The Budget Crisis Explained to a Nineteen-Year-Old

A junior in college majoring in finance asked me the other day what I thought of the negotiations coming out of Washington, D.C. I'll call him Arthur. Not much. The premise is raise taxes now, and a future Congress will make cuts later. Trust us. Trust us. Yeah, sure. How can any Congress promise to tie the hands of a future Congress? The Demos and MSM have made much of S&P's threatened downgrade of US bonds from AAA if we don't raise the debt limit. Well, the S&P report also said that they need to see significant budgetary reform too, i.e., regardless of lifting the debt limit. Bottom line: Congress can scramble and pass the debt increase, pat themselves on the back, and still get the bond downgrade because their "Grand Bargain," or whatever they call it, is transparently a fraud. Why don't they call it the Faustian Bargain? Arthur: I thought the Gang of Six's proposal was to cut close to $4 trillion off the debt over the next decade through tax changes and cuts, am I wrong...(Read Full Article)