As the fury and venom flies over the debt ceiling, and now the GOP attempt to shove a Balanced Budget Constitutional Amendment thru as the price for their votes, it’s easy to see how the public is manipulated into mutual disdain and vicious ideological and class warfare by media and politicians. Dare I suggest that we – taxpayers of all political stripes and beliefs, no matter how far apart – are being played the fools big time? This should be abundantly clear by one simple and unavoidable fact… there is overwhelming bipartisan unity that if the debt ceiling is not raised, the US faces fiscal Armageddon.
If that’s the case, exactly what are the parties arguing? Because neither one is making a genuine case, or dent, for the reduction of spending, genuine entitlement reform, or increased revenue thru tax increase or a more capitalist/entrepreneurial friendly policy.
The fear mongering of Fed Chair, Bernanke, as well as Treasury Sec’y Geither and the WH are simply passing on the strong arm tactics of the nation’s largest financial institutions and their bankers.
“Any delay in making an interest or principal payment by Treasury even for a very short period of time would put the US Treasury and overall financial markets in uncharted territory and could trigger another catastrophic financial crisis,” said Matthew Zames, a JPMorgan executive, in a letter to Tim Geithner, the Treasury secretary, this week.
Mr Zames was writing as chairman of the Treasury Borrowing Advisory Committee, which includes some of the largest investors in US
You can read Zames’ letter to Geithner here, as reprinted in the NYTs last April.
Not banking on letters and media as the only devices to fight the good fight of a higher US credit limit, bank exec lobbyists and Wall Street executives have been meeting privately with the political elite for some time now, looking for assurances that no matter what the political posturing done, or whatever concessions are agreed upon, the debt ceiling will be raised for the negotiated price paid.
This lobbying, Whining… er… Wining and Dining includes a hefty amount of the 20 banks that could bring the US economy to it’s knees, in the event of a default.
Simply put, the omnipotent authorities of banks and investors are whispering threats of doom and gloom into the collective ears of the WH, Congress and the US Treasury that unless the nation’s credit card threshold is increased, interest rates will rise on T-notes, the fed’s credibility in the bond market will be shot and there would be a fire sale on US bonds, banks will fail, short term lending will disappear or become unaffordable, and the nation will spiral into a depression…
… that’s assuming there’s someone left that doesn’t think we’re not already spiraling around the toilet bowl flush to depression already.
And when the big banks whisper sweet nothings, the Congress listens.
Indeed, the whole reason people are scared of hitting the debt ceiling is anxiety that bond markets will punish the government if it happens. That’s the hostage tea-party Republicans are holding: the credit rating of the US government.
Regardless of whether the payments of the existing revenue stream are wisely plied to the proper payments in the event of a default, a nation’s credit rating is not only dependent upon obtaining their credit via their debt ceiling, but also on that nation’s ability to repay that debt based on their spending trends. This seems to be a little ditty of data that the gung ho pro-increase types seem to ignore.
As even Moody’s recent warning about the US’s credit rating evaluations point out, raising the debt ceiling is one issue… under the assumption that nation *would* actually default. (not a given…). But they are also quick to note that “the rating outlook will depend on the outcome of negotiations on deficit reduction.”
Translation? Increasing the credit card limit doesn’t always make for a good credit rating, if you don’t demonstrate discipline in reining in your spending habits. At some point, a nation’s income to debt ratio looms large, ugly and fatal.
There’s one simple fact that comes out of this political farce, playing out before our eyes… the debt ceiling was going to be raised no matter what. So it was always just a matter of the price the GOP wanted to extract in order to be cooperative.
Or, as the joke quote from Winston Churchill was, paraphrased, “We’ve already determined what you are, Madam. We are now just negotiating the price.”
I doubt there are many left that believe politicians, of either party, are not beholding to Wall Street since Congressional members enjoy more prolific profits than laymen with their inside information, and immunity to prosecution for availing themselves of it. Altho I have to say that, in the instance of the Dem/lib/prog’s normal railing against the evil corporations as part of their ideological platform, it’s almost amusing to watch them at the forefront, furiously humping the water for those very rich entities they profess to disdain…
… and all in the name of the innocent taxpayer – the guaranteed losers in all possible outcomes.
