NOTE TO READERS: We're in the process of moving this week so the usual posting on Sunday as well as replies to comments will be missing this week. Thank you.
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Last November 19, about two weeks after the mid-term elections, the posting was entitled "Disappearance of the Middle: Bipolarization of Politics." The bottom line of the posting was that "the political middle seems to have disappeared, at least for now, as we drift toward increased bipolar politics." The "at least for now" still holds.
A very recent New York Times article carried the head, "Fight Harder, Voters Telling Congressmen." The article was based on comments from a few local gatherings held by House lawmakers during their unearned summer vacation. The comments came from the left and right, or perhaps it would be better to say from the farther left and right. They came from party activists who are the people who tend to show up for such gatherings. The middle and independents stay at home. Their primary political act is casting a vote, with an occasional word of disgruntlement.
The key words and views expressed in the article were "fight harder," meaning the lawmakers were not tough enough. A Minnesota liberal said President Obama just "rolled over" and needs "some steel in his backbone". A Utah Republican was quoted: ". . . Republicans chasing Democrats to the left, and I hate it when the party deserts me." And a Georgia Congressman was applauded when he said "compromises are what got us into this mess." Another liberal Democrat put blame on the tea party which "forced the country from one manufactured crisis after another."
The scarey part of the story, if such anecdotal stuff reflects a broader public opinion, is that what lawmakers seem to be hearing are messages that reinforce their partisan/ideological predispositions. Is anyone out there saying, go back to Washington and work issues out in an agreeable manner without political posturing and a vision that doesn't go beyond just getting re-elected?
Recent polls show an all time low for congressional approval ratings, with disapproval over 80 percent. Is the disapproval more a reflection of the disappointment of the ideologically driven wings of the two parties or does the low opinion primarily reflect a general attitude toward congressional political and policy behavior? That's no small question. This blogger prefers to think it's the latter, general disapproval, but the Times story could lend credence to the view that the two extreme sides don't believe their lawmakers are tough enough and thus give very low grades to Congress. If the latter is the case, then we are in for some discouraging times ahead when the so-called Super Congress makes it recommendations by late November on further cuts big cuts in spending and, perhaps, revenue increases. There is already room for skepticism about the Super Procedures of the Super Congress, a skepticism that could get even deeper if intransigence, purveyed primarily and quite successfully by the tea party to fellow Republicans, continues as the guideline for resolution of highly partisan political conflicts in Washington.
To me the Times story is depressing since lawmakers hear what they want to hear and if what they hear is that they're not tough enough in pushing their partisan/ideological agendas, then there can be little expectation of light at the end of the long, dark tunnel we have been traveling through. Is there a voice for the middle that is clear enough and loud enough to say, and be heard, that is is indeed time for a change in the Washington political culture? --or "In the name of God, go", or in Brooklyn baseball parlance,"throw the bums out."
Wednesday, August 17, 2011
Sunday, August 14, 2011
INTERNATIONAL POTPOURRI: ISRAEL, FRANCE, BRITAIN
It is hardly any wonder that Israel finds it difficult to make and keep friends in the international community.
About a week ago Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians, using the pre-l967 border as a starting point for negotiations. When President Obama first suggested such an approach, Netanyahu seemed outraged, saying the l967 borders were indefensible for Israeli security, even though Obama said some lands would have to be swapped by both parties to reflect the reality on the ground, primarily meaning the pattern of Israeli settlements built since l967. So Netanyahu's most recent statement sounded like a significant concession, although this blog labeled it a "phony gesture" concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass peace talks and go directly to the United Nations for recognition as an independent state. Mahmoud Abbas, President of the Palestinian Authority, said he would submit an application for membership when the U.N. General Assembly meets on September 20.
How "phony" Netanyahu was or how little control he has over his coalition government with its pro-settlement right wing was highlighted this week when his Interior Minister announced plans for large, new apartment settlements in east Jerusalem. East Jerusalem is a key area for the Palestinians who want to make it their future capital.
The announced new settlement plans were immediately denounced by the Palestinians who asked the U.S. to pressure Israel to stop this "unilateral" move. Lots of luck. The U.S. has been noticeably ineffective in trying to get the Israelis to halt new settlements on land envisioned to be part of a new Palestinian state. The Israeli "in your face" attitude on settlements was starkly evident in March 2010 when Israel announced major new settlement plans just when Vice President Biden was visiting the country.
In short, nothing has changed and it seems that the next confrontation will be at the U.N. when Israel, backed by the U.S. in a move that will be unpopular in the Arab world, works to block the Palestinian request for recognition. But . . . . There is always a "but" in the endless so-called peace talks.
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France, Italy, Spain, and Portugal have joined forces to halt "short selling" of their securities by market manipulators who bet that the fiscal conditions of these countries will get worse.
Short selling is when an investor anticipates or aids and abets a decline in securities, stocks or bonds, by taking steps to assure the decline will take place and the investor will make money. A short seller is one who sells securities he or she doesn't even own. In simple terms what he or she does is borrow the securities from some institution such as a pension fund and then sells the borrowed securities on the market. By selling them, the short seller hopes to drive the prices down. Then the short seller buys these or identical ones at the lower price and returns the securities to the institution from which they were borrowed. The profit is the difference between the cost at the time of the borrowing and the lower price he or she actually paid for the securities.
Large scale short selling can be very injurious to the companies or countries whose securities are involved. For a time after the October 2008 fiasco on Wall Street, the U.S. halted short sales on financial institution securities to prevent them from getting into an even deeper hole. With the shakey fiscal condition of some European countries, it is no surprise that the halt on short selling was put in place.
