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The Entire Premise Behind Debt Negotiations is a Farce

By: Daniel Horowitz (Diary)  |  July 15th, 2011 at 12:06 PM  | 

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“I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government; I mean an additional article taking from the Federal Government the power of borrowing.”

Thomas Jefferson, Letter to John Taylor of Caroline, November 26, 1798

Obama and the Democrats have no intention to cut spending in any long-term, meaningful, and consequential way.  To do so, they would need to abrogate the very essence of their being and the dependency state along with it.  As such, they will never agree to cuts that will reduce the deficit.  Period.  As Congressman Louie Gohmert said, “quit believing the president.”  So why does the GOP continue to parley with Obama in secret?

Some Republicans are impugning supporters of the Cut, Cap, and Balance plan for being suicidally intransigent.  They charge that our insistence on a deal that Democrats will not support will lead to a stalemate and an eventual default, which will invariably hurt Republicans, of course.  The problem with this rationale is that it overlooks the fact that Democrats will never support any meaningful shrinkage of their $3.7 trillion federal government behemoth.  It’s not just a balanced budget amendment they oppose; they will vote down any authentic spending deal that cuts trillions – in real cuts.

The entire brouhaha over Obama’s willingness to cut $4 trillion over 10 years, so long as the GOP acquiesces to tax increases, is a fraud.  Even if Republicans agree to massive tax increases tomorrow, Obama will never accede to a deal that substantially cuts, let alone eliminates, one major dependency program or government department (or even agency).


One need not be a trenchant political observer to understand that barring phony baseline projections and accounting gimmicks, you cannot cut trillions from government spending, unless you eliminate or seriously reform entitlement programs and major executive branch departments.  Here is a lesson in budgets 101 for those who believe Obama is serious about cutting $4 trillion.

The following figures are estimated outlays for FY 2011 in billions.  These are rough numbers compiled based on data from CBO.  It’s hard to obtain exact numbers because Democrats were too incompetent to pass a budget when they had full control over government.

Discretionary Outlays:-$1.365 trillion- This includes both emergency and non-emergency appropriations for all of the government departments and agencies, excluding mandatory entitlement programs.

Agriculture -$23.515

Commerce, Justice, Science -$65.223

Defense -$660.319

Energy and Water -$44.632

Financial Services -$24.921

Homeland Security -$45.314

Interior and Related Agencies -$33.075

Labor, HHS, Education -$202.504

Legislative Branch -$4.562

Military Construction-$80.501

State, Foreign Operations -$49.076

Transportation, HUD -$131.760

Total, Discretionary -$1.365 Trillion

Mandatory Outlays -$2.108 trillion (CRS report/June 15)

Here are some of the major components of mandatory outlays:

Social Security- $727

Net Medicare Spending-$492

Medicaid-$274

Unemployment- $129

Food Stamps- $77

SSI- $53

Veteran’s income and retirement- $78

Net Interest on Debt- At least $205 billion

As you can see, there is no way that Democrats can come up with $400 billion in annual spending reductions that will represent real cuts, unless they go after defense spending and use the baseline from Obama’s profligate FY 2012 budget – a budget that was never enacted.  They will not support free market reforms to Social Security and Medicare, cuts in Medicaid, welfare, or elimination of government agencies.  They certainly won’t support repeal of the most pernicious budget buster and mother of all entitlements; Obamacare – the 800-pound gorilla that is not even accounted for in the aforementioned budgetary figures.

Additionally, Obama announced his support for another extension of the payroll tax cut; another year of unemployment benefits – on top of the 99 existing weeks of payments; and yes, another stimulus.  He made this announcement during today’s press conference – the same forum in which he proposed “massive cuts.”  When Jake Tapper asked him to name one specific cut he would support, Obama declined to answer.   So how do we get to $4 trillion in cuts over 10 years?  Or should I not ask?

Everyone knows that had the GOP not assumed control over the House, Democrats would have blithely raised the debt ceiling without any spending cuts.  While they are now forced to play the game of cutting spending, why would any Republican believe that they will agree to any perennial downsizing of government?  Haven’t they learned their lesson from the grand bargain over the 2011 continuing budget resolution?

