Five Reasons the Debt Deal is a Budget-Busting Mistake

Rep. Tom McClintock, FloydReports.com

The “Budget Control Act of 2011” increases the debt limit by between $2.1 and $2.4 trillion, the biggest explosion of debt in American history. It allows the government to avoid spending reductions for the next two years while squandering our last best hope of averting a sovereign debt crisis.

I am opposed to this measure for the following reasons:

  1. The purported cuts, even if realized, are far below the $4 trillion deficit reduction that credit rating agencies have warned is necessary to preserve the Triple-A credit rating of the United States government;
  2. It blows the lid off the House budget passed in April by more than a half-trillion dollars over ten years;
  3. It makes no significant spending reductions for at least the next two years, essentially freezing spending at an unsustainable level. While the debt increase occurs this year, significant spending cuts aren’t to be made for many years and can be ignored or reversed by future acts of Congress;
  4. The spending caps are easily circumvented by declaring appropriations to be an emergency, a response to a “major disaster,” or necessary for the “Global War on Terror”; and
  5. The balanced budget amendment provisions are illusory because the amendment is completely undefined.

THE ACT FLIRTS WITH A CREDIT DOWNGRADE

Let’s not forget the gorilla in the room. America faces an unprecedented fiscal crisis because of an unprecedented spending binge by this administration and the last. Credit rating agencies have openly warned that the nation’s Triple-A credit rating cannot be sustained without a credible plan to reduce the projected 10-year budget deficit by roughly $4 trillion.

This bill averts the threat of downgrade for failure to pay our current bills, but it also gives the most spendthrift administration in American history a credit line to continue spending at unsustainable levels through the next election. And it falls far short of the measures demanded by the rating agencies as necessary to maintain the Triple-A credit of the United States government.

If the nation’s Triple-A credit rating is downgraded as a result of this failure, it will mean higher interest rates to maintain government debt. Given the enormity of that debt, even a small increase in interest rates can add crushing additional costs to government. Furthermore, interest rate increases would ripple through the economy, causing higher mortgage interest rates, higher credit card rates and a severe additional drag on the economy.

This would occur on top of the inherent economic damage this bill does. The borrowing authorized in this measure is not theoretical: it amounts to more than $7,000 for every man, woman, and child in the nation or roughly $28,000 for a family of four. This debt must be repaid through that family’s future taxes just as surely as if it appeared on their credit card statement. In a real sense, this act means that every family in America has acquired the obligation to make the same payments as if they had just bought a new car.

Predicting the future decisions of the credit rating agencies is a fool’s errand. Much of their economic analysis is marred by perception, psychology, political pressure, and self-interest. But there is no blinking at the fact that on many occasions in the last month their senior analysts have called for immediate adoption of a credible work-out plan for $4 trillion of genuine deficit reduction in order to maintain a Triple-A rating. We ignore these repeated and explicit warnings at our peril.

SAVINGS ARE GREATLY EXAGGERATED

The Budget Control Act purports to cut federal discretionary spending by $900 billion over the next ten years and set in motion another $1.2 trillion to $1.5 trillion in ten-year spending reductions by year’s end. A recurring theme by proponents is that it guarantees a dollar of cuts for every dollar of new debt.

However, while the debt limit increase occurs this year, the savings occur over the next decade and are heavily back-loaded toward the end of that period. The work of the great economist, J. Wellington Wimpy, can be observed here: “I will gladly give you a dollar of spending cuts ten years from now for a dollar of debt today.”

In reality, this bill will decrease total federal spending by just $4 billion between….

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Comments

  1. I would add one more reason to be opposed to this bad deal: as underscored by Trump yesterday, it probably will insure Obama's re-election by postponing until after the Presidential elections a new fight over the debt ceiling. This issue should have been re-visited by next year to help sink his re-election.

    • Everything legal or whatever should be done to keep O out ths next election. If he gets another 4 years, he'll never leave.

  2. Lorene B says:

    Just more of the same. There should have not been any increase in the debt limit or taxes. Spending cuts of whatever amount should have been set up to begin immediately.

    So, O will be able to keep on keeping on until this country is dead, which, of course, is his mission and why he was elected in the first place. .

  3. SEAN MURRY says:

    nothing new here all they want to do is spend,spend,just like a drug addict.

  4. A strong credit means a strong country. Destroy ot credit and destroy the country. Way to go obumnuts your doing a fine job, Just what you were sent here to do. Allah and his pediphile prophet coments you and your hard work in Destroying the Great Satan from with-in.

  5. DIANA JOHNSON says:

    americans are missing the big pictrue. the dems have been working with pes (party of european socialist) for years. they want one world government. with the help of soros and the demorats, their taking our country down. please read commieblaster.com

  6. Flittermouse says:

    First I would humbly apologize for voting this black Nazi into office. Secondly, I’m not versed in political society but it congruent that when strictly political agendas are initiated, it is we that suffer in what is considered without the vote of the people better for “their” government. There are ways to turn upward our plummeting financial crisis but for the obstacles presented (that being lobiest and faux decision makers) and to demonstrate I will use the estimated 7bil. squandered by the most dishonest and surprisingly legalized banking system.
    7 Bil. dollars decided by every legal working Americ(to be more specific; all legal residence and those who
    actually possess a green card) which is about
    311,000,000 people (that includes children) taking consideration that there is roughly 1adult to every 2 children that would leave 155,000,000 able body workers rich or poor… Now dividing that
    7,000,000,000 dollars by 155,000,000 people equals approximately 45 thousand to warm the economy and
    possibly rectify any blemished credit problems, pay off mortgages, pay for part if not full college tuition, start a business, buy a new car… the point is rather than let the American people recover our weakened financial state which could have literally saved our economy they chose to give it to the same institutions that helped in creating the mess in the first place! Our government and its subsidiaries DO NOT HAVE OUR BEST INTERESTS… The system established by its people have been ostracized and is running completely independent by political and idealistic faculties whose only goal has been to implement and facilitate premeditated financial obstacles to keep us from taking up our Constitutionally prote t

    • Flittermouse says:

      —continued— …protected right to abolish a disfunctional government. No one is going to stand up to question the Establishment if we’re in constant worry our fragile lives being bombarded on every flank at the threat of financial loss even if we know it’s our own governing system that has set it motion… They have us exactly where they want us.

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