The Debt Compromise – Some Simple Questions

While Washington and Wall Street cheer the passage of The Budget Control Act of 2011, I can’t help but note that my stomach is in knots and the chill of fear is running up and down my spine. Liberal bloggers and news outlets touted the compromise as a win for Tea Party Groups at the same time that Vice President Biden reportedly called Tea Party members “terrorists.” Biden doesn’t bother me nearly as much as the liberal media patting us on the back.

Speaker Boehner claims this deal is a step in the right direction and I got an email from Representative Gregg Harper letting me know that he was proud of the work Congress did and that he didn’t feel like he compromised violated his conservative principles.

In fact, here’s the direct quote from his email:

The “Budget Control Act of 2011” would cut and cap spending by $917 billion over 10 years, exceeding the $900 billion debt limit increase. This legislation also creates mechanisms for additional budget savings of $1.5 trillion over the same time period and requires both houses of Congress to vote on a Balanced Budget Amendment this year.

When debt increase discussions began, the White House initially demanded a clean debt limit hike with no spending reductions or budget reforms. The administration then shifted to a “balanced approach,” demanding equal parts spending cuts and tax hikes. Ultimately the agreement will cut government spending more than it increases the debt limit, implement spending caps to restrain future spending and advance the cause of a Balanced Budget Amendment, all without increasing taxes.

This Republican framework adopted by Democratic legislators does not violate my conservative principles and aligns with my commitment that Congress must act immediately to drive down spending and shrink the size of the federal government.

[Emphasis added by me.]

So, why don’t I feel better?

Where’s that warm fuzzy feeling that usually helps me believe that our best days are still ahead of us?

Instead, all I seem to be left with are questions.

• Why does the Vice President think that the people who try to stand up and argue against the conventional wisdom of tax, borrow and spend are terrorists? Does he really believe that common folk who stand up to protect liberty and freedom are the moral equivalent of suicide  bombers? I thought we were past all that.

• Why does Speaker Boehner believe that “a step in the right direction” is enough? This is not a game and yet every person on the big stage seems to think it is. Our economic ship is sinking and we need more than just a step toward getting a bucket, we need to start bailing as fast as we can. Boehner and the House of Representatives had the best leverage they will hold in the next 18 months and they accepted far less than they had to. I do not believe the predicted default was real nor do I believe the Government needed to close in order to get a better deal. The default deadline was arbitrary and yet when push came to shove, instead of forcing the President or the Democrats put some real offers on the table, the Republicans freaked out and started competing with themselves to see who could come up with the most Liberal-Lite plan they could.

• Does it surprise you that by this morning reports were coming out that the deal wasn’t as good as we were told it was? Remember when Pelosi said that we’d have to pass the Healthcare Reform Act to find out what was in it? What happened to the 3 day posting online pledge? For that matter, what happened to the Cut, Cap and Balance pledge? Is it any wonder why no one trusts politicians? Consider Rand Paul’s open letter that predicts this deal will still add an additional $7 Trillion to the debt because the cuts are to the baseline expenditures which are projected to grow by $10 Trillion over the next 10 years. Basically he argues that once again Congress and the President have come together to ‘slow the growth’ of spending and not actually cut spending itself. Exactly how can slowing the growth of spending be considered a cut?

• Why is it that no one seems to mention the fact that President Obama held out for one thing in this deal and ultimately got exactly what he wanted? President Obama wanted a long term deal. Well, not really that long, but longer than a short term deal. A short term deal would mean that the debt ceiling issue would be back on the table right smack in the middle of….wait for it…..wait for it…his Re-Election Campaign!!!! Why do you think that would be and why do you think Republicans would go along with that? Could it be that they think we are idiots with faulty short-term memories and that we’ll just forget about the National Debt by November of 2012? Did they think that if they just averted default we would all fall to our knees and thank the Washington Elite for saving us from such a terrible fate? Apparently, Obama believed that enough to risk everything to get what he wanted. What have any of them done to make us think that they are more interested in saving the Country than in saving their jobs?

• Why is Harry Reid still in the Senate at all? How can a Senator end up filibustering his own bill? I guess we should start calling him, Harry “DOA” Reid since that is the only type of bill the House can send to the Senate.

• Why did Rep. Harper use the word “would” instead of “will” in his description of the cut and cap spending benefits of the “Budget Control Act of 2011″? It seems to me that his choice of words is important and “would” is a lot more passive than the word “will”. We have been told that if they hadn’t passed the Stimulus Package things “would” be a lot worse. Is this the same kind of use of the word? Does the word “would” give everyone wiggle room so that if the situation on the ground changes in the next three years they can simply decide not to go through with the cuts that “would” have gone into effect. Additionally, what are “mechanisms” and how will they create savings? Are “mechanisms” budget tricks like we’ve seen before or are they real opportunities to try and cut more? Mechanisms is one of those words like infrastructure. These words are often used to describe something that sounds concrete, but may not actually be so. I really want to learn more about these mechanisms and how they work. The only mechanism that I’ve seen so far is the one that allows an additional automatic debt limit increase initiated by the President which can only be stopped by a 2/3 vote of Congress. How is abdicating any role of Congress to the President a good thing?

• Why are spending cuts spread over 10 years and the debt limit increases are immediate? According to Rep. Harper’s email, the difference between the “cuts” and the debt increase is an paltry $17 Billion. And, that does not take into account present and future values of money. If we assume a 2.77% interest rate, then the present value of the cuts over 10 years works out to about $697,759,519,713.19 ($698 Billion) which by my calculation is a lot less than the present value of the $900 Billion debt ceiling increase. Ultimately, it means that when you consider the time value of money, Congress traded $900 Billion of debt in today’s dollars for just $698 Billion of cuts in today’s dollars. And these number do not  include the automatic second increase in the debt ceiling. How can that be good? (I’m sure that someone else can do a much better job than me of estimating the actual present value of the cuts, but since we don’t know what the cuts will be nor do we actually know when they will take effect, this is sufficient for this discussion. And just for the record the 2.77% interest rate used is the current 10 year T-Bill Rate quoted by the U.S. Treasury today.)

• Why does this deal feel more like just another Continuing Resolution instead of real cuts? More to the point, it reminds me of an alcoholic who when confronted promised to “cut back” on his drinking. Both he and his family know he’s not going to stop, but the promise makes them all feel better and they can go back to their lives believing they have accomplished something important. The only accomplishment I can see coming from this debate is that we had the debate at all. My gut told me from the beginning that the results were going to be terrible; however, in fairness to some of the new members of Congress, we wouldn’t be having even the debate if they had not gone to Washington and stood up for the folks back home. When was the last time you even remember there being ANY debate about raising the debt ceiling? Most of the time it has been buried in procedural votes that no one even paid attention to. Now that at least the dirty secret of our debt crisis is on the kitchen table it will become a campaign issue that will lead to even more turnover in Washington. The question is: Can the economy or the Country wait that long?

If you listen to Dave Ramsey, you know that to get out of financial ruin, the first step is to cut up the credit cards and the second step is to start eating beans and rice and rice and beans until you can get back on your feet. Stepping back from the edge of financial ruin requires discipline and commitment both of which seem to be sorely missing in this debate. You cannot borrow your way into wealth and you definitely cannot borrow your way out of debt.

In the end, I’m left with a knot in my stomach, fear in my mind and one simple, burning question to which if I could get an honest answer, I’d probably be so shocked that I’d forget about all the other questions:

How can Washington with a straight face try to convince us that a bill that is supposed to hold the line on spending is a step in the right direction when it will increase the debt instead?

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