Budgets

Wow... the worst one-day loss in a few years and the market's in the red for 2011.  It's a good thing we didn't default, yanno?

―:☺:―

There's this about that...

Fiscal Responsibilities: Defense Secretary Leon Panetta said Wednesday the $350 billion in cuts to defense spending over the next decade that were included in the Budget Control Act of 2011, the nation's new debt ceiling legislation, can be implemented without affecting military operations or readiness. However, he cautioned that further reductions, if executed in a "hasty" or "ill-conceived way," would indeed "undermine the military's ability" to function. "The debt ceiling agreement contains a sequester mechanism that would take effect if Congress fails to enact further deficit reduction. If that happens, it could trigger a round of dangerous across-the-board defense cuts that would do real damage to our security, our troops and their families, and our ability to protect the nation," wrote Panetta in a statement to military members and their families. "This potential deep cut in defense spending is not meant as policy. Rather, it is designed to be unpalatable to spur responsible, balanced deficit reduction and avoid misguided cuts to our security." (AFPS report by Karen Parrish) 

Gosh, I'm just all warm and fuzzy, secure in the knowledge this Sooper-Dooper, Yet To Be Selected, Bi-Partisan Special Committee of Six Esteemed Congresspersons can do what no one else has been able willing to do in this space: achieve "responsible, balanced deficit reduction."  Just in the last year we've had the Simpson-Bowles Budget and Deficit Reduction Plan (DOA), Joe Biden's Budget Negotiation Committee or Deficit Working Group, or whatever-the-hell-it-was, The Gang of Six's Plan (DOA, also), Sen. Conrad's Sooper-Secret Budget (with no details), Harry-Fucking-Reid's Plan, Sen. Coburn's Plan, Sen. McConnell's Plan, at least three iterations of the Boehner Plan, and the Paul Ryan Budget... none of which even came close to making it into law.  So how is this newest kick-the-can committee gonna be any different? 

Yeah.  Warm and fuzzy.  That's me.

The Federal Debt Problem... A Visualization

A couple of screen shots from an interesting data visualization:

Those teeny tiny things are individual pallets of one hundred million dollars, each.  It gets worse, much worse.  Go look for yourself.  Is it any wonder sane Americans are upset by this sort of debt?  I think not.

h/t: Eddie Freedom on G+.

Interesting

You could cue up Arte Johnson after that "interesting" title, to wit: "But STOOPID."  From my congresscritter's newsletter, which hit my in-box moments ago:

Americans pay the price of Loose Monetary Policy and Quantitative Easing at the Pump

A weak U.S. dollar due to the Federal Reserve's unprecedented pumping of dollars into the American economy is adding 56 and a half cents* to the price of every gallon of gasoline, according to a new study by the Joint Economic Committee Republican staff.


Titled The Price of Oil and the Value of the Dollar, the study notes the value of the U.S. dollar has declined 14 percent since the Federal Reserve began its program of quantitative easing in November of 2008. With oil an international commodity that trades in U.S. dollars, the declining value of the dollar has added $17.04* per barrel to the price of Brent Crude oil. Crude oil is the primary input in the process of making gasoline.


Americans are paying a steep price at the pump as a result of the weak dollar policies pursued by this Administration and the Federal Reserve. There are two lessons here. Rather than pointing fingers at energy manufacturers the President should be looking to his own Treasury and the Fed for answers to the high price of fuel. And this drives home the point that the Federal Reserve should have one mandate, price stability, to prevent inflation and preserve the value of the U.S. dollar.

Read more here.

Ah, yes.  The Fed.  They're a day late and we're a dollar-three-ninety-eight SHORT.  Bernanke will burn in hell, I'm convinced of that.  Asshat.

Let's Hear It for RYAN!

Representative Ryan gets it.  The easiest way to understand whether Ryan is right or wrong is to look at who opposes what he's tryin' to do, and how hard.  We're talkin' about the usual suspects here... Pelosi and Van Hollen (the Dems' simpering mouthpiece, of late), just to name two.  Both Pelosi and Van Hollen have come out with their same tired ol' moans and groans about budget reform and deficit reduction in the last week... words to the effect the mean ol' GOP is after the children and our Seniors.   And fucking Democrats have the unmitigated GALL to rant about "special interests."

The current sideshow about shutting down the gub'mint over whether we should legislate either a paltry 30 billion dollars or a slightly less paltry 60 billion dollars worth of current expenditure reductions is just a warm up for the REAL fight that's gonna go down during the run-up to 2012.  We all need to fasten our seat belts and get ready for some serious political histrionics from the donkeys, coz it's gonna get real rough out there.  One hopes the serious adults... like Rep. Ryan... will be able to make their case to the American public and prevail in the budget war, but one should also NEVER underestimate the power of demagoguery.  The Dems excel at the latter and it works all too often.

Interesting times.

Toon from the usual source.

Yup. It's Gonna Be HARD.

The federal deficit is obscene but the states are in worse shape... which is no big secret to anyone who's been paying even the slightest bit of attention.  While California and New York garner the most attention as the poster children for the states' fiscal woes, things blew up yesterday in Wisconsin.  From the WSJ:

MADISON, Wis.—Democratic lawmakers fled the state in an effort to torpedo a closely watched vote on what would be the nation's first major overhaul of union laws in years, as government workers flooded the statehouse for a third day seeking to block passage of the bill.

