06 August, 2011

How Big Is Our Debt? Do We Really Have A Spending Problem?

Yes, I know our debt $14.580 trillion as I write this, but how big is that?

No, I’m not going to do some cutesy pictures. I’m going to do some math. Scary math, but simple. Even a Democrat Senator could understand it.

The entire tax revenue in the history of the United States through fiscal year 2010 is $49.531 trillion. Tax revenue so far this year is $2.201 trillion. Simple addition gives me the number $51.732 trillion. That’s it. That’s the sum of the entire tax revenue in the history of the United States. For the rest of this post I’m going to call that ETR to avoid repeating myself endlessly.

$51.732 trillion.

Our debt is $14.580 trillion.

14.580 / 51.732 = .2818.

Our debt is 28.18% of ETR.

This year we will spend $3.7 trillion.

3.7 / 51.732 = .0715

We will spend 7.15% of ETR this year. That’s about 1/14th of the total. 1/14. In one year.

When the Democrats took control of Congress in 2007, our combined tax revenues were $42.740 trillion. Since then, the Democrats have managed to spend $13.563 trillion.

13.563 / 42.740 = .3173

In the last four years, the Democrats have spent 31.73% of the entire amount of revenue we’d collected before their spending binge.

I can be nicer and include revenue up until now, but it doesn’t get much better.

13.563 / 51.732 = .2622

In the last four years, the Democrats have spent 26.22% of ETR.

You think I should only include President Barack Obama’s (D-USA) numbers? Ok.

Outlays for FY 2010 and 2011 (generously giving 2009 to President George W. Bush (R-USA), even though budget wasn’t passed until after he left office) total $7.063 trillion. Total revenue before FY 2010 = $47.369 trillion.

7.063 / 47.369 = .1491

Obama has spent 14.91% of the entire revenues preceding him.

7.063 / 51.732 = .1365

Obama has spent 13.65% of ETR. About 1/7th of ETR. In two years.

If you’ve forgotten since the beginning of this post, ETR means “entire tax revenue in the history of the United States”. Now go back and reread the statement above.

In fairness, so we can see how much it’s grown, if I go back to FY 2007, I get the following: $42.740 trillion gross receipts & total debt of $9.008 trillion.

9.008 / 42.740 = .2108

Before the Democrats took over, our debt was 21.08% of the ETR at the time. That’s bad. No denying it. But, in four years, it has grown from 21.08% to 28.18%. This is why S&P downgraded us. That kind of growth is obscene.

America has a spending problem. Anyone who says otherwise falls into one of four categories. 1) They’re lying, 2) they’re not in possession of the facts, 3) they’re incapable of understanding basic arithmetic, or 4) they’ve lost their minds.

It’s one of those four. There are no other options.

August 6, 2001

Insider trading based on advanced knowledge of the 9/11 attacks may have begun on this date, if not earlier. Investigators later discover a large number of put option purchases (a speculation that the stock will go down) that expire on September 30 at the Chicago Board Options Exchange are bought on this date. If exercised, these options would have led to large profits. One analyst later says, “From what I’m hearing, it’s more than coincidence.”

August 6, 1945

An American B-29, the Enola Gay, drops the atomic bomb known as “Little Boy” on Hiroshima, Japan.

Before After


War is Hell.

According to the U.S. Department of Energy the immediate effects of the blast killed approximately 70,000 people in Hiroshima.[44] Estimates of total deaths by the end of 1945 from burns, radiation and related disease, the effects of which were aggravated by lack of medical resources, range from 90,000 to 166,000.[1][45] Some estimates state up to 200,000 had died by 1950, due to cancer and other long-term effects.[3][6][46] Another study states that from 1950 to 2000, 46% of leukemia deaths and 11% of solid cancer deaths among bomb survivors were due to radiation from the bombs, the statistical excess being estimated to 94 leukemia and 848 solid cancers.[47] At least eleven known prisoners of war died from the bombing.

05 August, 2011

Can We Please Stop Calling It ‘Austerity’?

I’m sick of people using the word “austerity” regarding the GOP budget plans and the recent debt deal. Even Nate Silver (www.fivethirtyeight.com) used it recently, and he’s a numbers guy. He should know better.

