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Defusing The Debt Bomb

Defusing The Debt Bomb

How we doin?

Does the red go to the black, or the other way around?  And the yellow goes to the orange, or was it back to the red?

We only have [fill in arbitrary number of days based on articial deadline] to figure it out.  But whatever we do, let’s just do something by [insert artificial deadline here].

Does the “Gang of Six” plan do the trick?

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At the top of the White House press briefing, Obama described the plan as “good news,” adding that it was “broadly consistent” with the approach he had endorsed for reducing the deficit.

Ergo….NO !!!!!!!

    votermom in reply to Joy. | July 19, 2011 at 5:45 pm

    I agree. Any deal POUTUS is happy with should be regarded with deep, deep suspicion.

They’ve decided to issue a bipartisan “beige alert” on the debt. Who knows what the details are but if Obama is saying that they are in the same ballpark, that means taxes are going up big and the Obama budget killers that were piled on over the last 2 1/2 years were left untouched.

The Stupid Party rides again!

(The other shoe: S&P repeats its negative credit watch warning the day after the details of this GOP surrender compromise are revealed).

Joy – his saying that it is “conaiatent ” with his approach (whatever that was) that means he’ll be happy to take credit for it if it passes. Another splashy bill signing, surrounded by seniors and children who now won’t have their payments cut off. Maybe a token soldier or two.

So, I agree – NO.

I) “It (The Gang of Six plan) is “broadly consistent with the approach that I’ve urged,” (President0 Obama said.

II) “If these starkly different postures are any indication, the so-called Gang of Six is placing a heavy focus on Social Security, including benefit cuts, while holding back on health care entitlements. Any plan they outline will have to pass muster with the Obama administration. A senior Treasury Department official recently told a group of reporters on background that the administration won’t accept entitlements that run afoul of the progressive push to preserve benefits to without making sure that revenues are on the table in a meaningful way.” TPM

III) “The Gang of Six plan calls for an immediate $500 billion “down payment” on cutting the deficit as the starting point toward cuts of more than $4 trillion over the coming decade that would be finalized in a second piece of legislation. Most of that savings would come from four years of caps imposed on the day-to-day budgets of cabinet agencies set by the annual appropriations bills. It would also curb the growth of Social Security benefits by moving to a lower inflation adjustment for annual cost-of-living updates.

The tax reform outline would set up three income tax rates: a bottom rate of 8-12 percent; a middle rate of 14-22 percent and top rate of 23-29 percent to replace the current system that has a bottom rate of 10 percent, with five additional rates topping out at 35 percent. It would reduce but not eliminate tax breaks on mortgage interest, higher-cost health plans, charitable deductions, retirement savings and tax credits for families with children.

Both Republican and Democratic leaders, however, remain wary of the effort, since it would raise revenues by about $1 trillion over 10 years and cut popular benefit programs like Medicare and Medicaid. But many rank and file senators were enthusiastic.” AP

IV) Durbin: Gang of Six plan warmly received by many senators
Senate Majority Whip Dick Durbin (D-Ill., Barack Obama’s mentor) said a presentation of the Gang of Six’s plan to cut the deficit by $3.7 trillion Tuesday morning left many senators with a positive feeling. The Hill

How predictable was this failure? The exact same thing happened in health care. Six Senators, evenly divided between the parties, started negotiating on a bipartisan plan. They called themselves the “Gang of Six.” Then the most conservative Republican bolted. Then the other republicans started backing away from the deal, ultimately indicating they wouldn’t support it even if it reflected their own proposal.

V) Senators remain strongly attached to the folklore of bipartisanship. But no amount of meetings, charm, pleas, and dealing can get Republicans to break loose from their party’s caucus discipline. The modern Republican Party is a parliamentary party. Maybe you can still forge bipartisan deals on minor issues. But on major policy questions in which party activists and pressure groups take an interest, forget about bipartisan wise man deals. If you think that can still work, you’re living in the past. Jonathan Chait,
JourNoList, TNR

The “Gang of Six” give us yet another of the down payments on the debt. This is another of those SALT-treaty like things, when we need a real START-treaty like bill .. in other words, this is Carter when we need Reagan.

US backup debt plan doesn’t support rating – Moody’s

(Reuters) – A U.S. government backup debt plan to raise the country’s debt ceiling and avoid imminent default could still lead to a downgrade of U.S. ratings in the next year or so, Moody’s said on Tuesday.

