2012-02-14

U.S. capital moved from DC to La La Land

Remember in 2011, way back when the budget deficit was a big issue in American politics? There was a big fight over the deficit and the Republicans threatened to not increase the debt ceiling, forcing the government to make massive spending cuts immediately? The Democrats created a lie that this would cause America to default and lots of people believed it because they were Democrats or really scared. The two sides started negotiating and they decided to create a Super Committee of Congressmen, whose job it was to find $1.4 trillion in cuts over ten years. Even though America was set to spend $40 trillion in the next decade and this was only a couple percent of the whole pie, they couldn't do it. Still, everyone in Washington agreed they need to make cuts and $1 trillion or more over ten years was a good start.

Obama budget: National debt will be $1 trillion higher in a decade than forecastThis is going to be one hell of an election. If this budget isn't enough to get the ball rolling, Republicans don't want to face the electorate having cut spending and they're going to allow the extension of the payroll tax break with no offsetting cuts. ZeroHedge tells us what that means in GOP Finally Discovers Obama's Achilles Heel: Just Let Him Do What He Does... And Encourage It!
That's right - no offsetting spending cuts. Which means one thing - much more debt. How much more? At least $160 billion much. Which means that the debt ceiling discussion will hit not in November as we speculated previously, but potentially as soon as September.
Last year the debt ceiling debate took place during a period of unease in the markets. Panic over Greece and a downgrade of the U.S. debt rating were the headlines that dominated this period. Now, we're headed for a potentially similar period in September 2012, a month that is historically the worst performing due to the prevalence of crashes and panics.

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