No Runny Eggs

I decided to revisit my conceptions on the inevitable DOOM! scheduled to arrive next Wednesday, and I’ve got bones to pick with, and promptly bat about the heads of, everybody. This is a bit longer than a typical Captain Tenneal monologue at the start of “MXC”, so if your ox hasn’t been gored, keep reading and it will be.

First things first, I’m still of the opinion that House Speaker John Boehner royally misplayed things. He really should have walked away once “Cut”, Cap and Balance (there’s a reason why one of those words is in scare quotes; more in a bit) got tabled in the Senate. However, had he felt the need to put a Plan B out there before either Senate Democrat Leader Harry Reid or President Barack Obama put a Plan A up in legislative form, here’s what he should have said (in more-diplomatic terms, of course):

You don’t want a Balanced Budget Amendment? Fine; we plan on getting enough conservatives here and across the Routunda to send it out to the states in 2013. You don’t want to deal with this again until 2013? Here’s how that’s going to happen. You pass our budget and the appropriations based on it, and we’ll pass a $2.0 trillion debt increase to get this into 2013. If you don’t like that, lots of luck, gentlemen. By the way, that means instead of spending $29 billion more than the CBO baseline adjusted for the effects of the current continuing resolution and beginning the wind-down of the Global War on Terror, we’ll be spending $98 billion less.

I suppose it’s time to do the lengthy side note on why HR 2560 is “Cut”, Cap and Balance, with “Cut” in scare quotes. Nobody actually asked the CBO to score CCB, so that devolves to me. We start with the $1,225 billion limit on outlays for discretionary spending other than that on the Global War on Terror. The outlays on the GWOT, based on the $127 billion in budget authority for the same in both the President’s budget and the House budget, would be $118 billion. The “uncapped” portion of direct spending (what is often misleadingly-labelled “mandatory spending”), which consist of the majority of Social Security, Medicare, veterans benefits, and net interest, would come to $1,632 billion. The “capped” portion of direct spending is $681 billion. Add all that up, and it comes to $3,656 billion in total spending. Unfortunately, once the effects of the final FY2011 continuing resolution and the agreed-to-by-everybody GWOT spending are put into the March 2011 CBO baseline (or a net -$12 billion), the CBO baseline comes to $3,627 billion. That’s neither exactly Hertz nor exactly a cut.

On the other hand, the Cap part adopts as the spending ceiling the percentage of GDP the House budget would spend that year beginning with FY2013, that would a significant and immediate reduction of debt compared to the adjusted CBO baseline. In fact, the “short-term” FY2012-FY2013 deficit reduction would be somewhere north of $125 billion versus Boehner 1.0.2’s $63 billion, and be almost indisguishable to the House budget total 10-year deficit of $5.1 trillion, or a solid $1.5 trillion less than the $6.6 trillion in deficit spending indicated by said adjusted CBO baseline.

You may have noticed that is nowhere near the “$4 trillion in deficit reduction” the credit rating agencies want from an unspecified baseline, or even $2.5 trillion-$2.8 trillion in deficit reduction that a 1-to-1 ratio of debt-ceiling hikes to spending cuts call for. If you think that it’s possible to get the 10-year deficit from $6.6 trillion to $2.6 trillion, I wish you the best of luck, and then point you over to Wisconsin, Greece, France, and Portugal, where a whole lot of the populace (and in the case of the foreign countries, a majority of said populace) has been in a non-stop temper tantrum over far less cutting measures of austerity. It is, however, well over $4 trillion less in deficit spending than Obama’s budget, which envisions $9.5 trillion in deficit spending.

