Well, Sass, I believe the response is that April vote was a budget deal for the balance of 2011. The Republicans were willing to give a debt ceiling increase to cover the next 6 month, i.e. the budget they voted on in April. However, Obama said he would veto any increase that did not carry them through 2013. The Republicans said fine but we want a dollar for dollar reduction in spending for a debt limit increase that long. Obama said no but he ok with less cuts more revenue increases. Republican's said no tax increases but reduced the amount of cuts they wanted. Obama said he would veto any bill that did not include a debt ceiling increase for less then what he wanted and any that did not include revenue enhancements.

However, it appears a deal has been made. And it appears that it is more along the lines of the Republican plan then any of the Democratic plans. If that is the case, it won't be good for Obama.

Seriously though, if all the Tea Party Caucus wanted was a Bal. Bud. Amd. that has no chance of passing through the states, why not give it to them and get the bill signed earlier?

Sassenach wrote:Fact is that the Republicans are playing chicken with the entire global economy.

So, the Republicans, who took over the House in November and gained in the Senate and ran on fiscal discipline, should just acquiesce to the Democrats who have spent at an even faster rate than Bush?

This is despite having already extracted concessions that amount to pretty much everything they could ever have wanted. At the start of the process Obama wanted a straight increase in the debt ceiling with no strings, then he wanted a deal which included mostly cuts but also some moderate increase in tax to the wealthy. Now the Dems have been reduced to offering a deal with substantial cuts and no revenue increases whatsoever, not even the closing of tax loopholes. Still no dice. It's wholly irresponsible to behave this way when the stakes are this high.

This is just not accurate.

Do you know how much the deal will actually cut from spending this year?

Do you know that the "cuts" are mostly backloaded? That means two things: 1) such cuts rarely happen; 2) they are based on "baked in" increases. In other words, each budget has a baseline growth number that is assumed. This is a horrible way to budget, but it's what DC does.

Do you know that many of the "cuts" are not cuts at all? Like the $1T in "savings" for military spending cuts that are already planned (reductions in Iraq and Afghanistan).

Do you know that the cuts are so "substantial" that we are likely to pick up another $10T in debt over the next decade?

Do you know that the cuts are so "substantial" that we are likely to lose our AAA credit rating?

This deal is the proverbial band-aid on a sucking chest wound. Yet, many progressives are going to vote against it--the entire Congressional Progressive Caucus has announced its opposition. Why aren't you accusing them of playing chicken with the world economy?

Where was the President in all of this? If he had put a sensible plan out there, he could have excoriated the extreme wings of both parties with credibility. Instead, he went relentlessly after the GOP while never producing a legible, tangible plan of his own.

Sass:

Correct me if I'm wrong, but I wasn't there a last minute budget deal in April that averted a government shutdown ? What the hell was that all about then if the budget had been passed in December ?

Oh, I see what you are saying. You are correct: the final budget for the year ending Sep 30, 2011 was pass in early April. I was referring to an earlier deal before the new House took place in Dec. which kept the funding going.

There were about 30 Republican house members (largely TPers) who voted against the April deal, so that group is being consistent. That deal passed because many House Democrats voted for it. That deal did not include an increase to the debt ceiling, so that's why we are still talking about this stuff. This new agreement will show a similar voting pattern, with centrist Dems and Repubs supporting it, whereas the most left and the most right will not. I think the passing margin will be much smaller.

Steve:

Do you know how much the deal will actually cut from spending this year?

Do you know that the "cuts" are mostly backloaded? That means two things: 1) such cuts rarely happen; 2) they are based on "baked in" increases. In other words, each budget has a baseline growth number that is assumed. This is a horrible way to budget, but it's what DC does.

Do you know that many of the "cuts" are not cuts at all? Like the $1T in "savings" for military spending cuts that are already planned (reductions in Iraq and Afghanistan).

Do you know that the cuts are so "substantial" that we are likely to pick up another $10T in debt over the next decade?

Do you know that the cuts are so "substantial" that we are likely to lose our AAA credit rating?

I'm glad that we have a deal, but there's an amazing amount of irony here. Because of the mechanisms that Congress uses to score this stuff (10 years, built in increases, etc.) which is just recycled in headlines by the media, we have the strange dynamic of cutting billions and trillions from the budget, yet perpetually running a huge deficit.

Ray Jay wrote:Steve:

Do you know how much the deal will actually cut from spending this year?

