When the deal is the "historic" and "dramatic" agreement just passed by the U.S. House of Representatives. Gregg Easterbrook in an outstanding column on Reuters very ably explains why this "historic" debt reduction deal is "as phony as a three dollar bill."Easterbrook explains that there is no actual saving or spending reduction in the entire bill.
The closest thing to a tangible “saving” in the agreement is $1 trillion in caps on discretionary programs, spread over 10 years. The new national-debt ceiling allows borrowing to rise by $2.4 trillion, with a plan to pay back less than half that amount over 10 years.
Get it? A huge surge in spending now is called a “spending cut,” while actual cuts don’t take effect for up to a decade. And that’s setting aside that inflation means the present value of money spent today sharply exceeds the value of smaller cuts many years in the future.
Easterbrook also notes that the debt ceiling is not a ceiling, because it always gets pushed up, this time around by $2.4 trillion!
The deal raises the federal borrowing ceiling by $2.4 trillion. This means Congress will immediately spend another $2.4 trillion. That basic point is being overlooked.
You’ve got a debt ceiling on your credit card. The ceiling is there for emergencies, and all responsible borrowers work to stay below their credit ceilings. Experience with the national debt ceiling, by contrast, shows that every dollar of available debt is always spent. Announced in doublespeak as a “savings” plan, this deal guarantees the national debt will rise another $2.4 trillion. The moment the deal becomes law, members of Congress from both parties will see an added $2.4 trillion in the cookie jar and begin raiding.
The entire piece is worth reading, thinking upon, and sending to your friends. Nota Bene: Not recommended for those with high blood pressure.
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