Tag Archives: Debt Limit

House Republicans offer deal: delay Obamacare for a year, no government shutdown

This new House bill is a good compromise – even Tea Party stalwart Ted Cruz has endorsed it.

Excerpt:

During a speech on the Senate floor Monday afternoon, Texas senator Ted Cruz endorsed the latest House bill to fund the government. This continuing resolution would not defund Obamacare, as Cruz has demanded for months, but it would delay Obamacare’s individual mandate by one year and end employer subsidies for members of Congress and their staff.

During his speech, Cruz praised the House of Represenatives for trying to compromise and criticized Senate majority leader Harry Reid for refusing to negotiate. Senator John Cornyn, Cruz’s Republican colleague from Texas, then pointed out that the House will reportedly pass a continuing resolution that will include a delay the individual mandate and the Vitter amendment.

Cruz said that the Senate should pass “whatever” the House passes this evening.

“If the House of Representatives asks tonight I believe this Senate should come back immediately and pass the continuing resolution the House–whatever the House passes,” Cruz said. “I don’t know what it will be, but it will be yet another good faith effort to keep the government running and to address the trainwreck of a law that is Obamacare. And I very much hope that this body begins to listen to the people.”

Cruz’s comments mark an apparent shift in his position on defunding Obamacare. During his 22-hour speech on Obamacare last week, Cruz said he could not support a compromise.

[…]Monday evening, the Club for Growth endorsed the House compromise but Heritage Action opposed it.

Not sure how I feel about this compromise, because this Wall Street Journal article makes it sound like a good deal.

Excerpt:

Air traffic control will continue, in addition to airport and airplane safety inspections.  All Federal Highway Administration activities will also continue.

[…]The IRS will cancel audit appointments.

[…]The Department of Education could have to delay its issuing of competitive and formula grant awards later this year.

[…]Workplace dispute cases would not be resolved until after the shutdown, as the National Labor Relations Board would halt all case handling.

[…]Agency functions that protect national security and ensure human safety are exempt from the shutdown. Military operations, border security, coastal protection (including the Coast Guard), law enforcement, criminal investigations, counter-terrorism efforts and care of prisoners are all expected to continue. The Federal Bureau of Investigation, the Drug Enforcement Agency, the U.S. Secret Service, and the U.S. Marshals Service will all continue to function. The Transportation Security Administration will continue to staff airports.

On Friday, the Pentagon warned that a government shutdown could force the Defense Department to furlough about 400,000 civilian workers, delay military contracts and defer training.

The move would impact about half the department’s 800,000 civilian employees, most of whom were required to take six unpaid days off earlier this year as a result of the automatic spending cuts imposed under so-called sequestration.

Because of the unique role the Pentagon plays in protecting the country, defense officials are planning to exempt large numbers of people and projects. All active duty military personnel will not be furloughed – and large numbers of civilians supporting the war in Afghanistan and other essential military initiatives will stay on the job.

Pentagon leaders created a long list of exemptions, including counseling services for sexual assault victims, some child care facilities, and some base cafeterias.

[…] The U.S. Postal Service will continue to function as usual.

Social Security payments will continue to go out, and the administration is expected to continue taking applications for benefits, as in plans released Friday. In that plan, the agency said it will furlough 18,006 of its 62,343 workers.

Medicare and Medicaid payments will also continue, although the programs could encounter difficulty if the shutdown stretches into weeks.

[…]Food and Drugs: The Food and Drug Administration will continue its review of imports into the U.S., according to the Department of Health and Human Services’ plan released Friday.

Inspection of meat, poultry and egg products will continue, as these functions fall under the category of human safety. The HHS will furlough 40,512 workers, 52% of its staff.

Disease: The Centers for Disease Control and Prevention will cease disease surveillance, which could be particularly problematic as flu season approaches.

Medical care of inpatients and emergency outpatient care will continue.

The National Institutes of Health clinical center will not accept new patients into clinical research, but it will continue to provide medical services for current patients. In the 1995-96 shutdowns, calls placed to NIH’s disease hotline were not answered, according to the CRS report.

Obamacare: The Affordable Care Act will continue to be funded.

Other: Handling of hazardous waste, disaster assistance and power grid maintenance will continue.

On balance, it doesn’t sound like the catastrophe that the left-wing media make it out to be, at least for a couple of weeks.

Meanwhile, Senate Democrats are refusing to negotiate.

Conservative Party MP Pierre Poilievre explains how Canada escaped the recession

Conservative M.P. Pierre Poilevre (Nepean-Carleton), a member of the majority government in Canada, explains how Canada embraced the free entreprise system that America has rejected, and the results they got.

Here is the speech that went viral on Youtube:

And here is his article in the liberal Huffington Post.

Excerpt:

In a few days the “fiscal cliff” deadline will arrive and potentially bring massive automatic spending cuts and tax increases. Even if Congress and the President agree to avoid the cliff, the next crisis awaits. Treasury Secretary, Timothy Geithner, wrote the Senate this week to report that the “statutory debt limit will be reached on December 31, 2012,” which will require extraordinary measures to prevent a mass default. These measures will give the government 60 days before it runs out of money and Uncle Sam’s head smashes into the so-called “debt ceiling.”

It has long been said that when the U.S. sneezes, Canada catches a cold. So why have these debt-related ailments in the U.S. not afflicted the Canadian government?

The answer is that Canada has been practicing what the U.S. always preached: free markets, low taxes and minimal state interference. And it is working.

For example, Canada avoided the interventionist policies that led the U.S. to the sub-prime crisis.

In an attempt to expand home ownership, administrations from Carter to Bush Jr. forced banks to offer mortgages to people who would otherwise not qualify for them. Washington then ordered government-sponsored enterprises such as Freddie Mac and Fannie Mae to insure these “sub-prime” mortgages.

