Obama’s Choice – Cut Spending or Downgrade U.S. Sovereign Debt

Posted by PITHOCRATES - July 27th, 2011

The BIG Problem is the Excessive Spending, not the Debt Ceiling

I don’t know what’s more annoying in the budget debate to raise the debt limit.  The cries on the left for the Republicans to quit being partisan.  To instead propose a true bipartisan bill that has a chance of passing the Senate.  And by ‘bipartisan’ they mean one that gives the left everything they want.  Or is it the doom and gloom being bleated by the president, Congressional Democrats and the mainstream media if the debt ceiling isn’t raised (see Debt-ceiling threat has Wall Street scrambling by Nathaniel Popper and Jim Puzzanghera posted 7/27/2011 on the Los Angeles Times).

Without a deal, the most feared scenario is that the U.S. will miss payments on its bonds and default — which financial experts say would be disastrous. While still considered unlikely, the prospect is popping up more in conversations…

No.  This can’t happen.  There’s enough money to pay interest on the debt.  And to issue Social Security checks.  But they will have to make cuts elsewhere in some nonessential areas.  Like in some cabinet departments (Education, Energy, EPA, etc.).  This is all fear peddling by the Obama administration to do one thing.  Raise the debt ceiling.  So they can keep spending.  And this is the BIG problem.

The more likely scenario that investors are preparing for is that a temporary deal is struck to lift the debt ceiling. But such a makeshift plan is unlikely to allow the U.S. to maintain its AAA grade with bond rating companies. Citigroup analysts say the odds are 50-50 that the U.S. will be demoted to an AA rating for the first time ever.

Such a downgrade could lead to a temporary market panic. In the longer term it could push interest rates up for everyone from bankers down to ordinary people taking out car loans, and weaken the dollar’s position as the world’s reserve currency.

Even if they raise the debt limit in time there is a far greater problem.  And yet few are talking about THIS problem.  The excessive spending that will ultimately cause the credit downgrade.

To Avoid Credit Downgrade will Require $4 Trillion in REAL Spending Cuts

And it’s no secret.  S&P was very explicit in their report of what would cause a credit downgrade.  Unrestrained government spending (see The Real S&P Warning: A $4 Trillion Deal or a Downgrade by Veronique de Rugy posted 7/19/2011 on National Review).

As the debt-ceiling showdown heads into its final stages, the political maneuvering has intensified. Yet I fear that we are losing sight of the only reason why the fight over the debt ceiling matters: It forces a discussion of the country’s real problem — unrestrained government spending and the tremendous fiscal imbalances that jeopardize our financial safety.

This is the real message in the July 14 S&P report.

First, S&P writes that unless there’s a credible $4 trillion deal within the next three months, they will downgrade us. By “credible,” S&P explains, they mean a plan that will actually be put into place (i.e., not one where the tax increases happen but not the spending cuts). Not $2 trillion, not $1 trillion,  but $4 trillion. And it has to be credible.

That means REAL spending cuts.  Not those ‘future’ kind that never happen.  Those that Democrats have promised time and again only to renege on those promises.  Or the base-line budgeting type of ‘cuts’ that still increase spending.  The onus is all on Obama and the Democrats.  Because they are the ones steadfast in their opposition to any real spending cuts.

The Electric Car – Typical Wasteful Government Spending

To get an idea of their voracious appetite to spend, consider the electric car.  What the economy of the future is based on.  Green energy.  The thing that’s going to make America rich and prosperous again (see California dials back its electric car credits by Eric Evarts posted 7/26/2011 on Consumer Reports).

In large part, EV appeal was greater in California due to a $5,000 state rebate that came on top of the $7,500 federal tax credit. With the tax credits, the price of an all-electric Nissan Leaf could be as low as $21,000, making it cheaper than a Toyota Prius and putting it on par with other small cars. (The Chevrolet Volt was not eligible for the state credit, although it does receive the $7,500 federal tax credit…)

While the price of electric cars is going up for California drivers, other factors still make the Golden State more attractive than most for electric cars: California uses no coal to generate electricity; its major electric utility companies have time-of-use rates and special power rates for electric cars, effectively lowering their energy costs; and perhaps most importantly, pure electric cars are still eligible to use carpool lanes on the state’s notoriously congested freeways with just a driver onboard. In addition, public charging infrastructure is on a faster track than it is elsewhere in the nation.

So that’s $5,000 from the state.  $7,500 from Washington.  That’s a discount of $12,500 (37.3%).  And yet the price of the Nissan Leaf is still $21,000.  But that still isn’t enough to make this car sell.  They need a subsidized electrical rate as well.  Government at all levels is paying a lot of our tax dollars to make a car no one wants to buy.  And this is the kind of spending that they just can’t cut.  Wasteful.  And this is only one example from the multitude.

Repeal Obamacare – Save Money, Please the People

Cutting $4 trillion over 10 years will not be easy.  But we can halve this number with one stroke of a pen (See By a Margin of 21 Points, Americans Favor Repeal by Jeffrey H. Anderson posted 7/27/2011 on the Weekly Standard).

While President Obama’s notion of a “balanced approach” to deficit reduction isn’t written down anywhere, it’s quite clear that it doesn’t involve repealing Obamacare (despite the fact that the health care overhaul would cost over $2 trillion in its real first decade, from 2014 to 2023). Polling, however, strongly suggests that it should. The latest Rasmussen poll of likely voters shows that, by a margin of 21 points (57 to 36 percent), Americans support the repeal of the centerpiece legislation of the Obama presidency.

Repealing Obamacare would be a step in the right direction.  It will save $2 trillion in spending that is pushing the U.S. toward a credit downgrade.  And the people don’t want it by a margin of 21 points.  Save money.  Please the people.  It’s a no-brainer for responsible government.  If only government was responsible.

The Choice – Cut Spending or Downgrade U.S. Sovereign Debt

The president said we need to live within our means.  And he’s right about that.  But living within our means doesn’t mean taxing and borrowing more to pay for out of control government spending.  Living within our means starts by NOT spending money we don’t have.  Not to spend first and figure out how to pay later. 

And just because other presidents raised the debt limit doesn’t mean we have to raise the debt limit.  You don’t justify bad behavior with bad behavior.  We’ve borrowed too much.  The credit rating agencies have spoken.  We need to cut spending.  And not get all professorial and lecture the American people that we need to be ‘responsible’ and raise taxes to pay for the government’s irresponsible spending binge.

We either cut spending.  Or Obama and his Democrats will downgrade U.S. sovereign debt for the first time in history.  Those are the choices.  And a good place to start would be to repeal Obamacare.  Because that’s all future spending.  All $2 trillion.  Not like Social Security or Medicare.  You can cut Obamacare.  And no one will miss it.

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A Debt Default and ‘no Social Security Checks’ only Scare Tactics in the Budget Debate to Raise the Debt Limit

Posted by PITHOCRATES - July 25th, 2011

A Summary of the Budget Debate to Raise the Debt Limit

One day making tracks in the prairie of Prax came a tax-raising Zax.  A tax-raising Zax.  And a spending-cuts Zax.  A tax-raising Zax.  And a spending-cuts Zax.  And it happened that both of them came to a place where they… *boom*  There they stood foot to foot.  Face to face.

“Look here, now,” the tax-raising Zax said.  “I say, you are blocking my path.  You are right in my way.  I’m a tax-raising Zax and I always raise taxes.  Get out of my way, now, and let me raise taxes.”

“Who’s in whose way?” snapped the spending-cuts Zax.  “I always cut spending making spending-cuts tracks.  So you’re in my way and I ask you to move and let me cut spending in my spending-cuts groove.”

