Posts tagged Democrats
Debt Ceiling Delusions
The popular take on the current debt ceiling stand-off is that the Tea Party wing of the Republican Party has a delusional belief that it can hit the brakes on new debt creation without bringing on an economic catastrophe. While Republicans are indeed kidding themselves if they believe that their actions will not unleash deep economic turmoil, there are much deeper and more significant delusions on the other side of the aisle. Democrats, and the President in particular, believe that continually taking on more debt to pay existing debt is a more responsible course of action. Even worse, they appear to believe that debt accumulation is the equivalent of economic growth.
If Republicans were to inexplicably prevail, and the federal government were to cut spending so that its expenditures matched its tax revenues (a truly radical idea) the country’s financial mess would be laid bare. The government would have to weigh the relative costs and benefits of making interest payments on Treasury debt (primarily to foreign creditors) or to trim entitlements promised to U.S. citizens. But those are choices we will have to make sooner or later anyway. In fact we should have dealt with these issues years ago. But generations of mechanistic debt ceiling increases have allowed us to perpetually kick the can down the road. What could possibly be gained by doing it again, particularly if it is done with no commitment to change course?
The Democrats’ argument that America needs to pay its bills is just hollow rhetoric. Paying off one’s Visa bill with a new and bigger MasterCard bill can’t be considered a legitimate payment of debt. At best it is a transfer. But in the government’s case, it doesn’t even qualify as that. Treasury debt is primarily bought by the Fed, foreign central banks, and major financial institutions. None of that will change with a debt ceiling increase. We will just go to the same people for greater quantities. So it’s like paying off your Visa card with a bigger Visa card.
According to modern economists, an elimination of deficit spending will immediately cause a dollar for dollar decrease in GDP. For example, if the government stopped sending food stamp payments to poor people, then grocery stores would lose business, employees would be laid off, and the economy would contract. But this one dimensional view fails to appreciate that the purchasing power of the food stamps had to come from somewhere. The government can’t create something from nothing. Taxation transfers purchasing power from people living in the present to other people living in the present. In contrast, borrowing transfers purchasing power from people living in the future to people living in the present. The good news for politicians is that future people don’t vote in current elections (and current voters don’t seem to appreciate the cost to their future selves of current policy).
The Obama Administration has congratulated itself for turning around the contracting economy that it inherited from President Bush. But even if you take the obscenely low official inflation statistics at face value, we only grew at an anemic 1.075% annual pace from 2009 to 2012 (far below the between 3% and 4% that the U.S. averaged post World War II). Sadly, this growth pales in comparison to the accumulation of new debt that we are borrowing from the future.
U.S. GDP is measured at roughly $15 trillion per year. 2% growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth. If the deficit were subtracted from GDP, America would be shown to be stuck in a severe recession that Washington can’t acknowledge. But such a reality is more consistent with the dismal job prospects and stagnant incomes experienced by most Americans.
The belief that deficits add to the economy, and that debt can be dealt with in an imaginary future (that never seems to arrive) is the foundation upon which the President can chastise the Republicans as irresponsible suicide bombers. Using this logic, he can argue (with a straight face) that borrowing is the equivalent of paying. That the President can make this delusional argument is not so surprising (no lie too great for the typical politician to attempt). What is alarming is that the media and the public have swallowed it so willingly. As they call for limitless increases in borrowing, Democrats have offered no plan to reduce the current debt and they are unwilling to negotiate with Republicans on that topic. Yet somehow they have been perceived as the party of fiscal responsibility.
While the Republicans have a dismal track record of their own when it comes to budgetary management, it can’t be disputed that the minor dip in that rate of increase in spending that resulted from the recent Sequester, happened only because they dug in on the issue. Without the 2011 debt ceiling drama, there is no chance that any spending would have been touched.
Democrats had warned that the $85 billion in sequestration cuts slated for fiscal year 2013 (about 2% of the Federal budget) would be sufficient to bring on economic Armageddon. But guess what? We survived. Recently, Senate Majority Leader Harry Reid continued with such rhetoric by declaring that there are no more cuts to be found anywhere in the $3.8 Trillion dollar federal budget. (Apparently he missed last week’s 60 Minutes piece on the spreading epidemic of federal disability fraud.)