Last April, Republicans agreed to a Continuing Resolution for FY 2011 that supposedly cut $60 billion from this year’s budget.  Much to our consternation, the CBO reported that the deal only cut $352 million from the deficit.  Later on, Obama was caught on an open mic bragging how he ate their lunch.

The bottom line is that the debt ceiling cannot be raised unless it is clear that this will be the last time we do it.  The only way to ensure that we don’t continue to make a mockery out of the debt limit is by passing a balanced budget amendment.  Otherwise, in January 2013, we will be at the same juncture – with a second term of President Obama.

As the saying goes, fool me once, shame on you; fool me twice, shame on me, or in the case of the debt ceiling; 74 times.

Republicans were elected to accomplish two things; defund Obamacare and reduce the size and scope of government.  They kicked the can down the rode in April during the 2011 budget fight.  This is the time to call Obama’s bluff.

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  • ghostship

    We all know that if give Uncle Sam another spending fix we’ll just have to do this this all over again.

    If we don’t stop this reckless spending now then when will we?

    If we don’t stop borrowing money and adding to the debt then when will we?

    We need to be ideological warriors instead of wimps. It is well past time to say NO MORE DEBT. CUT SPENDING NOW.

    No more kicking the can down the road. No more reductions in the rate of spending instead of actual cuts.

    Enough is enough. The Republican Party needs to man up and stop wimping out.

    • unclefred

      While I agree with you in principle, I can think of a couple of reasons.

      1) The pressure of the debt ceiling may be enough to force a balanced budget amendment through the legislature. I have a hard time believing we’ll get it through any other way.

      2) Based on all the numbers I’ve seen including the various slush funds that are left in the administration, we can fund substantial chunks of the government, beyond the bare necessities, for perhaps six months. I am not sure that six months is long enough to intelligently cut the budget back to balance. I wold accept dollar for dollar cuts in immediate spending, not down the road, up to say $500 billion. Since the cuts are immediate, that would in effect be about $1 trillion in run rate. That would allow time to cut ongoing spending back to revenues. — I’m not particularly enamored of this idea, but even with time most legislation is pretty poorly written, legislating a balanced budget will be difficult, it should be done in the open, with time for constituent feedback. That does take time.

      • ghostship

        Washington will never agree to actual cuts as long as it has an out. The only way to force actual cuts is to have a debt ceiling limit coming due and the House (in this case) which absolutely refuses to consider raising it boxing them in on both sides. Only then would the WH and Senate be squeezed until they cry Uncle and actually cut spending.

        Of course the House has instead refused to take raising the debt limit off the table thereby giving the Washington an out. That’s why when they eventually cut a deal and raise it there will be no actual spending cut just the usual old garbage of spending increases rate of reduction. They crow about how much money this saves over a period of ten years because that’s the only way they can get a big enough number for them to pretend that they did something significant.

    • d_lamar

      As many on this site have pointed out for a long time, the democrats, by their very nature, will not ever agree to any reduction in the size of government.

      Therefore, they have to be defeated, not compromised with.

      Hopefully, there will be enough sensible conservatives in the house to vote down any increase in the spending limit. But I’m not holding my breath. It seems that Boehner and McConnell have no desire to reduce the size of government.

  • anjinconsulting

    for whatever thats worth. I let him know that I would volunteer to work for ANY challenger for his seat in the next Republican primary if he voted for ANY form of debt ceiling increase.

    • Flagstaff

      government by ultimatum is what gave us TARP I and TARP II and Government Motors and Obamacare.

      I don’t see how your ultimatum (or the thousands of others just like it out there) helps solve the problem. I think there are ways to avoid raising the the debt ceiling, but they needed to start working on them years ago, and they couldn’t be put in place with Obama as President and a Democrat Senate.

      As usual, we Republicans have negotiated ourselves away from power to weakness by making the wrong ultimatums to the Democrats. It still might not be too late to recover, but not with all hands tied behind backs.

  • msctex

    A Democrat/Liberal/Progressive without not just the power to spend, but the limitless power to potentially spend, has no reason to exist. This is nothing less than an existential crisis for an enormous number of people, and they will not go quietly.