Surrounded by thousands of tightly packed protesters, including teachers who had been encouraged by union leaders to show up in force, state senators gathered around 11 a.m. to vote on Republican Gov. Scott Walker's proposal to limit collective-bargaining rights for most state employees. 
 
The governor's proposal, part of a bill aimed at overcoming a $137 million deficit in the current budget and a projected $3.6 billion hole in the next two years, would allow collective bargaining on wages, but not pensions and health care. Workers would be required to pay more for both. And raises would be limited to the inflation rate, unless voters approved steeper boosts.

All that sounds pretty reasonable to me... and there's more detail at the link... but not to the public employees unions, most specifically the teachers unions, who are engaged in Academy Award level histrionics worthy of a "Best Performance By Spoiled Brats" Oscar, if there were such a thing.  And they're doing so on the taxpayers dime, too, and that's the most sickening part of the whole thing.  The WSJ, again:

The drama disrupted schools across the state, as thousands of teachers called in sick to attend the protests. Public schools were closed in Madison, La Crosse, Racine and Wausau.

Patrick Gasper, a spokesman for the Wisconsin Department of Public Instruction, the state's education agency, said he didn't have a statewide tally of closures among the state's 424 school districts, which educate 872,000 students. But he said, "They're all over." 

He added that some districts could have to add days at the end of the year to meet state requirements for days and hours of instruction. School officials in Milwaukee said missing work without a valid excuse would "leave teachers open to disciplinary action." 

"Disciplinary action" prolly means a letter of reprimand or a similar slap on the wrist.  I'm thinking wholesale firings, a la Reagan/PATCO would be more appropriate, but that's just me.  I read elsewhere that an estimated 60% of the teachers in some Wisconsin districts called in sick in order to attend the protests.  That is nothing short of despicable and speaks to the self-serving nature of teachers unions.  But, Hey.  They're entitled, not to mention privileged.  Check out these figures: 

In May 2009, preschool teachers in Wisconsin earned an average salary of $23,460, elementary school teachers earned $51,240, and secondary school teachers earned $49,400. ⁽²⁾ Education and experience level also make a difference in teacher salaries: secondary school teachers in the 90^th wage percentile earned $69,550, while the entry-level teacher salary is generally in the $30,000s. ⁽³⁾

Geographic location is another significant reason for variation in Wisconsin teaching salaries. Areas that have a higher cost of living often pay correspondingly higher salaries. Below are average annual earnings for secondary school teachers in five of the largest metropolitan areas in the state: ⁽⁴⁾

• Green Bay: $55,110
• Kenosha: $68,400
• Madison: $50,770
• Milwaukee: $54,620
• Racine: $49,710

I got those numbers from Wisconsin Teaching Salaries, via a link from Michelle Malkin.  That's pretty good money for folks who only work nine or nine and a half months out of any given year and receive benefits in excess of what private sector employees receive, yet they turn out by the thousands to protest.  On school time, no less. 

Just briefly: note the civil tone of the protesters (the image I used above is NOT from the WSJ).  A lot's been said about THAT, and I'm one of mebbe thousands of bloggers on the right to post this:




So, yeah... fixing our fiscal situation is gonna be very, very difficult if this is any indication of the sort of resistance the states will face.  And you KNOW it is.  Unions,  especially public-sector unions, have most definitely outlived their usefulness and have turned into left-wing organizations who have a "Fuck you, I got mine and I'm gonna keep it" attitude.  Who'd a thunk it?

Much, much more at memeorandum.  The link contains all articles on the subject as of 2230 hrs EST Thursday evening.

Why Nothing Will Be Done

Heh.  It's indeed "The New Civility" when it comes to entitlements.  Everyone wants to reduce the deficit but NO one wants their ox gored.  Mr. Asay has it right in his 'toon (note the audience appears old and angry):  the Geezer Lobby is prolly the loudest and most vociferous about their oxen... Social Security and Medicare... than anyone else.  Those oxen, however, account for 43% of the 2010 federal budget and the percentage will only grow as the Boomers retire.  This isn't news, of course.  Neither is it news that no politician has the intestinal fortitude required to make meaningful changes to these two programs.

Well, check that.  Erskine Bowles and Alan Simpson, the co-chairs of the president's budget commission, DID make meaningful recommendations to reduce the federal deficit, including some pretty good ideas about entitlement change.  The reaction was predictable: the left went ballistic in their opposition and the right was only somewhat more controlled in their rejection of the proposals.  Messrs. Bowles and Simpson couldn't even get a majority vote on the recommendations within their own commission, largely due to opposition from liberal House members.  It appeared the commission's work was DOA.

Ah, but wait.  There seems to be some hope, after all.  From Politico:

A bipartisan effort to resurrect the recommendations of last year’s presidential deficit-reduction commission gained steam Tuesday in the Senate, where nearly half the members turned out for early morning briefing on the debt crisis and old friends of House Speaker John Boehner are taking the lead alongside the Democratic chairman of the Senate Budget Committee.

The path ahead remains extremely difficult, but the forces coming together represent the best shot this Congress has of finding the political mass needed to bring President Barack Obama and the new House Republican majority to the table.