If the financial institutions are in fragile shape, and “too big to fail” has gotten only larger after the various incarnations of TARP, are we to assume they will be left to their bankruptcy failures in the future, sans public taxpayer help? Or are there more bailouts in the future, along with continued near zero fed rates where financial institutions and their stockholders again pad their assets with zip for risk?
Who the heck do they think they are kidding? If the banks and bond investors hold true to their threats, dumping US bonds like Pimco did back in March of this year, do they pay the piper? If the banks find themselves in jeopardy, is it not the borrower of their loans that pays the price?
Reality is, only the US taxpayer, regardless of any political party membership, holds the only short stick in all this political shtick. Wall Street is on firm footing with their threats, whether – for the first time in history – their promises of the world’s investors fleeing the US currency and economy for other nations come to fruition or not. Congress and the political elite not only will acquiesce to their whispered instructions, they will benefit by having a political football to dominate a hot campaign season… each attempting to portray themselves as the MVP quarterback hero of the game.
Debt ceilings have been raised over 70 times since the 1970s, and almost 100 times since it was established. Sometimes there’s a public bruhaha about it, others not. Simply depends upon the next election cycle. Reality and simple math dictate that the past spending, and guarantee future spending… sans any significant form of reform of entitlements… mandate an ever increasing debt ceiling.
Under the spending plan President Obama submitted to Congress in February, lawmakers would have to raise the limit by nearly $2.2 trillion just to see the nation through next year. Under the more austere blueprint that House Republicans approved last week, the government would require about $1.9 trillion in fresh debt by October 2012 — a month before the next presidential election.
In light of reality, the revolving door of piety and fiscal moral superiority any of these politicians attempt to don is wholly nauseating to behold. With few exceptions, all have been on both sides of the debate, depending upon the political climate. And yet all of them know that, since the debt ceiling is not accommodating for future spending but, instead, is paying for what they already *have* spent, the debt ceiling will have to go up.
But wait… there’s more. Apparently the GOP has also learned that Alinsky/Obama/lib/prog mantra, “never let a crisis go to waste” themselves. They’ve now bamboozled not only many lawmakers from both sides of the aisle, but a majority of the nation into believing that a Balanced Budget Amendment is the solution to keeping the Congressional sticky fingers out of the proverbial cookie jar.
H. J. Res 1 is being sponsored by Rep. Robert Goodlatte [R-VA6], along with 133 other House Republican co-sponsors. Rand Paul has already said the BBA is his price for a pro-debt ceiling vote.
Daddy and potential GOP nominee, Ron Paul, isn’t straying far from the same insanity…
“Nothing is more important than mobilizing a grassroots army to stop this sellout of conservative principles by the Washington establishment of both parties. And it is vital that Congress hears from the people, loud and clear, that they cannot support more of the same reckless spending and government overreach they were sent to Washington to end,” continued Paul.
“We may be just days away from a betrayal of the voters’ trust, and we could end up with no balanced budget amendment and no real spending cuts, and a deal that puts an even greater burden on the American taxpayers. But I refuse to stand by without fighting it.”
What sounds like a perfectly logical cure absolutely requires that fine print/fast talking disclosures of side effects you hear on legal drug pusher commercials on TV. Apparently most, desperate to tie a runaway and irresponsible Congress down, seem clueless to the pesky realities of national fiscal management, rigid brackets, and well-intended mandates.
First, let’s take the 8th grade simplicity view. I’m a family of four, and have lost all but one credit card, which only allows me to borrow no more than 18% of my anticipated earned income next year… likely based on my previous year’s performance.
There’s problem one… your next year’s performance may not match last year’s. And yet that’s what you based your next year’s budget on. How would that have worked out, say using federal revenue decreases, on the decline from 2008 to now? Or are we supposed to use the rosy accounting of the WH and CBO for GDP growth, which has proven their seer abilities are seriously lackluster?
Problem two? I’m likely making the same, less or not much more money, but the costs of utilities, groceries, fuel, car and homeowner insurance, state and local taxes, mandated health care coverage – all events out of my control – now increase what it takes to survive month to month.
