Tag Archives: Public Debt

The Fiscal Cliff Aversion, Avoidance and New Arrears Act of 2013

Late at night on New Year Day of 2013, the House voted after much last minute handwringing to accept the Senate compromise bill to avoid the Fiscal Cliff.

Reality is that the cliff has not been averted, just the rough edges of it.

Along the way many bargaining chips were wasted to get very little.

On December 31st the national credit card hit its limit. Treasury Secretary Geithner says that he can move some things around to pay the bills through sometime in February. Our new Fiscal Cliff Avoidance Bill of January 1st 2013 now adds almost $400 billion per year in new national debt per the CBO’s analysis.

LAW OF UNINTENDED CONSEQUENCES

The Republicans now own Obama in the next round of negotiations over increasing the debt limit. That crisis hits within six weeks. As the Washington Post put it: “The bill avoids austerity but doesn’t tame dangers of national default, high unemployment or swelling debt.”

There is little to rejoice about in the Senate bill, now approved by the House, because it is fiscally irresponsible. It will cause much of the good that it has supposedly created to collapse in upon itself … not within years but within months.

The GOP itself has major issues and #1 among them is that its has allowed itself to be held hostage by the Tea Party mentality of talk a tough game without having any specifics. It has also allowed ideologues like Grover Norquist and the disciples of Arthur Laffer to warp the ability of the GOP to think in terms negotiating for the greater good of the country rather than the GOP just following unproven maxims that always seem to increase the debt rather than resolve it.

Back in the good ol’days of RINOs ruling the GOP, our national debt was relatively low and social policy moved forward in some sense of balance because people went to the negotiating table with the intent of getting a balanced deal of trading off benefits and finding bill payers, and cutting debt where possible — and we often did cut a lot of debt.

Back during the good ol’days of the 1950s/60s/70s/80s Dems and Reps were able to work together on many things that kept debt low or paid down the debt while accommodating social concerns.

However, what the GOP has going for it now is that it owns the House vote at the precise moment that President Obama will need agreement on a host of issues for which he does not have many bargaining chips to put on the table.

We will see the stock market’s view of this deal play out over the next week. Whether you love or hate Wall Street, the stock market is considered a fairly reliable indicator of which way the economy is going.

$400 billion of new debt per year has just got to scare investors worried that the nation’s #1 purchaser of services, goods and materials may not be able to pay its bills either on time or in some cases be able to pay them at all — forcing renegotiation.

We also have the FY2013 federal budget to complete. Our new federal year started in October and we still have no approved federal budgets. Those too must now be negotiated with many in the new Congress of a mind to to pare back spending to offset this Fiscal Cliff deal.

In our aversion to negotiating in good faith (both parties) we have avoided the Fiscal Cliff from arriving on January 1st, 2013. But in doing so we have merely bought breathing space of just 1-3 months before we must return to the negotiating table for what are perhaps even larger stakes.

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Fiscal Cliff Alert Status for 2012.12.05: Condition Red

When it comes to the Fiscal Cliff, we all have much to lose.

The CBO projects that going over the cliff means that the economy takes a nosedive during 2Q 2013 and unemployment will easily break 9% by early 3Q 2013.

Should we go down the Fiscal Cliff path then 2013 will be a year of random misery as different parts of the economy adjust to magical movement of money, or lack thereof, in the marketplace. Ours is a marketplace addicted to subsidized money on both the left and the right, whether it be cheap credit cards, zero percent loans to large banks, defense spending or social spending, grants, shared underwriting of public programs or tax credits and deductibles for private investments.

Neither side is close to blinking. Neither side is close to have a ‘deal’ that their own party can support.

Negotiation on avoiding the Fiscal Cliff will go all the way to the 11th hour … and perhaps no deal will come about. More probable than just being possible at the moment.

President Obama has a strong hand for shooting down many aspects of what the GOP wants, although the GOP does not have any actual plan that is supported both within the House and the Senate as of yet. So criticism that Obama has rejected the GOP plan are largely empty words — there is no GOP plan that the GOP itself has endorsed that can provide a guaranteed 51%+ supportive vote in either the House or in the Senate.

And yet President Obama’s challenge is that he needs a deal that the GOP House will approve, and so far there is no real Democratic plan on the table that can provide a guaranteed 51%+ supportive vote in either the House or in the Senate.

The only two people that have a written plan are Simpson-and-Bowles … and neither the Dems nor the Reps are embracing it.

Today’s Risk Level of going over the edge: Condition Red

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Bogus Claim – Bush wiped out the Clinton $5.6 trillion surplus in just two years

The graphic below is making many rounds on the internet, and its publication is specifically widespread on Facebook.

Problem: The primary claim is grossly incorrect — so incorrect that the claim qualifies as a BIG Lie.

Bush wiped out Clinton surplus - BOGUS

Grossly inaccurate/BIG Lie category: Clinton left a $5.6 trillion surplus? Really? Per the Clinton administration’s own numbers, the surplus never exceeded $400 billion, and was just $237 billion in its best year (2000).

Good things were done to manage debt during President Clinton’s last few years: there was significant progress in paying down national debt in 1999 and 2000. The National Debt Clock had stopped and was even reversing.

Also good was that new debt under President Clinton’s eight years was minorly incremental as compared to almost all other presidents since World War II. Yet national debt within President Clinton’s last year in office began to rise again — all the gains of debt paydown in 2000 were wiped out by 2001’s gains.

