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Two-step program

Two-step program

Here’s the analysis by James Pethokoukoukis (via @irishspy):

Now is not time to let the perfect be the enemy of the good. Neither the Reid budget plan nor the Boehner budget plan packs the fiscal wallop of Cut, Cap and Balance. But significant progress on cutting debt can still be made before the Aug. 2 (or is it Aug. 8 or 10 or …) debt ceiling deadline. And by that measure, the Boehner plan is not only far better than the Reid plan, it is a pretty darn good plan in and of itself. While both plans would cut some $1.2 trillion in discretionary spending over a decade, Reid would then close up shop until 2013. The only other major cuts would be to future defense spending that no one really expects to happen….

Boehner, on the other hand, would keep the debt cutting process going and more likely result in substantive spending cuts of $3 trillion, nearly three times the Reid plan. (And if you tack on the Reid defense cuts, you suddenly have a $4 trillion plan, including interest savings. The raters would like that.) I don’t think spending hawks should fear the Boehner debt commission if it has real teeth and doesn’t create a trigger for higher taxes.

What thinks you?

I think there is upside in keeping the issue alive for the next year, in the framework where the only thing on the table is budget cuts.  I’d call it a single or a double, but not a strike out, with another appearance at the plate in about six months.

Update: Via The Hill:

In the closed-door meeting Tuesday, Cantor praised Boehner’s leadership and acknowledged that “the debt limit vote sucks.” But he told lawmakers that they had only three choices: allow the country to default on Aug. 2, pass a Senate bill that Boehner has denounced as “full of gimmicks” and a “blank check” for President Obama or support the GOP leadership and “call the president’s bluff.”

Cantor “said to stop grumbling and whining and to come together as conservatives and rally behind the speaker and call the president’s bluff,” the Republican with knowledge of his remarks said.

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Comments

Senator Rand Paul was commenting this morning and pointed out that all these cuts are using a baseline that called for $9 trillion in increases over the next ten years. It is sometimes difficult to remember for us plain speaking folks that Washington, DC = Orwell. So whatever Boehner’s cuts add up to they are cuts on a $9 trillion dollar increase. If they equal $3 trillion, then they have cut an increase of $9 trillion to an increase of $6 trillion.

Of course, the Democrat plan is far, far worse. But do not think these so called cut are cuts within the meaning of the English language.

    JayDick in reply to Viator. | July 26, 2011 at 1:21 pm

    You are correct. Most of the public does not realize that a cut is not a cut in Washington lingo but rather a reduction in the planned increase. Got that everyone? There will be a quiz on Friday.

    Aarradin in reply to Viator. | July 26, 2011 at 6:58 pm

    Fox interviewed Sen Paul and Gov Kasich (R) of Ohio back to back. By comparison, Kasich sounded like a Democrat. I was shocked at his ignorance on the issue and also shocked by his fearmongering.

That’s one of the main reasons why the markets aren’t selling off. This isn’t D-Day on debt and most American corporations have already adapted their business models to build in reckless government policy.

Neither deal will prevent a downgrade of US sovereign debt rating to AA and the chances of default are almost nil… for now.

IMHO, both deals are bad deals but “the markets” are showing no signs of caring which deal goes through since neither the issues hampering capital investment in America and neither will create jobs. Kicking the can down the road is what markets have come to expect from our entrenched criminal class of elected weasels.

    Correction:

    IMHO, both deals are bad deals but “the markets” are showing no signs of caring which deal goes through since neither ADDRESSES the issues hampering capital investment in America and neither will create jobs.

One more thing, Reid’s plan is a complete cop-out by both parties since it takes the most important issue out of play next year. At least Boehner’s plan continues the torture as both parties try to gain political advantage over the crisis. We need to torture these guys until Boehner isn’t the only one crying in DC.

I am pretty sure I Rand Paul say +$9 trillion baseline as I was driving, but here he uses +$10 trillion as the baseline budget. In any case, as you are following the lies, spin and obfuscation in Washington remember any cuts are taken from an increase. $9 trillion or $10 trillion increase over ten years, take your pick.

Senate.gov

Here is what really ticks me off about Cantor’s statement:

“they had only three choices: allow the country to default on Aug. 2,…”

That is an outright lie which what makes this kabuki so exasperating. The Republicans are telling the same lies as the Dems and getting away with it.

Also, Boehner refers to calming the “roiling” markets. What “roiling” markets? Only in “big tent DC” is there any roiling.

The debt downgrade is a done deal. Get used to it. The biggest damage from this will fall on those AAA states that rely on transfer payments from the feds to balance their budgets. The “markets” down care about bloated governments taking a hit.