From Webster:

Definition of AUSTERITY

1: the quality or state of being austere

2a : an austere act, manner, or attitude
 b : an ascetic practice

3: enforced or extreme economy

Obviously it’s definition 3 that applies to our budgeting. I suppose “enforced” qualifies, but I’m pretty sure that liberals are implying “extreme”. That’s certainly what I hear in my head when someone says “austerity” to me, and I am pretty sure I’m similar to the average Joe in this regard. In fact, since liberals also use the word “extreme” when describing GOP budgetary plans, I’m certain that this is their intention.

Is the debt ceiling deal really so extreme?

Based upon the January 2011 baseline from the CBO, our government will spend just a bit over $46 trillion through 2021. The debt ceiling deal reduces that spending by about $1 trillion, or about 2.2%. Our total deficit spending in that same time frame is right at $7 trillion. That means that we will be spending about 118% of our revenue over that time frame. I’ve mentioned this before, but these are extremely optimistic projections (revenues at 20%+ of GDP starting in 2015, +2.6% average GDP growth). We’re currently spending about 140% of our revenue, and honestly I don’t see any reason to believe at this point that number is going to shrink significantly over the next ten years.

However, assuming the 118% number is correct, then we’d lower spending to 115% of revenue. So, if I tell my accountant that for every $1 I take in, I’m going to spend $1.18, but then I rework my budget and realize I can get it down to $1.15, do you think my accountant is going to call that “austere” or “extreme”? No, me neither.

And it becomes even less extreme if you don’t adopt the CBO’s rosy projections. If we actually spend 130% of revenue, then this debt deal will only cut it to about 127-128%. Yippee.

How about the Ryan plan? It reduces spending by $5.8 trillion through 2012, or about 12.6%. However, it also only drops that 118% down to 115%. That’s because the Ryan plan assumes much less revenue, almost $5 trillion less, due to somewhat more realistic assumptions about economic growth (but I think the Ryan plan is too optimistic also).

In fact, the only plan that has been presented that may deserve the austerity tag is Cut, Cap, & Balance. I don’t believe that CCB has ever been scored by the CBO, but I can do some guessing based upon the January CBO data. I assumed the same optimistic GDP and revenue numbers as given in the CBO baseline, and used the spending caps as defined in the bill. It appears to cut spending by $6 trillion, much like the Ryan plan. The number works out to be about 13.1% reduction in spending. However, it does reduce spending over the next decade to a mere 102% of revenue, increasing the debt by about $1 trillion. That is significantly less than the 118%. I’m still not sure I’d tag it as extreme, though, since we still spend more than we’re bringing in. That’s in total, I should point out. CCB starts running an annual surplus in 2017, assuming the CBO’s optimistic revenue projections. My guess is that if the CBO scored CCB they’d reduce the GDP growth and revenue projections, which might make things worse.

I can’t point this out too many times. Liberals win when they define the argument. When they call these plans austerity measures and we let them, we lose the argument before it ever begins. The only plan above that might deserve that tag is CCB, and I personally wouldn’t even call it austere. Even CCB would increase our current debt from $14.5 trillion to $15.5 trillion at a minimum over the next ten years.

August 5, 1981

You’re fired.

President Ronald Reagan (R-USA) fires 11,345 striking air traffic controllers. PATCO had endorsed Reagan in the 1980 Presidential campaign, a decision I’m sure that they later regretted.

Alan Greenspan later commented:

Perhaps the most important, and then highly controversial, domestic initiative was the firing of the air traffic controllers in August 1981. The President invoked the law that striking government employees forfeit their jobs, an action that unsettled those who cynically believed no President would ever uphold that law. President Reagan prevailed, as you know, but far more importantly his action gave weight to the legal right of private employers, previously not fully exercised, to use their own discretion to both hire and discharge workers.

August 5, 1861

The Revenue Act of 1861 is enacted, levying the first income tax in the United States.

Rates under the Act were 3% on income above $800 (adjusted for inflation: $18,875 in as of 2009 dollars [2]) and 5% on income of individuals living outside the country.

The Revenue Act of 1861 was signed into law by Abraham Lincoln, the first Republican President. This Act introduced Federal income tax as a flat rate tax.

