“At the White House and in talks in congressional offices and corridors, most of the attention was focused on finding a way to define the precise conditions under which the president could get a second increase in the debt limit that would be needed early in 2012 under both Republican and Democratic proposals.”
– “Amid New Talks, Some Optimism on Debt Crisis,” The New York Times, July 30, 2011
It’s not hard to understand why the leaders of both political parties are vehemently opposed to the possibility of U.S. default. But as many commentators, including myself, have pointed out for weeks, a failure to raise the debt ceiling has absolutely nothing to do with the possibility of a sovereign U.S. default! In fact, raising the debt ceiling will make a default much more likely in the future. So why are the politicians, particularly Barack Obama, so desperate to see some sort of deal struck that will permit the raising of the $14.3 trillion federal debt ceiling?
NB – This column was written prior to the announcement of the “compromise” plan, which Karl Denninger summarized as below. Nothing in it changes anything substantive regarding the column.
1. Lie once again about “cutting spending.” It does no such thing. It increases spending – every year. Bogus and outright-fraudulent “baseline budgeting” means that if they intended to boost spending $300 billion but only increase it $200, that’s a $100 billion “cut.” If you ran your household like this you’d be broke in a week. For the US, it will take a bit longer.
2. No tax increases. That’s nice, but let’s not forget that while the Democrats scream about the “Bush Tax Cuts” the FICA tax cut was theirs. Obama signed it. You cannot keep reducing income and increasing spending forever.
3. The cuts, fraudulent though they are, aren’t even real anyway – and not binding either. There’s nothing before 2013, which means a downgrade is almost certain. Further, raising the debt ceiling now for the whole among but allegedly finding the “cuts” over 10 years is an outright fraud by a ratio of 10:1.
4. A 2013 timeline for actual changes means nothing, since the next Congress is not bound by what this one does. Period.
5. Sequesterization didn’t work in 1997. It won’t work in 2011 either.
6. We failed to get to $4 trillion. That’s what S&P said they needed, and they said they needed to see that within the next three years. Now we find out if S&P has any balls.
NRO reports: “According to sources, Boehner said the deal was “the best that we could get.”” And that is perhaps the most shameful thing about this whole bipartisan charade. The scriptwriters couldn’t even bother to write new dialogue for Republicans Cave on the Budget XXXI.