    We are at a watershed moment in our nation’s history, and there is every reason to believe the same is true on a worldwide scale. Collectivism’s failure as an applied system of governance was responsible for hundreds of millions of deaths in the 20th century, and we watch today as it drowns in a pool created by its own excesses.

    Our response MUST be to let it die, without an ounce of mercy nor the slightest hint of aid. Because anyone within reach will be dragged beneath the surface. And, we are confronted by its current ostensible leader as he tells us “not to call his bluff.” The fact this is at best contradictory and at worst gibberish only underscores that now is the time to put an end to this failed period of our (truly) collective history.

    No compromises. Not a hint of a step in their direction. Let them go under.

    (And that Jefferson quote was sublime.)

  • http://theminorityreportblog.com Repair_Man_Jack

    This screwed spending spree threatens to blow up.

    1) Under Reagan, Alan Greenspan and several others had to redesign how SS was being financed and paid for.

    2) Under Clinton we had the government shutdown.

    3) Under Bush, we had the economic crash of 2008 and had to do TARP, QEI, QEII, and Stimulus.

    4) Now we have the debt ceiling.

    When we have major failure events once every 7.5 years, it’s pretty obvious the whole darn thing is being done wrong. Make the system crash and start over again.

    • Christian

      How did the federal government get to balanced budgets and surpluses then?

      • http://theminorityreportblog.com Repair_Man_Jack

        Count how many years its happened since 1975.

      • http://www.hakubi.us/ Neil Stevens

        Oh wait, you’re including that Social Security accounting trick, aren’t you?

      • carolina

        Clinton’s imaginary annual ‘surpluses’ did not reduce the debt for the year during any of those years with a ‘surplus’ [which meant they didn't spend ALL of our SS payments that particular FY]
        DC operates on a cash basis. Their budgets are a joke, even when they have them. Have you ever reviewed the year end result for each agency or mandatory spending program. They know how much they have spent AFTER they have spent it. Why do you think they ‘pave all of the parking lots each Sept.? Ever heard “use it or lose it”?
        The fed govt ‘budget’ situation is much worse than you imagine.

      • carolina

        Clinton’s imaginary annual ‘surpluses’ did not reduce the debt for the year during any of those years with a ‘surplus’ [which meant they didn't spend ALL of our SS payments that particular FY]
        DC operates on a cash basis. Their budgets are a joke, even when they have them. Have you ever reviewed the year end result for each agency or mandatory spending program. They know how much they have spent AFTER they have spent it. Why do you think they ‘pave all of the parking lots each Sept.? Ever heard “use it or lose it”?
        The fed govt ‘budget’ situation is much worse than you imagine.

        • Christian

          It addresses both Social Security and cash versus accrual accounting:

          http://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/

          • jonnymuffin

            As someone who has worked with #’s – forecasting, budgeting, ect. – I know you can make things appear as you wish. I have heard the accounting tricks he used, but I’ve forgotten and haven’t bothered to reresearch it (too many other things!)

            I heard Jim Rogers (an investor and sometimes commentator that many highly respect), when confronted with this by a reporter just laughed at the guy and commented that “if you or I did accounting like Bill Clinton, we’d be in jail”.

            I think the point of it all is that this current system has been out of control for a while, it makes little difference who is in power, and it is getting close to the breaking point. Just look at the Debt. It to 200yrs to accrue our first Trillion dollars of debt. It took 20 to accrue the next $3T, 8 years to double that (bush), and now obama is on pace to more than double that. If you graph it out, the past 40 years (since we went to a completely fiat currency) shows a pattern of debt growing exponentially… That’s unsustainable, it’s (our monetary system) is going to break soon.

  • ghostship

    Every Republican who wants to raise the debt ceiling is showing their true colors.

    It’s easy to stand for smaller government and fiscal responsibility as long as one never has to prove it by actually cutting spending and shrinking government. THIS is Obama’s real leverage against the GOP. He has the raise the ceiling or I’ll prove what fake Conservatives you really are card. That’s why so many Republicans really want to cut a deal.