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Much was written during the period of the "Arab Spring" earlier this year and how the social media such as Facebook and Twitter were a very important part of mobilizing pro-democracy public sentiment in Egypt and elsewhere. Some countries sought to head off such communications through various technological schemes, with mixed success.
Now Britain is looking at what it sees as the other side of the coin with the social media allegedly being used to mobilize destructive riots that erupted in various cities. The violence started as a protest against a police shooting in an area of London. According to the British government, the London violence spread to other cities through the social media. Prime Minister Cameron is exploring ways to shut down such communications in what is turning out to be a free speech vs. public safety issue, an issue not easily resolved.
Will keep on looking for some good news at home or abroad, but such seems to be quite scarce.
About a week ago Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians, using the pre-l967 border as a starting point for negotiations. When President Obama first suggested such an approach, Netanyahu seemed outraged, saying the l967 borders were indefensible for Israeli security, even though Obama said some lands would have to be swapped by both parties to reflect the reality on the ground, primarily meaning the pattern of Israeli settlements built since l967. So Netanyahu's most recent statement sounded like a significant concession, although this blog labeled it a "phony gesture" concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass peace talks and go directly to the United Nations for recognition as an independent state. Mahmoud Abbas, President of the Palestinian Authority, said he would submit an application for membership when the U.N. General Assembly meets on September 20.
How "phony" Netanyahu was or how little control he has over his coalition government with its pro-settlement right wing was highlighted this week when his Interior Minister announced plans for large, new apartment settlements in east Jerusalem. East Jerusalem is a key area for the Palestinians who want to make it their future capital.
The announced new settlement plans were immediately denounced by the Palestinians who asked the U.S. to pressure Israel to stop this "unilateral" move. Lots of luck. The U.S. has been noticeably ineffective in trying to get the Israelis to halt new settlements on land envisioned to be part of a new Palestinian state. The Israeli "in your face" attitude on settlements was starkly evident in March 2010 when Israel announced major new settlement plans just when Vice President Biden was visiting the country.
In short, nothing has changed and it seems that the next confrontation will be at the U.N. when Israel, backed by the U.S. in a move that will be unpopular in the Arab world, works to block the Palestinian request for recognition. But . . . . There is always a "but" in the endless so-called peace talks.
0-0-0-0
France, Italy, Spain, and Portugal have joined forces to halt "short selling" of their securities by market manipulators who bet that the fiscal conditions of these countries will get worse.
Short selling is when an investor anticipates or aids and abets a decline in securities, stocks or bonds, by taking steps to assure the decline will take place and the investor will make money. A short seller is one who sells securities he or she doesn't even own. In simple terms what he or she does is borrow the securities from some institution such as a pension fund and then sells the borrowed securities on the market. By selling them, the short seller hopes to drive the prices down. Then the short seller buys these or identical ones at the lower price and returns the securities to the institution from which they were borrowed. The profit is the difference between the cost at the time of the borrowing and the lower price he or she actually paid for the securities.
Large scale short selling can be very injurious to the companies or countries whose securities are involved. For a time after the October 2008 fiasco on Wall Street, the U.S. halted short sales on financial institution securities to prevent them from getting into an even deeper hole. With the shakey fiscal condition of some European countries, it is no surprise that the halt on short selling was put in place.
0-0-0-0
Much was written during the period of the "Arab Spring" earlier this year and how the social media such as Facebook and Twitter were a very important part of mobilizing pro-democracy public sentiment in Egypt and elsewhere. Some countries sought to head off such communications through various technological schemes, with mixed success.
Now Britain is looking at what it sees as the other side of the coin with the social media allegedly being used to mobilize destructive riots that erupted in various cities. The violence started as a protest against a police shooting in an area of London. According to the British government, the London violence spread to other cities through the social media. Prime Minister Cameron is exploring ways to shut down such communications in what is turning out to be a free speech vs. public safety issue, an issue not easily resolved.
Will keep on looking for some good news at home or abroad, but such seems to be quite scarce.
Wednesday, August 10, 2011
SCORCHING THE FINANCIAL EARTH
Last November 22, my posting was entitled "GOP: Putting the Torch to Everything." The thought was inspired by economist Paul Krugman's inclusion of the GOP in his "Axis of Depression" which included China and Germany because of their opposition to the Federal Reserve plan to purchase $600 billion in government bonds to help drive down interest rates and contribute to economic growth. The need to use monetary policy came because fiscal policy, meaning at the time more federal spending, was blocked in Congress by the GOP backed by the obstructionist tea party (TP) and its fellow traveling fiscal hawks on the right right wing of the GOP.
With the debt ceiling legislation passed with its short term, remedy-light promises for cutting federal spending, and with Congress on vacation where it could do no further damage, it seemed like a time for a breather from the political angst rippling out of Washington everyday. Ah, for the good old days of just two weeks ago. Like the Cold War of yesteryear, just two weeks ago we knew who the enemy was and could try to protect ourselves, emphasis on "try".
But then, out of the cosmos came the credit rating agencies, particularly Standard & Poor (S&P) to gain immediate membership and perhaps leadership in Krugman's Axis of Depression. The three major credit agencies, S&P, Moody and Fitch, had been giving warning about downgrading the country's AAA credit rating because of the fiscal ill-health of the federal government. But there were few who expected the magnitude of the negative impact on the financial world when S&P lowered the U.S. credit rating from AAA to AA+ last Friday. Within two trading days on Wall Street, the Dow index dropped more than 1,100 points, bringing back analyst comparison with the debacle of October 2008 when the fall of Lehman Brothers triggered a Wall Street collapse and the Great Recession which still seems to be with us. In all fairness to S&P it should be noted that there were economic indicators and the fiscal troubles in Europe which contributed to the huge Dow decline.
