Kick the Can

1. The President and our fearless leaders in the Congress have decided to kick the can down the road once again. The $917B in "cuts" they agreed to yesterday, over 10 years, amounts to basically 1% of spending over that period. Wow. What a brave step. The $1.5T of additional spending "cuts" they agreed to pursue . . . will never happen.

2. Why won't the additional $1.5T of spending reductions occur? Because no new "committee" is going to be able to solve this problem on its own. How many "commissions" or "gangs" or "posses" do we need to create to get this through our heads? Both the Bowles/Simpson Commission and the Gang of Six put forth decent plans to solve the problem. These plans went . . . nowhere, because as soon as the details got out, politicians started posturing and primping and preening for the cameras (hello Barney Frank). Out went the idea that their job is to solve our big problems. In came self-preservation.

The only way to solve these fiscal problems is for brave legislators to look into the camera and stop lying to the American People about the fact that there is actually a price that needs to be paid by all of us. We can not eat as much ice cream as we want and have someone else get the calories. Congress, with our support, made promises that we can not keep.

Commissions are created to deflect pressure. To get the public to shift its focus to some other problem while the "commission" works on the issue at hand and reports back its findings six months hence. By which time, the public completely forgot what the commission was set up to do. And, the problem rolls on.

This is the kind of "solution" that has gotten us into this mess.

3. A cut is a cut is (not) a cut. The other smoke and mirror technique Washington politicos are fond of is using big headlines to keep people from reading the fine print. They did not agree to cut spending. They agreed to cut the rate of increase of spending. Spending will keep going up and up and up. Just at a (very) slightly slower rate, if this plan goes forward. That's not a cut. A cut is actually spending less money than you spent last year.

4. Trust. The reason new taxes are not a solution today is because we do not trust Washington with more of our money. It is actually very simple. First, show us that you can be good stewards of our money by making hard choices and being truthful. Then, we will send you more money. Not the other way around. The Tea Party, for all its warts, stands for the proposition that we are no longer the patsies that our politicians have known us to be for so long. We are paying attention and we will not get distracted by the shiny object in their hands.

5. Missed Opportunity. We missed an opportunity to use the pressure of the current situation to solve the problem. We let the politicians off the hook. Eventually, we will need to have an adult conversation about spending. It looks like Washington is not ready for that.

6. Wet Blanket. The current situation is dampening spending and curtailing job creation. Lower growth equals less jobs created. The threat of default scared everyone, inside and outside of this country. Not good. Don't go out onto the ledge if you don't really intend to jump. We scared everyone and now it will take a while to get people to start spending again. We may have actually caused another recession. The enemic growth in the 2Q seems to indicate the economy is slowing. We never really know we are in a recession until well after it has started, but anectdotially, it feels like a recession has already begun. Firms are announcing layoffs. Business seems sluggish. I would say that it is very bad news for the President if we are going into another recession.

Out