Some people are always grumbling because roses have thorns. I am thankful that thorns have roses.
Allophones Karr
Senate Approves Debt 74-26; Obama Signs Debt Deal:
Thumbs UP!
The good news is that Moody's is retaining the AAA rating on US securities; the bad news is that Moody's has a negative outlook. In other words, our attention deficit disorder "President" Obama: as much as you want to pretend that the crisis is over, you're only on the first step of a long staircase. True progress is not simply in slowing the rate Democratic program superspending raises the national debt: it's when the debt actually starts SHRINKING and the country is running a surplus. I still remember reading over 10 years ago where politicians were worried that we would run out of debt because of budget surpluses and what are policy alternatives were.
There are a variety of actual or potential issues with a large national debt, including the distribution of hard-earned domestic tax revenues to pay foreign holders of US debt and a competition for investor dollars resulting in higher rates and/or zero-sum/crowding out of private sector investment dollars, highly relevant to generation of jobs and future tax revenues (property, income, etc.)
Even China credit rating agencies are downgrading US debt, and Russian Prime Minister Putin has publicly called America a "parasite" on the global economy. [America is the world's best customer, a breadbasket for the world, and the dominant producer and leading-edge manufacturing of best-selling goods and innovative services. Foreigners do not have to invest in American securities. Maybe if Putin put as much effort into diversifying his country's economy beyond its dependence on producing natural resources as he does sustaining his political career and an indulgent aging male politician sex symbol delusional fantasy, we would listen to more of what he had to say.]
I just want to bring up a related point here: the late night comics like to harpoon China's large holdings of American debt. I have written some related ad libs in my recurring political humor feature. Foreign holdings of US debt (using May numbers) amount to roughly 31.5%, with China holding about a quarter of that, or 8% overall. The largest holding is the social security trust fund with about 19% overall, and the Fed, via quantitative easing, holds just over 11%, roughly 40% more than China does.
We have a number of factors impacting the dollar which are easy to overlook. The US comprises about a quarter of the global economy and is easily the world's most stable, diversified economy. Global alternatives don't have suitable scalability or stability; the euro is the most viable alternative, and it is facing its own challenges given analogous fiscal challenges from countries like Greece, Italy and Ireland. Right now Treasury notes/bonds are rallying given recent news reflecting plummeting consumer confidence and weak economic growth (i.e., perceived lower demand for debt). But make no mistake: the downgrading of US debt is all but inevitable, and that will likely result in $100B or more increases to our interest payments. This is $100B we can't spend towards other national priorities, and in contrast to other discussions of mandatory versus discretionary spending, interest payments on the debt really do constitute mandatory spending.
The fact of the matter is that the President and Democratic Congress increased discretionary spending by nearly 25% during the last session of Congress. (Paul Ryan argues 84%, but this includes the massive stimulus bill, which is a one-time, not ongoing expenditure.) This was at a time revenues were dropping by nearly 40%, and Democrats were ludicrously paying lip service to pay-as-you-go standards.
Obama has rediscovered the issue of jobs. We are glad to see the surge of official unemployment back up over 9% has finally gotten his attention; I heard that Obama actually had to postpone a fundraiser in DC during the debt ceiling crisis. Maybe he couldn't squeeze in a few extra rounds of golf, and I don't know if he's planning another visit to Martha's Vineyard to recuperate from all his hard work jawboning the two sides to get their act together while refusing to commit himself publicly to a constructive solution. No, he took the intellectually challenging alternative and innovative standpoint of criticizing legislative sausage making and making it clear his priorities: the next debt ceiling vote must not interrupt the only thing Obama really is good at: campaigning to be President. Being President is a totally different thing...
Here's a hint: try addressing pro-economic growth policies by getting back to the topic of globally uncompetitive business tax rate brackets. I would be happy to reopen the discussion of removing nuanced policies supporting crony capitalism across the board if for once in your life you shut up about your favorite whipping boy of corporate jets and oil and gas production tax accounting. Are you, for once, going to stop being a hypocrite over your federal breastfeeding of money-losing green energy initiatives and other Democratic program boondoggles, including corruptible so-called "investments" in rail?
Speaking of which, Craig Pirrong posted a couple of interesting commentaries on high-rail initiatives a few months back (see here and here). Here are a few relevant quotes:
- "In Japan, ... only a single bullet-train line, between Japan and Osaka, breaks even; ...in France, ...only the Paris-Lyon line is in the black. Taiwan tried a privately financed system, but ...the government had to bail it out in 2009."
- "A recent World Bank report on high-speed rail systems around the world noted that ridership forecasts rarely materialize and warned that “governments ... should also contemplate the near-certainty of copious and continuing budget support for the debt.”
- "Zhao Jian, a researcher at Beijing Jiaotong University, [says] that 'the debt [of China’s Ministry of Railways] had at least reached 2 trillion yuan by now, and the interests of those debts have grown too large for the government to afford'... Some experts say those debt levels are unsustainable... given that many of the country’s high-speed rail links are having trouble making money."