Aside from the immediate negative impact in financial markets, the really troubling aspect of the S&P downgrade is that that agency brushed aside the fact that its analysis was based, at least in part, on some faulty data. S&P chose to give emphasis to subjective factors, meaning its view of Washington politics and the inability of the players there to deal effectively with the country's fiscal problems, as the primary reason for the credit downgrade. And if that resort to subject analysis isn't enough, there is also the troubling fact that S&P and other rating agencies were among the villains who brought about the collapse of the housing market by overrating mortgage-backed bond issues which were huckstered to investors. So how reliable are they in judging the fiscal health of nations? (See previous post)
Not content with lowering the U.S. credit rating, S&P then proceeded to downgrade the ratings of financially troubled Fannie Mae and Freddie Mac whose holdings of untold numbers of bad mortgages had forced them to keep coming back to the government for bailout money. Those downgrades were overdue. At the same time, S&P lowered the ratings on some Israeli bonds backed by the U.S. government.
Still not finished, on Monday S&P also lowered the ratings on five large insurance companies from AAA to AA+ and warned that further downgrades may be ahead. On the same day it lowered the outlook on five other firms from stable to negative, including Warren Buffet's Berkshire Hathaway. Not content with all of that, S&P also lowered the ratings on some other firms who support credit by loaning to other banks.
And there may be more trouble ahead at the state and local levels. Even before the debt ceiling agreement in Congress, the Moody rating firm warned that at least five states are in trouble because of high levels of reliance on federal funds and the high number of federal employees in the state. If these states are downgraded they will have to pay higher interest rates to continue borrowing in the credit markets. And such downgrading is not likely to be confined to just five states. So far Moody and Fitch are staying with the AAA rating for the federal government.
The bottom line in all of this is that S&P, Moody, and Fitch by their in-house data and subjective political analyses have had or potentially will have a major negative effect on the financial markets, and all of the rippling effects are as yet unknown. If the TP and right wing extremists think the federal government is too big and too intrusive in our lives, what about these rating agencies who can and have already shaken the financial world here and abroad and have cost millions of us collectively to lose trillions of dollars in the 401k plans and other investments. We have heard disparagingly of "too big to fail;" how about "too arrogant to roam freely to scorch the financial earth."
With the debt ceiling legislation passed with its short term, remedy-light promises for cutting federal spending, and with Congress on vacation where it could do no further damage, it seemed like a time for a breather from the political angst rippling out of Washington everyday. Ah, for the good old days of just two weeks ago. Like the Cold War of yesteryear, just two weeks ago we knew who the enemy was and could try to protect ourselves, emphasis on "try".
But then, out of the cosmos came the credit rating agencies, particularly Standard & Poor (S&P) to gain immediate membership and perhaps leadership in Krugman's Axis of Depression. The three major credit agencies, S&P, Moody and Fitch, had been giving warning about downgrading the country's AAA credit rating because of the fiscal ill-health of the federal government. But there were few who expected the magnitude of the negative impact on the financial world when S&P lowered the U.S. credit rating from AAA to AA+ last Friday. Within two trading days on Wall Street, the Dow index dropped more than 1,100 points, bringing back analyst comparison with the debacle of October 2008 when the fall of Lehman Brothers triggered a Wall Street collapse and the Great Recession which still seems to be with us. In all fairness to S&P it should be noted that there were economic indicators and the fiscal troubles in Europe which contributed to the huge Dow decline.
Aside from the immediate negative impact in financial markets, the really troubling aspect of the S&P downgrade is that that agency brushed aside the fact that its analysis was based, at least in part, on some faulty data. S&P chose to give emphasis to subjective factors, meaning its view of Washington politics and the inability of the players there to deal effectively with the country's fiscal problems, as the primary reason for the credit downgrade. And if that resort to subject analysis isn't enough, there is also the troubling fact that S&P and other rating agencies were among the villains who brought about the collapse of the housing market by overrating mortgage-backed bond issues which were huckstered to investors. So how reliable are they in judging the fiscal health of nations? (See previous post)
Not content with lowering the U.S. credit rating, S&P then proceeded to downgrade the ratings of financially troubled Fannie Mae and Freddie Mac whose holdings of untold numbers of bad mortgages had forced them to keep coming back to the government for bailout money. Those downgrades were overdue. At the same time, S&P lowered the ratings on some Israeli bonds backed by the U.S. government.
Still not finished, on Monday S&P also lowered the ratings on five large insurance companies from AAA to AA+ and warned that further downgrades may be ahead. On the same day it lowered the outlook on five other firms from stable to negative, including Warren Buffet's Berkshire Hathaway. Not content with all of that, S&P also lowered the ratings on some other firms who support credit by loaning to other banks.
And there may be more trouble ahead at the state and local levels. Even before the debt ceiling agreement in Congress, the Moody rating firm warned that at least five states are in trouble because of high levels of reliance on federal funds and the high number of federal employees in the state. If these states are downgraded they will have to pay higher interest rates to continue borrowing in the credit markets. And such downgrading is not likely to be confined to just five states. So far Moody and Fitch are staying with the AAA rating for the federal government.
The bottom line in all of this is that S&P, Moody, and Fitch by their in-house data and subjective political analyses have had or potentially will have a major negative effect on the financial markets, and all of the rippling effects are as yet unknown. If the TP and right wing extremists think the federal government is too big and too intrusive in our lives, what about these rating agencies who can and have already shaken the financial world here and abroad and have cost millions of us collectively to lose trillions of dollars in the 401k plans and other investments. We have heard disparagingly of "too big to fail;" how about "too arrogant to roam freely to scorch the financial earth."
