Thursday, February 24, 2011

The Debt and the Republicans

I saw an announcement from the Obama Administration that the Federal Deficit for 2011 would be $1.7T. This morning I see big headlines about a momentous fight in the House over cutting $60B from the next budget. The article called it a massacre and suggested that it was the biggest cut in history! This is absolutely part of the big lie, from all concerned. The Republicans, and everyone else, know that $60B in one years budget is a rounding error. It is meaningless. The American public is being sold another big lie.

Also, historically in these things, these really aren’t cuts, but a reduction in the new spending levels. In other words, making up an example, if the spending on these areas last year was, say, $600B, and the new level is $700B, the actual level, after the great cuts by the Republicans, would be $640B, or still an increase of 6.67%. In typical fashion, the news article does not make it clear what has been “cut”.

What are we to make of BO’s announcement that the deficit will be $1.7? HA! As I noted in my recent post on the debt, last years deficit was announced as $1.7, but in fact the increased debt on the Treasury’s balance sheet was $3.3T. So, two things: First, it is unlikely that the deficit will only be $1/7T. The government will overspend and under collect. Employment will not improve as predicted and Social Security and Medicare will require more cash from the budget. Interest rates will also probably be higher than predicted. The deficit will be much wider than his public statement. Second, the “off the budget” obligations will further balloon the actual debt, which, after all, in reality, is what will soak up any real savings the public accumulates. In spite of all the posturing and back patting, the Republicans will have done nothing to keep us out of a depression. Who will tell them?

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