RUTHFULLY YOURS

What is being termed a “historic debt ceiling compromise deal,” complete with backslapping and self-congratulations at the highest levels, is being considered by the Senate and the House rank-and-file. And consider they will. With many provisions going against the principles of both the TEA Party contingent and the far-leftist Progressive faction, there is a lot to consider. Significantly, lost in this “grand compromise” are these facts: a) Almost all of the spending cuts trumpeted as victory for the TEA Party Movement come after the 2012 General Election and with the election of a new Congress, b) The agreement does not eliminate deficit spending, rather, it simply lowers the amount of deficit spending, and c) Because the agreement doesn’t reach the $4 trillion mark mandated by the ratings agencies there is still a chance for our nations credit rating to be downgraded.

Perhaps the most significant issue in all of this is that for all the talk of not wanting to “kick the can down the road,” this agreement “kicks the can down the road.” Why do I say that? I say that because one Congress cannot mandate a future Congress to do anything. Short of a constitutional amendment that includes triggers that would apply devastating consequences outside the manipulative reach of any future Congress – or the Executive Branch – future Congresses don’t have to honor anything passed by previous Congresses. A perfect example comes in the form of the Congressional Budget Act of 1974, which mandates that Congress must complete its annual budget resolution by April 15th. Even though there is an enforcement mechanism – a punishment for not achieving this goal – in that if Congress fails to pass a budget resolution, legislation that affects budgetary matters cannot be considered, today, the 111th Congress has essentially ignored the law, having been delinquent in passing a budget for over two years running.

So, while the major points of the so-called “historic debt ceiling compromise deal” may sound good on paper, the fact of the matter is this: If they agreed to actions do not take place within a time frame established by the lifespan of the 111th Congress, the likelihood of any of the actions taking place at all are next to none.

All of this understood, the results of this “historic debt ceiling compromise deal” stand at:

No immediate mandatory cuts in spending (those are deferred until 2013).

The total of the package calls for a $2.5 trillion spending decrease over the next ten years even as the budget deficit is set to rise by $3.8 trillion by 2014, only three years from now, not ten, and that’s using rosy numbers that most likely won’t be as kind as those used in the CBO projections.

S&P has said that a downgrade in the US credit rating is all but inevitable unless deficit reduction reaches $4 trillion.

So, besides “no new taxes,” which, as a deal-achieving compromise point can be destroyed simply by President Obama’s refusal to extend the Bush Tax Cuts when they are set to expire, and a “promise” to vote on a Balanced Budget Amendment to the Constitution, which, unless there are punishment triggers for future Congresses means absolutely nothing, what did we get besides a continuation of deficit spending, albeit in a slightly diminished form?

An old friend and global currency and public policy strategist for BMO Capital Markets’ Investment Banking Division in Chicago, Andrew Bush, who is routinely seen on CNBC and quoted in the Wall Street Journal, points to the only silver lining in all of this: tax reform. Finally, the full contingent of political opportunists in Washington DC are on record as supporting tax reform with one of the more popular reforms being a lowering of the tax rates for both individuals and corporations in exchange for closing loopholes.

Mr. Bush contends:

Truly, if this is achieved and a balanced budget amendment with failsafe triggers established beyond the reach of the elected branches of federal government is advanced to the States, the fiscally responsible – the TEA Party, which I continuously need to point out consists of Republicans, Democrats, Libertarians and Independents – will have scored an incredible victory, not just for themselves, but for the nation.

That said, the only thing that could derail this path to a true national victory for the American people is if the 111th Congress is too cowardly to achieve these victories during its own lifetime; if they “kick the can down the road” on enacting true tax reform and passing a balanced budget amendment to the next Congress.