Cutting Federal Spending...One Way or Another

The Dow fell 248 points. Oil dropped to $96. And gold down a whopping $46. Why?

“Deficit Effort Nears Collapse”

Thus did yesterday’s Wall Street Journal describe the latest Congressional failure. To put it into perspective, a group of well-meaning, intelligent members of Congress had been asked to do something very simple. Every head of a household in the nation does it. Every businessman does it. Even some college students do it.

Members of Congress are very good at cashing checks. They are very bad at balancing the national checkbook. They haven’t done it for 10 years. They’re out of practice.

The situation is simple. The feds are spending too much. Every half-wit and democrat can see that they can’t go on like this.

But they couldn’t agree on how to cut back. So, they ducked. They put the matter to a “super-committee.” If the committee couldn’t do it, then some “automatic” cuts would come into play:

The deficit-reduction super committee, stuck in a partisan deadlock, faces an almost certain collapse — raising the threat of disruptive military spending cuts and a resurgent public anger at Congress, as it struggles with the basic tasks of governance.

Barring an unlikely, last-second breakthrough, the committee is expected to announce that it failed to reach its mandated goal of writing a bipartisan bill to reduce deficits over the next 10 years by at least $1.2 trillion.

Well, so far…so good. We don’t care if the cuts are automatic or manual… But if they don’t make some kind of cuts the country will go broke… Heck, the country’s already broke.

“You are very negative and pessimistic,” said Elizabeth this weekend. “You’re cynical. You may be right, of course. But you should at least give them a chance. There are good people in Congress. They are trying to get control of spending. You can’t fault them for that. And they may succeed.”

But what’s this? Surprise, surprise! Senators McCain and Lindsay announced that they weren’t going to allow no stinkin’ automatic cuts to “devastate” the Pentagon.

The zombies are in control now. And after the next election they’ll still be in control.

Newt Gingrich is now leading the Republican pack. The man’s think tank got $35 million from the health industry. You’d think that $35 million would pay for a lot of thinking. But what kind of thinking? About ways to reduce the power, influence and profits of the health industry? Not likely. Instead, they were hoping the former Speaker of the House could help them gain more power, more influence and higher profits.

Mr. Gingrich also got $2 million consulting for Freddie Mac. Nice work if you can get it. And what do you think? Did the folks who run Freddie want the ex-Speaker’s sage advice on how to get the US government out of the mortgage finance business? Of course, Mr. Gingrich could have given that advice for free. But corporate executives do not pay $2 million for advice that would make them more vulnerable to the creative destruction of the free market. They pay politicians to protect them from creative destruction.

They pay money to stay on the right side of the political establishment. And they know they can trust Mr. Gingrich to do his job. He’s an honest politician. Once bought, he stay’s bought.

Bill Bonner
for The Daily Reckoning

The Daily Reckoning