Flickers and glimmers... that's all the hope we have right now... but I suppose it's a start.  There are other signs of progress, as well.  I read an editorial in the Denver Post this morning that Democrat Mark Udall is in favor of a balanced budget amendment and wants to see an up-or-down vote on Simpson-Bowles.  Both of these things are good ideas; it's a wonder any Democrat endorses them.  But I believe the handwriting is on the wall and it's writ large enough that even Democrats can read it.  But reading and acting are two entirely different things, no?

EIP went on the record back in November in favor of Simpson-Bowles, for what that's worth.  I'd be willing to go a bit further to reduce the deficit: the gub'mint can cut my Social Security benefit by ten percent as part of a deficit reduction plan.  I'll do my part, assuming, of course, that something VERY much like Simpson-Bowles is enacted into law.  I wanna see everyone do their part.  Yeah, I'm crazy like that.

SOTU? STFU!

Yeah, I watched it.  I had it in my mind to limit my comments to a screen-shot of the US debt clock, but Mz. Benson beat me to it.

It was pretty much the same ol', same ol'... except for the fact The One actually came out and admitted the US is an exceptional country, in his own oblique sorta way, of course.  One good thing: Boehner is much easier on the eyes than Pop-Up Nancy With The Botox Smile.  I'm grateful for small gifts.

That said... I don't wanna hear another goddamned word about "investments" unless it's how much you cut from the budget and apply to the deficit.  Paying down our debt is the best "investment" we can make at the moment.  Nota bene, Mr. President... you need to listen to Representative Ryan.  Attentively.

Watch This...

... if you're in to politics, if you're concerned about the deficit, and especially if you happen to be the sort who believes nothing can be done.  Something CAN be done and these two gentlemen put viable, reasonable proposals on the table.  Good proposals.  Some highlights right here, from last night's PBS Newshour:

Alan Simpson is my newest hero.  The man doesn't mince words, doesn't even THINK about mincing words.  Erskine Bowles appears to be cut from the same cloth, even if he is a Democrat.  I intend to write my congresscritters and implore them to support and implement the Simpson-Bowles recommendations.  These recommendations are something Tea Partiers ought to adopt as their own, or at least support in no uncertain manner.  We've had enough bullshit rhetoric --  the time to act is NOW... and the new House of Representatives just might do it.  I'm hopeful.

More in the WSJ, including another short video.

Debt and Spending

Sorry to keep going on, Gentle Reader, but I have a major case o' red ass.

Fiscal Irresponsibility

Apropos of the above... Erskine Bowles and Alan Simpson, the co-chairs of the president's budget commission... were on Charlie Rose for the entire hour last evening and it was compelling television.  The co-chairs released their budget/deficit reduction suggestions last week, which feature $200 billion in budget cuts, tax reform proposals, and a host of other ideas.  Bowles and Simpson were on Rose's program less to defend their suggestions... which have taken fire from both sides of the aisle... and more to discuss the dire necessity to get the budget under control, as if any sentient being doesn't realize the gravity of the situation.  I'd love to give you a specific link to the discussion, Gentle Reader, but it appears Mr. Rose hasn't updated his web site today.

I've read the Bowles-Simpson proposals and I'm on-board with them.  One of the interesting things about the proposals the chairmen put forth is the fact everyone sacrifices in order to correct the country's financial imbalance.  None of America's Sacred Cows are exempt from strong medicine and that is as it should be.  The other thing that interests me is the reaction of the Usual Suspects... which is to say the Left went totally ballistic, as evidenced by Nancy Pelosi's comment that the recommendations were "simply unacceptable."  You KNOW the co-chairs are on the right track if Nancy hates what they're doing.  The Right has its issues with Bowles-Simpson, too, but they are mild compared to the keening wails on the Left.

So.  The commission's official report is due by December first and the Bowles-Simpson suggestions are NOT the official recommendations... they're billed as "conversation starters."  It remains to be seen what the commission will actually SAY, given that 14 of its 18 members must agree on the specific proposals that will be given to the president.  The commission's liberal democrats have already gone on the record as opposing what the co-chairs suggested last week.  This should be interesting.

Which brings us full-circle in reference to the 'toon above.  If Congress had behaved in a fiscally prudent and responsible manner for the past 75 fucking years we wouldn't BE in this boat.

Update, 1345 hrs:  The complete video of last night's Charlie Rose episode is up now.  I still can't give you a specific link but it's on the main page as I write.  HIGHLY recommended... I cannot possibly over-emphasize that point.

Only in America...

... could a new budget-busting entitlement that some estimate as adding $460 billion to the federal deficit over the next ten years and $1.4 TRILLION dollars to that same deficit in the following ten years be described in this manner:

Before discussing the jobs bill, Mr. Obama lauded the Congressional Budget Office analysis released this morning showing the reconciled health care bill will cost $940 billion over 10 years.

The bill, he said, would bring "$1.3 trillion in deficit reduction over the next two decades," according to the CBO analysis.

He called it "the most significant effort to reduce deficits since the balanced budget act in the 1990s" and encouraged lawmakers to keep that in mind when they take their "important vote" on the measure "this weekend."

