DeMint and Erickson to Boehner : HOLD THE LINE

Says it all:

Boehner-Reid Debt Plan

By Sen. Jim DeMint

July 26 — I have troubling news. I’m very careful about criticizing my party’s leaders, but what is happening in Washington right now cannot be ignored.

House Speaker John Boehner (R-OH) has abandoned the Cut-Cap-Balance Act and is now pushing a new plan that is nearly identical to the one proposed by Senate Majority Leader Harry Reid (D-NV).

The Boehner-Reid plan gives the President an immediate increase in the debt limit and only promises to cut spending in the future. It violates all three principles of the Cut-Cap-Balance Pledge because it does not substantially cut current spending, it does not truly cap future spending, and it does not require the passage of a strong Balanced Budget Amendment before raising the debt limit.

In short, I oppose the Boehner-Reid plan because it won’t balance the budget and stop the debt that is destroying our country.

The Boehner-Reid Plan

You will hear many claims about this plan over the next few days as it is pushed through the House and Senate. Some of these claims will be true, but many will be false. Here are the facts. The Boehner-Reid plan:

Provides two increases in the debt limit — $900 billion and $1.6 trillion — totaling $2.5 trillion. It gives the President an immediate $900 billion increase given that Congress does not vote to disapprove it. It gives the President another $1.6 trillion increase next year if a bill written by a new Super Committee passes both houses and becomes law.

Reduces spending by only $1.2 trillion over the next ten years. This amount won’t even come close to balancing the budget, as the debt is expected to grow by as much as $10 trillion over the next decade. The plan also reduces spending by only $6 billion in 2012. Considering that our government currently spends $10 billion a day, $6 billion is far too little to cut over the first year of the plan.

Calls for a vote on the Balanced Budget Amendment but does not require its passage. Without passage of a strong Balanced Budget Amendment, Congress will never break its addiction to spending.

Makes it virtually impossible to stop the debt limit from going up. The debt ceiling increases can only be stopped if Congress passes a resolution of disapproval and then votes to override the President’s veto with two-thirds support in the House and Senate.

Creates a new, 12-member Super Committee to write another “grand bargain” to reduce the deficit by at least $1.6 trillion. It does not, however, prohibit the Super Committee from writing a bill to raise taxes and destroy jobs. The bill can then be fast-tracked through the House and Senate with no amendments.

Why It Should Be Rejected

After reviewing the details of Boehner-Reid plan, I cannot support it.

It won’t balance the budget and stop the debt. Even if the cuts called for in the plan were real, the debt will still increase by $7 trillion over the next ten years.

It won’t protect our AAA bond rating. According to financial reports, this plan will not reduce long-term spending by enough to prevent a downgrade. If we lose our AAA rating, it will create higher interest rates and cause our debt to grow even faster.

It will likely result in higher taxes that will destroy even more jobs. The unemployment rate is over 9 percent. We cannot afford to lose more jobs when so many Americans are struggling to find work.

There are some in my party who think I should ignore the flaws of the Boehner-Reid plan, bite my tongue, and support my party’s leaders. If I thought this were a political game, that might make sense. But the future of our country is at stake, I don’t believe this plan will save it, and I have a moral obligation to say so.

The Way Forward

Fortunately, there is a much better solution.

The Cut-Cap-Balance Act would balance the budget, stop the debt, and protect our AAA bond rating. This legislation passed the House with bipartisan support but was blocked by Democrats in the Senate.

The votes in the Senate for Cut-Cap-Balance are there if Republicans stand firm. 23 Democrats in the Senate have expressed support for the Balanced Budget Amendment at some point in their careers. They’re blocking it now because they believe Republicans will blink and agree to something much less.

And that’s exactly what will happen if the Boehner-Reid plan is passed. It gives the big spenders in Washington everything they wanted — an increase in the debt limit, phony spending cuts, and a mechanism to pass tax increases.

Please call your senators today and urge them to oppose the Boehner-Reid plan and to demand passage of the Cut, Cap, Balance Act.

Respectfully,

Jim DeMint
United States Senator
Chairman, Senate Conservatives Fund

In Defense of Holding the Line

By Erick Erickson

July 26 — I’m getting beat to hell and back by conservatives for insisting the GOP hold the line on Cut, Cap, and Balance. Even here at RedState, I’m getting accused of “ideological intransigence.” Yeah, here at RedState. There’s a first time for everything.