Back to the here-and-now beatings. I will, for the point of this post, ignore the fact that Boehner and McConnell were all-too-willing to return to permanent minority status before Obama decided he wanted it all, and go to Boehner 1.0.x. The first version was an unqualified disaster; even Reid’s all-defense-cuts plan, which won’t even be voted on until Boehner 1.0.3 receives the same cement burial that the House budget and CCB received, managed to create more scoreable cuts, and the scored cuts were less than the first phase in debt-ceiling increase. The second version was a minimum effort to beat Reid on the spending score, and it barely did both that and hit the 1-to-1 hikes-to-cuts ratio (against the toughest scorecard the CBO has in its files, no less) at the cost of the caucus and any semblance of bipartisanship, which “C”CB had. Of course, since it doesn’t automatically absolve Obama and Reid of having to deal with the debt ceiling again next year, it’s been declared dead-on-arrival, with Reid promising a tabling in 30 minutes (or the next one’s free). It also represented, even though it wasn’t voted on, the “ceiling” the House Republicans can possibly get.

At that point, Boehner had a choice of either bringing back the “Cap” or bringing back the “Balance”. He chose poorly from the negotiating standpoint – the BBA is a singular take-it-or-leave-it item, while the additional $1.4 trillion in identifiable deficit reduction in “Cap” is far more negotiable. At least Boehner managed to raise the ceiling a little bit, and probably more important, get the caucus back together.

One more thing – if we had a rational actor in charge of deciding which bills get paid once 8/3 rolls around without additional borrowing authority, I would be marginally less worried about the expansion of the default situation. That’s right; once Treasury Secretary Timothy Geithner had to start juggling accounts around and stop fully-funding the federal employees retirement system, we were in a default situation. The saving grace is that since there is enough cash available to pay all the actual bills, there was no real pain felt.

That will change soon, and can change at the drop of the hat (or in this case, the utterance of an order). Once that shell game is insufficient to keep the cash flowing, there is going to no longer be enough money to pay all the actual bills. While technically Geithner could likely keep up the shell game for a week or so beyond August 2, for political reasons, that is the drop-dead date.

The bad news is this is not a lack-of-appropriation shutdown, so beyond the Constitutionally-mandated servicing of the public debt, the entirety of the payments on federal obligations is up to the sole discretion of the executive branch. Yes, this includes the servicing of intragovernmental debt, which, if not fully-serviced, would be a technical default.

The ugly news is that the decision of whether or not to escalate the default situation is no longer in the hands of anybody in Congress. Once the calendar flipped over to 7/22, Obama gained the ability to bury any bill sent to him by Congress until after the 8/2 DOOM! date. The fact that he walked away from a deal that he and all four leaders of Congress had that would have given him almost every economic, and every political, element he could possibly want on that date tells me just about everything I didn’t want to know about how next week will play out.

As Monty over at Ace of Spades HQ is fond of saying, we’re boned.

Warning; there will be f-bombs. I am that fucking pissed off.

If you missed The Morning Jolt from Jim Geraghty this morning, you missed your humbled correspondent being featured in the Addendum. I guess it’s time to expand on the tweet that put the closing charge in things:

(W)ait until 8/3 to introduce the Boehner plan – NOTHING will get signed by Obama before then. NOTHING!

It should have become crystal-clear when the White House-led debt ceiling talks broke off abruptly last Friday, after President Obama altered the terms of a deal that would have both cemented his re-election and permanently buried the GOP as the minority “half” of the bipartisan Party-In-Government, that he wants a default and what Monty over at Ace of Spades HQ succinctly calls DOOM!. It did become crystal-clear when Obama kept on blaming everybody but himself for the collapse while offering, to date, no plan. We could argue the “why”, but that would be a tinfoil-hat-swapping party (hint; the one-word explanation starts and ends with a “S”).

At that point, the Republicans had a rather strong opening position called Cut, Cap and Balance, one that already was voted out of the House. I’ll state right here and now that, even though I like it, it had no chance of actually becoming law. However, it, along with the equally-stalled House budget (which, while it did not address the debt ceiling and indeed would need about a $2.0 trillion increase in the debt ceiling to make it work through early 2013, addressed the larger issue of size and cost of government), stood as the only things that actually had any demonstrable support.