Senator Mitch McConnell’s “Plan B,” increasingly seen as a “Plan A” in Washington, would avoid any immediate downgrade of the coveted U.S. triple-A rating, Moody’s analyst Steven Hess told Reuters in an interview.

“But the numbers that are being discussed in terms of any possible deficit reduction coming out of this plan don’t seem to be very large,” Hess said. “Therefore this plan might result in a negative outlook on the rating.”

Reuters

Presenting The Complete Generic Fluff That Is The “Gang of Six Plan To Reduce Our Nation’s Deficit”

Here is the only immediately actionable prerogative which comes from, you guessed it, Chained CPI and Social Security:

Enacting a $500 billion down payment that would secure immediate deficit savings, while establishing a fast track process for the committees in Congress to specify further savings

Zero Hedge

DINORightMarie | July 19, 2011 at 4:09 pm

The Senate Republicans, led by this Gang, are going to agree to raise taxes, and cut debt 10 years out, and raise the debt ceiling….all according to Obama’s diktat.

Same as before. No “there” there. But they are doing it anyway.

They had ALL the cards. And, once again, they fold. You can smell the fear from where I sit.

Thanks Sen. McConnell. We WILL remember in your upcoming election. And the rest of you Republicans who have signed up for this fiasco.

You will be primaried. You will have to fight to keep your seat.

You failed.

common tater | July 19, 2011 at 5:06 pm

Red to black? We’re in Le Rouge et la Noir territory, “Beylisme” v. “La force d’âme,” with no resolution, Congressional or otherwise.

Jim Demint is already out there decrying this agreement and calling for the House to reject it. It will be interesting to see what Weepy does here. Can he talk out of both sides of his mouth at the same time?

directorblue | July 19, 2011 at 5:50 pm

This deal is a pile of crap.

http://directorblue.blogspot.com/2011/07/gang-of-six-reactions-from-around-web.html

Gang of Six Reactions From Around the Web: It “Raises Taxes by $3 Trillion” and “It’s based on dishonest Washington budget math”

Gang of Six Reactions From Around the Web: It “Raises Taxes by $3 Trillion” and “It’s based on dishonest Washington budget math”

Republicans who support this proposal will pay dearly.

King of Fools | July 19, 2011 at 6:58 pm

Test comment. Ignore this.

I don’t know about you, but for myself and many of the people that I know and meet daily, they don’t want a deal. They want to Republicans to say “no”. They don’t want any new taxes, they want tax cuts and no fiddling with deductions, they want significant cuts in spending now, not in 10 years. If this were a business, the CEO would come in a say “cut your departments by 20% tomorrow”. As to entitlements, we have paid in the money, it is in a trust, if the money is not there, then someone has to answer. In the meantime, cut all other spending and start firing people. I don’t know if you have looked at entitlement obligations, but 30% of it is pensions for federal workers. No one seems willing to discuss those issues, many of which are the enormous pensions the politicians get.

If the Republicans fold on this, or even appear to, then that is the end. People will rebell, I sense that down here they are mad. It would be best to go into default, the pain would be quicker than what would happen if they compromise.

What BO’s presser remarks really say: “I can use this to my advantage. It will make me appear as though I’m actually doing something, help my tanking poll numbers and bolster my re-election chances.” Thus, I do not trust the Gang of Six plan. Seems to me that what likely happened behind closed doors is that the Senate and House made what they would term a ‘win-win’ deal that if the House would pass the Senate’s Gang of Six plan (favorable press BO/Reid and the Obamacrats), the Senate would then pass the Cut, Cap and Balance bill (favorable press for House leadership). Sen. Crapo, a Gang of Six member, was interviewed this afternoon on Fox and essentially said he viewed the Gang of Six plan and Cut, Cap, Balance as companion bills .But, IMO, with the Gang of Six plan an admitted ‘outline,’ that would require many details be worked out in Senate committees (bearing in mind that only entrenched Obamacrats are committee chairs on these committees), for the House to approve it would be once to again award the proverbial fox the oversight of the hen house.

Realistically, what are the chances of the House accepting any plan by the Gang of Six? I’d say pretty damn slim.

We’re screwed….again.

Can the Tea Party house members win over Boehner + RINOs + democrats? I don’t know the answer.

Why are Obama and his enabling Banana Republicans insist on wasting time pushing a Republican bill that has no chance whatsoever of passing in the House? Conservatives can play that game too.

I hope everyone notices that once again, Republicans are again allied in their war against conservatives. Bring it on.