Sunday, August 7, 2011
AT HOME AND ABROAD: U.S., ISRAEL, CHINA
The Standard & Poor rating service is becoming something of a handmaiden to the tea party (TP) and fellow traveling right wing fiscal hawks who seem to have an interest in aggravating our fiscal problems rather than seeking solutions. At least that's the way I view S&P's decision on Friday to downgrade the country's AAA credit rating. Moody and Fitch, the other two major credit rating firms, are sticking with the AAA rating, although both have served notice that they will be watching the U.S. credit standing with a critical eye.
In a recent posting I was critical of all the credit rating agencies in their role as judges of any country's credit standing, although there is enough evidence to question the fiscal viability of such countries as Greece, Ireland, Portugal, and perhaps a few other European countries. My point in that posting was that these private credit rating agencies were the same ones who were knowingly giving high investment ratings to mortgage-backed bonds being huckstered by investment banks such as Goldman Sachs. The high ratings were given even though there was plenty of evidence to know that the bundle of mortgages serving as collateral on a bond issue was loaded with subprime housing loans that were almost certain to go bad.
So why should we give them any more credibility when it comes to assessing a country's credit worthiness? In the case of the S&P downgrading the U.S.'s AAA rating, the Obama administration protested that the model used by S&P for analysis was off by several trillion dollars. S&P paused briefly in making the decision final, but quickly went ahead with the original downgrade decision. What really caught the eye (or ear) was that S&P acknowledged a $2 trillion error in its calculation but it didn't make a difference relative to other data points such as the ratio of debt to gross domestic product. The $2 trillion error didn't "make a material difference," according to S&P.
Then came the subjective political judgment on risk with S&P saying its decision also considered the slowness of Congress raising the debt ceiling and the political infighting involved. It was akin to the TP modus operandi -- we know where we want to go and that is where we are going regardless of the facts and how what we do may negatively affect the U.S. fiscal credibility in the world and the world economy itself. The only saving grace, at least in my initial reaction, is that ultimately it won't be the S&P decision that drives the bond market and collateral effects, but the judgment of investors in the safety of U.S. bonds. Given the shakey fiscal condition of some European countries, the U.S. bond market is likely to remain the best poker game in town. Now to turn the corner and go abroad.
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Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians using the pre-l967 borders as a starting point for negotiations. This comes after Netanyahu several weeks ago denounced President Obama's proposal that the l967 borders be the basis of new talks, but with the recognition that land swaps will be a necessary part of any agreement, such swaps reflecting the reality of where Israel has established new or expanded settlements.
The Netanyahu offer, agreed to in written form with the U.S., had the clear appearance of a phony gesture concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass the peace talks and go to the U.N. this fall to seek recognition of Palestine as an independent state. Both the U.S. and Israel figure they have a lot to lose if the Palestinians pursue their U.N. strategy for recognition. Recognition would put international pressure on Israel to make concessions on various outstanding economic and security issues. The U.S. stands to lose even more friends in the Muslim world if it votes against Palestinian recognition, as it almost certainly would if recognition comes to a vote. As of this posting, the Palestinians have rejected the Netanyahu offer. But on the unending Israeli-Palestinian confrontation, there is no such thing as the final word.
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There was another outbreak of violence in China's predominantly Muslim province of Xinjiang in northwest China. This time it was a rather mild outbreak compared with previous violence between the Muslim Uighurs and the Chinese Han minority. The basic Uighur complaint is that Beijing development policies, such as development of oil and natural gas resources, discriminate in favor of the Han. That has been the Uighur charge against China.
What struck me was farther down in the story with China saying that the Uighur ringleaders received their training in firearms and explosives in Pakistan! Pakistan has long been a staunch ally of China in China's long border dispute, including a war, with India, Pakistan's number one enemy. So Pakistan, or at least the northeast frontier region bordering Afghanistan, has now become an equal opportunity training camp for terrorists, a charge we have long made about Taliban and al-Qaeda safe havens in Pakistan.
To conclude, the world at home and abroad has become so jumbled and messy that it may be time to step through Alice's looking glass in search of an alternative reality.
In a recent posting I was critical of all the credit rating agencies in their role as judges of any country's credit standing, although there is enough evidence to question the fiscal viability of such countries as Greece, Ireland, Portugal, and perhaps a few other European countries. My point in that posting was that these private credit rating agencies were the same ones who were knowingly giving high investment ratings to mortgage-backed bonds being huckstered by investment banks such as Goldman Sachs. The high ratings were given even though there was plenty of evidence to know that the bundle of mortgages serving as collateral on a bond issue was loaded with subprime housing loans that were almost certain to go bad.
So why should we give them any more credibility when it comes to assessing a country's credit worthiness? In the case of the S&P downgrading the U.S.'s AAA rating, the Obama administration protested that the model used by S&P for analysis was off by several trillion dollars. S&P paused briefly in making the decision final, but quickly went ahead with the original downgrade decision. What really caught the eye (or ear) was that S&P acknowledged a $2 trillion error in its calculation but it didn't make a difference relative to other data points such as the ratio of debt to gross domestic product. The $2 trillion error didn't "make a material difference," according to S&P.
Then came the subjective political judgment on risk with S&P saying its decision also considered the slowness of Congress raising the debt ceiling and the political infighting involved. It was akin to the TP modus operandi -- we know where we want to go and that is where we are going regardless of the facts and how what we do may negatively affect the U.S. fiscal credibility in the world and the world economy itself. The only saving grace, at least in my initial reaction, is that ultimately it won't be the S&P decision that drives the bond market and collateral effects, but the judgment of investors in the safety of U.S. bonds. Given the shakey fiscal condition of some European countries, the U.S. bond market is likely to remain the best poker game in town. Now to turn the corner and go abroad.
