Wednesday, July 27, 2011

Math for the Slow

From Karl Denninger, some rudimentary math, which pols apparently cannot do:

The facts are this:

  • Their [Democrats] plan has a CBO score of $2 trillion in deficit reduction over 10 years.

  • S&P [ratings agency] says it must be FOUR TRILLION. Four is greater than two - by 100%.

Therefore, no matter what sort of crap the Democrats spew, until and unless they put a credible plan on the table that achieves four trillion in actual deficit reduction neither party is serious.

No, this is not a pass for the Republicans. They haven't put forward a credible plan either.

The fact of the matter is that both parties are well-aware that addressing the problem will cause an immediate contraction in GDP. If you get rid of deficit spending it's an immediate 12%+ hit. If you cut in half it's 6%.

Pick one - there's no resolution that actually fixes the problem and avoids this.

Either come up with a $4+ trillion plan which is still going to produce a monstrous amount of damage and will only extend the time before we blow up - not fix it - or shut up and go home.

The markets are done with the bullcrap - they know the Democrats and Republicans are lying and they're not going to believe either of you any more. Either cut it out Reid - and Boehner - or watch the markets crash and, once the downgrades come, you will risk getting too close to the critical point in the gravity well at which point disaster is inevitable.

From David Beers on Kudlow, who puts it in pretty-clear language. Argue with him if you wish - S&P only asked for half of the problem to get resolved (which gives enough time to find a political solution to the rest.) I don't think that's going to do it, but they'll pass on that - at least for now.

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