If you haven’t watched this video yet, please do so.
Poor Senator John Kerry (D-MA) entered a battle of wits against Senator Marco Rubio (R-FL), and he was unarmed.
This continues to trickle out, but the faucet has been opened a little wider. As I’ve said before, keep reading Moe Lane @ RedState. But I’ll keep providing summaries to his summaries.
Big news since my last update:
- Let’s start with this report from the House Oversight Committee, which helpfully informs us that BATFE officials active in Mexico were allegedly deliberately not told by their superiors – and the rest of the government – that there was a program in place to allow guns to be illegally resold to Mexican narco-terrorists and then lose trace of the guns. Once those officials found out about this on their own, they were allegedly told that the program had been completed several months before it actually was… only by which time both Mexican and American personnel were dead. To say that these officials are displeased that their own organization violated their training and made them unwitting dupes in an international incident is, to put it mildly, a vast understatement.
- Oh, and in case you were wondering: House Oversight Chair Darrell Issa (R) has indicated that the government is attempting to intimidate whistleblowers out of providing full details on this debacle.
- And - this is the revelation that threatens to really upset the applecart – Newell testifiedthat he shared information on F&F with National Security Director (North America) Kevin O’Reilly (in other words, somebody in the White House). The White House’s response was that… O’Reilly may have been told; but he wasn’t told-told, if you know what they mean.
And it seems like every single government agency has had their hands in this cookie jar. But, as Moe Lane points out above, the fact that we now know for certain that someone in the White House knew is the biggest news.
The more we learn about this the worse it sounds. And the more we learn, the more we learn how much there is to learn.
More and more we’re just waiting for someone in the press to ask the President that fateful question.
It has been nearly two months since I looked in on Mr. Barnum, the erstwhile ObamaCare sucker hunter. It’s not because there’s been no news for a while, but because I’ve been busy. Will attempt to catch up now, but there’s quite a bit.
The GAO determined that ObamaCare is already driving rates up, not down. From their Waiver report:
CCIIO granted waivers on the basis of an application's projected significant increase in premiums or significant reduction in access to health care benefits. According to CCIIO officials, applications with a projected premium increase of 10 percent or more tended to be approved while applications with a projected premium increase of 6 percent or less tended to be denied. Applications with a premium increase between 7 and 9 percent warranted additional staff reviews to determine if the application met the agency's criteria.
So, if your rates were going up 10% or more, you got a waiver. And almost all the waiver requests were approved. Conclusion? Just about everyone’s rates are going up 10% or more. Thought the opposite would be the case? Sucker.
And, another case of finding out what’s in it after they passed the bill:
[D]ue to a glitch in Obamacare, married couples of early retirees making around $64,000 a year will become eligible for Medicaid. That’s more than four times the federal poverty level of $14,710. According to Foster, as many as 3 million Americans will qualify for the benefit. It’s “a twist government number crunchers say they discovered only after the complex bill was signed.”
If we do a back-of-the-envelope calculation, in which the average annual Medicaid expenditure per early retiree is $15,000 per year, the ten-year cost of this glitch could be as high as $450 billion. Even if only half of those eligible opt to take advantage of the loophole, we’re talking at least $250-300 billion, as the sickest patients are the ones most likely to enroll. And the long-term cost could be in the trillions.
Medicare chief actuary Richard Foster says the situation keeps him up at night.
“I don’t generally comment on the pros or cons of policy, but that just doesn’t make sense,” Foster said during a question-and-answer session at a recent professional society meeting… “This is a situation that got no attention at all,” added Foster. “And even now, as I raise the issue with various policymakers, people are not rushing to say … we need to do something about this.”
Wait, ObamaCare is going to cost the government more than they said? You believed them? Sucker.
So, what are companies doing in response to the rising costs? Eliminating health care! You thought there was a penalty for that? Well, it turns out (as many predicted), it’s cheaper for many companies to pay the penalty than the increased cost! Though you were going to be able to keep your existing coverage, no matter what? Sucker.
Caterpillar Corp. has said it could save 70 percent on health care costs by dropping coverage and paying the penalties. AT&T’s $2.4 billion in annual health care expenses would drop to just $600 million using the same strategy.
In fact, Credit Suisse has told clients that forcing employers to drop coverage is “exactly what was intended” by the law. This was the main goal of many advocates of ObamaCare—to completely replace private insurance with a single-payer government healthcare system.
Even Obama’s former budget director, Peter Orszag, is admitting the obvious. Previously used by the White House to sell ObamaCare in the media as a net cost saver, Orszag is now admitting that ObamaCare could create a “spiral effect” of employees losing their private care and the true costs quickly become “unsustainable.”
In the latest issue of Foreign Affairs magazine, Orszag says that employers “could start dropping high-risk workers by designing health plans that encourage these employees to purchase insurance on the exchanges. This is a legitimate concern. If employers altered their plans, this could create a spiral effect, in which those employees buying insurance on the exchanges would be disproportionately high-risk patients, raising premiums and defeating the purpose of risk sharing. The cost to the federal government of subsidizing coverage in the exchanges, in turn, could become unsustainable.”
And there’s more news about small business cutting their coverage as well:
Among the most striking of NFIB’s findings was the number of employer health insurance plans that have been or will be eliminated since PPACA’s passage — 14 percent, or one in eight. Eliminating employer health care plans “is the first major consequence of PPACA that small-business owners likely feel,” the report said.
“We are not aware of any data suggesting we’ve had turnover anywhere near this level in the past,” said William J. Dennis, a senior research fellow at the National Federation for Independent Business.
But wait…there’s more.
From the Washington Times, just this week.
Despite President Obama’s promises to rein in health care costs as part of his reform bill, health spending nationwide is expected to rise more than if the sweeping legislation had never become law.
Total spending is projected to grow annually by 5.8 percent under Mr. Obama’s Affordable Care Act, according to a 10-year forecast by the Centers for Medicare and Medicaid Services released Thursday. Without the ACA, spending would grow at a slightly slower rate of 5.7 percent annually.
Sure, 5.7% to 5.8% isn’t a big change. But since we were told it was going to bend the cost curve down, any increase at all is a big deal. You really thought it was going to bend the cost curve down? Sucker.
And, finally, there’s this delicious report from the Heritage Foundation:
Private-sector job creation initially recovered from the recession at a normal rate, leading to predictions last year of a “Recovery Summer.” Since April 2010, however, net private-sector job creation has stalled.
Why am I bringing this up in a discussion of ObamaCare? Well, what major legislative change occurred just before April, 2010? Oh yeah, that’s right…
Within two months of the passage of Obamacare, the job market stopped improving. This suggests that businesses are not exaggerating when they tell pollsters that the new health care law is holding back hiring. The law significantly raises business costs and creates considerable uncertainty about the future. To encourage hiring, Congress should repeal Obamacare.
Pretty sure then Speaker of the House Nancy Pelosi (D-CA-08) told us that ObamaCare would create jobs. Let me go check. Yep, I was right.
Four million jobs will be created by the legislation when it is fully in effect. ... [T]his year, the biggest growth in jobs in our economy has been in health care jobs.
You believed her? Hahahahahaha! Sucker.
Here’s a nice pretty graph showing it quite clearly.
If you have read all my P.T. Barnum posts and you still don’t believe that ObamaCare is the biggest crap sandwich ever foisted on the American public, then please go back and reread. Either you missed something, or you’re incapable of coherent thought.
If you don’t believe that and you haven’t read them, please do so.
