Tag: Debt Ceiling

After having decided in December to delay raising the debt ceiling for the third time at the request of Congress until they returned from vacation in January, President Barack Obama has sent a letters to the House and Senate requesting the ceiling be raised. The debt ceiling has come within $100 billion of the current $15.194 trillion limit. The formal letters trigger a 15-day clock for Congress to consider and vote on a joint resolution disapproving of the increase. The vote a resolution of disapproval will be held in the House on January 18.

The trigger for the request actually occurred on December 30 while the President was vacationing in Hawaii and congress was “on a holiday break”. This is the third and final request to raise the ceiling that was agreed to last year when congress approved the budget. The last resolution of disapproval passed the Republican controlled House but failed in the Democratic controlled Senate. It’s expected that will again be the case, sparing President Obama the need to veto it.

This last bump will carry the government’s ability to pay its bills past the November elections when another raise will have to be discussed by the lame duck congress. Looking forward to that battle.

While he is on vacation in Hawaii, President Barack Obama will ask Congress to raise the debt ceiling for the third and last time under the agreement that was negotiated last August. The increase, which is expected to be made by December 30, can only be stopped by passage of a “resolution of disapproval” which the President can veto. That isn’t likely since the last resolution was blocked by the Democrats in the Senate and since Congress in recess until the end of January, well past the 15 days Congress has to vote in the resolution of disapproval.

Pres. Obama is expected to ask for authority to increase the borrowing limit by $1.2 trillion which is within $100 billion of the current cap of $15.194 trillion. The motivation to request this raise now is mostly political and tied to the election next November, as noted by David Dayen at FDL:

In numbers that came out earlier this month, the deficit under current law for Fiscal Year 2012, ending September 30, is set to be right around $1 trillion. That doesn’t leave a lot of wiggle room for the White House to get to the next election without having to deal with the debt limit again, especially if new measures like the payroll tax go unfunded. [..]

That seems to be the motivating factor here. The White House simply does not want to go through another bruising debt limit fight again before the election. That places a limit on borrowing in the next fiscal year. It explains why the “fight” over the American Jobs Act wasn’t that major a fight, because passing all of the measures without paying for them immediately would require raising the debt limit again. And paying for them immediately would make the stimulative effect irrelevant. A couple of the measures, like the payroll tax and unemployment benefits, could conceivably pass while allowing the Treasury to squeeze past the elections under the debt limit. But the numbers are pretty close.

David Weigel at Slate points out, with some amusement, another reason to make the request now:

Both parties like to vote against debt limit hikes, when they can — makes for good TV ads. The problem this time is that they may never get a chance. The Washington Post‘s sharp congressional reporter Felicia Sonmez points out that Congress is actually out of town until January 17. [..]

Congress is still playing the unconstitutional game of pro forma sessions to prevent the president form making recess appointments. Technically, the resolution could be passed but it would have to be by unanimous consent and that is just not going to happen. So as Weigel notes unless some renegade congress critter demands a vote, even Congress keep from getting near the “burning wreckage” of this fight.

Yes, it an old video but it deserves resurrection from time to time. This is one of those times. When you’re failing and looking to blame someone blame the left, it’s all our fault. This is the fall back that the White House has consistently used since Barack Obama took office. I chuckled at Jon Walker’s article at FDL Action using the Scoobie Doo analogy of the White house tactic of laying the blame on the left for their failed policies from the pathetic health care bill to the Dodd-Frank reform bill and now the economically disastrous debt ceiling deal.

It would seem the White House is basically taking the perspective of a Scooby Doo villain in concluding why their brilliant plans fail. Hanging upside down in a comically oversize net with their rubber monster mask removed they yell, “we would have gotten away with it, too, if it hadn’t been for you meddling progressive bloggers!”

A meeting that took place recently with White House National Economic Council Director Gene Sperling and progressive advocacy groups was described as “tense” by Politico‘s Ben Smith:

Sperling faced a series of questions about the White House’s concessions on the debt ceiling fight and its inability to move in the direction of new taxes or revenues. Progressive consultant Mike Lux, the sources said, summed up the liberal concern, producing what a participant described as an “extremely defensive” response from Sperling.

Sperling, a person involved said, pointed his finger at liberal groups, which he said hadn’t done enough to highlight what he saw as the positive side of the debt package — a message that didn’t go over well with participants.

