Speaker Kevin McCarthy is a weak-kneed empty suit, but at least he’s sort of a half-assed Republican.
But you can’t say even that much for the ostensible GOP leader in the Senate. After 59 years suckling on the public teat, Mitch McConnell is a bought and paid for Deep State saboteur, if there ever was one. He has been instrumental in the GOP’s capitulation on every debt ceiling battle since 2011— so heaven forfend that he would finally dare say “no” to the Brobdingnagian Spending Machine sprawled out on the banks of the Potomac.
Au contraire. McConnell’s notion of the Leader’s job apparently is to kick the can, con the voters and “soothe” the markets, while leaving future taxpayers to inherit the fiscal carnage. And never mind that he couldn’t even persuade his own ranks to go along with his latest folding-like-a-lawn-chair act. The bedraggled gaggle of GOP Senators actually voted 17-31 against McCarthy’s risible spot of fiscal bunko.
Under the current circumstances, of course, that required entertaining a short game of rope-a-dope with the intrepid few fiscal conservatives left in the Senate. Accordingly, amendments by Rand Paul and others containing real cuts were dispatched quickly, thereby paving the way for the public debt to reach at least $36 trillion by January 2025. And it was all over and done hardly before the shouting had even died down.
After the next election, of course, it will be time for another pointless round of the X-date games and for Washington to rinse and repeat yet again. And as far as we can tell, the GOP caucus in the US Senate cares so little about fiscal sanity that McConnell is likely to still be in the Leader’s saddle, calling for the markets to be “soothed”:
“I can tell you what I hope happens is that those who have amendments, if given votes, will yield back time so that we can finish this Thursday or Friday and soothe the country and soothe the markets,” McConnell told reporters.
Still, for the life of us, we can’t understand why McConnell thinks the markets need “soothing”. The punters down in the canyons of Wall Street got Washington’s number a good while ago.
They know full well that the Dems don’t care a whit about the public debt. And they also know that the once and former party of fiscal rectitude on the GOP side of the aisle is too cowardly to take on entitlements, to enthrall to the neocon Warfare State and Forever Wars to even scratch the defense budget and too hypocritical about their own slices of pork in the nondefense appropriations budget to do anything except stand-up phony outyear spending caps that are utterly unenforceable and call it a day.
As it has happened, in fact, the GOP was in control of either one or both houses of Congress and/or the White House for most of the six-and-one-half years after Obama moved out of 1600 Pennsylvania Avenue in January 2017 en route to several more commodious mansions.
Alas, since that blessed point the public debt has grown from $19.98 trillion to $31.46 trillion, thereby reminding us that the debt ceiling has been increased several times in the interim. And 70% of that $11.5 trillion eruption of the debt ceiling was owing to a GOP presidential signature and a majority of GOP votes on Capitol Hill.
At the same time, this 58% rise of the public debt (purple line) didn’t make much never mind to the stock market. During the same period the S&P 500 (black line) rose by 83%, and the reason isn’t hard to fathom. Wall Street had effectively threatened the Fed time and again with a hissy fit—so it had found one excuse after the next to monetize this massive outpouring of Treasury paper and thereby keep interest rate pinned close to the zero bound until March 2022.
That is to say, the Fed engineered a TINA (“there is no alternative” to stocks) bacchanalia on Wall Street, enabling Washington to borrow and spend like no time in prior peacetime history.
So here we are with an objective public debt of $55 trillion baked into the cake for the early 2030s and Washington has once again proven in spades that it has no capacity to do anything about it—except to slide by the seat of its collective pants into an eventual thundering fiscal calamity.
Public Debt Versus S&P 500 Since January 2017
For avoidance of doubt, here is a long-term view of the Federal spending in constant 2022 dollars, with GOP versus Dem tenures in the White House represented in red and blue bars, respectively. There is no magnifying glass that can detect the difference in the outcomes as between the two parties. That’s because there isn’t any!
The Republicans trade more domestic spending for higher defense budgets, while the Dems do the opposite. And both sides sit on their hands as automatic entitlements and debt service payments climb relentlessly skyward.
