Economy

Dissecting the So-Called “Budget Control Act of 2011”

The “Budget Control Act of 2011” increases the debt limit by between $2.1 and $2.4 trillion, the biggest explosion of debt in American history.  It allows the government to avoid spending reductions for the next two years while squandering our last best hope of averting a sovereign debt crisis.

I am opposed to this measure for the following reasons:

  1. The purported cuts, even if realized, are far below the $4 trillion deficit reduction that credit rating agencies have warned is necessary to preserve the Triple-A credit rating of the United States Government.
  2. It blows the lid off the House budget passed in April by more than a half-trillion dollars over ten years.
  3. It makes no significant spending reductions for at least the next two years, essentially freezing spending at an unsustainable level.  While the debt increase occurs this year, significant spending cuts aren’t to be made for many years and can be ignored or reversed by future acts of Congress.
  4. The spending caps are easily circumvented by declaring appropriations to be an emergency, a response to a “major disaster,” or necessary for the “Global War on Terror.”
  5. The balanced budget amendment provisions are illusory because the amendment is completely undefined.

THE ACT FLIRTS WITH A CREDIT DOWNGRADE

Let’s not forget the gorilla in the room.  America faces an unprecedented fiscal crisis because of an unprecedented spending binge by this administration and the last.  Credit rating agencies have openly warned that the nation’s Triple-A credit rating cannot be sustained without a credible plan to reduce the projected 10-year budget deficit by roughly $4 trillion.

Confessions of an OPM Addict

I am an addict. A junkie. For years I’ve maintained an air of respectability in public, while behind closed doors I’m always looking for my next fix. With every year that passes it takes more and more for me to satiate my need. I will tell any lie, distort any claim, and do whatever I need to do to maintain my habit. I used to be embarrassed about it, covered it up, but no longer. I am who I am and everybody can just deal with it. I used to be able to shuffle the finances around to fund my habit, hide it so that no one would notice. Now, my habit is so bad that I can’t cover the cost with what I earn. I had to find a way to pay for it.

I took out a second mortgage on my house, telling myself that my habit was not so bad, that I could quit whenever I wanted; that this was only a short term solution and I’d pay it back quickly. That is what I told myself anyway. But days turned to weeks, weeks turned to months and months turned to years, and I’m more addicted than ever, with no way to pay for my fix. I’ve maxed out my credit cards, emptied my savings account, borrowed from family and friends. I’ve emptied the trust funds that were supposed to be for my kids. I’ve stolen anything I could get my hands on that I could sell. I’ve gone to loan sharks.

August 2nd: A Day That Won’t Live In Infamy

If a deal hasn’t been reached by the time this is posted (the agreement reached by congressional leaders and the White House over the weekend is pending caucus approval), then tomorrow will be a day of infamy. According to public consensus, our credit rating will be downgraded, our borrowing rates will skyrocket, Social Security checks won’t go out, we’ll have to lay off millions of government workers (oh hyperbole), China will get mad, and our cost of living will sharply increase while the quality of living decreases dramatically. The sky will fall, the world economy will collapse, unemployment will make what we have now look like a cakewalk. It will be Disaster;.

Except it will be none of these things.

August 2nd, if a deal is not reached, will not spell the end of the world. Even if S&P and Moody’s try and downgrade the United States. Why? Three reasons: One, if the markets thought we were going to be screwed, they would have done it before. Second, the credit rating agencies are utterly superfluous and worthless when it come to US debt. Third, even if we hit the debt ceiling, Turbo Tax Geithner will be permitted to prioritize interest payments on the debt and send out Social Security checks, meaning we won’t have a default (and Grandma can still buy the ingredients for her damned fruitcake.)

Taken together, these three things illustrate a picture where August 2nd isn’t the end of the world, and that we should really slow down, take a deep breath, and then have a shot of whiskey. Preferably rye, but that’s just me.

