Showing posts with label Economic Collapse. Show all posts
Showing posts with label Economic Collapse. Show all posts

01 November, 2021

I Am Sure They Wouldn’t Be Saying This if Trump Were Still President

Washington Post Op-Ed: Don’t ‘Whine’ About Supply Chain Shortages, Empty Shelves | The Daily Wire

We call this, “protecting the Democrat President”, not “unbiased journalism”.

Across the country, Americans’ expectations of speedy service and easy access to consumer products have been crushed like a Styrofoam container in a trash compactor. Time for some new, more realistic expectations.

Fast food is less fast. A huge flotilla of container ships is stuck offshore in California, waiting to unload. Shelves normally stocked with Halloween candy this time of year are empty, as I saw the other day at a Target here in Ann Arbor, Mich.

American consumers, their expectations pampered and catered to for decades, are not accustomed to inconvenience.

No, we aren’t used to it. We’re used to living in the greatest country in the world. The greatest economic power the world has ever seen. The country that transformed the entire world in about 100 years. We’re not accustomed to socialist economic failures. And we don’t want to become accustomed to that.

Shame on you for trying to make us feel guilty about American Greatness and for trying to make uses feel we deserve less. Whose side are you on, anyway?

The Washington Post isn’t worthy of being used as a place for your dogs to $#!+.

31 October, 2021

Expect This to Accelerate. We May Be Teetering on the Brink of a Depression.

20 Million Americans Left Their Jobs Between April And August | The Daily Wire

The American economy saw 20 million job resignations in the spring and summer.

According to a Department of Labor report released on Tuesday, a record 4.3 million workers quit their jobs in August — the highest level of resignations in over 20 years. However, a summary of federal data from The Wall Street Journal reveals that August’s data continues an upward trend in employee exits[.]

Vaccination mandates will cause this to accelerate. Things are going to get worse before they get better. I thought things were supposed to be better already, not trending worse. Thanks, Joe.

I dunno. Maybe we need those illegal aliens after all. Job openings exceed the supply of workers.

26 October, 2021

“Let Them Eat Cake!”

White House Advisor Ron Klain Thinks Inflation and Shortages Are 'High-Class' Problems – PJ Media

Sure, food costs about 30% more than it did a year ago, but that’s a high class problem. The poor and the middle class don’t need to eat.

America was poised for a V-shaped recovery with a few bumps as production increased or was reshored to the United States. The current problems result from President Biden killing our energy independence, increasing reliance on China for critical inputs, and horrible public health messaging that makes many Americans think reemerging from the pandemic shutdowns is a deadly proposition.

The so-called “high-class problem” has middle- and working-class Americans scrambling to afford the increase in ground beef and a gallon of milk. At some point, it may become more difficult to find your elderly parents’ life-saving medications as they sit on a boat or in a rail yard. Somehow, I doubt Klain will miss a steak dinner or needed medications.

They have lost touch with the common man. Actually, losing would imply that they ever had it. They’re completely out of touch and have been. This is not your father’s Democratic Party. They’re wealthy and elite and entirely self-serving.

But keep on voting for them. Get used to empty shelves, high prices, low wages, and constant divisive rhetoric.

This is Biden’s America.

25 October, 2021

America Is Running Out of Everything

America Is Choking Under an ‘Everything Shortage’ - The Atlantic

Sorry, I had to steal the title. I couldn’t improve on it.

This is the economy now. One-hour errands are now multi-hour odysseys. Next-day deliveries are becoming day-after-next deliveries. That car part you need? It’ll take an extra week, sorry. The book you were looking for? Come back in November. The baby crib you bought? Make it December. Eyeing a new home-improvement job that requires several construction workers? Haha, pray for 2022.

The U.S. economy isn’t yet experiencing a downturn akin to the 1970s period of stagflation. This is something different, and quite strange. Americans are settling into a new phase of the pandemic economy, in which GDP is growing but we’re also suffering from a dearth of a shocking array of things—test kits, car parts, semiconductors, ships, shipping containers, workers. This is the Everything Shortage.

And the Biden administration is fixated on parents at school board meetings. And Gender studies.

WTF is wrong with these people?

No. I Won’t. You Can’t Make Me Be Happy About Being in the U.S.S.R. In the 80s, No Matter How Much You Try.

