Getting A Credit Limit Extended

Getting A Credit Limit Extended

We did it! Okay, well Obama did it. And when I say it, I mean that he managed to do something not terrible. Well, at least not as terrible as terrible gets.

Assuming no hiccups in the House -- and that might be a big assumption -- we’ve got a deal. The deficit-reduction side includes $1 trillion in cuts now, $1.5 trillion (or more) in deficit reduction later, and a vote on a balanced budget amendment. Meanwhile, it raises the debt ceiling by $900 billion immediately, and either $1.5 trillion (if the second deficit reduction package or a balanced budget amendment passes) or $1.2 trillion (if neither pass) later. Either way, the Treasury should have plenty of borrowing authority to get us to 2013.

Behind the deal is a creative way out of the impasse that’s held up the negotiations: how do you get “balanced approach” if Republicans refused to consider revenues? The solution that both sides seem to have settled on is to substitute defense cuts where taxes would otherwise have gone.

In the initial $900 billion in cuts, almost half will come from “security spending” (which includes defense, homeland security, veteran’s benefits, the State Department, etc). Defense is the big money there, and, according to the White House’s fact sheet, it will take a full $350 billion in cuts on its own. But the real hit comes in stage two: if the second round of deficit reduction isn’t signed into law, the “trigger” that will make automatic spending cuts absolutely savages defense spending.

Let’s stop there and talk about the trigger, as it’s arguably the most important part of the deal. In his remarks on Friday, President Obama said he would support a trigger if it was done in “a smart and balanced way.” The implication was that it had to include tax increases as well as spending cuts, as a trigger with just spending cuts wouldn’t force Republicans to negotiate in good faith. The trigger in this deal does not include tax increases.

What it includes instead are massive cuts to the defense budget. If Congress doesn’t pass a second round of deficit reduction, the trigger cuts $1.2 trillion over 10 years. Fully half of that comes from defense spending. And note that I didn’t say “security spending.” The Pentagon takes the full hit if the trigger goes off.

Don't you see, marginal defense cuts and the majority of which only kick in if congress fails to pass legislation which will completely gut social programs, and no tax increases whatsoever on the rich... Oh boy, I can hardly contain all my excitement.

But I guess Obama did a good thing here, guys. He generously cut down on the American Empire fund while gutting social programs.. Well, at least not social security and medicare. Not this year, that is. That's for after the election. In the meantime he will only cut education, health and human services, housing and urban development -- You know, the less important social programs that doesn't cost him votes. I knew my vote wouldn't go to wast eon Obama!

I mean, I guess I could sit here and pine for the idea that he would have punked congress with constitutional challenge, but I suppose I should take the bones I'm thrown here. I'm guessing the defense cuts mainly involve gutting the social security, education, provisions and equipment of soldiers. Not actually stopping research on that Dark-skin-seeking-laser,

If you look at every major news source, they'll all be hyping up that a deal has been practically struck between all involved because they're desperate to reassure the markets that it's safe to invest. Pay no mind to the credit rating almost about to get slammed, it's all good.

One major problem in all this is that cutting defense spending is contractionary economically but Americans are already getting pretty used to eating rats and hobo cans of beans. So what's a few more years of rats and hobo beans? And how much do you want to bet that half of these cuts have already been announced some time ago and this all ends up being a situation where they end up double counting the cuts for the sake of making it seem more than what it is.

Honestly, I should just take the tax hit on my 401k and should just invest it in Bank of America held stocks. Or maybe I should just put the entirety of my dollar into lead and then put a slug into my own brain.

But hey, the deal has been made and now everyone in congress gets to go on their August vacation while Obama gets to celebrate his birthday today. Everyone is a winner.. well, as long as you're not an American tax payer, that is.

Then again, no one in America will ever care about any of this as long as the TV keeps working and new shows get cranked out. That's why I like my job security. Though I have to honestly admit that I'm seriously bummed that the NFL cut their deal. Mainly because having no football in a couple of weeks would've brought about the revolution a whole lot faster than anything else.