By Steve Hynd
OK, here's the deal: the nonpartisan Congressional Budget Office says that the GOP's plan to cut the deficit at the same time as raising the debt ceiling will save a measly $850 billion over 10 years rather than the $1.2 trillion initially promised. That's just a bit more than the annual expenditure on defense's shiny toys and foreign adventures. The CBO says the Dem plan cuts $2.1 trillion over the same period.
So why are we still talking about the GOP plan as a serious option?
Even the Dem plan by Senate leader Harry Reid isn't going to be enough to stave of a downgrading of U.S. credit-worthiness, according to McLatchy:
Moody's Investors Service and Standard & Poor's, when putting U.S. bonds on a credit watch in mid-July for a possible downgrade within 90 days, said they feared that the political stalemate could lead to a solution that didn't significantly alter the course of the mounting U.S. debt. Right now, those fears seem warranted.
Only an agreement that cuts at least $4 trillion over 10 years from the projected rate of debt growth would be seen as "significant."
A downgrade means the government would have to borrow more to pay its bills. State legislatures and financial institutions would find the same thing happening to them. And:
Lots of U.S. lending rates are based at least in part on the interest rates on U.S. government bonds. These include mortgages, car loans and student loans. If there's a ratings downgrade and U.S. bond yields rise, that will spill over eventually into lending rates across the economy. This will add another head wind to the weak recovery.
Jason Rosenbaum is spot on when he explains the GOP's hypocrisy by saying that "Boehner and the GOP will walk away from any plan that doesn�t cripple President Obama." However, neither party's plan is seriously attempting to stave off a downgrade, because neither party is willing to take enough of a knife to bloated military spending and neither party wants to do the one other thing that could possibly get any plan close to that $4 trillion threshold without screwing funding for the poor and elderly entirely - raise revenue by raising taxes.
What both parties are quite willing to do is fund-raise off the political kabuki.
Why is America voting for any of these chumps again?
It should be pointed out that S&P made it clear that repeal of the Bush/Obama tax cuts would also be necessary to avoid a down grade. That's in addition to the 4 billion in cuts.
ReplyDeleteA downgrade means the government would have to borrow more to pay its bills.
ReplyDeleteI think that should read the government will have to pay more to borrow, as in the interest rates on new government debt will rise and make it more expensive to borrow money. The amount it will be borrowing should remain the same for the immediate future, at least once the debt ceiling does get raised and they can borrow (issue debt) again.
Granted that in time this will lead to more borrowing if they continue to run deficits, but that's not the immediate effect of a downgrade.
>> Why is America voting for any of these chumps again?
ReplyDeleteTo hell with waiting for the 2012 election. We're in the middle of a national emergency!
The only way we're going to get a functioning government is to immediately begin recalls on every last Congressional Representative, and then vote in a whole new House.
What's the best way to organize a nation-wide recall effort -- with dispatch?
The only way we're going to get a functioning government is to immediately begin recalls on every last Congressional Representative, and then vote in a whole new House.
ReplyDeleteSorry we can't recall House or Senate members. Only the House can kick out a House member and only the Senate can kick out a Senator.
>> Sorry we can't recall House or Senate members.
ReplyDeleteThen for God's sake let's start a nation-wide petition demanding that they all immediately resign.
None of them would resign, of course, no matter how many millions of voters signed the petition. But at least we'd have given them a preview of what the 2012 election results are going to look like if they don't start behaving like adults.