Thus, when the Reagan Revolution proposed to curtail Big Government back in 1980, Federal outlays in current (2022) dollars of purchasing power were a tad above $2 trillion. After 12 years of Reagan/Bush budget “cuts” that number had grown to, well, nearly $3 trillion in constant 2022 dollars. That is, Big Government got 50% bigger on the Republican watch, albeit mainly on the Pentagon side of the Potomac.
As it happened, the constant dollar budget remained nearly flat during the eight Clinton years owing to the fact that Washington did temporarily allow real defense spending to shrink by about 10%. But the Warfare State was not to be denied for long.
Bush the Younger launched two costly neocon wars abroad and goosed domestic spending too, via another Medicare entitlement (Part D) and a goodly helping of the existing domestic pork. That got constant dollar Federal spending to the $4 trillion mark.
For his part, big spending Barry pushed the number to about $4.8 trillion with his “shovel-ready” anti-recession boondoggles in 2009 and kept it at the level for the next seven years. Apparently, Hillary was scheduled to resume the push higher in 2017, but the electorate delivered a dirty trick—by a hair of 40,000 votes in three states—and put another “Republican” in the Oval Office.
It goes without saying, of course, that the Donald never took the old-time GOP course on fiscal rectitude. By 2020, constant dollar Federal spending hit $7.4 trillion. That was 54% more than Barry had spent during his last year, and it only took four years to get there.
Stated differently, between 1969 and 2016 a medley of uniparty presidents had increased constant dollar Federal spending from $1.5 trillion to $4.8 trillion, representing a growth rate of 2.5% per annum. Then came the GOP voter base’s new hero, who, in a manner of speaking, knocked the spending ball right out of the park.
Real Federal spending grew by 11.5% per annum on the Donald’s watch or nearly five times faster than the rate during the prior 47 years!
Indeed, it can be well and truly said that the Donald fiscally castrated the once and former party of budgetary rectitude. Which is perhaps why its rank and file on Capitol Hill is pleased to choose fiscal frauds like McCarthy and McConnell as leaders.
That is to say, they are in the service of the Warfare State and Welfare State uniparty, not the Republican party of yore. In that regard, Joe Biden almost blurted out the truth—until he mendaciously added “for our economy and the American people” to obfuscate what has actually happened.
No one gets everything they want in a negotiation, but make no mistake: This bipartisan agreement is a big win. (for the uniparty)…….
By now it shouldn’t take much data, if any at all, to demonstrate the fraudulent nature of the hideously named “Fiscal Responsibility Act” or FRA as it is fondly called in the Imperial City. But for avoidance of doubt, just consider a couple of gems from the CBO scoring report on the Congressionally passed debt ceiling bill.
As we have indicated, the current baseline for entitlements/mandatories over the 10-year budget window is $48.3 trillion, while the FRA cuts exactly nothing, and actually increases baseline spending for Food Stamps by $2.1 billion.
Perhaps this is why Chuckles Schumer was crowing about the Dems great victory on the matter, as he racked up their key takeaways from the negotiations:
“No. 1, we avoided default – our number one goal, which we’ve been talking about from day one,” Schumer said. “No. 2, it is a far, far cry from where the Republicans started out.”
Well, we guess so. On the matter of the vaunted work requirement, for instance, the House passed bill’s provisions were scored by CBO to save $110 billion from Medicaid, $10 billion from family assistance and $10 billion from Food Stamps over the next decade.
Then again, Schumer wasn’t lying when he said the savings from Medicaid and family assistance were each zero, and that the math from the food stamp provisions worked out as follows:
Savings from raising the mandatory work age for recipients without minor dependents from 49 years to 54 years: +$6.5 billion;
Impact of exempting veterans, homeless and ex-foster care recipients age 18-24 from the work requirement: -$8.6 billion;
Net Savings From the compromise “work requirement”: -$2.1 billion.
When it comes to “negotiations”, therefore, we can imagine there is a virtual army of beltway con artists getting in line to negotiate with McCarthy and his hapless henchmen.