President Lyndon Johnson (D-USA) signs the Social Security Act of 1965, which establishes Medicare & Medicaid, thus creating higher and higher taxes for a generation, and the debt crisis of 2011. What we see today are the natural conclusions of enacting President Johnson’s Great Society.
President Dwight D. Eisenhower (R-USA) signs Public Law 84-851 which authorizes In God We Trust as the United States national motto. This was mostly a formality as it had been used on U.S. coins since 1864.
[T]he United States Court of Appeals for the Ninth Circuit ruled: "It is quite obvious that the national motto and the slogan on coinage and currency 'In God We Trust' has nothing whatsoever to do with the establishment of religion. Its use is of patriotic or ceremonial character and bears no true resemblance to a governmental sponsorship of a religious exercise." The decision was cited in Elk Grove Unified School District v. Newdow, a 2004 case on thePledge of Allegiance. In Lynch v. Donnelly (1984), the Supreme Court upheld the motto because it has "lost through rote repetition any significant religious content". So-called acts of "ceremonial deism" have supposedly lost their "history, character, and context". In Zorach v. Clauson, the Supreme Court has also held that the nation's "institutions presuppose a Supreme Being" and that government recognition of God does not constitute the establishment of such a state church as the Constitution's authors intended to prohibit.
I have a large backlog of blog topics due to this ongoing debt ceiling issue. I’m going to try to ignore the debt for a little bit and catch up on some things that you may have missed recently, if you were, you know, out having a life or something.
First on deck, AGW suffers another severe blow this week. Two of them as a matter of fact.
Well, let’s just take a look. From the first, via Forbes.
NASA satellite data from the years 2000 through 2011 show the Earth's atmosphere is allowing far more heat to be released into space than alarmist computer models have predicted, reports a new study in the peer-reviewed science journal Remote Sensing. The study indicates far less future global warming will occur than United Nations computer models have predicted, and supports prior studies indicating increases in atmospheric carbon dioxide trap far less heat than alarmists have claimed.
And that’s just the first paragraph of the article. It gets better.
The new NASA Terra satellite data are consistent with long-term NOAA and NASA data indicating atmospheric humidity and cirrus clouds are not increasing in the manner predicted by alarmist computer models. The Terra satellite data also support data collected by NASA's ERBS satellite showing far more longwave radiation (and thus, heat) escaped into space between 1985 and 1999 than alarmist computer models had predicted. Together, the NASA ERBS and Terra satellite data show that for 25 years and counting, carbon dioxide emissions have directly and indirectly trapped far less heat than alarmist computer models have predicted.
In short, the central premise of alarmist global warming theory is that carbon dioxide emissions should be directly and indirectly trapping a certain amount of heat in the earth's atmosphere and preventing it from escaping into space. Real-world measurements, however, show far less heat is being trapped in the earth's atmosphere than the alarmist computer models predict, and far more heat is escaping into space than the alarmist computer models predict.
When objective NASA satellite data, reported in a peer-reviewed scientific journal, show a "huge discrepancy" between alarmist climate models and real-world facts, climate scientists, the media and our elected officials would be wise to take notice. Whether or not they do so will tell us a great deal about how honest the purveyors of global warming alarmism truly are.
Emphasis from the preceding paragraph is mine. I’ll get back to that in a moment.
And from the actual press release for the report:
“The satellite observations suggest there is much more energy lost to space during and after warming than the climate models show,” Spencer said. “There is a huge discrepancy between the data and the forecasts that is especially big over the oceans.”
Not only does the atmosphere release more energy than previously thought, it starts releasing it earlier in a warming cycle. The models forecast that the climate should continue to absorb solar energy until a warming event peaks. Instead, the satellite data shows the climate system starting to shed energy more than three months before the typical warming event reaches its peak.
“At the peak, satellites show energy being lost while climate models show energy still being gained,” Spencer said.
This is the first time scientists have looked at radiative balances during the months before and after these transient temperature peaks.
But that’s not all that came out this week. The polar bears have been saved!
From the AP:
Just five years ago, Charles Monnett was one of the scientists whose observation that several polar bears had drowned in the Arctic Ocean helped galvanize the global warming movement.
Now, the wildlife biologist is on administrative leave and facing accusations of scientific misconduct.
In case you haven’t been following the ups and downs of the AGW hysteria fiasco, let me sum up.
The question is no longer whether the AGW alarmists and politicians are lying about their “science”. That has proven to be unequivocally true. The question now is why.
Hint: Like watermelons, they’re green on the outside, but red on the inside.
Wow, once again I’m forced to support Speaker Boehner (R-OH-08). I guess I’m ready for my RINO card.
There’s this from Dr. Krauthammer:
Consider the Boehner Plan for debt reduction. The Heritage Foundation’s advocacy arm calls it “regrettably insufficient.” Of course it is. That’s what happens when you control only half a branch. But the plan’s achievements are significant. It is all cuts, no taxes. It establishes the precedent that debt-ceiling increases must be accompanied by equal spending cuts. And it provides half a year to both negotiate more fundamental reform (tax and entitlement) and keep the issue of debt reduction constantly in the public eye.
I am somewhat biased about the Boehner Plan because for weeks I’ve been arguing (in this column and elsewhere) for precisely such a solution: a two-stage debt-ceiling hike consisting of a half-year extension with dollar-for-dollar spending cuts, followed by intensive negotiations on entitlement and tax reform. It’s clean. It’s understandable. It’s veto-proof. (Obama won’t dare.) The Republican House should have passed it weeks ago.
The House Republicans are facing off against a Democratic Senate and the most left wing president in American history on a daily basis. They are not only fighting them at a huge disadvantage and with a media that has an evident bias, but they are actually winning by any standard. Are they perfect or have they accomplished everything I want them too? Of course not. However, they have accomplished a lot and for that they deserve praise and not scorn. Republicans like Paul Ryan have taken great political risks in order to do what is right and put the country first and it’s time we start rewarding them for it. The grass roots movements are vital to defining and expanding conservatism, but the Republicans that are now in control in Washington (at least in the house) are our friends and not our enemies. That is not to diminish the people who are opposing the current plan, who are also doing vital work, but I for one salute Speaker Boehner, Paul Ryan, Eric Cantor, Allen West and others for fighting for our country’s future. They truly are heroes of the conservative movement.
But my reasoning is even simpler. Look, you can argue that the Speaker should’ve never introduced a new bill and stuck with Cut, Cap & Balance. I might even agree with you. There’s no doubt it’s a better bill than the current one. By orders of magnitude.
But that’s not what happened. We’re not a place where we can say “it’s no bill or this bill”. It’s “this bill or a far worse one”. Those are our two choices.
Now that the new bill has been introduced, and is up for a vote, the Speaker needs our support. If he loses on this one, the Tea Party wing of the party will have cut him off at the knees. He becomes a mute voice at the negotiation table. He’s done incredibly well at negotiation so far. Until today I would’ve said it’s a guarantee that we’re going to get a small debt ceiling increase (which is what we need) with no tax increases, and a decent amount of cuts to baseline funding. Those are HUGE wins. And they’re good PR wins as well. It’s definitely not what the President has wanted.
Now, I’m not so sure. No matter what we end up with, it’s almost certainly going to be to the left of Boehner’s bill, because that bill is going nowhere in the Senate. But if it fails, the debate moves even farther to the left. Senate Majority Leader Harry Reid (D-NV) and President Barack Obama (D-USA) will know that Boehner has lost support of the Tea Party wing of the party. Thus any bill that passes in the House is going to need significant Democrat support. That means the bill moves even further to the left.
