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When a cut is not a cut

Original post made by Independent on Aug 1, 2011

Regarding the debt ceiling soap opera, shame on us all for letting our elected officials pull something over like this on us. We certainly do the get government we deserve when we let things like this slide.

In the next couple of years, the bond market won't be so easily fooled and that is when the true crisis will occur and when we will be forced to change our ways.

Regardless of your political affliation, it is important that you realize what is truely happening in Washington as outlined by Ron Paul:

Web Link

When a Cut is Not a Cut
One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase.

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues. If your family's income did not change year over year, would it be wise financial management to accelerate spending so you would feel richer? That is what our government is doing, with one side merely suggesting a different list of purchases than the other.

In reality, bringing our fiscal house into order is not that complicated or excruciatingly painful at all. If we simply kept spending at current levels, by their definition of "cuts" that would save nearly $400 billion in the next few years, versus the $25 billion the Budget Control Act claims to "cut". It would only take us 5 years to "cut" $1 trillion, in Washington math, just by holding the line on spending. That is hardly austere or catastrophic.

A balanced budget is similarly simple and within reach if Washington had just a tiny amount of fiscal common sense. Our revenues currently stand at approximately $2.2 trillion a year and are likely to remain stagnant as the recession continues. Our outlays are $3.7 trillion and projected to grow every year. Yet we only have to go back to 2004 for federal outlays of $2.2 trillion, and the government was far from small that year. If we simply returned to that year's spending levels, which would hardly be austere, we would have a balanced budget right now. If we held the line on spending, and the economy actually did grow as estimated, the budget would balance on its own by 2015 with no cuts whatsoever.

We pay 35 percent more for our military today than we did 10 years ago, for the exact same capabilities. The same could be said for the rest of the government. Why has our budget doubled in 10 years? This country doesn't have double the population, or double the land area, or double anything that would require the federal government to grow by such an obscene amount.

In Washington terms, a simple freeze in spending would be a much bigger "cut" than any plan being discussed. If politicians simply cannot bear to implement actual cuts to actual spending, just freezing the budget would give the economy the best chance to catch its breath, recover and grow.

Comments (36)

Posted by Gene, a resident of Carlton Oaks
on Aug 1, 2011 at 10:24 am

Ron Paul is a worthless hack. He's never written a significant piece of legislation that has done anything but die in the House. He named his son after the immoral trump Ayn Rand. Need I say more?


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 10:29 am

Gene - I urge you to look at the actual numbers regardless of the source. Do you suggest that Paul is lying about the fictitious cuts that are being proposed?


Posted by Gene, a resident of Carlton Oaks
on Aug 1, 2011 at 10:35 am

I'm saying Ron Paul is an incompetent hack, and I don't trust anything he says. He's unable to make himself intelligible except for the mentally deranged fringe crowd who'd be gathering around Lyndon LaRouche or some other slimeball if they didn't have this clown of obfuscation to worship.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 10:42 am

Gene - I'm trying to create a civil fact based discussion on whether/not the proposed cuts are real or phantom as Paul suggests.

Anything you could add to the discussion that actually exposes the facts for what they are would be much appreciated. Thanks.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 11:06 am

More opinion for Democratic Congressman John Conyers on how bad and fictitious this debt ceiling agreement is.

We deserve the government we get. The masses will awaken only when it is too late.

Long-Time Congressman John Conyers Calls for Protest Against the Debt Deal: "Thousands of People [Should Mass] In Front Of The Whitehouse

Web Link



Posted by Frugal, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 12:21 pm

Shame on you blabbers who just waste space.
I am not a Ron Paul supporter... However, he is accurate, that DC CUTS, mean SLOWING FUTURE GROWTH OF SPENDING. Good for him clarifying that fact. Always double check WHEN 'cuts' take place, and does that mean ACTUAL $$ WILL BE LESS than today, or just SLOWING what would have been FUTURE GROWTH.


Posted by Patriot, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 12:48 pm

And both parties are happy to support Wall Street and bail them out when they fail. The recession and high unemployment weren't caused by excessive government spending, high taxes, or even the real estate bubble. The recession was caused by financial shenanigans and too big to fail. We need to solve this problem first.


Posted by Gene, a resident of Carlton Oaks
on Aug 1, 2011 at 1:40 pm

See, you can tell that the above posters don't have the foggiest what the guy is talking about. Yokel Texans vote for him because they're stupid and he always votes Republican. They suffer his gibberish because it makes them feel intelligent. Big words = intelligence. But big words need to mean something; not so with the Yokel Ron Paul. Charlatan. Big time.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 2:46 pm

Gene - Might I suggest you start your own "Ron Paul is an idiot" blog and focus your comments there?