(emphasis mine)

If this has a familiar ring of “Groundhog’s Day”,, you’d be very correct. John Aravosis of AMERICAblog recalls attending one of those meetings in 2010 with Jared Bernstein, who was Chief Economist and Economic Policy Adviser to VP Biden:

I guess what struck me as most interesting about the meeting were two things. First, when Bernstein noted that, in trying to solve the country’s economic problems, the administration faces “budget constraints and political constraints.” By that, I took Bernstein to mean that the stimulus could only be so large last time, and we can only spend so much more money this time, because we’re facing a huge deficit, so there’s not much money to spend, and because the Hill and public opinion won’t let us spend more.

That struck me as GOP talking points winning the day, and I said so (Professor Kyle wrote about this very notion the other day on the blog). The only reason we’re facing a budget constraint is because we gave in on the political constraint. We permitted Republicans to spin the first stimulus as an abysmal failure, when in fact it created or saved up to 2m jobs. Since Democrats didn’t adequately defend the stimulus, and didn’t sufficiently paint the deficit as the Republicans’ doing, we now are not “politically” permitted to have a larger stimulus because the fiscal constraint has become more important than economic recovery.

And whose fault is that?

Apparently ours.

Bernstein said that the progressive blogs (perhaps he said progressive media in general) haven’t done enough over the past year to tell the positive side of the stimulus.

Jon Walker summed up this blame the left game that the White House is playing as another failure that faults everyone but themselves and their Republican allies:

If people see the the positive tangible effect that a policy has on their lives, they won’t care what anyone has to say about it.  Likewise, if a handful of writers sign on to the White House Happy Talk PR campaign, bad policy will never become broadly popular.  The administration’s failure to convince either bloggers or the public about the benefits of a particular action is most likely a signal that it is insufficient, ineffective, destructive or incompetent.

Personally, I am more that tired of being told by Obama supporters that we on the left are tea partying, Republicans and racist for criticizing President Obama’s right wing appeasement policies and his failure to follow up on his campaign promises. I’m tired of being told that by criticizing Obama I am emboldening the tea party, so I should STFU and go away. The truth be told they are the tea party Republican allies who are promulgating the right wing policies that will be the destruction of everything that has been gained since Franklin Roosevelt, all because of a well spoken bright shiny object has dazzled them and still does.  

One  of the signs of insanity is repeating the same mistake in hopes of a different outcome. Seventy five years ago, the congress and President Franklin D. Roosevelt did exactly the same thing that congress and President Barack Obama did on Wednesday with the same results.

FDR’s Recession

By the spring of 1937, production, profits, and wages had regained their 1929 levels. Unemployment remained high, but it was considerably lower than the 25% rate seen in 1933. In June 1937, some of Roosevelt’s advisors urged spending cuts to balance the budget. WPA rolls were drastically cut and PWA projects were slowed to a standstill. The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 per cent and production of durable goods fell even faster.

Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938. Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels. Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. In most sectors, hourly earnings continued to rise throughout the recession, which partly compensated for the reduction in the number of hours worked. As unemployment rose, consumers’ expenditures declined, leading to further cutbacks in production.

The Roosevelt Administration reacted by launching a rhetorical campaign against monopoly power, which was cast as the cause of the depression, and appointing Thurman Arnold in the anti-trust division of the U.S. Department of Justice to act, but Arnold was not effective. In February 1938, Congress passed a new AAA bill which authorized crop loans, crop insurance against natural disasters, and large subsidies to farmers who cut back production. On April 2, Roosevelt sent a new large-scale spending program to Congress, and received $3.75 billion which was split among PWA, WPA, and various relief agencies. Other appropriations raised the total to $5 billion in the spring of 1938, after which the economy recovered.

The stock market plummeted over 500 points yesterday wiping out any gains from the recovery since 2008. The market is continuing to fluctuate after rather weak jobs report. While the U-3 dropped to 9.1%, it was due mostly to workers who are no longer seeking employment or are now in the ranks of the under-employed and jobs creation was weak. So after the debt ceiling deal and the worsening European banks situation, investors lacked confidence that the US could increase productivity.

But the White House and Congress insist on sticking to their story that if they hadn’t given the hostage takers all they wanted with no jobs stimulus or revenue increases, they wouldn’t have gotten the debt deal and the markets would have crashed. As John Nichols said in The Nation, “Unfortunately, it was wrong. Not just morally wrong. Not just politically wrong. Not just economically wrong. It was wrong with regard to the cherished markets.”

