The United States seemed to have avoided the bullet one more time in our history.  We put off the tough decisions.  The Congress has again legislated by emergency since no one in any party can let a good crisis go to waste.  So what exactly did we get by extending the credit limit of the United States’ credit card.  Let’s take a look.

First, the legislation passed raises the debt ceiling by $2.1 trillion.  The U.S. will more than likely burn through that in the next year maybe eighteen months.  With annual trillion-dollar deficits how can we not?

Secondly, the Congress is to make an immediate cut of $1 trillion dollars from the budget through discretionary spending, over 10 years. That is not much of a cut. That is only $100 Billion each fiscal year. That is less than one percent of the annual budget, which now stands at $3.8 trillion. Wow! What a compromise that does almost absolutely nothing to bring down our spending.

Next, the Congress creates a special joint committee with members of both houses and both parties in a “Super Congress.” Their job is to find another $1.5 trillion to cut from the federal budget, over 10 years. These suggestions are not open for debate, amendment, filibuster or other procedural rules. This sounds like a dangerous power grab by Congress. Again, $1.5 trillion over 10 years is only $150 billion each year which is just over ten percent of our current $1.3 trillion deficit and less than one percent of the current annual budget. This is not any type of savings.

Another problem with these cuts is that they cannot be enforced until after 2013. What is the point? Who is going to honor these cuts in two years? Who is even going to remember that these cuts when the budgets in two years?

If the “Super Congress” does not make any suggestions by November 23, then an automatic cut of $1.2 trillion from the budget will occur.  Half of the cuts will come from the defense budget the other half from other discretionary spending. The entitlement programs will receive no cut under this “trigger,” except for payments made to doctors for Medicare. Here is the issues with this discretionary spending is not the big issues when it comes to the U.S.’s out of control budget and its massive deficits. The problem is entitlement spending in Social Security, Medicare and Medicaid. They make up more than fifty percent of our annual budget. This is where most of the changes need must be made and most of it can be done purely with actuary changes or limiting who can draw from these programs. This trigger is dangerous because it does not address the root causes of our deficits and debt. Also since all budgets are passed by the House, Senate and signed by the President, how does this become automatic?

Another part of this deal is a required vote on a balanced budget amendment to the Constitution. I am not against this proposal, since the idea of a balanced budget amendment is not a new idea. Jefferson suggested it when he was President. Again the issue comes to enforcement. How will this vote be enforced? You cannot force Congress to take up any specific measure at any give time. Also this is no guarantee that it would pass. Constitutional amendments require that two-thirds of both houses of Congress must agree with the bill. I don’t see that happening in either house.

In summary, the law that only cuts $2.5 trillion out of the budget in the next 10 years. All the while the budget probably continue increase annually, because entitlement spending continues to grown unchecked, thereby eliminating any cuts that have already  been made to the budget. Enforcement cannot even begin on additional deficit reductions until after the next election, with no real way to enforce any of the legislation since you cannot force Congress to take up any legislation at any time. With a “Super Congress” that is to make cuts that no one can debate or amend. This does not sound like a deal, this sounds like a dangerous compromise that continues to kick the can down the road.

Questions? Comments? Concerns? Class dismissed!

Financial Times: The Deal’s Details
Wall Street Journal: White House Issues Fact Sheet on Debt Deal
Science Insider: A First Look at the Debt Agreement