A Rigged Debt Deal

Tait Trussell is a national award-winning writer, former vice-president of the American Enterprise Institute and former Washington correspondent for The Wall Street Journal.


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President Obama’s interpretation of the debt-reduction deal he made with Congress twists the terms to favor entitlement programs and assure higher taxes on the rich. A White House “fact sheet” on the deal reveals these crafty terms showing Obama’s attempt to rig the agreement. Obama’s fiscal fancies, however, conflict sharply with approaches other countries have used successfully to rein in debt.

Actions by England and Sweden have shown dramatically that cutting spending worked better than raising taxes. They found that deficit and debt can be reduced by cutting, not boosting, taxes. A new study by the Tax Foundation, released July 29, notes that international experiences have occurred quite similar to the recent drawn out, bitter struggle involving Congress and the White House over raising the nation’s debt ceiling.

The agreement at the final hours prior to a probable default on the U.S. credit included the promise to create a special congressional debt committee. Its task is to handle the hot potatoes of entitlement reforms, such as for Medicare and Social Security, cuts in sensitive government programs, and possible tax reforms.

The tough budget cuts will be handed to this special committee made up of six Democrats and six Republicans, who will have to recommend debt reductions of $1.5 trillion over 10 years and report back to Congress by Thanksgiving. Congress is supposed to act on the recommendations by Dec. 23.

Studies have been made by Goldman Sachs (GS) and the European Central Bank (ECB) comparing the experiences of countries which have tackled the complex task of bringing under control debt and deficit problems like those of the U.S. The conclusions of the two studies are “remarkably similar,” Tax Foundation Economist David Logan explained.

Spending cuts are more effective than tax hikes, the Goldman Sachs Global Economics Paper No. 195 in April 2010 stated. Deficit and debt reduction can occur while taxes are being cut, according to the European Central Bank working paper No. 634, May 2006. “Perhaps the most striking and counterintuitive result of the literature is that spending cuts and tax decreases can yield a successful reduction of a nation’s deficit and debt.” According to the 2010 Goldman Sachs report, since 1975, some 20 countries have needed large deficit/debt reductions. Reductions driven by “government expenditure cuts, rather than tax increases…proved successful.”  Each “positively affected the deficit, reduced public debt, generally boosted economic growth” and resulted in “significant bond and equity market performance.” Is anybody listening?

In contrast, the deficit/debt reduction attempts driven by tax increases typically failed to correct imbalances and, furthermore, generally proved damaging to growth. “Successful episodes were three and a half times more likely to use tax decreases than increases. Contrary to the conventional wisdom in the United States, the international experience indicates that pairing spending cuts with tax cuts produce meaningful debt reduction and improved economic performance,” Logan concluded in his report.

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  • Angel

    Obama the architect of mayhem and disaster. Most readers who frequent this site are well aware of what this administration and the Left long term goals are. We know they aim to destroy this nation at any cost. The narrative in the News is about the right and the wrong way to solve the problem. We know what the talking head either don't know or are not talking about, it is about the total transformation of America. The bottom-up, top-down and inside-out an old Marxist theme of creating mayhem, Anarchy and fear (bottom-up) then pundits and political figures offer a solution (top-down) and finally destroy the system by turn it (inside-out). This needs to stop and we have to spread the truth every waking hour and bring these criminals to justice.

    • Jim_C

      If the goal is to destroy the country aren't there hundreds of quicker, more effective ways?

      So you'd think, according to what you're saying here, that Obama is quite effective at achieving these nefarious goals. If that were so, why aren't his supporters happier?

  • StephenD

    Angel, again, is spot on. A challenge that has yet to be answered:

    Tell us ONE THING this President has or has not done that a Socialist, Anti-American, Islamist leaning operative would or would not have done the same, in his position.

  • tanstaafl

    I did not vote for the Obamahdi since I felt that he was too inexperienced to run the country. Nothing his administration has done has changed my opinion. As our beloved country continues to spiral into bankrupty, let us concentrate on the lessons that our Dear Leader's incompetence has taught the public.

    Keynesian economics is a dead fish. Massive federal involvement in the economy is a disaster, and brings nothing by results that are the direct opposite of what Keynesian adovcates predict. The recent debt ceiling "crisis" is just another brick in the wall of Obama intransience. The obstacle to America's prosperity is Obama and his Democratic enablers.

    • Chezwick_mac

      There is a modern paradigm that supports your thesis unambiguously. While the USA and Europe were riding the crest of the dot-com bubble in the 90s, Japan's economic growth was so anemic that it is referred to among the Japanese as 'the lost decade'.
      In the course of that ten years, Japan's GDP fell from 3/5ths of the USA's to 2/5ths.

      The decade-long response from the policymakers in Tokyo was stimulus package after stimulus package…each one failing as miserably as the last. Bridges were built, roads were repaired, harbors expanded…all to no avail. Certainly Japan's infrastructure was modernized, but at what cost? The Japanese now have the highest debt to GDP ratio in the world (over 200%).