In the meantime, it would be great to get your perspective on the issue that Ron Paul identified that all current plans have fictitious spending cuts and the implication of that.


Posted by Frugal, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 3:17 pm

These several PW local yokels who always try to trash any thread they disagree with,,,,they aren't smart enough to be able to debate or discuss intellectually, but they allow other considerations,
Again, I am not a Ron Paul supporter, but he has been elected to office for decades...his first decade or two he was a libertarian.
He doesn't identify himself as with the tp.
Patriot, the problem actually DID start in DC...with Finance Chair Barney Frank and Maxine Waters, taking huge contributions from Fannie & Freddie's Pres, who himself racked in MILLIONS, all working in sinc together with ACORN,cranking out loans. We can all still see Maxine standing in Congress defending Fannie's Pres,,""why he does a wonderful job of putting people in homes, they wouldn't be able to afford otherwise"". (that's right they couldn't buy a home legitmately). Later there were others who seized foul opportunities that presented themselves, First, there had to be the low-down, liar loan applications...long before any wall street guys saw crooked ways to bury those defaults into new 'investments'.


Posted by Patriot, a resident of Another Pleasanton neighborhood
on Aug 1, 2011 at 3:41 pm

"long before any wall street guys saw crooked ways to bury those defaults into new 'investments'."

That's how the problem got gigantic. It would never have gotten to the point that the government would bail out the likes of AIG if there had been firewalls in place.

What I'm worried about is that the exact same thing is going on now, not so much with mortgage default bets (that is still going on), but with student loan default swaps, commodities derivatives, credit card default derivatives, and many others. We are setting ourselves up for another catastrophe that will likely hit long before we have any real problem caused by spending more than we take in.


Posted by Gene, a resident of Carlton Oaks
on Aug 1, 2011 at 11:50 pm

@"Ron Paul identified that all current plans have fictitious spending cuts...."

Of course, the guy is an expert on fiction -- bad fiction -- having named his wackadoodle son after the strumpet fiction writer Ayn Rand.

As virtually every contribution to this thread has illustrated, it doesn't matter what the fictionalist Ron Paul says. What's important is that he seems to criticize minority recipients of social welfare systems and the minority-loaded public sector workers who service them. He can say anything he does - nobody cares, nobody listens - what's important is that it fits the right-wing anti-minority bias, cloaked in teapot nonsense.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 6:50 am

Gene - Please note that it is only you who brings up race in a discussion where it is just not relevant.

To all:

Here are some interesting facts I got from the US Office of Management and Budget. Federal outlays have increased 105% since 2001 and 40% since the start of the recession. What have we received in return for this dramatic increase in spending?

And unfortunately the office projects that spending will resume its dramatic upward growth after at best two years of flat spending.

It is a matter of when not if we will be faced with the same financial situation as Greece and many other debt-laden European countries. With this will come the loss of some of our sovereignty.

We continue to fool ourselves that either this won't happen to our country, it won't be as bad as some predict or we are taking actions to avoid the crisis. We continue to fool ourselves ...


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 7:01 am

Here the opinion of Bill Gross on the subject. For those who are not aware, Bill runs PIMCO and is the largest purchaser of US debt besides China and maybe Japan. His opinion is highly relevant.


Web Link

In his latest letter, Kings of the Wild Frontier, crushes the optimism of all those, roughly 4 altogether in the entire world whose combined IQ barely breaks into triple digit territory, who believe that the debt ceiling "compromise" does anything at all for US spending patterns, weather it is for total marketable debt, or the $66 trillion in NPV of future liabilities. Gross, however, does show us the 5 ways (well, 4 plus default) that the "debt man walking", aka Uncle Sam and his tens of trillions of future liabilities, plans to rob from you: dear taxpayer, in order to minimize the present value of these unmanageable future liabilities. To wit:

Balance the budget and/or grow out of it
Unexpected inflation
Currency depreciation
Financial repression via low/negative real interest rates


Posted by Yet Another Indy, a resident of Danbury Park
on Aug 2, 2011 at 7:52 am

I'm not at all shy about using selective numbers and desperate predictions when talking about entitlement groups (the minorities) and the minority based populations that makes up a goodly percent of public workers. I don't like one cent of my hard-earned money going to someone who shouldn't be in this country and who will take my money and use it to drink and carouse. Face facts, the Founders were white and Christian, and anybody who isn't is probably either a entitlement receiver or a public worker who feeds the addiction.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 8:54 am

It is pretty sad and pathetic that often times the response to fiscal responsibility posts are racism accusations.

Those that respond this way to clearly non-racial issues are doing a disservice to situations where racism actually does occur.