I fail to see how that’s a good thing. In my opinion, Congressmen voting no on the Speaker’s bill are snatching defeat from the jaws of victory.
That’s my opinion. If you don’t share it, that’s fine. I understand wanting to stick to principles. Normally I’m right there with you. Read back in this blog, if you think I’m lying. I respect your opinion if you disagree. Please respect mine as well.
9/11 hijacker Marwan Alshehhi pays for some flying time at Kemper Aviation in Lantana, FL.
According to a document used as evidence at the Zacarias Moussaoui trial, on the first day, “Alshehhi could not answer basic questions on the written aviation test, which he needed an instructor’s assistance to complete.” Alshehhi returns on July 30 and August 8, when he rents a plane for approximately one hour.
This is not the time for political fun and games. This is the time for a new beginning. I ask you now to put aside any feelings of frustration or helplessness about our political institutions and join me in this dramatic but responsible plan to reduce the enormous burden of Federal taxation on you and your family.
President Ronald Reagan (R-USA), address to the nation.
The National Security Act of 1947 is signed into law, thus creating the CIA, the Air Force, the National Security Council, and the Joint Chiefs. The Department of Defense will be created two years later in an amendment to this Act.
The Act merged the Department of War and the Department of the Navy into the National Military Establishment, headed by the Secretary of Defense. It was also responsible for the creation of a Department of the Air Force separate from the existing Army Air Forces. Initially, each of the three service secretaries maintained quasi-cabinet status, but the act was amended on August 10, 1949, to assure their subordination to the Secretary of Defense. At the same time, the NME was renamed as the Department of Defense. The purpose was to unify the Army, Navy, and what was soon to become the Air Force into a federated structure.
Aside from the military reorganization, the act established the National Security Council, a central place of coordination for national security policy in the executive branch, and the Central Intelligence Agency, the U.S.'s first peacetime intelligence agency. The function of the council was to advise the president on domestic, foreign, and military policies so that they may cooperate more tightly and efficiently. Departments in the government were encouraged to voice their opinions to the council in order to make a more sound decision
Louise Joy Brown, the first baby conceived via in vitro fertilization (IVF) is born. The press calls her the “test tube baby”. This is of personal significance to me, as I have one IVF daughter, and a second conceived through a similar method.
The Catholic Church is vehemently against this practice, and while I understand the arguments, this is one area where my church and I are in complete disagreement. I have discussed this at length with my priest, and while he can not give an opinion contrary to church doctrine, I believe he understands and has no personal issues with my position. That’s good enough for me.
Happy birthday, Louise!
Chicago records its highest temperature ever, 109°F (44°C) as does Milwaukee, Wisconsin, 105 °F (41 °C). Both of these records still stand. Two years later, in July of 1936, Chicago would record temperatures of 100 °F (38 °C) or higher on 12 consecutive days.
Somehow no one thought this was anthropogenic global warming at the time. They thought it was—summer.
Silverstein Properties (headed by Larry Silverstein, left) takes out a 99 year lease on the World Trade Center, purchasing control from the New York Port Authority. It is the first time that control of the WTC has changed hands since it was built in 1966.
Channeling my inner Douglas Adams, this is part 4 in my 3 part series on the debt.
You can find the previous 3 parts at the links below:
Most of this post has appeared in various places elsewhere in this blog. Think of this one as a summary.
We have raised our debt limit over 100 times since it’s inception. There have been a few battles over raising it, but nothing like what we’re seeing this year. And we’ve never had the credit agencies breathing down our neck like this before. So, why are we hearing so much about credit agencies lowering our credit rating? What’s got them in a tizzy?
There are two things that make this time different.
The first is our current debt level. As I type this, it is 98.14% of our GDP, according to USDebtClock.Org. That’s the 12th highest in the world. It’s also the largest in the world, in terms of actual dollars. In fact, it’s almost 25% of the world GDP.
98% is exceptionally bad. As I’m sure you’ve heard, it’s only been that high once before in the country’s history, and that was right after WWII. However, that number was so large because of our enormous investment in defense during WWII. Once we cut defense spending to reasonable levels, it was not that hard to bring our debt levels down to manageable levels. But as the figure below shows (h/t The Foundry), in terms of GDP, the defense budget now is already at near historic lows. We won’t be able to handle the debt crisis merely by cutting defense.
But the problem isn’t just where we are now. It’s the projected growth in our spending, particularly from entitlements and interest on the debt, that has the credit agencies so worried. I’ve shown this graph before:
The only way we can keep the size of our interest payments down is to keep the size of our debt down. So, really the problem is entitlements spending vs. revenue. We’re going to have to bring down costs or “increase revenue” as you’ve heard. Actually, the problem isn’t an “or”. We have to do both, as I will show. Now, I define “increase revenue” correctly. When I say that, I mean that the IRS needs to bring in more revenue. There are a number of ways that can happen, but the easiest way is to grow the economy. Think of it as fishing. You just need to cast a bigger net. The liberal plan is to make the holes in the net smaller or to keep casting the net over and over in the same place (eliminate loopholes, raise taxes on those already paying). Both of those might work, but they aren’t going to work as well as using a bigger net.
The reason that Speaker of the House John Boehner (R-OH-08) lost his patience with President Barack Obama (D-USA) is over this very issue. The Democrats and the President have put various long term budget frameworks out for review over the last few months. I’ve reviewed some of them earlier. The others are more of the same. But none of them do much in the way of entitlement reform. This is the same problem with the Gang of Six plan that was released this week. And, if we’re to believe the rumors and leaks from the debt talks, that’s been true of every idea that’s come from the White House. All of the plans we’ve heard primarily try to solve our long term issues from increasing tax revenue.
So, the second reason the credit agencies are breathing down our neck is the number 20.9.
That number represents the highest tax revenue as percentage of GDP that we’ve ever had. In fact, William Kurt Hauser, economist, suggests that no matter what we do to the tax code, the best we can really do is 19.5% over any kind of extended period (actually, the average from 1946-2007 was even lower, 17.9%). This is known as Hauser’s law. The obvious effect of this is that if you know you’re going to end up with about 18-19% GDP for tax revenue, and you want more revenue, you’re going to have to increase GDP. This is basic and simple math. Something apparently beyond the capability of most liberals.
But anyway, the best ever was 20.9%.
I admit, I’m not totally sold on Hauser’s law. I believe that it might be possible to have tax revenues exceed 21% of GDP. In fact, it seems likely that one way to get there would be to continue to shrink GDP. That would not be a desirable way, however.
Every single plan suggested by the Democrats or left leaning think tank that I have seen has revenue goals exceeding 23%. From now on. Some exceed 24%. I’ve seen one that was very close to 25% for the majority of its lifecycle.
So, here’s the thing. I’m not stating that it’s impossible to exceed 20.9% (many do, in fact, say that, but I’m willing to keep an open mind). But I am stating unequivocally that it’s insane to expect exceed 20.9% for any kind of extended period, when we never have.
The credit agencies aren’t stupid. They see our debt forecasts. They see the revenue forecasts. They know Hauser’s law, and they know that it’s always been true. They know the revenue forecasts are wrong. They know the debt is going to be worse than forecast.
Any plan from our government that projects revenues at greater than 20.9% (and probably even a good 2 points less than that) is going to be summarily rejected by Moody’s and S&P.
