Tag Archives: debt

Who Won The Great Debt Debate?

As of noon today, the long battle over the debt ceiling is at an end (at least for now). The bill passed the House of Representatives by a 269-161 margin yesterday, and cleared the Senate by a 74-26 vote earlier today. From what you’ve probably heard from the avalanche of news about this deal, it won’t include tax increases, will raise the debt ceiling by roughly $2.4 trillion (ensuring we won’t deal with it until after the 2012 elections), and will cut that amount in taxes. At face value, you’d think this is a good deal?

Ah, but that is where they get you with the details. The cuts will be spread out over ten years, which theoretically would mean that we’d be shaving $240 billion off the deficit each year, all things being equal. However, not even that will occur, because when Washington “cuts” spending, they really mean that they’re going to slow the rate of growth in spending projected by the CBO, and calling the difference between the baseline and the spending pattern a “cut”. So in other words, rather than cut spending, spending will increase, just more slowly.

As expected, each party’s leaders are putting their own spin on the deal. House Speaker Boehner (R-Ohio) is trying to tell his caucus that the bill is a victory for Republicans because it doesn’t include tax increases, while House Minority Leader Nancy Pelosi (D-California) tells her caucus that it could’ve been worse, but it gets the job done.

In reality, nobody really won, because there isn’t anything in the compromise that is a cause for celebration. The debt ceiling is still being raised, so we’ve found more road to kick the can down, which means more room for spending. Also, a “Super Congress” was formed, which, as I mentioned in a post from last week, represents nothing more than legislators handing over their power to tax-and-spend to a small group of their peers, which could yield no actual solutions to the problem of debt and deficit. Yes, they’re being forced to act because of a spending-cut heavy “trigger” that would axe huge portions of entitlement and defense spending, which seems like the best way to actually cut spending right now rather than whatever smoke-and-mirrors tactics this deal is promoting.

Originally posted at www.silverunderground.com

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The Amazing Surrendering Congress

We’re now five days away from hitting the deadline to get a deal done to raise the debt ceiling, and things aren’t looking up for anybody interested in a “grand bargain”, or anything other than maintaining the status quo. What’s even more depressing is that from a couple of negotiations, there seems to be an almost bi-partisan push to surrender lawmaking authority to either the executive branch or a small group of lawmakers beholden to practically nobody.

In one case, some lawmakers are considering giving the president authority to raise the debt ceiling by himself, using a vague interpretation of the 14th amendment that states that the ability of incur debt “shall not be questioned”. The other method, which is being supported by Senate Majority Leader Harry Reid (D-Nevada) and Speaker John Boehner (R-Ohio), would allow a “Super Congress” to be formed, a 12-member body from the House and Senate that would have the exclusive power to draft legislation regarding the deficit, and the legislation couldn’t be amended by either the House or Senate. It doesn’t take much research to know that both of these proposals are disasters waiting to happen.

Starting with the “14th amendment solution”, which I mentioned in a previous “Constitution Watch” article, is a gross misinterpretation of one section of the Constitution, which disregards the part where it gives Congress the power to tax and spend. While I’m not surprised some of the President’s advisors want him to involve the 14th amendment, I am surprised that some in Congress want to handover decision making on the debt to the President so readily. As for the “Super Congress”, which is the proposed bicameral, bipartisan panel, it is just as bad. The deficit, which is getting closer to $2 trillion with no real end in sight, is one of the most important issues facing the legislature. Letting such a major issue be decided by 12 out of 535 members of Congress is unwise, especially if it’s filled with legislators committed to tax increases rather than making any meaningful cuts. Unsurprisingly, this proposal is being attacked by both the left and right as an unconstitutional power-grab that shuts out 96% of legislators to the decision making process, and reduces their role to a simple “yea or nay” vote on whatever the panel comes up with.

More at www.silverunderground.com

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A Nation Drowning in Debt

Our national debt crisis is serious, we all know that. Where many disagree is how serious the crisis really is. People like Robert Reich insist that it’s “ridiculous” to concern ourselves with the debt right now, when we can deal with it five years from now, and various Keynesian economists believe that spending will fix our current economic conditions, and tackle the deficit and debt when we’re on more stable financial footing.

Unfortunately for this side of the argument, the time to tackle debts and deficits is now, and the days are numbered. A recent Moody’s report, one of the most influential debt rating agencies in the country, stated that a downgrade on America’s debt rating “is likely” by mid-July if there isn’t a “credible agreement on deficit reduction”. This is the second such warning in two months, coming on the heals of the S&P’s threats of a downgrade amidst the debt ceiling discussions currently taking place in Washington.

Yet while the seriousness of this situation can’t be understated any longer, Congress doesn’t seem to be too concerned. President Obama set a deadline for a debt ceiling deal to be ready by the end of June, with Vice President Biden leading the talks. However, the Senate is in recess this week, the House will be in recess next week, and Biden is in Italy, making it unlikely a proposal will be ready at that time.¬†You’d think given the severity of the situation, Congress would hold off on their vacations until a proposal could be agreed upon. It’s their job, right? But alas, it is becoming clear that if there is one thing Congressmen value more than anything, it’s frequent vacations, even in times of national importance such as this.

America’s perfect credit rating hangs by a thread, our deficit has grown to unacceptable levels, and important budget reforms have been subjected to fear-mongering and childish insults. Maybe instead of taking a week off, our representatives should commit to staying in Washington to fix this fiscal nightmare. Otherwise, break out the gyro stands and pop the Ouzo, it’s going to look an awful lot like Greece.

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