I'm sure there was video of the Rose Garden remarks yesterday; I'm equally sure the video of the president was shot from the waist up to avoid showing his frickin' pants spontaneously bursting into flames when he made those deficit reduction remarks. 

I saw Rep. Paul Ryan on Charlie Rose last night and his deficit numbers (the ones you see in the lead paragraph) are significantly different.  There's a 12-minute video of Rep. Ryan's remarks on Charlie Rose's web site but the video is not embeddable, unfortunately.  The 12 minutes this video runs is well worth your time to view, mainly because Ryan is short on rhetoric and long on facts.  It's beside the point, really, but I LIKE this Ryan guy.

So... the debate on the healthcare numbers comes down to a massive game of "Who Do You Trust?"  I certainly do NOT trust The One or his minions.  It also comes down to how in the Hell are we going to pay for this massive new entitlement?  The short answer is "we can't."  We're broke, the checkbook is empty, and yet the Democrats continue to spend.  A complete gub'mint melt-down and economic ruin is sure to follow.  Kinda like this:

Brace, Ladies and Gentlemen.  Brace.

Ya Learn Sumthin' EVERY Day

Everyone is well aware of California's perilous economic situation and there's been a LOT of talk about the state going bankrupt.  Which raises the question:  Can a state go bankrupt, as in legally?  From a short article in Slate:

Can a state declare bankruptcy? Can a country? 

No and no. Chapter 9 of the U.S. bankruptcy code allows individuals and municipalities (cities, towns, villages, etc.) to declare bankruptcy. But that doesn't include states. (The statute defines "municipality" as a "political subdivision or public agency or instrumentality of a State"—that is, not a state itself.) For one thing, states are said to have sovereign immunity, as protected by the 11^th Amendment, which means they can't be sued. In other words, they don't need any protection from angry creditors who would take them to court for failing to pay their debts. As a result, states can simply borrow money ad infinitum.

Say the state can't make its debt payments, and no one will lend it any more money. In that case, the federal government can step in and put the state into receivership. This would involve the assignment of an accountant to manage the state's debt, overseen by a judge. It would be a lot like bankruptcy, except instead of following a structured set of steps—informing creditors, appointing creditors' committees, a 120-day window to file a plan, etc.—a receiver has the authority to force creditors to renegotiate loans in a speedy fashion. However, the accountant in charge would not have the power to make decisions about the state's budget, such as which programs needed to be cut and which taxes had to be raised. (No state has ever gone into receivership.)

There's much more at the link... and the "country" part of the question refers to Greece, which currently has debt exceeding 110% of its GDP.  That particular hand-basket has already arrived at its destination, if'n ya hadn't noticed.  And it's pretty danged hot in the streets of Athens and elsewhere around the country.

Overdrawn and Overplayed, For Starters

I like this:

There's just one lil problem with the image: MY bank won't give me any more money if I'm overdrawn.  The gub'mint doesn't have that lil problem, tho... they can always raise the debt ceiling and print more money.  Which they're doing, to our everlasting detriment.  This is NOT a good thing.  Some pundit uttered a sentiment about our Congress recently, to the effect of "Just STOP, already.  Don't do anything else.  Just Go Home!"  I couldn't agree more.

―:☺:―

It's the time of year when the retrospective lists start coming at us from every direction... except it's worse this year, seeing as how popular misconception has it we're closing out the first decade of the 21st century (we're not; that's next year).  Yahoo! has an interesting list... if'n you're into that sorta thing... of the most popular Yahoo! search terms of the Oughties.  It's chock full of links to interesting things, as well.  Like this:

The terrorist attacks on Sept 11, 2001, left a nation stunned, mourning and looking for answers. No one will ever forget the horrific images of airplanes crashing into the World Trade Center's North and South towers, the Pentagon and a Pennsylvania field. In the days and weeks that followed, people turned to the Web to find timelines of what happened, photos and videos of the attacks and information about who was responsible. Osama bin Laden and al-Qaida became household names.

Eventually, people began looking for sources of inspiration and healing. Images of the twin towers falling were replaced with one of ground zero's "Tribute in Light." Online memorials and dedications to the 2,976 victims became places of remembrance while people the world over searched for ways to help victims and their families. Iconic moments from "Saturday Night Live" (Lorne Michaels: "Can we be funny?" NYC Mayor Rudy Giuliani: "Why start now?"), David Letterman and "The Daily Show with Jon Stewart" gave people a reason to smile again.

I'm not a Jon Stewart fan and I don't watch The Daily Show, preferring to get my "news" and sarcasm from other sources.  But, that said (and I had to say it, yanno?  "Never miss a chance to get a shot in at people you don't like" is my motto.) Stewart's post-9/11 soliloquy was eloquent and well-said (Dept of Redundancy Department). There's lotsa other good stuff at the article link, as well.

Astronomical... In Two Flavors

I didn't watch The One deliver his elebbenty-lebbenth speech on ObamaCare last evening, this time to a joint session of Congress… his second speech to that august body assembled (<=== snark)… but I DID watch a lil bit of the analysis, more specifically the hour Charlie Rose devoted to the subject.