We have to acknowledge what even the Republicans haven’t fully grasped. We are in such a deep debt hole that there is no solution that does not involve serious economic pain. Tea Party Republicans rightly believe that government spending is a drag on economic growth. As a result, they conclude that immediate spending cuts will help with the “recovery”. But they are confusing real economic growth with the delusional expansion created by deficit spending (which is actually damaging the real economy). If they cut the deficit, this phony economy may likely implode and cause widespread distress.
So even though a reduction in government borrowing and spending does help the economy, it won’t feel very helpful tomorrow. The more we borrow and spend today, the more we will suffer tomorrow when the bills come due. Ironically, cutting government spending now helps the economy by allowing the economic adjustment to happen sooner rather than later. But this type of long-term thinking is very difficult for politicians to consider.
Unfortunately our debts don’t leave us much in the way of choices. We can choose to pay now or try to pay later. But the longer we wait the steeper the bill.
Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.
“The real dysfunction is a federal budget that doubled in 10 years”
It’s not that the GOP and the Dems can’t get together on anything that is the problem. It’s that they get together on too much.
Annual federal spending rose by a trillion dollars when Republicans controlled the government from 2001 to 2007. It rose another trillion during the Bush-Obama response to the financial crisis. So spending every year is now twice what it was when Bill Clinton left office a dozen years ago, and the national debt is almost three times as high.
Republicans and Democrats alike should be able to find wasteful, extravagant, and unnecessary programs to cut back or eliminate. And yet many voters, especially Tea Partiers, know that both parties have been responsible for the increased spending. Most Republicans, including today’s House leaders, voted for the No Child Left Behind Act, the Iraq war, the prescription drug entitlement, and the TARP bailout during the Bush years. That’s why fiscal conservatives have become very skeptical of bills that promise to cut spending some day—not this year, not next year, but swear to God some time in the next ten years
Image credit: http://www.againstcronycapitalism.org
12 Very Ominous Warnings About What A U.S. Debt Default Would Mean For The Global Economy
A U.S. debt default that lasts for more than a couple of days could potentially cause a financial crash unlike anything that the world has ever seen before. If the U.S. government purposely wanted to damage the global financial system, the best way that they could do that would be to default on U.S. debt obligations. A U.S. debt default would cause stocks to crash, would cause bonds to crash, would cause interest rates to soar wildly out of control, would cause a massive credit crunch, and would cause a derivatives panic that would be absolutely unprecedented. And that would just be for starters. But don’t just take my word for it. These are the things that top financial experts all over the planet are saying will happen if there is an extended U.S. debt default.
Because they are so close together, the “government shutdown” and the “debt ceiling deadline” are being confused by many Americans.
As I wrote about the other day, the “partial government shutdown” that we are experiencing right now is pretty much a non-event. Yeah, some national parks are shut down and some federal workers will have their checks delayed, but it is not the end of the world. In fact, only about 17 percent of the federal government is actually shut down at the moment. This “shutdown” could continue for many more weeks and it would not affect the global economy too much.
On the other hand, if the debt ceiling deadline (approximately October 17th) passes without an agreement that would be extremely dangerous.
And if the U.S. government is eventually forced to start delaying interest payments on U.S. debt (which could potentially happen as soon as November), that would be absolutely catastrophic.
Once again, just don’t take my word for it. The following are 12 very ominous warnings about what a U.S. debt default would mean for the global economy…
#1 Gerald Epstein, a professor of economics at the University of Massachusetts Amherst: “If the US does default, that will make the Lehman Brothers bankruptcy look like a cakewalk”
#2 Tim Bitsberger, a former Treasury official under President George W. Bush: “If we miss an interest payment, that would blow Lehman out of the water”
#3 Peter Tchir, founder of New York-based TF Market Advisors: “Once the system starts to break down related to settlement and payments, then liquidity disappears, as we saw after Lehman”
#4 Bill Isaac, chairman of Cincinnati-based Fifth Third Bancorp: “We can’t even imagine all the things that might happen, just like Henry Paulson couldn’t imagine all the bad things that might happen if he let Lehman go down”
#5 Jim Grant, founder of Grant’s Interest Rate Observer: “Financial markets are all confidence-based. If that confidence is shaken, you have disaster.”