And even growing the economy isn’t good enough. Here’s another chart from The Heritage Foundation:
It shows that by 2050, all of available tax revenue will be going to pay for entitlements. This comes from the CBO, and has somewhat optimistic economic growth assumptions. The credit agencies have charts like this one too. And they know that these economic growth assumptions are optimistic. So, not only do they know we’re not likely to have tax revenues exceed 20% of GDP, they know what will happen if we don’t fix our spending when that doesn’t happen.
So, like any plan that include insanely optimistic revenue projections, any that include insanely optimistic GDP growth, or any that don’t include entitlement reform, will also be summarily dismissed by the credit agencies. All of the liberal plans suffer from at least one of these problems, usually all three.
That’s why it’s different this time. And until everyone involved understands that’s why it’s different, the odds of avoiding a credit rating downgrade don’t look good.
Ford Motor Company sells its first car, a Model A to Ernst Pfenning of Chicago Illinois.
Unlike the later Model T, you could get the Model A in any color you liked, as long as it was red.
The original Ford Model A is the first car produced by Ford Motor Company, beginning production in 1903. Ernst Pfenning of Chicago, Illinois became the first owner of a Model A on July 23, 1903. 1,750 cars were made from 1903 through 1904. The Model A was replaced by the Ford Model C during 1904 with some sales overlap.
The car came as a two-seater runabout or four-seater tonneau model with an option to add a top. The horizontal-mounted flat-2, situated at the amidships of the car, produced 8 hp (6 kW). A planetary transmission was fitted with two forward speeds and reverse, a Ford signature later seen on the Ford Model T. The car weighed 1,240 lb (562 kg) and could reach a top speed of 28 mph (45 km/h). It had a 72 inch (1.8 m) wheelbase and sold for a base price of US$750 (equivalent to $18300 today). Options included a rear tonneau with two seats and a rear door for $100, a rubber roof for $30 or a leather roof for $50.
The United States Senate stands up to a power hungry President, and votes down the Judicial Procedures Reform Bill of 1937, which would have added six more justices to the Supreme Court. President Franklin D. Roosevelt (D-USA) wanted to do this, so he could pack the court with justices sympathetic to his plans.
The Judicial Procedures Reform Bill of 1937, frequently called the court-packing plan, was a legislative initiative proposed by U.S. President Franklin Roosevelt to add more justices to the U.S. Supreme Court. Roosevelt's purpose was to obtain favorable rulings regarding New Deal legislation that had been previously ruled unconstitutional. The central and most controversial provision of the bill would have granted the President power to appoint an additional Justice to the U.S. Supreme Court, up to a maximum of six, for every sitting member over the age of 70 years and 6 months.
During Roosevelt's first term, the Supreme Court had struck down several New Deal measures intended to bolster economic recovery during the Great Depression, leading to charges from New Deal supporters that a narrow majority of the court was obstructionist and political. Since the U.S. Constitution does not limit the size of the Supreme Court, Roosevelt sought to counter this entrenched opposition to his political agenda by expanding the number of justices in order to create a pro-New Deal majority on the bench. Opponents viewed the legislation as an attempt to stack the court, leading to the name "Court-packing Plan".
Any similarities between this my bringing up this event and the events of today in the U.S. House of Representatives are entirely coincidental.
The only attack on the American mainland during World War I occurs: the Attack on Orleans. The German U-boat U-156 opens fire on the town of Orleans, MA and merchant vessels. Several boats are sunk, but there are no fatalities.
Under Richard Feldt, on the morning on July 21, 1918, SM U-156 was positioned off of Nauset Beach, located in Orleans, Massachusetts. She was armed with two torpedo tubes and 18 torpedoes as well as two 105 millimeter deck guns, with 1672 shells. U-156 then surfaced and opened fire on the town with her deck guns, then with both torpedoes and her deck guns, the 140 foot tugboat, Perth Amboy, surrounded by four wooden barges.
Men from the nearby Coast Guard station rushed up to their looking tower to see what all the commotion was about. One of them called Chatham Naval Air Station to inform them of the ongoing U-boat attack. Reuben Hopkins, a Coast Guard veteran of the engagement, reached the tower rail in time to see an enemy shell explode over the tugboat. The tug was quickly sunk and U-156 then started firing upon the barges. Escaping from the now burning Perth Amboy and barges were 32 merchant sailors and civilians, including the captain's wife and children.
Reuben Hopkins remained behind as other men went to rescue the tugboat survivors who were coming ashore in lifeboats. Soon, Curtiss HS-2L and R-9 seaplanes arrived to bomb the U-Boat but the ordnance dropped either were duds or failed to hit the target and the warplanes had to fly back to Chatham, Massachusetts to reload. That ended the engagement.
For months now, I’ve been detailing the issues with our debt problem. And explaining that it’s worse than most people are saying. In the last two posts, I showed that while the economy has had a major impact on our debt the last couple of years, the Democrats still own the problem. They can try to pretend otherwise, but the numbers don’t lie.
The previous two posts were chock full of facts. I will attempt to maintain the same evenhandedness here, but it’s true that when talking about the next steps, I’m entering the realm of speculation. Still, hopefully I’ll back up my speculation with enough supporting facts. That’s for you to decide.
There are a number of possibilities from here, so I’ll hit the significant ones one at a time.
The first is the one that the Democrats and the President keep bringing up, “default”. Unless they have come up with a new definition for the word “default”, my understanding is that means “not paying one’s creditors”. So, let’s just put that one to bed right now. The U.S. government will take in approximately $172B next month. Interest on the debt will amount to $29B. Last I checked 172 > 29. So, we’re not going to default. Anyone who says that is a danger is either dangerously misinformed, or lying. Yes, I’m talking to you, Mr. President.
However, I do think that in such a situation, the credit agencies would likely downgrade our credit rating, regardless of an actual default occurring. No, a downgrade in our credit rating is not the end of the world, but unless the downgrade is very short-lived, it makes the job of solving our problems that much harder.
Once we take the option of default off the table, then we can examine the option of doing nothing. I don’t believe that’s possible mathematically or economically. And it’s certainly not possible politically.
This study by the “Bipartisan” Policy Center does show the danger of doing nothing. First, we have to quickly and drastically pick some winners and losers. Second, no matter what winners and losers we pick, we will be victim of the natural ebb and flow of cash. If you’ve ever worked for a company that’s under fiscal constraints, you know what that’s like. Yes, you have plenty of money at the end of the month to meet all your obligations, but the problem is that the cash coming in isn’t always ahead of your obligations going out. Third, due to our shortfall in revenue discussed in the previous post in this series, we’d be forced to make some very hard choices. We simply can’t pay everyone, and we’re not even very close on the “essentials” list. As the Weekly Standard article linked above points out:
The BPC study found that the United States is likely to hit the debt limit sometime between August 2 and August 9. “It’s a 44 percent overnight cut in federal spending” if Congress hits the debt limit, Powell said. The BPC study projects there will be $172 billion in federal revenues in August and $307 billion in authorized expenditures. That means there's enough money to pay for, say, interest on the debt ($29 billion), Social Security ($49.2 billion), Medicare and Medicaid ($50 billion), active duty troop pay ($2.9 billion), veterans affairs programs ($2.9 billion).
