Tag: Federal Debt

The New Order

During the debate earlier this week, Congress quietly issued an omnibus budget bill. It just passed both houses today. There is some stuff in the bill to like but a lot to dislike.

Dislikes first:

  • Provisions do tighten immigration and refugee procedures were dropped, although the visa waiver program will be tightened.
  • The bill increases overall spending.
  • The bill increased the budget deficit, albeit mostly through extending tax provisions.
  • The bill includes surveillance provisions that violate civil liberties, essentially passing CISA through the back door.

There are a few provisions I don’t have a strong opinion about at this point. The bill increases the number of H2-B visas dramatically, which is opposed in many quarters. It also drops the effort to defund Planned Parenthood. Personally, I would prefer that we drop all non-budget riders from the bill.

There’s another provision that’s kind of difficult to get a grasp on. The bill makes some tweaks to Obamacare: delaying the Cadillac tax, dropping the medical device tax and maintaining the caps on the “risk corridors”. The tax delays cost money but make Obamacare more palatable to some opponents. The risk corridors could result in insurance companies leaving the system. But the willingness of Democrats to negotiate away parts of Obamacare may portend an uncertain future for the program and an eventual overhaul. So we’ll have to see where this goes.

Now the good:

  • It lifts the crude oil export ban.
  • It make a number of tax breaks permanent or long-term, rather than having them renewed every year. This at least will mean more honest accounting. Indeed, much of the deficit increase is on paper because we’ve stopped pretending we’re going to let those tax breaks expire.
  • It replaces the sequester with more targeted spending cuts.
  • It avoids a government shutdown.

That last bit is probably the most important. The budget deal is a step toward renewing the normal budget process rather than budgeting through a series of self-created crises. It is a worrying step toward both parties agreeing to ignore the deficit. That will have to be addressed. But if we’re getting back to a normal budget process, it should at least be easier to tell what the hell Congress is doing.

All the Coins That’s Fit to Print

A long time ago, the Simpsons did an episode about Congress creating a trillion dollar bill to rebuild Europe after World War II. Apparently, a few pundits and at least one Congressman think that was a documentary:

Rep. Jerrold Nadler has an admittedly “out of the ordinary” solution to the coming fight over the debt ceiling.

“There is specific statutory authority that says that the Federal Reserve can mint any non-gold or -silver coin in any denomination, so all you do is you tell the Federal Reserve to make a platinum coin for one trillion dollars, and then you deposit it in the Treasury account, and you pay your bills,” Nadler said in a telephone interview this afternoon.

I’ll let Doug Mataconis tackle the legal and statutory issues. A short version is that Nadler is using a bill for a purpose for which it was never intended. The authors of the bill have specifically said it was meant for making commemorative coins and such. The idea of avoiding the debt ceiling by printing an inflation-producing trillion dollar coin is way beyond any authority in the law. And even if it weren’t, Congress could override it in about ten seconds.

Stand by for a few, “well, actually…” articles from the left wing claiming this idea isn’t as stupid as it sounds. But rest assured, it is stupider than it sounds.


Standard and Poor has just downgraded us to AA+ rating.

There will be a lot said and a lot of finger-pointing. I’ll have more to say later (I’m traveling). But this is simply the result of 11 uninterrupted years of fiscal recklessness capped by a knock-down drag-out blue-in-the-face fight over spending cuts that wouldn’t impress the most gullible subprime loan company.

We brought this on ourselves. All of us.

Update: It bears pointing out that S&P gave AAA ratings to mortgage-backed securities. So they may be out to lunch. But the refusal to budge on either entitlements or taxes is scaring the markets.

Update: What she said:

Well, frankly, I don’t blame Standard and Poor’s. And not because we didn’t make deeper cuts–we have lower debt loads and more favorable demographics than countries like France and the UK which still have their AAA. S&P is apparently telling us exactly what this is about: the frightening breakdown in our political system. Unless those reports turn out to be wrong, everything else is excuse-making.

