August 8-9, 2011
Aug 08 05:01 Debt Ceiling Debate Continues Aug 08 05:33 St. Cloud Times Admits Its Mistake Aug 08 07:00 Sen. Kerry to the rescue? Aug 08 11:12 Obama administration thinks we're stupid Aug 08 15:49 Desperation, flailing replace hope, change Aug 09 02:46 Making Sense of Wall Street, S&P Aug 09 13:03 The Face of Evil
Prior Months: Jan Feb Mar Apr May Jun Jul
Prior Years: 2006 2007 2008 2009 2010
Debt Ceiling Debate Continues
Though President Obama has signed the bill raising the debt ceiling, the debt debate coninues unabated. Unfortunately, people aren't getting the basic facts right. This statement is particularly bothersome:
The drawn out debt ceiling debate, during which Republicans threatened to default on the country's bills until President Obama backed off his call for tax hikes, revealed that "the effectiveness, stability and predictability of American policymaking and political institutions have weakened," the ratings agency said.
The country was never in danger of defaulting on its obligations. That isn't my opinion. It's what St. Thomas University economist David Vang said last week:
MURPHY: First of all, are you amongst those that agree that if there is not a deal reached by Tuesday, that the consequences would be devastating for average people?
PROF. VANG: Not really. There's alot of silver linings in this whole thing. One thing, believe it or not, is that the IRS is still working so they're still collecting tax revenues so there's still revenues coming into the government as we speak. So then, the issue is prioritizing, which bills get paid first, just like your own household.
Another thing is, if worse comes to worse, the United States government still has the copying machine to make more money. So they could always make the money to pay its bills.
It certainly doesn't sound like Professor Vang was worried about the United States defaulting on its debts. More importantly, his explanation sounds totally rational.
That isn't to say that this was the optimal solution. It's saying that the United States was never in danger of defaulting on its obligations.
It's worth noting that S&P's statement sounded more like a political document than a fiscal document. When did it become bond rating agencies' responsibility to comment on the political process, especially considering the fact that it had nothing to do with whether the United States would default on its obligations?
King Banaian noticed the difference, too, in this post :
I feel like going Jonah on S&P. It has unilaterally expanded its purview of sovereign debt to much, much more than what it had in the past. I am not going to get caught up in S&P's past mistakes, its role in creating the need for TARP (and TARP's role in getting us to this level of government debt.) I am simply asking: When did the ratings agency decide they could use the letter grades that were for default risk and use them to define interest rate risk?
Frankly, if S&P was going to make a political statement, they should've said what financial experts were thinking. They should've said that President Obama and the Democrats are refusing to reform the biggest deficit drivers, entitlements, and that they aren't doing it out of principle, that they're doing it simply to score political points. Rep. Mike Doyle's, (D-PA), statement is a perfect example:
Rep. Mike Doyle, D-Forest Hills, said he is ready to put partisan politics aside to remedy the downgrade.
"I can be passionate and get worked up at times, but let's all put the sword away and focus on jobs," Doyle said. "A pox on all of us if we don't. No party will survive this. Americans don't like our behavior."
How lovely. This is the same Mike Doyle who said this:
'We have negotiated with terrorists,' an angry Doyle said, according to sources in the room. 'This small group of terrorists have made it impossible to spend any money.'
It's insulting to hear a U.S. congressman call a group of his colleagues "terrorists" who've "made it impossible to spend...money." It hasn't dawned on Rep. Doyle that we're at this point because Democrats haven't stopped spending since President Obama's inauguration.
It isn't just that Democrats have spent like crazy. It's that they've run the economy into the ground. Had they not passed Obamacare and Dodd-Frank, the economy would've rebounded by now. It'd likely be growing at a normal 3-3.5% clip.
Rep. Doyle is a major embarrassment in a party filled with embarrassments. There hasn't seen an original thought in the Democratic Party since Clinton left office. People who had the right solution to this country's problem shouldn't be called terrorists. They should be called patriots.
S&P should be criticized mightily for including political kibbutzing in their downgrade notice. It's inexcusable for a document with such serious consequences.
