$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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Urban Redneck's picture

It's not the FED dividends that boost the banks' bottom lines, it's the banks' spread when the FED is loaning its members unlimited free $ at 0%, and passing the (inflationary/dilution) costs onto the actual "users" of said $...

ShrNfr's picture

But it all pales into insignigicance by the fact that we are not at war with Andorra. Trillions upon trillions have been saved by that fact.

Yen Cross's picture

 This shit is better than reruns of "Pee Wees Playhouse"... These idiot politicians picked up the ball right where the ECB fumbled it, and are running full steam ahead into the "crack house"...

glenlloyd's picture

It's all meaningless.

As long as political careers are in jeopardy the hard fights will just be swept under the rug.

Promises of spending cuts in the future in trade for more spending today is just idiocy. I find it hard to believe they can look the people of this country in the face when they talk about this crap.

When people make promises to do things 'next year' who can be surprised when next year never actually arrives....

And to think we pay these people......


kevinearick's picture

The Jump


Thus far, humanity has been quite exceptional, at creating black holes. Look at Frisco. No matter how much Bernanke prints, fewer and fewer are capable of doing less and less, spending more and more, on less and less, with a delay relativity circuit to infinity supporting their make-work, on display in your December issue of San Francisco now.

 And the following middle class layers are right up their a-, like flies on sh-, waiting in line, for the cascading die-off, each event horizon pushing the one behind it off the cliff to temporarily save itself, as designed by capital to preserve the nonperforming counterweight, which is rapidly approaching the cliff itself, hiding the problem only from itself and the middle class by monetizing the phantom tax base in the pension ponzi.

 We are going to make the jump this time, to sustain the fusion/fission reactor, with or without the majority of people on this planet. It’s not my job to care. Theoretically, you have provided your children with love and security in the first year, exposed them to social fear and given them techniques to offset it in the second, and set them loose to explore the extending fence line, and are now waiting for the springback in adolescence when their training begins to reassert itself, just when the middle class and capital kids are being anchored in the past. Two hydrogens form helium…

 San Francisco has all the steps on the ladder required to re-ignite economic mobility, the economy, but everyone is waiting in ever-growing lines to scale the ladder, because there is no circulation, watching these a-holes replicate nonperforming capital just as fast as they can. No intelligent kids to complete the circuit (all of whom the middle class and capital want to put at the end of all the lines, to wait for another line, to give away their ideas) results in no circulation, surprise, surprise. Apple, Facebook (Boeing, Microsoft) all shams, surprise, surprise.

You go into town to look for work and what do you find, but a bunch of lines, because everyone is a government prescribed hammer looking for a nail, employing the Internet to increase the size of the line, artificial demand for make-work, trying to play God. If your organization cannot take someone off the street at random and make that person a productive participant more times than not, you have no business being in business. When you create a line for that job, you slow everybody in that line down, leaving them no recourse but to enter another line as the economy slows, to infinity. That’s why the USA is becoming the USSA.

So, let’s say you go in to get your GA, government assistance. You need work boots, eyeglasses, a drivers license, temporary shelter, and a food card, to go get that job and keep it. Guess how many lines you are going to get into, to keep all the make-workers busy, while they pray that they are not going to be next on the layoff block. Why does anyone wonder why there are no jobs at the end of all these lines, which have no end? The job is on the back end when it’s supposed to be on the front end. That’s it, don’t make room for others that you cannot control in your business, and then complain about government, because enough is never enough. We have already proven that Bank must print to infinity without labor. What are you waiting for?

I am not responsible for providing for you, so you can continue to go out and do stupid a- sh-, as an example to be followed by your children and everyone around you. The world is what we make of it, and yes, the last couple of generations have made a sh-y a- mess of it. You’ll have that. Get off you’re a- and do something about it.

My three exes are bankrupt, and they can’t do anything about it, because they are addicted to the past. I can. I don’t have anything because I don’t want a flock of seagulls following me to tomorrow, and I have no use for existing capital, which is not going to be here tomorrow.  Just as soon as I can find a female that does not have her head up her own a-, her mother’s a-, or someone else’s a-, I will get married, have more children and go back to work. Until then, everyone else can go f-themselves, Bank can continue to print to infinity, the middle class can get wiped out, and capital can go over the cliff, because all of labor feels the same way I do.

I understand the frustration. I’ve had a lifetime of it, but you have to take what God sends to your door, when it shows up. On that Burlington Hospital job, I inherited a crew of kids that liked nothing other than to go down into the basement and cook heroin or pot. Do I support that behavior? No. Do I have to deal with it? Yes. Half those kids turned out to be pretty good laborers, once they saw a path to the future, half self-selected themselves out, and one turned out to be a really good laborer, always where he was needed just before he was needed.

If you take the first person that comes to your door when you are in a position to create a job, what you lose in sub-system efficiency you will make up for many times over in system-wide organic growth. Don’t be an idiot trying to play God, or you will lose everything, over time. When you rent the oxygen you breathe, it’s not a good idea to choke off the source, happy that your competitor is going to go out of business first.


Life has always been a leap of faith, for which there is no insurance plan.