That means that in order to make a plausible deal, both parties are going to have to hold hands and jump together . . . and yes, that’s right, GOP, I mean compromise. I mean higher taxes. I don’t like it. But I also don’t see any way around it. Any party that tries a unilateral solution will simply be removed from office the next time around.

The Democrats played their role, obviously, by going hysterical over even the most mild budget cuts. But keep this in mind: a large fraction of the Tea Party wanted us to not raise the debt ceiling at all.

Oh-nos! You Can’t Cap Spending Growth!

Well, the debt deal is out. And, as you might expect, so is the hysteria. Here’s Krugman:

For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

Let’s take these apart one by one. It won’t take long, I promise. I can do it in three short paragraphs, the idiocy is so transparent.

First, this is not “austerity”. This is a cap on spending growth. There are no cuts, although some programs may be cut so others can grow (imagine that). We will still spend 95% of what we’d planned to spend over the next decade. My salary has been frozen two of the last three years; some grants cut by 50% or more. I would mud-wrestle a dolphin to get these kind of “cuts”. In other countries like the UK, they have actually cut spending — real cuts not phony-baloney caps in spending. And, somehow, the world has not ended.

Second, Krugman advocates more borrowing because interest rates are near zero. Now I’m not a Nobel Prize winner, but even I know that interest rates are not going to stay low forever. And when they rise, the stimulus spending of just the last three years (some $4 trillion) will eat up $100-200 billion a year in interest. That could potentially be an amount greater than the “draconian budget cuts”. And the more debt we run up, the sooner and harder those interest rate hikes are going to hit.

Third, we will see if the GOP pays a political price. I was not terribly happy with the tactics and am annoyed with the GOP for walking away from a potential “grand bargain”. However, raw extortion is nothing new to anyone who remembers budget battles past. The President and the Democrats dragged this out with their devotion to tax hikes. And if the Republicans are guilty of extortion, the Democrats are guilty of negligence. They had many opportunities to fix this; they chose to kick the can to the Republicans, hoping the GOP would pay the price for the tough choices.

But I feel I’ve wasted the three minutes it took me to write the above, because even Paul Krugman doesn’t believe that shit. No, what really pisses him off is that we had a debt showdown and we didn’t get the tax hikes he so desperately wanted. He even calls for them (because the economy apparently can’t survive 5% less spending growth, but can survive 10% more taxes). Back in December, I wrote the following about the unemployment-tax deal Obama cut:

There is something very revealing about the Left’s extremely angry reaction to this deal. Most of the center-left are OK with the deal, understand the need for compromise. But the far Left is beside themselves this morning.

This shows just how many Democrats really are into the wealth envy game. They’re not happy that they’re getting an unemployment benefits extension from a GOP Congress. They’re outraged that taxes aren’t going up on the rich for two more years. What kind of person thinks like that?

We’re seeing this again. The Left was convinced that this budget fight would end up with their long-wished and eagerly-awaited tax hikes (which may still happen in 2013). Last week, they spent the week yelling, “Cut a deal, any deal! Just stay away from the debt ceiling!” Now, suddenly, it’s “Oh, wait, not THAT deal!” In fact, some of them are now openly calling for either a default or a 14th Amendment solution.

Who is it that was taking hostages, again?

Threatening the debt ceiling has always been the tactic of those opposing the status quo. Now that the status quo is to … let’s repeat this for those of you joining us late … capping spending growth, it’s the liberals in opposition and, not surprisingly, the liberals who want to take hostages on the debt ceiling.

Paul Krugman and his travelers don’t care about the debt, default or the economy nearly as much as they care about big government. More spending and more taxes are not a means to an end; they are the end themselves. Fortunately, the President isn’t as in love with the State as they are.

Update: It bears pointing out that the crazy no-compromise Republican extremists did conceded something important here: defense spending is on the table. In fact, it’s got more limbs on the table than anti-poverty spending. That is a big win for the Democrats, the President and the country as a whole.