Posted Monday, August 8, 2011 5:01 AM
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St. Cloud Times Admits Its Mistake
It isn't often that the Times admits that their opinions were off but that's essentially what they did in their editorial board editorial yesterday:
Local Rep. Steve Gottwalt's 'Healthy Minnesota Contribution Program' should be one of the closest-watched reforms of the session.
The measure represents a major change in how state dollars are used for health care of low-income residents. Essentially, this program privatizes insurance for one segment of MinnesotaCare participants, single adults earning between 200 percent and 250 percent of the federal poverty level.
Supporters believe this approach will save money by allowing individuals to shop for insurance. Also, as the Minnesota Academy of Family Physicians notes, providers will be paid at market rates rather than the much-lower MinnesotaCare rates.
This will bring down costs to people with private insurance because doctors, hospitals and clinics will be paid market rates. That will eliminate some of the costshifting that happens when Medicaid underpays clinics, doctors and hospitals.
The other positive to this is that these people own this insurance policy. When they get back on their feet and making more money, they'll have a good health care policy that can't be taken away from them.
Then there's this:
Local freshman Rep. King Banaian was leader in passage of The Minnesota Sunset Act, which holds the potential to restructure (think shrink) state government by requiring boards and commissions automatically expire or even amending bureaus and abolishing agencies.
Certainly, the potential is obvious. There could be some big hurdles, though, such as the cost of annual reviews the act requires; how politics and elections every two years will impact the makeup of a 12-member sunset commission; and if enough legislators will have the courage to fully back this approach.
I've been told by several legislators that this provision has bureaucrats throughout state government worried sick. They're thinking that they'll be the first to hit the chopping block. Rep. Banaian said in March that there are boards, panels and commissions whose origins can't be tracked. They don't know whether they were created by executive order, through the legislature's resolution or if they were part of a negotiated budget deal.
That's troublesome, to say the least. That's how to guage whether a government is too big. If you can't tell when or how a government commission came into existence, the government is too big.
The other troubling thing about this is that these commissions, councils and panels haven't had to justify their continued existence. These commissions, councils and panels are expensive if looked at from a multi-biennium perspective. We can't afford to pay for these these commissions, councils and panels in rough times like this.
Moreover, we shouldn't have to pay for them if they aren't serving a useful purpose.
Congratulations to Rep. Gottwalt and Rep. Banaian for getting their important reforms signed into law. Minnesota's taxpayers will benefit from these reforms.
Posted Monday, August 8, 2011 5:33 AM
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Sen. Kerry to the rescue?
With the nation's credit rating downgraded for the first time in history, Sen. Kerry is claiming that the downgrade is the TEA Party's fault. Here's an exchange between MTP's David Gregory and Sen. Kerry :
MR. GREGORY: Senator, as you know, this is part of a debate about America's influence in the rest of the world. And our economy and this debt fight has raised similar questions. And now the other big news that markets are going to be reacting to tomorrow and that is the downgrade of America's credit rating. Standard & Poor's issued a release on Friday, and this was part of its justification: "The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, less predictable than we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge." ...
Is this a wakeup call to Washington?
SEN. KERRY: Well, it's a partial wakeup call. I believe this is, without question, the "tea party downgrade." This is the tea party downgrade because a minority of people in the House of Representatives countered even the will of many Republicans in the United States Senate who were prepared to do a bigger deal, to do $4.7 trillion, $4 trillion, have a mix of reductions and, and reforms in Social Security, Medicare, Medicaid; but also recognize that we needed to do some revenue. I think this is one of the most telling, important moments in our country's history right now. We've had a fairly straightforward economic road throughout the 20th Century. But now, David, this poses a set of choices. It's not just about a recession, it's about a financial crisis and a structure of our economy which really has been misallocating capital. We've had an enormous amount of capital going into arbitration over these last years--phony deals, commissions, not creating jobs. And the real problem for our country is not the short-term debt. We can deal with that. It's the long-term debt. It's the structural debt of Social Security, Medicare, Medicaid measured against the demographics of our nation. That, then juxtaposed to the lack of jobs and job creation and growth. That's our problem, structural. And what we need is a Washington that stops this bickering, that gets rid of these hard positions that I noticed even in Speaker Boehner's comments about the downgrade, politicizing it in the sense that, you know, sort of blaming it on the Democrats and the lack of decision. Barack Obama put a $4.7 trillion deal on the table. Three times he was refused that deal because there were some people in the Republican Party, and Mitch McConnell even admitted this, who wanted to default. He said there were people in his party who are willing to shoot the hostage. In the end, they found that the hostage was worth ransoming. This is not about ransom. This is about our nation. It's about our country. It's about growth. It's about statesmanship. I know John McCain and I know many of his colleagues in the Senate are prepared to sit down and be serious about how we deal with this quickly because our nation's security, our nation's future is at stake in an unprecedented way.