People want a deal. People want John Boehner’s deal. People are upset with me for not liking John Boehner’s deal. People are telling me, “They only have one house, Erick. You can’t expect them to not compromise. They control nothing.”

I’ve said all along I expect a deal and a compromise. Here’s the problem and I need you to understand this from perspective, whether you agree with me or not.

See, I worked to send people to Washington, DC to solve problems, to make things right, to fix the things that were broken, and to send power back to the states. They are not doing that.

We all saw Democrats go to Washington in 2008 and take the whole thing. They controlled everything and they made everything worse. They passed a stimulus bill that killed or ruined hundreds of thousands of jobs in the private sector while growing the government. They increased dependency on the federal government. And then they passed Obamacare and socialized American healthcare. But it doesn’t fully take effect until 2014. We saw Democrats willing to lose their positions to lurch the nation left.

So we sent to Washington an army of conservatives to Washington to defund Obamacare and stop the White House. And now they’ve gotten there and have refused to fight. They promised and put in writing that they’d cut $100 billion from the federal government budget in 2011 and they ultimately cut only $38 billion. The Congressional Budget Office, when it was done scoring it, said they really were only cutting about $500 million and it would cost more money that it was worth it to actually cut those dollars.

So they said, “But we”ll stand firm on the debt ceiling. We’ll hold the line.” Everybody gave them a pass and said, “Okay, hold the line on the debt ceiling.”

Now here we are the week before the deadline. John Boehner laments they should have done it sooner, but he refused to do it sooner. The Speaker has prevented the Republicans from submitting legislation to ensure we would not default so that he would have leverage over his own members to force them to take a deal. And now they are dealing.

What is their deal?

Their deal creates another committee to look at spending — the 18th in the past 30 years. These 18 committees have never done anything except raise taxes. Their spending cuts are put off a decade and future congresses ignore them.

Boehner’s spending caps are easily waived as they’ll be rules, not laws. And they punt.

A lot of you are emailing and getting on twitter saying to take the deal. Take the compromise. Why should we compromise? That’s what we always do. Even when in the majority we compromise. The Democrats didn’t compromise on healthcare. But you people want to compromise. Republicans, whether in the majority or minority, are always compromising in favor of bigger government and imaginary spending cuts.

To make matters worse, why the hell are the Republicans the ones coming up with the plans if they only control one house of one branch of the federal government? Why are they doing it? We’re on the third damn plan. They aren’t even compromising with the Democrats. They are compromising with themselves.

The Democrats are holding their line. The GOP is splitting conservatives. The Democrats are saying “Raise the debt ceiling. Don’t cut anything.” And Boehner is saying okay and putting in cuts that take affect in year eight of ten so none of them will be around to be held accountable. Why?

The GOP came up with Paul Ryan’s plan. They passed it. They took bullets. The GOP put him in a witness protection program and dropped it like a hot potato.

So then the GOP passed Cut, Cap, and Balance and the Democrats beat them up and again accused the GOP of killing grandma. The leadership was lukewarm to it and never fought for it. And immediately after voting for it, the leadership said, “Now, let’s move on to the third plan.”

Are these all just symbolic votes? If so, I’d rather some substance. This symbolism is getting the GOP killed with nothing to show for it.

Why the hell are we on our third plan when the Democrats haven’t even come up with one plan? They haven’t even passed a budget in over 800 days. We’re in this mess because Harry Reid, in December of 2010, refused the raise the debt ceiling so the GOP could own the problem. The GOP fell into the trap with eyes wide open.

And the Republicans are falling for it yet again.

And now I’m being accused of thinking this is all a game even by long time RedState readers. I do not think this is all a game.

I know the credit rating is going to be downgraded and I don’t want it to happen. You people who want the deal are so worked up in emotion that you are ignoring all the facts. Here are the facts:

1. S&P says we need a deal of at least $4 trillion in cuts to avoid a credit rating drop.

2. Neither Boehner nor Reid get us there.

3. The only plan that gets us there is Cut, Cap, and Balance and the GOP is running away from it as fast as they can. The GOP already passed it and it just four votes shy of a majority in the Senate.

No one wants to fight. “No, we’ve already had that vote. It can’t pass the Senate,” they say.

There will be no default on August 2nd. We know it will not happen. How do we know? Because we have more money coming in each month than is needed to pay principle and interest on our national debt. And we have had multiple prior occasions where we have gone passed the deadline and the world did not suddenly end. It is all political rhetoric. Shame on you for succumbing to fear.