Article the First: The market was supposed to explode under the debt ceiling, showing how urgent and necessary it is to raise it, according to John Carney:

VIDEO: Overstock.com CEO Patrick Byrne Talks Internet Sales Taxes

Following up on an earlier post I wrote about the legal theory and precedent behind online retailers and state sales taxes, I thought I’d share this video from C-SPAN’s “The Communicators” show, in which Overstock.com CEO Patrick Byrne makes the consitutional and policy cases for not subjecting online retailers to state sales taxes:

Scott Peterson, executive director of the Streamlined Sales Tax Governing Board, offers the pro-tax position in the latter half of the video.

Recall in my last piece that I deduced that

the Internet has connected people in ways they’ve never before been able to connect, and one of the ways it has done this is through electronic commerce. As such, if someone in Michigan buys something from an Amazon Associate seller in California, and that order is filled in California (or anywhere else), then commerce has taken place across state lines. Last time I checked, only the U.S. Congress has the power to regulate interstate commerce, and California therefore has no taxing power over Amazon Associates sellers in California — unless they’re taxing purchases made by Californians only.

Rejecting False Choices and Exposing Lies

As August 2nd approaches, stipulated by Treasury Secretary and tax cheat Timothy Geithner as the date when the U.S. will reach its statutory debt limit, our illustrious president, Barack Obama, becomes more and more unhinged. From highly partisan, contemptuous and fact-challenged press conferences, to his angry and petulant exit from a meeting with Republicans on the issue, it is clear that Obama is feeling the pressure. This is compounded by the fact that the historically weak-willed Republicans seem shockingly willing to be proven vertebrates, and actually refuse to back down on principle (Senate Minority Leader Mitch McConnell’s recent suggestion to completely abdicate constitutional duty and give all power to the president notwithstanding).

From class warfare rhetoric about tax breaks for corporate jet owners (signed into law by Obama in the 2009 stimulus bill, and less than a rounding error on the federal budget) to fear mongering the elderly to think Social Security checks will not go out, nothing is beneath this integrity-challenged president in his quest for power. He tirelessly repeats his Marxist mantra of needing to get “millionaires and billionaires” to “pay their fair share” and be a part of the “shared sacrifice”, despite the fact that the top 1% of all income earners (a group starting at $380,354/year and including millions of small businesses that file taxes under personal returns…hardly millionaires and billionaires) paid 38% of total tax revenue, while the bottom 50% paid only 2.7%. The top 5% starts at $159,619 and accounts for 58.7% of taxes paid.

The Debt Debate, “Cut Cap Balance,” and Bush (Video)

As the debt debate continues with no end in sight (not even Aug. 2nd) some people are getting understandably upset. They want to know who to blame, and if anything that’s come up so far will actually fix the problem. Well, I have good news and bad news.

The good news is that the Cato Institute has come out with another outstanding video on the situation. The bad news is that you have to blame everybody, and no, there isn’t really a good solution coming out yet:


Again, there will be no dismantling of unconstitutional (or just flat out bad) programs and departments, just “trimming” around the edges, which won’t be good for the long term as they’ll a piece of cake to overcome. The “Cut Cap Balance” idea is a good start, but the Democrats will never go for it, and it’s only that—a start.

The Imperial Presidency, Round #43917

So Senator Mitch McConnell has released a “solution” to the debt ceiling crisis. Jason has already jumped on this topic, but I feel the need to add my own two cents. For me, the crucial portion of this non-solution is that it gives additional power to the White House, and perpetuates a seeming tradition of Congress abdicating responsibility that we’ve seen over the past decade.

The entire deal punts the debt and spending over to the President. Essentially, he decides to raise the debt limit. While Congress can pass a “bill of disapproval” with a two-thirds majority, the President can simply veto, which would then require a 2/3 vote to override. The plan would also require the President to make spending cuts roughly equal to the increase in the debt limit (as I understand it.) Yet there is no enforcement mechanism that I can see to ensure he does so. What would Congress do if he raised the debt limit with no corresponding cut in spending? Stamp their feet? It might be all they can do.

Haven’t we seen enough power consolidated in the Oval Office yet?