0-0-0-0-0
Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians using the pre-l967 borders as a starting point for negotiations. This comes after Netanyahu several weeks ago denounced President Obama's proposal that the l967 borders be the basis of new talks, but with the recognition that land swaps will be a necessary part of any agreement, such swaps reflecting the reality of where Israel has established new or expanded settlements.
The Netanyahu offer, agreed to in written form with the U.S., had the clear appearance of a phony gesture concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass the peace talks and go to the U.N. this fall to seek recognition of Palestine as an independent state. Both the U.S. and Israel figure they have a lot to lose if the Palestinians pursue their U.N. strategy for recognition. Recognition would put international pressure on Israel to make concessions on various outstanding economic and security issues. The U.S. stands to lose even more friends in the Muslim world if it votes against Palestinian recognition, as it almost certainly would if recognition comes to a vote. As of this posting, the Palestinians have rejected the Netanyahu offer. But on the unending Israeli-Palestinian confrontation, there is no such thing as the final word.
0-0-0-0-0
There was another outbreak of violence in China's predominantly Muslim province of Xinjiang in northwest China. This time it was a rather mild outbreak compared with previous violence between the Muslim Uighurs and the Chinese Han minority. The basic Uighur complaint is that Beijing development policies, such as development of oil and natural gas resources, discriminate in favor of the Han. That has been the Uighur charge against China.
What struck me was farther down in the story with China saying that the Uighur ringleaders received their training in firearms and explosives in Pakistan! Pakistan has long been a staunch ally of China in China's long border dispute, including a war, with India, Pakistan's number one enemy. So Pakistan, or at least the northeast frontier region bordering Afghanistan, has now become an equal opportunity training camp for terrorists, a charge we have long made about Taliban and al-Qaeda safe havens in Pakistan.
To conclude, the world at home and abroad has become so jumbled and messy that it may be time to step through Alice's looking glass in search of an alternative reality.
Wednesday, August 3, 2011
THE HIGH PRICE OF BIPARTISANSHIP
It seems that whenever Congress and President Obama cobble together major domestic legislation tailored to get bipartisan support the end result is a lopsided, so-called compromise victory for the GOP and the wealthy. This is the real outcome regardless of Democratic efforts to find some silver lining in the debt ceiling agreement. We hear some Democrats tout how they saved medicare, put the Pentagon budget on the line, and how they succeeded in avoiding another debt ceiling battle until after the 2012 election. But for the GOP, pushed by the tea party (TP) and fellow traveling kamikaze-like fiscal hawks, the victory was in the $2.1 - 2.5 trillion in spending cuts over the next decade while excluding any revenue increases by closing tax loopholes and tax give- aways to the wealthy and large corporations.
The last time "bipartisanship" blossomed so visibly was late last year in the special session of Congress following the huge GOP victory in the congressional elections which gave them control of the House and set the stage for this year's display of how broken the congressional branch of government really is. The 2010 special session preserved the Bush income tax cuts which particularly benefited the wealthy, along with aiding the wealthy in preserving the big benefits of the estate tax. This is not to say that President Obama and the Democrats got nothing out of the deal. The extension of benefits for the unemployed and the disguised stimulus of a one-year, 2 percentage point reduction in the social security payroll tax were also included in the fiscal package. Further extension of these Democratic pieces of the package were not included in the debt ceiling agreement just passed.
In this week's minimalist agreement the Democrats are quick to point out that tax reform and revenue increases are possible this fall. That's when a special 12-person "bipartisan" (again in quotation marks) congressional committee submits its vote-up-or-down proposal on a further increase of about $1.5 trillion to be added both to spending cuts and the debt ceiling This would be added to the approximately $900 billion provided in a two-step increase between now and the fall. Lots of luck. Any proposal from the special committee that includes new revenues that look like a tax increase has dim prospects of passing, at least in my opinion. As a side note, the establishment of a special committee further indicates how broken Congress is that it can't conduct its business through normal processes.
If the GOP could kill revenue increases in the deal just completed, there is no reason to believe it can't do the same this fall. Congressional rejection of the special committee proposal would trigger an across-the-board cut in spending, including a big reduction in the Pentagon budget but exclude cuts in medicaid and social security. The argument is made that the GOP may go for the special committee package to avoid cutting defense spending. But it should be noted that the tea party wants reductions in the Pentagon budget and the TP already has demonstrated how the TP tail can wag the GOP dog.
The upshot of the minimalist deal just signed into law is that it just kicks the can down the road. In 2013 this battle will have to be fought again and the President, whoever he or she may be, and Congress cannot continue to avoid the really big decisions needed to get the country's fiscal house in order. Such decisions could very well include ways to control social security and health care spending, as well as tax reform to increase revenues.
Also, keep in mind that the Bush tax cuts expire at the end of 2012 which means a post-election lame duck session of Congress is again likely. The GOP will again seek to protect those in the top income brackets and the Democrats will take a stand on preserving the tax cuts for the middle class. The same positions were taken in the post-election 2010 special session and we saw how that turned out. The determining fact is that in these great taxing/spending battles, the GOP, stiffened by TP intransigence, seems willing to risk an economic debacle while the Democrats are not. Translated, this means the GOP can take a no compromise stand to get its way, maneuvering the Democrats into a so-called compromise that undermines the basic Democratic political ideology and alienates the progressive wing of the party while the GOP walks away with its ideology intact as it continues to pander to its extreme right wing base.
How many more "bipartisan" compromises can the Democrats afford?
