There are rumors that Obama may do a bit Clinton-era triangulation and agree to a GOP-friendly increase in the debt limit. That means no tax increases and as much as $3 trillion of so-called spending cuts.
I’m skeptical, and even if it happens, I suspect that most of the spending cuts will be ephemeral (like the junk we got during the government-slowdown fight earlier this year), and that’s even assuming that we should accept Washington’s dishonest definition of a budget cut. As I explained to Investor’s Business Daily:
In Washington-speak, a spending cut means a government program that is projected to grow, say, 5% next year will rise just 3%. “If I told you I was starting a diet and a month later I told you I was successful because I only gained five pounds instead of 10 pounds, you’d probably call me a stupid jerk,” said Dan Mitchell, a senior fellow at the libertarian Cato Institute. “But if I was a congressman you’d call me a frugal, fiscally responsible lawmaker.”
And I also wouldn’t be surprised if some of the spending cuts turn out to be back-door revenue increases. Under Washington budget-scoring rules, if the government makes us pay higher Medicare premiums or Fannie Mae loan fees, those revenues are counted as “offsetting receipts” and counted as “negative spending.” I’m not joking.
Notwithstanding these potential concerns, a budget deal with no explicit tax increases and a multi-trillion spending cut number (however exaggerated) would be a much better outcome than I’ve been expecting.
But let’s not kid ourselves. The GOP may win a political victory, but that doesn’t mean America’s fiscal problems will be solved. Something like the Ryan budget would be a real step in the right direction. But that’s not what we can expect, even in a best-case scenario.
As such, we’ll still be heading for a Greek-style fiscal nightmare, as I note in these two recent interviews.
Here’s my interview for the Willis Report on Fox Business.
And here’s what I had to say for Larry Kudlow’s CNBC program.