(Brief digression:  I've mentioned this before, but I REALLY like Charlie Rose.  Charlie probably ain't cool in some circles, given he lives and works in New Yawk, his show is on PBS (Gad!  PBS!), and he tends to feature more liberals on his show than a shouter like young Mr. Hannity or the bomb-throwing Glenn Beck.  But the man IS thoughtful, organized, and devotes at least half of his hour-long show to the subject at hand… when the subject is politics.  Mr. Rose is low key and asks probing questions of the sort rarely found on political shows in these United States these days.  Moreover, he engages his guests in actual dialog, inasmuch as dialog with politicians and other poohbahs… like generals and ambassadors… is possible.  Moreover, Mr. Rose is something of a Renaissance Man in that he is just as well-versed in the arts and technology as he is in political arcana.  I will admit, though, that I tune Mr. Rose out when he does things like opera and movies… two subjects about which I have little or no interest.  If you're not watching Mr. Rose… well, you should be.  You can check out a lot of his stuff on his website.)

Well… that digression wasn't very "brief," now, was it?  Especially since I really don't have much to say about ObamaCare, other than the fact nearly all the Talking Heads seem to agree the "public option" is dead.  None of the pundits I watched last evening were reading the public option's eulogy, but all seemed in agreement that it is something that just won't fly this time around… which is a great good thing as far as I'm concerned. 

And about my "great good thing" comment: Seeing as how I live in the Glass House of Military Health Care it's hypocritical of me to throw stones at gub'mint health care, in general.  The military's health system has been very, very good to me and it is one of my most prized… which is to say valuable… benefits.  The only stone I can throw… and throw it I will… is the fact I don't believe we can afford public health care beyond what we already provide to the military and seniors (Medicare).  If you don't buy into the "we can't afford it" argument, then I invite you to take a look at this:

That's just a snapshot of what you'll find at US Debt Clock.org.  There's more, a LOT more, and it's updated in real-time… which is to say the numbers are spinning around like an odometer in a 1940s Bugs Bunny cartoon.  It's actually pretty damned scary, in that the numbers are nearly incomprehensible in their magnitude.  Now… what was that about Universal Healthcare?  Hmmm?

(h/t for the Debt Clock: Lex)

―:☺:―

In other news… NASA released the first pictures from the newly-refurbished Hubble telescope yesterday, and they are spectacular.  Here's a sample:

The cool thing is the images are available for download in various sizes, up to and including "stupendous." 

Another digression: didja see "Saving Hubble" on PBS/Nova's Science Now series?  If you click on the link you can watch it... or parts of it... on your peesee.  Amazing stuff, in the most literal sense of the word.  (And yes… it IS a PBS kinda day here at El Casa Móvil De Pennington.  Why do you ask?)

An Ill Wind

About which (Investor's Business Daily -- "Meet the New Boss"):

A president of the United States orders the chief executive officer of General Motors to resign. The same president is further ordering Chrysler to merge with Fiat, the Italian firm specializing in flimsy cardboard boxes on wheels.

This new reality should send a chill down the spines of all Americans. The federal government has begun to run U.S. companies.

President Obama said Monday, "my team will be working closely with GM to produce a better business plan."

To that confident assertion he added these stern sentiments:

"They must ask themselves: Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets, or are they still saddled with so much debt that they can't make future investments? Above all, have they created a credible model for how not only to survive, but to succeed in this competitive global market?"

Who is in a better position to know the answers to these questions? Rick Wagoner, the GM CEO for nine years and former GM chief financial officer who has been with the automaker since the late 1970s, even running one of its foreign affiliates in Brazil, and who holds a Harvard Business School MBA?

Or President Obama, a former community activist from the south side of Chicago with a great rhetorical gift?

The president answered that question this week by ordering Wagoner's firing.

Who'd a thunk it? I knew things weren't going to be good under an Obama administration but I really didn't think it would be this bad. And to add insult to injury... The One has the incredible chutzpah to chide GM about their balance sheet and debt... after submitting a budget to Congress that guarantees the largest deficits in our history. Just how we... the United States... are going to finance this debt remains to be seen, but let's not go down that road. Let's think about other things, such as going to the DMV (or some other to-be-announced Fed agency) to file a warranty claim on your GM car. Yeah. THAT will be fun, dontcha think?

―:☺:―

In other news... You know how I'm always going on about the wind here on The High Plains of New Mexico? Aside from being a real pain in the a$$ as far as comfort goes, the high winds can have real negative effects. Case in point (from the Portales News-Tribune.):

After wind knocked down a transmission line serving parts of Portales on Monday, 3,136 customers were without power for as long as almost 2 1/2 hours, Xcel Energy spokesmen said.

Spokesman Troy Foos said the power went off in stages, but the longest time before it was restored was two hours and 20 minutes. Spokesman Wes Reeves said power was back by about 5 p.m.

“We’ve had some wind issues across the whole system today,” Reeves said.

The wind caused several outages at once in the Portales and the Texas Panhandle, he said.

I was without power for about an hour and a half yesterday afternoon. It could have been worse, as it's said.

You Inflated My Stimulus! No... YOU Stimulated My Inflation!

So… the new day dawned bright, clear, and cold. But it was such a joy to fill the coffee pot from the tap, wash my face with hot running water, yadda, yadda. The simple joys of indoor plumbing that works!

