Captains of Contrived ChaosPosted: July 27, 2011
It’s started. All you have to do is watch the stock market and you’ll see it. The unbelievably contrived debt ceiling nonsense is taking hold. The republican business big guns are out and they don’t seem to be able to stop a group of very determined crazy, freshmen congressmen that don’t have a clue about government or economics.
Here’s some headlines you may want to check out.
First, it’s obvious Boehner, the Chamber of Commerce, and even Wall Street minions don’t have control over the teabots.
Boehner: ‘A Lot’ Of Republicans Want To Force Default, Create ‘Enough Chaos’ To Pass Balanced Budget Amendment
House Speaker John Boehner (R-OH) said today that some members of his own caucus who are refusing to agree to a compromise debt ceiling deal are hoping to unleash “chaos” and thus force the White House and Senate Democrats to make bigger concessions than they’re already offering. As many as 40 House Republicans, especially Tea Party members and freshmen, have demanded nothing short of changing the Constitution to include a balanced budget amendment before they would vote to raise debt ceiling, even though that has zero chance before the U.S. faces potential default on Aug. 2.
A balanced budget amendment is one of the most insane laws a government can pass. It lets them spend all they want when revenues come in and create depressions during recessions. Pretty much what they’ve been doing the last 10 years. Even John McCain says its crazy.
In exchange for not sending the nation into economic ruin, a swath of Republicans are demanding to pass a Balanced Budget Amendment (BBA) to the Constitution. By forcing government to actively slash spending in the face of falling revenues, such an amendment “would greatly damage an already-weak recovery,” “mandate perverse actions in the face of recessions,” and is considered one of the worse ideas in Washington. Nonetheless, as House Speaker John Boehner (R-OH) said today, the fringe contingent of the GOP is aiming to create “enough chaos” to force the Senate and the White House to accept a BBA. Freshman Sen. Mike Lee (R-UT), sponsor of the Senate’s BBA bill, actually wants America’s “house to come down” unless he gets his way. But today on the Senate floor, a more seasoned senator schooled the freshman contingent on economic reality. Though an avid supporter of the BBA, Sen. John McCain (R-AZ) stood amazed that some members actually believed a BBA could pass in the Senate. Such a belief, he said, is “worse than foolish. That is deceiving.” Taking heed of numerous economists’ warning about the Aug. 2 deadline, McCain said that Republicans who are holding out on raising the debt ceiling for an impossible amendment is “unfair” and “bizarro”
Here’s a list of the Republicans and which side they’re on: CIVIL WAR: GOP Coalition Splinters Into Open Conflict Over Debt Ceiling. Boehner’s signed on The Chamber of Commerce, crotchety old Fred Thompson, Nasty young Cantor, Nutcase Allen West, and the presidential candidates that aren’t Michelle Bachmann. She’s out in front of creating the end times, as usual.
The resistance came from the right. At least 60 House Republicans have declared that they won’t vote for a debt-limit increase — for any reason. Although outside experts were brought in to explain the potential consequences of default, including a “death spiral” in the bond market initiated by a loss of confidence, many of the Tea Party intransigents didn’t bother to attend the lecture. In any case, they preferred a potential catastrophe to a deal that would provide political benefits to the president — even if most of the policy benefits accrued to Republicans.
When Obama called for increasing the revenue component from $800 billion to $1.2 trillion, Boehner had his excuse. He pulled out of negotiations, leaving Obama to complain in an impromptu news conference that he had been left, once again, “at the altar.”
It’s hard to know how much of Obama’s lament was genuine and how much of it was designed to give Boehner bragging rights about how he had bested the president. In any case, it wasn’t enough. Boehner merely gave his colleagues dramatic cuts in spending; what they really want is for Obama to fail, painfully and visibly. For that, higher interest rates, a devalued dollar, cratering stock markets and another recession appear to be a price worth paying. They don’t want to govern; they want to stick it to the man.
It’s obvious today that the markets realize that the confidence fairy ran off with the high priests of voodoo economics. Things are starting to crumble. That’s the live link to all the red. Here’s a mid day recap. Notice that credit default swaps (argghhhh) are on the rise!
Stocks fell for a third day and Treasuries and commodities slid as a stalemate over the debt ceiling pushed the U.S. closer to default and durable-goods orders unexpectedly dropped. The dollar rallied.
The Standard & Poor’s 500 Index lost 1.7 percent to 1,309.87 at 2:31 p.m. in New York. The cost of insuring against a U.S. default climbed to the highest level since February 2010 and 10-year Treasury note yields climbed four basis points to 2.99 percent. Coffee and oil lost more than 1.5 percent and gold erased earlier gains to drag the S&P GSCI Index down 0.9 percent. The Dollar Index rose 0.8 percent.
The dispute over plans to cut the U.S. federal deficit has stolen investor attention away from an earnings season that has produced higher-than-estimated results at about 81 percent of S&P 500 companies that reported so far. Shares of industrial companies helped lead declines today after a Commerce Department report showed durable goods orders fell 2.1 percent.
“It’s a tug of war between the headline risk of the debt ceiling issue and earnings,” Matthew DiFilippo, who helps manage $1 billion as director of research at Stewart Capital Advisors LLC in Indiana, Pennsylvania, said in telephone interview. “The volatility may create buying opportunities because corporate earnings are coming in strong, and the market does appear to be cheap compared to the underlying earnings power.”
Wall Street really doesn’t care how we pay are bills. They only care that we do it. There are plenty of revenue sources out there. Most of these guys don’t subscribe to voodoo economics at all. Republicans and most likely the President think that they’re all supply side-oriented. Most economists and financiers don’t buy that at all and a lot of them have been calling for increased taxes. They just want a plan that reduces risk,
What Wall Street, and the ratings agencies are worried about is not whether we can pay–we can–but whether we will. A lot of Republicans seem to think that we can secure our AAA rating by showing the agencies–and the markets–that we’ve made serious cuts. But if you achieve this end by holding the debt ceiling hostage, what you’re really demonstrating is not a tough-minded commitment to entitlement reform, but a political system so broken that it has trouble taking even simple, obvious steps to keep the fiscal engine running. Our AAA is not at risk because our current fiscal path is unsustainable, but because ratings agencies know what many GOP freshman and party activists apparently do not: that doing the unpopular things required to get the budget in balance is going to require both parties to hold hands and jump together. Otherwise, whoever forces through their unpopular plan (huge tax increases/massive spending cuts) is going to get trounced at the next elections by an opposition party promising to undo whatever it is the party in charge has just done.
We are not broke. We can pay our bills. We can meet our obligations. It’s just a bunch of nutcases in Washington DC aren’t going on reality. They’re off playing Professor Chaos and General Disarray with our economy because they hate the Washington Insider Kewl Kids.