Do you know that the "cuts" are mostly backloaded? That means two things: 1) such cuts rarely happen; 2) they are based on "baked in" increases. In other words, each budget has a baseline growth number that is assumed. This is a horrible way to budget, but it's what DC does.

Do you know that many of the "cuts" are not cuts at all? Like the $1T in "savings" for military spending cuts that are already planned (reductions in Iraq and Afghanistan).

Do you know that the cuts are so "substantial" that we are likely to pick up another $10T in debt over the next decade?

Do you know that the cuts are so "substantial" that we are likely to lose our AAA credit rating?

I'm glad that we have a deal, but there's an amazing amount of irony here. Because of the mechanisms that Congress uses to score this stuff (10 years, built in increases, etc.) which is just recycled in headlines by the media, we have the strange dynamic of cutting billions and trillions from the budget, yet perpetually running a huge deficit.

"Strange" is one word. I would say it's a bit dishonest in that it allows politicians to pretend that they've accomplished something when they haven't. I just read their are no "real cuts" until 2014.

And yet, one Democrat is calling for a march on DC.

We've got a real divide in this country. It's not between the rich and the poor. It's between those who want a centralized power structure, wherein government decides who gets what, and those who believe in a form of economic freedom. The differences could not be more stark.

Personally, I'm glad. I think it's time for America to decide if she wants to be a European-style socialist nation and thus not be able to play World's Policeman or if we are going to be a smaller government (NB: not "small," but "smaller"), more capitalistic society. The next election will, I think, determine that.

I think it is very relevant that Romney came out against the plan. In effect, Romney is now to the right of Cantor, which is weird. Just like Romney, no doubt House Republicans are calculating the pros and cons of supporting the plan. I guess it is possible that there isn't a majority in the House when the smoke clears. Forgetting about the national interest for a moment, each Congressmen has to consider his personal interest (re-election) as well as his Party's interest (which Party will be blamed if the compromise fails.

One of the effects of the ban on earmarks is that congressional leaders have fewer tools to cajole disagreeing members of their own party. In the past, you could promise most Congressmen a bridge or defense contract in their own district. Now you can't so it is tougher for Boehner (and Pelosi) to get those last few votes. We shall see ...

Doctor Fate wrote:We've got a real divide in this country. It's not between the rich and the poor. It's between those who want a centralized power structure, wherein government decides who gets what, and those who believe in a form of economic freedom. The differences could not be more stark.

This is an interesting statement because I sort of agree with it. To put it in more "scientific" terms it is an argument between the U.S. being a Liberal Democracy or a Social Democracy. Most of Western Civilization started out as Liberal Democracies and then transitioned into Social Democracies. In some places the transition has happened quickly(Europe) and in some places in happens more slowly(America). The reason for the differences are many but a large part of it is the social uphevals Europe experienced between 1914-1945 (two major conflicts and the Depression). The U.S. experienced some of that upheval but not nearly as much. This is why we have some of the social safety net programs but not nearly as extensive as other countries.

The problem now is that I think OBama and the Progressive wing of the Democratic party seriously misread their mandate and the nature of the financial crisis. I kind of get the impression they hoped to use the Great Recession to complete the Liberal Democracy/Social Democracy transition in the U.S. the way FDR was able to use the Depression to start the transition. The problem is there wasn't the other fears in 2009 that there were in 1933, i.e. Facism and Communisim, that caused people to be willing to accept the expansion of government in 1933.

Of course I could just be talking out of my ass.

Doctor Fate wrote:Do you know how much the deal will actually cut from spending this year?

My guess is that it's in the order of about $10Bn. More than Boehner's original plan, but not by much.

Do you know that the "cuts" are mostly backloaded? That means two things: 1) such cuts rarely happen;

Hmm. The reason cuts are backloaded is that it's hard to 'frontload' them. for a start, if your cuts involve layoffs, you have to pay severance. If you have existing contracts you can't just cut them off without a penalty clause. I understand that any future Congress could just reverse any cuts in following years though, but you seem to be predicting that next year's election will stop that from happening...

2) they are based on "baked in" increases. In other words, each budget has a baseline growth number that is assumed. This is a horrible way to budget, but it's what DC does.

It's what sensible people do. You account for projected inflation, projected demographics etc. If you don't do that, you are not 'budgeting' properly, because it's not realistic.

As a starting point it is saying effectively: "today we pay X to do Y. Next year we'd have to pay X+dx to do Y."

If you want to spend the same as before, you need to reduce Y, not assume that as if by magic X will not increase.