This statement is infuriating:
And the real problem for our country is not the short-term debt. We can deal with that.
Let's restate that accurately: Short-term deficits aren't the biggest problem facing the nation, though they're a major problem. The biggest obstacle is entitlements, which are badly in need of reform.
Sen. Kerry blithely dismisses short-term deficits as though they're nothing. Though he got away with that with David Gregory, he won't get away with that with real journalists. Sen. Kerry voted for the bills that caused the 3 biggest deficits in U.S. history.
Since voting for these bills, the Senate has refused to even hold Budget Committee mark-up hearings for another budget. It's been 800+ days since the Senate either voted on or debated another budget blueprint. Considering the Senate's inaction and indifference to budgeting and deficits, it's impossible to think that Senate Democrats think of these deficits as a problem, much less the cause of this debt crisis.
Here's another infuriating statement by Sen. Kerry:
I believe this is, without question, the "tea party downgrade." This is the tea party downgrade because a minority of people in the House of Representatives countered even the will of many Republicans in the United States Senate who were prepared to do a bigger deal, to do $4.7 trillion, $4 trillion, have a mix of reductions and, and reforms in Social Security, Medicare, Medicaid; but also recognize that we needed to do some revenue. I think this is one of the most telling, important moments in our country's history right now.
Nevermind the trillions of dollars of debt the Democrats have run up since regaining control of the House and Senate in 2007 and especially since electing Barack Obama. Their reckless spending, Sen. Kerry contends, isn't the problem. It's the TEA Party that's the problem.
Sen. Kerry must think we're total dunces with short memories. The Democratic Party thinks that TEA Party activists are radicals because they insist on reforming entitlements, growing the economy and balancing the budget.
The Democratic Party's intentions were made clear with the infamous Push-Grannie-off-the-cliff advertising campaign. Even modest changes in Social Security and Medicare that would produce major savings to the programs would be treated as though they might end western civilization as we know it.
Sen. Kerry's statements are part of a Democratic chorus that shouldn't be taken seriously. Consider the fact that the people singing that chorus are the people who will have increased the debt more in FY2011 alone than the debt was increased in the 8 years of the Bush administration.
The Democrats' reckless spending, not the TEA Party's insistence on entitlement reform and balancing the budget, is what created this very real debt crisis.
UPDATE: Ed has more on Kerry's appearance in this post .
Posted Monday, August 8, 2011 7:07 AM
Comment 1 by Bob J. at 08-Aug-11 08:59 AM
As was said so eloquently on Powerline today: we've had a Congress that has been influenced by the Tea Party for exactly six months. During the four prior years where Democrats have had control of both houses of Congress, they added $4.8 trillion to the debt. To blame this on the people who are trying to solve the problem is ludicrous, but then that's today's Democrat Party for you.
Once again, Barack blames everyone but himself. It's S&P's fault. It's the Tea Party's fault. It's the fault of everyone except the people who keep raising the limit on Mom and Dad's credit card.
The Democrats' lies are getting thicker and thicker, and more and more desperate.