CNN Preps Americans for Socialist Scarcity – PJ Media

CNN is already laying the groundwork for this, preparing Americans for one of the foremost hallmarks of socialist regimes the world over: empty supermarket shelves. On Sunday, the Leftist propaganda organ masquerading as a news source published a lengthy article entitled “Grocery store shelves aren’t going back to normal this year.” Or, from the looks of things, after that, unless the Leftists in the American government are thrown out of office in 2022 and 2024 and decisively repudiated.

CNN was up front about disappointing Americans who are still optimistic that some day this will all end: “If you hoped grocery stores this fall and winter would look like they did in the Before Times, with limitless options stretching out before you in the snack, drink, candy and frozen foods aisles, get ready for some disappointing news.”

No. We won’t accept that. If this is going to continue to be a problem, we need to invest the time and resources to fix it. Empty shelves and high inflation are not tolerable. If the people in charge won’t fix it, then they need to be replaced by ones who will.

Welcome to Biden’s America. You voted for this.

And Then the Ferryman Said, ”There Is Trouble Ahead”

4 Million Workers Quit Their Jobs in August – PJ Media

According to the Labor Department, 4.3 million workers quit their jobs in August. That represents almost 3 percent of the entire U.S. labor force and is the largest number of workers quitting their jobs in one month in history.

Nearly 900,000 of those workers were employed in the restaurant industry. Another 720,000 were employed in retail, 700,000 in business services, and 534,000 in health care.

While the data do not reveal the reasons why so many workers quit their jobs in August, it’s assumed by economists that workers are less willing to endure inconvenient hours, low compensation, or bad conditions because they know there are ample opportunities elsewhere.

Working conditions. Being forced to wear masks. Being forced to be vaccinated. Fear of being exposed to the virus because the government and the media have made us all terrified of going outdoors.

24 October, 2021

And the Hits Just Keep On Coming

Brace yourself for a mass exodus of employees (restaurantbusinessonline.com)

Restaurants struggling to hold onto their employees are about to hit by a major setback, according to new research.

A survey of 13,659 wage earners by the online job marketplace Joblist revealed that 58% of restaurant and hotel employees intend to quit their jobs by the end of the year, stoking what the researchers have dubbed The Great Resignation.

If the pattern set by earlier quitters persists, a fourth of the workers will leave the hospitality industry for good.

The employees who intend to bail are in addition to the 16% of industry respondents who indicated they’re already no longer working.

Well, we should all eat at home more anyway, I guess. Safer, and healthier. And cheaper.

18 October, 2021

This Doesn’t Sound Like Good News

Supply Chain Disruption Update for September 28, 2021 « Lawrence Person's BattleSwarm Blog

You have to work really hard to completely wreck the worldwide economy. The Democrats are working really really hard.

You voted for this.

04 February, 2021

The China Virus is an Economic Disaster

American Airlines to send staff furlough notices again with travel demand low (cnbc.com)

13,000? And they’ve already cut a bunch.

We have to open up the economy again. I’m not blind to the health issues.

But we have to get the economy back on its feet. This could turn into a decade long depression. Or worse.

I sure hope President Joe Biden (D-USA) or someone on his team has a good plan for this. What we need in the White House right now is a businessman. Someone who understands what it takes to get businesses moving.

Oh yeah. We had one of those.

#IToldYouSo

23 May, 2012

CBO Says We’re Between a Rock And a Hard Place

Interesting report released yesterday by the CBO. While it still depends heavily upon the static analysis that I’ve criticized so often in the past, it does still show the hard choices we’re going to have to make in the very near future.

In short, the report says that if the Bush tax cuts expire on January 1, then we will have a short recession in 2013. I think they’re optimistic about the length of the recession, especially taking into consideration external factors such as the economic crisis in Europe, but it’s not a pretty picture regardless.

Under those fiscal conditions, which will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects—with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half. Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.

However, the CBO says that if the Bush tax cuts are extended, then GDP growth for next year will be around 4.4%. That’s extremely optimistic, considering the current state of the economy and the pace of the “recovery” we’ve had so far. I merely present it as a data point from which to judge the rest of their projections.

Unfortunately, extending the Bush tax cuts is not all sunshine and rainbows, according to the CBO. Since they believe that such an occurrence will limit tax revenue, they see this as a problem down the road. I can’t say it any better than the CBO did, but I will bold some key points:

If all current policies were extended for a prolonged period, federal debt held by the public—currently about 70 percent of GDP, its highest mark since 1950—would continue to rise much faster than GDP.