Similarly, revenue projections in the budget should be based on projected inflation and GDP growth.

Do you know that many of the "cuts" are not cuts at all? Like the $1T in "savings" for military spending cuts that are already planned (reductions in Iraq and Afghanistan).

So, going back to an earlier point, aren't these actual reductions in spending that reduce the pressure on future deficits, then? They may be 'new' reductions in spending, but they are still reductions.

Do you know that the cuts are so "substantial" that we are likely to pick up another $10T in debt over the next decade?

Which is better than $13Tn, and as long as bond rates don't go much above 3%, the cost of that borrowing is affordable, if not sustainable for the long term. Still, you do know that the cuts are also tied to a review in the next few months that will come up with a load of recommendations on how to reduce the deficit?

[quote]Do you know that the cuts are so "substantial" that we are likely to lose our AAA credit rating?[quote]Better than being certain to lose it. The next question is how far you drop and how bad it could have been if the limit had been stuck into tomorrow. The message I see from the market is that they are unhappy at the wrangling it took to get where you are.

I'd place the divide in a different place. Frum's got a great piece on the split with the republicans:

I'm a Republican. Always have been. I believe in free markets, low taxes, reasonable regulation and limited government. But as I look back at the weeks of rancor leading up to Sunday night's last-minute budget deal, I see some things I don't believe in:

I expect Steve will say that he's not really a Republican, but I guess that's the point he's trying to make, isn't it?

http://www.cnn.com/2011/OPINION/08/01/frum.debt.republicans/index.html?hpt=hp_c1

danivon wrote:

Doctor Fate wrote:Do you know how much the deal will actually cut from spending this year?

My guess is that it's in the order of about $10Bn. More than Boehner's original plan, but not by much.

I doubt it's even that. Furthermore, there is still unspent Stimulus money and other slush funds that could be eliminated without any negative impact whatsoever.

Do you know that the "cuts" are mostly backloaded? That means two things: 1) such cuts rarely happen;

Hmm. The reason cuts are backloaded is that it's hard to 'frontload' them. for a start, if your cuts involve layoffs, you have to pay severance. If you have existing contracts you can't just cut them off without a penalty clause. I understand that any future Congress could just reverse any cuts in following years though, but you seem to be predicting that next year's election will stop that from happening...

Oh, I'm certain about next year's election--as certain as anyone can be. The curtain has been pulled back on how idiotic our entire process is. In order to be "fiscally responsible," we have to go 18% further into debt.

No sane person believes that. While we may have needed to borrow a fraction of that money, it is only because of the reckless spending of the last Congress (read "under Pelosi and Reid") and these past two Presidents, especially the current one. No one who personally owed a sum equal to their annual income would call it "fiscally responsible" to go borrow another 18%. It's only with the US government that an endless stream of borrowing is "wise."

If the current budget were cut, we would not have layoffs. Please. I could cut $50B without losing a single job. And, that would take about two days.

2) they are based on "baked in" increases. In other words, each budget has a baseline growth number that is assumed. This is a horrible way to budget, but it's what DC does.

It's what sensible people do. You account for projected inflation, projected demographics etc. If you don't do that, you are not 'budgeting' properly, because it's not realistic.

As a starting point it is saying effectively: "today we pay X to do Y. Next year we'd have to pay X+dx to do Y."

If you want to spend the same as before, you need to reduce Y, not assume that as if by magic X will not increase.

Similarly, revenue projections in the budget should be based on projected inflation and GDP growth.

I do the budget for a small company. We do something really weird. We look at what we spent last year, plan for what we will spend this year, and allocate only that. We don't have an "automatic" increase. You know why? Because, and I know this is really crazy, we are saving money for a variety of reasons (rainy day fund, etc.) so we don't want to spend more than we have to.

Now, contrast that with the Federal government. When you KNOW increases are baked in, what's your incentive to cut costs or to strive for efficiency?

Look at this from Kudlow:

It’s because of something called the “current services baseline,” which includes population and inflation increases built into the budget. Entitlements have their own formulas.

So when you hear a politician tell you they’re cutting spending, they’re actually referring only to reducing the growth of spending. Rarely, if ever, do they actually reduce the level of spending.

Think of it this way: You’re out car shopping and thinking about buying a $100,000 Mercedes. That’s your target. But then you decide to forego the Mercedes and opt for a $20,000 Chevy instead. Well, guess what? Congress would score that as an $80,000 budget cut. Huh? We all know that it’s actually a $20,000 budget increase.

