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Congressman McClintock & The "Budget Control Act Of 2011"

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Bloviating Zeppelin: Congressman McClintock & The "Budget Control Act Of 2011"

Bloviating Zeppelin

(in-ep-toc'-ra-cy) - a system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

Friday, August 12, 2011

Congressman McClintock & The "Budget Control Act Of 2011"

[Again, from an e-mail, my congressman, Tom McClintock (4th District, Fornicalia) writes from experience and knowledge. -BZ]

The loss of America ’s Triple-A credit rating should have surprised no one. Standard & Poor’s warned explicitly for two months that a minimum of $4 trillion had to be cut from the projected deficit. But the same politicians who ignored these warnings were shocked-just-shocked when S&P finally lowered the boom. Instead they blamed the Tea Party that has been sounding the alarm for the past two years!

As you know, I was one of a handful of Republicans who warned the leaders of both parties that the “debt deal” would not preserve our Triple-A credit. Furthermore I am convinced that without getting our fiscal house in order, we will face a sovereign debt crisis in just a few years, when corrective measures will be too late.

Congressman McClintock continues to write:

Full Article: Dissecting the So-Called "Budget Control Act of 2011"

By Tom McClintock, on August 2, 2011

The “Budget Control Act of 2011” increases the debt limit by between $2.1 and $2.4 trillion, the biggest explosion of debt in American history. It allows the government to avoid spending reductions for the next two years while squandering our last best hope of averting a sovereign debt crisis.

I am opposed to this measure for the following reasons:

  1. The purported cuts, even if realized, are far below the $4 trillion deficit reduction that credit rating agencies have warned is necessary to preserve the Triple-A credit rating of the United States Government.
  2. It blows the lid off the House budget passed in April by more than a half-trillion dollars over ten years.
  3. It makes no significant spending reductions for at least the next two years, essentially freezing spending at an unsustainable level. While the debt increase occurs this year, significant spending cuts aren’t to be made for many years and can be ignored or reversed by future acts of Congress.
  4. The spending caps are easily circumvented by declaring appropriations to be an emergency, a response to a “major disaster,” or necessary for the “Global War on Terror.”
  5. The balanced budget amendment provisions are illusory because the amendment is completely undefined.


Let’s not forget the gorilla in the room. America faces an unprecedented fiscal crisis because of an unprecedented spending binge by this administration and the last. Credit rating agencies have openly warned that the nation’s Triple-A credit rating cannot be sustained without a credible plan to reduce the projected 10-year budget deficit by roughly $4 trillion.

This bill averts the threat of downgrade for failure to pay our current bills, but it also gives the most spendthrift administration in American history a credit line to continue spending at unsustainable levels through the next election. And it falls far short of the measures demanded by the rating agencies as necessary to maintain the Triple-A credit of the United States Government.

If the nation’s Triple-A credit rating is downgraded as a result of this failure, it will mean higher interest rates to maintain government debt. Given the enormity of that debt, even a small increase in interest rates can add crushing additional costs to government. Furthermore, interest rate increases would ripple through the economy, causing higher mortgage interest rates, higher credit card rates and a severe additional drag on the economy.

This would occur on top of the inherent economic damage this bill does. The borrowing authorized in this measure is not theoretical: it amounts to more than $7,000 for every man, woman and child in the nation or roughly $28,000 for a family of four. This debt must be repaid through that family’s future taxes just as surely as if it appeared on their credit card statement. In a real sense, this act means that every family in America has acquired the obligation to make the same payments as if they had just bought a new car.

Predicting the future decisions of the credit rating agencies is a fool’s errand. Much of their economic analysis is marred by perception, psychology, political pressure and self-interest. But there is no blinking at the fact that on many occasions in the last month their senior analysts have called for immediate adoption of a credible work-out plan for $4 trillion of genuine deficit reduction in order to maintain a Triple-A rating. We ignore these repeated and explicit warnings at our peril.


The Budget Control Act purports to cut federal discretionary spending by $900 billion over the next ten years and set in motion another $1.2 trillion to $1.5 trillion in ten-year spending reductions by year’s end. A recurring theme by proponents is that it guarantees a dollar of cuts for every dollar of new debt.

However, while the debt limit increase occurs this year, the savings occur over the next decade and are heavily back-loaded toward the end of that period. The work of the great economist, J. Wellington Wimpy, can be observed here: “I will gladly give you a dollar of spending cuts ten years from now for a dollar of debt today.”

In reality, this bill will decrease total federal spending by just $4 billion between FY 2011 and FY 2012. Put another way, it cuts actual federal spending by one tenth of one percent – a breathtakingly underwhelming achievement after a 28 percent increase over the last three years. Between FY 2012 and 2013, the bill will increase spending by about $8 billion. (The CBO estimate of a $21 billion net reduction for 2012 is relative to the CBO baseline, not an actual cut relative to 2011).

At best, proponents can claim that between now and September 30, 2014, the “Budget Control Act” freezes spending at the unsustainable FY 2011 level.

In reality, spending will be much higher than these figures suggest, because of a variety of loopholes that allow Congress to spend outside the budget controls for any purpose that a simple majority declares to constitute an “emergency,” or necessary for the “Global War on Terror.”

