Super Committee: Take Automatic Cuts ... or Make a Deal?

by Gerri Willis

Alan Simpson directs a response as he and Erskine Bowles testify before the U.S. Joint Select Committee on Deficit Reduction during a hearing on Capitol Hill in Washington.Five days - that's how much time is left for 12 partisan lawmakers to reach a compromise. It could be five months - or five years - and the odds of a compromise would still be slim to none. But five days is what the Super Committee has - or these "automatic cuts" will be triggered. So what does that mean?

If the six Democrats and six Republicans fail to reach an agreement - we would see one point two trillion dollars in cuts. But that's over ten years. And they won't kick in until January 2013.

These cuts would also be put in place if Congress rejects the Super Committee plan or President Obama vetoes it. $984 billion dollars in cuts would be split between defense and non-defense programs. The other $20 billion will come in the form of lower interest payments on our 15 trillion dollar debt.

According to the Center for Budget and Policy Priorities - that's about $55 billion in both defense and non-defense spending each year through 2021.

Social Security benefits are exempt from the spending cuts - as are Medicare benefits, veteran's benefits, food stamps and a few other programs designed to help seniors and low-income americans. But not everything having to do with Medicare will be spared!

Payments to hospitals and other health-care providers will be reduced by two percent a year - these cuts will be coming just as obamacare really starts to kick in - so I'm sure doctors are loving this plan!

And regulatory agencies such as the Commodity Futures Trading Commission and the Securities and Exchange Commission will see their budgets slashed - making it even more likely they will not catch major violations.

One of the biggest casualties of the automatic cuts though would be the military.

And as we've mentioned Defense Secretary Leon Panetta is warning of "doomsday" if the Super Committee fails to act! The Pentagon is already facing $450 billion in cuts over the next ten years. If these automatic cuts take place that would mean a 23 percent cut in the budget - in the first year alone!

By his calculations, Panetta says: "We would then have the smallest ground force since 1940, the smallest number of ships since 1915, and the smallest air force in history."

Not to mention possible months-long furloughs of civilian employees and a complete overhaul of our national security strategy. But Secretary Panetta shouldn't panic just yet - because there's a chance Congress might actually cave on these cuts.

Congress can take all of next year - an election year - to rescind or change any of these things.

Either way I'm not very optimistic any legitimate plan will emerge by 2013. Why? Because this is fourth group of people tasked with coming up with one. The National Commission of Fiscal Responsibility and Reform - headed by Bowles and Simpson - came up with a plan to cut four trillion dollars. That never went anywhere.

The Debt Reduction Task Force - with Pete Domenici and Alice Rivlin - wanted to cut six trillion dollars! That plan was dead on arrival. And the Gang of Six - the bi-partisan senators - had a three and a half trillion dollar plan that never happened.

This administration's approach to debt reduction is the definition of insanity - doing the same thing over and over again - but the national debt is now above $15 trillion.

It's beyond time to stop playing political games and start taking our national debt seriously cause you know us taxpayers already are.

Is the SEC Effective?

by Gerri Willis

Former US SEC General Counsel Becker testifies at a hearing on Capitol Hill in Washington. 09/22/2011. You might have heard the news recently that the victims of Bernie Madoff would get some of their money back. The news was bittersweet - that's because those folks are only getting some of the money, just $312 million was expected to be distributed. Total losses of victims? $17 billion.

It's still tough in this country to steal $17 billion without anyone noticing - and if you're wondering where the cops were - well, that is a smart question. Truth is, the announcement about payments to victims got lots of attention - but another announcement, this one from regulators at the Securities and the Exchange Commission, got too little attention this weekend.

Four years after Madoff's arrest - the SEC said it had disciplined eight employees for failing to uncover the pyramid scheme over a 16-year period. What's notable here? Nobody lost their job. The biggest Ponzi scheme in the world operates in plain sight right under the noses of the nation's biggest securities regulators - and everybody keeps their jobs. Unbelievable!

But frankly, it's not the first time that the SEC has missed a big fish. Allen Stanford, the Texas-based financier ran a Ponzi scheme for 12 years before the agency halted the fraud, potentially costing investors more than a billion dollars. That according to an agency watchdog's report.

In both cases, the SEC was given tips but couldn't translate the tips into a successful prosecution. Then there are the companies that commit violations. When the SEC manages to find one of those, the form of punishment is usually a few bucks and a vow to never do that bad thing again.

The New York Times recently conducted an analysis of the "punishments" handed down by the SEC over the past 15 years. At least 51 cases involved Wall Street firms breaking a law they had agreed never to break again!

Last month, Citigroup had to fork over $285 million to settle charges it defrauded customers -- they had to promise to never do it again - but guess what - that was them doing it again!

Citigroup had already agreed not to violate that exact antifraud statute in 2010, 2006, 2005, and 2000! Bank of America has promised not to violate that law four times since 2005, they made the same promises four times regarding a separate law. In fact, the list of repeat offenders goes on and on and on. A Wall Street who's who if you will. AIG, Credit Suisse, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Raymond James, UBS, Wells Fargo, etc.

So obviously this practice is not deterring the bad behavior - so why do they do it?

The SEC told the Times the "never-do-it-again promises" were a much cheaper form of punishment than taking big banks to court. Especially if they lose! And as if that wasn't bad enough, another problem plaguing the SEC? They don't actually make the company admit their mistakes or wrong-doings!

So Citigroup or Bank of America can simply shell out a few million dollars. And never have to face what they did wrong. The public is never the wiser. This is outrageous.

Don't forget this was the agency whose workers spent more time surfing porn then looking out for the consumer! If the SEC doesn't have the ability to actually catch warning signs or enforce the law - maybe it's time to streamline this process.

The Justice Department can throw these crooks behind bars - that sounds good to me!


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