{"id":4576,"date":"2011-08-01T10:26:09","date_gmt":"2011-08-01T16:26:09","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=4576"},"modified":"2018-09-21T02:05:33","modified_gmt":"2018-09-21T06:05:33","slug":"evaluation-of-u-s-debt-crisis-deal","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/08\/01\/evaluation-of-u-s-debt-crisis-deal\/","title":{"rendered":"Evaluation of U.S. Debt Crisis Deal"},"content":{"rendered":"<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Yesterday saw a deal reached to raise the U.S. debt issuance limit, potentially averting a fiscal crisis.\u00a0 Here is my evaluation of the U.S. debt crisis deal.<\/span><\/p>\n<p><span style=\"font-size: 16px;\"><strong>Details:<\/strong><\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">Amount of the deal: $2.4 trillion in debt ceiling rise and $2.4 trillion in spending cuts<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Debt ceiling is lifted in two stages:<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Stage 1: spending cuts of $917 billion over 10 years<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Stage 2: a Congressional committee of both 6 Republicans and Democrats must find $1.5 trillion of additional deficit reduction; will come from:<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Tax overhaul<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Changes to entitlement programs<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"font-size: 16px;\">If the bi-partisan committee doesn&#8217;t find $1.2 trillion in cuts, or if Congress doesn&#8217;t approve its proposals, then pre-set spending cuts automatically kick in<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 16px;\"><strong>Analysis:<\/strong><\/span><\/p>\n<p><span style=\"font-size: 16px;\">Before saying anything else, I have to point out that House Republicans have to vote on this plan and they have proved to be a motley, unruly bunch.\u00a0 So all of the finagling may have been for naught.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">I am a fan of this plan in the following ways:<\/span><\/p>\n<ol>\n<li><span style=\"font-size: 16px;\">It raises the debt-ceiling which will mitigate, if not entirely avert, a sovereign U.S. debt crisis<\/span><\/li>\n<li><span style=\"font-size: 16px;\">That each dollar of a rise in ceiling was accompanied by a dollar of spending cuts<\/span><\/li>\n<li><span style=\"font-size: 16px;\">It does roughly what I had hoped a &#8220;short-term&#8221; plan would do: lift the debt ceiling and provide a framework for dealing with long-term issues going forward.<\/span><\/li>\n<\/ol>\n<p><span style=\"font-size: 16px;\">I am not a fan of this plan for the following reasons:<\/span><\/p>\n<ol>\n<li><span style=\"font-size: 16px;\">This plan doesn&#8217;t address the long-term fiscal health of the United States.\u00a0 After months of wrangling in which both parties looked prepared to have a substantive discussion about how to right the U.S. fiscal ship, both parties, due to intransigence, punted.\u00a0 So the scope went from broad to narrow: let&#8217;s find a way to raise the debt ceiling limit.\u00a0 Frankly, this response from Congress is European-like in its lameness.\u00a0 It is strong proof that the government of the United States is gridlocked and impotent.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">The plan specifically doesn&#8217;t include a balanced budget amendment &#8211; something that I think is critical for the long-term viability (20+ years) of the United States.\u00a0 A balanced budget with a provision that allowed for an unbalanced budget in the event of TRUE crisis, such as war, or economic depression, will do a lot to ensure the long-term health of the United States&#8217; economy.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">The plan doesn&#8217;t address the long-term revenue side of the equation at all.\u00a0 As I wrote last week, <a href=\"https:\/\/jasonapollovoss.com\/web2011\/07\/26\/what-my-intuition-tells-me-now-u-s-taxes-lowest-since-1950\/\" target=\"_blank\" rel=\"noopener\">U.S. taxes are currently their lowest in 61 years<\/a>, and lower than they have been under any President, Republican or Democrat in that time.\u00a0 Yet, the fiscal situation in the U.S. is about the worst it has been since World War II.\u00a0 The &#8220;Tea Party&#8221; and &#8220;Trickle Down Economics&#8221; thinking goes that low taxes equal strong economic growth, yet economic growth is anemic.\u00a0 As I also wrote about last week, <a href=\"https:\/\/jasonapollovoss.com\/web2011\/07\/27\/what-my-intuition-tells-me-now-do-tax-increases-negatively-affect-the-economy\/\" target=\"_blank\" rel=\"noopener\">tax policy seems to have no measurable difference on the economic health of the nation<\/a>.\u00a0 But I do know that a viable, fiscally sound government does have a profound effect on economic sustainability and health.\u00a0 So why not raise taxes and begin to resolve the U.S. fiscal situation?<\/span><\/li>\n<li><span style=\"font-size: 16px;\">The plan doesn&#8217;t address the hard questions about spending going forward.\u00a0 For example, when Social Security and Medicare were imagined the life expectancy in the United States was about 67 years.\u00a0 So entitlement programs were basically only going to be exercised on a small proportion of the people.\u00a0 Now life expectancy is much longer, so shouldn&#8217;t the age when benefits kick in be raised from 65?\u00a0 This is the type of hard question that needs to be addressed.<\/span><\/li>\n<\/ol>\n<p><span style=\"font-size: 16px;\">In short, I think that the U.S. political leadership has more than mildly failed &#8211; not a colossal failure, but more than a minor one, too.\u00a0 Primarily, the government has damaged much of the small amount of trust that it had remaining from the U.S. public and investors worldwide.\u00a0 Unfortunately, trust takes a long time to rebuild.<\/span><\/p>\n<p><span style=\"font-size: 16px;\"><strong>Importance grade:<\/strong> 9; that the debt ceiling was raised, pending a likely affirmative vote today, is the most important thing.\u00a0 That there was so much fuss over, what was ultimately a &#8220;punt&#8221; is despicable.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; Yesterday saw a deal reached to raise the U.S. debt issuance limit, potentially averting a fiscal crisis.\u00a0 Here is my evaluation of the U.S. debt crisis deal. Details: Amount of the deal: $2.4 trillion in debt ceiling rise and $2.4 trillion in spending cuts Debt ceiling is lifted in two stages: Stage 1: spending [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-4576","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4576","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=4576"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4576\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=4576"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=4576"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=4576"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}