If I were a congressman, I wouldn’t vote for either plan. Let’s call BOTH parties’ bluff on the phony default argument. We want a solution. SOLUTION.

U.S. Can Avoid Default Until September: Silvia

“The U.S. government can avoid a default for at least a month after the Aug. 2 deadline to lift the debt ceiling set by the Treasury Department, said John Silvia, chief economist at Wells Fargo Securities LLC.

“The Federal Reserve and the Treasury can work together to generate enough cash probably for the next two or three months to avoid any kind of automatic default on the Treasury debt,” Silvia, who is based in Charlotte, North Carolina, said in an interview on Bloomberg”

Bloomberg

    Aarradin in reply to Viator. | July 26, 2011 at 6:55 pm

    “U.S. Can Avoid Default Until September:”

    Considering that revenues exceed debt service by a factor of 11:1, the US can avoid default indefinitely even if the debt ceiling is never raised.

    What is at risk is NOT a default. Debt service gets paid first, no matter what, even before entitlements. What’s at risk is a partial government shutdown, during which the Executive gets to pick and choose what gets shut down and what stays open. There’s sufficient revenue to pay debt service, the big 3 entitlements, the military and roughly half of what’s left.

Coming up, 15 minutes of fame..

Are you kidding me?

http://www.youtube.com/watch?v=8SGyVNippvA

IMHO, due to go viral

I think that Speaker Boehner is doing the best that he can, and deserves support rather than the constant sniping. You cannot find better spear carriers than Cantor and Ryan.

I just heard Speaker Boehner with Rush Limbaugh. Limbaugh was sweetness and light until the phone call ended. Then the sniping began.

Phooey. A pox on all of those who sit on the sidelines and throw rocks (self censored for the sake of propriety). If we won’t support the people who are actually in the arena carrying the fight for us, then we deserve what we get.

The Republicans have to get to the next election as well and they must convince the American people they are worthy to control all parts of government again. If standing up for righteousness begets the opposite, is it still righteousness?

House GOP revolts against Boehner/Cantor. Try calling us “whiners” again. Insulting us conservatives always a good strategy. Worked great for McCain in 2008.

http://www.washingtontimes.com/news/2011/jul/26/house-gop-revolts-against-boehner-debt-plan/

JimMtnViewCaUSA | July 26, 2011 at 4:10 pm

Repubs need to get tougher and raise the bar.
Pass a reasonable bill that will stick in Obama’s craw. Let him veto it.

There is no metric by which Boehner’s plan could be called a good plan.

No raising the debt ceiling and no taxes. Make significant cuts, not what amounts to be $100 billion every year over the next ten years. This is nothing but a game designed to fool you.

Plans X, Y and Z…

“Obama still has a clutch of cards to play, in extremis.

As Yves Smith from Naked Capitalism argues, the White House can challenge the constitutionality of the debt ceiling in Congress.

The 14th Amendment of the Constitution states that the “validity of the public debt of the United States shall not be questioned”.

Such recourse would kick it up to the Supreme Court, which would take its own sweet time. (Fortuitously a complex matter.)

Bill Clinton advised Obama to do just that: blaze ahead, break the debt ceiling in defiance of Congress, and “force the courts to stop me”.

Or, the US Treasury could eliminate the Fed’s entire holding of Treasury bonds at a stroke, gaining an extra two years. This would be a simple accounting transaction. Ben Bernanke might feel uncomfortable, and gold might blast to $3,000, but the Bernanke Fed has proved itself supple.

The Treasury also has the authority to issue infinite amounts of platinum coins at any denomination it chooses (ie, like fiat paper currency, far above the metallic value): a chest of $1bn coins, say. This is seignorage on steroids, pace Prof Summers.”

UK Telegraph

    Aarradin in reply to Viator. | July 26, 2011 at 6:50 pm

    “The 14th Amendment of the Constitution states that the “validity of the public debt of the United States shall not be questioned”.”

    This is a non-starter. Even left wing law school profs that are begging for Judicial appointments from Obama are near unanimous that this approach is unconstitutional.

    Milhouse in reply to Viator. | July 27, 2011 at 5:58 am

    Viator, the constitution is crystal clear, and that 14th amendment argument is bull. If Obama borrows money without Congress’s authorization, they will have no choice but to impeach him. But more likely he won’t be able to borrow in the first place, because what fool would lend him money knowing that debt not authorized by Congress need not ever be paid, and that the next Republican president will repudiate any such debt?

