A Debt Deal Without $4T in Cuts is a Double Whammy

Sunday, July 31st, 2011 2:20 pm by mikeinvaldosta

Yesterday I wrote of the consequences we face if the debt-ceiling is raised and if President Obama chooses to default. The reality is even worse. The compromise being sought by establishment Republicans, The Senate, and the president will ultimately lead to both higher inflation AND higher interest rates. A crushing double whammy on the US economy.

The “limited magnitude” of both debt plans put forward by congressional leaders would not put the nation’s AAA credit rating back on solid footing, Moody’s Investors Service announced Friday.

“Reductions of the magnitude now being proposed, if adopted, would likely lead Moody’s to adopt a negative outlook on the AAA rating,” the credit rating agency said in a new report. “The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high.”

It added that “prolonged debt ceiling deliberations” have increased the odds of a downgrade, but that the firm is still confident policymakers will avoid a default.

Our elected leaders had three options. Raise the debt ceiling and continue to print money to buy our own debt while making every commodity cost Americans more. Default and drive interest rates higher and hurt borrowers while rewarding responsible savers. And last, they could cut the $4 trillion in spending required to sustain our AAA credit rating, strengthen the dollar, and place America back on solid footing.

Washington kumbya compromise has once again found another, even worse than compromise, to stick us with. They have predictably decided to raise the debt ceiling, continue to print money AND have our country’s credit rating downgraded. We will be left with higher interest rates for borrowing and weakened purchasing power due to inflation caused by printing new money. The worst of both worlds. Ah, compromise.

But hey, screw reality and logic, let’s all have a feel good emotional moment of the grand compromise in Washington. Republicans and Democrats have reached across the aisle to screw the American people once again. Feels great, doesn’t it?

Now, more than ever, I am convinced congressional term limits AND a balanced budget amendment to the Constitution are the only ways our country can solve its government bloat problem.

2 Responses to “A Debt Deal Without $4T in Cuts is a Double Whammy”

  1. Jiles Says:

    You can most likely add higher unemployment also.

  2. Neal Says:

    Higher unemployment = fewer “revenues” + increased crime + a lot more social ills. Fewer “revenues” increase the pressure to creatively tax, and so it goes.

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