will only last until it all comes crashing down.

Real people suffer from real inflation.  Gerry rigging the formula to say inflation is non-existent doesn't really do away with inflation.  I've been updating the inflation numbers this morning.  it looks like inflation really jumped on the YoY calcs. from 11.4% to a 12.9%.

Oh, and corporate said no raises this year.  They're worried about the coming year and want to be cautious. Swell.  Looks like I'll be cutting the church offering back. Or, maybe I'll just stop paying the mortgage.


Tue, 12/18/2012 - 12:08 | 3074828 Catullus
Catullus's picture

#ref! ?! More like #Winning!

Actually, they might be right. The more debt the Fed purchases, the more interest on Treasury securities they remit back to the Treasury in the form of Fed "profits".

Tue, 12/18/2012 - 12:26 | 3074899 Duke Dog
Duke Dog's picture

Oh yeah, but only AFTER they pay the legally required 6% preferred dividend to the OWNERS - this is payable for every share of Fed stock, which every member of the Fed SYSTEM (JPM, GS et al) is required to own based on their capitalization - check it out. jd.

Tue, 12/18/2012 - 12:36 | 3074926 Non Passaran
Non Passaran's picture

Check it out where?
Last I checked this stuff was (relative) peanuts.
"Profits" to the Treasury were paltry few billion dollars.

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