That leaves you with about $39 billion to fund (or not fund) the following:
- Defense vendors ($31.7 billion)
- IRS refunds ($3.9 billion)
- Food stamps and welfare ($9.3 billion)
- Unemployment insurance benefits ($12.8 billion)
- Department of Education ($20.2 billion)
- Housing and Urban Development ($6.7 billion)
- Other spending, such as Departmens [sic] of Justice, Labor, Commerce, EPA, HHS ($73.6 billion)
The decision to prioritize payments would fall on the Treasury department, and Powell points out it would be chaotic picking and choosing who gets paid (in full or partially) and who doesn't.
Powell notes, however, that Congress made sure during a budget standoff in 1996 that Social Security recipients would not be affected. “In 1996, during an impasse, [Treasury Secretary] Bob Rubin gave the Congress notice that he would be unable to pay the March ’96 Social Security payment. Congress immediately—and I mean, immediately—passed a law that allowed the Treasury to borrow money specifically for that purpose and exempted that borrowing from the debt limit.” While the U.S. wouldn't default on its debt, Powell argues that failure to raise the debt ceiling could spook the credit markets and lead to higher rates. But that's a risk many Republicans are willing to take if the alternative is accepting a rotten deal.
And there’s no doubt that the stock market would not like that choice at all. There would definitely be at least a short term economic hit. I’m not sure how long it would last, but we’re teetering on the brink of a recession already. Beating up on a fragile economy is not a wise thing to do.
But the political damage is likely even worse. Jazz Shaw nails it in a piece at the Green Room @HotAir.
The spending decisions will take place under the watchful eye of the bean counters who are all on Team Obama.
What does that mean? Here’s where we get into the prognostication. While I have absolutely no way to confirm this right now, I would bet you dollars to donuts that there is a person (or, more likely, team of people) in the White House right now who are coming up with a list of bills coming due. True, some will be looking at the things that have to be paid. But more importantly, there is a list of bills that could conceivably not be paid, and those will be based on the ones that cause the greatest possible political damage. Think of it as Plan Nine from the DNC.
Yes, the Democrats will decide which bills to pay and which not to pay. And every time one doesn’t get paid, they’ll be on TV blaming the Republicans. Kiss the White House goodbye in 2013. Kiss the Senate goodbye. Maybe lose the House too, depending on how long it drags on.
So, let’s agree that we don’t want to go down that road.
Next, we have a couple proposals from the GOP that appeared in the last 10 days or so that have virtually no chance of getting a signature from President Barack Obama (D-USA), and a “proposal” from the One Himself.
The McConnell Plan
First, there’s the plan from Senate Minority Leader Mitch McConnell (R-KY), which has more holes in it than I can count. Here’s the best summary I’ve found, from Jamie Dupree:
Congress would first pass a new law that authorizes the President to approve an increase in the debt limit in three steps before the 2012 elections - currently, the Congress approves debt limit changes. President Obama would have to send up budget cuts that matched the level of debt limit increase, but it would not require their immediate approval Lawmakers could then vote on a "Resolution of Disapproval" in order to block any such increase in the debt limit. The President could then veto that "Resolution of Disapproval," if it gained a majority in both houses of Congress Congress would then need a two-thirds supermajority to override that veto, or the debt limit increase would automatically occur. The plan would allow for a debt limit increase of between $700-900 billion in three distinct requests by the President
Response to this from the right has been mostly negative, but here’s a contrarian view from The American Spectator:
On the contrary, he is giving Obama the rope necessary on which to hang his presidency. Just because Obama could be given the authority to thrice raise the debt ceiling over the next twelve months doesn't mean he actually has to do so. But McConnell knows full well that Obama cannot help himself and has never met a government program he thought unworthy of borrowing more money to finance. McConnell is banking that Obama will raise the debt ceiling three times over the next year. And if Obama does so, it will ensure that the President's irresponsible fiscal policy remains in the spotlight through next year's presidential election and all the while Republicans remain free to object to his ways and means.
Or let me put it this way. If the cost of giving Obama more power today results in Obama not having any power eighteen months from now, then wouldn’t it be a price worth paying? Let’s give him the rope.
I understand this viewpoint, and I agree with the bolded section, but I’m not sure that’s how it would play out. Even if I did, there’s a bigger problem. As I keep hammering home, the credit agencies are not just concerned about our debt ceiling, but also about our rising level of debt. If we don’t at least try to address the debt issue itself, the credit agencies will give us a downgrade. Now, it’s true that in such a scenario, the President would have to take all the blame, and I don’t see how his Presidency could survive, but that’s not a path I’m willing to follow. It’s possible that I’m being too pessimistic here. But I think that if this is the scenario we end up with, next year is going to be a bumpy one.
The President’s “Plan”
The next option to address is the President’s plan. I find myself in the position of the CBO, in that I’m trying to score a speech. While the President has given 4 press conferences over this during the last few weeks, he’s been remarkably non-specific about his ideas (actually, that’s not remarkable at all—he did the same thing during the healthcare debate). However, given what I’ve been able to pick up from leaks and from House Speaker Boehner’s (R-OH-08) remarks, the President’s “plan” is heavy on tax increases and while it may have some budget cuts, they’re pushed as far back in the 10 year plan as he can get them. In fact, that’s apparently one of the reason for McConnell’s plan. He asked how much there was in cuts for next year under the President’s plan and got the response $2 billion. It was then he determined that the President is still not serious about his issue and decided we needed a fall back plan.
Anyway, the prospects of the President’s “plan” appear dim. I’m not sure it would even satisfy the credit agencies, and certainly could not pass the House without major changes. Speaker Boehner has been adamant that there will be no new taxes in any bill passed by the House. He may be willing to give a little on loopholes, deductions, and credits, depending on what he gets in exchange for them. However, he may even have trouble selling that one to the new House freshman and to the Tea Party base. With the cuts pushed back so far, it’s easy to believe they won’t even happen, in any event, and as I have said repeatedly, it is impossible to get out of this situation with only tax increases. Entitlement reform is a necessity.
However, we have that same problem to some degree with all the plans. Everyone is doing a ten year plan and they’re all backend loaded. But some are worse than others. The President’s appears to be the worst. I say, “appears” because I still can’t find concrete details. If I’m wrong, let me know & I’ll update the post.
Cut, Cap & Balance
The third option is the House GOP plan, “Cut, Cap, & Balance”.
- Cut – The bill provides specific numbers to limit both discretionary and mandatory spending for FY12. These numbers would drive further Congressional action this year or else force a Presidential sequester. (I explain a sequester below.) The intent of this section is to force Congress and the President to cut spending immediately.
- Cap – The bill would establish a new enforceable limit on total federal spending as a share of the economy. The new caps are designed to phase federal spending down to just below 20% of GDP by FY17 and then hold it there through the end of a 10-year budget window in FY21. Put more simply, this is a new enforceable aggregate spending cap.
- Balance – The bill would increase the debt limit by $2.4 trillion after the House and Senate have passed a Balanced Budget Amendment (of a certain type).
What is a sequester?
A sequester is an automatic across-the-board proportional spending cut written into law and implemented by the Office of Management and Budget (OMB). It is usually combined with some kind of budget target and designed as a backup measure to force legislative action to hit that target.
Keith Hennessey discusses the sequester in more detail in the linked post. Sequesters are great in theory, but awfully hard to pass.
