It’s a Deal! — Instant Analysis (updated)

Good news this morning from the Wall Street Journal:

The deal would raise the debt ceiling by $2.4 trillion in two stages, and provide initially for $917 billion in spending cuts over 10 years. A special committee of lawmakers would be charged with finding another $1.5 trillion in deficit reduction, which could come through a tax overhaul and changes to safety-net programs.

If the committee doesn’t find at least $1.2 trillion in savings, or Congress doesn’t adopt its proposals, a pre-set array of spending cuts would kick in, including cuts in military spending and Medicare payments to health-care providers.

Or is it?

To find out, let’s get out our “Whoop-de-doo Budget Deal” Deficit & Debt Forecaster spreadsheet, a copy of which is available for downloading and your personal use here.

(Link is to spreadsheet updated & corrected 08/04/11. The one shown below is what was originally posted. See 08/04/11 post for corrected information.)

Note that the inputs have been set at 90% revenue growth rate factor and zero spending cuts. Considering the recent revenue history, the base forecast seems optimistic. That’s the reason for the adjustment. No attempt was made to forecast “intragovernmental” debt and that was assumed constant at the closing value for fy2010. The “Base” numbers are taken from the OMB fy2012 budget spreadsheets.

This is the acid test to see if the “Deal” has anything to do with fiscal sanity or is merely a ruse to get past the 2012 election. Sure enough, even if the economy continues to lag and none of the “cuts” are put in place quickly enough to affect the 2012 deficit, both political parties can make it under the election wire without having to again address the debt limit question prior to that looming referendum. Just political Theatre Kabuki as per usual.

But that Ol’ Man Deficit will just keep rollin’ along.

Perhaps you’d like to send this to your Congressperson? (spellcheck did accept that) That’s one way of letting him or her know you know more than they know. . .or will admit to.

Ciao, Dennis

P.S. “Happy August,” by the way.

UPDATE: From the WSJ editorial page:

A Tea Party Triumph

The debt deal is a rare bipartisan victory for the forces of smaller government.

“Triumph”? Rupert, get serious. Or don’t you read your own papers?


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