Posted by the gipper, a resident of Foothill Farms
on Aug 2, 2011 at 9:04 am

Yes, for me it isn't that the fiscal conservative movement started with a collective pants-wetting when the Ghananian Obama got elected. And it isn't that I rescend minorities living off my tax dollars. And it doesn't bother me one iota that the state has abzorbed all those minorities who stand behind the counters at the dvd when taking my money. I only care about the money. Dear Taxpayer: We're in trouble. To wit: We're facing a title wave of gargantuan perportion.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 9:32 am

Juvenile and untrue e.g.:

About The Concord Coalition

The Concord Coalition is a nationwide, non-partisan, grassroots organization advocating generationally responsible fiscal policy. The Concord Coalition was founded in 1992 by the late former Senator Paul Tsongas (D-Mass.), former Senator Warren Rudman (R-N.H.), and former U.S. Secretary of Commerce Peter Peterson. Former Senator Bob Kerrey (D-Ne.) was named a co-chair of the Concord Coalition in January 2002.


Posted by steve, a resident of Parkside
on Aug 2, 2011 at 9:38 am

Gene/Indy-I'd like to apologize on behalf of the other posters who continue to confuse you with numbers and realistic analysis. It's understandable that you react with vitriol and vacuous statements trying to defame people that are obviously trying to point out the oncoming depression you will no doubt blame on Bush. Stick with your strengths: race baiting, victimization, class envy, promoting giveaways to underachievers and a general condescention to anyone to the right of your messiah.


Posted by Concerned, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 11:02 am

All public sector employees should take cuts in pay,pensions and medical benefits comparable to the private sector over the past 10 years. That is the only way we can make any progress and it is equitable.


Posted by Sherman, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 1:32 pm

I strongly resent how anyone could say that a movement designed largely to strip underachieving people of color of their laziness-promoting benefits could in any way be racist.


Posted by 6 of one half dozen of the other - no!, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 1:47 pm

"When a cut is not a cut"

On the local level we call that furlough days.

Or maybe we, I mean the city, claim that when an employee group starts paying 2% of "their" pension plan payments it is a "cost savings" of 700K per year. Doesn't matter that the cost increase of the plan completely wipes out the savings. I guess it is a savings if we can just ignore the increased cost. What was I thinking?


Posted by Frugal, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 3:08 pm

Sherman does his weasel trick of pretending to be somebody else. He thinks all you readers are so dumb to believe that orthers are saying the weassel words. Isn't it fun to see who's he stickin' so&so with words, that he is, in fact writing. SO childish !


Posted by Frugal Douglas, a resident of Mariposa Ranch
on Aug 2, 2011 at 4:10 pm

It's always been a pet peeve of mine. How anyone could have identified slavery as a "race" issue is beyond me. It was simply good people raining in the bad people and being frugal with their dollars by so doing. Yes, many of the slaves were black. Does that make it a race matter? Now, the welfare lazies and the incompetent public sector workers who encourage their laziness also happen to be black and brown and other hyoos of color. And the rich aren't stained but are pure as the driven snow. But how can you interpret my free choice to go after the minority slackers instead of the rich good people a race matter? Everybody's equal ... except union workers.


Posted by I agree, a resident of Amberwood/Wood Meadows
on Aug 2, 2011 at 4:28 pm

"Posted by Frugal Douglas Everybody's equal ... except union workers."

Union workers should be expected to live by the same economics as everyone else. Why should they receive better wages than people doing the same work in the private sector, better job security, better pensions with earlier retirement ages, better healthcare, and retiree healthcare that is more generous than what working people receive?

While the working class doesn't receive anything close to those public employee union wages/protections/benefits they are being asked to pay for it all. Why is that?


Posted by Frugal Douglas, a resident of Mariposa Ranch
on Aug 2, 2011 at 6:25 pm

@"While the working class doesn't receive anything close to those public employee union wages/protections/benefits they are being asked to pay for it all. Why is that?"

Um, I dunno, have you tried asking which social class and political party had the most significant role in busting up and decimating working-class unions in the U.S.?




Posted by I dunno-I know, a resident of Another Pleasanton neighborhood
on Aug 2, 2011 at 6:54 pm

"Um, I dunno, have you tried asking which social class and political party had the most significant role in busting up and decimating working-class unions in the U.S.?"

Why is the conversation always about working class unions. Did you know that most union employees in CA are making FAR more than the "real" working class. And the"real working class" employees are being asked to pay for those salaries, benefits, and early retirements.

Even in Pleasanton the compensation for the average employee, when considering total compensation, is higher than the median FAMILY income in Pleasanton.


Posted by Amused, a resident of Deer Oaks/Twelve Oaks
on Aug 2, 2011 at 8:38 pm

""When a cut is not a cut"

On the local level we call that furlough days."

LOL...


