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.
International Liberty 
[…] keep in mind that Republicans got spending caps on discretionary spending back in 2011, but those caps were then abandoned after some early […]
[…] keep in mind that Republicans got spending caps on discretionary spending back in 2011, but those caps were then abandoned after some early […]
[…] The spending caps adopted as part of the debt limit fight in 2011 have curtailed spending increases as part of the appropriations […]
[…] to be more accurate, what I basically discovered is that debt limit fights, sequestration, and government shutdowns were actually very effective. Indeed, the United States […]
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[…] points. First, we made a lot of fiscal progress between 2009 and 2014 because various battles over debt limits,shutdowns, and sequestration actually did result in real spending discipline. Second, I used […]
[…] we made a lot of fiscal progress between 2009 and 2014 because various battles over debt limits, shutdowns, and sequestration actually did result in real spending […]
[…] be happy about the shutdowns, debt-limit battles, earmark fights, and […]
[…] be happy about the shutdowns, debt-limit battles, earmark fights, and […]
This quote from Alexander Fraser Tytler (Lord Woodhouselee) on “The Decline and Fall of the Athenian Republic” is even more applicable to modern democracies and bears repeating:
Dan, what baffles me is that surely, these people know what we know. Obama knows what’s going to happen if we keep doing the same thing, he’s not stupid. So, it makes sense to me that this may be what he wants. He was brought up on all the radical worldviews which make America the great evil. He comes up as this mystery candidate with just the right weird potion of things to say that a tv-addled public have been shown to fall for. And so now here he is presiding over America, steering it toward the edge of the cliff, all while maintaining plausible deniabilty.
So, does this qualify me as a “crank?” –Sam Walker