Democracy: a system of government in which the cows think they pick who milks them.
The Budget Control Act of 2011 (pdf) passed Congress and President Obama signed it, telling the American people:
“Congress has now approved a compromise to reduce the deficit and avert a default that would have devastated the economy.”
The noise about deal-making in Washington, D.C. over the increase in the federal government debt limit was pure political theater—a scripted performance for the American people. The President and Congress pretended to debate and take political risks to fix the federal government’s finances, but the outcome was a foregone conclusion—increase the national debt limit. Everything else was putting lipstick on a pig—a show for the rubes, whose price of admission is paying taxes and being prodded like cattle at airports and train stations.
Despite the dramatic entrance of shooting victim Gabrielle Giffords (D-AZ) during the vote, arriving just in time to cast her vote for continued spending of non-existent money, the conclusion was never in doubt.[1] The votes to increase the debt limit in the House: 269-161, and the Senate: 76-24, weren’t even close.
The only question was how much the limit would be raised. Our political “leaders” agreed to the largest increase in the debt limit ever—a $2.4 trillion increase to the current national debt limit of $14.3 trillion. The new $16.7 trillion limit is more than the entire economic output of everyone in the US—and the new limit is expected to be exceeded in two years.[2] The $2.4 trillion increase is greater than the total national debt accumulated by the federal government from 1791 to 1987—the first 196 years of its existence.
Who Does the Dirty Job?
“It was a long and contentious debate.” –President Obama after signing the Budget Control Act of 2011
The congressional “debate” was mainly about how to sell the debt limit increase to the working people who pay the bills and vote to “pick” their rulers:
- Rs said they wanted no new taxes, spending cuts over the next 10 years, and a small increase to the debt limit so the next increase would come before the next Presidential election.
- President Obama and congressional Ds wanted tax increases, spending cuts over the next 10 years, and an increase to the debt limit over to $16 trillion so that with the current rate of deficit spending, the debt limit would not be exceeded until after the next Presidential election.
Leaders of both parties have never been averse to deficit spending or increasing the debt limit above the ridiculously high amount that already exists: since 1946 both parties have increased the debt limit 96 times.[3][4] This time, both Ds and Rs wanted an agreement that let them keep spending money the government doesn’t have, but each wanted an agreement that made the other side look bad.
In 2006, then-Senator Obama voted against increasing the debt limit when then-President Bush (R) was in office. When asked about his 2006 senatorial vote today(video), President Obama (D) acknowledged his vote was part of the same political game.[5]
Congressman Mike Doyle (D-Pa), expressed the true purpose of the exercise when he criticized Tea Party tactics during the negotiations:
“We have negotiated with terrorists. This small group of terrorists have made it impossible to spend any money.”[6]
Default or Fearmongering?
“Default is a false threat. We take in over $220 billion in revenues every month and our debt service is only roughly $20 billion. The only way we will default is if the President of the United States makes the irresponsible choice not to pay our debts.” - Mark Meckler, co-founder of the Tea Party Patriots
Default is a false threat. The US would not have defaulted on its debt. The federal government takes in more than enough in tax revenues to pay interest on its debt and more. That the US government would default was a lie—a lie to intimidate voters.
Citizens are always told this lie when their rulers want to increase spending. Politicians scare taxpayers into agreeing with spending increases by threatening cuts to things taxpayers want. Politicians never mention cutting out things taxpayers don’t want.
Ron Paul called it “fearmongering” (video). When government says “default,” people become afraid. They think they won’t be getting their checks any longer. The fearmongering distracts the public from the real issue: that their dollars are worth less as a result of the increased debt.
Deficit Reduction
“This compromise guarantees more than two trillion dollars in deficit reduction.” – President Obama
The much ballyhooed spending cuts were not cuts to actual current spending. They were cuts to proposed increases in spending for next year. News stories about the agreement are filled with details on the elaborate spending cuts and savings inflated by Washington, D.C. political math:
- The bill promises $917 billion (pdf) in spending cuts by putting caps on proposed increases in discretionary spending over the next 10 years.[7]
- The bill also promises $1.2 trillion in deficit reduction, by including an allowance for interest savings, and requiring reductions in both discretionary and direct spending to make up for any shortfall in the targeted $1.2 trillion over the next ten years.
- The cuts are over ten years because it makes the amount of spending cuts seem larger when they’re multiplied by ten.
- While the doubtful future spending cuts take place over ten years, the newly increased $2.4 trillion debt limit is expected to be exceeded in less than two years. So the federal government is still overspending by more than a trillion dollars a year.
Rs made certain that the spending cuts matched the amount of increase in the debt limit to give the appearance that they fought for reduced spending, but if the debt keeps rising, the federal government is still overspending.
Ds pretended it was painful to vote for a bill that didn’t let them increase spending as much as planned—but D-leaders involved in the negotiations said they were able to keep the discretionary spending cuts to a minimum — just $7 billion in real terms in 2012, and an additional $3 billion in 2013.[8]
The real purpose of the bill was to let the federal government spend another $2.4 trillion it doesn’t have. That’s why the politicians spent so much time talking about how they were cutting future spending—they didn’t want the average American thinking too much about their political rulers robbing them in plain sight today.