As for debt hitting $10 trillion on Bush’s watch: $10,628,881,485,510.23 was the debt on President Bush’s last day in office. It was $5.727 trillion on the day he took office.

Note: It is easy to check such numbers. The Department of the Treasury has a website that let’s you check the national debt (technically ‘Public Debt’) at any time. You can check the numbers yourself at Debt to the Penny.

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National Debt / Deficit Meltdown — Maybe kicking the can down the road is the better path + an idea

The smell of financial meltdown is in the air.

We stand at the threshold of maxing out our national credit card and there is absolutely no plan that has been presented to the public that seems to really make economic sense — mostly because no one wants their sacred cows touched.

>> A tax deduction for the interest on your home is not much different than helping someone that lives in subsidized housing. Welfare is welfare.

I almost agree at this point that kicking the can down the road could be a desirable outcome.

My logic is that it really is too late now for there to be any comprehensive plan. A short term bandaid plan that drops the need for decision prior to the 2012 elections only serves political purposes, it doesn’t matter what party you support.

Kicking the can down the road has the beneficial effect of guaranteeing that bad things will happen to good people. Hopefully it will sober them up enough that they will empty their heads of all the partisan crap. Then perhaps they will try to think a bit more critically about the situation and to think a bit more objectively.

Whether Left or Right, reality is that neither side is anywhere near agreement — not even among themselves — as to what should be done.

Politics are just economics draped over other issues. It is always about power.

All or nothing works no better at one end of the fringe than the other.

If we respected the average taxpayer we would ask them to choose the plan that they believe we should pursue. Let’s hold six months of public debate, critiqued by both citizens and academics, and then let’s hold a referendum.

Let’s let Americans choose by line item vote in a referendum what goes and what stays or what changes.

If we truly believe in ‘We the People’ then let’s let Americans decide their future and their fate.

What say ye?

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So I’m thinking … about August 2nd and the Debt Ceiling … I blame …

I do not expect a deal. Not a meaningful deal. Not anything that fixes or changes the course of our national deficit or debt and the path that it is on to gobbling up 106 percent of our GDP by 2020 if the CBO is correct.

My disappointment leans heavily towards the Republicans. While no one knows the details of debt negotiations except the negotiators themselves, there are enough leaked details that I am ever so glad that I am not Speaker Boehner.

Whether Speaker Boehner likes to have a few hardy drinks, or drinks hardy, I’m sure that he is looking forward to all of this being over.

Two people are coming out of this looking good, at least in my book: President Obama and Speaker Boehner.

I want a balanced budget; defense included. Yes, a constitutional amendment as part of a grand deal would be good.

I want taxes to be more fair and always lower. But we should pay for those things that we have obligated debt towards.

Let’s eliminate debt by making smart cuts or placing ceilings on program expenses. Let’s make it so that Congress must vote to increase funding for any program that exceeds its projected expense by 5% — whether it is a social program or a defense program.

Let’s … do many things.

But we won’t.

President Obama is in some ways in a great position at the moment. No doubt every day is challenging but he is poised to come out of the Debt Ceiling negotiations looking like the man that was willing to roast his own sacred cows to move the country in the right direction.

Except if he did he would lose the support of much of his own party.

There are no worries about President Obama having to sacrifice himself for the grand deal, however. Speaker Boehner is the one that I worry for. He leads a party that wants no deal and that will try to sabotage anything that looks like a deal. My worry is that the Republicans are being held hostage by their own ideals gone amok. The challenge for Speaker Boehner is ‘who do you trust’ on the Republican side? His majority whip Eric Cantor has pretty much made it known that no deal is the best deal.

So if there is no deal and the economy does well then the Republicans will come off smart looking and will stand a good chance to take it all in 2012.

If there is no deal and the economy crumbles, stumbles or just plain bad happens to us all then Americans will come back on the Republicans with a vengeance that makes 2008 look like just a warmup.

President Obama’s biggest challenge is that he has Democrats on his side.

Speaker Boehner’s biggest challenge is that he leads a party in the midst of a hostile takeover and those that wish to acquire the party have no problem taking out those that can’t adhere to the doctrine of ‘No’.

Chances are that on August 2nd there will be no deal. Or nothing worthy of that name. This is a probability not a possibility in my estimation. While I believe that President Obama is playing at triangulation (and maybe, just maybe hoping for no deal), I will hold the Republicans responsible for anything bad that happens to America as a result.

How we got to this point is one discussion. How we could have gone forward is what we are talking about.

If the economy does not go down in absence of a deal it helps the Right. If the economy becomes even more toxic then so will the Republican Party and it will go down to hard-earned, deserved defeat.

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DEBT & DEFICITS | Cut Your Stuff Not Mine — Republicans Most Resistant To Cuts. Go Figure.

NBC and the Wall Street Journal (WSJ) conducted a poll to see who supports what from the Deficit Commission’s preliminary list of recommendations.

One amazing survey finding: Republicans were more negative than Democrats on the plan, which cut just about everything.

Nearly half of Republicans called it a “bad idea”. Only one-third of Democrats saw it that way.

Republicans have been hot to trot on making cuts … but if they don’t like what the commission proposed and they can’t name any specific cuts that they would make on their own … then what is the plan?

Read Story http://online.wsj.com/article/SB10001424052748703688704575620891838063332.html

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