While “markets react favourably” and “disaster is averted” because the Republicans and Democrats have reached a deal that will prevent America defaulting on its debts I feel I need to explain how the “plan” works.
It works like this: Obama bends over and the Republicans give it to him, hard
And I’m not even blowing this out of proportion. This is metaphor, not hyperbole.
You see friends this is a tale of a crisis that has 3 facets.
1) The American government uses up too much money (spending)
2) The American government doesn’t take in enough money (taxes)
3) Because of 1 and 2 the American government is in danger of exceeding its debt ceiling.
The debt ceiling is basically the legal limit on how deeply into debt the US government allows itself to get. It’s like an overdraft facility. When you run out of money the bank will let you keep on drawing, because they are sure you will eventually pay them back (and they love the extra fees they charge).
But that will only work for so long. If you keep drawing without paying back you will soon get so deeply into debt that you can never get out, which is bad for you and the bank, so they enforce a limit on how much extra money you can take. Likewise, the debt ceiling places a limit of $14.whogivesacrap trillion on America’s debt. If the government exceeds it then it will not be legally allowed to borrow any more, which means it will be unable to pay its expenses, the interest on its loans and so on.
When the Republicans and the Democrats started battling over this problem they each had things that they wanted. The Repubs wanted to cut government spending (because they are in favour of a small government that will be more easily pushed around by big business) while the Demos wanted to raise taxes on the rich (because their sponsors are mostly from Wall Street and they are experts at dodging tax hikes and because tax hikes are the only way America is going to actually solve its problems).
(Let’s be clear here: there are only 2 ways to reduce the deficit: you can cut spending or increase taxes. There are no other ways.)
So when debates over these issues started the Repubs were all about cutting spending and the Demos were all about raising taxes on the rich. Both of these would reduce the deficit and keep America away from its debt ceiling. So when a deal was struck it seemed that some sort of compromise had been reached.
And so it has: the deal calls for cuts in spending, and a raising of the debt ceiling.
What the fuck?!
So…the Republicans got what they wanted and the Democrats didn’t get what they wanted.
But because the Republican plan isn’t actually going to solve the problem they were “forced” to agree to raise the debt ceiling, since America’s debt is now going to get much, much worse.
This isn’t a compromise. The Republicans got what they wanted. The Democrats did not get what they wanted, and to deal with how shit this deal is they are giving America permission to go even deeper into debt!
I’m not even American and this pisses me off. It’s even more annoying than the New York Times trying to portray this as a historic compromise that Boehner is going to have to convince his party to take.
I’m sure the Republicans will make a big song and dance about resisting but if they aren’t laughing their fucking asses off at this point then I’ll eat my titanium hat.
And while markets initially “reacted favourably” to the news that a deal had been stuck when the details of the deal became known investors (who tend to be quite good at math) shat a collective brick and started making the “y u no” face at Obama.
And the markets tumbled as well.
(Incidentally did you notice that the article in the above link mentions reduced spending but makes no mention of tax hikes on the rich? This is not a surprise, given the demographic of the website.)
All I can hope at this point is that Obama has some kind of epic plan for turning this thing around.
But while I’d really like to hold on to that hope there is a certain Nobel laureate economist who thinks that I, and Obama, are fools.
[Standard Disclaimer: this post was entirely my own opinion and was not paid for in any way, directly or otherwise, by anyone or anything that stands to gain in any way from the ideas expressed herein.]