View 686 Monday, August 01, 2011
Ramadan, Defaults, and The Deficit Dance
· The White House View of the Deal
The Wall Street Journal is proclaiming it “A Tea Party Triumph.” I don’t quite see it that way. The Journal says:
If a good political compromise is one that has something for everyone to hate, then last night’s bipartisan debt-ceiling deal is a triumph. The bargain is nonetheless better than what seemed achievable in recent days, especially given the revolt of some GOP conservatives that gave the White House and Democrats more political leverage.
***
The big picture is that the deal is a victory for the cause of smaller government, arguably the biggest since welfare reform in 1996. Most bipartisan budget deals trade tax increases that are immediate for spending cuts that turn out to be fictional. This one includes no immediate tax increases, despite President Obama’s demand as recently as last Monday. The immediate spending cuts are real, if smaller than we’d prefer, and the longer-term cuts could be real if Republicans hold Congress and continue to enforce the deal’s spending caps.
I don’t quite see it that way. What I see is a continuation of the Stimulus; more Bunny Inspectors and a larger and more expensive Department of Education SWAT team; no elimination of or control over regulations and regulators; and a continued exponential growth of government, with no cuts whatever in spending and not even a lot of slowing in the rate of acceleration; and the foundation for the largest tax increases in recent history.
And that, we are told, is the best we can do having won the House last November. There was not even an attempt at Zero Increase Budgeting.
The most important thing to understand is that if the Congress were to freeze government spending: pass a Bill that says that we will next year spend precisely the same amount as we did last year, same salaries, same payments to pensions, same purchases, same veteran benefits, same payments to Bunny Inspectors and SWAT teams, same amount to Food Stamps and Free Lunches – if we froze government, the result would be called a $9.5 Trillion cut.
Stopping the exponential growth of government will be called a $9.5 Trillion cut, an intolerable cut, balancing the budget on the backs of the poor, giving enormous tax benefits to the rich, grinding the faces of the poor for the benefit of corporate jet owners. Etc.
The Budget Deal proposes at best about $3 Trillion “cut” over a ten year period. This amounts to a reduction in the exponential growth of government from something over 7% to something over 6%; meaning that government spending now on track to double in 11.5 years will instead double in 13.5 years. Since no Congress can bind the next Congress, and no “cut” takes place before 2013, there is a possibility that exponential growth of government will not change at all; and at best the exponential growth of will continue the inexorable march of the United States toward a regulated planned economy welfare state.
The Deal Bill says there are no tax increases, but that is not correct. The Bush Tax Cuts will expire under this deal. That is a tax increase. The Deal Bill has no effect on the increases in taxes built into ObamaCare, and has no effect on ObamaCare costs or employer burdens.
The Deal Bill increases spending by at least $8 Trillion, locking in all of the Stimulus Increases. It makes almost certain the largest tax increases in history.
This is, according to the Wall Street Journal, the best we can get from having taken the House last November.
The White House view of this budget deal is given here. It is triumphant in tone, as it should be.
What Comes Next:
The government will grow, defense will be cut, the economy will continue to plummet, and taxes will rise, in theory for “the rich”.
Note that this won’t be distributism: that is, confiscation of wealth in order to distribute it to everyone. That is one form of “stimulus” on the theory that poor people spend their money and that builds an economy. I am not making that case, but a case can be made for lowering the gap between rich and poor in the interest of the appearance of fairness, and distributing the money to those who will spend it is the best way to stimulate an economy, particularly if that is coupled with more economic freedom.
That is not what will happen. Under this New New Deal things will go on as before. Government will grow, unionization of government will continue with a vengeance, much of the government spending will go to create political funds and lobbies for continued spending, and the United States marches on toward becoming Portugal, or Greece. Taxes will rise.
The Deal raises the Debt by the greatest amount that the Debt has ever been raised in one putsch. The Deficit Dance ends in a grand finale. Perhaps the Bunny Inspectors will now come out to show us what we are getting for our 2010 Election Victory.
We can all hope I am wrong in this analysis. Alas, I do not think I am.
This has not passed the House, and may not do so. The Dance may not be over. And in any event this Deal hasn’t anything like enough “cuts” to affect the US AAA Bond rating. We may get the Deal and a bond downrating. And many say “this is the best we can do until we take both Houses and the White House.” The House leadership fears that Obama will deliberately default then blame it on the Republicans. The Dance continues.
The Deal Passes
The deal comfortably passed the House. That put the crucial vote off until November 2012, when there will be a natonal referendum on Zero Growth budgeting. The Tea Party won no victory here, but it did stave off defeat, and lives to fight another day.
The next step is to look at Obama Care. I remind everyhone: no Congress can bind the next one, and no money can leave the Treasury except according to law; which is to say, without a House resolution appropriating money, the budget does not grow. And there is such a thing as a continuing resolution…
![clip_image003[1]](https://jerrypournelle.com/chaosmanor/wp-content/uploads/2011/08/clip_image0031.gif "clip_image003[1]"){kind=small}
