Friday ReadsPosted: July 8, 2011
It’s hard not to be be completely discouraged these days. Our Washington deal-makers are permanently stuck in opposites day. No amount of reality is going to bring the lot of them out of whatever place they strategically reside. This Reuters piece stands as a hallmark to the current lunacy. We shouldn’t have any financial problems. Social Security is solvent and it’s not part of the federal budget are deficit problem. Why am I reading this then?
If Treasury were to decide to delay some payments, one option could be to postpone a disbursement of more than $49 billion to Social Security recipients that is due on August 3.
It would be a politically explosive step but one that could allow the government to temporarily pay bondholders to try to avoid foreign investors dumping U.S. Treasuries and the dollar.
The administration has warned that any missed payments, including those to retirees, veterans and contractors, would be default by another name, and the Treasury team still has concerns that any contingency plan would prove unworkable.
Steve McMillin, a former deputy director of the White House Office of Management and Budget under Bush, said Treasury has options but most of them are “pretty ugly.”
If Treasury were to decide to delay payments, it would need to re-program government computers that generate automatic payments as they fall due — a massive and difficult undertaking. Treasury makes about 3 million payments each day.
Do they figure that seniors aren’t going to riot in the streets effectively like that episodede of South Park called Grey Dawn? I can pretty well imagine that they won’t stop payments to their corporate bosses. After all, that option would soothe the bond vigilantes.
Here’s the issues under study now according to that same Reuter’s article.
- Whether the administration can delay payments to try to manage cash flows after August 2
- If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt
- Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments.
The Treasury team has also spoken to the Federal Reserve about how the central bank — specifically the New York Federal Reserve Bank — would operate as Treasury’s broker in the markets if a deal to raise the United States’ $14.3 trillion borrowing cap is not reached on time.
I’m teaching an MBA Corporate Finance seminar this summer. Every single asset pricing model that prices securities, bonds, loans,options or whatever basically uses the US treasury bond as the risk-free asset. I feel like I have to asterisk everything I’m teaching right now which is basically the same thing that was taught to me back in the 1980s. It’s like these folks are purposefully trying to tank the financial markets and bring on another crisis. If they manage to raise the debt ceiling, then it appears likely to be done by ‘austerity’ measure like $4 trillion dollars in cuts. Start your backyard gardens now. The next depression is bound to be a big one. I have just have no idea why they’re trying to blow up our economy. It’s just frigging unbelievable. Of course, Orrin Hatch wants us all to suffer more, because after all, people that aren’t filthy rich are obviously defective in gawd’s eyes.
So, here’s a nifty graph on the left from Ezra Klein showing the mix of spending cuts vs. tax increases the last few times we’ve had these debt and deficit discussions. Looks like the real practitioner of voodoo economics wasn’t Ronald Reagan but is Barrack Obama. Just more of the alternate reality forced on us by media and politicians that make up news, history, and economic theory.
As you can see on the graph, in each case, taxes were at least a third of the total, and in Reagan’s case, his massive tax cuts were followed by deficit-reduction deals that actually relied on tax increases. Today, tea party conservatives would be begging Sen. Jim DeMint to primary the Gipper.
Bush also included taxes in his deal, and Clinton relied heavily on taxes in his first deficit-reduction bill, which passed without Republican votes. In 1997, when he was working with Republicans, he actually cut taxes slightly while passing spending cuts. But of course the economy was in much better shape then, and Clinton had already increased revenues substantially.
The one-third rule doesn’t break down until you get to the deal Obama reportedly offered Republicans in the first round of debt-ceiling talks: $2 trillion in spending cuts for $400 billion in taxes, or an 83:17 split. And that, if anything, understates how good of a deal Republicans are getting. Tax revenues and rates are much, much lower than they were under Reagan, Bush or Clinton. And next year, Obama is pledging to extend most of the Bush tax cuts, which amounts to a $3 trillion-plus tax cut against current law.
Meanwhile, the polls–like this one from Pew Research–show that people overwhelmingly want to maintain social security, medicaid and medicare and would support tax increases to do so. So much for government of, for, and by the people.
As policymakers at the state and national level struggle with rising entitlement costs, overwhelming numbers of Americans agree that, over the years, Social Security, Medicare and Medicaid have been good for the country.
But these cherished programs receive negative marks for current performance, and their finances are widely viewed as troubled. Reflecting these concerns, most Americans say all three programs either need to be completely rebuilt or undergo major changes. However, smaller majorities express this view than did so five years ago.
The public’s desire for fundamental change does not mean it supports reductions in the benefits provided by Social Security, Medicare or Medicaid. Relatively few are willing to see benefit cuts as part of the solution, regardless of whether the problem being addressed is the federal budget deficit, state budget shortfalls or the financial viability of the entitlement programs.
