Tuesday, July 26, 2011

What's the Debt Dealio?

No doubt, some of you will be surprised to hear that Obama spoke to the nation last night. . . at least the part of the nation that still listens to him. No doubt, the MSM is full of articles (all written a couple days ago) that extol the brilliance of Obama’s speech and proclaim that the speech made the public cry tears of joy. . . it was joy, right? Also no doubt, many of you are totally confused about what is going with the debt ceiling negotiations. Here’s where we stand.

1. Why Obama Spoke: Obama went on television because he is losing the public relations war, despite media claims and fake polls to the contrary. Rasmussen reports that the public trusts Republicans over Democrats 45% to 35% on economic issues. Indeed, Republicans win 9 of 10 top issues -- education being the one Democratic “stronghold” (42%-38%). So Obama had no choice but to try to win the public over.

2. Obama’s Speech: Obama’s main line of attack was (1) failure to raise the debt ceiling until after the 2012 election will destroy our economy, (2) the Republicans are trying to cause a default because they are evil, and (3) why can’t we all just get along on my terms? His most effective line was: “If that happens, and we default, we would not have enough money to pay all of our bills -- bills that include monthly Social Security checks, veterans’ benefits and the government contracts we’ve signed with thousands of businesses.”

3. Boehner’s Response: Boehner’s main line of attack was (1) I gave it my all, but Obama wanted a blank check and has never negotiated fairly, and (2) he wants tax hikes that will destroy jobs. His best line was: “The president would not take yes for an answer. Even when we thought we might be close on an agreement, the president’s demands changed.”

4. The Reid/Obama “Plan”: Let’s start with the basics. First, Obama has finally given up on getting tax hikes.

Secondly, this proposal is a crock:

● They are calling it a $2.7 trillion debt “reduction,” but that’s a total lie. First, $1 trillion of that is from “winding down the wars in Iraq and Afghanistan.” This is essentially an accounting trick, like claiming you will buy a million dollar house next week and then saying you cut your budget by a million dollars by promising not to buy it after all. Even Joe Lieberman has said “I don’t think it’s a real cut. It’s like a bookkeeping cut.”

● The proposal then includes $400 billion in “interest savings,” which appear to be more accounting gimmicks. These are like the magic “everyone will be healthier” savings in ObamaCare.

● Next, it includes $100 billion which have already been negotiated. Those are the only legitimate cuts.

● Finally, the last $1.2 trillion come from a promise that a committee of 12 politicians will agree to find more cuts in the future. That and $18 gets you a Double Sugarmoccacrappe at Starbucks.
So what we have is $100 billion in cuts over ten years (i.e. $10 billion a year.... 0.0003% of the budget), some false accounting and a promise to find more cuts. In exchange for this, Obama gets an immediate $2.4 trillion hike in the debt ceiling.

5. The Latest House Plan: Boehner’s latest plan calls for a two-stage approach. Stage one involves $1.2 trillion in cuts over 10 years combined with an immediate debt ceiling hike of $900 billion. This would be followed by larger cuts to be agreed upon later. The Democrats object to this plan because it would likely result in the need for an additional debt ceiling hike before the next election.

6. Boehner’s Problem: There are 178 House Republicans who seem to be taking the position that they won’t vote for anything, and apparently oppose the new House plan. This is actually fairly stupid. The point where everyone is desperate to get a deal is the time to lay out your demands and get some good cuts. By simply refusing to vote for any plan, these Republicans make themselves irrelevant and will eventually force Boehner to seek Democratic support.

7. Reid’s Problem: Believe it or not, Reid has lost the left because of potential cuts to entitlements and a failure to tax the rich. Thus, he will need a lot of Republican support. . . support he doesn’t have. His ace in the hole is the 178 House Republicans who will force Boehner and McConnell to deal to find Democratic support. That will give him a chance to buy back his left flank.

8. Something You Should Know: Believe it or not, raising the debt ceiling has nothing to do with new spending. We need to raise the debt ceiling to cover amounts we already spent. Getting the public to see this as “new spending” has been a Republican PR triumph.

9. Who Loves You Baby?: A couple weeks ago, Boehner said that negotiating with Obama “was like trying to nail Jell-O to the wall.” According to certain leftist reporters, Democrats privately say “much worse” about Obama off the record (and no, the reporters haven't shared what has been said).

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