Obama administration thinks we're stupid
One of the things I took from Ed Morrissey's post is that Obama's administration's plan to wage war against S&P is a distractionary reaction:
The Treasury Department and the Federal Reserve have already revealed what their strategy toward Standard & Poor's will be now that the agency has stripped the U.S. government of its AAA rating: to destroy S&P's credibility.
They can make a pretty good case. It's not just that S&P revealed its ratings process to be corrupt and deeply flawed during the subprime mortgage bubble, as it gave inflated AAA ratings to bad securities in order to satisfy its investment banking clients, according to the Financial Crisis Inquiry Commission report. It's also that the ratings agency appeared to go well beyond its ambit this time by taking it upon itself to assess, as it said in its report Friday , the 'effectiveness, stability, and predictability of American policymaking and political institutions.'
There isn't a thoughtful person who's paid attention to the credit collapse of 2008 that thinks S&P has a sterling reputation. They don't. That doesn't mean, however, that thoughtful people don't think we have a debt crisis.
That said, waging war on S&P only works if people allow themselves to be distracted. That isn't likely to happen with bloggers like Ed and myself, along with presidential candidates refocusing the nation's attention on what's the underlying problem, the skyrocketing debt.
That debt wasn't caused by the Bush tax rates. Those rates were in place the year before the Democrats retook the majority in 2007. The deficit for FY2006 was a paltry $161,000,000,000.
What caused the problem was the unprecedented spending binge Congress went on, starting with the stimulus plan, then followed by the budget, then followed by Obamacare.
Ed's analysis is spot on:
That runs into two problems, however. National Journal's Michael Hirsh notes one of them, which is that Egan Jones had already downgraded the US over its dept-to-GDP ratio and the prospects of rapidly increasing debt over the next several decades. The second is the immediate spin from the White House and Democrats that tried to blame the entire thing on Tea Party intransigence. Essentially, that spin corroborates S&P's analysis; it just blames it on a minority of politicians in a party that only controls one chamber of Congress, a rather ridiculous notion.
The White House seems rudderless, responding in entirely contradictory ways to the embarrassment of the downgrade, without any sense of leadership from the man in charge. This isn't 'leadership from behind,' it's the political equivalent of an absentee landlord.
The debt-to-GDP ratio didn't jump during the Bush administration. That didn't start happening until the Obama administration. That isn't absolving the Bush administration of all fault. It's just telling the truth about when the debt-to-GDP ration jumped at unprecedented rates. That's the first 3 years of the Obama administration, which is when we had the first and only trillion dollar deficits in our nation's history.
Unprecedented spending, coupled with an explosion of overregulation and an unwillingness to put a plan on paper for serious entitlement reform, are what triggered this debt crisis.
The debt crisis wasn't caused by the TEA Party's intransigence, though their steadfastness led to the highlighting of the Democrats' spending addiction and the source of the debt crisis.
That this administration couldn't sweep their spending addiction under the rug isn't the TEA Party's problem. It's this administration's problem just like it's the Democrats' electoral millstone for 2012.
Posted Monday, August 8, 2011 11:12 AM
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Desperation, flailing replace hope, change
The Obama campaign's twin themes of hope and change disappeared seemingly ages ago. It wasn't until this weekend that we saw their 'replacements'. Thanks to S&P's downgrading the United States' credit rating from AAA to AA+, we're able to see the Obama campaign's new co-themes of desperation and flailing. It was never more evident than during President Obama's speech on the debt crisis :
President Barack Obama on Monday essentially dismissed the first-ever downgrade of the U.S. credit rating, trying to reassure investors and the public that the nation's leaders need only show more "common sense and compromise" to tame a staggering accumulation of debt.
Seeking to demonstrate command in a volatile economic climate, Obama said he hoped the decision by Standard & Poor's would at least give Congress a renewed sense of urgency to tackle debt problems. He said that must be done mainly by taking on the politically difficult issues of reforming taxes and entitlement programs in the coming months.
In his first public comments on the credit downgrade, which S&P announced late Friday, Obama said Washington had the power to fix its own political dysfunction.
"Markets will rise and fall," he said. "But this is the United States of America. No matter what some agency may say, we've always been and always will be a triple-A country."
