Debt Deal On Its Way to Spending Us to Kingdom Come, Another Municipal Bankrupcty, and Friedman Blocks Hayek from University of Chicago

Well what do you know, it turns out the whole debt ceiling debacle was on theater and a back-room deal is making its way through Congress as we speak.  The media pundits are of course surprised at such a development and are now trying to pick which side won the debate.  The real answer is that each side won, here we get a raise in the debt ceiling without any substantial cuts in the foreseeable future.  There is no cut to government spending, just a slight slowing down of the spending rate.  On top of that, the so-called "Super Congress" looks like its well on tract to being created.  Simply put: its a joke.  But then again, everything Congress does is a joke.

Here is the cheat sheet on the deal from the Ministry of Truth a/k/a the White House:

Mechanics of the Debt Deal

• Immediately enacted 10-year discretionary spending caps generating nearly $1 trillion in deficit reduction; balanced between defense and non-defense spending.
• President authorized to increase the debt limit by at least $2.1 trillion, eliminating the need for further increases until 2013.   
• Bipartisan committee process tasked with identifying an additional $1.5 trillion in deficit reduction, including from entitlement and tax reform. Committee is required to report legislation by November 23, 2011, which receives fast-track protections. Congress is required to vote on Committee recommendations by December 23, 2011.
• Enforcement mechanism established to force all parties – Republican and Democrat – to agree to balanced deficit reduction. If Committee fails, enforcement mechanism will trigger spending reductions beginning in 2013 – split 50/50 between domestic and defense spending. Enforcement protects Social Security, Medicare beneficiaries, and low-income programs from any cuts.    

Like always, Ron Paul has the best description of the deal:

One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth.  In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase. 

No plan under serious consideration cuts spending in the way you and I think about it.  Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases.  This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda.  But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues.

Paul also makes sure to lambast the disgusting new "Super Congress:"

Perhaps the most disturbing aspect of this deal is the “Super Congress” provision.  This is nothing more than a way to disenfranchise the majority of Congress by denying them the chance for meaningful participation in the crucial areas of entitlement and tax reform.  It cedes power to draft legislation to a special commission, hand-picked by the House and Senate leadership.  The legislation produced by this commission will be fast-tracked, and Members will not have the opportunity to offer amendments. Approval of the recommendations of the “Super Congress” is tied to yet another debt ceiling increase. This guarantees that Members will face tremendous pressure to vote for whatever comes out of this commission-- even if it includes tax increases.  This provision is an excellent way to keep spending decisions out of the reach of members who are not on board with the leadership's agenda.

Look for sneaky entitlement cuts and tax increases to come from this new commission disguised as "comprehensive reform."
Barry Ritholz sums up the whole situation perfectly, this is the only thing one needs to look at when gauging how successful the debt ceiling deal is at addressing the accelerating debt problem:

First it was Jefferson County, Alabama, now we have another.  In the midst of all the financial difficulty on the federal level, it looks like the much demonized Meredith Whitney may finally be having her prediction of massive municipal bankruptcies come to fruition.  Via Bloomberg:

Central Falls, Rhode Island’s poorest city, sought Chapter 9 bankruptcy protection as it struggles to meet pension obligations.
A petition was filed today after state officials failed to persuade police, fire and municipal employee unions to accept concessions and to get retirees to agree to lower benefits, according to a statement from Robert Flanders, a former state Supreme Court justice named to oversee the city’s finances. The city asked the court to permit the rejection of union contracts.

Once again, unionized public employee's pensions have brought another government to its knees.  Yet the bitching and moaning about the rich not paying their fair share for outrageous pension benefits will continue.

If that isn't aggravating enough, it looks like Lew Rockwell is rightfully taking more shots at Milton Friedman:

How great to have had historian Ronald Hamowy as a distinguished visiting faculty member at Mises University last week. We did a fascinating and moving podcast about his teacher F.A. Hayek, and his close friends Murray Rothbard and Burt Blumert.
In his graduate seminar, reports David Gordan, Ronald confirmed that it was indeed Milton Friedman who blocked Hayek from the Chicago economics faculty. As a result of the Miltonian blackball, Hayek had to take an unpaid position at the university, and eventually returned to Austria. His American salary was paid by the heroic Volcker Fund, but there was no pension and certainly no tenure.

The is unforgivable.  It will be interesting to see what Don Boudreaux and Russ Roberts say about this over at CafeHayek.  After all the depressing news, this graph via Mark Perry shows just how optimistic we should be about the future and humanity's constant need to improve its own condition despite an inevitable fiscal collapse.