Jim DeMint is one of the people that should be the first in line to be charged with treason and gross stupidity. Where was Senator DeMint when all the votes were taken to spend all this money to start out with? Plus, all those irresponsible revenue cuts back in the early 2000s when we basically had a balanced budget? He was a congressman from 1999-2005 so certainly he must’ve tried to stop Dubya Bush from all that spending!
Sen. Jim DeMint (R-S.C.) said Wednesday night that Republicans should maintain their hardline position in the debt-ceiling debate even if it results in “serious disruptions” to the economy.
“What I’m advocating here is, let’s use this as a point of leverage, give the president an increase, but don’t come away without real cuts from real caps and spending, and without a balanced budget,” DeMint said on FOX Business Network.
“We’re at the point where there would have to be some, you know, some serious disruptions in order not to raise [the debt ceiling],” he said. “I’m willing to do that.”
The president pushed the economy into “crisis” mode, according to DeMint. He said the president has been “burning time” with the deficit negotiations led by Vice President Biden, when the looming debt ceiling and budget deficit could have been addressed last year.
DeMint, well-known for speaking out in favor of limited government and balancing the budget, told host Andrew Napolitano that if Republicans and Democrats couldn’t vote in “something permanent” that would limit government spending, “we’re going to continue to spend [until] the total country collapses.”
Warren Buffet says the GOP is Threatening To ‘Blow Your Brains Out’ Over Debt Ceiling
Republicans are playing a dangerous game by refusing to raise the debt ceiling, according to Berkshire Hathaway CEO Warren Buffett.
“We raised the debt ceiling seven times during the Bush Administration,” Buffett told CNBC on Thursday. Now, the Republican-controlled Congress is “trying to use the incentive now that we’re going to blow your brains out, America, in terms of your debt worthiness over time.”
If Congress fails to raise the borrowing limit of the federal government by August 2, the date when the U.S. will reach the limit of its borrowing abilities, it will likely begin defaulting on its loans.
Buffett, who according to the Washington Post has helped raise money for Democratic candidates like Hilary Clinton in the past, has been highly critical of the actions of the Republican-controlled Congress. In May, Buffett stated at a Berkshire Hathaway shareholder’s meeting that if the Congress failed to raise the debt ceiling, it would constitute “the most asinine act” in the nation’s history, reports Reuters.
Other political news is equally disheartening. Most of the governments in the states are as crazy–if not crazier–than the US Congress. Planned Parenthood in North Carolina is suing the state over budget cuts designed to cut access to much used and cost saving preventive health care.
One of North Carolina’s two Planned Parenthood affiliates filed a federal lawsuit Thursday to invalidate part of the new state budget that cuts it off from federal or state funds for family planning.
The budget, written by Republicans in control of the General Assembly for the first time in more than a century, states that Planned Parenthood and its affiliates are forbidden from receiving any contracts or grants from the state health agency. The lawsuit filed in Greensboro’s federal court by Planned Parenthood of Central North Carolina contends the group is being punished for its abortion-rights advocacy, saying that violates its free-speech protections.
The organization is barred by law from using public money to perform abortions and uses the government contracts to provide family planning or teen pregnancy prevention services, yet is being singled out because Planned Parenthood supports abortion rights, the lawsuit said. Efforts to cut off funds to Planned Parenthood affiliates in North Carolina are similar to those in Kansas and Indiana, which were also met with federal lawsuits, the group’s attorneys said.
“Their sole purpose is to single out, vilify, and punish Planned Parenthood as a particularly visible provider and advocate — even though, ironically, the eliminated funds have nothing to do with abortion, but will only deprive low-income people of desperately needed health services and teen pregnancy prevention programs,” the lawsuit said.
Planned Parenthood of Central North Carolina received $287,000 in federal, state and matching local funds in the year that ended last week for teen pregnancy prevention and family planning programs that provided contraceptives to poor women, according to the state Department of Health and Human Services. The non-profit operates from locations in Chapel Hill, Durham, and Fayetteville.
Some of the most extremist pastors are signing on to Texas Governor Rick Perry’s Pray-a polooza. Talk about a hater-thon. Remember, Perry is supposed to be the ‘electable’ Republican.
And we already knew Perry didn’t care much about including, or even not offending, non-Christians: his personal letter announcing the event calls on the entire nation to pray to Jesus Christ. But the news, reported by Right Wing Watch, that a radical pastor named C. Peter Wagner has signed on as an official endorser of The Response deserves more attention.
His brand of evangelicalism, known as the New Apostolic Reformation, is characterized by extreme hostility to other religions. In this passage from his book “Hard-Core Idolatry: Facing the Facts,” Wagner praises the burning of Catholic saints, copies of the Book of Mormon, voodoo dolls, and other “idols”
Yup, welcome to the new surreality. All we need is Rod Serling introducing the morning reads today and I’d say that would be about right.
What’s on your reading and blogging list today?