It isn't a matter of whether President Obama "more or less dismissed the first-ever downgrade of the U.S. credit rating." It's a matter of whether voters dismiss S&P's downgrade. I'm betting they won't. I'm betting that they're upset with DC's business-as-usual attitude.
Voters listening to David Axelrod's whiny responses about how it's difficult to govern won't change the election's outcome. Listening to Sen. Kerry accuse TEA Party activists of having caused the downgrading of the United States' credit rating won't change the outcome either, except possibly making the blowout bigger.
This sentence is pathetic:
No matter what some agency may say, we've always been and always will be a triple-A country.
Let me restate that using a concept called honesty. Here's how I'd rewrite that statement:
S&P is right. Prior to my administration's spending spree, the United States had always maintained a AAA credit rating. After I'm defeated, it's likely that it will return to maintaining a AAA credit rating.
We've slid a long ways from Hope and Change. Desperation and flailing just doesn't have the same ring to it, although it's probably more accurate.
Posted Monday, August 8, 2011 3:49 PM
Comment 1 by Bob J. at 09-Aug-11 10:05 AM
"The United States of America: AA+ to Standard and Poors but Triple-A in your hearts." -- Barack Obama
Comment 2 by Luke Matthews at 10-Aug-11 06:22 PM
That's why they are getting so desperate. Their collectivist experiment has failed like every other one in the past has. We've finally reached maximum density on the weight of government compressing the productive sector with its weight and are witnessing the results. Too much government sucks the very oxygen out of the air and takes over from actual product and service creation. I just hope enough people awaken to this reality in time.
Making Sense of Wall Street, S&P
If anyone in Minnesota is equipped to understand what's happening on Wall St. and with ratings giant S&P, it's King Banaian. This afternoon, King sat down with KARE11's Diana Pierce for an interview:
Here's a partial transcript of the interview:
DIANA PIERCE: You come at things from a really interesting perspective as far as I'm concerned because you can see 'Hey, what are the voters seeing?' What do they think of this?
REP. BANAIAN: That's a very good question. It's not a day that I'd want to be President Obama. I can tell you that.
PIERCE: Exactly. Let's talk first about what happened...let's talk about the gold because that's been the standard and it's been creeping, creeping, creeping and then the spike today. Some say 'It's not stopping there'. Others are saying 'Oh no, pretty soon, it's going to turn around and head in the other direction.'
BANAIAN: Well, compared with where it would've been compared with 1980, when we last had a gold spike, if you corrected for inflation, the current price would have to get to $2,400 per ounce to get to where it was then. So it spiked. It was up over $50 today. It's the one safe place where people think they can go, but in terms of all-time highs in dollars, but in real terms adjusted for inflation, not yet. Maybe it does have a ways to go.
PIERCE: Again, what I was listening to people saying 'It's going to go even higher', which is not always a good thing for our economy.
BANAIAN: No, it's not. Gold's going up. We're seeing other investment opportunities sitting on the sidelines. People are nervous. Gold's where you put your money when people are nervous or uncertain about what's going on elsewhere in the economy. Other investments are going to suffer as a result of people trying to find a safe haven for their money and they're looking for it in gold or they're looking for it in U.S. Treasuries.
PIERCE: So now Standard and Poor's basically said that they were going to roll back from AAA to AA+ and all of this stock market action today happened. So what is Jane and Joe Average at home, what do we need to think about?
BANAIAN: Well, I think they need to think about the long-term. Markets react to news and they react very quickly in the first step. So if you haven't made your sale, if you haven't decided, if you've got a little nervous, you should take a deep breath and be calm and see what happens next, perhaps wait for a new opportunity, possibly buy some new things that are about to go on sale soon. Alot of good stocks went down on Friday that are still good stocks today.
There's alot of interesting information to digest in that conversation. Let's start with this statement from Prof. Banaian because it's important:
Other investments are going to suffer as a result of people trying to find a safe haven for their money and they're looking for it in gold or they're looking for it in U.S. Treasuries.