Then the tax-raising Zax said with tax-raising pride, “I never have taken a step to one side.  And I’ll prove to you that I won’t change my ways if I have to keep standing here 59 days.”

“And I’ll prove to you,” yelled the spending-cuts Zax.  “That I can stand here in the prairie of Prax for 59 years.  For I live by a rule that I learned as a boy back in spending-cuts school.  Never budge that’s my rule, never budge in the least.  Not an inch to the west, not an inch to the east.  I’ll stay here not budging, I can and I will.  If it makes you and me and the whole world stand still.”

(The Zax, from The Sneetches and Other Stories by Dr. Seuss, slightly modified)

Spending worries most Americans

If neither Zax is moving, at least there’s no spending.  And it appears that it is the spending that worries most Americans.  Based on the polling.  Which shows the spending-cuts Zax gaining support (see GOP has 10-point edge on Democrats in public trust on economic issues in latest Rasmussen Reports national survey by Mark Tapscott posted 7/24/2011 The Washington Examiner).

Republicans have gained a 10 point lead over Democrats in Rasmussen Reports latest national survey on who the public most trusts to deal effectively with economic issues.

The 10 point lead is the widest margin held by either party in months and has opened up in recent weeks as President Obama and House Speaker John Boehner have become the central players in the debate over how to deal with the approaching debt-ceiling crisis.

It seems pretty clear.  The people want the tax-raising Zax to take a step to the spending-cuts side.

You can’t Fool the Bond Market

And while one Zax stands foot to foot with the other Zax, not budging, the bond market is not all that worried.  Which is kind of odd being that they hold the debt that Obama, Geithner, Pelosi, Reid, etc., warn they may default on (see U.S. bond market: Watching and waiting by Ben Rooney posted 7/25/2011 on CNN Money).

As policymakers in Washington continue to butt heads over the debt ceiling, the response in the bond market Monday was relatively subdued…

…many bond market watchers suggested that stocks are more vulnerable to the ongoing debt ceiling drama. By contrast, some say Treasuries could actually benefit from a flight to safety if the debt ceiling isn’t raised.

This seems counterintuitive.  Especially with all of the dire predictions coming out of Washington.  But it turns out that you can’t fool the bond market.

Another reason why Treasuries have held their ground is that a default would not necessarily result in huge losses for holders of U.S. debt. Treasury would probably have to furlough workers and make other adjustments if the debt ceiling is not raised, but analysts do not expect it to immediately miss interest payments on the federal debt.

The money is there.  Some money.  Tax revenue is still making it to Washington.  Almost $200 billion each month.  The bond market knows this.  They’ll get their interest payment.  Still, there could be some fallout from a downgrading of U.S. debt. 

…many institutional investors, including money market funds and pensions, are required to hold only AAA-rated securities. If the U.S. government is downgraded, those funds may be forced to dump billions worth of U.S. paper.

This could wreak a little havoc.  But probably no more than a downgrade due to the lack of resolve to restrain out of control spending which is the root cause of all these budget problems.  One way or another, we have to cut spending to ultimately calm the bond rating agencies.

Businesses are more Worried about the Tax Code

And they aren’t that worried in corporate America either (see Analysis: CEOs count on cash to cushion default risk by Scott Malone posted 7/25/2011 on Reuters).

Bankruptcy attorney Martin Bienenstock, of Dewey & LeBoeuf LLP, said it seemed like most business people were dismissing the likelihood of a default

“People still don’t think there is going to be an actual default,” Bienenstock said. “There doesn’t seem to be any domino effect brewing yet with the concept of ‘rates will rise and companies on the brink will fail and things like that.'”

If the U.S. runs out of money it is more likely that there will be a partial government shutdown.  Not a default.  And, to be frank, there isn’t a lot these businesses need from government.  Other than a simplified tax code.

While businesses would balk at paying higher taxes, CEOs have said that what they want right now is to have the tax debate settled so they know what they will be paying in taxes.

A government unable to pay its bills won’t affect them.  But not knowing what their taxes will be will.  Because the government shakes them down for a lot of money.  And they have to plan accordingly.  Like having a forklift and other heavy-lifting equipment available to lift those vast sums of cash.

Social Security Checks will go out Regardless

It would appear that most aren’t falling for the scare tactics of Obama and the Democrats.  But what about the seniors?  Will they get their Social Security checks?  Team Obama has been playing this card every chance someone places a microphone in front of them.  So what about Social Security?  Should seniors worry about not getting their checks?  As it turns out, no (see Contrary to the President, Social Security Checks Are Not At Risk by Michael McConnell posted 7/23/2011 on Advancing a Free Society).

The Social Security trust fund holds about $2.4 trillion in U.S. Treasury bonds, which its trustees are legally entitled to redeem whenever Social Security is running a current account deficit. Thus, if we reach the debt ceiling…, this is what will happen. The Social Security trust fund will go to Treasury and cash in some of its securities, using the proceeds to send checks to recipients. Each dollar of debt that is redeemed will lower the outstanding public debt by a dollar. That enables the Treasury to borrow another dollar, without violating the debt ceiling. The debt ceiling is not a prohibition on borrowing new money; it is a prohibition on increasing the total level of public indebtedness. If Social Security cashes in some of its bonds, the Treasury can borrow that same amount of money from someone else…

President Obama is therefore wrong when he says that failure to raise the debt ceiling might result in not sending out Social Security checks. Many bad things might happen, but not that.

Interesting.  So Social Security checks will go out.  Automatically.  Even if the current account is in deficit.  Because of that glorious trust fund stuffed with treasury securities.  In fact, the only way checks won’t go out is if Obama prevents this automatic mechanism to score some political points by falsely blaming Republicans.  Which will be risky.  Because people will eventually learn the truth.  If they don’t know it already.

The Tax-Raising Zax needs to Step to the Spending-Cuts Side

The tax-raising Zax had better learn to swallow his tax-raising pride and however reluctantly he should now take that first step to the spending-cuts side. 

For the people and the bond market and businesses agree.  The problem is spending.  Much too much spending as you must by now plainly see.

And leave our seniors alone and frighten them not with horrors of checks that won’t come their way.  For the trust fund is brimming with securities aplenty that can be cashed to pay all promises made without delay.

Unless Social Security has been a big Ponzi scheme all along.

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Using Class Warfare to raise the Debt Limit while the Chinese Love Chairman Mao

Posted by PITHOCRATES - July 16th, 2011

You just don’t create more Jobs by Raising Taxes

Long story short the economy sucks.  And it’s not getting better anytime soon (see Number of the Week: 5% Unemployment Could Be Over a Decade Away by Justin Lahart posted 7/16/2011 on The Wall Street Journal).

162: Number of months it would take at this year’s pace of job growth for unemployment rate to fall to 5%.

That’s 13 and a half years of more of the same.  High unemployment means fewer taxpayers.  This does not bode well for our current debt crisis or that out of control government spending.  Which has all of Washington in a panic as they desperately try to get the Republicans to cave and increase the debt limit so they can borrow more. 

Obama and the Democrats want tax hikes.  To take more from those who work.  The Republicans want to go the route of making more taxpayers (i.e., create more jobs).  And you just don’t create more jobs by raising taxes.  Unless you live in fairyland.

‘Shared Sacrifice’ means Taxing the Wealthy More

But the spending is so out of control and the economy so bad that the Obama administration is desperate for new taxes.  They’re willing to offer any deal.  And tell any tall tale (see Obama appeals to middle class on debt talks; GOP touts balanced budget by the CNN Wire Staff posted 7/16/2011 on CNN).