Cutting Increases in Future Spending
“There is nothing in this framework that violates our principles. It’s all spending cuts.” – John Boehner
"In fact, this bill will never balance the budget. Instead, it will add untold trillions of dollars to our deficit. This also assumes the cuts are real cuts and not the same old Washington smoke and mirrors game of spending less than originally projected so you can claim the difference as a ‘cut.'”– Ron Paul
When politicians talk about budget cuts they play by different rules than you or me. For example, the Budget Control Act of 2011 talks about $917 billion in cuts over ten years. Using real math that should be almost $92 billion in cuts the first year. It would be if politicians used real math to plan their finances.
But in Washington, D.C. our leaders have no respect for the intelligence of the American people. According to their math, in the near term, the bill sets budget numbers for 2012 that would require a real cut of $7 billion in discretionary spending from 2011 levels. But because that’s $25 billion less than projected spending would have been had it kept pace with inflation, our leaders are taking credit for $25 billion in savings. In 2013 they estimate even higher inflation, so there are only $3 billion in real cuts for which they claim an even higher amount of savings.
So for the first two years of the ten year budget control plan, our leaders are making $10 billion in real spending cuts while taking credit for an average of $180 billion over two years, and claiming a total of $917 billion in spending cuts for the ten years from 2012 - 2021.
If Joe Sixpack could play by the same rules, instead of declaring bankruptcy when hopelessly in debt, he could ask a bank for a loan, explaining that he had decided not to buy his planned two new $90,000 Porsches every year for the next ten years—that instead he’d make a cut and buy just one new Porsche every year. Using the same reasoning as our politicians in Washington, D.C., Joe Sixpack could multiply the cost of each new Porsche he will not purchase by 10, factor in savings for anticipated inflation on the money he isn’t spending, add savings on interest he is not paying on a loan he didn’t need to get for money he didn’t spend. Joe could say he was saving a couple of million dollars in the next ten years, so could he please have a loan for two million dollars?
The difference between Joe Sixpack and the federal government is that after the bankers stopped laughing hysterically at Joe’s ridiculous plan, they’d give Joe the bum’s rush out the door.
Democracy: the Ideal Form of Government
“If the new Republican majority in the House of Representatives gives into establishment pressure by voting to increase the debt ceiling once again, you will know that the status quo has prevailed.” – Ron Paul, May 23, 2011
The debt limit has been increased many times in the past. This time the mob was getting unruly, so our democratic system of government let the crowd blow off steam by voting for Tea Party candidates who talked a good game. Despite all the rhetoric, the key point about the latest circus side show is an agreement that the debt limit will increase and the federal government gets two more years to spend money that doesn’t yet exist. The status quo has prevailed.
That’s the beauty of our democratic system of government—it defuses riots and revolts by letting the cows think they have a say in who milks them. Did you wake with all of the noise during this performance? Your rulers want you to rest easy, go back to sleep—they’re taking good care of you.
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[1] Any who doubt Giffords’ mental capacities after she was shot in the head, can be assured that Giffords hasn’t forgotten that a congresswoman’s job is to keep the financial fraud going as long as possible.
[2] “Gross Domestic Product: First Quarter 2011 (Third Estimate); Corporate Profits: First Quarter 2011 (Revised Estimate),” US Dept of Commerce, Bureau of Economic Analysis, June 24, 2011.
On June 24, 2011 the GDP was $15.1 trillion.
[3] GAO Letter to Daniel Patrick Moynihan, February 23, 1996 (pdf), (Accessed at http://www.cnsnews.com/sites/default/files/documents/GAO-HISTORY%20OF%20DEBT%20LIMIT.pdf on Aug 3, 2011).
[4] “The Debt Limit: History and Recent Increases,” (pdf), by Andrew Austin and Mindy Levit, Congressional Research Service, April 5, 2011, (Accessed at http://www.cnsnews.com/sites/default/files/documents/DEBT%20LIMIT%20HISTORY-CRS.pdf on Aug 3, 2011).
[5] Here is then-Senator Obama’s speech on March 16, 2006 opposing an increase in the debt limit.
[6] “Sources: Joe Biden likens tea partiers to terrorists,” by Jonathan Allen & John Bresnahan, Politico.com, Aug 1, 2011, (Accessed at http://www.politico.com/news/stories/0811/60421.html on Aug, 1, 2011).
[7] “Section-by-Section Analysis of the Budget Control Act of 2011 as Announced on July 31, 2011” (pdf), House Rules Committee, (Accessed at http://www.rules.house.gov/Media/file/PDF_112_1/legislativetext/731%20CBAsbs%20v2.pdf on Aug 3, 2011).
[8] “Debt deal: $32.4 billion per page,” Stephen Dinan, Aug 1, 2011, Washington Times, (Accessed at http://www.washingtontimes.com/news/2011/aug/1/debt-deal-32-billion-page/ on Aug 3, 2011).
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