The following was submitted by Nick Nottleman, a reader and concerned American, on the debt ceiling debate and subsequent downgrade in our credit rating by S&P.
Newt Gingrich recently said that his biggest regret while Speaker of the House was not addressing baseline budgeting. This is the mechanism that says Federal Government Spending is automatically increased each year based on a given percentage. For Example, our 2011 Federal Budget is approximately 3.9 TRILLION dollars. Using the baseline of 8 percent, our spending should automatically increase 312 BILLION in 2012.
It is also the mechanism that projects these increases in spending and thus a projected budget for the next 10 years. And the really neat part is that if you decide to spend a little bit less than what these projections indicate, you get to call it a “cut”.
Now here’s the kicker… Anything you add to the annual spending, call it something crazy like “Stimulus”, “Omnibus”, or heck, even “Socialized Medicine”, well, that stuff sneaks right in there and receives it’s nasty little automatic increase.
As you’ve no doubt heard, on Friday, Standard & Poors (S&P) downgraded the United States’ AAA credit rating because the debt deal reached by the White House and Congress failed to cut the $4 trillion deemed necessary by the credit rating agency during the debate the debt ceiling:
S&P removed for the first time the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn’t do enough to address the gloomy outlook for America’s finances. It downgraded long-term U.S. debt to AA+, a score that ranks below more than a dozen governments’, including Liechtenstein’s, and on par with Belgium’s and New Zealand’s. S&P also put the new grade on “negative outlook,” meaning the U.S. has little chance of regaining the top rating in the near term.
The unprecedented move came after several hours of high-stakes drama. It began in the morning, when word leaked that a downgrade was imminent and stocks tumbled. Around 1:30 p.m., S&P officials notified the Treasury Department that they planned to downgrade U.S. debt and presented the government with their findings. Treasury officials noticed a $2 trillion error in S&P’s math that delayed an announcement for several hours. S&P officials decided to move ahead, and after 8 p.m. they made their downgrade official.
Rep. Michele Bachmann launched her third ad this week in Iowa, where she is leading the field, touting her voting against the debt ceiling, knocking President Barack Obama’s economic policies and encouraging Iowa Republicans to support her at the Ames Straw Poll, arguably the most important event for campaigns in this early stage of the race.
The ad comes just over a week before the straw poll, which will be held at the Iowa State Fair on Saturday, August 13th:
Since Tuesday, there have been a lot of concerns expressed about the “Super Committee” created as part of the debt deal hashed out between the White House and Democrats and House Republicans, including whether it has the ability to raise taxes. Republican leaders in both chambers have played down this possibility, but Philip Klein writes that they aren’t being honest with themselves, let alone taxpayers:
It’s an ominous sign that, even before the legislation creating the committee actually became law, the parties were already sending out dueling press releases about what it could and could not do.
If Republicans were smart, they would take Democrats at their word. But instead, they have been publicly in denial about the obvious risks of this committee for conservatives.
The key problem lies with the enforcement mechanisms, or “triggers,” created to compel the committee members to reach an agreement. While Republicans wouldn’t agree to a tax-hike trigger, they did agree to one that would slash defense spending by up to $600 billion, depending on how far short the committee falls of the deficit-reduction goal. This puts anti-tax Republicans who favor a robust military in a bind.
Democrats on the committee could insist on raising taxes, and Republicans will either have to give in to their tax demands or accept the deep defense cuts.
When I posed this clear dilemma to House Majority Leader Eric Cantor, R-Va., as he was leaving the Capitol after Monday’s vote to raise the debt limit, he was dismissive.
Once again, I am in agreement with Dennis Kucinich:
A liberal Democrat on Tuesday called the “super committee” included in the debt-limit deal “anti-democratic.”
Rep. Dennis Kucinich (D-Ohio) said the committee reduced the governing majority down to a seven-person agreement on a 12-member committee. “It’s like ‘Honey, I shrunk the Congress,’” he said on ABC’S “Topline.”
The debt-limit agreement cuts federal deficits by nearly $1 trillion over 10 years while raising the debt ceiling at least $2.1 trillion through 2012. It also establishes a bipartisan, bicameral committee of 12 legislators charged with putting together an additional $1.5 trillion deficit-reduction package.
Of course our agreement ends at the establishment of the so called “Super Committee.” It is difficult to tell if Kucinich is genuinely opposed to this cessation of power to a small group because of its “anti-democratic” nature or if he’s simply trying to prevent any cuts any way possible. For now, however, I’ll take him at his word since he is one of the only Democrats to consistently oppose the wars regardless of who is president.