Obama cited budget deals forged by President Ronald Reagan and Democratic House Speaker Tip O’Neill and President Bill Clinton and Republican Speaker Newt Gingrich.

“Nobody ever got everything they wanted,” Obama said. “But eventually they worked together, they moved this country forward…”

“We’ve been down this road before,” he said. “In 1990 Congress and the president struck a deficit reduction deal that combined spending cuts with tax increases. Unfortunately, while the tax hikes remained, the spending restraint did not, and our debt has marched higher.”

There’s a little history revisionism.  The Democrats got their tax hikes.  And screwed Republicans on the spending cuts.  The infamous $3 in spending cuts for every $1 in new taxes promise in the Tax Equity and Fiscal Responsibility Act of 1982Tip and his Democrats reneged on that promise.  Just like the Democrats did on their 1990 promise. 

‘Working together’ to Obama means to do what the Democrats want and to stop being a pain in the ass.  So you can understand why the Republicans are a little gun-shy when it comes to making deals with them that require trust.  Because they have a history of being untrustworthy.

Evoking compromises of the past, President Barack Obama said Saturday that a commitment to shared sacrifice can break the current impasse on the debt ceiling…

He used his address to reach out to the middle class, reiterating his call for higher taxes on the wealthy and reforms to politically popular entitlement programs such as Medicare and Social Security. “We are all part of the same country. We are all in this together…”

One of the issues at heart of the current debate is Obama’s call for more tax revenue by allowing tax cuts from the Bush presidency to expire at the end of 2012 for families making more than $250,000. His plan would keep the lower tax rates for Americans who earn less.

Obama noted earlier this week he is not looking to raise any taxes until 2013 or later. In exchange, the president said, he wants to ensure that the current progressive nature of the tax code is maintained, with higher-income Americans assessed higher tax rates.

Shared sacrifice?  Higher taxes on the wealthy?  Clearly that’s not shared sacrifice.  That’s making the wealthy pay more.  Even though they are already paying a lot.  In fact, any poor person who wins the lotto will be shocked to see how much they will owe in taxes.  Say you won a million dollar jackpot.  Per the 2010 federal income tax table, you’ll owe $327,643.75.  Not to mention state or local taxes.  You’ll be lucky to keep half of your winnings by the time you’re done paying your taxes.  Is that fair?  If it’s you, no.  If it’s the ‘rich’ and you’re not rich, sure.  Why not?  Classic class warfare.  And it’s exactly what the Democrats are banking on.  

A Warm Love for Chairman Mao

And speaking of class warfare, you know who else is good at it?  The Chinese communists.  And it starts by indoctrinating their children (see Red State by Hannah Beech posted 7/16/2011 on Time).

Twelve-year-old Chen Le is a typical Chinese kid. He loves flying paper airplanes, plays Ping-Pong and dreams of becoming a scientist. And he aims one day to join the Chinese Communist Party (CCP) so, as Chen puts it, “I can puff out my chest and say I am a party member…”

…Then there’s the Red Army school program, which uses donations and other funds to instruct 1.15 million kids in academies named after the communist militia. “Our patriotism classes are even more patriotic than those of normal schools because loving our country is very important for our current society,” says Fang Qiang, the secretary-general of the National Red Army Construction Project Council. “Our students all have a warm love for Chairman Mao.”

A warm love for Chairman Mao?  Interesting.  Talk about history revisionism. 

[The] red revival is facing something of a backlash. For some Chinese, the color red brings back the bad memories of the 1966-76 Cultural Revolution, when frenzied Red Guards rampaged nationwide. The resurgent glorification of Mao, who even staunch supporters have grudgingly labeled “70% right and 30% wrong,” has alarmed others. As the red-culture campaign reached a crescendo this spring, economist Mao Yushi of Beijing think tank Unirule Institute of Economics wrote an online essay blaming Mao for overseeing the deaths of some 50 million Chinese. The Great Helmsman was “a backstage orchestrator who wrecked the country and brought ruin to the people,” the academic wrote. Censors quickly purged his comments.

There wasn’t a whole lot of love for Mao when he was killing those 50 million Chinese.  Just a lot of fear.  And suffering.  As China reformed and purged the rich and made everyone equal.  And poor.  And now the young are singing patriotic songs about the world’s greatest mass murderer.  To help keep everyone patriotic.  So they don’t see the rich getting richer.  And the poor staying poor.

For a nostalgic faction in the Chinese leadership, it is the market-oriented economic reforms of Mao’s successor Deng Xiaoping — which turned China into the world’s factory — that are responsible for having allowed ills such as graft and income inequality to flourish. In national surveys from 2005 onward, Chinese have expressed progressively less satisfaction with their lives, even as their incomes have surged. “We can’t stop divisions in society completely, but we can try to lessen the pain,” says Fang Ning, director of the Institute of Political Science at the Chinese Academy of Social Sciences in Beijing. “The central theme of red culture is to promote unity and equality in society. China has had economic growth. Now we want to pay attention to social growth as well.”

After some spectacular growth caused by allowing a little capitalism in, they will now be paying attention to social growth.  Much like in the United States.  And we see what that did for the Americans.  A 15 year or so recession.  And a debt crisis.  Which is now coming to China.  Who are no strangers to income redistribution.  Been there.  Done that.  Under Chairman Mao.  During his Great Leap Forward.  Which was more central planning disaster than moving the country forward.  In fact, it was capitalism that finally did move China forward.  As it moved America forward.  Until the Americans focused on social growth.   

If history repeats, as it usually does, perhaps their future will be our present.  Where they will be making speeches about shared sacrifice.  To avert a disaster.  And keep the peace.  Or they could just send the tanks in.  Which have proven to be pretty effective in shutting down an unhappy opposition.

Income Inequality sure pays the Tax Bills

The American economy won’t be getting better anytime soon.  Thanks to excessive government spending and debt.  Which the Obama administration is going to ‘fix’ by borrowing and spending more.  And increasing taxes.  Things that aren’t known for creating jobs.  Which is what we need.  Like in China.  They have a lot of them.  And see how well they’re doing?  They’re getting so rich that they have to get their young to sing patriotic songs to hide the income inequality.  So they don’t grow up and become dissidents.

Say what you want about income inequality, but it sure pays the tax bills.  China is buying U.S debt. The United States isn’t buying Chinese debt.  That should tell you a thing or two about letting the rich get rich.

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Only Obama can make the U.S. Default on its Debt Obligations

Posted by PITHOCRATES - July 15th, 2011

$172.4 Billion is a lot of Money

Still no closer to a budget agreement to raise the debt limit.  Obama wants more taxes and more borrowing.  The Republicans want a little fiscal sanity.  Because something is definitely wrong in Washington when $172.4 billion a month isn’t enough (see August Invoices Show U.S. Treasury’s Limited Choices by David Rapp posted 7/12/2011 on Bloomberg Government).

The U.S. government, whose legal authority to borrow money expires on or about Aug. 2, expects to take in $172.4 billion next month — enough to cover little more than half of its bills due then, according to a study for the Bipartisan Policy Center, a research organization.

The U.S. may not have to default on outstanding debts or withhold interest payments for that month; it may be able to cover $29 billion in anticipated interest due on Treasury securities with its cash receipts…

Jay Powell, undersecretary of the Treasury for Finance under President George H.W. Bush, calculated for the policy center that $306.7 billion in bills will come due after Aug. 2. They include Social Security benefits, defense vendor payments and military active duty pay, along with federal pay for every department and agency, in addition to the interest payments.