Posted by Leland, a resident of Ruby Hill
on Aug 3, 2011 at 12:29 am

I inherited my hundreds of millions from my Daddy. But each and every day I take phone calls from my team of accountants who I've entrusted to preserve and expand my wealth. Taking these phone calls is hard work. I guess I must be a member of 'the real working class'. Argggh! Down with public workers who really aren't workers.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 3, 2011 at 9:21 am

See below for early evidence of the US losing its independent sovereign rights. Simply amazing that we have allowed it to come to this. It would be interesting to see the parallels between the US and UK when the UK had the world's reserve currency, abused that position and lost it, then slowly sank into economic stagnation for decades.

Web Link

China Joins Russia in Blasting U.S. Borrowing After Debt Ceiling Agreement
QBy Bloomberg News - Aug 2, 2011 11:29 PM PT


Posted by Ed, a resident of Another Pleasanton neighborhood
on Aug 3, 2011 at 9:54 am

Well, that's a conversation stopper.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 3, 2011 at 12:11 pm

Warnings continue:

Wall Street Warns Tim Geithner That The Dollar Is Staring To Lose Its Reserve Status

The Treasury's Borrowing Advisory Committee, chaired by such luminaries as JPMorgan and Goldman Sachs, which according to some (and by some we mean anyone who cares about such things) is the brains behind the decision-making process of US debt issuance has released its quarterly minutes, in which it has issued one of the most stark warnings about the fate of the US Dollar to date. While it is now a daily occurrence for China and Russia to bash the dollar, for the most part still powerless to provide an alternative (but rapidly gaining), the same warning coming from Jamie and Lloyd has to be taken far, far more seriously. Which is precisely what happened today. As Bloomberg reports, "The Treasury Borrowing Advisory Committee... said the outperformance of haven currencies and those from emerging nations has aided in the debasement of the dollar's reserve status, according to comments included in discussion charts presented ahead of the quarterly refunding. The Treasury published the documents today. "The idea of a reserve currency is that it is built on strength, not typically that it is 'best among poor choices'," page 35 of the presentation made by one committee member said. "The fact that there are not currently viable alternatives to the U.S. dollar is a hollow victory and perhaps portends a deteriorating fate.""


Posted by The impact of these statements?, a resident of Another Pleasanton neighborhood
on Aug 4, 2011 at 2:23 pm

"Warnings continue:

Wall Street Warns Tim Geithner That The Dollar Is Staring To Lose Its Reserve Status

The Treasury's Borrowing Advisory Committee, chaired by such luminaries as JPMorgan and Goldman Sachs, which according to some (and by some we mean anyone who cares about such things) is the brains behind the decision-making process of US debt issuance has released its quarterly minutes, in which it has issued one of the most stark warnings about the fate of the US Dollar to date..."

Can you explain the impact of these statements in simplified terms? I would really like to understand.


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 4, 2011 at 3:09 pm

First ZeroHedge is pointing out the hypocrisy of a bunch of banks warning the US and the Fed that the US is getting closer to losing reserve currency status (all international transaction us dollar as basis) as it was the banks who helped cause this and have benefited the most from the Fed's debacement of the dollar.

Secondly, one of the reasons the US hasn't lost this status yet is that there isn't a viable option. However, a viable option is on the horizon and may come in a different form than the past (e.g. SDRs from the IMF or a set of multiple currencies like the yuan for all asia pacific commerce).

Third, there are tremendous benefits for having reserve currency status most noteably lower interest rates. If the US loses this status, others (not the Fed) will dictate what interest rate we have to pay and our interest expenses will go up which will crowd out other spending.

None of this is good for the future of our country but it is what we deserve if we continue to abuse our reserve currency status.


Posted by ?, a resident of Another Pleasanton neighborhood
on Aug 4, 2011 at 3:35 pm

"None of this is good for the future of our country but it is what we deserve if we continue to abuse our reserve currency status."

Can you link some reading material on this topic? If possible, I would like some articles that support/oppose your opinion.

Thanks in advance


Posted by Independent, a resident of Another Pleasanton neighborhood
on Aug 4, 2011 at 4:00 pm

I would start with this:

Web Link

I have deepened my understanding of the situation by reading John Hussman's weekly piece at Web Link and ZeroHedge on a daily basis.

Hussman is a conservative investor but his perspectives on economic issues are highly respected and widely read. ZeroHedge has been the definitive source for what is truely going on with markets (it is written by a bunch of dis-infranchised wall street people). It too is highly referenced by others. It has a negative slant but has been spot on with regards to the true unvarnished financial issues. For example, it was one of the first to point out the dangers of the European situation and the fact that it has not been solved - evidenced today.

Thank goodness I don't use CNBC/etc. as my data source. This saved me much money today.


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