What are my choices to deal with a limited credit card threshold, stable thereabouts income, and increased expenses? a) I either cut down on the groceries, the fuel needed, and dump some insurance policies; b) I demand a raise from my employer at the point of a gun, or c) take on additional jobs for additional income – hoping that the increased tax bracket doesn’t make it a wash. But how many years can I play that game when there is no end to the cost of living increases?
A BBA is no different. Aside from the disconcerting vagary of never knowing whether the Congressional spending I am mandated to pay for – without oversight – is wisely placed, efficient or even legit (consider earmarks, ridiculous grants, some foreign aid, etal), the spending is guaranteed to go up every year just by entitlement spending, legislated in the 1960s and 1930s, alone. Revenues and GDP, not so much. The Constitution (if changed) will now mandate either cuts (and not necessarily wise ones, and subject to the whims of who?)… or tax increases.
We have just legitimized all Congressional spending by mandating that, no matter what they spend – or on what, they may take from the taxpayer what they need because it’s a Constitutional mandate to “balance the budget”.
Really now.. who thunk this stuff up?
The proposed BBA wants to cap a budget to no more than 18% of (anticipated) economic output each fiscal year…
…. Unless, of course 2/3rds of each chamber votes to do otherwise.
Taxes won’t be raised…
… unless they have a 3/5ths vote to do so.
Debt ceiling can’t be raised….
….unless they have a 3/5ths vote to do so.
Right… Mind you, I certainly think there’s an inherent value to considering GDP growth and revenue anticipated when doing a budget… but a Constitutional mandate? Don’t think so. Most especially one that means nothing if they can simply vote to override it… which necessity would dictate happening far too often. Not to mention, what constitutes an “emergency” in the eyes of the elected ones?
And oh, BTW… what happens if they overestimate the economic output, upon which they base their budgetary spending? Any penalties for their errors? Not for the elected ones, of course. How convenient that when they accidentally overspend, a Constitutional mandate is handy to rob the taxpayer of more simply to “balance the budget”. Again they face the same choices… raise taxes, or cut something.
Based on historical behavior by all sessions of Congress since the New Deal, any bets on a future filled with responsible cuts?
Outside, of the years of process, and amount of States it would take to get such an amendment thru, Ed Morrissey has a few more simple explanations for those blinded by the rosy title of this proposal:
But let’s assume that all the stars align for a balanced budget amendment, one that the states approve and that actually forces Congress to put spending in sync with revenue. What then? Our current deficits come not from discretionary spending, but entitlements. Non-mandatory spending in fiscal year 2011 was $1.3 trillion, which means that Congress could have redlined every last dime of defense, homeland security, and other discretionary spending — and we would still have a $300 billion deficit. That problem becomes worse each year, too, as entitlements expand while running on autopilot.
Passing a balanced budget amendment would still require entitlement reform, unless we choose to raise taxes instead. That’s the trap. Congress wants to say yes to its constituents, and that means spending money. Once a constitutional requirement to balance the budget gets imposed on Congress, they will have to choose between raising taxes and cutting services every year, while voters want neither to happen. If we hear nothing but class-warfare demagoguery now on budget issues, just wait until Congress can no longer kick cans down the road. Every budget will end up with new surtaxes on the “wealthy,” which will drive investors overseas, which will eat into revenues, and which will prompt more surtaxes on the wealthy.
Here’s the reality. The US taxpayer, collectively, is being played, taken for a ride, and being strong armed by banks, Wall Street and investors who speak thru the WH administrative powers and our own elected Congressmen. The debt ceiling, after the political farce plays down and the government power is again altered for another session, will continue to be raised. If the GOP has their way, they’ll have used the crisis to use the Constitution to justify taxes for increased spending.
And if there’s any delay inbetween those bleak moments, the increased interest rates and yields change leave the taxpayers holding the bag for the cost. We’ll be more in debt then if the inevitable is done in a timely fashion. For what? Cuts that aren’t deep or effective enough? No… just to score political points. And both sides are vying for the surprise ending that leaves them the standing winner in the public’s eyes.
Both the financial institutions/investors, plus the political parties, have everything to gain, and little to lose. Because no matter what is decided on the inevitable debt ceiling… when, by how much and how often… it’s always the taxpayer that’s going to lose.
And it seems that neither party much cares.
Vietnam era Navy wife, indy/conservative, and an official California escapee now residing as a red speck in the sea of Oregon blue.