A new Cato video examines the federal government's credit rating, which was just downgraded by Standard & Poor, and explains that Washington has a debt problem because it has a spending problem:
The legislation signed by President Obama on Tuesday, as a solution to the debt ceiling debate, includes the possibility of cuts to military spending. But as Chris Preble points out, the legislation guarantees no defense cuts. Republicans will try to dump all the required cuts on non-defense areas. And the White House has already distanced itself from the prospect of any real defense budget cuts, as did Secretary of Defense Leon Panetta. Both support only the first round of cuts, which will at best halt Pentagon growth at roughly inflation.
Everyone agrees that it’s rather stupid for a federal funding dispute to idle about 70,000 workers on airport-related construction. Just as absurd, there have been 20 stop-gap funding bills passed for the FAA since 2007. News stories are digging into the political disputes surrounding the FAA, but they aren’t addressing the root problem.
Centrist and liberal columnists are lamenting the lack of tax increases in the debt deal. But the hollowness of the deal itself provides a good justification for Republicans to oppose all tax increases in such bipartisan deals.
The Washington Post reports that spending cuts in the budget deal threaten to slow the economy. The article quotes a number of economists who seem to harbor a rather extreme Keynesian bias in their thinking.
The following chart looks at total projected federal spending according to the Congressional Budget Office’s adjusted March baseline and its score of the debt deal. The chart only considers the reduction in outlays resulting from the deal’s cap on discretionary spending, which the CBO says will save $917 billion over the next ten years. It does not consider the $1.2-$1.5 trillion in future “deficit reduction” that Dan Mitchell discusses here.
Republicans and Democrats have come together on a “historic” budget deal that cuts federal spending by more than $2 trillion over 10 years. The Washington Post’s lead story calls the cuts “sharp” and “severe.”
However, the budget deal doesn’t cut federal spending at all.
House Speaker John Boehner has revised his budget plan in response to an unfavorable analysis by the CBO. The CBO has examined Boehner’s new plan and finds that it would cut spending by $917 billion over 10 years. Of the total, only $761 billion would be cuts to programs. The rest of the savings would be from reduced interest costs.
The USPS is proposing to close 3,700 post office locations across the country, as mail volume falls and the agency is losing billions of dollars.
House Speaker John Boehner is scrambling to revise his budget plan after the CBO found that it would only cut spending by $850 billion, not the $1.2 trillion promised.