It was conventional wisdom in the 1960s, and a not uncommon belief into the 1980s, that the centrally planned USSR was more efficient that the U.S., and would eventually overtake the U.S. economically. In the 1980s, the Japanese model, which involved considerable state involvement in choosing winning industries and firms, was considered by many in the U.S. as superior to the U.S. model. In the 1930s, the USSR (again) and fascist economies were held out as exemplars.Congratulations to the Republicans, whom have finally managed to install speed bumps on Democrats' unsustainable path to financial Armageddon; this is only a first step, but one that irresponsible Senate Democrats and President Obama resisted kicking and screaming every step of the way. You made the best of the hand that was dealt to you. The real battle is the next election where, at last, we'll have an opportunity to finally stop the unconscionable Democratic theft from future generations.
Sarah Palin on Romney and Revisiting the Ayers Affair
As if we needed any more reason to ensure this pseudo-conservative populist failed governor from Alaska never again gets so much as a visitor's pass to the White House, Sarah Palin used another appearance as a paid contributor on Fox News Channel to spout her pathetic, vacuous nonsense, second only to Obama's inane rhetoric (Roger Ailes must have been out of his mind signing one of the worst mistakes made by a Presidential candidate since McGovern's poorly vetted selection of Thomas Eagleton).
I know Fox News has been obsessed with leftist smears of the Tea Party movement, suggesting that the Tea Party, by not letting President Obama have his "just put it on my tab [for the next generation to pay--in fact, it's probably a good thing Sasha and Malia are going their homework on time because they are going to have to work their asses off cleaning up after their Daddy and paying his bills]" way in irresponsibly spending money he doesn't have without speaking up, was engaging in economic "terrorism". I'm part of the legitimate Tea Party movement, and I fully supported the GOP effort to derail business as usual.
Let us be clear: President Obama and his fellow Democratic cronies are getting their just deserts for embracing fiscally unsustainable policies. Would credit card lenders think it's a wise thing to extend the credit limit of a cardholder whom has actually paid off principal on his debt 3 times over the past 5 decades? Are they engaging in "economic terrorism"? So what do I care what a bunch of leftist wackoes think? They think it's perfectly ethical to pick other people's pockets to pay for their megalomaniac policies; you can't reason with a pack of shameless thieves.
When I heard Sarah Palin try to turn the tables on these idiots by resurrecting the Bill Ayers connection to Barack Obama from the 2008 campaign, I am appreciative of the only good thing stemming from McCain's loss to a grossly incompetent, clueless Barack Obama: at least we didn't have Sarah Palin a heartbeat from the Presidency. Why in the world did the McCain campaign try to make much of some washed-up, irrelevant figure from the 1970's whom lived in relative obscurity as a mediocre college professor? Because he showed up for or hosted one or 2 fundraising events for Obama's state senate bids in the 1990's? Are you kidding me? What about all the notable fundraisers and questionable donations for the Clintons' campaigns? You know, why was the McCain campaign spending so much time sweating the small stuff? Why weren't they pushing more on a spendthrift Presidential candidate? This may play well with nostalgic partisans fondly remembering those good old Palin's 'Obama pal-ing around with terrorists' red meat rallies, but not with reasonably intelligent human beings. Does Ailes really think it brings his network credibility by letting this failed politician rehash leftover bumper stickers from the 2008 campaign?
But I want to focus on her shot at GOP front runner Mitt Romney, which seemed to be a thinly disguised swipe by someone whom is being rumored as getting ready to make a Labor Day announcement of her own candidacy (despite every poll in the world showing she can't beat Obama in the general election). I myself was critical of Mitt Romney's decision not to support the debt ceiling compromise, but Sarah Palin didn't argue for or against the merit of his view, but suggested his recent decision amounted to Obama-style indecision made for purely political reasons.
Sarah Palin's analysis and judgment are not respectable. Never mind she's implicitly arguing against a proper review time for major legislation which most REAL maverick reformers, like myself, advocate. I did give a pass on this because of the nature of a debt deadline (yes, I'm aware of the fact that the President could try to put off payment of 40% of the bills). But arguing that Romney's timing on his decision, which, by the way, I did not agree with as I wrote in a recent post, was politically motivated is patently ABSURD. The big issue was how you could do a 2 phase approach and motivate both parties to continue towards a follow-up agreement of budget cuts. There was almost no news coverage of the mechanisms at all.
What Romney said was not that he opposed the debt limit compromise in concept--he had a problem with the enforcement mechanisms being used--particularly the idea that Defense Department spending would be cut at the expense of discretionary spending targets.
Now, Ms. Palin, since you go through your perfunctory "stand up and recognize the troops" ritual every rally you attend, do you disagree with Romney's concerns that if these legislators don't get their act together, across-the-board Defense cuts may not be such a good idea? Instead of taking an unnecessary cheap shot at the only candidate whom runs competitively against Obama, why don't you take the time to understand what he's saying before shooting off a premature blast? I don't agree with Romney's position but I understand and respect it. You shoot off your mouth before you think things through, and we've seen a lot of that already with Barack Obama. The last thing we need is a right-wing Barack Obama.
Musical Interlude: My Favorite Groups
The Eagles, "One of These Nights"