Given that they only have control of the House, I’d say its a decent compromise. Remember, we’ve had an average of 2 debt ceiling increases per year for decades, usually in exchange for nothing.

There are some good things about he Boehner plan:

1) No tax hikes. This is really a huge loss for Obama and the Dems, they really really need the R’s to do their dirty work for them here. The deficit has to come down, the D’s want tax hikes so they can keep their new 25% of GDP spending level. If the R’s don’t agree to raise taxes, then spending must be cut. It really is that simple. The D’s blinked (or are about to, anyway), which means we should eventually see spending cuts rather than tax hikes to close the deficit. Reagan called this ‘starving the beast’.

2) We’re back at the table again next Spring, during the election cycle. If you don’t think this is a big deal, go look at the recent polling at Rasmussen for the D vs R numbers on the economy (and everything else for that matter) – the D’s numbers have been in freefall for 2 solid months.

3) Precedent. Its never been done before, and will start a precedent. I’m talking about Boehner’s formula that a debt ceiling hike must be accompanied by a spending cut at least as big. This means we’ll get future showdowns every time the debt ceiling needs to be raised. Usually, the President just asks for an increase, and gets it.

4) Obama is NOT responsible for the deal. He can’t very well pose as the ‘adult in the room’ that got this deal done. The deal is being made with Obama out of the loop (having been cut out is the sole reason for him going on TV last night). This deal will not help him get reelected.

5) Baseline. While the ‘cuts’ are not off the Ryan budget baseline (which having passed the House is used by the House Budget committee), it is using a current spending baseline. Any bill Reid comes up with will most likely use Obama’s budget (the one that failed 97-0 in the Senate) as its baseline, so any ‘cuts’ reported about it will be against spending that would never have happened anyway.

Yeah, there’s no Balanced Budget Amendment in it, but that wasn’t ever a realistic expectation anyway. The CCB bill was twice the cuts for twice the debt ceiling increase + the amendment, and most of you thought it was great. This is a 1 Trillion debt increase for 1.1 Trillion in cuts – no tax hike but no amendment. Its a decent deal.

    aguyfromjersey in reply to Aarradin. | July 26, 2011 at 8:58 pm

    I’m sorry, if you cut $1.00, why do you have to borrow that $1 again?
    The “base line” has been blown up (I think by 25% or more).

    How about going back to spending like it’s 1999. Just pick a year in the last 10, set the budget to that, adjust for inflation (Government said that has been little to none). W was bad, but I’m sure we would be happy with his spending now.

PrincetonAl | July 26, 2011 at 7:16 pm

Lousy, lousy deal. Largely fake cuts that amount to $100 billion in cuts to projected high levels of spending increases = no cuts, plenty of time to reverse them in the out years, etc. Also the 6-person cut team can vote to raise taxes, and unless you had real conservatives on it (unlikely) will push more oatmeal mush.

Redstate has it right. Hold the line on CCB. Let the country struggle now. Read how bad this plan is:

http://www.redstate.com/mikehammond/2011/07/26/the-boehner-plan-phony-cuts-slimy-procedures-dangerous-ignorance/

Beyond phony cuts, it opens all kinds of backdoor, unstoppable shenanigans.

This is a terrible unaccountable plan, and an abdication of leadership beyond the pale.

    Viator in reply to PrincetonAl. | July 26, 2011 at 7:36 pm

    I recommend to everyone Michael E. Hammond’s, former General Counsel Senate Steering Committee 1978-89, analysis of the current proposals linked by PrincetonAl above. Read it and weep.

    aguyfromjersey in reply to PrincetonAl. | July 26, 2011 at 9:04 pm

    CBO scored this today. Little or no cuts. John is going to work on it some more.

    For you budget panel pick 12 people out of the phone book, have them decide, up and down vote, prime time all networks, last Saturday in October, 2012.

Just a reminder. The National Debt has continued to increase an average of $3.82 billion per day since September 28, 2007!

The so called cuts amount to $120 billion annually and many of them are Easter Bunny cuts. You will see these cuts the same time as you see the Easter Bunny.

$3.82 billion a day X 365 days in a year = $1,394.30 billion we are currently borrowing each year. So after all the smoke and mirrors we will still, in the very best case, be borrowing $1,274.30 billion dollars a year.

[…] CBO Says Boehner Plan Saves Less Than $1 Trillion Over Ten Years, Less Than $1 Billion This Year Legal Insurrection: Two-Step Program Fred Thompson: An Open Letter To The GOP Pirate’s Cove: President Snippy Pants Spokesweasel […]

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