Let’s be honest here. This budgetary game remains one big taxpayer scam. Look, I used to work in the federal budget office. I know the game.

Here’s yet another scam: Big budget deals say they “cut” (there’s that word again) a couple of trillion dollars over ten years. But most of it is targeted for the last couple of years, as in years eight, nine, and ten. So basically it’ll never happen. It’s four or five Congresses from now. Laws change. Deals are broken.

At the end of the day, the only thing that really matters is next year’s budget. Will it be cut? Ever in my lifetime? Because if it were cut, it would bring that line in that chart above down. Now that would be a called a decline. All of that other stuff? Increases.

What would be so terrible about not having automatic increases and instead making departments justify their increases? What would be so terrible about a Federal government that actually reduced its spending from year to year? It's not like it's a model of efficiency. I think it's because there is no incentive to be efficient.

Do you know that many of the "cuts" are not cuts at all? Like the $1T in "savings" for military spending cuts that are already planned (reductions in Iraq and Afghanistan).

So, going back to an earlier point, aren't these actual reductions in spending that reduce the pressure on future deficits, then? They may be 'new' reductions in spending, but they are still reductions.

See Kudlow. They're net increases. They bought the Chevy instead of the Mercedes, but they still bought a new car.

Which is better than $13Tn, and as long as bond rates don't go much above 3%, the cost of that borrowing is affordable, if not sustainable for the long term. Still, you do know that the cuts are also tied to a review in the next few months that will come up with a load of recommendations on how to reduce the deficit?

That's just ridiculous--to "plan" on those kind of increases.

I have a great Balanced Budget Amendment--foolproof. Every year that Congress does not pass a budget and/or said budget is not balanced (or at a net positive), every member of Congress shall be replaced in a special election within 90 days. The members of Congress who were part of the budget that fell short of balance shall not be eligible to run in the special election.

Watch the scrambling that ensues when their jobs are on the line.

The commission will be a disaster, as all commissions are. What will happen after that is the GOP will try and forestall military cuts and Democrats will go back to demagoguing Medicare cuts.

Do you know that the cuts are so "substantial" that we are likely to lose our AAA credit rating?

Better than being certain to lose it. The next question is how far you drop and how bad it could have been if the limit had been stuck into tomorrow. The message I see from the market is that they are unhappy at the wrangling it took to get where you are.

That's the message of the HuffPo and other liberal outlets, not the market.

geojanes wrote:I'd place the divide in a different place. Frum's got a great piece on the split with the republicans:

I'm a Republican. Always have been. I believe in free markets, low taxes, reasonable regulation and limited government. But as I look back at the weeks of rancor leading up to Sunday night's last-minute budget deal, I see some things I don't believe in:

I expect Steve will say that he's not really a Republican, but I guess that's the point he's trying to make, isn't it?

http://www.cnn.com/2011/OPINION/08/01/frum.debt.republicans/index.html?hpt=hp_c1

Oh, Frum is a Republican all right. Then again, so are Olympia Snowe, Susan Collins, and Scott Brown. There is little Frum says that Nancy Pelosi would disagree with.

Frum is a Republican, but he's no conservative.

I find it interesting that he blames Republicans for the rancor. Has he been listening to the President?

It's only a matter of time before Frum changes parties. His core principles are in line with big government, no matter what he says about "limited" government. I respect him about as much as Arlen Specter because he has the same level of commitment to conservativism.

Doctor Fate wrote:I respect him about as much as Arlen Specter because he has the same level of commitment to conservativism.

You do realize that not all Republicans are conservative right? I mean some are libertarians.

Steve, do you think inflatin and population growth are myths?

Archduke Russell John wrote:

Doctor Fate wrote:I respect him about as much as Arlen Specter because he has the same level of commitment to conservativism.

You do realize that not all Republicans are conservative right? I mean some are libertarians.

Right, which would mean they are at least fiscal conservatives.

Frum is not a social conservative nor a fiscal conservative. He is well on his way to being a Democrat. He's part of "No Labels." Maybe he'll turn that into a party.

danivon wrote:Steve, do you think inflatin and population growth are myths?

No, but both are variable. To just assume you HAVE to have 8% growth because of inflation and population growth is irresponsible.

Beyond that, if we adhere to your vision of budgeting, the US will never, ever, ever have a balanced budget. We'll be borrowing endlessly as long as it's "manageable." That is senseless.