Saturday, April 9, 2011

What's In The New Budget... And What's Not

David Dayen of FDL has a good item list in his post, The Ugly, the Ugly and the Ugly: A Look at the 2011 Funding Deal. Go read it, but realize what this budget does NOT deal with:

Note that there’s nothing in here about one looming item: the debt limit. America reaches that sometime in May. That’s next month’s big fight. It’s not logical to hope for a better outcome.

No indeed, it is not. A couple weeks ago, ABC News reported this:


The Treasury Department estimates that the United States will reach its debt limit between April 15 and May 31. Administration officials are ringing alarm bells and warning of dire consequences if the $14.3 trillion ceiling isn't raised. 

[Geithner's warning at that embedded link included the following:
• Treasury defaulting “on legal obligations of the United States, causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009”;
• This would also require the imposition of substantial taxation on every American since interests “rates for state and local government, corporate and consumer borrowing, including home mortgage interest, would all rise sharp”:
• No longer paying U.S. military salaries, Social Security and Medicare benefits, or student loans.
- SB]
But Republican lawmakers say they won't commit to such a move until President Obama takes bold steps in tackling entitlement programs like Medicare, Medicaid and Social Security that are weighing down the country's pocketbook. 


Senate Republicans reportedly are working on a Balanced Budget Amendment, a Constitutional amendment that would require a balanced budget every year, as a condition to raising the debt ceiling. 


That amendment has been on the wingnut wish list forever, but I know of no sane economist who thinks it is even possible, let alone a good idea, to force the budget to balance every single year. Such a law flies in the face of everything we learned in the Great Depression in the 1930s; it is the path Hoover took, and the path FDR initially embarked on in an attempt to appease his political opposition, before reversing himself and ultimately saving us from the Depression.

The only thing the Tea Nutcakes have learned from history is how to ignore mistakes when it is about to repeat them. WASF!

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