You have to hand it to the Donald. He speaks his mind. This week
he dropped an unwelcome stink bomb on Capitol Hill during his Phoenix rant
Tuesday night. If Mexico won’t pay for my wall, he seemed to say, then Congress
will—-even if I have to shut down the Imperial City to extract the first $1.6
billion of seed money:
“We’re
going to get our wall,” Mr. Trump said at a rally in Phoenix. “If we have to
close down our government, we’re building that wall.”
The Mexican Wall waste an estimated $20 billion needed to
complete and would place ICE agents at the border handing out guest worker
papers to anyone who comes across looking for a job. That would mean more
domestic production and tax revenue, and a tad less addition to the crushing
national debt that Washington is handing generations to come.
It didn’t take long for Washington’s permanent political class
to say “no dice” to the shutdown idea. It seems Speaker Paul Ryan has been
domiciled in the Imperial City since he was 21 years old and makes no bones
about his priorities.
“I don’t
think anyone’s interested in having a shutdown,” House Speaker Paul Ryan said
at a stop at an Intel Corp. facility in Oregon on Wednesday…….
Mr.. Ryan
said he expected lawmakers would need to pass a short-term spending bill in
September to give them more time to work out a broader budget agreement later
this year.
What has the GOP Congress been doing the last nine months that
it hasn’t enacted into law a single one of the 12 annual appropriations bills?
The same bills that would provide upwards of $1.1 trillion to run the Pentagon
and the domestic agencies.
The answer is simple. They’ve been deliberately burning up the
clock in order to force spending measures through as emergency continuing
resolutions (CRs) or 11th-hour compromises to keep the government open. This
has been going on for years. It is the very reason Washington now stands
on the edge of raising the national debt ceiling above $20 trillion.
So we’ve officially enter the kick-the-can season. You can count
on Paul Ryan to spin and misdirect in order to obfuscate what’s actually going
on. The House Speaker is about to capitulate again to the nation’s fiscal
doomsday machine. Expect clever maneuvers designed to hide the truth through
yet another election cycle.
That’s
exactly what Ryan did back during the 2013 shutdown crisis when
he negotiated a sell-out deal with ultra-liberal Dem Senator Murray to keep the
government open through the 2014 election.
In that
case, he agreed with Sen. Murray to bust the sequesters caps by $64 billion over FY2014-2015.
Per the
typical routine, Ryan got $32 billion on
top of the $1.01 trillion already slated
to be wasted by the Pentagon during that two year period, while Murray
got $32 billion more (a 3.5% increase ) to sprinkle across a myriad of domestic
social programs. At the end, all parties were praised by the beltway lobbies.
Likewise,
Ryan’s first act as Speaker after succeeding John Boehner following the shutdown crisis of 2015 was to pass the
Boehner-Obama deal that suspended the national debt limit and empowered the
Obama Treasury to borrow at will.
That it did!
As of
October 1, 2015, the net debt of the US was $17.66
trillion. After the Ryan-enacted debt limit suspension expired
on March 15, 2017, the net debt soared to $19.82 trillion.
Paul Ryan
and Continuing Resolutions in the Imperial City
This time, Speaker Ryan is going to need to deploy his best
tricks to avoid a giant fiscal mishap. That’s because the White House is
occupied by the Great Disrupter. By the looks of Trump’s Twitter account he’s
still capable of unleashing the kind of impulsive curve ball that the Imperial
City simply cannot anticipate.
Having
already complicated the appropriations and CR, the Donald piled on more by
suggesting GOP leadership had already screwed up raising the debt ceiling
during the few days available when Congress returns from August recess.
Opined the Donald,
I
requested that Mitch M & Paul R tie the Debt Ceiling legislation into the
popular V.A. Bill (which just passed) for easy approval. They……didn’t do it so
now we have a big deal with Dems holding them up (as usual) on Debt Ceiling
approval. Could have been so easy—–now a mess!
Here’s the
thing. Trump is 70 years old and has spent just eight months in the Imperial
City, or about 1.0%of his life. Ryan and
McConnell are collectively 122years old and
have been playing their trades in the Great Swamp for 82collective years, or two-thirds of their lives.
The rank and file Republicans on Capitol Hill desperately fear
being blamed for a shutdown. They have bound themselves as hostage to both the
Fiscal Doomsday machine and the main street media’s need to safeguard Uncle
Sam’s credit at all costs.
CNN talking boxes would have a field day excoriating the GOP for
shutting down the government. Now that the GOP allegedly controls the White
House and both chambers of Congress the situation is even more muddled. Thus,
as one member of the Freedom Caucus opined to the Wall Street Journal,
“A
government shutdown hurts Republicans—it’s the last thing I want,” said Rep.
Trent Franks (R., Ariz.), a member of the House Freedom Caucus who was at Mr.
Trump’s rally Tuesday. “It is a political liability of profound significance to
us.”
Many GOP
lawmakers worry a shutdown or a failure to raise the government’s
borrowing limit—another deadline they are
facing this fall—could harm their chances of retaining the House majority in
next year’s midterm elections. Treasury officials have said Congress must raise
the government’s borrowing limit at some point near the end of September.
The real aim is herding legislators into the Christmas holiday.
In that circumstance, as has been proven over and over in the past, not even
the most resolute hawks have been able to stand by their convictions. The
mantra always becomes “on to next year for real reform!”
Goldman
Sachs, Debt Ceilings and Can Kicking
But
perhaps this time it will be even worse. The Goldman Sachs Regency in the White
House would readily sign up for the skinny bill and three-month punt. They are
flat-out desperate to keep the casino at bay and the stock average from
plunging.
Assuming
that the Donald doesn’t blow-up the proceedings on a skinny bill, the
maneuvering for a December deadline would be where the rubber could finally
meet the road. That’s because there would need to be at least a $1.5 trillion debt ceiling increase just to
make it to December 2018 under current tax and spending policy.
The
Treasury will need to borrow $500 billion or
more to replenish its depleted cash balances and to pay back the funds which
allowed it to pay the bills since March 15. The Treasury will be running
upwards of an $800 billion annualized
cash deficit between now and December 2018.
Even with
a $1.5 trillion interim debt ceiling increase,
there still wouldn’t be room for a single dime of tax cuts on top of the red
ink that is already baked in. When it comes to Wall Street’s hope that Congress
will pass a tax bill before the end of the year, or the next election – fuggedaboutit!
There’s no way to get a big enough debt ceiling increase to
accommodate the current structural deficits and the Trump Stimulus, without
major help from the Democrats.
The can kicking season is once again here, and this one will be
like no other.
Reprinted
with permission from The Daily Reckoning.
Former
Congressman David A. Stockman was Reagan's OMB director, which he wrote about
in his best-selling book, The Triumph of Politics. His latest book
is The Great Deformation: The Corruption of Capitalism in
America. He's the editor and publisher of the new David Stockman's
Contra Corner. He was an original partner in the Blackstone Group, and reads
LRC the first thing every morning.
Copyright © 2017 The Daily Reckoning, David Stockman
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