Of course, it also bears repeating on this score that the only real savings in the House passed bill were the $320 billion for cancelling Biden’s student loan forgiveness plan and $570 billion for cancelling Sleepy Joe’s wasteful green energy tax credits. McCarthy & Co are still grasping for their britches on these items. CBO scored them at zero because they ended up on the cutting room floor, not in the FRA text!
Next, there has been a lot of GOP brouhaha about freezing discretionary spending at $1.590 trillion in FY 2024 and $1.606 trillion for FY 2025. Except you don’t have to read very far in the CBO report to uncover a $417 billion elephant in the room. That is, these huge amounts are reserved for emergencies and other exceptions and are not counted under the caps!
Some funding would be limited either according to a formula or to specified amounts, funding designated as an emergency requirement or for overseas contingency operations would not be constrained, and certain other funding would not be subject to the caps. With those adjustments, and base funding constrained by amounts specified in section 101(a), CBO projects that total discretionary funding under the bill would amount to $1.795 trillion in 2024 and $1.818 trillion in 2025 (see Table 3)
Worse still, the GOP’s propaganda sheet pretends the CBO estimate of $205 billion and $212 billion for these exempt items in FY 2024 and FY 2025, respectively, is non-existent. The GOP sheet tendentiously scores them at zero.
Moreover, if you follow the normal budgeting convention for the 10-year window, the total cost of these “no see ’em” spending loopholes would be in excess of $2 trillion. Some kind of elephant in the room, that.
Actually, it gets worse from there. In the first place, the ballyhooed “rollback” in FY 2024 spending is no such thing. The chart above is based on so-called BA or budget authority. The latter is the authorization for Federal agencies to obligate funding, but does not represent actual cash out of the drawer at the US Treasury, which is called “outlays.
So, naturally, the relatively trivial $12 billion cut in BA shown in the chart above (from $1.602 trillion in FY 2023 to $1.590 trillion in FY 2024) disappears entirely when it comes to outlays. The CBO cash outlay numbers are $1.712 trillion and $1.781 trillion for FY 2023 and FY 2024, respectively.
So, mirabile dictu (wonderful to relate), the $12 billion “cut” for FY 2024 is actually a $69 billion increase in cash out the door!
And that’s just more new borrowings under the now open-ended debt ceiling. So just like all the other kids in Woke America, Kevin gets his trophy for, well, failing.
And this isn’t some kind of budgetary quirk, either. The CBO discretionary spending number for FY 2025, which is supposedly “capped” at a 1% increase from FY 2024, is no such thing. The outlay number is $1.833 trillion, representing a 3% gain over FY 2024.
More importantly, CBO’s estimate for the second year (FY 2025) of the FRA discretionary freeze/cap represents a 37% gain in outlays from pre-Covid levels of $1.338 trillion in FY 2019 and an increase of 53% from Obama’s last budget at $1.200 trillion.
So let us repeat. McCarthy and McConnell have “frozen” discretionary spending at nearly $500 billion above Barry’s last budget, and they still want a trophy.
Needless to say, after FY 2025 there is nothing except a large void. No entitlement cuts and only aspirational targets for discretionary defense and nondefense spending. They haven’t even bothered with a make pretend enforcement mechanism. It’s entirely scouts honor.
Then again, there is no honor among these wanna be fiscal boy scouts, either. They claim $1.331 trillion of discretionary spending cuts over the 10-year budget window, but only $248 billion of that is due to the enforceable caps for FY 2024 and FY 2025. The remaining 81% is to due the aspirational targets for the out-years that have exactly zero chance of being realized.
In sum, even if you credit $42 billion of 10 year interest savings to the FY 2024-2025 reductions, which are only “cuts” from a rising CBO baseline, the total semi-honest “savings” would be only $290 billion over 10 years. That’s just 0.31% of the $80 trillion of total baseline spending over the period.
So, as we said, the GOP has been fiscally castrated. You can’t interpret a total punt on entitlements, a freeze on discretionaries at 53% above the Obama level and a mere one-third of one percent cut in a runaway spending baseline as evidence of anything else.
Reprinted with permission from David Stockman’s Contra Corner.