In the “Shock Doctrine”, Naomi Klein describes disaster capitalism as “treating disasters as exciting market opportunities”. She also explains core economic philosophy of Milton Friedman, an American economist, statistician, academic, and author who taught at the University of Chicago. He was also economic advisor to President Ronald Reagan. What has now become known as the “shock doctrine” is Friedman’s lasting legacy. It is Friedman’s teaching that are at the core of the tactics being used by the Tea Party and the GOP in with the completely manufactured debt ceiling crisis.

Friedman observed in “Capitalism and Freedom:

Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depends in the ideas that are lying around. That, I believe, is our basic function to develop alternatives to existing policies, to keep them alive and available until the politically impossible  becomes the politically inevitable

This is precisely what has unfolded over the last 11 years since President George W. Bush cut taxes favoring the wealthy and corporations until today with the passage of the bill raising the debt ceiling and the creation of the new “super committee” that will inevitably slash Social Security, Medicare and any other social safety program while raising no revenues.

Friedman also noted that a new administration has a six to nine month window to achieve major changes and if it doesn’t seize the opportunity to act decisively in that period, it won’t get another chance. The Bush administration understood that along with controlling both houses of congress which facilitated the tax cuts, the passage of the Patriot Act and the trillions that were thrown at the wars and the banks in 2008 with TARP.

President Obama had the perfect opportunity to do do much of what he had promised in the first six months if 2009. The question is why didn’t he press his agenda with the Democratic majority controlled congress? If you look closely at his campaign speeches and interviews and his history in politics then the legislative and policy results of the last three years were quite predictable.

It was Rep. John Conyers (D-CA), angered at Obama during this debt ceiling negotiations, who pointed out that it was Obama who put the big three social safety programs on the table, not the Republicans. Republican were decimated in two electoral cycles partially based on the electorate fear that these programs would be thrown to the wolves of corporations and Wall St. Little did most voters realize that it would be a Democratic president and congress that would chisel away at those programs with “shock Doctrine” tactics of making them vulnerable with the ACA, which helped revive the Republicans, and the manufactured debt ceiling crisis.

Some Obama supporters, in attempts to explain his policy’s and what at first glance appears to be failure and leadership weakness, blame the obstructionist tactics of the GOP and feckless blue dogs in the Senate and the tea party. But it was Obama who created the deficit commission to look at ways to cut the deficit. It was Obama who appointed two deficit and anti-social security hawks to chair the commission. And who helped finance it? None other than octogenarian, billionaire Pete Peterson whose life’s goal has been to end Social Security and Medicare.

It was Obama who took single payer off the table even before talks on ACA began. He then proceeded to negotiate behind close doors with hospital executives, insurance and pharmaceutical industry to remove the public option and lower prescription drug costs.

It was Obama who failed to get a strong bank regulatory bill and prosecute the bankers for the fraud in the mortgage and housing collapse. It was Obama who agreed to extend the Bush tax cuts for two more years worsening the deficit and cut payroll taxes making Social Security part of the deficit problem for the first time and actually raising taxes on households making less than $40,000 worsening their economic status. It was Obama who blocked cost of living raises for Social Security recipients and retires federal employees and froze pay for all federal employees.

Some critics are trying to explain away all these events as weakness either do not understand, or are just ignoring, that this latest “crisis” ws as much Obama’s making as it was the tea party’s.

Paul Krugman gets it now when he concluded that this is what Obama wants

Glenn Greenwald said “the President wanted tax revenues to be part of this deal.  But it is absolutely false that he did not want these brutal budget cuts and was simply forced — either by his own strategic “blunders” or the “weakness” of his office — into accepting them.  The evidence is overwhelming that Obama has long wanted exactly what he got: these severe domestic budget cuts and even ones well beyond these, including Social Security and Medicare, which he is likely to get with the Super-Committee created by this bill.”

At “Rolling Stone”, Matt Taibbi, on pondering Obama’s tack to starboard, thinks that Obama is doing what he is told

The Democrats, despite sitting in the White House, the most awesome repository of political power on the planet, didn’t fight at all. They made a show of a tussle for a good long time — as fixed fights go, you don’t see many that last into the 11th and 12th rounds, like this one did — but at the final hour, they let out a whimper and took a dive.