It's interesting to see that, despite S&P's dropping the United States' credit rating, U.S. Treasuries still remain a viable option if the investor is looking for stability.
That's important to know for a couple of reasons. First, David Axelrod, Sen. Kerry and Rep. Keith Ellison spent the past 2 weekends essentially selling panic to the masses. Next, and possibly more importantly, it's important to take panic out of people's financial decisions.
The other important thing is what isn't talked about explicitly, aka the weakness in the economy. People don't usually look for safe havens to park their money if the stock market is bullish or the economy is booming.
There are 2 things that are making investors panic: President Obama's lack of a pro-growth plan and this administration's plan, aided greatly by congressional Democrats, to spend at reckless and unprecedented rates.
For the first time, inside-the-Beltway types like Sen. Kerry were told by the TEA Party caucuses in the House and Senate that they wouldn't agree to a deal that swept Washington's spending addiction under the rug. That got people's attention and not in a good way for inside-the-Beltway veterans.
President Obama's lack of leadership will continue to be exposed, leading to diminished consumer confidence.
The TEA Party will continue to grow in strength because people still agree that we're spending way too much money and that Washington's addiction to spending must stop ASAP.
Posted Tuesday, August 9, 2011 2:46 AM
Comment 1 by IndyJones at 09-Aug-11 06:15 PM
I do miss Kings economics blog that was discontinued when he won election. It was a favorite site to visit and comment on the topics. I do wish him well...I wish I was as optimistic about our economic outcome as he is but I'm afraid that the debt accrued from financial speculation will sink us.
The Face of Evil
If there's anything more repulsive than union thugs plying their trade, I haven't found it. This article highlights what union thug tactics looks like:
Graeme Zielinski, spokesman for the Democratic Party of Wisconsin, was blunt, countering that the Walker administration's proclamation of economic victory is a 'right-wing fantasy, a total lie.'
'This economic success is predicated on low wages, low benefits and a workforce that's going to have to slither on its belly, thanks to Scott Walker,' Zielinski said.
He pointed to nearby Illinois as outpacing Wisconsin's economy, but the Land of Lincoln added 18,900 to its unemployed rolls in June , pushing the state's total jobless to 603,700 people.
As repulsive as that is, the union thugs' tactics get far worse:
What happens next is that I contact the publishers and editors of the papers that publish you as 'unbiased,' and let them know our deep concern about the obvious bias that permeates your entire operation. Then, we let our activists know which papers publish you, and they will write the publisher and the editor. Then, we contact the Capitol press pool and let them know about our deep concerns about your credentialing. And we continue on until you actually admit the truth of your operation.
Union thugs won't hesitate in censoring voices that they disagree with. Let's put things in the simplest terms possible: Union thugs are about destroying anything they disagree with. No hesitation, no guilt.
If they need to trample the First Amendment, it's done without hesitation. If it means threatening businesses into supporting their thug tactics , it's done without hesitation. It if means threatening an entire state, it's done without hesitation:
If necessary, we will use the valuable public service jobs that we perform as a weapon and shut this state down.
That's what Herb Sanders, the president of AFSCME Michigan, said at a rally this spring. This doesn't sound like something that sane people would say or do. The union thugs' threats aren't the type of things that thoughtful people agree with.
It's stunning that the Democratic Party and their union thug allies don't hesitate in issuing all manner of threats. It's stunning that they apparently don't have any respect for the First Amendment. Their tactics are totally ruthless. This is who the Democratic Party and their union thug allies are.
Their hatred is surpassed only by their evil.
If you want to know what today's recall elections in Wisconsin are about, it's a choice between union thugs running state government or having Republicans restoring the state to its prosperous past under Tommy Thompson.
If you want union thugs threatening their political opponents and controlling the legislative agenda, vote for the people that "BLEED UNION". If you want people who will cut property taxes and give local units of government budget relief, then it's imperative you get out and vote for Sheila Harsdorf.
Think of a vote for Sheila Harsdorf as a vote against union thug tactics and higher taxes.
Posted Tuesday, August 9, 2011 10:24 PM
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