I think we’re missing the bigger picture here.  The government collects $172.4 billion but spends $306.7 billion.  That is, for every dollar it collects it spends $1.78.  In other words, the government’s spending is 78% over their cash budget.  Managers in the corporate world get fired for performances like this. 

That is either a big spending problem.  Or a big revenue problem.  So are taxes too low?  I don’t think so.  I mean, $172,400,000,000 is a lot of money.  How much?  It’ll buy 542 of the new Boeing 747-8 jetliners.  Or 149 Dallas Cowboys Stadiums.  Or 27 nuclear powered aircraft carriers.  It’ll even pay for the Apollo moon program with $41.3 billion left over.  $172.4 billion is an enormous amount of money.  You couldn’t spend this much money if you tried.  Even if you bought the best houses, cars, jewelry, clothes, island, etc.  And if you had the mother of all drug addictions.  It’s just a staggering amount of money.  And if you’re collecting in taxes more money than the cost of the Apollo moon program each month, guess what?  You don’t have a revenue problem.  You have a spending problem.

Bloomberg has a nifty little calculator on their website.  You can put checks on the things you want to pay.  And leave the things you don’t unchecked.  It’s an interesting list of bills coming due this month.  There’s a lot of stuff we can cut easily to save $47.1 billion.  Federal salaries & benefits ($14.2 billion).  Small Business Administration ($0.3 billion).  Education Department ($20.2 billion).  Department of Housing and Urban Development ($6.7 billion).  Energy Department ($3.5 billion).  Labor Department ($1.3 billion).  Environmental Protection Agency ($0.9 billion).  What taxpayer would miss any of these?  Cuts to Social Security and Medicare, on the other hand, will be a little more difficult.  For they actually do something.  And people will miss them.

Incidentally, interest on the debt is $29 billion.  Though a lot of money, it’s not too high for the $172.4 billion to cover.  So if the Obama administration doesn’t pay this and causes a downgrade in our credit rating, President Obama will have some ‘splaining to do.

Monthly Spending Equivalent to 1.3 Apollo Programs should be Enough

The president has no intention of cutting spending.  Their goal is to make Republicans look bad.  And to better position themselves for the 2012 election.  So the president will lie and spin misinformation in hopes that this stuff is just too complicated for the layperson to follow.  And that they only remember one thing.  That Republicans stopped Social Security checks going out because they’d rather give tax breaks to the rich.  And that they miss the fact that Obama and his Democrats gave us this crisis to begin with.  With the greatest spending orgy of any peacetime president.  So he threatens that if the Republicans don’t pay for his reckless spending, he’s going to tell everyone it’s their fault that the country defaulted (see Obama: Chance for ‘something big’ to calm economy by Jim Kuhnhenn, Associated Press, posted 7/15/2011 on Yahoo! News).

Obama urged Republican lawmakers to make tough calls, too. He attempted to turn their opposition to any tax increases back against them, warning that a government default caused by failure to raise the debt ceiling would increase interest rates, “effectively a tax increase for everybody.”

No, a failure to raise the debt ceiling won’t cause a government default.  Barack Obama will.  If and when he decides to pay something he thinks is more important than the interest on the debt.

Obama sternly rejected any plan of that size that did not include increases in tax revenue.

Apparently spending the equivalent of 1.3 Apollo programs a month just isn’t enough.  Obama gives new meaning to tax and spend liberal.  Pity Ted Kennedy didn’t live long enough to work with his kind of liberal in the White House.  Or see his pet cause, national health care, signed into law.  Then they both could have seen their policies destroy this country.  Don’t believe me?

Spending/Debt so bad it’s bringing back the Gold Standard

Then ask the Chinese communists.  Though their economy is rife with cronyism and will no doubt collapse as the Japanese economy did in the Nineties, they know too much debt when they see it (see Return of the Gold Standard as world order unravels by James Quinn and Ambrose Evans-Pritchard posted 7/16/2011 on The Telegraph).

Xia Bin, an adviser to China’s central bank, said in June that the country’s reserve strategy needs an “urgent” overhaul. Instead of buying paper IOU’s from a prostrate West, China should invest in strategic assets and accumulate gold by “buying the dips”.

Step by step, the world is edging towards a revived Gold Standard as it becomes clearer that Japan and the West have reached debt saturation. World Bank chief Robert Zoellick said it was time to “consider employing gold as an international reference point.” The Swiss parliament is to hold hearings on a parallel “Gold Franc”. Utah has recognised gold as legal tender for tax payments.

A new Gold Standard would probably be based on a variant of the ‘Bancor’ proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China’s central bank chief Zhou Xiaochuan two years ago as a way of curbing the “credit-based” excess.

So the Chinese, the World Bank, the Swiss, Utahans and a dead John Maynard Keynes agree that the U.S. has a spending problem.  A spending problem that is racking up debt to saturation.  So bad that the once invincible U.S. dollar should no longer serve as the world’s reserve currency.  A sad development indeed.  And painful to hear.  Especially coming from a commie.

Tax Hikes First, then Broken Spending Cuts Promises

And yet the president is in denial.  He doesn’t see a spending/debt problem.  He sees a revenue problem.  Because high taxes and high debt are okay in his world.  As long as they pay for liberal government spending.  That’s why he’s dead set against spending cuts only.  He wants those tax hikes.  He needs those tax hikes.  And will promise almost anything to get those tax hikes.  Because once he does, and mark these words well, he will break every spending cuts promise he made to get them.

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Obama Threatens Seniors and Veterans if he doesn’t get his Way in the Budget Debate to Raise the Debt Limit

Posted by PITHOCRATES - July 13th, 2011

Hypocrisy is a Two Way Street

Arguing over debt limits is nothing new.  Neither is the hypocrisy.  It’s not about doing the right thing.  It’s about politics.  Always has been (see Debt Crisis Déjà Vu by Howard Kurtz posted 7/12/2011 on The Daily Beast). 

Democratic Sen. Kent Conrad is losing patience with arguments for raising the debt ceiling.

“The question is: Are we staying on this course to keep running up the debt, debt on top of debt, increasingly financed by foreigners, or are we going to change course?” he asked.

But Republican Sen. Chuck Grassley says there is no alternative, with lawmakers facing “a choice between breaking the law by exceeding the statutory debt limit or, on the other hand, breaking faith with the public by defaulting on our debt…”

“To pay our bills,” said John Kerry, who had just lost his presidential bid, “America now goes cup in hand to nations like China, Korea, Taiwan, and Caribbean banking centers. Those issues didn’t go away on Nov. 3, no matter what the results.”

And always will be.  Parties typically stand by their president.  As the Republicans stood with George W. Bush in 2006.  Who then made the same arguments that the Democrats are making now.  And the Democrats are making the same arguments now that the Republicans made then.  Nothing ever changes.  Just their principles change to suit the politics.

In fact, every Senate Democrat—including Barack Obama and Joe Biden—voted against boosting the debt ceiling, while all but two Senate Republicans voted in favor. It was Bush’s fourth debt-ceiling hike in five years, for a total of $3 trillion.

Eric Cantor and John Boehner voted then to raise the ceiling, and on other occasions during the Bush administration; now they’re leading the opposition. Obama, who warned Tuesday in a CBS interview that he can’t guarantee Social Security checks will go out after the August 2 deadline, has said his 2006 vote was a mistake.

Obama and Biden were against raising the debt limit then because it was fiscally irresponsible.  They’re for it now.  Even though the debt is higher.  And more fiscally irresponsible.

