Update: 08.09.2011, 4:00 PM. President Obama has now signed the legislation to raise the debt ceiling and avert default. The bill immediately raises the debt ceiling by $400 billion. The additional steps that our country will have to endure to raise the debt ceiling for the balance of next year are described below. “Enough talk about the debt. We have to talk about jobs,” said Democratic Minority Leader, Nancy Peloisi.
Only two days remain in this season’s final episode of the made-for-cable-news mega-series drama, “The Right Wing – Raising the Debt Ceiling”*. The whole world is watching. Whose jobs will be lost? Whose fortunes, real, imagined, hedge, shorted or political, will be wiped out? Who will blink or tear up? Will the T-Party take to the streets or is just too damn hot? Will the golf partners stick to their “deal” for an entire news cycle? What will Sarah tweet? Will a deminted Senator sabotage it all with a last minute filibuster? Can Pelosi be turned to the dark side? Will S&P downgrade the credit rating anyway leading to higher interest and a need for even greater cuts? Will we do this again before Christmas?
The stranger-than-fictional leaders of our government have leaked elements of their surprising planned finale where they use this totally made-up crisis to solve the nation’s, and the world’s, great problems. The markets have already rallied in anticipation. As has the dollar. As have oil prices. The pundits, blogmeisters, and spin doctors have already picked the winners and losers. The bottles of sparkling tea have been chilled.
The drama couldn’t have been cast with a more exciting backdrop:
- Two official wars (Afghanistan and Iraq), one official unofficial war (Libya), two well-known secret wars (Yemen and Pakistan), revolutions underway or being brutally suppressed in Syria, Egypt, Bahrain, and Saudi Arabia, on-going and potential conflicts in Palestine, Iran and North Korea, and chaos, famine and human tragedy in Somalia and the Horn of Africa;
- An earthquake, tsunami and nuclear disaster in Japan that will continue for a hundred thousand years;
- A massacre of white people by a white, right-wing Christian anti-muslim lunatic;
- Worldwide recession with grave concern for the Euro zone, specifically Greece, Italy, Portugal, Spain and Ireland;
- A dismal 1.3% US GDP growth last quarter after only .04% first quarter growth;
- The lowest percentage of Americans working in almost 30 years with 9.2% unemployment (20+% black unemployment) and at least 18.5% overall underemployment – more than 25 million Americans are out of work and glued to their TV sets;
- More than 50 million Americans without health insurance;
- 28% of US homeowners are behind on their mortgage, a backlog of six million US homes in foreclosure with more than three million homes already seized, and home prices continuing to decline;
- Executive pay has risen 23% this year, plus, record earnings continue to be announced by our largest corporations – US companies have now accumulated and horded, depending upon who counts, $20-30 trillion in cash, while spending millions on lobbyists to whine about regulation, taxes and certainty;
- The wealth gap continues to widen with whites now averaging 20 times the wealth of blacks, 18 times the wealth of Hispanics;
- US worker productivity is at an all time high, yet real wages are lower than they have been in 41 years;
- Federal, state and local taxes are the lowest per capita since 1954;
- The number of government workers has gone down more than 500,000 since Obama took office;
- And, it is hot, though not officially from global climate change even though the northern hemisphere is trying to endure a record-breaking heat wave.
For those who may have missed an episode, ignore the backdrop (above) – the crisis in America is clearly our deficit. With total government revenues, as a percentage of our economy, at their lowest level in more than 60 years, obviously, the only answer is to cut government spending.
The announced plans include an immediate $400 billion debt limit increase (whew) and $900 billion in spending cuts over the next 10 years. These cuts will be from the annual appropriations of the day-to-day operations of Cabinet agencies (specific cuts will be determined by the Appropriations Committee after annual lobbying and whining by each agency and their related lobbyists), but largely the cuts will be from capping projected inflation-adjusted increases. These cuts do not include Social Security, Medicare or Medicaid.
Another $500 billion debt limit increase would be allowed later this fall, which Congress could only disapprove, which President Obama could veto, which Congress could overturn by a two-thirds vote in the House and Senate (I’m not making this up).
A third installment of debt limit increase of between $1.2 and $1.5 trillion would be available after enactment of the recommendations on November 23, 2011 by a 12-member super Congress (also to be announced) of three members from each party and each chamber.
The super Congress’s report to the mortal Congress could include tax code changes, maybe even revenues, and changes in any other program – including Social Security, Medicare, Pentagon spending. All dependent upon an up or down, no amendments allowed, vote in Congress on December 23, 2011.
Should super Congress not agree (how likely is that?) or the mortal Congress does not act on the recommendations, we’ll face the poison pill of across the board spending cuts to be implemented by the White House including cuts to the Pentagon, domestic agency budgets and farm subsidies… beginning in 2013, after the next Presidential election. However, Social Security, Medicaid, veterans benefits and military pay would not be subject to cuts.
Oh, yeah, the House and Senate are also required to vote, but not pass, which they won’t, a balanced budget amendment to our Constitution. The bill will establish at a cost of $1 billion, a “program integrity” initiative in an attempt to stem abuses in Social Security and federal health care programs. This bill will also preserve Pell Grant funding for 2012-2013 by cutting student loan subsidies. Go figure.
This is one terrific plan.
“The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President,” said President Obama in announcing the deal. “Now, this process has been messy; it’s taken far too long… We’re not done yet.”
“I know this agreement won’t make every Republican happy. It certainly won’t make every Democrat happy,” Senate Majority Leader Harry Reid said.
“Now listen, this isn’t the greatest deal in the world. But it shows how much we’ve changed the terms of the debate in this town… There is nothing in this framework that violates our principles. It’s all spending cuts. The White House bid to raise taxes has been shut down. And as I vowed back in May – when everyone thought I was crazy for saying it,” said Speaker of House John Boehner (R-Oh.).
Senate Majority Whip Dick Durbin (D-Ill.) said, “I would say … that symbolically, that agreement is moving us to the point where we are having the final interment of John Maynard Keynes… So here we are in the horns of a dilemma. In order to avoid the disaster that would occur August 2 if the United States defaulted for the first time in its history, we are being told we have to cut back on government spending and by cutting back on spending, we may also have a negative impact on our economy.”
The head of the Congressional Black Caucus, Rep. Emanuel Cleaver, (D-Mo.) called it “a sugar-coated Satan sandwich.”
Over time, the combined cuts should add about 1.25 million to our unemployment rolls, and could bump unemployment over 10%. The cuts in spending will almost certainly turn our anemic GDP growth into negative numbers putting us back into official recession – this time, an official bipartisan recession. But don’t be fooled that the impact will stop there. The cuts will have dramatic impact on every state. Those laid off will be teachers, law enforcement and regulators. Food and medical care will be cut for our poorest children and their families. Transportation and infrastructure spending will also be cut.
When the series continues, we’ll get to watch who is to blame. How gerrymandered districts will make things even more partisan? How the T-party will get revenge on Boehner? How Obama will seek to mend fences with his base? And how all, but a few of us, will continue suffering and electing these fools? I wish I could change the channel.
*A sequel to the popular series, “The West Wing.”
Note: This story was updated at 5:45PM, August 1, 2011 to correct details once the bill was announced.