The US Is Facing A Day Of Reckoning Over The Deficit

As we write, there is still no debt limit for the US Treasury and the protagonists are still playing politics. That leaves a week to find a solution by August 2nd.

The first House passed a $16.7 trillion cut, cap and balance bill calls for a cut in the fiscal September 1st budget for 2012 and a balanced budget amendment that goes into effect in five years. Why five years, so they can amend it in a couple of years? This is truly political theater. This has little to do with the budget and everything to do with political powers. Worse yet, unless it meets the President’s approval, he will veto the bill.

Rating agencies such as Moody’s have warned of downgrading US sovereign debt, or at best being put on a negative watch list. We believe this is just another part of the play, or part of Wall Street and banking efforts to get extending legislation passed.

The media is solidly behind the Democrats for an increase in the debt limit and little or no cuts in spending. Mainstream media has even taken sides blaming the problem on the Republicans. Usually such positions are more subtle, but not this time.

We see little attempt by Congress to really cut spending. All they are really interested in is spending more money. Congress knows if proper cuts are made it will be very negative for the economy. From their viewpoint and from the viewpoint of their handlers there has to be little or no cuts and an increase to $16.7 trillion to take the economy past the next election in a year from November. A Republican plan to cut $9 trillion over ten years has been rejected out of hand. The consideration now is for $2.4 trillion. Obviously government cannot function unless we continue as we have been building more debt and Americans will just have to be patient until the whole debt edifice collapses. This kind of forced prosperity always has ended badly. Just look at history, it is all there for you to see. The same mistakes over and over again. America’s Keynesianism is certainly the antithesis of sound money. That is what the basis to the problem is. The corporatist fascist model. The model that has been foisted upon us since 1935.

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