The income tax provision (Sections 49, 50 and 51) was repealed by the Revenue Act of 1862. (See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 ($12,742 in 2009 dollars) and 5% on incomes above $10,000 ($212,369 in 2009 dollars) or those living outside the U.S., and perhaps more significantly it was explicitly temporary, specifying termination of income tax in "the year eighteen hundred and sixty-six").

This tax was later completely repealed, but re-enacted during World War I. The burden on taxpayers has been increasing almost continuously ever since.

July Unemployment Report-Not Decent. Not Bad. AWFUL

By now you’ve probably heard the news on this month’s unemployment report from the Bureau of Labor Statistics (BLS). At first blush, it sounded decent, but not good: 117,000 jobs added, unemployment down 0.1% to 9.1%. And that’s how I called it on Twitter.

If you listen to Rush or to Jim Pethokoukis, you know a bit more of the truth. Labor force participation rate is down to 63.9%. Employment-population ratio is down to 58.1%. 193,000 people left the workforce in July. And if the active labor force was even as big as it was when President Barack Obama (D-USA) took office, the unemployment rate would be 11.7%. That’s bad. And that’s how the market is reacting.

The truth? It’s worse than that. Much worse.

Between May and July, the number of employed Americans shrank by 483,000. To put that in perspective, since last July, the number of employed Americans only grew by 400,000. In the last two months, we have erased over half the gains of the entire last year. If we have another two more months like this, we’ll erase the entire gains of the last year.

If that sounds like the economy is improving to you, then you’re delirious.

And that doesn’t even take into account the amount the labor force should be growing every month just due to the birth/death rate in the United States. We need to hire 125,000 people every month (about what we did last month) just to keep pace, and to keep the unemployment level at about the same. In other words, a gain of 125,000 jobs represents a net gain of 0.

Adding in that little tidbit of information, and now instead of being down 483,000 jobs the last two months, we’re down 733,000 (net). Instead of being up 400,000 since last July, we’re down 1,225,000 (net).

You can try to spin this positively, and I’m sure the White House and our compliant media will, but these numbers are awful.

As I said on Twitter, if a cancer patient was recovering like this economy, the doctor would be talking with the family by now about “preparing for the future”. That’s how bad these numbers are.

04 August, 2011

August 4, 1977

The Department of Energy is created when President Jimmy Carter (D-USA) signs the Department of Energy Organization Act.

The reasons given for this:

Sec. 101. The Congress of the United States finds that—
(1) the United States faces an increasing shortage of nonrenewable
energy resources;
(2) this energy shortage and our increasing dependence on foreign
energy supplies present a serious threat to the national security of the
United States and to the health, safety and welfare of its citizens;
(3) a strong national energy program is needed to meet the present
and future energy needs of the Nation consistent with overall national
economic, environmental and social goals;
(4) responsibility for energy policy, regulation, and research, development
and demonstration is fragmented in many departments and agencies
and thus does not allow for the comprehensive, centralized focus
necessary for effective coordination of energy supply and conservation
programs; and
(5) formulation and implementation of a national energy program require
tie integration of major Federal energy functions into a single
department in the executive branch. (91 Stat. 567; 42 U.S.C. $71 11)

And some highlights of its defined purpose:

(2) to achieve, through the Department, effective management of energy
functions of the Federal Government, including consultation with
the heads of other Federal departments and agencies in order to encourage
them to establish and observe policies consistent with a coordinated
energy policy, and to promote maximum possible energy
conservation measures in connection with the activities within their respective
(3) to provide for a mechanism through which a coordinated national
energy policy can be formulated and implemented to deal with the
short-, mid- and long-term energy problems of the Nation; and to develop
plans and programs for dealing with domestic energy production and
import shortages;
(4) to create and implement a comprehensive energy conservation strategy
that will receive the highest priority in the national energy program;
(5) to carry out the planning, coordination, support, and management
of a balanced and comprehensive energy research and development pro
gram, including—
(A) assessing the requirements for energy research and development:
(B) developing priorities necessary to meet those requirements;
(C) undertaking programs for the optimal development of the various
forms of energy production, and conservation; and
(D) disseminating information resulting from such programs, including
disseminating information on the commercial feasibility and
use of energy from fossil, nuclear, solar, geothermal, and other energy

(9) to promote the interests of consumers through the provision of an
adequate and reliable supply of energy at the lowest reasonable cost;

If those are the defined reasons and purposes, I think we can all agree that the Department of Energy has been a dismal failure.