  • moosewing

    The whole notion of a debt ceiling is a farce. It will be raised and raised agian, which, in essence meanse that there isn’t a debt ceiling. The Republicans are fighting the wrong fight. Instead, they should propose a debt ceiling that is high enough to fund everything that Obama and the Dems have passed – projected spending for the next 10 years without changes. Then, tell the Senate Dems, that the govenrment shuts down September 30 unless they propose and pass a serioius budget. Go to the American people and lay this out. Fight the fight on spending there. Take away this issue by making it a farce and force the hand of the Senate Dems to actually do their job. Then, you will have a true compare and contrast spending to present to the American people for 2012.

  • snowshooze

    There are about a zillion agencies, a lot of them just useless, redundant bureaucracies… and nobody has offered up a single cut to them They are apparently sacred. The Republicans haven’t made a single mention of any agency or program cuts.
    Well… Medicare, but that doesn’t count because if we kill that, it will force all the participants into Obama’s own favorite pet program, and make it bulletproof. What ever happened with that 500 BN waste-fraud-abuse cut? Did that all work out ok?
    WHERE oh where is there a single program / agency cut???
    Why is there absolutely NO mention of this?
    Are we reeeely running on the ragged edge with a skeleton crew in the Federal Government???
    Sure..ya.

    • http://redmeatconservative.blogspot.com/ Daniel Horowitz

      The annoying thing is that even the GOP has thwarted attempts to eliminate agencies and programs within their discretionary spending authority through the appropriations process. Just today, Congresswoman Blackburn introduced $1.5 billion additional cuts to the job killing/green Energy Department, yet dozens of Republicans opposed it. If they can’t trim a few billion in discretionary spending, how do they expect to advocate for a balanced budget amendment?

  • ss396

    This fifth statutory report from CBO on the TARP’s transactions follows the report that OMB submitted to the Congress on February 14, 2011.

    (snip)

    As a result, only $432 billion will be disbursed through the TARP, CBO estimates, well below the $700 billion initially authorized. Overall, the outcomes of most transactions made through the TARP were favorable for the federal government.

    http://www.cbo.gov/doc.cfm?index=12118

    That is, there is some $268-billion (or significant fraction thereof) sitting around uncommitted – which is about 60% of the debt limit increase Obama is looking for. It is my understanding that none of the TARP money has been released back to the general funds. Why not?

    “Default” is pure BS.

    • renny

      Why? I think he wants the stimulus leftover, $128 billion, for walking around money in 2012. The stupid act was never structured to release all of the money in 2009, when it was supposedly going to keep unemployment at 8%. Speaking of 8%–that’s the number o just gave as a raise to his multitudinous staff.

      The TARP remainder is $137 billion (much less than the $800 billion orig. expense that lefties keep posting on WaPo and POLITICO as fully paid–I wonder is they lent someone $800 and only got back $137 if they would feel they had been fully repaid). What o wants that for is likely to pump into the still large numbers of banks and financials that are not in good shape, and he wants to have them remain quiet during his endless reelection bonaza.

  • renny

    I have posted these before, so I apologize for repeating myself, but,
    even on August 2 and 3, et. al., the federal government will be receiving revenues from payroll withdrawals, Social Security and Medicare payroll deductions, and quarterly business payments (except for Immelt’s GE that doesn’t pay taxes as it gets credits for its green program but builds its factories in China). Mr. Obama, who just gave his staff an 8% raise when Social Security recipients have not received one in 2 years, could cut all the ?engagement advisers,? simply employed to keep the president in touch with his supporters and donators and let them share the sacrifice because, in the president?s favorite words, it would surely be ?more fair.?

    The government will have nearly $200 billion in revenues: $29 billion goes to DEBT SERVICE (which is why we do not want to borrow anymore) $2.9 billion to military pay, $12.8 to unemployment payments, $32 billion to military contracts, and so Social Security?s $49 billion along with Medicare’s and Medicaid’s $50 billion can be paid (Wall Street Journal).