By the time you read this, CCB may have already been passed in the House. Generally, I like the bill. I think it’s exactly what the credit agencies are looking for. If it weren’t for our complete inability to get Congress to pass reasonable budgets, I’d be opposed to the balanced budget part of it. I’m more in favor of limited debt tied to GDP. There’s some data that suggests that small debt, particularly when owned by the citizenry, not foreign governments, is good for the economy and good for the citizenry. In case you haven’t noticed by now, I’m generally in favor of things that are likely to be good for the economy, and opposed to those that are not. And I tend to think about things in terms of 5-50 years out, not 6-18 months. I’m not convinced a BBA is good for the economy long term. I just think it’s likely better than the insane spending we’re doing now.
But I digress. Back to the bill.
Since it’s a budget bill, it won’t need 60 votes to make it through the Senate, merely 51. I think it could possibly get all 47 Republicans. But the White House has already signaled a veto in its future. However, despite all the bluster from Obama, he doesn’t really want to veto this bill. He knows doing so will not make him look good. He’d much rather it never reach his desk. The White House will be reminding Senate Majority Leader Harry Reid (D-NV) and the rest of the Democratic caucus of that quite emphatically.
It won’t pass the Senate. Not without major changes, i.e. the kinds of changes that would make it unlikely the House would pass the amended version. This bill hasn’t even been voted on by anyone and it’s already dead. (Note: while writing this, the bill passed the House)
This bill is going nowhere. I like it, but it’s a waste of time, and it’s the wrong time to be doing things that are wastes of time. However, it’s not symbolic. The point of this bill is not to get it passed. The point is to force the other side to do something. And, from that perspective, it’s a huge success. So, maybe it’s not a waste of time after all.
The Gang of Six
Suddenly today, the Gang of Six popped up again, with their own bill. So, that’s next on the possibility list. The Gang of Six presented it with apparently the support of 50+ Senators. Of what we’ve seen so far, this is the most likely bill to pass the Senate. Many other questions remain unanswered, though. Does it do what’s necessary to keep the credit agencies happy? Will the House pass it? Will the President sign it? Is it a good bill?
From what I can tell, the preliminary answers are maybe, maybe, maybe, and probably not. Nice definitive answers, eh?
Here’s the executive summary (h/t Kaiser Health News):
This bipartisan, comprehensive, and balanced plan consistent with the recommendations of the Bowles-Simpson fiscal commission that will:
Slash our nation’s deficits by $3.7 trillion/$3.6 trillion over ten years under CBO’s March 2011 baseline, or $4.65 trillion/$4.5 trillion under the original fiscal commission baseline (which used the President’s 2011 budget request as the starting point for discretionary spending).
Stabilize our publicly-held debt by 2014.
Reduce our publicly-held debt to roughly 70% of our economy by 2021.
Impose unprecedented budget enforcement.
A COMPREHENSIVE AND BALANCED PROPOSALThe plan uses a two-step legislative process: (1) an initial bill that makes immediate cuts; and (2) a process for a second bill to enact comprehensive reform and put our nation on a stable fiscal path. The plan would:
Immediately implement aggressive deficit reduction down payment
- Cut deficits by $500 billion.
Dramatically cut discretionary spending
- Cut nonsecurity and security discretionary spending over 10 years.
- Maintain investments that encourage economic growth, strengthen the safety net for those who truly need it, and preserve a strong national defense.
Carefully strengthen the solvency of our most important entitlement programs
- Spend health care dollars more efficiently in order to strengthen Medicare and Medicaid while maintaining the basic structure of these critical programs.
- Fully pays for SGR (the “doc fix”) over 10 years.
Fundamentally reform our tax code
- Reduce marginal income tax rates and abolish the $1.7 trillion Alternative Minimum Tax.
- Encourage greater economic growth.
- Enhance the competitiveness of American businesses and workers against global competition.
- Reform spending through the tax code to eliminate investment distortions and tax gaming.
- Change the debate about taxes in America from rate levels and carve outs to competitiveness, fairness and growth.
- If CBO scored this plan, it would find net tax relief of approximately $1.5 trillion.
Strictly tighten the government’s budget processes
- Impose spending caps and security/nonsecurity firewalls.
- Sequester accounts at the end of the year to recoup any excessive spending by Congress.
- Restrict the use of emergency designations that circumvent the spending caps.
- Prevent Congress from exceeding the caps by requiring a stand-alone resolution subject to a 67-vote threshold, in order to isolate that vote to increase the deficit from any other policy items.
Reform Social Security for future generations
- Ensure 75-year solvency of Social Security and provide for a decennial review of the program to ensure it remains solvent.
- Reform Social Security on a separate track, isolated from deficit reduction – any savings from the program must go towards solvency.
AN AGGRESSIVE PLAN THAT INVOLVES THE WHOLE CONGRESS
The plan would be implemented through an open, aggressive two-step legislative process led by committees of jurisdiction and involving the American people by:
Enacting a $500 billion down payment that would secure immediate deficit savings, while establishing a fast track process for the committees in Congress to specify further savings
- Impose statutory discretionary spending caps through 2015.
- Implement numerous budget process reforms.
- Shift to the chained-CPI (a more accurate measure of inflation) government-wide starting in 2012, along with the following specifications for Social Security: (1) exempt SSI from the shift for five years, and then phase in the shift over the next five years; and (2) provide a minimum benefit equal to 125% of the poverty line for five years. (According to CBO, the shift to chained-CPI would result in the annual adjustment growing, on average, about 0.25 percentage points per year slower than the current CPI.)
- Repeal the CLASS Act.
- Enact concrete policy changes that lock-in additional savings, including freezing Congressional pay and selling unused federal property.
- Require GAO and the Department of Labor to report to Congress on establishing a more effective unemployment insurance trigger.
Enacting a comprehensive deficit reduction plan that includes discretionary and entitlement savings as well as fundamental tax reform
- Require committees to report legislation within six months that would deliver real deficit savings in entitlement programs over 10 years as follows:
- Finance would permanently reform or replace the Medicare Sustainable Growth Rate formula ($298 billion) and fully offset the cost with health savings, would find an additional $202 billion/$85 billion in health savings, and would maintain the essential health care services that the poor and elderly rely upon.
- Armed Services would find $80 billion.
- Health, Education, Labor, and Pensions would find $70 billion.
- Homeland Security and Government Affairs would find $65 billion.
- Agriculture would find $11 billion while protecting the Supplemental Nutrition Assistance Program.
- Commerce would find $11 billion.
- Energy would find $6 billion and may propose additional policies to generate savings that would be applied to the infrastructure deficit or to reduce the deficit.
- Judiciary would find an unspecified amount through medical malpractice reform.
- Require the Finance Committee to report tax reform within six months that would deliver real deficit savings by broadening the tax base, lowering tax rates, and generating economic growth as follows:
- Simplify the tax code by reducing the number of tax expenditures and reducing individual tax rates, by establishing three tax brackets with rates of 8–12 percent, 14–22 percent, and 23–29 percent.
- Permanently repeal the $1.7 trillion Alternative Minimum Tax.
- Tax reform must be projected to stimulate economic growth, leading to increased revenue.
- Tax reform must be estimated to provide $1 trillion in additional revenue to meet plan targets and generate an additional $133 billion by 2021, without raising the federal gas tax, to ensure improved solvency for the Highway Trust Fund.
- If CBO scored this plan, it would find net tax relief of approximately $1.5 trillion.
- To the extent future Congresses find that the dynamic effects of tax reform result in additional revenue beyond these targets, this revenue must go to additional rate reductions and deficit reduction, not to new spending.
- Reform, not eliminate, tax expenditures for health, charitable giving, homeownership, and retirement, and retain support for low-income workers and families.