  • Supreme_Galooty

    God, in His Wisdom, neglected to build a large fence around that tree in the Garden, thus giving us our most precious freedom of all: The Freedom to Fail. For without the very real possibility of failure, how can one ever actually succeed? Now the USA engages in failure, a failure that could achieve catastrophic dimension, a failure that could be fatal.

    Christ taught that failure (sin) is abominable; is unreconcilable to God; and must be relegated to the trash heap. The Sinner, however, can be rehabilitated and made pleasing to the Eyes of God, first by recognising the error, and then by renouncing it.

    America stands at a stage where it has allowed a sizable portion of its populace to degenerate into parasitic, larcenous debauchery. It may be too late to save the country through mild remedies. It may be necessary to exise the cancer through surgery or radiation, or most painfully, through chemical poisoning. But without significant ACTION, our country is doomed.

  • http://prothink.org Luke

    Obama isn't doing this on his own….. he's being controlled by his Jewish handlers. Prothink.org for all you unenlightened folks.

  • Ghostwriter

    Luke,that was a disgusting and bigoted statement. That comment would not have been out of place on "Der Sturmer" in the 1930's. Anti-semitic garbage has no place on this website or anywhere else.

  • Ghostwriter

    Luke,that was disgusting and bigoted. Anti-semitic garbage like yours has no place on this website or anywhere else for that matter. You'd be much happier on a neo-Nazi website.

    • Luke

      I can't be anti-Semitic; I have Arab friends and Arabs are Semites. You lose :)

      Think next time before you talk out your ass.

      • Ghostwriter

        I meant stop with the Jew hatred,Luke.
        Think next time before you make yourself look stupid.

  • Supreme_Galooty

    Lumping Arabs and Jews together into the term "Semite" is certainly one of Mother Earth's proofs that God has a sense of humour. The Supreme Galooty, however, suspects that God merely let one of His lesser appointees get ahead of himself by proffering such a concept.

    But upon further examination it comes to pass that God is, once again, unblemished, whilst his minions – once again – have proven themselves unworthy. Semites are an ethnic group comprised of Jews and camelbuttsniffers, whereas Islam is a religion of moonbat moonfollowers. Judaism is a religion, SOME of whose members are Semitic, that focuses on the concept of beneficence of, and the ascendancy of, Life. Musselmen, on the other hand, focus on death and the propagation of death. May God infest their tents with fleas and rap "music."

    • http://prothink.org Luke

      Arabs (not necessarily followers of Islam) and Jews are Semites, goofy. By definition: Semitic: of, relating to, or constituting a subfamily of the Afro-Asiatic language family that includes Hebrew, Aramaic, Arabic, and Amharic.
      I guess I am proof of God's sense of humor in that I just made your Kosher ass look silly :)

      • StephenD

        No, you are proof that some cultures allow bestiality.

        • http://prothink.org Luke

          Dumb-ass,

          How about instead of smearing me, you refute my assertions?
          Oh wait, you can't :) The truth hurts, doesn't it?
          p.s.- holohoax101.com

  • Supreme_Galooty

    Firstly, The Supreme Galooty's Ass is neither kosher nor open to discussion. Secondly, name three Arabs who AREN'T Musslemen. Thirdly, goofy, you obviously did not read or did not understand my first sentence in my comment above.

    The Supreme Galooty sentences you to nine lifetimes of rap "music." May you rest in peace!

  • Supreme_Galooty

    The Supreme Galooty needs no reference to wiki whatever. SOME Arabs are Christians. YOU, on the other hand, remain benighted. Off with you. Rest In Rap. (RIR)

    • Luke

      Supreme galoot,

      Judaism is not a religion of beneficence, but an ethnocentric cult of hate. I'm sure you've heard of the Talmud — the true bible of the Jews. It preaches death toward all non-Jews (i.e. "Goyim"), and permits pedophilia.

      Just keep drinking the fluoride, goofy.

      • Ghostwriter

        I think you've got the religions mixed up,Luke. Islam seems to allow child marriage. And while I may not be an expert on the Talmud,I doubt very highly it allows that. Please stop showing your anti-semitic filth on this website. You are a blight on civilized conversation.

        • Luke

          I don't have the religions mixed up at all. Judaism is satanic whether your petty ass wants to admit it or not.

          You want talk filth? Just look at the Talmud.

          • Ghostwriter

            You're appalling,Luke! Do you know that? Your hatred for the Jews is disgusting and vile. Most Jews are a decent and honorable people,but you wouldn't know that. Why don't you go back to the ooze that you were spawned from and leave the rest of us alone.

  • Ghostwriter

    Luke,you are still drinking from the putrid well of anti-Jewish hatred. It's foul and disgusting. Please peddle it elsewhere.

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