03 August, 2011

August 3, 1492

“In 1492, Columbus sailed the ocean blue.”

Cristoforo Columbo leaves Palos de la Frontera in attempt to reach the Indies by sailing across the western ocean (the Atlantic).

On the evening of 3 August 1492, Columbus departed from Palos de la Frontera with three ships; one larger carrack, Santa María, nicknamed Gallega (the Galician), and two smaller caravels, Pinta (the Painted) and Santa Clara, nicknamed Niña after her owner Juan Niño of Moguer.[35] They were property of Juan de la Cosa and the Pinzón brothers (Martín Alonso and Vicente Yáñez), but the monarchs forced the Palos inhabitants to contribute to the expedition. Columbus first sailed to the Canary Islands, which were owned by Castile, where he restocked the provisions and made repairs. On 6 September he departed San Sebastián de La Gomera for what turned out to be a five-week voyage across the ocean.

A lookout on the Pinta, Rodrigo de Triana (also known as Juan Rodriguez Bermeo), spotted land about 2 a.m. on the morning of October 12, and immediately alerted the rest of the crew with a shout. Thereupon, the captain of the Pinta, Juan Alonso Pinzón, verified the discovery and alerted Columbus by firing a lombard.[36] Columbus later maintained that he himself had already seen a light on the land a few hours earlier, thereby claiming for himself the lifetime pension promised by Ferdinand and Isabella to the first person to sight land.

Aside: It’s amusing that we’re taught in the United States that the names of the three ships were the Nina, Pinta, & Santa Maria. Pinta was a nickname of the ship Santa Clara. But the nickname of Santa Maria was Gallega. So, in typical inconsistency we accept the nickname of one ship, but not the other.

Next Time

I’ve been giving the debt deal more thought, and I have decided there are three things that are still giving me angst. In fact, two of them frustrate me more and more each time I think of them.

Here are the three things we need to be working towards every time we get a chance:

  1. Zero-based budgeting. This is vital. We keep patting ourselves on the back, saying “Hey, we finally got some cuts out of Washington. Hooray for us!” Bullhockey. We reduced the trajectory of growth. Real cuts were minimal, and perhaps non-existent. We have to get back to zero-based budgeting and get rid of this idea of baseline budgeting. That’s the only way we can change the language of the debate and make a cut be an actual cut. I think we could have gotten this on this last debt deal and it’s infuriating to me that we didn’t even try. Until we get this, it’s hard to make the case that any progress towards shrinking government is real.
  2. Real matching cuts for debt limit increases. Speaker John Boehner (R-OH-08) and others on the GOP side are trumpeting that we now have the Boehner rule on debt ceiling hikes: “In the future, no debt ceiling increase will occur without a matching level of cuts”. Big effing deal. First of all, see point one about “cuts”. Second, we gave President Barack Obama (D-USA) a debt ceiling hike that will last about 20 months. The “cuts” we got are over the next 10 years. If the timeline doesn’t match, the cuts don’t match. In the future, if we raise the debt ceiling for 20 months, then the matching cuts should come from the next 20 months as well. I’m willing to give a little on this, but it has to be close. It can’t be 20 months and 120 months, which is what we got this time. I know this one is going to be hard to achieve, which is why I’m willing to compromise, a little. But this needs to be a goal.
  3. Balanced budget amendment. Sure, everyone on the right is screaming about this, saying we didn’t push hard enough for it. I’ll add my voice to the chorus, but forgive me if it’s not a scream. This is a big deal, but as I said earlier in the week, it takes too long to help us turn the corner now, which is what we need to be doing. I’d rather work on 1 & 2 first, because they can have immediate impact.

Don’t mistake my frustration here as frustration with the GOP. Other than not working on #1, which I do think was a winnable issue, I don’t fault our GOP leadership. This is a war, and to win it, we need to start winning battles. Every battle should have some goals. These are the goals I want to start working on in the upcoming battles.

02 August, 2011

August 2, 1776 & 2011

The Declaration of Independence is signed today in 1776.

On this day, in 2011, President Barack Obama signs The Budget Control Act of 2011.

You’ve come a long way, baby.