#6 Richard Bove, VP of research at Rafferty Capital Markets: “If they seriously default on the debt, what we’re really talking about is a depression”
#7 Chinese vice finance minister Zhu Guangyao: “The U.S. is clearly aware of China’s concerns about the financial stalemate [in Washington] and China’s request for the US to ensure the safety of Chinese investments.”
#8 The U.S. Treasury Department: “A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse”
#9 Goldman Sachs: “We estimate that the fiscal pull-back would amount to 9pc of GDP. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed quickly”
#10 Simon Johnson, former chief economist for the IMF: “It would be insane to default, but it’s no longer a zero-percent probability”
#11 Warren Buffett about the potential of a debt default: “It should be like nuclear bombs, basically too horrible to use”
#12 Bloomberg: “Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.”
A U.S. debt default could be the trigger for the “nightmare scenario” that so many people have been writing about in recent years. In fact, it could greatly accelerate the timetable for the inevitable economic collapse that is coming. A recent Yahoo article described some of the things that we would likely see in the event of an extended U.S. debt default…
A default would upend money markets, destroy bond funds, slam the brakes on lending, cause interest rates to spiral, make our banks insolvent, and deal a blow to our foreign trading partners and creditors around the globe; all of which would throw the U.S. and the world into economic disarray.
And of course stocks would crash big time. Deutsche Bank’s David Bianco believes that if the U.S. government starts missing interest payments on U.S. Treasury bonds, we could see the S&P 500 go down to 850 by the end of the year.
There would be almost immediate panic among ordinary Americans as well. In fact, it is being reported that some banks are already stuffing their ATM machines will extra cash just in case…
With just 10 days left to raise the debt ceiling and congressional Republicans threatening to force the government to default on its obligations, banks are taking some dramatic steps to prepare for the economic chaos that would result should the brinkmanship continue.
The Financial Times reports that one major U.S. bank has started stuffing its automatic teller machines with extra cash in preparation for a possible bank run from panicked depositors. The New York Times reports that another bank is weighing a plan to advance funds to customers who rely on Social Security and other government payments that could stop in the event of a default.
Let’s hope that cooler heads will prevail and that a U.S. debt default will be avoided.
Unfortunately, it appears that the Democrats are absolutely determined not to be moved from their current position a single inch. They have decided to refuse to negotiate and demand that the Republicans give them every single thing that they want.
And who can really blame them for adopting that strategy? After all, it has certainly worked in the past. Whenever Democrats have stood united and have refused to give a single inch, the Republicans have always freaked out and caved in eventually.
Will this time be any different?
The funny thing is that once upon a time, Barack Obama was adamantly against any increase in the debt limit. The following comes courtesy of Zero Hedge…
But now Obama says that it is so unreasonable to be opposed to a debt limit increase that any negotiations are out of the question.
So which Obama is right?
If the Democrats will not negotiate, a debt default could still be avoided if the Republicans give in.
And that is what they always do, right?
Perhaps not this time. Just check out what John Boehner had to say on Sunday…
“I, working with my members, decided to do this in a unified way,” the speaker said — with demands to defund, delay or otherwise alter the Affordable Care Act.
Boehner had expected that the Obamacare fight would come during the next vote to raise the debt ceiling, “but, you know, working with my members, they decided, let’s do it now,” he said. “And the fact is, this fight was going to come, one way or another. We’re in the fight. We don’t want to shut the government down. We’ve passed bills to pay the troops. We passed bills to make sure the federal employees know that they’re going to be paid throughout this.”
“You’ve never seen a more dedicated group of people who are thoroughly concerned about the future of our country,” he said of House Republicans. “It is time for us to stand and fight.”
But will the Republicans really stand and fight?
In the past, betting on the intestinal fortitude of the Republican Party has been a loser every single time.
