A look at data taken from the Congressional Budget Office’s August Baseline Budget Outlook and the final Monthly Treasury Statements from fiscal 2008, 2009 and 2010 quickly reveals that a $100 billion reduction in planned spending is not only not enough, it’s not even a “cut”:
First, on the receipts side, the CBO thinks that collections from all sources are going to increase by 22% in fiscal 2011, and by 37% in two years. Given that actual collections have trailed CBO’s projections by over $100 billion in each of the past two years, and that the economic recovery (if it’s even fair to call it that) has been anemic, I don’t what else to say except, “You cannot be serious.”
On the spending side, note that fiscal 2011 spending as the CBO defines it is projected to be 7.5% higher than the year just ended, and an obscene 36% higher than it was just four years ago. Even if the Republicans reduce fiscal 2011 spending by $100 billion or so, outlays will still be about 4.5% higher than 2010. This is what Davis and Kellman refer to as “cuts.” It is obviously nothing of the sort.
Davis and Kellman (conveniently, I believe) are forgetting that the GOP’s Pledge to America is calling for a return to the level of spending seen in 2008, exempting national security. After considering a bit of inflation, that would amount to about $3.2 trillion, representing a legitimate and long, long overdue cut of about 7% from fiscal 2010.
Can anybody seriously look at the numbers above and claim that this can’t or shouldn’t be done? Even though the answer is obviously “no,” Obama, Democrats, and the press will scream bloody murder. The president, who despite RINO Republicans’ wishes is not prone towards any kind of compromise, will likely veto anything that doesn’t keep the spending spigots wide open. It is reasonable to believe that he would let the government shut down rather than give in to the GOP Congress.
If this happens, will it work? It did last time, for the Democrats. The Gingrich Congress caved. The GOP congressional majority never regained its fiscal mojo, and eventually became a congressional minority because of it.
But this time may be different. The stakes are much higher. The national debt held by “the public” (i.e., except for amounts owed between federal agencies) will be about two-thirds of gross domestic product by the end of 2011. If trillion-dollar deficits continue for the rest of the decade, it’s virtually certain that the public debt-to-GDP ratio will hit 90%, a figure many economists consider a tipping point. At that juncture, it becomes very likely that investors will either refuse to continue to buy government bonds or will begin demanding much higher interest rates for doing so. Massive tax increases, hyperinflation, or worse will become likely scenarios.
The new media-driven, tea party-inspired portion of the electorate seems to get that. If enough of the rest of the voting public does, an Obama shutdown scenario could blow up in his and his party’s collectivist faces. Recently, we’ve learned that even if his union supporters “go French,” there’s a chance they’ll get taken down by fatigue.
Regardless of whether the confrontation occurs, our national solvency is clearly at stake in the next few years. There will be little if any time for rest after November 2.