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Monday, August 1, 2011

Fake Debt Solution The Latest Deception

The Tea Party activists and others protesting a $14.3 trillion national debt (growing by the second) should take little solace in tonight's resounding Republican betrayal of taxpayers and future generations, approving the debt ceiling increase.  Make no mistake, this is no victory for the Tea Party, or for anyone other than those getting government contracts.

If this is winning, it's only in the Charlie Sheen sense, that being that one wins when one gets screwed.

Rather, this is losing.  And losing stinks.  And being a "good loser," or accepting a moral victory, is worse.  Just ask legendary college basketball coach Bobby Knight, who famously remarked once, "Show me a good loser, and I'll show you a loser."

Our children will likely reach adulthood and face much higher tax rates and institutionalized mandates imposing other costs upon them. Compounding debt can be rolled over at low rates today but almost certainly will be at higher rates, using up a growing percentage of future tax dollars. Future budgets -- and tax revenues -- will need to grow simply to preserve the current level of government services because the debt portion of the budget will grow indefinitely unless there are principal paydowns and budget surpluses.

Today's House vote paves the way for the government to incur trillions more in debt, while the budget reductions are only taking effect after 2013, are illusory and non-guaranteed.

Many Republican supporters of this horrid deal were terrified of a credit rating downgrade of the United States. Problem is, that downgrade probably will occur anyway under this deal. Yet the fear of higher rates across the board illustrate precisely the need for current, significant budget cuts.

There are places to cut. The incredible bailout boondoggles of the last three years are a great place to start. These epic, monumental failures represent perhaps the greatest single wealth transfer -- from low and middle class Americans to wealthy owners of businesses in favored industries like banking, insurance and energy -- in our history.

Moreover, this wealth transfer, done under the guise of rescuing the economy, has achieved nothing but prolonging an economic recession, as the well-off beneficiaries hoarded the largesse in preparation for a still-feared (and ever more likely) financial day of reckoning.

This debt ceiling deal also represents a negotiating epic fail. It was the surrender of leverage of a magnitude and at a critical time, a perfect opportunity that occurs rarely.  Leverage that goes unused -- or misused -- is wasted.  And rarely regained.

There was criticism of Tea Party congressmen for not compromising. But there was no compromise on spending, nor on tax rates. The debt may be so enormous that the stubborn adherence to the supply-side economic theory (which may not operate well in an uncertain legal, regulatory and economic climate in which the hoarding impulse reigns supreme over the entrepreneurial risk-taking, profit-seeking impulse) may require reconsideration.

In any event, one senses the political landscape, on both the Right and Left, has changed. The 2012 presidential race has changed. The window of opportunity for some individuals, and even movements or third parties, has unexpectedly and suddenly opened. This will be an eventful 15 months going into Election Day in November 2012.

Eric Dixon is a New York-based election lawyer who handles legal issues and strategic consulting for various political candidates, party organizations and civic organizations including a New York-area "tea party" organization.
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