A Few More Depressing Thoughts About The Debt

The plan that will be approved by the Senate today and signed by the President projects debt growth of $7 trillion over the next 10 years, or a 50% increase in our debt.

That’s the bad news. The worse news is this.

That’s based on the rosy economic projections of +3% GDP annually, and interest rates holding the line where they are.

Each .1% on annual GDP works out to be about $50-$100 billion on our government’s balance sheet. So, what happens if we only get to +2.5 GDP annually over the next ten years? That would add about $3-$5 trillion in debt. If interest rates go up a couple points, that could also add $2-$3 trillion in interest payments. Or more.

So, that $7 trillion in debt increase over the next ten years could easily double. We owe $14 trillion now, and could owe another $14 trillion in 2021.

How’s that make you feel?

You understand all my posts from the last couple months saying that we may already be at the tipping point now?

It is no exaggeration to say that the 2012 election is the most important election of my lifetime. Not just for the White House, but the House and Senate as well. The Democrats are trying to destroy America and the American dream. I’ll give them the benefit of the doubt (that they probably don’t deserve) and say that they’re not doing it deliberately, but their policies certainly will. There is now no doubt on that matter.

Math trumps politics.

I keep saying that and I will continue to say it until November 2012, and probably beyond.

So, The Economy Really Sucks

This is yet another post I should have done last week. Still waiting has allowed me to do some more analysis and allowed another set of numbers to trickle in.

Let’s start with this graph. This is the graph of the latest GDP revisions for the last 13 quarters.

That is ugly. Just about every quarter was revised downward from the previous release. Most of them significantly. It also shows that what little “recovery” we had ended after Q1 2010, 18 months ago. That’s when we peaked at +3.9 GDP.

In case you’re wondering, the previous GDP numbers for these quarters (up to Q12011) were +0.6, –4.0, –6.8, –4.9, –0.7, +1.6, +5.0, +3.7, +1.7, +2.6, +3.1, and +1.9. The average revision (ignoring sign) was about 0.9. These numbers were taken directly from the BEA spreadsheet which you can find here.

Here’s another look at those same numbers, compared to the Carter/Reagan recession (h/t Liberty Works):

The red bars represent the Reagan recovery and is fairly typical of what you’d see coming out of a major recession. To say that President Barack Obama’s (D-USA) recovery has been anemic is putting it mildly.

The numbers for the latest two quarters, +0.4% and +1.3% came as something of a shock to most economist and news agencies. Up until about a month ago, we were hearing projections exceeding +2%. In the last month they started to drop off a bit, and you started hearing numbers like +1.9%, +1.8% and even the occasional pessimistic +1.5%.. So, 1.3% was quite a shock.

I’m not sure why, though. Every single economic indicator pointed to a worse number than Q1 (previously thought to be +1.9%). Unemployment was trickling upwards, we had the Japanese quake, continuing slowness in the housing market, high inventory, and slow manufacturing. Other than some recovery in the Japanese markets, all of these things are ongoing as well. Based on that, and the Q1 number of 1.9%, my own guess at Q2 was +1.2%.

So, I hit the number almost exactly. Except a big part of my number was based on Q1 being +1.9%. Now it’s been lowered to +0.4%. We won’t know exactly why on that until the details are released later this week. But I will state for the record that it would be extremely unlikely for Q2 to be better than Q1 based upon what we know now. So, expect either Q1 to be revised back upwards somewhat, or Q2 to be revised downward. Or some combination of the two. Next revision is at the end of this month, on 8/27.

So, the economy sucks. But then we knew that already. Can we make any guesses about the future? Well, we can add two more interesting numbers to the mix, the year-over-year growth for the last four quarters, which works out to be +3.7%, and the annualized growth over the last two quarters, which works out to be about +1.7%, according to the spreadsheet linked above.

Why I do I point out those numbers? Well, there’s a relatively new buzz phrase in measuring economic strength that you may have heard, called “stall speed”. People have talked about stall speeds for economies for some time, but the idea was given little credence. Basically, it’s the theory that before the economy tanks completely, there are indications that the economy has flattened, or stalled.

People have been talking about this due to a paper from back in May by an economist at the Federal Reserve named Jeremy Nalewaik which analyzed previous recessions and previous periods of growth to determine if there was any truth behind the idea of stall speeds. Nalewaik is an economy research wonk. He leads the curve on just about everything he puts out. If you start hearing any new buzz phrase on the financial channels, chances are he put out a paper about that topic in the last 3-6 months.