Such a path for federal debt could not be sustained indefinitely, and policy changes would be required at some point. The more that debt increased before policies were changed, the greater would be the negative consequences—for the nation’s future output and income, for the burden imposed by interest payments on the federal debt, for policymakers’ ability to use tax and spending policies to respond to unexpected challenges, and for the likelihood of a sudden fiscal crisis. And the longer the necessary adjustments in policies were delayed, the more uncertain individuals and businesses would be about future government policies, and the more drastic the ultimate changes in policy would need to be.

The CBO is going to keep hammering this home (and so will I), until someone other than Congressman Paul Ryan (R-WI-01) gets it. The economic path President Barack Obama (D-USA) has put us on leads to financial ruin. And we are very far down the path. Every day we delay doing something about it a) makes it harder to solve, and b) makes the required solutions more drastic.

Now, the CBO thinks that we can avoid this financial ruin by raising taxes. But, unless we can raise taxes to 30% of GDP without destroying the economy (we can’t), then the CBO is wrong. We may need to raise taxes. But we absolutely need to lower spending. And, until we commit to doing the latter, there’s no point in even considering the former.

One final point: politicians, regardless of party, who are ignoring this problem or pretending it doesn’t exist are endangering the future of America. These people must be stopped. Quickly. This is what the elections this November are all about. It’s very simple. You can either vote for America, or against it. The time to choose is now.

23 April, 2012

The Final Countdown In Europe

As you know, I’ve been pessimistic about the Eurozone for more than a year. I’ve been telling you for that long that a Greece collapse and default were inevitable (I was right). The only questions were whether the rest of the Euro leaders could come up with a default plan for Greece that would a) be acceptable to the creditors, and b) provide a soft enough landing for Greece that would avoid an overall Eurozone collapse.

Those questions still remain unanswered, but things do look a bit better than they did 6 months ago.

The second problem for the Eurozone has always been that Greece was only one part of the problem. I’ve used this chart before, but it demonstrates the problems very well. (Click for full-size)

I said this the last time I used this pic:

When Greece falls (yes, I said “when”, not “if”), the effects will be felt all over Europe. It’s hard to see how some of the teetering economies there will be able to survive. Spain in particular is very weak, perhaps the weakest card on the table. One of the many problems is that everyone has been financing everyone else’s debt, like paying off one credit card with another. Eventually that stops working and the debt comes due. That time is now for Europe and the United States.

Spain is still very weak. And Spain is going to follow Greece’s course. Some bad news out of Spain this weekend:

Why the bad headlines? Put bluntly, things are accelerating in the Eurozone now. If we’re still talking about an impending or probable Spanish collapse three months from now, it will be a minor miracle. We’re not months away, but weeks, possibly days.

From Zerohedge:

Spain is about to enter a full-scale Crisis.

A few facts about Spain:

•    Total Spanish banking loans are equal to 170% of Spanish GDP.

•    Troubled loans at Spanish Banks just hit an 18-year high.

•    Spanish Banks are drawing a record €316.3 billion from the ECB

      (up from €169.2 billion in February).

[…]

Spain is telling us point blank that disaster is looming.

With that in mind, I believe we have at most a month before Spain drags down the entire EU. The Spanish economy and banking system are too large to be bailed out. The IMF and ECB know this.

Moreover, worldwide banking exposure to Spain is well over €1 TRILLION. What impact do you think that might have on the EU which has an entire banking system that is leveraged at 26 to 1 (Lehman Brothers was leveraged at 30 to 1 when it collapsed)?

The Europeans have done a decent job so far of containing the Greek crisis. This one will not be able to be contained (and if you think that Greece had nothing at all to do with what’s happening in Spain, you’re fooling yourself). Spain’s economy is too big, and the rest of Europe has their own problems.

More European news from this weekend:

The first line is bad news because Germany has been the bright spot in the European economy of late. If it falters, there’s no one else to pick up the slack. The last is bad news because Sarkozy and Merkel have essentially been the power brokers behind staving off the Eurozone collapse. If Sarkozy is replaced by Hollande (and he will be…the odds look very long for Sarkozy right now), France and Germany will not be on the same page in this crisis. If they aren’t on the same page, it’s going to get much worse before it gets better.

And if you think that the Eurozone can go into recession without having a significant negative impact on the American economy, it’s time to put down the hash pipe.

UPDATE: Just because Greece may have a soft landing, don’t think everything there is sunshine and rainbows (from ZeroHedge): It’s official & As I Foretold Years Ago, Greece Is Now In a True Depression. Also from ZeroHedge, there’s this today regarding the Eurozone: “I Do Not Believe, Any Longer, That The Catastrophe Can Be Avoided”.