    The president has declared off limits $128 billion in unspent stimulus money (it would pay for 2 months of Medicare/Medicaid or Sec. Sec. checks), $137 repaid TARP monies, $53 for ?green? technology (there is one month of Soc. Sec. checks) and high speed rail (no state wants) and student loans (subsumed into the Patient Protection Act), or any monies spent for PPA implementation, whatever that amount is, as we have no budget from the Senate for 2 years to be able to tell.

    If the above were not “off limits,” in Aug. at least the gov’t would have over $600 BILLION, so ag. support payments and fed. road work could continue.

    If Reps. give up this stand here and now, in 2-3-4-how many? months down the line, the SAME debt ceiling issue and MORE spending will be back in the news again. It all has to stop somewhere. The Reps. should keep saying NO until someone on the left says yes.

  • swi2522

    obama has changed his position and will not cut any spending from the budget

    i think this is all part of the plan he has to blame the repubs for causing the collapse of the dollar and the future default of our debt

    i still think martial law will be imposed prior to the 2012 elections and there wont be any voting
    this collapse may happen as early as next month when the fed tries to refinance 600 billion in debt after obama signs an executive order to raise the debt ceiling

  • http://www.ssce.net/Web-Articles/Web-articles-indexed-authors.html#authors-l JLenardDetroit

    What Republicans should be doing immediately in the House, rather than these BS talks — just for starters, of course —

    • Bill to CUT DEPARTMENTAL PAYROLLS 10%
      As well as cutting their Budgets by 10% also, and NO they are not the same or mutually exclusive (but people who have never run a business may never understand the distinctions). The following Departments need their Payrolls (and Budgets) immediately ordered reduced by 10% as they’ve had far too much time (and too large of Staff) if they could meddle where they shouldn’t. EPA (Cap-And-TradeTax {Climate $cam} end around), FCC (Net Neutrality end around), HHS (Obamaocare and more), Education Dept. (No Politician’s relatives left behind Dept.), Dept. of Energy (it only takes one employee to stamp APPROVED or DENIED on Permits), Commerce, Labor (NRLB), Treasury, and on and on… Also, immediately reduce any/all amounts of ANY Department that has GRANT MONEY available by 20% minimum.
    • Essential Government Services Act
      This Bill MUST be designed/developed and passed BEFORE the next Budget, Debt Ceiling, etc… crisis comes along to REMOVE any Demoncrat demagoguing of the issues of what Government Services and Processes/Procedures remain in effect should (yeah right, when an eventual) GOVERNMENT SHUTDOWN occur. No longer can the Democrats claim troops wouldn’t be paid, because payment to them would be assured under the Act. No longer would they claim Seniors wouldn’t get Social Security checks, because those being cut/sent would also be assured. Grossly reduced (say, 10% funding levels) to most Departments would be allowed to keep the Building lights on and Security Personnel to Guard them while their Staffs’ would be furloughed! What else would/should be defined in such an Act?!?!
    • True TAX REFORM
      Flat Tax reform or for those who favor the Fair Tax you need a Constitutional Amendment that Repeals Federal Govt. authority to levy an Income related Tax and replaces it with the Consumption Tax or we will land up with both just like Canada.
    • BALANCED BUDGET AMENDMENT
      Various organizations have discussed such language for decades, the different plans/approaches can/should be discussed and one chosen or many of them merged/modified to produce a reasonable Amendment.

    Again, these things would only be a start. Would not pass the Senate, but puts the emphasis where it belongs.

    excerpt from: New “Contract” = “Contrast for America”
    As always, Regards from NoMoTown (THE MOTORless CITY)
    Liberals, looking to do for America what they’ve done to Detroit – Destroy it!

  • http://aposematic.wordpress.com aposematic

    The Balanced Budget Amendment (BBA) being pushed by the Reps is also a farce. Why you may ask. Simply because a BBA will never get through the States. There are way too many States already dependent on Federal redistribution of tax, borrow, and spend Big Government to ever pass an Amendment preventing through forced Federal austerity the redistribution of the wealth from the sound fiscal policy States to the socialist policy States. This will get even worse over time and it takes time to get an Amendment through the States even in the best of times. Therefore, the Reps are pushing a BBA knowing full well it will never, ever become law. It is just another smoke and mirrors farce to allow for the increase of the debt limit.