The further to the left or the right you move, the more your lens on life distorts.

Tuesday, November 22, 2011


It’s really no surprise that the vaunted Congressional Budget Supercommittee failed in it’s job of finding a $1.4 trillion in budget cuts over the next 10 years. Remember, that’s 140 billion in cuts a year (on average) against a budget of 3.7 trillion in spending per year. About 4 percent in cuts.

The Democrats blame the intransigence of the Republicans, who at least proposed a concrete, albeit flawed, plan as the basis of a start in negotiations. Robert Samuelson reports:
Contrary to much press coverage, the committee's Republicans opened the door to compromise by abandoning -- as they should have -- opposition to tax increases. Sen. Pat Toomey of Pennsylvania proposed a tax "reform" that would raise income taxes by $250 billion over a decade. First, he would impose across-the-board reductions of most itemized deductions and use the resulting revenue gains to cut all tax rates. Next, he would adjust the rates for the top two brackets so that they'd be high enough to produce the $250 billion. All the tax increase would fall on people in the top brackets.

Senate Democratic Whip Dick Durbin called Toomey's proposal a "breakthrough." With good reason: It came from a "no new taxes, over my dead body" Republican who had signed Grover Norquist's pledge against any tax increases. But the details of Toomey's plan are murky, and many Democrats claim that it would cut taxes for the rich. Nor did Democrats respond with an equal concession: a willingness to deal with Social Security and Medicare.

According to many sources in the media, the Democrats on the committee seemed frozen, not able to make a substantive counter-offer and come to a negotiated agreement.

Part of the problem with the Democrats inability to make a counter-offer was the President’s now predictable absence during this process. Rather than defining his position clearly (i.e., stating specifically what structural changes in entitlements he could accept) he talking in broad generalities. As a consequence, the Democrats were leaderless and seemingly afraid to commit.

So now, we go to “sequestration cuts,” mandatory cuts in defense and other small cuts to discretionary spending. The GOP howls about cuts to defense, when in fact, they are probably justified and will do little to endanger the country. The Democrats seem relieved that they didn’t have to address entitlements, even though it’s delusional to believe that structural changes are not required. The President? He has demonstrated repeated that he’d prefer to vote present and not commit to anything unless it aids in his reelection.

The problem is that sequestration cuts do little to change our current trajectory. Veronique de Rugy writes:
… the automatic sequester cuts do very little to the overall trend in the growth of debt. Under current law, according to CBO projections, public debt will reach nearly $14.54 trillion by 2021. Under sequestration, it is projected to reach $14.38 trillion, a rather minute difference of $153 billion.

The United States was downgraded by S&P in August for failing to take the steps necessary to change our financial path. Unfortunately, sequestration cuts wouldn’t change much about our march to more and more debt.

Rather than taking fiscally responsible actions, both parties will now fight about the viability of the sequestration cuts, even though the cuts themselves are miniscule. The President will promise vetoes to protect the cuts in a laughable effort to look like a deficit hawk, hoping that we forget that he spent more money in 3 years than his predecessor spent in eight.

And in the background, we watch Greece, Italy, Spain, and other countries slide into bankruptcy for doing the things 10 years ago that we’re doing right now.