According to a 2010 Report on the U.S. Financial Crisis by the World Bank’s Development Research Group, Freddie and Fannie bought an estimated 47 per cent of these toxic mortgages. Harvard financial historian Niall Ferguson indicates that the amount of mortgage debt backed by these government-sponsored enterprises grew from $200-million in 1980 to $4-trillion in 2007.(1) The government pumped so much air into the housing bubble that it burst in 2008. The resulting financial crisis led to government bailouts of the banking sector.

Big government caused the economic crisis. So we are told the solution is more big government. Funny how the problem becomes the solution.

Because the Canadian government did not impose sub-prime mortgages on the country’s charter banks, we avoided the crisis and did not bailout a single financial institution. To keep it that way, Canada’s Finance Minister has ended all government-backed insurance of low-down payment and long-amortization mortgages. In other words, if you want to take on risky debt, taxpayers will not insure you.

Governments must lead by example when managing their own debt and spending. Low debt is the result of low spending. Federal government spending as a share of the overall economy is 15 per cent in Canada (2) and 24 per cent in the U.S. (3). The numbers are not merely the result of prodigious U.S. military spending, though that is certainly a factor. Non-military federal government spending is 14 per cent of Canada’s economy (4), and 18 per cent of America’s (5).

Take a look at some of these graphs from earlier in the year about the Canadian 2012 budget. (This is straight from their government’s web site – they have new transparency/anti=corruption measures now, so the citizens know everything that government does). When comparing the deficit and debt of Canada to the United States, always multiply the Canadian number by 10 to get a benchmark to compare. For example, Canadian GDP is 1.7 trillion, and the US GDP is 15 trillion.

Canada’s budget deficit is around 30 billion, but ours is 1.2 trillion:

Canada Federal Budget Deficit / Surplus 2012
Canada Federal Budget Deficit / Surplus 2012

If we were doing as well as Canada, our deficit would be about $300 billion. But we have run up about 6 trillion in debt over 4 years! Not only that, but Canada’s national debt is only $600 billion. If we multiple that by 10, we would expect ours about $6 trillion. And it was that – during the Bush Presidency. But then the Democrats took over the House and Senate in 2007 and everything went wrong and we packed trillions and trillions onto the debt, including about $6 trillion during Obama’s first term.

Canada’s Debt to GDP ratio is 34%:

Canada vs US Debt to GDP
Canada vs US Debt to GDP

But things are even worse for the United States, now. The current United States Debt to GDP is 105%, according to official U.S. government figures. We are due for yet another credit downgrade, and should see Greece-like levels of Debt to GDP during Obama’s second term. We are spending too much, and we aren’t going to be able to make up trillion dollar deficits even if we confiscate every penny that rich people earn. (And they won’t be daft enough to keep working as hard if we did that – they would move, and probably to Canada)

What is happening to us here in the United States is self-inflicted. We are – and have been – voting to impoverish ourselves and generations of children born and unborn, by punishing those who work hard and play by the rules, and rewarding those who don’t work and don’t play by the rules. It didn’t have to be this way. We could have elected a President who actually knew something about business and economics. Knowledge matters. We can’t just choose a President who gives us the “tingles” and then expect him to perform the actual duties of being President. Competence is more important than confidence. Substance is more important than style.

Standard and Poor’s: there may be more downgrades

From CNBC.

Excerpt:

Standard & Poor’s may downgrade the long-term credit rating of the U.S. once again in less than three months after sending shockwaves through the bond and stock markets by stripping the nation of its top notch triple-A rating last week, according to an emergency Sunday night conference call for clients of Bank of America Merrill Lynch.

“We do expect further downgrades,” said Ethan Harris, North American economist, on the call. “We doubt the newly appointed bipartisan commission will come up with a credible long-term deficit reduction plan. Hence by November or December we would not be surprised to see S&P downgrade the debt again from AA-plus to AA.”

Harris said that the U.S. should have avoided the downgrade in the first place by meeting S&P’s demands of a $4 trillion deficit cut and a “demonstrating a sensible budget process.” What they got instead was a “deficit cut of $2.1 trillion and a budget process that’s been extremely chaotic,” said Harris.

[…]”If a disorderly Treasury market leads to the Fed embarking on QE3, repercussions for the dollar will be catastrophic,” said David Woo, head of global rates and currencies research, on the call. “Investors will be quick to conclude that U.S. monetary policy has been subjugated by fiscal policy and the Fed’s independence would be placed seriously into question.”

In other news, Estonia has actually received a recent debt rating UPGRADE:

In the midst of a world embroiled in economic turmoil, a few nations have managed to do surprisingly well—among them, Estonia. After near economic collapse during the 2008–2009 financial crisis, the country has managed to successfully bounce backwith substantial GDP growth, a vibrant trade environment, and a notable budget surplus.

During the first quarter of this year, Estonia had the highest rate of growth in the EU and the biggest drop in unemployment. In July, its credit rating was raised by Fitch to A+, a reflection of substantial economic growth.

But how did Estonia get here? Estonia possesses a flexible, open economy and investment climate that encourages competition and economic growth. It remains one of the world’s freest economies, according to The Heritage Foundation’s Index of Economic Freedom. However, prudent fiscal policies have played the largest role in Estonia’s impressive economic performance, particularly in recent years. Still, the path to fiscal conservatism was not easy; it required a lot of rigorous, painful cutback involving 9 percent of GDP in fiscal adjustments and large cuts to nominal wages.

Notice that Estonia’s economic policies are tea party conservative policies, not socialist policies.

Meanwhile, the White House has yet to respond to our first credit downgrade.