The first two fuck-ups actually predated the collapsed White House talks, one by a large margin. The continuing resolution to fund government through September 30 did absolutely, positively nothing to alter either the timing of the debt-ceiling crisis or the amount perceived to be necessary to get the next credit-card application date into early 2013. In fact, those of us who bitched about it not exactly cutting spending were told to shut up and wait for the debt ceiling battle. As I noted above, the House budget did change the latter slightly, but then again, that is as stalled and dead as Cut, Cap and Balance.

Senate Repulican “Leader” Mitch McConnell leaked the first Plan “B” (for Blame) – let Obama raise the debt ceiling on his own unless 2/3rds of Congress objects. It would have been, had it truly been a Plan “B” rather than Plan “Good, Solid B+”, an elegant trap for Obama. However, it was released weeks before the DOOM! date.

The third fuck-up was offering up $800 billion in tax hikes in those ultimately failed talks, presumably versus what the CBO calls the alternative fiscal scenario, which continues all current tax rates through 2021 rather than current tax law. News flash – by 2018, the taxes under that scenario already would be more than the 50-year (1951-2000) average of 18.06% of GDP, and then it would permanently be stuck at the even-higher 18.4% of GDP it reaches by 2021. That tax-pledge break would, had only Obama been savvy enough to accept it, have been strike three on fiscal matters for the GOP in the last 21 years, and functionally the same as the broken “No New Taxes” pledge from former President George H.W. Bush that was strike one.

The fourth fuck-up was McConnell and House Speaker John Boehner getting a “broad” agreement with Senate Democrat Leader Harry Reid that had only a nebulous $2.8 trillion “deficit reduction” number and no tax increases with with absolutely, positively no common baseline. Reid, who unlike either McConnell or Boehner, is at least someone who has a half-assed fucking clue on how to lead, played the Stupid Party “leaders” like a pair of bongo drums by claiming the $1 trillion in “savings” from reductions in expenditures in the Global War on Terror everybody else already agreed to as, ultimately, the major part of his “deficit reduction”.

The fifth fuck-up was Boehner going first on the basis of that agreement. Actually, I’ll call it two fuck-ups to make it an even half-dozen; going first, and going before Obama forces a default. Going first allowed Reid to put in just enough non-GWOT “deficit reduction” to beat Boehner in that category, at least with version 1.0.0. Boehner did put in a minimal amount of effort to beat Reid with version 1.0.1 (note to self; update the previous post with that minimal effort).

As I stated above, there is NOTHING, and I mean NOTHING, Obama will sign before he forces a default and DOOM!. It actually has been too late to avoid DOOM! since July 21st as Obama can sit on a bill for 10 days (plus Sundays) before he has to do something with it. Proof of that is that Reid, who has served his role as Obama’s roadblock well, declared Boehner’s version 1.0.0 plan dead-on-arrival.

All Boehner has done is make the “ceiling” the GOP can reach the Ohio Two-Step instead of Cut, Cap and Balance. By releasing it before anything the Democrats put forward either get to a vote or get to a head, he lost any chance of getting even that modest concession.

You’re going to see a whole lot of bloviation on how the Congressional Budget Office scored the Harry Reid plan as reducing the growth of the debt far more than the already-scrapped-for-retooling John Boehner plan. What you won’t see nearly as much of is how Reid and the LeftSteamMedia are able to get away with it.

Before I give you the tale of the tape in table form, I’ll explain that it has almost everything to do with the spending on the Global War on Terror (or whatever it’s being called nowadays at the White House). The CBO, in its baseline, assumes that spending on the GWOT will continue to increase at the rate of inflation through the end of FY2021, the end of its 10-year estimation period. That, between FY2012 and FY2021, would be (give or take rounding) $1,590 billion. Both the White House and the House of Representatives, in their budgets, reduced the amount of that spending to $547 billion over that same period, or a $1,043 billion reduction from the CBO baseline. Since the House already passed those cuts in budget form, Boehner told the CBO to not consider that spending in the baseline.