The last time "bipartisanship" blossomed so visibly was late last year in the special session of Congress following the huge GOP victory in the congressional elections which gave them control of the House and set the stage for this year's display of how broken the congressional branch of government really is. The 2010 special session preserved the Bush income tax cuts which particularly benefited the wealthy, along with aiding the wealthy in preserving the big benefits of the estate tax. This is not to say that President Obama and the Democrats got nothing out of the deal. The extension of benefits for the unemployed and the disguised stimulus of a one-year, 2 percentage point reduction in the social security payroll tax were also included in the fiscal package. Further extension of these Democratic pieces of the package were not included in the debt ceiling agreement just passed.
In this week's minimalist agreement the Democrats are quick to point out that tax reform and revenue increases are possible this fall. That's when a special 12-person "bipartisan" (again in quotation marks) congressional committee submits its vote-up-or-down proposal on a further increase of about $1.5 trillion to be added both to spending cuts and the debt ceiling This would be added to the approximately $900 billion provided in a two-step increase between now and the fall. Lots of luck. Any proposal from the special committee that includes new revenues that look like a tax increase has dim prospects of passing, at least in my opinion. As a side note, the establishment of a special committee further indicates how broken Congress is that it can't conduct its business through normal processes.
If the GOP could kill revenue increases in the deal just completed, there is no reason to believe it can't do the same this fall. Congressional rejection of the special committee proposal would trigger an across-the-board cut in spending, including a big reduction in the Pentagon budget but exclude cuts in medicaid and social security. The argument is made that the GOP may go for the special committee package to avoid cutting defense spending. But it should be noted that the tea party wants reductions in the Pentagon budget and the TP already has demonstrated how the TP tail can wag the GOP dog.
The upshot of the minimalist deal just signed into law is that it just kicks the can down the road. In 2013 this battle will have to be fought again and the President, whoever he or she may be, and Congress cannot continue to avoid the really big decisions needed to get the country's fiscal house in order. Such decisions could very well include ways to control social security and health care spending, as well as tax reform to increase revenues.
Also, keep in mind that the Bush tax cuts expire at the end of 2012 which means a post-election lame duck session of Congress is again likely. The GOP will again seek to protect those in the top income brackets and the Democrats will take a stand on preserving the tax cuts for the middle class. The same positions were taken in the post-election 2010 special session and we saw how that turned out. The determining fact is that in these great taxing/spending battles, the GOP, stiffened by TP intransigence, seems willing to risk an economic debacle while the Democrats are not. Translated, this means the GOP can take a no compromise stand to get its way, maneuvering the Democrats into a so-called compromise that undermines the basic Democratic political ideology and alienates the progressive wing of the party while the GOP walks away with its ideology intact as it continues to pander to its extreme right wing base.
How many more "bipartisan" compromises can the Democrats afford?
Sunday, July 31, 2011
2011 SHAPING UP TO BE A BAD YEAR FOR U.S.
The year is just seven months old but is shaping up as a bad year for the U.S. at home and abroad in both substance and image.
Starting at home, one would have to conclude that regardless of how the debt ceiling issue ends, it is almost certain to be a half measure at best in terms of a long term solution to the country's fiscal condition. The problem is undertaxation, thanks to George W. Bush, and the inability to support the high spending levels to which we've become accustomed. Further, the inability to get beyond short-term, politically driven fixes can be laid to a significant degree on the GOP's lack of leadership against the irresponsible demands of the tea party (TP) and its no-compromise, fiscal extremist supporters in the House of Representatives.
Not only has the TP-driven fracture among Republicans undermined congressional ability to deal with the substance of the spending/taxing issue, but the mess in Washington has further sullied the standing of the U.S. as the gold standard of fiscal responsibility. China, which has a big stake in the soundness of the U.S. government debt, has labeled the floundering and fumbling in Washington as "dangerously irresponsible". It is difficult to sell democracy abroad when our own government is badly broken.
Adding further to the diminished image of U.S. financial responsibility and strength has been the threat of downgrading the country's credit rating by the major rating companies. While at vastly different levels of fiscal soundness, the U.S. now gets bundled with Greece, Ireland, Italy, and a few other European countries, as nations whose credit standing needs to be watched for further signs of deterioration. This comes on top of the worldwide financial crisis three years ago when fast and loose practices by Wall Street and mortgage lenders brought us and some other countries to the brink of financial collapse. Thus, we now face the world with a badly tarnished image of financial stability, reliability, and integrity.
Turning to 2011 as a bad year for the U.S. abroad, it is difficult to know where to start. An obvious starting point would be our two wars in Iraq and Afghanistan, but first a look at the so-called Arab Spring sparked by pro-democracy movements toppling the government of Tunisia followed by the ouster of long-time ally President Mubarak of Egypt. Mubarak's fall clearly undermined our image as a reliable ally. Now once-close Middle East partners such as Saudi Arabia view us as an unreliable partner willing to undermine authoritarian rulers such as Mubarak (and perhaps the Saudi king) with whom we were aligned for decades if the politics of the moment demand it. Mubarak had been our principal spear carrier in the Middle East in seeking a resolution of the Israeli-Palestinian issue and in serving as a military counterbalance to the growing power of Iran. The expansion of Iran's influence was greatly aided by our invasion of Iraq and the toppling of Saddam Hussein in 2003. Now the Iraq invasion is seen by many in the Muslim world as a neo-Christian crusade seeking to implant western political and cultural values in the Muslim Middle East.
Looking at EGYPT today, there are troubling signs that our major hope of preventing the emergence of a strict Islamic regime may be in danger. It was very recently reported that ultraconservative Islamics, along with the large and influential Muslim Brotherhood whose political/religious goals are not clear, have been turning out in very large numbers to protest against some of the political aims of liberal activists.
