Death Spiral Debt Deal
As I’m sure we’re all aware, the major political players in Washington agreed to debt ceiling deal last night. Reuters has a terrific breakdown of the final deal here. I’m not happy with this “deal” at all and if I were in Congress, would certainly vote “No” on passage.
Why? Simply put, this agreement does absolutely nothing about either the current deficit or the even larger problem of the national debt. In fact, passage guarantees that the debt will double over the next decade. And just for grins and giggles, there are also some really rosy ideas about anticipated economic growth baked into the framework – ideas that in light of last week’s GDP reports are proven to be a complete sham.
Let’s start with the sham of an idea that this deal somehow trims the deficit. The only guaranteed cuts in the whole package are for FY2012 – and they total all of $6 billion. Even if you use the overly-optimistic CBO estimate of “only” a $1.049 trillion deficit for FY2012, that amounts to about ½ of 1% of the deficit. To put this in perspective, it’s the equivalent of the average American cutting their total annual spending by $37.85, or the typical price for a dinner for two. This is every bit a dog-and-pony show, not budget cutting.
Secondly, this deal does little to curb long term spending, either. The final total of $2.4 trillion takes place over the remaining 9 years. However, the combined deficits over the next decade are forecast to equal another $13 trillion. That would bring the national debt to a total of around $28 trillion by 2020. Even if future Congresses don’t reduce that $2.4 trillion in deficit reduction (good luck with that), the federal debt will amount to $25.6 trillion in 2020. This package doesn’t do anything to actually begin reducing the debt. Only in Washington could a package that will grow the federal government’s debt obligation by 77% be considered a “debt-reduction plan.”
Finally, there’s the kabuki-theater method of arranging these “cuts.” Part of the reduction comes from presupposing that the Pentagon can find $350 billion in cost savings as a result of the wars in Iraq and Afghanistan ending. The deal-makers completely ignored the fact that we recently got involved in another war in Libya and also imagine that we won’t get involved in any others before 2020. I would like to go on record now as believing in the tooth fairy and unicorns, since those are less farfetched assumptions. There is a “super committee” that’s supposed to recommend budget cuts on a straight up-or-down vote; failing that, across the board reductions in all government programs. Well, almost all – federal employee pay, Medicaid, Social Security, welfare and veteran’s benefits are excluded. Considering we’ve already had 16 deficit committees in the past 20 years, each of which has said that the principle way to reduce the debt is to transform entitlement programs – and this deal exempts most of them from automatic cuts – how successful do you suppose this one will be? Expect another political dog-and-pony show, only this one should be a spectacle that would make PT Barnum proud. After all, it’s taking place during an election year. The posturing and grandstanding over recommendations that have no chance of passing both Congressional houses will liven up campaign ads and the evening news, but mean nothing.
So, no, I can’t support this deal. It just lends further proof that Washington is run by inept morons and snake-oil salesmen.