―:☺:―

New folks to follow… From The Hill:

Audiences usually treat presidents to a round of polite applause, but when President Obama addressed House Republicans on Tuesday, they started Twittering.

Just a week after being inaugurated and becoming the most powerful man in the world, Obama strode into the Republican redoubt on Capitol Hill, whereupon its denizens started texting accounts of the proceedings into cyberspace.

There could be no clearer demonstration of the way politics has moved into an age in which technology trumps formality.

While Obama implored Republicans behind closed doors to consider supporting his economic stimulus bill, GOP thumbs worked overtime, tapping updates onto the microblogging website for thousands to read.

[…]

The Republicans commended Obama throughout the meeting, but were quick to note their continued disagreement with the president and the House Democratic leadership after conservative blogs pounced on the friendly rhetoric. (Pundit Michelle Malkin, a frequent Twitter user herself, directed a message toward Burgess during the meeting: “You Tweeted during Obama [meeting]: ‘Sharp differences are muted.’ That’s exactly what’s wrong [with] the Republican Party!”)

This, of course, presupposes you care enough about politics to have your congress-critter tell you how his day is going via tweets. Imagine: “In the limo and off to Heidi’s place! Wish U wur me?” I’m not so sure that’s such a great ideer. But I’m considering it.

―:☺:―

In today’s Politico… The Case for Doing Nothing. The lede:

Most of Washington has reached quick consensus: Government must do something big to shock the economy, and it should cost between $800 billion and $900 billion.

But dissident economists and investment professionals offer a much different take: Most of Washington is dead wrong.

Instead of fighting over what should go in the economic stimulus bill, pitting infrastructure spending against tax cuts and contractors against contraceptives, they say lawmakers should be fighting against the very idea of any economic stimulus at all. Call them the Do-Nothing Crowd.

“The economy was too big. It was all phantom wealth borrowed from abroad,” says Andrew Schiff, an investment consultant at Euro Pacific Capital and a card-carrying member of the stand-tall-against-the-stimulus lobby. “All this stimulus money is geared toward getting consumers spending and borrowing again. But spending and borrowing were the problem in the first place.”

Washington has a habit of passing legislation in a crisis and suffering from morning-after regrets — the Iraq war, the Patriot Act and last year’s original bank bailout plan come to mind. So we thought it would be wise to air the views of the naysayers toward Washington’s latest consensus approach.

I don’t have any regrets about Congress’ vote on the Iraq war OR the Patriot Act, but all this frantic bailing out worries me. Don’t get me wrong: I support certain types of bail-out activities when the failure to “do something” would result in catastrophe… the “too big to fail argument,” in other words. I also supported the relative pittance given in the form of $17.4 billion in bridge loans to the auto industry… a pittance, that is, compared to the currently proposed $800 billion stimulus package. Another case of too big to fail, not to mention the domino effect of GM et al going under, massive unemployment, and so on.

But the stimulus has me worried, not because of the reasons highlighted in the Politico article, which tend to focus on the superficial and specious. Reasons such as a recession that’s “weeding out the weak (companies),” and “shocking Americans into reducing their debt,” while (very) arguably good things, aren’t necessarily good reasons NOT to spend nearly one trillion taxpayer dollars. Nope. I disagree on two counts. First is the way the proposed stimulus monies would be allocated. The WSJ has a few highlights in this space, including the graphic on the right that I purloined from this article, which says, in part…

Most of the rest of this project spending will go to such things as renewable energy funding ($8 billion) or mass transit ($6 billion) that have a low or negative return on investment. Most urban transit systems are so badly managed that their fares cover less than half of their costs. However, the people who operate these systems belong to public-employee unions that are campaign contributors to … guess which party?

[…]

Another "stimulus" secret is that some $252 billion is for income-transfer payments -- that is, not investments that arguably help everyone, but cash or benefits to individuals for doing nothing at all.

[…]

As for the promise of accountability, some $54 billion will go to federal programs that the Office of Management and Budget or the Government Accountability Office have already criticized as "ineffective" or unable to pass basic financial audits. These include the Economic Development Administration, the Small Business Administration, the 10 federal job training programs, and many more.

Oh, and don't forget education, which would get $66 billion more. That's more than the entire Education Department spent a mere 10 years ago and is on top of the doubling under President Bush.

Pet-projects that have languished on the Democrats’ back-burner for years, in other words. Only about ten percent of the projects in this bill are worthy investments in infrastructure, power grid improvements, and broadband projects, by the WSJ’s accounting.

But it’s the Financial Times (UK) that identifies my principal objection to this latest boondoggle… the humongous deficits we’ll incur. Excerpt:

The US debate over the fiscal stimulus is remarkable in its neglect of the medium term – that is, the budgetary challenges over a period of five to 10 years. Neither the White House nor Congress has offered the public a scenario of how the proposed mega-deficits will affect the budget and government programmes beyond the next 12 to 24 months. Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package.

[…]

What we need is a medium-term fiscal framework, one that lays out an anticipated schedule of taxes and spending consistent with the needs of the economy and government functions. Rather than soundbites about ending pork-barrel projects or scouring the budget for waste, or about the relative multipliers of tax cuts versus spending increases (both of which depend on expectations about the future, a point mostly overlooked in the debate), we should be reflecting on certain basic fiscal facts, the most important of which is that the US government faces huge and potentially debilitating structural deficits as far as the eye can see.