In IRAQ violence is greater now than it was a year ago with assassinations, bombings, and attacks on U.S. troops increasing rather than decreasing as Iraqi has assumed greater responsibility for its own security. At the same time, Iran has been gaining greater influence in Iraqi affairs.
In AFGHANISTAN the recent killings of the mayor of Kandahar and the half brother of President Karzai have highlighted the fragile nature of political and military control there. This comes at the same time still another U.S. report is issued on the rampant corruption inside and outside of the Karzai government. Meanwhile, at home there is increasing public discontent with the seeming war-without-end which has now been going for ten years.
In SYRIA we had been holding out the hope that the Assad government might somehow be the vehicle for political reform. Instead Assad has cracked down severely on the dissenters and there is evidence that the fighting is becoming a sectarian battle promoted by Assad. With fighting between religious groups possibly emerging, Assad can claim that his government is the only means to protect the various religious and ethnic groups in that country.
In LIBYA. we have passed the baton for getting rid of Qadaffi to NATO but what we seem to have is a stalemated civil war with no near term sign that this will change.
In the ISRAELI-PALESTINIAN confrontation, what can one say? Despite the many international efforts to get peace talks resumed, the issue appears to be stuck on square one.
In sum, to flip the words of a Frank Sinatra song, 2011 so far has not been a very good year.
Starting at home, one would have to conclude that regardless of how the debt ceiling issue ends, it is almost certain to be a half measure at best in terms of a long term solution to the country's fiscal condition. The problem is undertaxation, thanks to George W. Bush, and the inability to support the high spending levels to which we've become accustomed. Further, the inability to get beyond short-term, politically driven fixes can be laid to a significant degree on the GOP's lack of leadership against the irresponsible demands of the tea party (TP) and its no-compromise, fiscal extremist supporters in the House of Representatives.
Not only has the TP-driven fracture among Republicans undermined congressional ability to deal with the substance of the spending/taxing issue, but the mess in Washington has further sullied the standing of the U.S. as the gold standard of fiscal responsibility. China, which has a big stake in the soundness of the U.S. government debt, has labeled the floundering and fumbling in Washington as "dangerously irresponsible". It is difficult to sell democracy abroad when our own government is badly broken.
Adding further to the diminished image of U.S. financial responsibility and strength has been the threat of downgrading the country's credit rating by the major rating companies. While at vastly different levels of fiscal soundness, the U.S. now gets bundled with Greece, Ireland, Italy, and a few other European countries, as nations whose credit standing needs to be watched for further signs of deterioration. This comes on top of the worldwide financial crisis three years ago when fast and loose practices by Wall Street and mortgage lenders brought us and some other countries to the brink of financial collapse. Thus, we now face the world with a badly tarnished image of financial stability, reliability, and integrity.
Turning to 2011 as a bad year for the U.S. abroad, it is difficult to know where to start. An obvious starting point would be our two wars in Iraq and Afghanistan, but first a look at the so-called Arab Spring sparked by pro-democracy movements toppling the government of Tunisia followed by the ouster of long-time ally President Mubarak of Egypt. Mubarak's fall clearly undermined our image as a reliable ally. Now once-close Middle East partners such as Saudi Arabia view us as an unreliable partner willing to undermine authoritarian rulers such as Mubarak (and perhaps the Saudi king) with whom we were aligned for decades if the politics of the moment demand it. Mubarak had been our principal spear carrier in the Middle East in seeking a resolution of the Israeli-Palestinian issue and in serving as a military counterbalance to the growing power of Iran. The expansion of Iran's influence was greatly aided by our invasion of Iraq and the toppling of Saddam Hussein in 2003. Now the Iraq invasion is seen by many in the Muslim world as a neo-Christian crusade seeking to implant western political and cultural values in the Muslim Middle East.
Looking at EGYPT today, there are troubling signs that our major hope of preventing the emergence of a strict Islamic regime may be in danger. It was very recently reported that ultraconservative Islamics, along with the large and influential Muslim Brotherhood whose political/religious goals are not clear, have been turning out in very large numbers to protest against some of the political aims of liberal activists.
In IRAQ violence is greater now than it was a year ago with assassinations, bombings, and attacks on U.S. troops increasing rather than decreasing as Iraqi has assumed greater responsibility for its own security. At the same time, Iran has been gaining greater influence in Iraqi affairs.
In AFGHANISTAN the recent killings of the mayor of Kandahar and the half brother of President Karzai have highlighted the fragile nature of political and military control there. This comes at the same time still another U.S. report is issued on the rampant corruption inside and outside of the Karzai government. Meanwhile, at home there is increasing public discontent with the seeming war-without-end which has now been going for ten years.
In SYRIA we had been holding out the hope that the Assad government might somehow be the vehicle for political reform. Instead Assad has cracked down severely on the dissenters and there is evidence that the fighting is becoming a sectarian battle promoted by Assad. With fighting between religious groups possibly emerging, Assad can claim that his government is the only means to protect the various religious and ethnic groups in that country.
In LIBYA. we have passed the baton for getting rid of Qadaffi to NATO but what we seem to have is a stalemated civil war with no near term sign that this will change.
In the ISRAELI-PALESTINIAN confrontation, what can one say? Despite the many international efforts to get peace talks resumed, the issue appears to be stuck on square one.
In sum, to flip the words of a Frank Sinatra song, 2011 so far has not been a very good year.
Wednesday, July 27, 2011
. . . GO." AND DON'T COME BACK. AND A NOTE ON KARZAI
In the previous posting, I borrowed from British history the frustrated outcry, "In the name of God, go" to characterize what must be the growing national frustration in this country about the inability of the Washington political self-interest establishment to resolve the debt ceiling issue. The posting was particularly aimed at House Speaker John Boehner and his Majority Leader Eric Cantor whose lack-of-leadership strategy seems to be, "if we can't have it our way, we walk away" from any negotiations on proposals that have "compromise" attached or implied. And for Boehner it has become increasingly evident that he is unable to control the tea party (TP) members and their fiscal extremist supporters.
