Republicans Begin To Cave On No New Taxes Pledge

The President and Republicans are at loggerheads over the debt ceiling problem. Signs are the Republicans are starting to cave on the no new taxes pledge.

The debt ceiling is the top limit the government can borrow up to. It is perhaps one of the most amorphous and irrelevant numbers in all of finance. How so? Well, it is set by Congress. It’s like having a credit card that you can set your own limit on. Gee, that sounds great.

So what is the big deal with this particular debt ceiling limit? Well, there are two issues. The first is we are really starting to feel the strain of a national debt that is out of control. The media and politicians like to report we are $14.3 trillion in debt, but the number is about 5 to 6 times this amount. How can this be? Well, Congress doesn’t count entitlement program obligations like Social Security and Medicare. It is akin to having 10 credit cards and not counting the 7 that have big balances! 

With such a huge balance, the concern is investors may stop buying United States debt. In truth, this has already happened. The biggest buyer of our debt is not China as you so often here. In truth, China barely buys our debt anymore. No, the biggest buyer is now…the Federal Reserve Bank. Yes, we are living off a Ponzi Scheme. Well, the Fed is about to stop buying at the end of June, so all bets are off and the debt problem is suddenly front and center. 

A second reason we are having this debate now is politics. We will elect a President in little over a year. This presents Republicans and Democrats with the opportunity to strut their stuff and what have you. This is generally bad for the peasants. That would be you and me. Regardless, much of this debate is based on this fact.

Republicans have been crowing that they will not agree to any new taxes in a debt ceiling deal. Being politicians, this doesn’t mean what it would seem to when they talk about it. Word is now out that Republicans will indeed not allow any new tax increases to be part of the project. That doesn’t mean they will not allow tax loopholes to be closed. Although technically not a tax increase, such closures would give the President the increased revenues he is looking for in the deal. 

What does it all mean? Absolutely nothing. These pinheads aren’t dealing with the real debt problems we face. Social Security, Medicare and the military cost more money per year than we bring in as total tax revenue. Until these three sacred areas are dealt with, the politicians are just spitting in the wind.