We Cut Nothing. It’s All Still Broken!

August 2nd, 2011

So the debt ceiling is all fixed? Too bad. What else will generate so much hyperbole from our politicians? There were stories of terrorism, global disaster, and economic meltdown. My favorite was this one from Nancy Pelosi who insisted the debt limit be raised massively, “We’re trying to save life on this planet as we know it today.” Rep. Michelle Bachmann worried that raising the debt limit at all would be “like saying we embrace being Greece.” It was fun to watch. Rep. Maxine Waters said the final compromise bill “may be the single-worst piece of policy to ever come out of this institution.” Maxine needs to brush up on her history, this comes nowhere close.

It seems in general people are happy this is over. But I am not sure what everyone is celebrating as far as the “debt ceiling deal”. Maybe that is why the stock market was down 265 points today and has been down 8 days in a row?! Government did not “cut” the deficit, and they did not “cut” spending. THEY ONLY SLOWED THE GROWTH OF SPENDING. They cut the “future growth” of spending. Why don’t people understand the word game that is being played?  This deal will “cut” the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent. There, that is the only “cut” that we got. The deal kicks most of the cuts to the back of the Congressional Budget Office’s 10-year spending window, which means they may not occur at all.

And we were never going to DEFAULT! We were always going to pay the interest on the debt, we were not going to default on the debt. Default is when you do not pay your debts. We would have been forced to cut spending on some programs and all the goodies we love to have until this was resolved, but we were never in danger of default. We would have paid our debts that were due. So thanks to rhetoric big spenders won and fiscal sanity LOST!

Both sides acted like eight year old children whose brother just took the last cookie at the dinner table. The extreme ideologues of the political parties sicken me. And the reality is that we cut NOTHING. If anyone would bother to slow down and look at the real numbers, all the geniuses on Capitol Hill did was slow the future growth of our spending (most of it back loaded). It’s like me saying I want four new Porsche automobiles next year, but instead to be cost conscious I am only going to borrow enough money for three. How is that cost cutting? I can’t afford one new Porsche in the first place; let alone 4 or 3! And our country can’t afford to spend $3 trillion, or $4 trillion, or any trillion! What don’t we all understand about the fact that we are broke! And we cannot keep borrowing massive amounts.

All we have done is masterfully disguise what will be continued growth in reckless, unaccountable, big government spending. But the markets will not be fooled, even if we were. That means a debt rating downgrade soon, which makes it more costly to borrow, and will limit our ability to borrow as much as we are used to borrowing. Rates will go up when the market figures all this out, thanks Congress. Trust me, in the end the markets are never fooled. It is time cut all the pet projects beloved by both parties, we’ll be forced to pretty soon. We have too much government, and too much government spending.

I’ll leave you with some Thomas Jefferson quotes. If you think Jefferson a fool, then you may be a lost cause:

“It is incumbent on every generation to pay its own debts as it goes.  A principle which if acted on would save one-half the wars of the world.” by Thomas Jefferson

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” by Thomas Jefferson

“My reading of history convinces me that most bad government results from too much government.” by Thomas Jefferson

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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