    WarEagle82 in reply to Pasadena Phil. | July 19, 2011 at 10:51 pm

    I hope you are right that this bill has no chance in the House. I am not certain of that at this point. Betting on the GOP to do the right thing is not generally the “safe bet.”

      We’ll see but today’s vote wasn’t even close and drew a few Democrat votes too. This is a disaster for the establishment of both parties if the House conservatives hold. The conservative rhetoric makes a lot more sense than the RINO rhetoric which is nothing more than parroting the Dem talking points (balanced solution vs no chance of winning, any deal is better than no deal, we can’t risk a default, etc…)

      The only difference between the Dems and most Republicans is that the Republicans are by far the bigger liars and hypocrites.

      Sanddog in reply to WarEagle82. | July 19, 2011 at 10:56 pm

      There are 87 Freshmen Republicans who were elected specifically to stop the nonsense in Washington. I’m sure most of them would like to remain in office in 2012.

Perhaps this is the beginning of the end for the GOP. Once people realize the “conservatives” in the Senate has screwed us again we may finally get enough votes to get rid of the worst of them.

We are several election cycles from a total purge but if we can get rid of a few now and a few in 2014 it may make a difference. Assuming we still have elections by then…

Bottom line – the Republicans have stopping power. If there was ever any time to use it – it’s NOW.

“Think of the Senate “Gang of 6″ Plan as the “Gangrene Plan.” It will slowly, but surely, rot away the nation. It was presented yesterday with a few claims:

(1) It was not designed to play a role in the debt ceiling debate;

(2) It was not meant to undercut the House Republicans’ “Cut, Cap, and Balance” plan; and,

(3) It would not be a tax increase.

The reality is the opposite of each of those statements. The Gang of 6 plan is intended to play a role in the debt ceiling debate by giving the McConnell-Reid-Pelosi Pontius Pilate Act more life to get passed until the Gangrene Plan can take affect.

They rushed the plan out the door with a coordinating statement of support from the White House to try to stop the momentum toward the Cut, Cap, and Balance Plan.”

“The House Republicans, joined by five Democrats, passed Cut, Cap, and Balance last night. The House GOP showed it is in favor of raising the debt ceiling, but only if spending is cut, future spending is capped, and the budget is balanced.

The Senate GOP is furious. They have been undermined. The House GOP stood up for principle.

What’s going to happen now is the Senate will tell the House that its plan cannot pass. House Republicans must now continue to hold the freaking line. They must not waiver. They must understand that now that their plan is passed and that it allows the debt ceiling to be raised, the House GOP’s hand strengthens every day closer to August 2nd. And if this debacle goes past August 2nd, the House GOP is in charge as long as it holds the freaking line.”

Red State

“He (Obama) also noted that the Senate’s two top leaders have been cooperating on a measure that would allow him to raise the debt limit without a prior vote of Congress while also setting up a special committee to recommend cuts from federal programs, including Social Security and Medicare.

“That continues to be a necessary approach to put forward. In the event that we don’t get an agreement, at minimum, we’ve got to raise the debt ceiling,” he said.” AP

The “Gang of 6 Plan” is the classic Washington Punt
http://washingtonexaminer.com/blogs/beltway-confidential/2011/07/gang-six-plan-another-washington-punt

As to the debt ceiling debate, along with all the doom and gloom that is being talked about in the media:

Gloomy Forecast for Europe’s Banks and US debt downgrade
“A credit rater with a strong track record sees sovereign-debt defaults and bank woes in the Old World’s future.”
http://tinyurl.com/3mpsqsl

Not good news.

The same credit rater, Egan-Jones, whose work is paid for by institutional investors, such as pension funds, and not the issuers of the debt like Moody’s and Standard & Poor, issued a down grade notice for US debt on March 1, 2011.

It formally down graded US debt to AA+ on Monday:

Egan-Jones Cuts U.S. Rating to AA+ on Spending-Cut Concern
http://tinyurl.com/3gn7hl2

I suggest people listen to an interview of Sean Egan, one of the founders of Egan-Jones on CNBC’s Squak Box, that was conducted on Monday, July 18, 2010:
http://tinyurl.com/44es3co

During the course of the interview he speaks about the EU and US situation. As to the US, he explains why the issue of whether the US will miss or delay an interest payment is a “red herring” and that the real problem is the debt to GDP ratio, the present inability to cut spending, along with ballooning entitlement payments for baby boomers. His comments start at 6:45 of the video.