We probably need to start wondering why this keeps happening. Also, this: if the Democrats suck so bad at political combat, then how come they continue to be rewarded with such massive quantities of campaign contributions? When the final tally comes in for the 2012 presidential race, who among us wouldn’t bet that Barack Obama is going to beat his Republican opponent in the fundraising column very handily? At the very least, he won’t be out-funded, I can almost guarantee that.

And what does that mean? Who spends hundreds of millions of dollars for what looks, on the outside, like rank incompetence?

It strains the imagination to think that the country’s smartest businessmen keep paying top dollar for such lousy performance. Is it possible that by “surrendering” at the 11th hour and signing off on a deal that presages deep cuts in spending for the middle class, but avoids tax increases for the rich, Obama is doing exactly what was expected of him?

Yes, that is exactly what he is doing. This was and is Obama’s plan.

h/t Vastleft for the graphic

The House of Representatives raised the debt ceiling by a vote of 269 to 161 and the bill moved to the Senate where it was expected to pass by unanimous consent passed by a vote of 72 – 26 and was signed into law by President Obama this afternoon. Besides raising the debt ceiling enough so that it won’t have to be considered again until 2013, well after the election, the bill contains budget cuts that will total over $2 trillion, part immediately, the rest over 10 years.  The bill was called “a sugar coated satan’s sandwich” by Rep. Emanuel Cleaver (D-MO), chairman of the Congressional Black Caucus due to the rest of the bill’s proposals. House Speaker John Boehner spoke with the press gleefully stating that he got 98% of what he wanted. On the other side of the Capitol building, Senate Minority leader Mitch McConnell warning that there is more use of raw extortion as a negotiating tactic in the future:

: It set the template for the future. In the future, Neil, no president – in the near future, maybe in the distant future – is going to be able to get the debt ceiling increased without a re-ignition of the same discussion of how do we cut spending and get America headed in the right direction. I expect the next president, whoever that is, is going to be asking us to raise the debt ceiling again in 2013, so we’ll be doing it all over.

The bill includes the creation of an equally split “super committee” that abrogates the right of congressional parliamentary prerogatives to debate or amend bills that arise from any agreement and if there is no agreement on cuts, then automatic across the board cuts that include Medicare and military spending. Keith Olbermann’s Special Comment eviscerates the bill’s flaws and the consequences.

There is no deal. The Reid bill failed to get the 60 votes needed for cloture. As expected it was blocked by Republicans and four Democrats. From CNN:

Senate Republicans on Sunday blocked a Democratic effort to end debate and move to a vote on Majority Leader Harry Reid”s debt ceiling proposal, extending consideration of the measure as negotiations continue on a deal to raise the federal debt ceiling and cut spending.

Reid had postponed the vote for 12 hours, until 1 p.m. Sunday, saying at the time there were “many elements to be finalized.” He plans to insert a negotiated final agreement into the proposal once a deal has been reached.

The Republican-controlled House rejected Reid’s plan on Saturday — partisan payback for the Democratic-controlled Senate’s rejection of GOP House Speaker John Boehner’s plan Friday night.

The Senate has been advised not to got to a ball game as there could be another vote later this afternoon with more sell outs to the hostage takers.

Paul Krugman on “This Week with Christiane Amanpour” said that this deal will cost jobs and decrease revenue worsening the crisis to even greater proportions:

“From the perspective of a rational person, we shouldn’t even be talking about spending cuts at all now,” Krugman told ABC’s Christiane Amanpour. “We have nine percent unemployment. These spending cuts are going to worsen unemployment… If you have a situation in which you are permanently going to raise the unemployment rate – which is what this is going to do – that’s actually going to reduce future revenues.”

“These spending cuts are even going to hurt the long-run fiscal position, let alone cause lots of misery. Then on top of that, we’ve got these budget cuts, which are entirely – basically the Republicans {saying}, ‘We’ll blow up the world economy unless you give us exactly what you want’ and the president said, ‘Okay.’ That’s what happened.”

“We used to talk about the Japanese and their lost decade. We’re going to look to them as a role model. They did better than we’re doing,” he added. “There is no light at the end of this tunnel. We’re having a debate in Washington which is all about, ‘Gee, we’re going to make this economy worse, but are we going to make it worse on 90 percent the Republicans’ terms or 100 percent the Republicans’ terms?’ The answer is 100 percent.”

H/t Raw Story for the transcript

Up Date: 20:00 EDT There is a tentative deal that could be voted on tonight in the Senate but I wouldn’t count on that considering that back stabbing duplicity of the GOP leadership. Brian Buetler at TPM has the ugly details of the agreement. If this is accurate it will probably throw this country into a second recession with the jobless U-3 heading back into double digits.

