Much Ado Over Nothing On US Budget Cuts, Debt Ceiling Next

As we previously argued the brouhaha over US budget cuts signified nothing but symbolism.

From the Washington Post, (bold emphasis mine)

A new budget estimate released Wednesday shows that the spending bill negotiated between President Barack Obama and House Speaker John Boehner would produce less than 1 percent of the $38 billion in promised savings by the end of this budget year.

The Congressional Budget Office estimate shows that compared with current spending rates the spending bill due for a House vote Thursday would cut federal outlays from non-war accounts by just $352 million through Sept. 30. About $8 billion in immediate cuts to domestic programs and foreign aid are offset by nearly equal increases in defense spending.

When war funding is factored in the legislation would actually increase total federal outlays by $3.3 billion relative to current levels.

To a fair degree, the lack of immediate budget-cutting punch is because the budget year is more than half over and that cuts in new spending authority typically are slow to register on deficit tallies. And Republicans promise that when fully implemented and repeated year after year, the cuts in the measure would reduce the deficit by $315 billion over the coming decade.

So instead of cuts, we have budget increases. And prospective cuts only apply to projected spending which are decades away.

As Lew Rockwell writes, (bold emphasis mine)

In other words, this is all political play, which is obvious from the numbers and the norms. In the first place, no one is talking about actual cuts, not even the supposedly radical Republicans. These are cuts in projected spending, meaning that everyone is dealing with symbolic changes in a future that is just as symbolic. Even on paper, the only way to consider these cuts is to compare them with the GDP and the national debt -- both of which are slated to rise. Forgetting those two metrics, and looking at the actual numbers, there are no cuts at all and only increases.

Even the dating of the Republican’s balanced budget is ridiculous. So the budget will be fully balanced in 2040? That’s three decades from now. Few of the people in office will still be in office, and many will be dead. To see how viable this is, consider how many political plans of the year 1982 still survive today.

The Republican plan proposes domestic cuts in these gargantuan programs like Social Security and Medicare with nothing specific beyond the old prattle about establishing bi-partisan commissions and sending block grants to the states. There is nothing specific here beyond a numbers-laden pipe dream. No programs are abolished, no benefits are slashed or even trimmed, and although the propagandists claim to attack the culture of spending in Washington, there is not one word about taking on the money-printing machine that made the $14 trillion national debt possible in the first place.

This brings back my earlier observation where...

Stripping away control and spending other people’s money is so addictive that politicians can’t seem to do away with it and would fight heaven and hell to avoid it.

And so it has been.

The next step will be a vote FOR raising the debt ceiling.

Prediction Market Intrade suggests that the odds for raising the debt ceiling by June 2011 seem to be at 75% as of the moment.

The usual, government authorities will raise the spectre of fear of a prospective mayhem (bogeyman) to justify the actions of politicians.

From Marketwatch.com (bold highlights mine)

Treasury Secretary Timothy Geithner on Thursday said Congress will act to raise the debt ceiling because they realize the consequences for not doing so. "We're only two years from a cataclysmic financial crisis, and the huge damage to credibility and huge loss of confidence," he said before a Bertelsmann Foundation conference. "The idea that Washington would court that risk is inconceivable." Publicly and privately, Congressional Republicans have indicated they understand the implications of not raising the debt ceiling, Geithner said. Geithner added that markets have confidence that Congress will cut deficits. "The world basically believes that problems are manageable, and the system will solve it," he said

Could Mr. Geithner be utilizing the power of suggestion or is he conditioning the public?

This reminds me of General Douglas MacArthur who once said,

Our government has kept us in a perpetual state of fear -kept us in a continuous stampede of patriotic fervour -with the cry of grave national emergency. Always, there has been some terrible evil at home, or some monstrous foreign power that was going to gobble us up if we did not blindly rally behind it.

Of course, a further move will be by the US Federal Reserve who will bring forth QE 3.0 by the latter half of 2011.

Politicians (everywhere) and bureaucrats are nearly cut from the same cloth.

So far, everything seem to jibe.