I won’t bore you with the paper, but will just provide this little bit of summary from James Pethokoukis.

More importantly, it means we’re in the danger zone for another recession. Research from the Federal Reserve finds that that since 1947, when two-quarter annualized real GDP growth falls below 2 percent, recession follows within a year 48 percent of the time. (And when year-over-year real GDP growth falls below 2 percent, recession follows within a year 70 percent of the time.

Well, our last two quarters are at +1.7%. Which is below that +2% number. And I still think that number will go down. The last 4 quarters looks better, +3.7%. Far above the magical +2% number.


There is little doubt that, since the summer of 2010, U.S. growth has faltered—the only question now is how much weaker could things get and how long will the (very) “soft patch” last. His Global Insight now expects that growth in the third quarter will come in much weaker than previously expected—probably less than 2 percent and possibly less than 1 percent.

This all tells us that at the very least, we are teetering on the brink of the “R” word. It’s basically a coin flip at this point whether we enter one. If anything else happens, inflation, global economic turmoil, another 9/11, or another Katrina, we almost certainly tip into one. If you’ve been following this blog, you know that I think there’s a high likelihood of at least one of the first two happening (read my posts on Italy, Greece, and QE2).

The Nalewaik paper also notes that GDI (gross domestic income) may be a better predictor of recessions than GDP. If I’m understanding the BEA website correctly, the GDI report comes out today.

If we do enter another recession later this year, conservatives thinking about careers in Washington, D.C. should start sending out résumés to the GOP Presidential candidates and their staff. There will be a lot of job openings in January, 2013.


UPDATE: The GDI numbers were released. And they’re not good. Will likely blog about this in the next couple days. But the AP report can be found here.

01 August, 2011

Debt Ceiling Deal—Good or Bad?

Of course it’s bad. It came from the federal government. Do you really need to know more than that?

However, it’s not as bad as it could have been, and frankly better than most of us had any right to expect.

A summary can be found here. You should read the summary, or you may not understand the rest of this. You can also see Speaker John Boehner’s (R-OH-08) slides on it here.

Here are my thoughts in a nutshell.

The good:

  • The deal gets us into early 2013. Many people think this should fall under the bad list, but I disagree. It will certainly be a campaign issue now, particularly since it’s going to come up so early in the next President’s term. But, since it won’t happen before the election, that will keep President Barack Obama (D-USA) from deliberately sabotaging the talks to win votes. And yes, I believe he’s capable of that.
  • The first round of cuts comes from the Boehner bill, not the Reid bill. That means that they’re real cuts (or at least as real as Washington, D.C. ever gets), and not number fakery.
  • I’m sure some on the right are annoyed that it doesn’t require a BBA, but nothing with a BBA requirement was ever coming back from the Senate. You’re fooling yourself if you think otherwise. Still, the fact that there’s BBA language in it at all is surprising. It also has some strength, as Congress has to accept the BBA if they can’t come to an agreement and don’t want across the board cuts. No, the BBA isn’t going to happen, but it is still a pretty big bargaining chip, even in the final deal.
  • The super committee has hard deadlines to come up with proposals that will pass Congress, and they have to pass the current Congress.
  • I mentioned previously that I like sequesters. I’m not particularly in love with this one, but again, its presence forces Congress to move. I like that.
  • There’s little doubt, that for now anyway, the Tea Party was the big winner. No, they’re not going to get all they wanted, or even very much of what they wanted, but they forced the movement of this entire debate to the right, and forced the solution to the right as well. They forced both sides to admit that we have a spending problem and a debt problem. As I’ve said previously, it’s going to take a while to turn this boat around. The Tea Party is making slow but steady progress in this direction.