In their efforts to appease the TP and the fellow travelers, which they don't seem to be able to do, both Boehner and Cantor have rejected any proposals that require or imply increasing revenues in any form. The basic GOP idea of a deal is to make deep spending cuts in exchange for increasing the debt limit, and the cuts-only approach will make the deficit go away. For many in the TP and its supporters, however, the demand is to cut spending deeply BUT don't raise the debt ceiling at all. The result is a floundering House GOP leadership with the resultant inability of Congress to enact any resolution of the problem, at least to this point.
Congress and the White House have for some time been floating numerous proposals to raise the debt ceiling, with new ideas coming out almost daily, adding to the bewilderment and frustration of the public. In addition to the cut spending/raise revenues division between the GOP and the Democrats, there is also the politically driven issue of a short term fix to meet the August 2 deadline for default on the national debt versus larger, longer term plans. The GOP wants a short term fix to keep the issue alive to be trotted out again next year in hopes of damaging the re-election of President Obama. The Democrats want a solution that will carry beyond the 2012 elections, giving the voters an opportunity next year to register their party preference before the issue would return to the congressional agenda in 2013.
So as of today, July 27, the parties are deadlocked on both the substance and the time frame of a solution with the default deadline just five days away. And just three days after that, lawmakers are scheduled to leave Washington to begin a month-long unearned summer vacation. It is possible that the vacation could be delayed or canceled to keep Congress in town to do whatever needs to be done to clean up their mess.
The title of this posting is based on the expectation that some kind of minimal band-aid fix will be agreed to and the congressional vacation will occur. Thus another concluding note of frustration. Most of the nation is tired of partisan deadlock and political posturing with the White House and congressional eyes fixed on getting re-elected. The lawmakers will, of course, come back in September but contempt for Congress by many voters at least requires a concluding characterization of frustration. Thus, "And don't come back" -- until you reach adulthood or at least go through puberty.
0-0-0-0-0
And while at it, how about applying the title of the previous post, "In the name of God, go" to Afghanistan, specifically President Hamid Karzai.
Once again Karzai's chutzpah amazes. Despite his depending on the U.S. and NATO for his government's preservation, and U.S. and international money for its fiscal existence (not counting what goes on with the opium trade in Afghanistan), he has once again rammed a stick in our eye. Now, according to a recent U.S. Treasury report, Karzai has blocked U.S. officials from checking on funds being stolen through government corruption or diverted to the Taliban as a bribe not to attack our truck convoys traveling through the war zone.
So for Karzai, it's also "go," but, like Congress, since that doesn't seem likely the message should go to Obama in modified form. "In the name of God, get out" of that pit of corruption and war-without-end which keeps sucking out money we can't afford and killing young men and women which the nation and their families can afford even less.
In their efforts to appease the TP and the fellow travelers, which they don't seem to be able to do, both Boehner and Cantor have rejected any proposals that require or imply increasing revenues in any form. The basic GOP idea of a deal is to make deep spending cuts in exchange for increasing the debt limit, and the cuts-only approach will make the deficit go away. For many in the TP and its supporters, however, the demand is to cut spending deeply BUT don't raise the debt ceiling at all. The result is a floundering House GOP leadership with the resultant inability of Congress to enact any resolution of the problem, at least to this point.
Congress and the White House have for some time been floating numerous proposals to raise the debt ceiling, with new ideas coming out almost daily, adding to the bewilderment and frustration of the public. In addition to the cut spending/raise revenues division between the GOP and the Democrats, there is also the politically driven issue of a short term fix to meet the August 2 deadline for default on the national debt versus larger, longer term plans. The GOP wants a short term fix to keep the issue alive to be trotted out again next year in hopes of damaging the re-election of President Obama. The Democrats want a solution that will carry beyond the 2012 elections, giving the voters an opportunity next year to register their party preference before the issue would return to the congressional agenda in 2013.
So as of today, July 27, the parties are deadlocked on both the substance and the time frame of a solution with the default deadline just five days away. And just three days after that, lawmakers are scheduled to leave Washington to begin a month-long unearned summer vacation. It is possible that the vacation could be delayed or canceled to keep Congress in town to do whatever needs to be done to clean up their mess.
The title of this posting is based on the expectation that some kind of minimal band-aid fix will be agreed to and the congressional vacation will occur. Thus another concluding note of frustration. Most of the nation is tired of partisan deadlock and political posturing with the White House and congressional eyes fixed on getting re-elected. The lawmakers will, of course, come back in September but contempt for Congress by many voters at least requires a concluding characterization of frustration. Thus, "And don't come back" -- until you reach adulthood or at least go through puberty.
0-0-0-0-0
And while at it, how about applying the title of the previous post, "In the name of God, go" to Afghanistan, specifically President Hamid Karzai.
Once again Karzai's chutzpah amazes. Despite his depending on the U.S. and NATO for his government's preservation, and U.S. and international money for its fiscal existence (not counting what goes on with the opium trade in Afghanistan), he has once again rammed a stick in our eye. Now, according to a recent U.S. Treasury report, Karzai has blocked U.S. officials from checking on funds being stolen through government corruption or diverted to the Taliban as a bribe not to attack our truck convoys traveling through the war zone.
So for Karzai, it's also "go," but, like Congress, since that doesn't seem likely the message should go to Obama in modified form. "In the name of God, get out" of that pit of corruption and war-without-end which keeps sucking out money we can't afford and killing young men and women which the nation and their families can afford even less.
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