Keep in mind that no matter what the Senate may pass there is the renegade House and this time it isn’t just the tea party faction but the Progressive Caucus that is balking. This is not over yet.

The Boehner bill on raising the debt ceiling barely passed the House on a strict partisan line with a vote of 218 to 210. Not one Democrat voted for the bill, 22 Republicans voted against it and 5 Democrats were not present to vote. The bill was essential dead on arrival in the Senate where it was quickly table in a bipartisan vote of 59 to 41.

This is what’s next but it won’t happen until very late Saturday night/early Sunday morning. Why because Sen. Mitch McConnell says so. McConnell is refusing to even negotiate with Reid

Senate Majority leader Harry Reid’s proposed bill is no prize either but at least it moves the debt ceiling limit to past the 2012 election into 2013 and a new congressional session. (I think Reid is betting on taking back the House.) Reid also said that he is open to tweaking but it’s up to Republicans

At a late Friday press conference, Reid suggested that the door is still open to further tweak his proposal, including by adding failsafes to assure future entitlement and tax reforms — but it’s up to Republicans to offer up their votes.

“We have a closet full of triggers, people have suggested dozens of them but even though earlier this week, I was sitting talking to Jack Lew about triggers for an hour and a half and we can’t get Republicans to move on any trigger. We’re not going to have cuts on more programs without some revenue – that is a line we’ve drawn in the sand,” Reid said. “It’s up to the Republicans, right now we have a proposal…we are waiting for them to do something, anything, move toward us.”

How The Revised Reid Amendment Compares To The Revised Boehner Bill

h/t David Dayen @ FDL and Brian Buetler @ TPM

Up Date, 12:22 PM EDT: House Speaker John Boehner has said that the Reid bill is “dead in the water” and is refusing to meet or compromise with the Democrats. The Senate will vote for cloture on the bill at 1 AM Sunday morning. Boehner plans to hold a symbolic vote on the bill this afternoon to reject the plan preemptively.

Reid’s plan which cuts more without new revenue and creates the “super commission” only differs in the length of time for considering raising the debt ceiling again. The bi[artisan Senate plan extends the debt ceiling through 2012 while the tea party plan wants it rehashed in 5 months with guarantees that a “cut, cap and destroy” constitutional amendment is passed. Boehner is probably the worst house speaker since Newt Gingrich and even he knew how to get his ducks in a row and conpromise.

Up Date: 15:35 EDT The House has voted to reject the Reid bill before it even gets to a vote in the Senate. All of the Republicans votes nay along with a few Democrats. The voter was 173 – 246.

House Minority Leader Nancy Pelosi and Sen. Reid are on their way to the White House to meet with the President to presumably to discuss options and the next move.

This is what you get for negotiating with terrorists.

The Reid bill will still come to a vote late tonight at 1 AM EDT.

Up Date 1430 EDT: The Reid bill failed to reach cloture this afternoon it is now back to the drawing board.

I don’t even know what the hell the teabaggers want. Oppose whatever Obama might not veto, and blow up the world seems to be the agenda. ~ Atrios

Regrets, they have a few. After spending billions of dollars to buy the House, the US Chamber of Commerce has discovered that those Tea Party Republicans have a different idea about the economic needs of the country. The Chamber has been unsuccessful in convincing the freshmen, as well as, some of the more seasoned representatives that it is imperative to raise the debt ceiling to protect “the faith and credit of the US. The Tea Party caucus is winning

The chamber and other business groups have pressed with increasing urgency for Congress to raise the maximum amount that the government can borrow. They have cataloged the consequences of default at meetings, parties and dinners and over drinks.

On Tuesday, the chamber threw its weight behind the proposal of the House speaker, John A. Boehner, telling recalcitrant Republicans that a pending vote on the plan was a with-us-or-against-us moment that would be remembered during the next election campaign.

But as the government runs out of money, those efforts have not produced the desired result. The freshman class of House Republicans, along with longer-serving members, is balking at Mr. Boehner’s plan, let alone anything that Senate Democrats and the White House might be willing to accept.