Obama said his 2006 vote was wrong?  I guess we can forgive him being that he was young and inexperienced coming into the U.S. Senate.  Of course, he was even more young and inexperienced as far presidents are concerned.  So perhaps his policy is wrong, too, like that 2006 vote.  The stimulus.  The auto bailout.  The Wall Street bailout.  All that Keynesian tax and spend.  Perhaps when he grows up and learns from experience he will be saying he was ‘wrong’ a lot more often.

Monetary Policy fails to Eliminate the Business Cycle

And speaking of all that Keynesian policy, how has it worked?  (see Bernanke: Fed May Launch New Round of Stimulus by Jeff Cox posted 7/13/2011 on CNBC). 

Federal Reserve Chairman Ben Bernanke told Congress Wednesday that a new stimulus program is in the works that will entail additional asset purchases, the clearest indication yet that the central bank is contemplating another round of monetary easing…

Markets reacted immediately to the remarks, sending stocks up sharply in a matter of minutes. Gold prices continued to surge past record levels, while Treasury yields moved higher as well.

It hasn’t been working.  But never say die.  Just because QE1 and QE2 failed it doesn’t necessarily mean QE3 will fail.  But it will.  And it will further depreciate the U.S. dollar.  Which is why gold prices and Treasury yields are up.  They’re priced in dollars.  So when you make the dollar smaller, you need more of them to buy things priced in dollars.

The Fed recently completed the second leg of its quantitative easing program, buying $600 billion worth of Treasurys in an effort to boost liquidity and get investors to purchase riskier assets…

“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support,” Bernanke told the House Financial Services Committee on the first of two days of Capitol Hill testimony.

Bernanke also said it was possible that inflationary pressures spurred by higher energy and food prices may end up being more persistent than the Fed anticipates.

So the Fed is looking at policy to fight both inflation and deflation.  Interesting.  Because you use monetary policy to fight one with the other.

This is the Business Cycle that Keynesian economics purportedly did away with.  As inflation starts rising you contract the money supply via higher interest rates.  As deflation reduces asset value you lower interest rates to stimulate borrowing and asset buying.  There’s only one problem to this Keynesian economics theory.  It doesn’t work.

Playing with interest rates to stimulate borrowing does stimulate borrowing.  People take advantage of low rates, take out loans and buy assets.  Like houses.  In fact, there is such a boon in the housing market from all this stimulated borrowing that house prices are bid up.  Into a bubble.  That eventually pops.  And a period of deflation sets in to correct the artificially high housing prices resulting from artificially low interest rates.

The Dollar Loses against the Embattled Euro

So how bad is the depreciation of the dollar (see Bernanke says more support possible if economy weakens posted 7/13/2011 on the BBC)? 

The dollar extended earlier losses against the euro following Mr Bernanke’s comments, with the euro rising more than a cent to $1.4088.

The Eurozone is teetering on collapse with the Greek crisis.  Especially if their problems spread to the larger economies of Italy and Spain.  Further pressuring the Euro.  The Euro had been falling against the dollar.  It’s not anymore.  Not because the Euro is getting stronger.  But because the dollar is getting weaker.

Tax, Borrow, Print and Spend Keynesians love to Spend Money

And the safe haven from a falling dollar?  Gold (see Gold hits record high on Bernanke, euro worries by Frank Tang posted 7/13/2011 on Reuters).

Gold surged to a record above $1,580 an ounce on Wednesday as the possibility of more Federal Reserve stimulus coupled with Europe’s deepening debt crisis gave bullion its longest winning streak in five years…

Gold benefits from additional U.S. monetary easing because such a move would likely weaken the dollar and stir inflation down the road.

“The worst thing for gold would be to have the economy doing well enough that the Federal Reserve starts to normalize monetary policy, or conditions in the European Community begin to settle down,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott, a broker/dealer with $54 billion in assets.

That’s right.  Gold loves bad monetary policy.  And it loves Keynesian economics.  Because the weaker the dollar gets the more expensive gold gets in U.S. dollars.  Gold says, “Print on, Chairman Bernanke.  Keep printing those dollars.  I’ve never felt so alive and powerful.”

Gold is a tangible asset.  Dollars are just pieces of paper.  Gold gets more valuable during periods of inflation because you can’t print gold.  That’s why Keynesian governments refuse to reinstitute the gold standard.  Because having the power to print dollars lets them spend more money than they have.  And tax, borrow, print and spend Keynesians love to spend money.

Democrats Screwing Seniors and Veterans to get their Way

One government advantage of printing money is reducing the value of dollar-priced assets.  Such as government debt.  Economists call it monetizing the debt.  By making the treasuries and bonds people invest their retirement in worth less, it costs less to redeem them.  This is bad for retirees who have to live their retirement on less.  But screwing retirees helps the government to spend more.

Despite this the debt is at a record level.  They still need to borrow more.  Screwing retirees just isn’t paying the bills anymore.  So President Obama, the Democrats and the Republicans have been bitterly arguing about raising the debt limit.  But making little progress (see Obama walks out of tense debt meeting: aide by Andy Sullivan, Reuters, posted 7/13/2011 on the Chicago Tribune).

President Barack Obama abruptly ended a tense budget meeting on Wednesday with Republican leaders by walking out of the room, a Republican aide familiar with the talks said.

The aide said the session, the fourth in a row, was the most tense of the week as House of Representatives Speaker John Boehner, the top Republican in Congress, dismissed spending cuts offered by the White House as “gimmicks and accounting tricks.”

Gimmicks and accounting tricks are all the Democrats want to offer.  Because they just don’t want to cut back on spending.  It’s not who they are.  Big Government tax, borrow, print and spend Keynesians who love to spend money (see Eric Cantor: Obama abruptly walked out of debt meeting by Jonathan Allen posted 7/13/2011 on Politico).

President Barack Obama abruptly walked out of a debt-limit meeting with congressional leaders Wednesday, throwing into serious doubt the already shaky debt limit negotiations, according to House Majority Leader Eric Cantor (R-Va.) and a second GOP source.

Cantor said the president became “agitated” and warned the Virginia Republican not to “call my bluff” when Cantor said he would consider a short-term debt-limit hike. The meeting “ended with the president abruptly walking out of the meeting,” Cantor told reporters in the Capitol.

That bluff would be, off course, not printing Social Security checks or paying the military.  The Education Department will probably get paid.  But seniors will get screwed.  As those serving in the military.  And veterans.  Because when all else fails, take hostages.  Threaten their wellbeing unless you get what you want.

The Democrats believe it’s all their Money

Why is there such a divide between the Republicans and the Democrats?  It’s because of their underlying philosophies.  Republicans believe that this is a nation of ‘we the people’.  Whereas Democrats believe it’s a nation of ‘we the government’ (see We have a taxing problem, not just a spending problem by Ezra Klein posted 7/12/2011 on The Washington Post). 

The Bush tax cuts were not supposed to last forever. Alan Greenspan, whose oracular endorsement was perhaps the single most decisive event in their passage, made it very clear that they were a temporary solution to a temporary surplus. “Recent data significantly raise the probability that sufficient resources will be available to undertake both debt reduction and surplus-lowering policy initiatives,” Greenspan said in 2001.

Okay, so maybe he wasn’t so clear. But everyone knew what he meant. And, broadly speaking, they agreed. We had a big surplus. It was time to do something with it. Brad DeLong, a former Clinton administration official and an economist at the University of California at Berkeley, didn’t want to see the surplus spent on tax cuts. He wanted to see it spent on public investments. “Nevertheless,” he wrote in 2001, “it is hard to disagree with Greenspan’s position that — if our future economic growth is as bright as appears likely— it will be time by the middle of this decade to do something to drastically cut the government’s surpluses.”