- Retain the Earned Income Tax Credit and the Child Tax Credit, or provide at least the same level of support for qualified beneficiaries.
- Maintain or improve the progressivity of the tax code.
- Establish a single corporate tax rate between 23 percent and 29 percent, raise as much revenue as the current corporate tax system, and move to a competitive territorial tax system.
- Require the Budget Committee to report legislation within six months that would:
- Extend discretionary caps and enforcement mechanisms through 2021.
- Ensure Congressional action to reduce the deficit if the debt-to-GDP ratio after 2015 has not stabilized.
- Review total federal health care spending starting in 2020 with a target of holding growth to GDP plus one percent per beneficiary and require action by Congress and the President if exceeded.
- Achieve program integrity savings of $26 billion in entitlement programs to curb fraud, abuse, and other wasteful spending government-wide.
- Create a working group to provide updated budget concepts for CBO and OMB.
- Provide expedited floor consideration for a consolidated bill meeting these instructions:
- If any committee fails to report entitlement program savings, impose across the board cuts to programs in that committee’s jurisdiction as necessary to achieve the required savings. To protect programs that benefit low income families, exempt from across the board cuts those most in need.
- Allow a group of at least five senators from each party to introduce a resolution in lieu of the non-reporting committee.
- If a resolution receives 60 votes on the floor, those recommendations will be added to the comprehensive bill.
- If the Senate does not agree to those recommendations, the comprehensive bill cannot come to the floor under the special procedures established in the first (down payment) bill.
- Bar substitute floor amendments that upset the revenue/spending balance or any amendments that make the deficit worse, but place no other limits on debate or the substance of amendments.
- Allow the Majority Leader and Minority Leader to limit debate and the number of amendments, or impose other substantive restrictions by agreement, so that the Leaders can manage the bill with a process that satisfies 60 Senators and the process cannot be held up by a small group on either side. If the Leaders cannot agree, the bill is considered under the regular order.
- Hold any such comprehensive bill that receives 60 votes at the desk pending consideration of the Social Security bill.
Enacting Social Security reform if the comprehensive deficit reduction plan has passed
- Consider Social Security reform, if and only if the comprehensive deficit reduction bill has already received 60 votes.
- Reform must ensure 75-year solvency of the program and provide for a decennial review to ensure it remains solvent. Any savings from the program must go towards solvency, not deficit reduction.
- If Finance fails to report Social Security reform meeting the instructions, allow a group of at least five senators from each party to introduce a resolution with recommendations that meet the committee’s instructions.
- Bar substitute amendments that worsen the solvency of Social Security.
- Combine any qualifying Social Security reform bill that receives 60 votes on final passage to the comprehensive bill at the desk before being sent to the House as a single bill.
- Vitiate the vote on the deficit-reduction bill if the Social Security reform bill does not receive 60 votes.
There’s good and bad here. It’s hard to say whether the good outweighs the bad. Which is the first bad thing about it…
This is awfully complex. Complex is not good. Complex allows people to hide things. Complex allows people to claim they’re lowering taxes while actually raising them. Complex may allow people to claim they’re addressing the debt issue while they aren’t really at all. And it’s not just complex by accident. It’s deliberately complex. In fact, complexity is mandated by the bill!
That line about an “aggressive plan that involves the whole Congress” caused at the very least, 100 Senators to get on the phone with their staffs telling them to start adding in their pet projects. This bill is going to be ugly when it’s finished.
It claims it will lower the marginal rates, lower the corporate tax, and get rid of the AMT. Those are all good things, and will spur economic growth. The summary seems to imply that tax revenue growth will come primarily from economic growth. But it doesn’t say so explicitly. And it definitely doesn’t say that it will come exclusively from economic growth.
There are also a couple phrases in the summary that make me very nervous. The first is “reform spending through the tax code”. I’ve mentioned before that I find this phrase worse than Orwellian. The second is “maintain or improve the progressivity of the tax code”. Just reading that sends shivers down my spine. The fact that it comes with no explanation of exactly what that means makes me want to go hide all my money in a coffee can in the back yard.
Worse, this plan is a two phase process. So, there will be two bills. One that makes some quick cuts. And increases the debt limit by some amount. The same amount? I don’t know. It doesn’t say. Then a second, bigger bill, some time later, that will do all the heavy lifting. Will there be another increase in the debt limit then? Or is the entire debt limit increase in the first bill? I don’t know. It doesn’t say. If it’s all in the first bill, the idea is DOA in the House. And, frankly, should be DOA in the Senate too. Still, though, to get it through the Senate, it’s going to have to have Democrat support. That means that if they can craft something together that’s not DOA in the House, there might be enough Democrat support to push it through, even with the obvious Republican defections. It might make it through the House then. But the President has threatened to veto anything that just comes with a small debt limit increase. Will he do so, knowing that this big “wonderful” bill is around the corner? I don’t know.
Furthermore, there’s nothing in this plan regarding Medicare and Medicaid reform. Let me be blunt. Without that, it’s junk. If we can’t pass something with Medicare and Medicaid reform with this White House (and we probably can’t), then our goal should be to pass something as small as we can get away with, so we can really fix things in 2013. We shouldn’t be trying for some big “grand bargain”. The only person that wins that way is Obama. The remaining 311,802,074 people in the United States lose.
So, the last unanswered question is whether this will satisfy the credit agencies. Again, the answer is that I don’t know. They killed the Greek plan precisely because it was too complex. In the Greek plan they were trying to make it so complex that no one would notice it amounted to a default. The credit agencies noticed. I worry that the same thing will happen here. We’ll craft this incredibly complex bill that does nothing to address the actual problems we have and the credit agencies will slap us in the face for it.
Still, having said all of that, of the things that I’ve discussed so far, this seems to have the best chance of getting a Presidential signature and getting the credit agencies off our back for a while. That doesn’t mean it’s a good bill or that it should be passed.
There’s one final option that should be considered. And I hit on it briefly in the last section.
Pass a small bill now
This is probably the best idea. And it had been gaining steam on the right over the last few days. Call it “calling the President’s bluff”. Frankly, CCB is targeted along these lines. But it should be even smaller than CCB. Pass a bill with targeted cuts and a matching debt limit increase that will get us through August, maybe even September. This would be fairly easy to write and would easily pass the House. Then force Reid and Obama to explain to the people why enacting that would be worse than not. They won’t be able to. They would be in an indefensible position.
There are two problems with that scenario. Maybe three. First, it might not make the credit agencies happy. I keep hammering on that, but it’s a big deal. Unfortunately, I don’t see any way to make them happy before January 20, 2013. All we can hope to do is get them to remain at their same level of unhappiness until then. Second, the Gang of Six plan torpedoed this idea. It’s going to be hard to get momentum for this stopgap plan as long as everyone thinks a “grand bargain” is a possibility. Third, it still depends upon the intelligence of Reid and Obama. They may be just stupid enough to stop it.
So, did I answer where we go next? No, not at all. Sue me. I’m feeling disgusted tonight. It seems apparent to me that there’s only one way to do the following:
And that’s to pass something that will increase the debt limit enough to get us through about the middle of 2013. Whether we do that as one bill or several, I think that should be the goal.
Political campaign specialist Mary Jo Kopechne dies in a car accident in Chappaquiddick. She was a passenger to Senator Edward Kennedy (D-MA). Kennedy escaped the vehicle, but left Kopechne behind to drown.
