We Give Up! Part 2: Republicans Cave On Budget, Debt Limit, Everything

By: John Rubino | Wed, Dec 11, 2013
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A growing number of Americans seem to have concluded that elections offer no real choice, that whoever wins is going to spend and borrow more each year and extend Washington's power here and abroad, so why bother voting? That point of view is being ratified by the budget deal now working its way through Congress.

Budget Deal to Ease Spending Cuts Gets Republican Backing

Congressional negotiators selling a budget accord won Republican endorsements for the plan to ease automatic U.S. spending cuts for two years, remove the risk of a government shutdown and cut the deficit by $23 billion.

The limited agreement seeks to end three years of political gridlock in Congress over spending and revenue that culminated in a 16-day government shutdown in October. Lawmakers' approval ratings in opinion polls have tumbled amid the regular partisan standoffs over the budget.

The deal was faulted by some Republicans, including those backed by the small-government Tea Party movement, who say it trades concrete spending cuts that are part of sequestration for future promises. In the House, they are poised to resist Boehner's attempt to win passage this week.

"There is a recurring theme in Washington budget negotiations," Senator Rand Paul, a Kentucky Republican, said today in a statement. "It's: I'll gladly pay you Tuesday for a hamburger today. I think it's a huge mistake to trade sequester cuts now, for the promise of cuts later."

The bipartisan plan would set U.S. spending at about $1.01 trillion for this fiscal year, higher than the $967 billion required in a 2011 budget plan. The agreement sets spending for defense at $520.5 billion and for non-defense at $491.8 billion.

The agreement also cushions the military from a $19 billion cut scheduled next month as part of the across-the-board cuts that lawmakers from both sides warned would hollow out the military and cost U.S. jobs.

The agreement, though, falls short of the panel's original goals. It doesn't fully replace the automatic cuts and it will have a marginal effect on the U.S. debt because it doesn't address the growing entitlement programs that are its long-term drivers. It produces a sliver of the $1 trillion to $4 trillion in savings previous budget negotiators sought to identify.


Some Thoughts

Note the return to business as usual, in the form of more spending now and promises to cut later (just to be clear, the $23 billion of deficit reduction mentioned in the first paragraph of the above article is over ten years, so even if it happens it's a rounding error in a $4 trillion+ annual budget). The past few months' experience with real cuts via the sequester was more than enough for politicians who have never before had to say "no" to constituents. Now, with great relief, they can go back to saying yes.

This week the Republican Party effectively ceased to exist -- though one could argue that it actually died during the first Bush administration and has since been wandering the land as a political "Walking Dead" zombie. (For non-zombie aficionados, that's the slow, shambling, pathetic kind rather than the fast, destructive "28 Days Later" kind.) Put another way, with this deal the Republicans have officially become Democrats, albeit dumber and uglier ones.

Which is not to say the Republicans won't win some more elections. Even with all their incoherence and timidity, the fact that they're running against Obamacare might keep them in office in 2014, though that would redefine "irrelevant outcome" for the modern political age.

The one notable change that might come from all this is increased odds of the libertarian/Tea Party sub-culture finally forming a separate party. It wouldn't get more than 15% in national elections but would, at least, present voters with a visible choice.

Now, why does it matter who's in charge if they're all the same? Because until this week Republicans continued to talk about small government, even though they didn't do much about it, which at least presented a rhetorical choice. Now they can't even talk the talk. The Republican capitulation thus removes the last (admittedly minor) restraint on government spending and borrowing. The doves are in charge of the Fed and "extend and pretend" has captured Congress, so the debt ceiling will quietly jump by another couple trillion, QE will live on (though perhaps under a different name) and the debt monetization orgy will shift into even higher gear.

If you're anywhere else in the world but here, and you're comparing our flaccidity to China's strategy of buying so much gold that Swiss refiners are struggling to fill the orders, emulating China is going to look even smarter than before.

 


 

John Rubino

Author: John Rubino

John Rubino
DollarCollapse.com

John Rubino is author of Clean Money: Picking Winners in the Green Tech Boom (Wiley, December 2008), co-author, with GoldMoney's James Turk, of The Collapse of the Dollar and How to Profit From It (Doubleday, January 2008), and author of How to Profit from the Coming Real Estate Bust (Rodale, 2003). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine and edits DollarCollapse.com and GreenStockInvesting.com.

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