Tag Archives: Cut Cap and Balance

News

John Boehner stands up for spending cuts and job creation

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Obama went on television last night to argue for more wasteful spending and higher taxes on job creators. I guess he thinks that 1.65 trillion dollar deficits and a 9.2% unemployment rate is acceptable for working families, as long as he isn’t personally affected by it.

The Wall Street Journal did not like Obama’s speech at all.

Excerpt:

The Obama Presidency has been unprecedented in many ways, and last night we saw another startling illustration: A President using a national TV address from the White House to call out his political opposition as unreasonable and radical and blame them as the sole reason for the “stalemate” over spending and the national debt.

We’ve watched dozens of these speeches over the years, and this was more like a DNC fund-raiser than an Oval Office address. Though President Obama referred to the need to compromise, his idea of compromise was to call on the public to overwhelm Republicans with demands to raise taxes. He demeaned the GOP for protecting, in his poll-tested language, “millionaires and billionaires,” for favoring “corporate jet owners and oil companies” over seniors on Medicare, and “hedge fund managers” over “their secretaries.” While he invoked Ronald Reagan, the Gipper would never have used such rhetoric about his opposition on an issue of national moment.

[…]Apart from shifting blame for any debt default, the speech was also an attempt to inoculate Mr. Obama in case the U.S. loses its AAA credit rating. He cleverly, if dishonestly, elided the credit-rating issue with the debt-ceiling debate. But he knows that Standard & Poor’s has said that it may cut the U.S. rating even if Congress moves on the debt ceiling. Mr. Obama wants to avoid any accountability for the spending blowout of the last three years that has raised the national debt held by the public—the kind we have to pay back—from 40% in 2008 to 72% next year, and rising. This will be the real cause of any downgrade.

Speaker John Boehner made clear in his speech that the GOP doesn’t want a default but wants more genuine cuts in spending. Mr. Obama is betting his rhetoric will cause the public to turn against the GOP, but we wonder if voters will be persuaded by a man whose concept of leadership is the politics of blame.

Thankfully, John Boehner isn’t going to let Obama get away with wrecking the economy any more.

Here’s Boehner’s response:

The transcript is here.

Obama’s Monday night speech was insulting, deceptive, vindictive and divisive. He doesn’t know how to solve a problem by getting people who are opposed to him to buy into a compromise plan. Instead, he just goes in front of cameras and insults the people he has to work with. That is not the right way to get people to work together. Imagine if a manager in a private company called a press conference to excoriate some people on a different team in that company. Is that any way to get people working together to solve a problem? To point fingers at your co-workers and poison the well? It’s juvenile. Where is his plan? How is he solving the problem?

The only people I see solving the problem are intelligent people like Paul Ryan, John Campbell, Tom Price, Tom McClintock, Mike Simpson, Ken Calvert and Tom Cole. People who work weekends developing solutions. People who understand how to write policies. People with degrees in economics, business and finance. People with private sector experience running businesses and creating jobs. Obama isn’t one of those people. Obama just reads a teleprompter. He doesn’t know how to create jobs – he never did it before becoming President. So why did we elect him?

News

Do the Boehner and Reid plans address the concerns of credit agencies?

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Obama Budget Deficit 2011
Obama Budget Deficit 2011

The Heritage Foundation assesses the new Boehner and Reid plans: can they stop us from getting our credit downgraded?

First, the credit agencies:

The second and even more crucial issue is whether Congress will take necessary action beyond the next year to bring our debt under control over the medium and long-term.  This is where the rating agencies really voice their strong concern. Again, Standard & Poor’s:

Congress and the Administration might also settle for a smaller increase in the debt ceiling, or they might agree to a plan that, while avoiding a near-term default, might not, in our view, materially improve our base case expectation for the future path of the net general government debt-to-GDP ratio.”

Moody’s response is similar:

The outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction. To retain a stable outlook, such an agreement should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years.

What the rating agencies are saying is that Congress and the President must pass legislation that immediately begins to rein in deficits and bring our debt down to more acceptable levels, and either keeps it there or continues to drive it down further.

Right now, there are two plans on the table, because the Senate rejected Boehner’s “Cut, Cap and Balance” plan. Do either of these plans address the concerns of the two credit agencies?

The Boehner proposal would cut $1.2 trillion in discretionary spending.  There is no assurance that these cuts will occur, but let’s assume they do.  Let’s even be generous and assume that they are – in the words of S&P– “enacted and maintained throughout the decade.”  This would cut debt held by the public from its projected $24.9 trillion in 2021 to $23.7 trillion, and when measured against the economy from 104% to 99.4%.  Certainly, this is an improvement, but it is hardly declining from today’s levels, nor would these cuts fundamentally restructure entitlements – the real driver of our deficits in the future.