While being interviewed, he also referenced that Canada has a true triple A rating because of its debt to GDP ratio.

In that regard, on June 15, Jim Flaherty, Canada’s Minister of Finance spoke to a New York audience about the US fiscal situation. During the course of his remarks he said:

“What’s required is a solid plan to eliminate deficits, reduce debt and create a cushion against the next global economic shock, combined with the determination to deliver results on time and as promised,”
http://tinyurl.com/3edbuyh

It will be interesting to see whether Congress and the Administration can put together such a plan (and IMV the work being done by the Group of 6 Senators does not meet the criteria set by Minister Flaherty as it has far too many “holes” to avoid making the needed spending cuts, such that it end’s up being the classic “Washington Punt.”)

Bottom Line:

– The Republicans in Congress (including Representative Bachmann) made a strategic error (failing to heed the wisdom of Sarah Palin and Senator DeMint) and should have force the issue during the debate over the continuing resolution earlier this year instead of waiting until now.

– While Moody’s and Standard & Poor may not issue a debt downgrade, institutional investors have already been told that US debt is no longer triple A and the world did not come to an end.

– Congress and the President need to wake up and smell the coffee. We need a firm plan to cut spending, balance the budget and start paying down the debt, such that the debt to GDP ratio falls from the present level to about 35%.

While tax reform can be part of the equation, so broadening the tax base, the emphasis must be on entitlement reform and spending cuts, with the ratio being roughly 1:8 and not the 1:2.7 ratio being talked about with the gang of 6.

The gang of 6 plan simply does not get us there. Despite the fear mongering coming from the LSM, while Democrats and their media allies claim the Tea Party are at fault, the reality is that the Democrats, along with many Republicans and the President are the one’s living in la-la land.

– Congress has gone over 810 days without passing a budget. While the House passed a budget by April 15, 2011 as required by law, the Senate has done “nothing.” This is totally irresponsible. Again who controls the Senate? The Democrats.

So the best we can hope for is a stop gap measure which will tide us over until after the next election.

To fix the problem? We are going to need new leadership, starting with someone as President who has strong executive experience, including a proven track record of taking on the corrupt SOB’s. No, that is not any of the existing candidates, nor is it Perry or Christie.

Egan-Jones Cuts U.S. Rating to AA+ on Spending-Cut Concern

“Egan-Jones Ratings Co. cut its rating on the U.S. by one step to AA+ from AAA, citing the high level of debt outstanding relative to other countries and concern that politicians may fail to reduce spending.

“The major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending,” the firm said July 16 in a report. Egan-Jones placed the U.S. on negative watch on March 1.”

Bloomberg

Egan-Jones,Wikipedia

DINORightMarie | July 20, 2011 at 6:50 am

“It would reduce but not eliminate tax breaks on mortgage interest, higher-cost health plans, charitable deductions, retirement savings and families with children.” –AP

That quote is the last paragraph in an AP article I just finished reading.

That is raising taxes on the middle class – ME. I have a mortgage; use my HSA and itemize medical costs; I make charitable contributions (unlike most Democrats, right Joe Biden?!); I have a family with children. I am screwed. I already have tight finances. The inflation-that-is-not-inflation according to Democrats is killing our budget. Gas is going up – again. They want me, the non-rich, non-millionaire, non-billionaire, to pay.

They are SCREWING with me, the middle class – NOT “MILLIONAIRES AND BILLIONAIRES!” (Yes, I’m shouting.)

This needs to be REASON #1 to clean up the Senate. Vote out entrenched RINO Republicans, and all Democrats running in 2012!! If this passes, I will have had my taxes raised. I won’t forget it, either.

So much for a Pledge to America. “No taxes on anyone making less than $250,000.” “No raising taxes in a recession” (actually a depression, but ooooh, that “D” word is sccccaaaaaarrrrryyyyy).

No deal.

DINORightMarie | July 20, 2011 at 6:52 am

Oh – one thing to add:

The terms “tax break” and “tax loophole” actually mean “tax deduction.”

That was implied, but I wanted to clarify. Removing or reducing these deductions IS raising my taxes.

this well:

http://www.washingtonpost.com/rw/2010-2019/WashingtonPost/2011/07/15/National-Economy/Graphics/w-debt15-correction-g.jpg

In light of that graph, McConnell and now Coburn are poking us in the eye with a sharp stick.

[…] his post ‘Defusing The Debt Bomb‘ the good professor asks how we are […]

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