Two weeks ago when discussing [6]the latest lunacy surrounding America's exponential curve #1 also known as its debt balance, we suggested what the GOP election strategy should be: "[if] the debt ceiling becomes a sticking point at the election, Obama's chances of reelection plunge. Which makes us wonder - will Republicans grasp that the paradox of defeating Obama is precisely in giving him a carte blanche on all the stimulus programs he wants? Because if Congress approves another $200, 300 or even $400 billion in stimulus pork (the only thing better than one Solyndra? One thousand Solyndras!) the Treasury will drown in the need to raise hundreds of billions more, and will in fact hit the ceiling well in advance of the elections. As for the stimulus projects themselves, they will crash and burn just like all centrally planned endeavors, and actually result in a far worse outcome than if they had never been attempted. [Because] the best way to finally get back to a fiscally prudent regime? Why go to town, of course." We were delighted to discover that our policy anti-recommendation has finally been adopted. Because as the WSJ reports [7]when it comes to the latest payroll tax extension we find something quite stunning: "House Republican leaders said Monday they would introduce a bill extending the payroll-tax break for the rest of the year without finding spending cuts to offset the program's cost. The proposal marks a major shift for Republicans, who previously had insisted that the costs of extending a trio of provisions expiring at the end of the month be offset with spending cuts." That's right - no offsetting spending cuts. Which means one thing - much more debt. How much more? At least $160 billion much. Which means that the debt ceiling discussion will hit not in November as we speculated previously, but potentially as soon as September.
It also means that by the time the GOP candidate is debating Obama the primary topic of discussion will be just how much the Administration is plundering from government retirement and pension accounts to keep the country under the latest and greatest (and just upwardly revised) $16.4 trillion debt ceiling.
Stone McCarthy [8]has the following estimate on the cost of the program:
We've heard reports that the cost of extending all of the provisions is about $160 billion, although we've seen no official scoring. That figure is in the right ballpark, based on CBO's scoring of the two-month extension passed last December.
The following table provides an estimate of extending the provisions for 10-months based on a simple extrapolation of the two-month cost. Based on that calculation, extending the payroll tax cut for 10 months would cost $105.0 billion, and add a like amount to the deficit if it's not offset.
And some more on this shocking change in strategy by the GOP:
Lawmakers agreed at the end of 2011 to extend the payroll-tax break, federal jobless benefits and a measure to reimburse doctors for treating Medicare patients for two months. A bipartisan group of 20 lawmakers has been working to find an agreement to extend the provisions for the rest of the year, but have been struggling to agree on ways to offset the cost of the programs, about $160 billion in total.
The GOP leaders said in their statement Monday that since Democrats hadn't agreed to their proposed spending cuts, House Republicans plan to "introduce a backup plan that would simply extend the payroll-tax holiday for the remainder of the year while the conference negotiations continue regarding offsets, unemployment insurance, and the 'doc fix.' "
Over the weekend Republican negotiators had proposed extending the payroll-tax break for 10 months without finding ways to offset its cost, though the GOP still wanted the federal jobless benefits and doctor's reimbursement measure to be balanced with spending cuts, aides from both parties said.
If we are correct, and if indeed this "major shift" in GOP tactics is predicated by finally grasping that the only way to let Obama blow himself up is to do precisely what he is doing and in fact to encourage him to spend, spend, spend, watch for the GOP to fundamentally change their approach to everything and to encourage hundreds of billions in idiotic fiscal programs which will achieve nothing at all, but merely send the US debt to previously unseen stratospheric heights at an exponential rate in virtually no time at all.
And here is the official GOP statement:
Boehner, Cantor, McCarthy Statement on Payroll Tax Cut Conference Negotiations
House Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), and Majority Whip Kevin McCarthy (R-CA) today released the following statement on the status of the payroll tax cut conference negotiations:
“We support the work of our conference negotiators and continue to support a responsible resolution that extends current payroll tax relief, reforms and extends unemployment insurance, and includes a Medicare ‘doc fix.’ Republicans have attempted to reach an agreement and negotiated in good faith for months, and we will continue to do so. Unfortunately, to date, Democrats have refused virtually every spending cut proposed – insisting instead on job-threatening tax hikes on small business job creators – and with respect to the need for an extension of the payroll tax cut, time is running short.
“Because the president and Senate Democratic leaders have not allowed their conferees to support a responsible bipartisan agreement, today House Republicans will introduce a backup plan that would simply extend the payroll tax holiday for the remainder of the year while the conference negotiations continue regarding offsets, unemployment insurance, and the ‘doc fix.’ If Democrats continue to refuse to negotiate in good faith, Republicans may schedule this measure for House consideration later this week pending a conversation with our members. Democrats’ refusal to agree to any spending cuts in the conference committee has made it necessary for us to prepare this fallback option to protect small business job creators and ensure taxes don’t go up on middle class workers.
“This is not our first choice. Our goal is to reach a responsible agreement in conference. But in the face of the Democrats’ stonewalling and obstructionism, we are prepared to act to protect small businesses and our economy from the consequences of Washington Democrats’ political games.”