In rough numbers, the US federal tax system collects about 18 per cent of gross national product, while the total of just five categories of public spending – Social Security (retirement and disability), health (Medicare, Medicaid), veterans’ benefits, defence and homeland security and interest payments – eat up about 18 per cent of GNP. Yet government has more to do – for example, providing the justice system; help for the poor and unemployed; science and technology research; energy systems, transport and other infrastructure; diplomacy and international aid; natural hazards mitigation; training; and the future costs of financial clean-up. Let us add in the fact that state and local governments are broke and need increased federal transfers, and that America’s ageing population, broken healthcare system and growing underclass all require increased fiscal attention. We currently pay for all of this, if we do so at all, by borrowing from China and from the future.

Does the foregoing scare you? It sure scares ME. At some point in time the Chinese will either decide to quit lending us money, or they’ll do something much more nefarious… they’ll begin attaching strings to the money they lend us… as in “you can spend it on this, but not this…” and so on. Not up front, of course… T-Bills and Notes don’t come with contracts. But the Chinese could wield influence in policy decisions, like no aid for Taiwan, discontinuing anti-ballistic-missile defense programs, or the setting of tariffs and duties. Couldn’t happen? Think again. And remember: “money IS power.”

But I feel our Chinese lenders are the least of our problems. A government cannot simply “print money” without underlying value without suffering consequences… terrible consequences. A lot of folks are too young to remember hyper-inflation, which plagued Argentina as recently as the 1980s and currently rages in Zimbabwe. But the classic case is the Weimar Republic… From an article at forexhound.com:

Concerns about the global financial system and economy are increasing and now there is a dawning realization that the cheap money, irresponsible lending practices, trillions of dollars of derivatives, massive leverage and government profligacy of recent times may lead to hyperinflation in some countries internationally. Due to the prodigal money printing and creation of fiat currencies in order to bailout much of the banking system and a continuing meltdown in the asset backed securities market and derivatives market, the threat of Weimar Germany is being mentioned more often, including on the front page of the Financial Times.

[…]

There is now a real risk of Warren Buffett’s “financial weapons of mass destruction” leading to what some have termed the neutron bomb of a meltdown in the out of control derivates market which now has a value in the hundreds of trillions ($40 trillion credit derivatives alone). The US Treasury is backstopping some $600 trillion in derivatives and the Fed and the Treasury are doing the same for the entire ‘structured finance’ segment.

These figures are of a magnitude far greater than the World War I war reparations that the Germans had to pay which led to their hyperinflation. It is worth remembering that Germany was one of the, if not the, strongest powers that the world had ever seen at the end of the 19th century and many saw Germany surpassing the British Empire which was in decline, as a superpower. Germany was one of the strongest nations in the world – culturally, scientifically, militarily and economically and a superpower of the time.

Enter hyper-inflation and misery on a scale unknown to ALL Americans living today. One would think the specter of hyper-inflation would be enough to make our politicos think long and hard about the stimulus Obama is proposing. But apparently not… Obama himself, when asked about the inflationary aspects of the stimulus and the ballistic trajectory of federal deficits said “we’ll deal with that later.” Famous last words, and all that.

Here’s a good primer on the concept of stimulus plans in a White Paper published by the Council on Foreign Relations. More doom and gloom here, here, and here.

An Economic Idiot Discusses Economics

… and that economic idiot would be me, Gentle Reader. But I’ve come across a few articles that seem to be written in layman’s terms, all of which make sense to me. “Sorta,” he said… contradicting himself. YMMV, of course… but… read on.

―:☺:―

We’ve been subjected to a lot of negative reporting and Gloom ‘N’ Doom missives on the state of our economy over the past week or so, but there IS one person who has a kind word for the American economy: Irwin Kellner, writing in MarketWatch (“Don't call it a bailout. Or a depression.Commentary: The nattering nabobs of negativism have it wrong. Here's why…”) Excerpt:

PORT WASHINGTON, N.Y. (MarketWatch) -- We are nowhere near a depression, so let's stop talking ourselves into one.

Spiro Agnew's words of the Nixon era ring true today. The politicians, pundits and, yes, the press, are nattering nabobs of negativism.

[…]

Now, don't get me wrong, I am not saying things aren't serious out there, but another Great Depression? I don't think so.

· If you look at the data, you will see more differences than similarities between the 1930s and today:

· In the crash of 1929 the Dow Jones industrials plunged 40% in two months; this time around it has taken a year to fall 22%.

· The jobless rate jumped to 25% by 1933; it is little more than 6% today.

· The gross domestic product shrank by 25% during the early 1930s; it is up over 3% during the past year.

· Consumer prices fell by about 30% from 1929 to 1933; and the last time I looked they were still rising.

· Home prices dropped more than 30% during the Depression vs. about 16% today.

· Some 40% of all mortgages were delinquent by 1934 compared with 4% today.

· In the 1930s, more than 9,000 banks failed compared with fewer than 20 over the past couple of years.