The Democrats believe it’s all their money.  Any money they let us keep is ‘government spending’ in their world.  That’s why they call all ‘tax cuts’ government spending.  And not simply returning money to its rightful owners.

But the Republican Party refuses to let any of them expire. And forget admitting that tax cuts meant for surpluses don’t make sense during deficits; they refuse to admit that tax cuts have anything to do with deficits at all.

It’s this belief that stands in the way of a debt deal. “We have a spending problem, not a taxing problem,” Republicans say. If the federal government defaults on Aug. 2, that sentence will be to blame. What a shame, then, that the sentence is entirely, obviously, wrong.

Obviously?  What is obvious is that this person ignores the economic prosperity caused by JFK‘s tax cuts.  Ronald Reagan‘s tax cuts.  And George W. Bush’s tax cuts.  Tax cuts stimulate economic activity.  More economic activity means more tax dollars flowing into Washington.  As history has proven.  And yet the economically naive hang on to Keynesian theories despite their history of failure.  Because they think they are oh so smart.  When in reality they’re not.  Just lemmings unquestioningly following the party line.

The Democrats favor unlimited Taxing, Borrowing and Printing

The budget debate over raising the debt ceiling is not a financial debate.  It’s a political debate.  Currently, the politics have the Republicans opposing the increase.  And the Democrats favoring it.  This is actually more in line with their underlying philosophies.  Democrats believe it’s all their money and they want to keep more.  The Republicans believe the money belongs to the people who earned it and are trying to let them keep more of it.  So you would expect the Democrats to be in favor of unlimited taxing, borrowing and printing.  And Republicans in favor of less taxing, borrowing and printing.  Which is the case in the current budget debate.

The question now is who will blink first?  The Republicans fearing another 1995 government shutdown?  Or the Democrats who are doing the preponderance of bluffing?  (There’s almost $200 billion in cash coming into Washington each month.  If they don’t pay seniors and veterans, people will want to know who they felt was important enough to pay.)

The stakes have never been higher.  What happens in the current debate could very well determine the outcome of the 2012 election.  Oh, and the future of America.

www.PITHOCRATES.com

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Learning nothing from Europe’s Financial Crises, Obama pushes hard to increase the Debt

Posted by PITHOCRATES - July 11th, 2011

No Economy is too Big to Fail

Having too much debt is a bad thing.  For one thing, you have to pay it back eventually.  And until you do, you have to service it.  Make interest payments.  Which can become very large if you have a lot of debt.

Greece has a lot of debt.  So much that they can’t sell any more.  And they can no longer service that debt.  Which is a big problem for the European Union (EU), in particular the Eurozone and its common currency the Euro.  Greece is small.  But the EU is big.  And Greece’s problem is now their problem because of that common currency (see Eurozone moves to stop Greek debt crisis by Gabriele Steinhauser, Associated Press, posted 7/11/2011 on USA Today).

Investors are concerned that the debt crisis, which has so far been contained to the small economies of Greece, Ireland, and Portugal, could soon drag down bigger countries like highly indebted Italy and unemployment-ridden Spain. The mere size of their economies could easily overwhelm the rescue capacity of the rest of the eurozone…

“The fact that contagion is spreading marks the failure of politicians to draw a line under the Euro-crisis to date,” Rabobank analyst Jane Foley said. “As yields rise and debt financing costs become even more exaggerated the difficulties of containing the crisis become even bigger.”

The Europeans crated the EU and the Eurozone to counter the economic prowess of the United States.  And it has.  Their economies run shoulder to shoulder.  Which is why the U.S. should be worried about what is happening in Greece.  And how scared the EU is that their contagion may spread.  For no economy is too big to fail from an overload of debt.

Excessive Government Debt making Investors Nervous

If you’re looking for confirmation on the size and reach of the Greek debt crisis, look no further than the world’s financial markets (see Markets Tumble on Debt Crisis by The Associated Press posted 7/11/2011 on The New York Times).

Wall Street and global stocks slid further Monday because of renewed concerns about the euro zone’s debt crisis and after a dismal jobs report in the United States last week rekindled concerns about the recovery in the world’s largest economy…

The downbeat sentiment in markets was worsened by indications that Europe’s debt crisis might be spreading beyond the three countries that have already received rescue packages. There have been mounting concerns that after Greece, Ireland and Portugal, much-larger Italy and Spain could need bailouts to manage its tremendous debt load.

Investors are nervous.  Both about Greece and the EU.  And the United States.  They’re worried about excessive government spending.  And excessive government debt.  Because the higher the debt the higher the interest paid on the debt.  And interest paid on the debt is money spent that results in nothing beneficial.  It’s just a drag on the economy (i.e., higher taxes are required to pay it).  Or worse.  As in borrowing money to service the debt.  Which makes a bad problem (too much debt) worse (more debt).  Which is a further drag on the economy.

The Children refuse to Eat their Peas

And speaking of debt, there was no progress on the budget debate to increase the debt limit.  As if anyone was surprised by this (see WRAPUP 9-Obama, lawmakers fall short on US debt deal by Steve Holland and Thomas Ferraro posted 7/11/2011 on Reuters).

U.S. President Barack Obama and top U.S. lawmakers fell short on Monday of finding enough spending cuts for a deal to avoid an Aug. 2 debt default and Republicans came under fresh pressure to agree to tax hikes.

The two sides achieved no breakthrough in a roughly 90-minute meeting and scheduled a third straight day of talks for Tuesday. This came after Obama, at a news conference, declared it is time for both Republicans and Democrats to “pull off the Band-aid, eat our peas” and make sacrifices.

I’m a grownup.  And I like peas.  I think a lot of grownups like peas.  That’s probably why I see a lot of peas in grocery stores.  But one thing I don’t see is kids begging their mother to buy more peas.  No.  Mothers have to tell them to eat their peas even though kids don’t want to.  Because kids just don’t know what’s good for them.  And mothers, being mothers and not diplomats, don’t discuss this.  They just dictate terms to their children.  Which is what Obama appears to be doing.  Trying to dictate terms to the children on the other side of the aisle.  To get them to accept what’s best for them.  Because he knows best.  Like Mother.

The Treasury Department has warned it will run out of money to cover the country’s bills if Congress does not increase its borrowing authority by Aug. 2. Failure to act could push the United States back into recession, send shock waves through global markets and threaten the dollar’s reserve status.

This ‘running out of money’ line is very strange.  The government is currently collecting some $2 trillion plus in cash a year.  Which comes out to about $180 billion a month.  And as long as your employer is withholding taxes from your paycheck, there’s money flowing into Washington.  So how exactly are they running out of money?

Back into recession?  Didn’t know we ever came out of recession.

Boehner also took issue with Democrats’ suggestion that most of the spending cuts should be concentrated out into future years, rather than beginning right away.

Smart man that Boehner.  He knows Democrats lie.  “Raise taxes now and we’ll make spending cuts later.  Promise.  $3 in cuts tomorrow for every new dollar in taxes today.”  Ronald Reagan fell for it.  George H. W. Bush, too.  But tomorrow never came.  And neither did those spending cuts.  The Democrats had their new taxes.  So they said, “Screw you, Republicans.  Suckers.”

Obama used the latest in a series of White House news conferences to urge lawmakers on both sides to stop putting off the inevitable and agree to tax increases and cuts in popular entitlement programs, trying to persuade Americans he is the grownup in a bitter summer battle over spending and taxes…

Obama is seeking to cast himself as a centrist in the bitter debate. His 2012 re-election hopes hinge not only on reducing America’s 9.2 percent unemployment but on his appeal to independent voters who are increasingly turned off by partisan rancor in Washington and want tougher action to get the country’s fiscal house in order.

