Sugar Coated Satan Sandwich

The "budget deal" has a huge tax increase and has no budget cuts. I know this is not what you have been hearing as the rhetoric is in high gear. Emmanuel Cleaver called the budget deal a “sugar-coated Satan sandwich.” 

Another congressman said this:

Cedric Richmond from New Orleans, said he feared it would have a "devastating impact" on working and middle class families, whom he said would bear the brunt of the cuts.

The final absurdity from Politico:

“We have negotiated with terrorists,” an angry Doyle said, according to sources in the room. “This small group of terrorists have made it impossible to spend any money.” Biden, driven by his Democratic allies’ misgivings about the debt-limit deal, responded: “They have acted like terrorists.” 

Impossible to spend any money? Congressman Doyle we are spending trillions. So the rhetoric is devastating cuts, republicans as terrorists, the deal being a Satan sandwich, with Pelosi adding that there were Satan fries on the side.  

So much angst—however the budget deal has no budget cuts. None. Zero. Imagine that your family is spending $40,000 a year with a $30,000 income. You plan to spend $45,000 next year. So you "cut" the amount you plan to spend to $42,000. Voila. You have cut $3,000 from your family’s budget. Nonsense. You have added $2,000 to your budget deficit. This is the way Washington does math. There are no spending cuts.

No doubt you are hearing that there are no tax increases in the "compromise." True to a degree, but there is a huge tax increase scheduled for 2013 when the Bush tax cuts expire. This will be $4 trillion over 10 years. This is the biggest tax increase in American history. It is certainly possible the tax cut expiration will be extended. It already has been extended once, but there is a big problem with an extention of the tax cuts. The estimated deficits of $13 trillion (or ten trillion depending on who you talk to) already include that $4 trillion tax increase. So if the tax cuts are extended then the deficit will be $17 trillion over the next 10 years.

Were the Budget Negotiations a Kabuki Dance of the Absurd?

I said I was an "optimist" on Monday because I think it likely we will have a number of these deals that will kick the can down the road. This will work for a while. If we gradually slow down we will not go off the cliff. I hope that is what will happen, but with the Democrats howling when there are no budget cuts, and the Republicans not understanding that we need to cut defense and raise taxes, it is not certain what will happen.