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A Further Perspective
Doing the Math
The debt ceiling bill seems like a Republican win, but there is still plenty to worry about.
Examine the political math of the debt ceiling/spending-reduction bill and it adds up to a Republican win. Examine the green eyeshade math, however, and there is plenty to worry about in the near future.
When Democrat Senator Charles Schumer whines and a Tea Party official says, “We got rolled,” you know that compromise—the essence of the American legislative system—has worked. When House Speaker John Boehner says, “We got two-thirds of what we wanted,” you also know that the Republican House has succeeded in changing the language of debate. Now, instead of the prevailing Democrat theme of “let’s-spend-whatever-we-to-need-for-this,” everyone is now scrambling to find ever more things to cut.
No wonder. To get the compromise, Obama and the Democratic Senate had to agree to the creation of a select committee of six Congressional Democrats and six Republicans that must come up with an actual $1.5 trillion list of cuts by fall, beyond some $900 billion in initial cuts. If they fail, an agreed-upon advance list would be triggered for automatic cuts.
The compromise and the select committee process are all triumphs for the Republicans and, for that matter, the Tea Party. Lurking in the background of the debate was the Tea Party and its focus on cutting government spending and debt. Some of the House members it helped elect last year voted against the compromise package because it didn’t go far enough.
While the package certainly wasn’t everything the Congressional Republicans wanted, it moved the argument from “spend” to “save.” This is remrarkable because the Republicans control only one-third of the levers of legislative power in Washington. The Democrats still control the other two.
Thinking back to the early spring, Mr. Obama and Sen. Harry Reid were calling for a straight-up-or-down vote extension of the federal debt ceiling. Then they moved to the mantra of a “balanced” approach. That was code for tax increases on the “very rich” (i.e., anyone earning $250,000 or more a year). Then, “tax increases” morphed into “revenue enhancements,” code for tax code adjustments (cutting out some deductions and exemptions in exchange for reducing tax rates). When that did not pass muster, taxes were dropped from the final package.
Now for the green eyeshade math. Though the bill calls for an initial cut in spending of close to $1 trillion, it may not actually reduce the deficit by a dime. Here’s why: The package is based on the Congressional Budget Office’s projection of 3.1 percent growth in Gross Domestic Product this year and 2.8 percent next year. Alas, in the first half of this year, the GDP grew by only 0.8 percent. It would take a massive increase in economic activity to meet the CBO’s projection for the year. The Office of Management and Budget says that if the economy’s growth comes in one percentage point off that projection, it could lead to an increase in cumulative federal deficits of $750 billion over ten years.
One private sector banking unit, Barclay’s Capital, thinks that actual results below the CBO projection could vaporize the expected cuts from the recent legislative deal, while increasing federal debt as a percentage of GDP to nearly 90 percent (versus 82 percent estimated in the debt-ceiling package).
That increases the burden on the Congressional special commmittee to come up with even more cuts to compensate for an annual growth that will almost certainly be well below the CBO’s rosy projection.
It also means the Tea Party must keep up the noise and the presssure, and House Republicans must continue to more than hold their own in the negotiations. Despite Obama’s obsession with “millionaires and billionaires,” if the federal government were to confiscate everything all of them earn for the year it would only put a small dent in the spending and debt totals. The special committee must reform entitlements and reduce more domestic spending.
About the Author
Peter Hannaford was closely associated for a number of years with the late President Reagan, beginning in the California Governor’s office. His latest book is Presidential Retreats.
Letter to the Editor View all comments (17) | Leave a comment
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Ken (Old Texican)| 8.8.11 @ 7:29AM
Peter,
you are preaching to the choir.
POST American| 8.8.11 @ 8:45AM
AND------1.5 QUADRILLION in FAKE usurer's
derivatives debt, still unaddressed anywhere
on our false front political spectrum.
buckeyeman| 8.8.11 @ 9:23AM
Refusing to raise the debt ceiling would have been a win for the Tea Party. The unintelligible nonsense and lies we got instead was a victory for the forces of chaos and darkness. Now just who would that be?
Solo| 8.8.11 @ 9:28AM
"Doing the math", the republicans got zero cuts, Zero reductions in deficit spending, and Zero reductions in our debt .
"Doing the math" clearly indicates that spending is going to go up, borrowing is going to go up and the debt is going to go up.
But...we will get MONDO tax increases starting on Jan.1, 2013 when the Bush tax cuts expire.
And..guess what's going to happen?
Congress is going to spend every penny of that MONDO "revenue enhancement", borrow tons more...and then spend that too!
And guess what...? The public is blaming it all on republicans!
Hows that for "the Hat Trick"?
The next thing you know, McConell and Boehner will be running Public Service Announcements endorsing Obama for re-election!
Dai Alanye | 8.8.11 @ 9:37AM
I'm guessing Solo must be one of those glass-half-empty conservatives. Reminds me of the character in The Russians Are Coming who ran around saying, "We're doomed, there's no hope now. We're doomed!"
This is the type of thinking and rhetoric that will lead conservatives to stay home on election day.
Bill S| 8.9.11 @ 2:21AM
We ARE doomed! $2.2 trillion in taxes, $3.6 trillion in spending, $5.3 trillion in unfunded liabilities for this year alone. The Fed will print whatever it can't borrow. We're going to see hyperinflation like Germany did in the 1920s.
Mike Hawk| 8.8.11 @ 9:42AM
Conservatives had damn well better not stay home on election day. That what the Oborg would like. The Marxists will get full control and you won't have another chance. One party statists Socialism will be the ruler. If they do it will be the end for us.