Ron Paul is running for president, and as such it’s no surprise that he has his own solution to the budget problem we’ve been having. It was posted recently on The Hill’s website. I have little doubt that detractors will call it “radical”, but after reading it, I just don’t see it. It calls the proposed cuts “illusory”. He’s got a great analogy for how many Washington cuts are made:
No plan under serious consideration cuts spending in the way you and I think about it. Instead, the “cuts” being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family “saving” $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.
Yeah, that’s kind of the way it works up in D.C.
Paul’s suggestion? Freeze spending as a start.
Well, the debt plan has been passed by both chambers of Congress and signed into law by President Barack Obama. While Republicans are trying to save face by continuing to say this deal will cut spending, the fact is they’ve done next to nothing, especially since the cuts are largely placed at the end of the 10 year period; meaning that they’ll likely never come to pass. And the most glaring short-coming is entitlements. This deal does nothing to rein in entitlements, programs that represent over $61 trillion in unfunded liabilties.
Economists at the Cato Institute, Dan Mitchell, Chris Edwards and Jagadeesh Gokhale, also express skepticism that the so-called “Super Commission” is going to be able to get anything accomplished other than kick the can down the road:
Progressives don’t like the new debt deal. What. A. Shock. However, on some level, they’re also looking at how that debt deal happened and what they can learn from it. At least one progressive blogger, Jane Hamsher, sees the Tea Party Movement as having been the biggest influence on the deal. Usually, when a progressive mentions the Tea Party, it’s with venom, but not this time.
This time, Hamsher seems to genuinely understand, at least in part, how the Tea Party got results:
It is unquestionable that the Tea Party moved the entire debt ceiling deal to the right. How did they do it? By taking out the people who failed them. Arlen Specter. Charlie Crist. Lincoln Chaffee. The people they felt betrayed their principles. Even if you don’t agree with those principles, their consistent adherence to them got results.
Whenever the talk of a primary comes up, I always ask “who is going to do this?” The answer is always someone like Bernie Sanders or Jan Schakowsky, the same people whose job it is to put the Good Liberal Housekeeping Seal of Approval on whatever piece of neoliberal s*** the White House cooks up to please the bond vigilantes. The people who suddenly become okay with war when the White House says so, who shake their fists in the air with outrage right before they fold, the people you can count on to always be there when there’s nothing they can do…and are nowhere to be found when they can.
Vice President Joe Biden has a habit of sticking his foot in his mouth, perhaps more often than his boss, President Barack Obama, would like. Given all the talk earlier this year about a “new tone” in our politicial discourse, it looks like someone didn’t get the memo. Politico reports that Biden compared tea party activits to “terrorists” during a House Democratic caucus meeting yesterday:
Biden was agreeing with a line of argument made by Rep. Mike Doyle (D-Pa.) at a two-hour, closed-door Democratic Caucus meeting.
“We have negotiated with terrorists,” an angry Doyle said, according to sources in the room. “This small group of terrorists have made it impossible to spend any money.”
Biden, driven by his Democratic allies’ misgivings about the debt-limit deal, responded: “They have acted like terrorists.”
Biden’s office initially declined to comment about what the vice president said inside the closed-door session, but after POLITICO published the remarks, spokeswoman Kendra Barkoff said: “The word was used by several members of Congress. The vice president does not believe it’s an appropriate term in political discourse.”
OMG! How dare people believe that Congress shouldn’t spend like drunken sailors and run up a $1.5 trillion budget deficit. That kind of thinking is just extreme!1!!
It may surprise Rep. Doyle and Biden, given the bubble they are surrounded with in Washington, that ideas like a balanced budget amendment generally poll well with the public; not just tea party activists. Yes, it’s shocking to hear that voters believe that our elected officials shouldn’t spend more than they take in.
With yesterday’s overwhelming vote in favor of the debt plan in the House, no one expects the Senate not to deliver on putting it on President Barack Obama’s desk. But given pace at the plan has been pushed through Congress, details on what it actually does are becoming clear; and I’m not talking about what media reports say. No, I’m referring to the spending cuts that won’t likely happen, as Chris Edwards notes (emphasis mine):
The “cuts” in the deal are only cuts from the CBO “baseline,” which is a Washington construct of ever-rising spending. And even these “cuts” from the baseline include $156 billion of interest savings, which are imaginary because the underlying cuts are imaginary.
No program or agency terminations are identified in the deal. None of the vast armada of federal subsidies are targeted for elimination. Old folks will continue to gorge themselves on inflated benefits paid for by young families and future generations. None of Senator Tom Coburn’s or Senator Rand Paul’s specific cuts were included.
The federal government will still run a deficit of $1 trillion next year. This deal will “cut” the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent.