The Obama-Ryan Trillion Plus Spending Deal

[BigLouie]

The reason behind the spending bill is simple. The republicans campaign on fear about social issues but when elected they are the same old party of rich people. The people paying for this election foolishness expect to get paid in some fashion and they just did

[WTF]

Originally Posted by BigLouie

The reason behind the spending bill is simple. The republicans campaign on fear about social issues but when elected they are the same old party of rich people. The people paying for this election foolishness expect to get paid in some fashion and they just did

The so called fiscal conservatives are really folks like JD ... wanting to government to make cuts except to his government pet projects. You don't see him offering up cuts to his government retirement!

[CuteOldGuy]

Originally Posted by BigLouie

The reason behind the spending bill is simple. The republicans campaign on fear about social issues but when elected they are the same old party of rich people. The people paying for this election foolishness expect to get paid in some fashion and they just did

Pretty much describes the Democrats, as well.

[WTF]

Originally Posted by CuteOldGuy

Pretty much describes the Democrats, as well.

You got that right!

[Texas Contrarian]

Originally Posted by nwarounder

Guess what the establishment has been doing...Boehner 2.0

"Congressional leaders and the White House have reached agreement on a massive year-end tax and spending package, House Speaker Paul Ryan told GOP lawmakers late Tuesday, urging support for the legislation that delivers GOP wins but also includes many Democratic priorities.

So Ryan has been cutting deals with Obama to spend another trillion we don't have. Does that sound conservative to anybody?

Any guess on how the four conservative repub senators running for president are going to vote on this if it passes the house? I'm guessing Rubio and Lindsey will vote Yes, Cruz and Paul No

Old-fashioned logrolling, pure and simple.

Politico published a concise description of the process:

http://www.politico.com/story/2015/1...ck-tock-216938

When Paul Ryan and Nancy Pelosi feel compelled to "closely coordinate" their public statements, you can rest assured that something very expensive is going down.

David Stockman, who understands the federal budget process and sovereign finance better than most, is even less kind:

http://davidstockmanscontracorner.co...ke-folds-fast/

All the while, no one seems eager to lift a finger to approprately reform the tax code, the entitlement structure, or much of anything else.

We are a nation adrift with no responsible leadership.

[lustylad]

Did anyone really expect the Republicans to shut down the government in an election year? Paul Ryan would not have taken the job of House Speaker to commit hara-kiri.

3 reasons why this deal was doable:

1. Both sides wanted to clear the decks and focus on the 2016 election.

2. Every time we've had a govt shutdown to date, the public has blamed the GOP more than the Dims. The last shutdown back in 2013 (when Ted Cruz read Dr. Seuss) was not only ineffective and counter-productive - it deflected the public's attention away from the disastrous rollout of the Obamacare website taking place at the time.

3. The federal budget deficit has shrunk. We're no longer suffering annual shortfalls of over $1 trillion, as we did in Obama's first four years. The deficit for fiscal 2015 was $439 billion, or 2.5% of GDP. Unfortunately, this has taken pressure off Congress. They feel unconstrained and willing to bust the sequester spending caps with impunity.

I want to cut these fuckers off from their idiot spending binges as much as any tea party enthusiast, but I have yet to figure out how to do it without having it backfire.


"The boom, not the slump, is the time for austerity." JMK

Here is how Congress willfully subverts Keynes - when we're in a slump, we need to spend more to get out of it; when we're in a boom, we have new revenues to spend! Good years or bad, it doesn't matter - we can always find reasons to spend, spend, spend... Wheeeee!

Question - if the economy is in recession roughly 10% of the time, why is the federal budget in deficit 90% of the time?


.

[lustylad]

Originally Posted by CaptainMidnight

David Stockman, who understands the federal budget process and sovereign finance better than most, is even less kind:

http://davidstockmanscontracorner.co...ke-folds-fast/

A long time ago I noticed the numbers used to estimate the impact of fiscal policy changes were getting a lot bigger. Turns out Congress was now tossing around 10-year numbers instead of one-year estimates. This opened the door for all kinds of mischief. If a politician wanted to inflate the value of something they voted for, they would cite the ten-year figure. That way they could claim to have raised your benefits by $50 billion instead of $5 billion, etc. Then I noticed how they were pretending to "pay for" one-time goodies in the CURRENT year with new revenues to be collected over the next TEN years. That is flim-flammery (Obamacare is full of such frauds) and David Stockman is spot-on to call bullshit on it. I would like the CBO to get rid of those 10-year estimates. Everyone knows they are fiction. Congress knows it can't repeal the business cycle - yet they never build any recessions into their 10-year forecasts.

My biggest long-term concern is exactly what Stockman says about the national debt. Right now the interest burden is deceptively low because the Fed has kept rates near zero. Once rates go back up and the Treasury has to borrow at, say, 5% instead of 1.8%, we're doomed. We'll either have to cut a shitload of other federal spending or (more likely) monetize the debt and pay it back in inflation-eroded dollars.


"...the $19 trillion of national debt can be serviced on the cheap—–currently at a weighted average yield of about 1.8%. Accordingly, debt service costs which would be upwards of $1 trillion under normalized interest rates (5%) are currently only about $350 billion. So the politicians feel no financial pressure, and become accustomed to kicking the can."

[Texas Contrarian]

Originally Posted by lustylad

A long time ago I noticed the numbers used to estimate the impact of fiscal policy changes were getting a lot bigger. Turns out Congress was now tossing around 10-year numbers instead of one-year estimates. This opened the door for all kinds of mischief. If a politician wanted to inflate the value of something they voted for, they would cite the ten-year figure. That way they could claim to have raised your benefits by $50 billion instead of $5 billion, etc. Then I noticed how they were pretending to "pay for" one-time goodies in the CURRENT year with new revenues to be collected over the next TEN years. That is flim-flammery (Obamacare is full of such frauds) and David Stockman is spot-on to call bullshit on it.

Indeed! Seems to me this sort of sleight-of-hand would have thrilled Enron C-suite executives c. 1999.

I would like the CBO to get rid of those 10-year estimates. I would, too! Everyone knows they are fiction. Congress knows it can't repeal the business cycle - yet they never build any recessions into their 10-year forecasts. Reminds me of the "$5.6 trillion surplus" Bush administration officials and various congressional big spenders (along with eager tax-cutters, often one and the same) were prattling on and on about roughly a decade and a half ago. Seems that in its usual manner, CBO and other analysts assumed that recent year-over-year growth numbers could be extrapolated far into the future, and that slowdowns and recessions can simply be wished away.

My biggest long-term concern is exactly what Stockman says about the national debt. Right now the interest burden is deceptively low because the Fed has kept rates near zero. Once rates go back up and the Treasury has to borrow at, say, 5% instead of 1.8%, we're doomed. We'll either have to cut a shitload of other federal spending or (more likely) monetize the debt and pay it back in inflation-eroded dollars.

That's my concern, too.

"...the $19 trillion of national debt can be serviced on the cheap—–currently at a weighted average yield of about 1.8%. Accordingly, debt service costs which would be upwards of $1 trillion under normalized interest rates (5%) are currently only about $350 billion. So the politicians feel no financial pressure, and become accustomed to kicking the can."

As I see it, policymakers (in the administration, the congress, and the Federal Reserve) are caught in something of a trap. The budget will be under stress in the coming years anyway due to existing promises and commitments. A substantial increase in interest rates would only compound the problem, and rather severely.

So a number of years of financial repression could be required in order to stabilize and eventually reduce the historically high debt/GDP ratio, which in my view acts as a depressant to prospects for economic growth. The large debt buildup we incurred to fight World War II was slowly inflated away after many years. Of course, it helped that we ran budget surpluses in three of the five years immediately following the war, in addition to a couple of times in the 1950s.

Now I believe it's more likely than not that we face a number of years of a "muddle-through" economy characterized by substantially slower growth than we became accustomed to during the second half of the 20th century, anemic demand, low inflation teetering on the edge of deflation at times, and very low interest rates. (And very likely negative real interest rates across much of the yield curve for extended periods of time.)

Not quite like Japan, to be sure -- and it may additionally be noted that we have a much more dynamic, flexible economy and set of institutions than the Japanese do, and that obviously helps.

But taking on high levels of debt isn't likely to be free of serious consequences.

[Old-T]

Some of you unfortunately want to pretend that there are simple solutions out there. At this point there are not. Come to consensus on two things and you can fix it:

1. Whose stuff do you cut? Every congressman wants to cut what is not in their district, because their constituents want to cut what is not in their district. Rationality has little if anything to do with it. Go back and look at the loud argument about which states get the federal money--and how quick some of the RWWs choked when THEIR region was sucking up the excess shares. "That's not fair! Don't cut THAT, THAT is critical!" And so it goes every time. Any of you see the cesspool that were the BRAC dealings in Congress?

2. Decide just how many of the "expendable" people you will throw under the bus--let's be honest, how many you will crush and ruin--to "save" the rest. I will be honest, I think we have gone far too far into entitlements on many types. I don't think there is any doubt about that. But we have parts of society that have played fair by following the rules set out--often rules that strongly penalized hard work and good choices. So now those people are to become the human sacrifices on your altar of ideological "correctness". The reality is, too many "conservatives", and too many "Tea Party" nuts truly do not care how many people get crushed so that they can "win".

Always odd how most people find excuses why their subsidies, their tax breaks, their services, their social/cultural/artistic/recreational interests should be saved but all others pillaged.

Most the people here don't have the faintest clue about the real people who will be hurt by cuts they think are absurdly simple. Sadder still, often they really don't care. "I got mine." Yes, we need to get spending under control--but neither party has anything out there that I have seen that is a remotely equitable spreading of the pain to do so. Look at the laughable budget agreement that cuts/adds for military and discretionary have to match. Complete nonsence--it should be based upon what value I gain or lose for the dollar (value being a hard to define term). And then we have the brain dead buffoon in Utah who wants to decree that there is 5% waste everywhere. There likely is--but too bad much (most?) of it is protected by congressional pork. But what is in MY district is vital! THAT is not pork! Close some Guard bases. Retire the A-10. Quit buying C-130s that are not needed. Trim G.O. positions in podunk communities (mostly in the South) that scream when their "prestige" is hurt because the "only" have an O-6 to cone to the county fair. Utah, by the way, gets quite a slice of lard that I suspect the "honorable" gentleman from Utah does not consider pork. Change the acquisition abomination that is the FAR which hamstrings intelligent business practices and adds time and cost for often no value added. Quit wasting huge amounts of money on the dumb parts of enforcing morals that only the Thumpers care about. Spend money to really enable and encourage people to get jobs--not just look down at them and edict that they are all worthless and lazy because the cost of childcare is more than their wages when they work. And I am sure you could add a few more.

But I suspect we will see the typical IIFFy kind of babble that Idiot Boy Trump will just kick all those problems magically away. I hope I am wrong about that, but history says I am not.

[DSK]

Originally Posted by CaptainMidnight

As I see it, policymakers (in the administration, the congress, and the Federal Reserve) are caught in something of a trap. The budget will be under stress in the coming years anyway due to existing promises and commitments. A substantial increase in interest rates would only compound the problem, and rather severely.

So a number of years of financial repression could be required in order to stabilize and eventually reduce the historically high debt/GDP ratio, which in my view acts as a depressant to prospects for economic growth. The large debt buildup we incurred to fight World War II was slowly inflated away after many years. Of course, it helped that we ran budget surpluses in three of the five years immediately following the war, in addition to a couple of times in the 1950s.

Now I believe it's more likely than not that we face a number of years of a "muddle-through" economy characterized by substantially slower growth than we became accustomed to during the second half of the 20th century, anemic demand, low inflation teetering on the edge of deflation at times, and very low interest rates. (And very likely negative real interest rates across much of the yield curve for extended periods of time.)

Not quite like Japan, to be sure -- and it may additionally be noted that we have a much more dynamic, flexible economy and set of institutions than the Japanese do, and that obviously helps.

But taking on high levels of debt isn't likely to be free of serious consequences.

Fuck man, if deflation is bad and most agree that it is, and printing money causes inflation, and no one wants to pay taxes for all this profligate spending, the running deficits is the most palatable option.

Print the fucking money and don't worry about it.

This country has so dramatically overreached with the stupid policies of paying lazy, poor and unskilled people enough to get high or drunk in exchange for votes, bullied companies into hiring unqualified people of the favored sex and race in the name of diversity, and opened the borders to poor, unskilled workers that we cannot recover.

Print the fucking money, get drunk, and fuck pretty girls.

Patriotism is the stupidest fucking response possible at this point - we are rats on a sinking ship, and the very people who say otherwise are either naive or in on the game, and want to leave you holding the bag of shit.

[Texas Contrarian]

Originally Posted by Old-T

Some of you unfortunately want to pretend that there are simple solutions out there. At this point there are not. Come to consensus on two things and you can fix it:

1. Whose stuff do you cut? Every congressman wants to cut what is not in their district, because their constituents want to cut what is not in their district. Rationality has little if anything to do with it. Go back and look at the loud argument about which states get the federal money--and how quick some of the RWWs choked when THEIR region was sucking up the excess shares. "That's not fair! Don't cut THAT, THAT is critical!" And so it goes every time. Any of you see the cesspool that were the BRAC dealings in Congress?

2. Decide just how many of the "expendable" people you will throw under the bus--let's be honest, how many you will crush and ruin--to "save" the rest. I will be honest, I think we have gone far too far into entitlements on many types. I don't think there is any doubt about that. But we have parts of society that have played fair by following the rules set out--often rules that strongly penalized hard work and good choices. So now those people are to become the human sacrifices on your altar of ideological "correctness". The reality is, too many "conservatives", and too many "Tea Party" nuts truly do not care how many people get crushed so that they can "win".

Always odd how most people find excuses why their subsidies, their tax breaks, their services, their social/cultural/artistic/recreational interests should be saved but all others pillaged.

Most the people here don't have the faintest clue about the real people who will be hurt by cuts they think are absurdly simple. Sadder still, often they really don't care. "I got mine." Yes, we need to get spending under control--but neither party has anything out there that I have seen that is a remotely equitable spreading of the pain to do so. Look at the laughable budget agreement that cuts/adds for military and discretionary have to match. Complete nonsence--it should be based upon what value I gain or lose for the dollar (value being a hard to define term). And then we have the brain dead buffoon in Utah who wants to decree that there is 5% waste everywhere. There likely is--but too bad much (most?) of it is protected by congressional pork. But what is in MY district is vital! THAT is not pork! Close some Guard bases. Retire the A-10. Quit buying C-130s that are not needed. Trim G.O. positions in podunk communities (mostly in the South) that scream when their "prestige" is hurt because the "only" have an O-6 to cone to the county fair. Utah, by the way, gets quite a slice of lard that I suspect the "honorable" gentleman from Utah does not consider pork. Change the acquisition abomination that is the FAR which hamstrings intelligent business practices and adds time and cost for often no value added. Quit wasting huge amounts of money on the dumb parts of enforcing morals that only the Thumpers care about. Spend money to really enable and encourage people to get jobs--not just look down at them and edict that they are all worthless and lazy because the cost of childcare is more than their wages when they work. And I am sure you could add a few more.

But I suspect we will see the typical IIFFy kind of babble that Idiot Boy Trump will just kick all those problems magically away. I hope I am wrong about that, but history says I am not.

You make a number of very good points. Cutting spending, in some respects, might be "simple" -- but it is the furthest thing from easy!

One man's pork is another man's delicious prime tenderloin.

Remember all the caterwauling about congressional attempts to cut $37 billion during the discussions leading up to the sequester? Listening to some of those people, you would have thought the world was going to end! Yet they were talking about two-tenths of one percent of total federal spending.

