George Rebane
Now you’re free to believe that last night’s debt limit deal between the Repubs, Dems, and President is a solution to any of the ills our country faces. But you would be wrong, because nothing has changed except another little shot of morphine to ease our cancer’s pain.
The deal, which may not even pass Congress, will continue to increase our national debt, ignore meaningful deficit reduction, and enlarge government over the next ten years. The deal also sets up the Dubious Disciples – a committee of twelve, evenly split among Dems and Repubs – to manage kicking the can some more when it meets later this year. The piddling cuts will not mount to a hill of beans in the grand scheme, and both sides will expect to get more of what they want from the next baked in crisis – Repubs real spending cuts, Dems real tax increases.
The credit rating arguments have been specious. This deal will not affect them one iota, and will even affect less the lenders’ propensity to buy Treasuries. Those bonds will sell or not based on the relative risk that the world’s borrowers present. Uncle Sam, believe it or not, still seems to be sitting on top of that dung heap.
So this little exercise was all done for the politics of 2012. And it will be a politics with a gaping, smoking hole where America’s ideological middle used to be. Each side will accuse the other of stretching their ideological boundary away from the center, and each side will be right. The progressives caught the conservatives napping in 2008 – Bush2 had damaged the right much more than anyone thought. And then when all was set for the socialist road to utopia, up rose the people in the tea party movement and made history in 2010.
But our real destination has not changed since the country decided that it could borrow, tax, spend, and regulate our way into a prosperous and secure 21st century. To change that destination will require a real crisis.
[2aug2011 update] Congress has passed the compromise bill to raise the debt limit, and a promise to cut a tad of spending way out there in Neverland. The tea parties are not happy about anything save introducing the idea that we should at least talk about spending cuts when we promise to increase borrowing. Without going out on too much of a limb, I predict that the spending cuts from this legislation will not amount to one tenth of the projected (by whatever bamboozle you care to quote) $2.4T.
All we just did is to keep up the borrowing, and as predicted (at least here) the markets are behaving accordingly – there is no joy on Wall Street because national debt will be over $21T in ten years. On TV, talking heads are wondering whether the Bernank is going to do a QE3. Hell yes he’s going to pump more faith-based money into the economy, it’s the only play Team Obama has left from their Keynesian game book – bet the farm on it.
The reason for doing this was again intoned this morning by Dirty Harry in the Senate before it voted. Harry was telling the world that continued stimulus is needed to help the tottering economy; that for every billion dollars the government pumps into the economy, 40,000 jobs are created. No media pundit did the quick math and asked ‘Then where are the 32,280,000 jobs from Obama’s $807B ARRA stimulus?
Then another helping of ‘Bush2 did it!’ will once more be trotted out to be lapped up by those who reason light. Even Fox News seldom mentions that Bush2 did inherit the dotcom recession along with plunged government revenues and, of course, 9/11. New studies are now showing that, had W not pushed through his tax cuts, the recession would have been longer and deeper – but this again passes by the progressive board. And somehow the long simmering housing bubble that went into full bloom in 2006 also slips the common mind. All we remember is that it was W’s two ‘wars’ that took our economy down.
So we have now ballyhooed ourselves into thinking that something has been accomplished to avert disaster, default, destruction, you name it. The markets have told us all along, and are telling us now that it doesn’t matter. In a couple of months the 2012 budget comes due, and that will again throw everything into the air. (You do remember federal budgets, don’t you? Obama doesn’t.) And then in December, the new Dubious Twelve are supposed to identify $1.5T in additional spending cuts and tax increases (any bets here?). Absent that, the legislation calls for an “automatic” $1.1T of cuts to kick in, and a Balanced Budget Amendment introduced into Congress.
The BBA will be a joke with a snowball’s chance in hell of passing. The automatic cuts are designed to begin castrating our military, since everyone knows that the world will be the same as it is now when the carrier task groups come home for the last time. So what’s there not to like about this great piece of historic bi-partisan legislation that was born a bastard and will soon become an orphan?
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