David Case at Global Post‘s Macro says that business is fed-up with irrational right-wingers:

With the specter of a economic catastrophe looming unless Washington agrees to increase the government’s debt ceiling, Wall Street is already feeling the pinch. As lawmakers bicker, U.S. stocks have fallen for four straight days. The Dow has shed 3.3 percent, leaving it “on pace for its worst week since August 2010,” according to the Wall Street Journal. Meanwhile, investors this week gave the cold shoulder to a recent federal debt auction, foreshadowing downward pressure on the economy, higher borrowing costs and, in all likelihood, higher taxes on Americans (via even greater interest payments on our 14.3 trillion in debt) if lawmakers don’t get the deal right.

Who is to blame for this? “Tea Party hardliners,” according to an insightful analysis by Financial Times journalist Stephanie Kirchgaessner.

(emphasis mine)

At this point because of the doubt that this purely manufactured crisis, the average American tax payer will pay more thanks to the tea party idiots who are opposed to raising taxes. To say that this is pure idiocy on their part is an understatement. In the end they will play the victims and blame President Obama who wanted to give them even more that what they are now asking.

That is going to be not just a headache for the billionaires of the Chamber of Commerce but a migraine for most of the rest of the country. The Chamber of Commerce has a big problem that they created, like this whole manufactured crisis over merely paying the bill for what the US has already spent.

Apparently the rating agencies don’t like either the Republican or Democratic plans to raise the debt ceiling and address the deficit. Love them or hate them, the rating agencies still have huge power over credit ratings and have warned raising the debt ceiling and cutting spending is not enough:

Market analysts and investors increasingly say yes. The outcome won’t be quite as scary as a default, but financial markets would still take a blow. Mortgage rates could rise. States and cities, already strapped, could find it more difficult to borrow. Stocks could lose their gains for the year.

“At this point, we’re more concerned about the risk of a downgrade than a default,” said Terry Belton, global head of fixed income strategy at JPMorgan Chase. In a conference call with reporters Tuesday, Belton said the loss of the country’s AAA rating may rattle markets, but it’s “better than missing an interest payment.”

snip

Standard & Poor’s warned earlier this month that there was a 50-50 chance of a downgrade, if Congress and President Obama failed to find a “credible solution to the rising U.S. government debt burden.” S&P said it may cut the U.S. rating to AA within 90 days. Passing a $4 trillion agreement could prevent a downgrade, S&P said.

The other chief rating agency, Moody’s Investors Service, said the U.S. government would likely keep its top rating if it avoids a default.

CNN’s Erin Burnett also reported from her sources that neither bill may be adequate to keep the US credit rating from being down graded:

“I think it is important to emphasize that most people think both of the plans are really Band-Aids and don’t deal in any significant way with the spending and cost issues in the country,” Burnett said. “The issue was that Speaker Boehner’s plan does not cut enough spending right away. Harry Reid’s plan would cut about $2.7 trillion. Just because it is bigger than Speaker Boehner’s plan is really the reason the Boehner plan may still trigger a downgrade.”

The ratings agencies aren’t alone in their criticism. there is plenty of opposition from both sides in the deficit debacle. Zero Hedge noted:

Paul Craig Roberts – a true conservative, who was a Wall Street Journal editor and Assistant Secretary of the Treasury under Reagan – slams the Republican intransigence on the debt.

The Reid plan came under fire from Anti War for its alleged trillion dollar saving from the draw down of the two wars:

   Senate Democrats have issued a new “savings” plan that would nominally pare the projected deficit by over $1 trillion simply by assuming that the costs of the wars in Iraq and Afghanistan will eventually go away by virtue of those wars ending.    

   This has spawned a myriad of criticism, including a leaked Goldman Sachs memo warning that the nation faces a credit downgrade if it tries to use this sort of on-paper gimmick instead of actual cuts in spending.    

   And indeed, while politicians may be comfortable with the notion that the wars will end at some point in the next decade, it isn’t clear at all that this will be the case. Officials are already talking up continuing in Afghanistan long beyond 2014, while the war in Iraq seems set to be extended for “years to come.”  

   The memo noted that this war savings was only a problem “without a credible follow-on process,” which is to say an actual effort to end those wars. Given strong Democratic opposition to other efforts to end wars (including the ongoing war in Libya), it seems hard to believe officials are looking at doing anything credible about the seemingly endless conflicts.

The damage may already have been done. A small ratings agency based in China, Dagong Global Credit Rating Co., said it would down grade the US next week even if the debt ceiling is raised before August 2, citing the acrimonious fight has already damaged investor confidence.

It would seem that the Republicans and Democrats have already driven off the cliff and the crash will be as early as next week.