And that’s what this debate is all about.  The 2012 election.  If he comes out of this smelling like a centrist he wins.  Even if he loses the debate.  Because he can campaign as a centrist.  Even though he’s the biggest leftist to have ever entered the Whitehouse.  Who tripled the deficit.  And put the U.S. on the road to national health care.

So how much exactly are they looking to raise the debt limit by to save the country?

They said Obama’s view was that without tax increases, the package would at best be little more than $1.5 trillion in deficit reduction, far short of the estimated $2 trillion needed to extend the $14.3 trillion debt ceiling through the end of 2012.

Hmmm, $2 trillion dollars.  Where can we find $2 trillion dollars?

You Repeal Obamacare and we’ll raise the Debt Limit by $2 Trillion

Here’s a thought.  How about repealing Obamacare?  If we need to live within our means and can’t muster the guts to reform entitlements, then Obamacare is a no-brainer.  It’s not an entitlement yet.  No one would miss it if they repeal it.  Because how can you miss something you don’t even have yet?  So how much money would this save?  Let’s take a look at some facts and figures from an interesting article (see Obamacare Tragedy Primed To Further Explode the Deficit by Peter Ferrara posted 7/6/2011 on The American Spectator)?

…close analysis of the CBO score and additional new data indicates that, quite to the contrary, Obamacare will likely add $4 to $6 trillion to the deficit over its first 20 years, and possibly more…

Of course, the deficit is not the biggest problem.  Even bigger is that regardless of the deficit, Obamacare involves trillions of increased government spending and taxes…

In the Wall Street Journal on June 8, Grace-Marie Turner, President of the Galen Institute, estimated based on the numbers in the McKinsey report that as many as 78 million Americans would lose their employer provided coverage.  If those workers ended up receiving the new Obamacare exchange handouts, the estimated costs for those subsidies in the first 6 years alone would soar by 4 times, adding nearly $2 trillion to the costs and deficits of Obamacare during that time…

Such draconian cuts in Medicare payments would create havoc and chaos in health care for seniors.  Doctors, hospitals, surgeons and specialists providing critical care to the elderly such as surgery for hip and knee replacements, sophisticated diagnostics through MRIs and CT scans, and even treatment for cancer and heart disease would shut down and disappear in much of the country, and others would stop serving Medicare patients.  If the government is not going to pay, then seniors are not going to get the health services, treatment and care they expect.

Yet, reversing these unworkable Medicare cuts would add $15 trillion to the future deficits caused by Obamacare.

So Obamacare isn’t going to reduce the deficit after all.  How about that?  You see, Boehner is right not to trust Democrats.  Because they lie.  And while they’re bitching and moaning about trying to raise the debt limit by $2 trillion Obamacare will add another $4 to $6 trillion, or more, to the deficit over its first twenty years.  And there’s a whole bunch of unpleasantness in addition to that.  78 million people losing their private insurance coverage.  And the gutting of Medicare that will destroy that program.  Which will add another $15 trillion to future deficits. 

This should be the Republican position.  This is the deal they should offer.  Raise the debt limit by $2 trillion.  And repeal Obamacare.  Final offer.  Take it or leave it.  Either eat your peas.  Or you, President Obama, can default on America’s debt obligations.  For it is your Obamacare that has put us in this position in the first place.

Too much Debt is a bad Thing

Having too much debt is a bad thing.  We see it in Europe.  The EU is worried about what’s happening in Greece spreading to larger countries in the Eurozone.  Markets are jittery about Europe’s financial crises.  Even on Wall Street.  Because too much debt is a bad thing.  And no economy is too big to fail from an overload of debt.

The whole world understands this.  That too much debt is a bad thing.  And yet what is the Obama administration doing?  Piling on to their debt.  And not in a little way.  They’re collecting some $2 trillion in cash each year but it’s not enough.  They need to borrow an additional $2 trillion this year to pay their bills.  I don’t know what’s going on in Washington but one thing for sure – it ain’t good governing.

Repeal Obamacare.  Solve a bunch of problems with one act of legislation.  And demonstrate some good governing for a change.

www.PITHOCRATES.com

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Team Obama Lying to Scare Americans to Increase the Debt Limit so they can Continue their Orgy of Spending

Posted by PITHOCRATES - July 10th, 2011

Talking up the Horrible Economy in 2010

Back in August of 2010, Timothy Geithner took to the New York Times to tell everyone how wonderful the economic recovery was (see Welcome to the Recovery by Timothy Geithner posted 8/2/2010 on The New York Times).

The recession that began in late 2007 was extraordinarily severe, but the actions we took at its height to stimulate the economy helped arrest the freefall, preventing an even deeper collapse and putting the economy on the road to recovery…

Private job growth has returned — not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months…

Wow.  In only 6 months their policies have created 136,000 new jobs.  And their swift and bold action prevented the freefall loss of gosh knows how many jobs.  That’s good.  So how bad was that freefall?

The new data show that this recession was even deeper than previously estimated. The plunge in economic activity started an entire year before President Obama took office and was accelerating at the end of 2008, when G.D.P. fell at an annual rate of roughly 7 percent.

Panicked by the collapse in demand and financing and fearing a prolonged slump, the private sector cut payrolls and investment savagely. The rate of job loss worsened with time: by early last year, 750,000 jobs vanished every month. The economic collapse drove tax revenue down, pushing the annual deficit up to $1.3 trillion by last January.

Okay, first he has to get the obligatory blame George W. Bush first out of the way.  So then we get to the good news.  The amount of damage they prevented.  We were losing 750,000 jobs every month.  Which would be 4,500,000 in a 6-month period.  Humph.  Getting back 136,000 of the 4,500,000 jobs lost is being on the road to recovery?  That’s like one job back for every 33 lost.  Are you sure this is a recovery? 

Oh, and that $1.3 trillion deficit?  It wasn’t from a lack of revenue.  It was from an orgy of spending.

The economic rescue package that President Obama put in place was essential to turning the economy around. The combined effect of government actions taken over the past two years — the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve — were extremely effective in stopping the freefall and restarting the economy.

According to a report released last week by Alan Blinder and Mark Zandi, advisers to President Bill Clinton and Senator John McCain, respectively, the combined actions since the fall of 2007 of the Federal Reserve, the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing. The study showed that government action delivered a powerful bang for the buck, and that the bank rescue on its own will turn a profit for taxpayers.

A powerful bang for the buck?  I don’t know.  Saying how great your actions were by what didn’t happen is a bit spurious.  I mean, I could say that thanks to George W. Bush and the policies he implemented after 9/11 he saved the lives of 8.5 million Americans that would have otherwise died in terrorist attacks.  Simply by scaring a lot of bad guys from trying anything now that there was a new sheriff in town.  It’s as plausible as that Blinder and Zandi report.  You can’t prove either.  Or disprove either.  So it’s a license to lie.

Still Talking up the Horrible Economy in 2011

It’s almost been a year since Geithner’s NYT piece.  If he was right things should be a whole lot better now.  The Obama administration took full credit then for the ‘recovery’.  So the current economic numbers are now theirs.  Which means they can’t blame George W. Bush anymore.  And how are those numbers?  Still horrible (see You are what your record says you are by Conn Carroll posted 7/10/2011 on The Washington Examiner).

Last month, David Gregory tripped up new DNC Chair Debbie Wasserman Schultz up with a chart detailing President Obama’s economic record. It showed unemployment up 25 percent since Obama was inaugurated, debt up 35 percent, and gas up more than 100 percent. Wasserman Schultz lamely tried to argue that the economy was getting better, to which Gregory replied: “Americans don’t believe that’s the case.”