Pleasant, huh?

23 March, 2012

Path to Prosperity 2012 Version

Congressman Paul Ryan (R-WI-01) released this year's version of his Path to Prosperity this week. I give him credit for it, but it's really the work of the House Budget Committee, which he chairs. This will be the starting point for the 2013 budget prepared by the House of Representatives. The Senate is required to prepare their own budget, but they won't. The Senate Majority Leader is a spineless, lying, sniveling coward, who knows that a budget prepared by Democrats would destroy their party.

But, I digress.

This year's version shares quite a bit with last year's version. It greatly simplifies the tax code, and cuts the corporate tax rate to 25% (which is still 25% too high, sadly--but at least it's identical to the top marginal rate). And, based upon CBO's conservative growth estimates, it balances the budget around 2040. Which is far too slow, but I'll get back to that later. Obviously, it also assumes pretty much a complete repeal of ObamaCare.

The major differences lie in two areas: Medicare & Medicaid, and dealing with the sequester. The Medicare/Medicaid section is quite a bit different. Not sure if it's better or worse, but different. Ryan clearly understands the heat he & the Republicans took on this issue last year and is trying to address it in a more palatable way. This part is the same as what was released last year and is commonly called the Wyden-Ryan plan for Medicare, co-authored with Senator Ron Wyden (D-OR).

The heart of the Wyden-Ryan plan is to use competitive bidding to allow private insurers to compete with traditional, 1965-vintage fee-for-service Medicare. If you want to learn more about competitive bidding, see this piece I wrote about Mitt Romney’s proposal for Medicare reform. If that doesn’t quench your thirst, you can read the definitive book on competitive bidding:Bring Market Prices to Medicare, by Robert Coulam, Roger Feldman, and Bryan Dowd.

The basic idea behind competitive bidding is that, say, on a county-by-county basis, you let private plans and traditional Medicare offer plans with the same actuarial value compete, to see who can offer the same package of benefits the most efficiently. Each plan in a given county will name a price for which they are willing to offer these services, and seniors are free to pick whichever plan they want. However, the government will only subsidize an amount equal to the bid proposed by the second-cheapest plan. If you want a more expensive plan, you have to pay the difference yourself.

I have some concerns with this, like what happens when private insurers can't compete with an unfunded government plan, but overall, at least Ryan can't be accused of pushing grandma off a cliff. Also, this clearly is an arrow to the heart of IPAB ("death panels"), one of the most offensive parts of ObamaCare.

As for Medicaid, this section appears to be unworkable to me. Funds are fixed based upon an inflation and population index. That assumes that healthcare services remain static. Generally, not only have healthcare services increased in price, but also in quantity. You're offered a lot more healthcare choices today than you were 50 years ago. In other words, there are more opportunities for you to spend your hard earned dollars on healthcare related costs. This is one of the reasons programs like Medicare and Medicaid always expand beyond expectations. It doesn't seem like to me that the Ryan plan would deal with that, leaving further Medicaid burdens on the states. Maybe that's ok. But I know it'll be a criticism from the left.

Finally, the other significant change in the Ryan plan this year is dealing with the sequester. From the actual doc:

Reprioritizing sequester savings to protect the nation’s security:  The defense budget is slated to be cut by $55 billion, or 10 percent, in January of 2013 through the sequester mechanism enacted as part of the Budget Control Act of 2011. This reduction would be on top of the $487 billion in cuts over ten years proposed in President Obama’s budget. This budget eliminates these additional cuts in the defense budget by replacing them with other spending reductions.  Spending restraint is critical, and defense spending needs to be executed with effectiveness and accountability. But government should take care to ensure that spending is prioritized according to the nation’s needs, not treated indiscriminately when it comes to making cuts. The nation has no higher priority than safeguarding the safety and liberty of its citizens from threats at home and abroad.

As an aside, Ryan points out that the entire $400B of "savings" from President Obama's (D-USA) plan comes from shredding the military budget (emphasis mine).

Yet,  the defining characteristic of the President’s new defense posture is a reduction in the administration’s own defense plan from last year, bringing the total reduction to $487 billion over the next ten years. This number stands out as significant for several reasons. In the President’s latest budget proposal, total spending increases by $1.5 trillion and taxes increase by $1.9 trillion, for a total of around $400 billion of deficit reduction over ten years. A clear‐eyed look at the numbers reveals that American taxpayers and the Department of Defense are being asked to bear the entire burden of deficit reduction under the President’s budget.