The bad:

  • $350 billion of the cuts in the first tranche are from defense. That’s a lot. I’m not saying that we don’t overspend in defense, but in terms of GDP and size of budget overall, we’re at near historic lows, as the chart below shows:
  • The sequester tranche is unbalanced. 50% of the savings must come from defense. Medicaid and Social Security are excluded. Based upon my calculations earlier, this year’s budget breaks down this way: Social Security, 19.1%, Defense, 18.5%, Other, 18.4%, Unemployment & Welfare (estimated), 16.8%, Medicare, 12.9%, Medicaid, 7.8%, Interest, 6.5%. If you think it’s reasonable that defense should have to bear half the burden, while Social Security & Medicaid, which combined for 27% of the budget, should play no part, then you aren’t thinking clearly. By the way, that 50% for defense adds up to about $600 billion over the 10 years. On top of the $350 billion already in the first tranche. So, basically a trillion dollars. Unrealistic and unsafe.
  • The deal assumes the expiration of the Bush tax cuts on 1/1/2013. In fact, it appears to make that almost a requirement.
  • There’s no entitlement reform in the package. We weren’t going to get that with this President, but it still bears mentioning. Without entitlement reform, we can’t even claim to have taken a reasonable first step on solving our debt woes.
  • I’m not sure if this is enough to make the credit agencies happy. Actually, I know it’s not enough to make them happy. I’m not sure if it’s enough to keep them at their current level of unhappiness. This deal may not avert a credit downgrade. I think it will, but I wouldn’t be the farm on that. We’ll certainly still be on a watch list, and anyone who hasn’t at least dropped our outlook to ‘negative’ will almost certainly do so.

The ugly:

  • The whole tax hike situation definitely falls under ugly. Mostly because I can’t decide whether it’s good or bad. Boehner says that it will be almost impossible for the super committee to raise taxes. Others say that’s not true. First, the word “almost” makes me nervous. Second, the mere fact that we can’t figure out if Boehner is right means this part is definitely ugly. Here’s the description from the GOP.

    It has an undefined mandate of deficit reduction but the way that is constructed would essentially make it impossible to raise taxes. Anything scored by CBO is based on current law. Current law assumes that taxes are going to go up by three-and-a-half trillion dollars next year [over ten years].  So anything you do to the tax code, unless it starts off with a $3.5 trillion tax increase, it’s going to be adding to the deficit  … It’s almost impossible for them to touch taxes because if they do, almost anything will be scored as a tax cut, making it that much more difficult to reach the $1.5 trillion that they need to get to.
    If you're scratching your head over that, you're not alone.
  • The whole process has been beyond ugly. However, there may be a silver lining to all of this. Democrats are like Muslims. They never forget when they feel they’ve been wronged. Witness the number of Democrats who still complain about President Bill Clinton’s (D-USA) impeachment or Vice President Al Gore’s (D-USA) Supreme Court loss to President George W. Bush (R-USA) regarding the FL vote in 2000. This means that any Republican President requesting any kind of debt ceiling increase will face even stiffer opposition than President Barack Obama (D-USA) has had to face.  My interpretation of the Senate Rules (someone will correct me if I’m wrong) is that a debt ceiling increase bill would still require cloture, and therefore a 3/5 majority. Good luck getting any Democrats on board, Mr. Republican President. Even a Democrat President will face, at best, something similar to what we just went through. So, if you’re a Tea Party person, and trying to get our debt ceiling frozen, we may be nearing the point where that dream is a reality.
  • The entire BBA sideshow was a pointless distraction. Yes, it was nice to pass Cut, Cap & Balance, but afterwards there were better ways to focus our attention. As I said, I’m surprised that any BBA language has ended up in the final bill. But, even if it were to pass both chambers (two chances: slim and none), it still has to be approved by 2/3 of the states. My 7 year old daughter may be finishing med school by the time that happens. Not that a BBA wouldn’t be a good thing. But I’d rather concentrate on items that we can do now and have an actual chance of being enacted, like zero-based budgeting.  If anything has shown the necessity of going to that, it has been this process. Both Boehner and Senate Majority Leader Harry Reid (D-NV) were made to look silly by the CBO when their bills didn’t do what they said they would. Why? Because they were using the wrong baseline to compare against. And if that doesn’t make your head spin, nothing will. Again, I’m not saying that I’m opposed to a BBA. In fact, I think we should continue to push for it. But we also need to push for solutions that will make things better until (and if) it gets passed.

31 July, 2011

Marco Rubio Hits One Out Of The Park

If you haven’t watched this video yet, please do so.


Poor Senator John Kerry (D-MA) entered a battle of wits against Senator Marco Rubio (R-FL), and he was unarmed.