Step two in the Boehner proposal would reduce deficits by an additional $1.8 trillion over ten years.  Even assuming these cuts all happen, and even assuming they were all spending cuts – a broad assumption given the President’s rhetoric surrounding tax hikes on the wealthy – this would bring publicly held debt down to 92% of GDP. Better, but not that much.  Even throwing in interest savings from deficit reduction would bring this down to 88%.  Again, not much improvement and far worse than today’s debt ratio.

The Reid proposal doesn’t move the ball forward enough either.  At best it falls somewhat short of Boehner’s $3 trillion by $800 billion ($1.2 trillion in discretionary and some confusing savings to be had from winding down operations in Iraq and Afghanistan of $1.0 trillion.)

Neither of this week’s dueling debt ceiling proposals would pass the test from Moody’s or Standard and Poor’s for a credible, firm and actionable plan that would turn the tide of our deficits to put our debt on a manageable track. And if that holds true, then a downgrade by the rating agencies could occur smack in the very election year the President is trying to scoot through.

[…]The fact is, the only plan that could likely pass muster with Moody’s and Standard and Poor’s is House passed, Cut, Cap and Balance.  Why?  They tackle spending with firm caps that are enforceable, and before the end of the decade bring spending down to 19.9% of GDP and keep it there.

My guess right now is that Obama is going to sign the Boehner plan into law. He has no choice, Boehner pwnd him in the deal negotiations. Obama is going to have to yield, or all the blame for the default will go on HIS shoulders. As much as I like the new Boehner plan, it doesn’t look like it’s going to stop our debt rating from being downgraded. We needed to pass the Cut, Cap and Balance plan, but the Democrats rejected it. Think of that when interest rates shoot up. A debt downgrade is going to cause WIDE-RANGING repercussions in the lives of ordinary working families.

News

Would the Republican “cut, cap and balance” plan solve the debt crisis?

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Let’s take a look at the Republican “Cut, Cap and Balance” plan, as reported by CBS News.

Excerpt:

The House next week will take a vote to raise the debt ceiling and pass a balanced budget amendment, House Republican leaders said today.

The plan is unlikely to go anywhere, since a balanced budget amendment would likely fail in the Democrat-led Senate, but GOP leaders nevertheless called it a serious plan to raise the debt ceiling. They said President Obama and Democrats have failed to come up with an equally serious plan.

“We asked the president to lead,” House Speaker John Boehner said in a press conference today. “We asked him to put forward a plan — not a speech, a real plan — and he hasn’t. We will.”

The “cut, cap and balance” proposal would make raising the debt ceiling contingent on Congress sending a balanced budget amendment to the states. It would also cap government spending at 18 percent of Gross Domestic Product over the next 10 years.

The plan would raise the debt ceiling by $2.4 trillion, since that is the increase requested by the president. However, the plan would actually make even more in spending cuts — as much as $111 billion in 2012 alone.

[…]Boehner said the House would vote on the “cut, cap and balance” plan and then decide how to proceed from there.”I don’t want to preclude any chance of coming to an agreement, but [Democrats have] been unwilling to put a real plan on the table,” Boehner said. “Without serious spending cuts or real reform to entitlement programs, this problem is not going to be solved.”

That’s what the Republicans would do if they were in control. The balanced budget amendment would cap spending at 18% of GDP, so that we would never have a debt crisis ever again. That’s the right solution, except that the Democrats cannot give up the idea of buying votes with the money they steal from job creators. They just can control their addiction to spending.

Now, let’s take a look at who caused the debt crisis, with this House Budget Committee article by fiscal hawk Paul Ryan. (H/T Washington Post)

Excerpt:

While President Obama has recently professed a newfound — and vague — desire to cut government spending, it’s useful to recall what the President has actually done since taking office in 2009. The President signed into law a massive spending spree that plunged us deeper into debt, and failed to deliver on its promise to create jobs.

  • 24% Increase in Base Spending. Non-defense discretionary spending grew by 24% for the first two years of the Obama Administration, adding $734 billion in spending over the next 10 years.
  • Record Government Spending. The Federal government will spend $3.6 trillion this year, 24% of gross domestic product (GDP) and the highest burden on the economy since World War II. Spending has historically averaged a little over 20% of GDP.
  • President’s Budget Makes Matter Worse. According to CBO, the President’s budget never spends less than 23% of GDP and by the end of the decade rises to 24% of GDP. His budget’s failure to address the drivers of our debt threatens the health and retirement security of America’s seniors, and the economic security of all Americans. The President’s budget seeks to spend $46 trillion in government spending over the next decade, and has subsequently fought against House Republican efforts to restrain his spending appetite down to $43.5 trillion.

During the four years when Nancy Pelosi was the Speaker of the House, and Harry Reid was in control of the Senate, the Democrats packed 5.34 trillion dollars onto the national debt.