So we’ll see. Boehner insists that this time is different. Boehner insists that he is not going to fold like a 20 dollar suit this time. In fact, when he was asked if the U.S. government was headed toward a debt default if Obama continued to refuse to negotiate, Boehner made the following statement…
“That’s the path we’re on.”
The mainstream media has certainly been placing most of the blame at the feet of the Republicans, but at least the U.S. House of Representatives has been trying to get an agreement reached. The House has voted 26 times since the Senate last voted. Harry Reid has essentially shut the Senate down until the Republicans fold and give the Democrats exactly what they want.
The funny thing is that this could probably be solved very easily. If the Democrats agreed to a one year delay to the individual mandate, the Republicans would probably jump at it. And because of epic technical failures, hardly anyone has been able to get signed up for Obamacare anyway. So a one year delay would give the Obama administration time to get their act together.
Unfortunately, the Democrats seem absolutely obsessed with the idea that they will not give the Republicans one single inch. They seem to believe that this will be to their political benefit.
But this is a very dangerous game that they are playing. The U.S. government must roll over 441 billion dollars of short-term debt between October 18th and November 15th.
If a debt ceiling increase is not in place by that time, it will send interest rates soaring. Borrowing costs for state and local governments, corporations, and ordinary Americans will go through the roof and economic activity will be hit really hard.
And as detailed above, we could potentially be looking at a financial crash that would make 2008 look like a Sunday picnic.
So let us hope for a political solution soon. That will at least kick the can down the road for a little bit longer.
If a debt default were to happen before the end of this year, that would bring a tremendous amount of future economic pain into the here and now, and the consequences would likely be far greater than any of us could possibly imagine.
Image credit: http://theeconomiccollapseblog.com
Posted September 3, 2013
Matt Drudge Breaks Up With Republicans, Joins Libertarians
“It’s now Authoritarian vs Libertarian,” Drudge tweeted. “Since Democrats vs. Republicans has been obliterated, no real difference between parties…”
Drudge also asks his followers why anyone would still vote Republican. “Who are they?!” he asks. “Raised taxes; marching us off to war again; approves more NSA snooping.”
Posted by Judy Morris
Democratic establishment unmasked: prime defenders of NSA bulk spying by Glenn Greenwald
One of the worst myths Democratic partisans love to tell themselves – and everyone else – is that the GOP refuses to support President Obama no matter what he does. Like its close cousin – the massively deceitful inside-DC grievance that the two parties refuse to cooperate on anything – it’s hard to overstate how false this Democratic myth is. When it comes to foreign policy, war, assassinations, drones, surveillance, secrecy, and civil liberties, President Obama’s most stalwart, enthusiastic defenders are often found among the most radical precincts of the Republican Party.
The rabidly pro-war and anti-Muslim GOP former Chairman of the House Homeland Security Committee, Peter King, has repeatedly lavished Obama with all sorts of praise and support for his policies in those areas. The Obama White House frequently needs, and receives, large amounts of GOP Congressional support to have its measures enacted or bills its dislikes defeated….
In reality, the fate of the amendment was sealed when the Obama White House on Monday night announced its vehement opposition to it, and then sent NSA officials to the House to scare members that barring the NSA from collecting all phone records of all Americans would Help The Terrorists™.
Read the rest at The Guardian, here.
Democrats Defy White House on Obamacare, Vote Against Individual and Employer Mandates
The president doesn’t have the authority to just delay the employer mandate part of Obamacare. He can’t just say (as he did) “OK we’ll move it back another year because things are so screwed up.” The law states that it is supposed to go into effect on October 1st 2013.
The GOP in the House offered to make Obama’s decree legal by passing a law delaying the employer mandate. This is what one does in a country which is supposed to be under the rule of law. The president is not king.
But then, fearing an assault on his perceived (by some) power (that whole rule of law thing is such a pain) the President threatened to veto any bill which expressly gave his administration the power to delay the bill.
You see, he has said it will be so, the law be damned. Congress isn’t going to tell him what to do, even if it is the law.