Wayne | 8.8.11 @ 10:44AM
Was it a compromise or a win? You can't have it both ways. As far as changing the discussion from spend to save, I would say that the Democrats changed the discussion also, from tax cuts to tax increases. I didn't hear one proposal from the GOP that suggested any tax cutting.
Also we found out that "cuts" is also a misnomer, since the cuts were just fewer cooked in increases due to the baseline rising 8 percent a year. A simple immediate way to create a ton of cuts is to cut that baseline to 0 percent increase each year.
Also despite all the wailing and gnashing of teeth, not one government job was cut nor were wages reduced or employees benefits reduced.
Please quit making no-brainer cuts sound like brain surgery.
Alky| 8.8.11 @ 11:01AM
Raising the debt ceiling was no one's win but Congress & Senate. How is giving an irresponsible spender a bigger credit limit a good thing when the high debt is the problem???
Oldefarte| 8.8.11 @ 11:18AM
ITS THE DEMOCRATS STUPIDS! The tea party did not establish the CRA of 1977, AFFORDABLE HOUSING governmental housing policies, Community Action Agencies, The War on Poverty, the Great Society, WELFARECARE, NONSTIMULUS TO LABOR UNIONS etc [but guess who or what political party did so?]. Also, from the Daily Caller:
'....Teabaggers reply: Downgrade this -- The Tea Party is downgrading Axelrod and Kerry right back. TheDC's Matthew Boyle reports: "FreedomWorks President Matt Kibbe told The Daily Caller that liberals are using the ['Tea Party downgrade'] slogan to distract Americans from the bad economic numbers he says President Obama's policies have caused. 'Well of course they want to say that,' Kibbe said of how the Obama administration is attempting to blame the tea party movement for the credit downgrade. 'They don't want to talk about how Obama's fiscal policy led to this and 9.1 percent unemployment.' Kibbe noted that Obama never provided his own debt plan and added that he believes it was Democrats and liberal Republicans who perpetuated the 'out-of-control spending' that led Standard & Poor's to downgrade the U.S. credit rating from AAA to AA+ with a negative outlook for the first time in the nation's history." But no, see, it's the people who want to control spending who are the problem. As Instapundit puts it, "Everyone knows that when you're using your MasterCard to pay your Visa bill, it's the person who doesn't want the limit raised who's the real source of the problem." Remember when the Tea Party was just an ineffectual bunch of rednecks? Now, apparently, they're responsible for everything. But that's what happens when you move the cookie jar out of the Democrats' reach. You're going to hear a lot of crying and screaming and pleading.....'
Anthony| 8.8.11 @ 11:22AM
What exactly worked Mr. Hannaford? Just because "both sides" were upset with the deal does not mean it's a good one by default. That age old axiom does not always fit.
The debt deal was a D.C. debacle and the markets and the credit rating services are telling us so.
Only Cs asking for the insanity of spending coming from the morons in D.C. could be called terrorists and trolls by leftists, media whores, and RINOs.
2012 is the fight to take back America. We need to rid America of all of the above.
Solo| 8.8.11 @ 12:15PM
No..."Solo" is one of those "There is no glass" conservatives. At least in this case.
There were no cuts!
There is no reduction in spending!
There will be no reduction in our debt!
THERE WILL BE HUGE TAX INCREASES!
And, as an added bonus, the public is now more upset with republicans in Congress then they are with Obama!
How's that for the republican leadership advancing the conservative cause?
Nice job, boys!
Oh...and "special mention" goes out to McConnel and Boehner agreeing to let Obama off the hook on the debt issue until after the 2012 election cycle! Brilliant! Simply brilliant!
Doctor Right| 8.8.11 @ 1:53PM
A Republican "win"?
Fine. Whatever.
Unfortunately for the GOP, it was a big LOSE for the American people...
...And we know who sold us out.
TrueBlue| 8.8.11 @ 3:03PM
This worst part is that we wouldn't have defaulted anyway. There would have been a ton of people not getting unemployment checks, Medicaid wouldn't have been able to pay any future bills until their current ones were paid off, and the government probably would have shut down for a bit, but we still take in enough to pay the interest payments on our debts.
I agree with Wayne that they should remove the 8% annual increase to the baseline. That'd be a huge cut right there.
Numerian| 8.8.11 @ 5:33PM
I'm with Solo - the debt deal was a total victory for the left, and a total defeat for conservatives. There are no cuts; NONE. And we are on track for massive tax increases.
POST American| 8.8.11 @ 11:47PM
-----------------BOTTOMLESS LINE-------------------
"The NWO is now openly at war with
the USA."
-Webster Tarpley
(Alex Jones yesterday)
"Globalism, 'Free Trade' (monopoly trade)
and EUGENICS (---and TREASON) are
ALWAYS linked. ALWAYS. ALWAYS."
-ALAN WATT
(deadly online coverage)
"We ARE using MASSIVE third world
immigration to DESTROY British culture
once and for all, beyond repair --FOREVER."
-Fmr PM TONY BLAIR
(Daily Mail interview)
---ANYONE STILL left out there NOT seeing
that USURY IS ABOMINATION?
----that the Glow-Ball---IST RED China
TREASON OP -------IS REAL?
----that SIN is ALWAYS onthe move,
and ALWAYS LINKED
----that RED Chinese 'EUGENICS management'
is coming?
-------------------------ANYONE?
------------------------------ANYONE AT ALL?
--------------------SEE YOU IN NUREMBERG!
obadiah| 8.9.11 @ 3:12PM
Definite Republican win. The debt deal damages America, damages the world and damages Obama. Advances the Republicans strategy of "ruin and rule." Strengthens the grip of the plutocrat masters and prepares the populace for their deeper enslavement. Republican win all around.