This Sunday was Treasury Secretary Tim Geithner’s turn and he fared no better. At one point he even blamed the weather for Obama’s terrible economic record.

The numbers are horrible now.  And they were horrible a year ago.  There’s been no recovery.  And all of the administration’s actions haven’t done anything but explode the federal debt.  Which is at a record high.  As are the deficits under Obama.  And what does Team Obama want to do about that?  Why, borrow some more.  To spend some more.  Of course.

The U.S. isn’t close to Running out of Money

Despite the great economic news last August and the current great news (per the Obama administration, not per reality), things are pretty bad on the debt front.  In fact, those rascally Republicans with their opposition to raising the debt limit may place this glorious economic recovery into jeopardy.  Worse, they may destroy America as we know it (see ‘No delaying’ deadline to lift US debt ceiling posted 7/10/2011 on the BBC).

The US faces running out of money and defaulting if Congress does not allow the government to take on more debt.

If no agreement is reached, the government would be unable to pay civil servants, government contractors, pensioners or holders of government debt.

Economists and the White House have warned that such a default could push the US back into recession and have a global economic impact.

This is actually BS.  And I don’t mean Barbara Streisand.  The federal government is awash in cash.  Just not enough to further increase spending.  How much?  Well, let’s look at some of the numbers per the Tax Policy Center.  Tax receipts (i.e., actual cash dollars the government collects) for the years 2008, 2009 and 2010 were $2.5 trillion, $2.1 trillion and $2.2 trillion, respectively.  That doesn’t include any borrowing.  That’s pure cash on the barrelhead.  That’s a lot of cash that can pay a lot of bills.  It’s in the neighborhood of $180 billion a month.  And the projection for 2011?  Holding steady at about $2.2 trillion.  Again, that’s cash flowing into Washington from taxpayers.  Nothing borrowed.  Or printed.

Despite this staggering amount of cash raining down on Washington it’s not enough.  For the years 2008, 2009 and 2010, the deficits were $458 billion, $1.4 trillion and $1.2 trillion, respectively.  And the projected deficit for 2011 is $1.6 trillion.  Again, it’s the orgy of spending that is the problem.  It’s not a revenue problem.  The U.S. isn’t close to running out of money.  Team Obama is just lying to try and scare the pants off of people to get them to hate Republicans.  And to pressure them to raise the debt limit.  So they can borrow more.  And go on another spending bender.

Green Energy can only Survive when heavily Subsidized by the Government 

So what, exactly, did they spend all that money on?  Well, there was the stimulus.  The financial and auto bailouts (which should have been left to the bankruptcy courts).  And all their tweaking of the private sector economy.  Especially the green one.  For that’s America’s future.  Green energy.  And they were going to help make it happen.  By subsidizing the crap out of it (see Michigan town shows promise and pitfalls of job retraining by Don Lee posted 7/10/2011 on The Los Angeles Times).

Uni-Solar began with a hiring surge that by 2009 had climbed to 422 workers… But the Greenville plant’s primary market is Europe, and when sales in Italy and France declined as a result of the recession and other factors, Uni-Solar cut back…

Greenville and Uni-Solar also were hurt because state and federal policies simply weren’t in place to support them. Unlike the United States, for instance, Canada subsidizes consumers who adopt solar power, but only if they buy solar panels with domestically manufactured contents…

Canada is not alone in adopting comprehensive programs of subsidies, tax provisions and other incentives to foster domestic industries. Germany has an elaborate program to support automobile, electronics and other manufacturing and to discourage its companies from moving operations overseas.

That’s right, the green energy sector can only survive when heavily subsidized by the government.  To help the green energy market compete with the more reliable and less expensive fossil fuel market.  In the U.S.  As well as in Europe.  Worse, all this government help has only created a green energy bubble.  Created a lot of supply for a demand that wasn’t there.  Just like this plant in Greenville, Michigan.

The only way to make Green Energy practical is to make Consumers pay more for Electricity

The U.S. should consider itself lucky that their government is cutting subsidies.  Because it at least gives consumers a chance at a better economy.  Perhaps Washington will cut its spending.  And let the taxpayers keep more of their money so they can make it in an economy with rising prices.  Unlike in the UK (see Power bills to soar by 30% in ‘green’ reforms by Rowena Mason and David Barrett posted 7/9/2011 on The Telegraph).

Costly new incentives to encourage energy companies to invest in renewable power sources such as wind farms will put an extra £160 a year on the average household bill over the next 20 years…

Mr Huhne is expected to announce on Tuesday that energy companies, such as Centrica and EDF, will get a fixed price for electricity generated from nuclear power and wind farms, which will be higher than the market price.

The financial incentives will be funded by consumers, who will see their electricity bills rise by 30 per cent over the next 20 years from an average of £493 per year to £655 per year.

You see, renewable energy is a money losing investment.  It’s just too costly.  So power companies won’t venture into these green markets unless someone makes it worth their while.  And in the UK the government is doing just that.  By giving them lucrative cash incentives.  Which the government will pay for via higher electricity bills.  Leaving the consumer with less money to live on in an economy with rising prices.

The costly package due to be outlined in full this week is designed to reassure generation companies that Britain is an attractive place to build nuclear power stations and wind farms.

Mr Huhne admitted in an interview with The Sunday Telegraph last year that there was no money available for direct state subsidies for a new generation of nuclear plants, so this week’s announcement sets out how consumers will shoulder the cost of incentives directly.

Yes, the only way to make green energy practical is to make consumers pay more for electricity.

The changes to be outlined by Mr Huhne this week will hand billions of pounds in subsidies to the energy companies and kick-start a construction programme creating thousands of jobs.

But combined with further green taxes, such as the European emissions trading scheme, and upgrades to Britain’s national grid the measures could see Britain’s gas and electricity bills rise by 50 per cent – or £500 per average household bill – according to Ofgem, the energy regulator.

Create ‘thousands of jobs’ by making all consumers live on less.  At least those who use electricity.

By the time you factor in the other costs of green living the average Briton could see a 50% increase in their utility costs.  Which is a staggering cost to pay for a few thousand jobs.  The economy, and the consumer, would be better off with coal.  It’s more reliable.  It’s cheaper.  And one plant out of site can provide power to hundreds of thousands.  Which is better than dotting the landscape with windmills as far as the eye can see.  To produce power only when the wind blows.

The Government has a Spending Addiction

Team Obama has made a mess of things with their orgy of spending.  More than tripled the deficit since coming into office.  Requiring ever more borrowing to ‘save the country’.  Which is, of course, a lie.  Washington is awash in cash.  Over $2 trillion a year.  And if that isn’t enough to pay the bills then this administration should just resign.

The economy is stalled.  The recession never ended.  Money poured into the green energy sector was money wasted.  And is only creating a green energy bubble by building supply for demand that isn’t there.  Like in Greenville, Michigan.  Yes, supply can create demand per Say’s Law.  If that supply is something that people want.  And that’s the problem.  People don’t want more expensive and less reliable energy.  Especially in an economy with rising prices.

The facts and figures all confirm one thing.  The U.S. has a spending problem.  Not a revenue problem.  The government is like an addict with a spending addiction.  Who will lie and say anything to satisfy that addiction.  Only this addict is worse than your run of the mill junkie.  For if Team Obama overdoses it will take a nation with it.  In fact, this administration is in such denial that perhaps an intervention is in order.  Which is really what the budget debate is.  The Republicans need to be strong.  For Obama.  And the nation.  They have to hold the line on the debt limit.  Do not give them more money to spend.  Because with over $2 trillion a year, they have enough already.

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