I mean, the President can assassinate people with a drone without so much as a whoopsie-daisy; have anyone imprisoned on suspicion of terrorism and interrogated; can have a lovely jaunt off to war and only send Congress a politely-worded letter; formulate budgets and tax policy while merely requesting Congressional approval; through executive agencies and department make and enforce law without a vote; and now we’re going to give him the power to unilaterally raise the debt limit with requirements that are so wishy-washy they make Natty Light look good?

Coming to Expect the Unexpected

Shortly after the 2008 presidential election, historian Michael Bechloss gushed with praise for President-Elect Barack Obama, declaring him to be “probably the smartest guy ever to become President”, and raving that his IQ is “off the charts”. When interviewer Don Imus inquired as to what Obama’s IQ is, Bechloss admitted that he did not know, but that did not keep him from gushing effusive praise. We are left to take a historian’s word for it, because Obama has steadfastly refused to release his college transcripts, and his policies while in office certainly do not lend credence to the claims of his brilliance. In fact, if we had to judge the president by the effectiveness of his policies, Obama would be the functional equivalent not of the class valedictorian, but of that weird kid that sat in the corner and ate paste while talking to himself.

On matters of the economy, the president and his advisors seem to be particularly clueless. Consider some statements from the administration of late:

In a recent video clip making the rounds, Obama responds to a question about the near $1 trillion “stimulus” package and its effect on the economy by laughing and then declaring “ ‘Shovel-ready’ was not as shovel-ready as we expected.” This is, you will recall, the same stimulus package that Obama demanded must be passed immediately if we were to stem the possibility of another Great Depression. We were promised (by Christina Romer, the first chairman of Obama’s Council of Economic Advisors) that if we passed it, unemployment would stay below 8%. Well, we DID pass it, and we have been rewarded with unemployment levels between 9-10+% for well over two years. Now, we have high unemployment AND staggering quantities of additional debt crippling the economy.

Yes, the Stimulus Really Did Fail

I have to disagree with Dave Weigel here. He wrote on Friday in Slate that the stimulus bill really didn’t fail, although everyone is saying it is:

Veterans of the stimulus wars talk about it that way—as a war. They lost. The implication of the loss is that Keynesian economics are, arguably, as discredited with voters as neoconservative theories were discredited when the invasion of Iraq failed to turn its neighbors into vibrant democracies, highways clogged with female drivers.

This week, we got a concrete example of what it meant to lose. The Weekly Standard published a back-of-the-cocktail-napkin analysis of the seventh quarterly report on the stimulus, stipulating that every job created by its spending has cost $278,000. Republicans, who’d previously said the stimulus created no jobs, immediately started repeating the $278,000 figure. They kept doing it even after the magazine followed up, suggesting that the cost-per-job could have been as low as $185,000. $278,000, $185,000. $0.00? It didn’t really matter, because the White House and liberal response was perfunctory. As the stimulus winds down, with most of the money spent, everyone knows that it failed.

Protectionist Tries Redefining Free Trade

Knowing there is no legitimate case for protectionism, its proponents are now attempting to define free trade as something that it is not. Writing for Salon, David Sirota says:

Trade policy, as I’ve previously noted, often has nothing to do with what we conventionally define as “trade” — that is, it has nothing to do with the exchange of goods and services, and everything to do with using state power to solidify corporations’ supremacy over individual citizens. In that sense, the modern era’s ongoing debates over “free trade” are a corporate public relations coup — by tricking the public and the media into believing we’re debating one thing (commerce) when we’re debating something entirely different (power), the “free trade” brand casts those who raise questions about these pacts as know-nothing Luddites (who could be against commerce, right?).

Oddly, Sirota offers no further support for his claim that free trade uses “state power to slidify coporations’ suppremacy over individual citizens” nor does he even clarify precisely what it is he means. It appears as though he is content to level that charge and move on to a different subject:

…In creating direct unprotected competition between Americans and foreign workers who have no labor, wage or human rights protections, the most celebrated trade pacts of the last two decades have — quite predictably — resulted in widespread layoffs and the hollowing out of America’s middle class job base.


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