Barack Obama does not want to be remembered as the President on whose watch the nation defaulted. His leverage goes away on August 3rd and the GOP holds all the cards. We won’t default. We can improve our negotiating position.

The GOP could hold the line. And because they won’t hold the line, they are tanking our credit behind a bunch of smoke and mirrors. If the Democrats blame the GOP when the credit rating drops, the GOP will damn well deserve the blame if they stick with Boehner’s plan.

They could at least fight to turn the tide. They could at least hold the line.

This entry was posted in Deficit, Government Spending, Obama, Politics, Treasury, USA and tagged , . Bookmark the permalink.

18 Responses to DeMint and Erickson to Boehner : HOLD THE LINE

  1. Vincent says:

    the political nonsense in this post is disappointing, and doesn’t help the cause. let’s get back on track.

    Reply

  2. Leverage says:

    Please, think politically, because like any depression this is time of political conflict.

    Let tea nuts have their little default, if good in the long run. Remember: the western world now is a fight for a political regime change, it is about democracy surviving and MORE democracy or about the end of democracy and the rise of oligarchy for final (the European Empire controlled by oligarchs and ‘technocrats’ and the same in USA).

    A short default and all the damage it would cause to the people is preferable now than later. A gradual degradation of the economy may destroy output capacity and make the government so dysfunctional that eventually a currency collapse could happen (that’s what tea Party “hard money” nuts and some oligarchs want). So close-down the goverment, cut spending and let the world economy.

    And then Tea Party and all the retarded free market fundamentalist will be gone for good for a while, hopefully the banks will fall too and we can get real political reform and decent economic policy going.
    Some damage now could be better for the future than continue slowly killing thee world economy.

    Reply

    Mario Reply:

    @Leverage,

    this seems to be the latest idea…destruction of output and productivity through debt deflation leads to hyper-inflation once the government attempts again to kick start things by spending.

    I am not buying it yet but you’ve got my attention. Does anyone else have anything to say about this rationale behind hyperinflation in the USA?

    Reply

    Leverage Reply:

    @Mario,

    Is not only destruction of output that would have to happen but other things. For example a drop in necessary inputs because of an increase in prices (gradual depreciation of the currency), eg. oil. And a lose of confidence in USA political system (which I agree tho, that a temporal damage could be counter-productive to the credit of USA government too, there is a risk that this may offset long term gains).

    I think something of this sort could be seen in my own country or in some other periphery nations of Europe (Greece) if there was a sudden exit of the euro right now, with extreme balance of trade deficits and goods and huge internal problems (for example raising unemployment which would be politically unstabilizing).

    But ultimately it wouldn’t be an economical issue but a political issue: with government in disarray and desperate dysfunctional system (for example the rejection to pay taxes by a part of the population).

    yes I know it looks like a doomsday scenario, but if you add cost-push inflation, unbalances and a depression which has just started; the erosion of the system could go for years. A sudden shock right now could be for the good or for the bad: 1) either it wakes up policy makers and enforces the governments to do something and reform the system; or b) it’s used ‘shock doctrine’ style to advance the agenda of undercover anarcho-capitalists (dismantle the government, social net and taxes) which would lead to conflict in the future and probably collapse, and in any case to a extremly dysfunctional society (ala Mexico).

    Check Latino America or Asia of how a ‘new normal’ can be slowly pushed on the population while it’s accepted gradually. This has happened and continues to happen in a lot of places.

    Reply

    Mario Reply:

    @Leverage,

    here’s the thing though…the Fed would be destroying itself if that were to happen and the power elite would be destroying themselves. It will be abject poverty yes, but eventually you get to a point where you have no taxes to pay anyway…that’s the whole point about automatic stabilizers not working anymore once the Treasury can’t spend.

    The politics are dysfunctional BUT most people don’t see it that way. They see this insanity as responsible bookkeeping and getting thing back on track. Everyone theoretically wants to and is willing to take the hit that needs to be taken so they say. Therefore people will pay the taxes and accept the budget balance.

    The insanity is there but once spending kicks back in eventually it wouldn’t necessarily lead to hyperinflation unless the government was just throwing cash out to people. Usually when the government spends it is to get something in return whether that be a contract with a business, a job in a department, a metro bus driver, etc. So there is output tied directly to government spending.

    We have had cost-push inflation before and it actually only hurts people further and is more deflationary. Again, people seem to WANT these policies and austerities so why would they rebel? If anything wouldn’t they just elect new reps and policies?

