Boehner's Big Number Ain't Really That Big
Here's Wash Post's Ezra Klein on John Boehner big fiscal sanity speech last night:
Boehner's got a big number, but it's not, over time, an impossible number. All of the major long-term budgets cut and raise more than $2 trillion over the next 10 years, so Boehner's demands, though impressive in the abstract, are actually in the center of deficit-reduction consensus. What's more questionable is his timetable. It's very unlikely that Congress will be able to cut a multi-trillion dollar deal on deficit reduction before early-August, when the Treasury runs out of financial gimmicks to delay a default. And if Boehner and the Republicans won't accept fiscal rules as a downpayment on deficit reduction, that leaves us with few options save for a series of hard-to-negotiate, short-term increases in the debt ceiling—which is to say, an extremely extended period of uncertainty for the market.
Klein's right that the $2 trillion figure that keeps getting trotted out by the House Speaker is more than a little like Dr. Evil's bathetic "$1 million!" reveal in Austin Powers. This is in keeping with the fact that budget promises over a 10-year (or even half that) span are worse than useless.
The immediate question regarding the budget is what Obama, House Republicans, and Senate Democrats (who still haven't filed their proposal despite it being due April 15!; the "gang of six" ate Kent Conrad's homework yet again!) are gonna spend next year. All the talk of 2021 is mostly fantasy (not all, but mostly). If Obama and most of the GOP essentially agree that we should spend $3.7 trillion in fiscal 2012 (and they do!), then write it up fellas and start processing the paperwork now. The only thing holding you back would be the president's own party (who haven't filed their budget proposal but are making partisans angry) and we all know that Obama is gonna need them less and less as he starts gunning for his second term.
And if anyone starts saying we're already at the edge of cutting back on essential services, please show them this tally of big-category spending increases over the past decade:
For more on that, including how to balance the budget over the next decade without raising taxes or making draconian cuts to anything (forgive me true small government types!) read "The 19 Percent Solution" by me and Veronique de Rugy.
As for the debt ceiling gambit, think about this: A few months back, Tim Geithner, whose credibility is less than zero, was sweating gumdrops about the "first default in history caused by fiscal insanity" and saying we had to raise the limit in anticipation of it being reached or ELSE! Now he's saying we've got until August, whew. In reality (meaning using the past as a guide) it's likely we've got even more time in two ways. First, during 1995-96, the limit was in force for six months without catastrophic results. So if we reach the limit say this month, that should provide much more time than August before we're in uncharted territory. Second, and more important, the feds have more than enough cash flow to pay interest on the debt for a long time, thereby averting default (the fiscal insanity is another matter; that's been unfolding for years).
For more on the debt ceiling, click below and read this too.