Next, instead of reporting the issue to the authorities, he went back to his hotel and went to sleep, before complaining to the hotel owner at 3 am of being awakened by a noisy party.
He didn’t report the incident until after the car and Kopechne’s body were discovered.
According to Ed Klein of the New York Times, later in his life, Kennedy was fond of asking people, “Have you heard any new jokes about Chappaquiddick?”
Classy guy. Lion of the Senate.
According to his own testimony, Kennedy swam across the 500-foot channel, back to Edgartown and returned to his hotel room, where he removed his clothes and collapsed on his bed. Hearing noises, he later put on dry clothes and asked someone what the time was: it was something like 2:30 a.m., the senator recalled. He testified that, as the night went on, "I almost tossed and turned and walked around that room ... I had not given up hope all night long that, by some miracle, Mary Jo would have escaped from the car."
Back at his hotel, Kennedy complained at 2:55 a.m. to the hotel owner that he had been awoken by a noisy party. By 7:30 a.m. the next morning he was talking "casually" to the winner of the previous day's sailing race, with no indication that anything was amiss. At 8 a.m., Gargan and Markham joined Kennedy at his hotel where they had a "heated conversation." According to Kennedy's testimony, the two men asked why he had not reported the accident. Kennedy responded by telling them "about my own thoughts and feelings as I swam across that channel ... that somehow when they arrived in the morning that they were going to say that Mary Jo was still alive". The three men subsequently crossed back to Chappaquiddick Island on the ferry, where Kennedy made a series of telephone calls from a pay telephone near the crossing. The telephone calls were to his friends for advice and again, he did not report the accident to authorities.
He also issued this bull**** statement.
On July 18, 1969, at approximately 11:15 p.m. in Chappaquiddick, Martha's Vineyard, Massachusetts, I was driving my car on Main Street on my way to get the ferry back to Edgartown. I was unfamiliar with the road and turned right onto Dike Road, instead of bearing hard left on Main Street. After proceeding for approximately one-half mile on Dike Road I descended a hill and came upon a narrow bridge. The car went off the side of the bridge. There was one passenger with me, one Miss Mary [Kopechne], a former secretary of my brother Sen. Robert Kennedy. The car turned over and sank into the water and landed with the roof resting on the bottom. I attempted to open the door and the window of the car but have no recollection of how I got out of the car. I came to the surface and then repeatedly dove down to the car in an attempt to see if the passenger was still in the car. I was unsuccessful in the attempt. I was exhausted and in a state of shock. I recall walking back to where my friends were eating. There was a car parked in front of the cottage and I climbed into the backseat. I then asked for someone to bring me back to Edgartown. I remember walking around for a period and then going back to my hotel room. When I fully realized what had happened this morning, I immediately contacted the police.
For his crimes, he received a two month suspended sentence.
On July 25, seven days after the incident, Kennedy pleaded guilty to a charge of leaving the scene of an accident after causing injury. Kennedy's attorneys suggested that any jail sentence should be suspended, and the prosecutors agreed to this, citing Kennedy's age, character and prior reputation. Judge James Boyle sentenced Kennedy to two months' incarceration, the statutory minimum for the offense, which he suspended. In announcing the sentence, Boyle referred to Kennedy's "unblemished record" and said that he "has already been, and will continue to be punished far beyond anything this court can impose".
Kopechne’s birthday is next week. She’d be 71.
This is part 2 in my series on the U.S. Debt. Part 1, “U.S. Debt-How We Got Here”, can be found here.
In part 1, I explored the budgets for the last 5 years, and our exploding debt during the same time. It would be reasonable to criticize that post for not taking into account the effects of the economic downturn of 2008. This post will attempt to do that. If you like, you can think of this as “How We Got Here, Part 2”.
First I’m going to examine revenue projections for 2009, 2010, and 2011. I start with the 2009 budget as it was the last one submitted before the financial crisis of September, 2008. Then I’ll look at the government cost for dealing with the financial crisis and economic meltdown. After that, we should have a good idea on how much that has impacted our debt. As before, all amounts are in billions of dollars.
2009 Budget: (2011 & 2012 based upon current projections—2011 should be pretty close, fiscal year almost over)
|Year||Projected Revenue||Actual Revenue|
|Year||Projected Revenue||Actual Revenue|
|Year||Projected Revenue||Latest Projection|
|Year||Projected Revenue||Latest Projection|
You can see the continued downward forecasts in the later budget projections. Notice that revenues have been basically flat since 2009, and yet we’re still projecting over 20% revenue growth for 2012.
In addition, looking at projected debt again, the 2009 budget projected a debt load of $11,432B at end of FY11. Our current debt projection for this FY is $15,476B, a difference of $4,044B.
We are also still projecting 2012 revenue to be over $600B less than the projection given in the 2009 budget. This shows that the economic slowdown is still hurting us quite a bit, and likely will for several years to come. In addition, for the three years from 2009-2011, we are down $2263B in projected revenue, leaving $1781B to blame on “new spending”.
That’s a lot of new spending over three years. It would be nearly $6T over ten years assuming the pace doesn’t accelerate. But that does include cost of stimulus, TARP, etc.
So, how much did all of these cost?
Well, if you believe President Barack Obama’s (D-USA) numbers, TARP has cost us basically nothing. Seriously, it’s in the tens of billions of dollars. A drop in the bucket on a budget of $3729B. According to the linked documents above, we spent $151B on TARP in 2009, and got back $110B in 2010, with a projection to get back $28B in 2011, and additional expenditures totaling less than $40B over the next 10 years.
The math gets a bit fuzzier for unemployment & welfare dollars. From 2007-2009, projected growth for that was pretty large, about 10.65% annually. Projecting that forward, gives $398B for 2010 and $441B for 2011. Actual for 2010 was $571B, and my estimate for 2011 was $641B, a difference of $373B.
The math gets even fuzzier when we talk about economic stimulus dollars. No one can really say how much has been spent. I chose to use the data on Recovery.Gov. It breaks the spending down by quarter.
|Quarter Ending||Funds Disbursed|
There’s no data available for the most recent quarter yet, but based on the previous quarters, I think it’s safe to assume that it’s less than $30B. I’ll be generous and say $30B. That means the total spent on stimulus to date is $183B. Add in my generous figure for welfare, and a generous $50B for TARP, and the total is $606B (likely significantly smaller).
That still leaves $1175B unaccounted for that we can safely call “new spending”. The calculated revenue shortfall from above was $2263. Add the $606B, and $2869B (71%) of our recent deficit woes are related to the economy.
That’s quite a bit, and it shows that the economy is definitely the driving force behind our current debt ceiling crisis. But the fact that $1175B (29%) of this is new spending over the last three years, and is not directly attributable to economy is disturbing as well. If you split that up evenly over the three years, you get $392B, or 10.5% of this year’s budget. It’s unlikely that the amount is actually evenly split over three years. It’s more likely that it’s weighted towards 2011, and I’m pretty sure I could prove that, but I think I’ve put enough math in this post already.
Let that sink in a moment. At least 10.5% of this year’s budget is new spending that was not projected in the original 2009 budget and is not related to our economic woes.
As I keep saying, this is the problem that has the credit agencies so concerned. Yes, they’re worried that we’re going to hit our debt limit without some sort of resolution, but they’re more concerned that we are going to do nothing to address our exploding debt, and in fact seem content to make the problem worse.
And that’s the subject of part 3 of this series, “Where Do We Go From Here”.
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