Interestingly a group of Democrats in the house voted to pass the bill anyway. Some even voted to delay the individual mandate as well as the employer mandate.
These Dems knew the president was overstepping his authority and likely because they are vulnerable said something about it. Congress is supposed to write the laws. Congress is a co-equal branch with the Executive ( and also the Supreme Court) of the US government. Obama doesn’t just get to make up the rules as he goes along, no matter how big a disaster Obamcare is.
Also, the main constituency fretting about the delay of Obamacare? You guessed it, the insurance industry. They did write the law so I guess it’s to be expected.
About Nick Sorrentino
Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.
Posted by Judy Morris
Dems pitch national park on the moon
The Hill reports:
Two House Democrats have proposed legislation that would establish a national historical park on the surface of the moon to mark where the Apollo missions landed between 1969 and 1972.
The bill from Reps. Donna Edwards (D-Md.) and Eddie Bernice Johnson (D-Texas) would create the Apollo Lunar Landing Sites National Historical Park. The park would be comprised of all artifacts left on the surface of the moon from the Apollo 11 through 17 missions.
The bill says these sites need to be protected because of the anticipated increase in commercial moon landings in the future.
Read the rest at The Hill, here.
Posted by Judy Morris
Farm Bill Defeated in Blow to Boehner
The House defeated the farm bill resoundingly on a 195-234 vote, “dealing a blow to Speaker John A. Boehner and prompting a bitter round of finger pointing between Democratic and Republican leaders,” Roll Call reports.
“Most Democrats opposed the bill, unhappy with a deep $20.5 billion, 10-year cut to food stamps and backed by a White House veto threat, while Republicans split into competing factions, with a sizable group opposing the bill over concerns it did not cut deeply enough.”
As scandal after scandal rocks Washington DC, the American people are fed up. A new Gallup poll reveals the lowest ever confidence rating for Congress, or any institution ever polled by Gallup.
“This is the lowest level of confidence Gallup has found, not only for Congress, but for any institution on record.” Gallup writes.
Confidence in Congress fell to just 10%, down from 13% in 2012.
In 2009, in the afterglow of President Obama’s historic election, 27% of Democrats had confidence in Congress while only 10% of Republicans did.
There is no longer a significant partisan divide among those polled. In other words, people of all political persuasions now roundly agree, Congress stinks.
By Eric Blair
Is it More Treasonous to Violate the Constitution or to Expose Those Violations?
In a free society the government is supposed to be open and transparent while the citizens enjoy privacy. What, then, do you call a society where the government is ultra secretive and all citizens are spied on by the state?
Establishment pundits are frantically attempting to make the NSA spy scandal story about whether the whistleblower is a hero or a traitor instead of debating the real issue — whether broad government spying on U.S. citizens violates their Constitutional rights.
This divide-and-distract strategy has long been used to protect the real criminals to a free society. Some officials are taking the extreme position that the NSA whistleblower, Edward Snowden, committed treason by releasing proof of what most Americans already suspected, that their every move is being spied on by their government.
These officials, like Rep. Peter King (R-NY) and Sen. Dianne Feinstein (D-CA), also happen to be the staunchest advocates for destroying the Bill of Rights, the Fourth Amendment in particular. Snowden broke a corporate disclosure contract; these officials broke their oath to the Constitution. Who are the real traitors here?
Director of National Intelligence (DNI), James Clapper, claims that a leaked court document proving the government is colluding with communications companies to spy on Americans causes ‘irreversible harm’ to national security, and that the leaker should be prosecuted under the Espionage Act.
This is the same James Clapper that lied under oath to Congress when Senator Ron Wyden asked him in a Senate hearing this March, “Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?”
Bradley Manning is facing espionage charges for allegedly revealing war crimes to the public, while the actual war criminals walk around scot-free. There’s another case where a hacker who exposed a rapist may face more jail time than the rapist. How did our society become so inverted?
Despite the best efforts by the establishment to make whistleblowers out to dangerous criminals, the real criminals are those who are violating the rights of innocent people in a free society.
What we need now are not more whistleblowers, but more oath keepers to arrest these enemies of America.