The big news today is that the so-called super committee could not come up with $1.2 trillion in "cuts" (see articles here and here). The stock market went down significantly today and many are blaming its poor performance on the news. This is a tough sell though, given the major volatility of the market lately.
This whole super committee was a joke. It was put in place when the Republicans sold out on raising the national debt ceiling. It was kicking the can down the road. They just kicked it again today. Now, automatic cuts are supposed to happen. Whether they will or not, we shall see.
The super committee was supposed to come up with $1.2 trillion in cuts. This was a joke to begin with. This is over a 10 year period. The government could cut $1.2 trillion from this year's projected budget and the budget still wouldn't be balanced. Spread out over 10 years, it would only be $120 billion per year. And these aren't even really cuts. They are just cuts in the projected spending, which is of course projected to increase.
Now here is the biggest joke of all. The reason the super committee supposedly failed was because they couldn't agree on the right amount of new "revenue enhancements". This is lingo for tax increases. The Republicans were already willing to agree to some tax increases. The Tea Party should be so proud.
The Republican hacks in DC were not labeling these tax increases. They were saying they wanted to eliminate some loopholes and deductions. One example is the deduction for the interest on your home mortgage. It doesn't really matter whether you call it a loophole or a deduction because the bottom line is that it is a tax increase. By eliminating certain deductions, it will mean more people will pay more in taxes. That is a tax increase.
The best part about this whole thing is that they consider raising taxes a spending cut. We are truly living in a bizarre world. So I guess the politicians in DC could just double all tax rates and claim that they have cut spending by $2 trillion. This is what we are dealing with.
Anyone who favors small government who is still supporting and voting for Republicans on a wide scale is simply delusional. They never learn. They are Einstein's definition of insanity, doing the same thing over and over again and expecting different results.
I am not talking about people who support Ron Paul. I am talking about people supporting most of the other politicians in DC. The Republicans in DC do not want small government any more than Obama wants to restore peace and civil liberties.
The politicians in DC will continue to spend until there is some kind of a major revolt or until the laws of economics forces the situation (like what is happening in Greece). For now, they can still rely on the Fed and the Chinese to buy U.S. government debt. When the dollar sinks more and eventually faces the threat of hyperinflation, the Fed will have to make a choice. If and when it chooses not to buy any more government debt, then Congress will have to massively cut spending. Be prepared.