All future savings that proponents claim are in the form of promises by a government that doesn’t have a stellar track record of keeping such promises.

Indeed, this bill authorizes discretionary spending levels a half trillion dollars more over the next ten years than is permitted under the House Budget Act, also known as the “Ryan Plan” that passed just four months ago.


Much of the Budget Control Act of 2011 depends on a bipartisan committee that is charged with the responsibility to cut the deficit, but not necessarily to cut spending, by $1.5 trillion. These are two very different things.

The 12-member committee is to be appointed by Congressional leaders, evenly divided between Democrats and Republicans and between the House and the Senate. Its recommendations on deficit reduction will be decided by majority vote and put to both houses for approval or rejection. Absent adoption of a balanced budget amendment, the second tranche of debt limit increase depends on enactment of its recommendations.
There is little reason to be optimistic of its success.

First, although the committee’s formal goal is $1.5 trillion in deficit reduction, the law only requires it to reduce the deficit by $1.2 trillion in order to avoid sequestration and trigger a $1.2 trillion debt limit increase.

Second, this is not a new concept. Since 1982, there have been 17 “bipartisan” commissions charged with reducing federal spending or borrowing. As evidenced by the current crisis, all 17 have failed. The Budget Control Act of 2011 heavily relies on the 18th such panel actually succeeding.

This particular panel is made up exclusively of a bipartisan group of current members of Congress. It invites the question, “If a bipartisan group of current members of Congress (which we often call, ‘the Congress’) can’t agree to reduce spending to sustainable levels at this critical moment in our history, why would we place far greater confidence in the proposed bipartisan panel of – wait for it – current members of Congress?”

Third, the panel is not responsible for reducing spending, but rather for reducing the deficit. Tax increases may also reduce deficits (while doing significant economic damage). Since the committee is to be evenly divided between Democrats and Republicans, it would take only one Republican to place a massive tax increase on the House and Senate floors. As the deadline approaches and yet another debt crisis looms, the pressure on that one Republican will be enormous, and if history is any indication, irresistible.

It must also be noted that the deficit reduction figures underpinning the Budget Control Act assume restoration of the Clinton-era tax rates. Proponents argue that with these tax increases already baked into the calculations, it will be politically untenable for the special Joint Committee to add even more taxes to reduce the deficit. I disagree. Tax increases score just the same as spending cuts when calculating their effect on the deficit, whatever is the underlying tax rate. In addition, building Clinton-era tax increases into the deficit projections sets up a self-fulfilling prophesy. Although the Act does not itself raise taxes, it assumes massive tax increases, making them more – and not less – likely to occur.


Adoption of the Joint Committee report is one way to release the second tranche of debt. The other is for Congress to send the states a balanced budget amendment for ratification. I believe the states would ratify a genuine balanced budget amendment in short order and that it would send a strong signal to markets that the United States Government is finally serious about restoring the integrity of its finances. For two reasons, however, I believe the measure falls far short of this objective.

First, the act sets no specifications for what will be in the amendment. A genuine balanced budget amendment would forbid any government borrowing except by extraordinary majorities and for limited purposes. A balanced budget amendment that could be entirely circumvented through loopholes, or that could automatically trigger tax increases to finance Congressional appetites, would certainly meet the definition of a “balanced budget amendment” under this act.

Second, it is entirely possible – indeed, likely -- that the Congress as currently constituted would not reach 2/3 agreement on the precise details of an amendment while facing another debt crisis in December. Nothing in this bill would prevent Congress from simply scrapping all requirements for the second tranche of debt and approving a debt limit increase anyway.


The most promising feature of the Budget Control Act is an automatic sequestration feature that would order cuts in spending if Congress failed to enact the specified $1.2 trillion in deficit reductions to be recommended by the Joint Committee or if Congress failed to send a balanced budget amendment to the states.

As discussed above, these provisions can be circumvented to the point that they are largely meaningless, which makes sequestration much less a guarantee than it first appears. But assuming for a moment that the sequestration were actually invoked, its impact would fall heavily and disproportionately on defense spending while leaving general government spending relatively untouched.

After a maximum two percent cut to Medicare, reductions are split evenly between defense and non-defense spending. The problem becomes two-fold.

First, certain aspects of defense spending, such as Homeland Security, military construction, and veterans benefits are reclassified as “non-defense” for purposes of sequestration, meaning that defense programs could conceivably be subject to both sides of the reductions.

Second, core defense spending has already been subject to significant budget reductions in the last two years, while non-defense spending has been bloated by a parade of stimulus programs. The “evenly divided” cuts therefore begin to look like a contest between a marathoner and a couch potato over who can lose the most weight.

Should you wish to read further, go here for the full article in all six parts. Lengthy, but filled with breathtaking honesty and truthfulness. You will not find, on the entire internet, a more pointed, cogent, detailed and thorough examination of this bill. Period.

This is why Mr McClintock was one of only 22 House members who dared to vote down the "Budget Control Act of 2011" bill. You know -- those House members whom Mr Obama accuses of "partisan politics," whilst in the midst of a New York fundraiser hosting such stellar politically-intelligent luminaries as Gwyneth Paltrow and Jimmy Fallon, MENSA members all.



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