Meanwhile, the Senate has not passed a budget for either FY2011 or FY2012. Harry Reid is using this as the opportunity to effectively sign on to that GWOT spending plan, with a $1,044 billion reduction in GWOT spending relative to the CBO baseline (effectively a rounding error compared to the White House/House of Representatives plan). Because this is also not a true budget, Reid did not specify which year or years those cuts would need to be made, which is something both the White House and the House of Representatives did. Even though the CBO separated the raw effect of the cuts in spending on the GWOT from the “cuts” elsewhere in the discretionary budget, they did so in a clumsy way. Therefore, I decided to redo the first and third tables from each CBO summary to put the two plans back on the same playing field.

There is one more thing to keep in mind while looking at the charts – there is supposed to be another $1.8 trillion in “cuts” from a bipartisan commission in the Boehner plan that is, due to the lack of ANY detail, not scored by the CBO. Likewise, there’s a bipartisan commission in the Reid plan that is supposed to keep the deficit at or below 3% of GDP, which is, in the quick take, a bunch of Bravo Sierra. I’ll get back to that after the charts.

Note: There was a rather big error on the first chart I had up. As I did not save it in Excel, I decided to pull it entirely rather than spend time reworking something where a third of the data has been rendered moot.

Next, the net effect of the duelling pieces of legislation on the deficit (which includes Reid’s further cuts on farm subsidies and additional revenues from “re-auctioning” of various radio frequencies). I had to re-estimate the effect of the reduced debt service because that was not broken down by GWOT versus non-GWOT spending/revenue changes on the Reid proposal, and that re-estimation, bumped back up against the CBO’s estimate from House proposal, was low by $5 billion (again, click for the full-sized table):

Boehner managed to back-load things rather badly the first time around, and he got schooled by Reid even once the spending on the Global War On Terror gets discounted, at least when the “scored” items are counted. However, that does not quite tell the whole story.

Remember what I said about the Reid commission to bring deficits down to 3% of GDP? If the extended-baseline from the CBO can be believed, the only two years of the next 10 that the deficit would be above 3% of GDP are FY2012 and FY2013. Since Congress is dealing with, or at least is supposed to be dealing with, the FY2012 appropriations process right now, I’ll assume the commission won’t be able to affect that massive deficit. FY2013’s deficit under the Reid plan would be scored at $592 billion, or a mere $100 billion less than the $492 billion that is 3% of the estimated $16,400 billion GDP.

Meanwhile, Boehner’s commission would have a hard $1,800 billion in additional deficit reductions to come up with. Even if one applied the usual Boehner-to-reality conversion rate, that would result in a much larger reduction in deficit than the Reid plan, at least assuming that the adjusted CBO extended-baseline scenario of $5,807 billion in deficits or the House budget scenario of $5,088 billion in deficits is anything near reality.

Revisions/extensions (1:23 pm 7/27/2011) – There’s more from Ed Morrissey, who somehow forgot that one plan raises the debt ceiling by about $0.9 trillion to get us barely into 2012 while the other raises it the $2.5 trillion Obama needs to get past November 2012.

R&E part 2 (6:56 pm 7/27/2011) – After what can only be described as a “minimum effort” (namely, a revision of FY2012 and FY2013 caps), Boehner Verison 1.0.1 does barely beat Reid 1.0. I won’t redo the graphics, but the bottom line is:

• FY2012 discretionary spending change is -$25 billion from the adjusted baseline, $2 billion better than Reid’s plan
• FY2012 net deficit change from the adjusted baseline is -$21 billion, $4 billion better than Reid’s plan
• FY2013 discretionary spending change is -$47 billion, $1 billion better than Reid’s plan
• FY2013 net deficit change (excluding debt service, which is a somewhat-shaky estimation) from the adjusted baseline is -$41 billion, $3 billion better than Reid’s plan
• The subtotal net deficit change (again excluding debt service) is -$758 billion, $3 billion better than Reid’s plan

R&E part 3 – 8:46 am 7/29/2011) – I screwed up the math on the Memorandum portion of Table 1, affecting the CBO assumption for GWOT funding. I have pulled the chart.