    Leverage Reply:

    @Mario,

    But check polls, it’s not so clear. For example most of the population don’t want cuts in social security, medicare, etc. And most of the population want tax rises for the rich. Also the majority would agree with stupid spending for useless wars (which massively increased the debt).

    However politicians are totally corrupted and won’t hear! I wouldn’t be so fast to say that “politicians are doing what the people wants”, I don’t think this is completely true and people is realizing the government is dysfunctional. All this debt ceiling charade is an other hit on the government confidence not only from foreign nations, but from US citizens which are ashamed of the level of corruption and ineptitude in Washington from all the politicians.

    Trust can be gone fast and is hard to build it back. Indeed Tea Party as nuts as it is, was the first sign of this, and they will reinforce the situation by the wrong feedback on the system (and ideological bias and not moving). Inflation is perceived as a whole and a big part of the population will blame the FED, the government or whatever that reinforces their own bias. This combination of inflation in some commodities and goods and deflation in almost anything else is very dangerous economically and damaging politically.

    As for voting new reps and policies, yes this is what I’m saying: with a recession now (which a short default, or at least failure to raise the debt ceiling, will trigger because the underlying fundamentals of the slowdown are already there)people will wake up and demand government intervention (think like when at war: no single person will care about public spending and debt if it makes them win the war, because the cost of not doing is huge), but first they MUST see that fiscal austerity or not not-rising taxes for the rich, etc. does NOT make anything. Also a byproduct of this is to make the banks pretty much insolvent again, but this time the FED and politicians CAN’T afford to save them. So wiping them out could mean at once a real political reform on fundamental causes.

    But continuing extend and pretend without reform while the ‘new normal’ is pushed to the people and situation continues to get worse and worse undermining the real economy will only help the agenda of the rich. Indeed I think they will use fear again for what will happen to raise again the debt ceiling. The tea nuts may be making the rest of the people a favour even if their policies are failing.

    Look, the problem is that we didn’t have real events that challenged the dominating neoliberal era mantras yet, so as historical example: it’s impossible to have a FDR without travelling all the steeps including Hoover legislature (Obama). Only then can be a real change in social and political mood, and in economic thought and policies.

    Until then the other thing we would see MMT used for is to finance useless wars, like Bush did. And that is inflationary because is entirely unproductive.

    WARREN MOSLER Reply:

    I’m betting on ‘monetary deflation’ though with some prices going up that will show up as core cpi increases

    Reply

    Tom Hickey Reply:

    @WARREN MOSLER,

    It looks like the world is entering a period of rising prices due to global competition for energy and materials, according to Soc Gen and Jeremy Grantham. Looks like the era of abundant cheap energy is coming to a close and this will affect prices across the board. Material prices, farm land, etc. are all being bid up too, even though the global economy is still recovering from the crisis. Given the increasing effect of climate change, supply side price pressure looks like s a sure thing without technological innovation that doesn’t seem to be in the pipeline. The problem is not only inventing it but also scaling it up.

  3. roger erickson says:

    This guy is giving Ericksons everywhere a bad name.

    Reply

  4. Mario says:

    sounds to me like someone is bought out by S&P wouldn’t you say?

    Reply

  5. GLH says:

    Are those two missives reality based? If they are then I’ve been reading the wrong material.
    One thing I believe is that if the Democrats had been as adamant about their ideas as those two are with theirs, then there would be a much better outcome for the country.

    Reply

  6. Steve J. says:

    As soon as Erikson says “…they passed Obamacare and socialized American healthcare…” he loses all credibility in my book as an idiot liar who spews nonsense. I stopped reading at that point.

    Reply

    beowulf Reply:

    @Steve J.,

    In the immortal words of Austan Goolsbee, “these are the kinds of people who get eaten by bears”.

    Reply

    ESM Reply:

    @Steve J.,

    Too bad you stopped reading. It’s good stuff. Obamacare of course leads inexorably to socialized medicine. What do you think we call it when the government controls the prices of medical procedures and provides subsidies arbitrarily?

    Reply

  7. anon says:

    how do you interpret the effect of a downgrade on treasury bond rates, in the context of the Fed determining rates?

    Reply

    WARREN MOSLER Reply:

    downgrade should not matter much for tsy rates

    Reply

    Clonal Antibody Reply:

    @WARREN MOSLER,

    Should, or should not?

    Reply

    WARREN MOSLER Reply:

    should not. just corrected, thanks!

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