There is a bit of a flaw in Mr. Kellner’s reasoning from my point of view. He makes an historical leap from the crash of 1929 to quote facts and figures from 1933. Which is sorta like trying to visualize what our GDP, unemployment figures, and foreclosure rates would be in 2012, if one believes the economy is going to tank based upon our sub-prime mortgage-cum-credit crisis. Still and even, I do think Mr. Kellner makes a good point, and that point is we shouldn’t try to talk ourselves into another Great Depression. I agree with Senator McCain: the American economy is fundamentally strong. Our system encourages entrepreneurship, our productivity is high, inflation and unemployment are low (for the moment, anyway), and we still lead the world in areas where it matters… like information technology, aerospace, and pharmaceuticals, just to name three industries.

So: Don’t panic. Let’s just fix it and get back to business.

―:☺:―

Further on the subject of “Fixing It”… Here’s Joseph Calhoun, writing at Real Clear Politics (“In Times of Crisis, Trust Capitalism”). Excerpts:

The US government is executing a coup d’etat of capitalism and I fear that we will pay the price for many years to come. Hank Paulson, Ben Bernanke and a host of others tell us the credit market is not working and the only way to get it working again is for the government to intervene. They claim this intervention is urgently needed and if we don’t act, the consequences are dire. Dire, as in New Depression dire. Have these supposed experts on capitalism forgotten how it really works?

Last week Goldman Sachs raised $10 billion in new capital in one day. They sold $5 billion in preferred stock and warrants to Berkshire Hathaway and also completed a secondary offering of common stock that raised another $5 billion. Friday, JP Morgan raised $10 billion in a secondary offering to help pay for the Washington Mutual takeunder. Both of these offerings were oversubscribed, meaning that the companies could have raised more capital if they wanted. There is not a shortage of capital for well run financial companies.

There is, however, a shortage of capital for companies that have acted irresponsibly with investor capital in the recent past. For some reason, our political leaders believe this is a failure of the market, but isn’t this what should be expected from rational investors? Given a choice, why would a rational investor allocate limited capital to the losers rather than the winners? If capital is really as scarce as it seems, isn’t it better for our economy if we make sure that it is allocated wisely?

[…]

Paulson has said that the cause of the current problems is the housing deflation, but that ignores the elephant in the living room. The housing bubble, which was concentrated in a relatively small number of states, was caused by the reckless actions of the Greenspan Fed. The consequences of that bubble have been exacerbated by the Bernanke Fed. The market is functioning as it should. It is the Fed that is not functioning correctly. There is no reason we had to go through either the bubble or the aftermath. We got into this mess because we tried to avoid the consequences of the Internet bubble. We will only make things worse by trying to avoid the consequences of the housing bubble.

We are not on the verge of a new depression. The housing bubble collapse in California, Florida and a few other states is not enough to bring down the entire banking system. Investors who made mistakes in these markets should be held responsible and those who navigated the Fed-distorted market should be rewarded for their wisdom and prudence. Enacting the Paulson plan will not allow that to happen and our economy will suffer for it in the long run. The Japanese tried to prop up failed banks in the aftermath of the bursting of their twin bubbles and the result was 15 years of stagnation. Why are we emulating a strategy that is a demonstrable failure? A better alternative would be to allow capitalism to work as it should and stop the interventions of the Fed in the money market. Trust capitalism. It works.

There’s an interesting and fairly lengthy discussion about the whys and wherefores of the current crisis in between the excerpts I’ve quoted, along with a prescription for solving the problem. I believe Mr. Calhoun is articulating (and quite well, at that) the reasons a large block of Republican members of the House oppose the current rescue/bail-out bill that will be voted on today. The passage of that bill is far from a done-deal, if one believes what one is hearing today. I’m beginning to have second thoughts about the wisdom of this “bail-out,” as currently written. But then again, I could stick everything I know about economics in my right eye and it wouldn’t even water…

―:☺:―

The Economist has an alternative POV on this subject, expressed in its op-ed “Unpleasant but essential.” Excerpts:

IT MUST be one of the most unpleasant laws that Congress has found itself writing so close to an election. Devoting $700 billion of taxpayers’ money to rescuing the country’s least popular industry is not a vote winner. That Democratic and Republican congressional leaders held their noses this weekend and came up with the Emergency Economic Stabilisation Act is encouraging evidence that they appreciate the gravity of the financial crisis. “This is something that all of us will swallow hard and go forward with,” John McCain said. Barack Obama added that “What we can't do is do nothing.”

[…]

By legislative standards Congress moved at light speed after Mr Paulson and Ben Bernanke, the Federal Reserve chairman, proposed action on September 18th. Yet it may not be fast enough. In the past week the financial crisis has erupted in even more dangerous forms globally. The interbank-funds market has seized up and even the most creditworthy corporate and financial firms are paying punitive rates. Last week Washington Mutual became the largest-ever American bank to fail. In Europe, three countries had to come to the rescue of Fortis, a Belgian banking group, and Britain did the same with a mortgage lender, Bradford & Bingley. And on Monday Citigroup agreed to buy most of the assets of Wachovia, another beleaguered American bank, in a deal brokered by regulators.

So… this isn’t just an American problem, it’s a global problem. And that makes it pretty damned serious, doesn’t it?

Aiiieee. My head hurts. But that’s what one should expect when an economic idiot tries to understand economics, innit?