Everything gets extended, ratified, and added to over time; nothing ever gets cut. I just wish, like I and Lustylad mentioned in previous posts, that political leaders would try to have an honest conversation with the public and leave out all the sleight-of-hand.

Of course, I might also wish for eternal youth and permanent peace in the Middle East!

[Texas Contrarian]

Originally Posted by DSK

Fuck man, if deflation is bad and most agree that it is, and printing money causes inflation, and no one wants to pay taxes for all this profligate spending, the running deficits is the most palatable option.

Print the fucking money and don't worry about it.

First, I'm not sure that deflation, in and of itself, is quite the scary monster people make it out to be.

In the classical gold standard era of the late 19th and early 20th century, we had multi-year periods of deflation during prosperous times. At other times we had inflation. Although in each case matters obviously depend on the direction in which causality runs, I think it's far from clear that recession or depression must necessarily follow, or even exist concurrently with, deflation.

Consider the severe deflationary recession of 1920-1921. The government did little to combat it; in fact it substantially cut both taxes AND spending.

https://www.washingtonpost.com/opini...sEQ_story.html

Although year-over-year deflation was quite substantial, the economy recovered quickly and robustly after the price mechanism was allowed to play out and equilibrium was restored.

Second, is it really clear that "money-printing" -- at least the only kind we've employed in great measure, QE -- is really an effective way to juice the economy and stoke a little inflation (as the Fed obviously wishes to do), or prevent deflation?

What if QE not only isn't inflationary, but may, at least under certain sets of conditions, be deflationary?

Yeah, I know. That's as counterintuitive as anything you're ever likely to hear. But before you laugh at the notion, please ponder the points made in the following links:

http://www.bloombergview.com/article...conomic-theory

http://www.pragcap.com/wait-qe-might-be-deflationary

http://www.economist.com/blogs/freee...onetary-policy

http://www.businessinsider.com/is-qu...ionary-2013-11

http://euronomist.blogspot.com/2013/...onjecture.html

http://newmonetarism.blogspot.com/20...ry-policy.html

That's some stuff I took a quick look at a year or so ago when there was a flurry of discussion on all this in the economics and finance blogoshere.

There still is nothing that remotely resembles a set of clear answers. Perhaps the only thing you can say for sure is that all this will be a much-debated topic for a long time!

[nwarounder]

Originally Posted by lustylad

Did anyone really expect the Republicans to shut down the government in an election year? Paul Ryan would not have taken the job of House Speaker to commit hara-kiri.

3 reasons why this deal was doable:

1. Both sides wanted to clear the decks and focus on the 2016 election.

2. Every time we've had a govt shutdown to date, the public has blamed the GOP more than the Dims. The last shutdown back in 2013 (when Ted Cruz read Dr. Seuss) was not only ineffective and counter-productive - it deflected the public's attention away from the disastrous rollout of the Obamacare website taking place at the time.

3. The federal budget deficit has shrunk. We're no longer suffering annual shortfalls of over $1 trillion, as we did in Obama's first four years. The deficit for fiscal 2015 was $439 billion, or 2.5% of GDP. Unfortunately, this has taken pressure off Congress. They feel unconstrained and willing to bust the sequester spending caps with impunity.

I want to cut these fuckers off from their idiot spending binges as much as any tea party enthusiast, but I have yet to figure out how to do it without having it backfire.


"The boom, not the slump, is the time for austerity." JMK

Here is how Congress willfully subverts Keynes - when we're in a slump, we need to spend more to get out of it; when we're in a boom, we have new revenues to spend! Good years or bad, it doesn't matter - we can always find reasons to spend, spend, spend... Wheeeee!

Question - if the economy is in recession roughly 10% of the time, why is the federal budget in deficit 90% of the time?


.

Based on the politicians who voted for it, and what they said or still saying on the campaign trail (Rubio), it isn't doable.

But being a Repub is much like being a Christian, they are both conveniently forgotten when money or sin is involved.