Overall, as I said last year, the Ryan plan is a good start. But it still has areas that concern me. In no particular order:

  1. There's no way to bind future Congresses to his plan. So, really, any budgetary saving after FY2013 must be taken with a grain of salt. However, with our baseline budgeting, it would establish the "baseline". So, future Congresses would have to explain why their future budgets differ from the baseline. For once, baseline budgeting could play in our favor. Maybe.
  2. Spending vs. GDP (based on CBO forecasts) is still too high. It's still over 20% GDP through 2030. That is unacceptable. The President's "plan" never drops below 25% GDP and is nearly 40% GDP in 2050. As I have mentioned numerous times in the past, the President is ignoring our impending financial crisis. The best you can say about his plan is that it may kick the can down the road a bit. Let me repeat this for what seems like the thousandth time. Our impending financial crisis is real, huge, and unavoidable. And the longer we wait to deal with it, the worse it's going to be. We can do something now and maybe have a soft landing, that won't be too terrible. Or we can destroy the economy for a generation or more. The President has chosen the latter. That last statement is not hyperbole. It's not even opinion. It's demonstrable fact..
  3. It takes too long to balance the budget (based on CBO forecasts). The budget isn't balanced until 2040. That is also unacceptable. And unrealistic. And disappointing. But it shows the depth of the 2008 financial crisis and how much worse the current White House occupant has made things. It may take decades to undo the damage that he has done to America.
  4. Finally, a minor quibble, but I don't think Path to Prosperity is a good name for the document. It's truthful, but not a powerful enough statement. It should be called. Path From the Brink or something. Perhaps even Saving America From Bankruptcy.

Ok, that's the bad news. There's some good news. All of the economic projections are based on low growth estimates from the CBO. That includes the spending vs. GDP projection and the deficit projections. Ryan has released a supplemental document called "The Budgetary Impact of The Path to Prosperity Under Alternative Growth Scenarios". The tax reform and budgetary reform outlined in the plan should act as a giant shot in the arm to the economy. Also, moving towards deficit and debt reduction will make investors less skittish and increase economic investment, which will also boost the economy. Finally, corporations with profits sheltered outside of the U.S. will be allowed to invest this money back in the U.S., further stimulating economic growth.

Currently, U.S. companies have an estimated $1.4 trillion parked offshore and are reluctant to repatriate those funds back home due to the significant taxes that could be incurred under the current U.S. tax system.7 A worldwide tax system essentially locks this money out of the U.S. economy, where – if it were repatriated – it could be used to fund investment, business expansion and job creation in the United States. Policymakers on both sides of the aisle have proposed a temporary repatriation tax holiday in order to give businesses an incentive to send these funds home and put them to work in the U.S. economy. A switch to a territorial tax system would give U.S. businesses a permanent incentive to do exactly that.

This three pronged economic stimulus package (and it actually really would be one), makes the CBO's low growth estimates far too limiting.

In its range of estimates, CBO found that the economy under The Path to Prosperity could be 1 percent larger in 2030, 3 percent larger in 2040 and 6 percent larger in 2050 relative to its long-term base case. By contrast, under the path implied by the extension of current tax and spending policies, the econ0my would shrink by as much as 10 percent in 2030 and 28 percent in 2040. In other words, the difference in outcomes between these two trajectories could sum to as much as 11 percent of total economic output in 2030 and over 30 percent of output in 2040.

[...]

A larger and faster-growing economy leads to significantly higher revenue than the base case. This higher amount of revenue, when compared to the spending levels outlined in The Path to Prosperity, leads to a much-improved fiscal path. Assuming higher growth within the range cited above – percentage-point increases of 0.5 (lower-bound AGS), 0.75 (mid-point AGS), and 1.0 (upper-bound AGS) – the budget could achieve balance in the mid-to-early 2020s, with the upper-bound growth assumption producing budget balance within the ten-year budget window – much sooner than CBO’s estimated balance date of 2039.

In the spirit of a picture painting a trillion words, see below. The red line is the President's "plan". Based on his plan, you can expect total economic collapse sometime between 2030 and 2050. By "total economic collapse", I mean that you should consider an event like the Great Depression as a best case scenario.

image

I have a couple more posts on this plan coming up. I think they'll be a bit shorter. I want to hit a couple sections of the document and point them out specifically, as I think Ryan makes some incredibly important points that aren't being made elsewhere, or at least aren't being made loud enough.

12 July, 2011

First A Greece Fire, Now Rome Is Burning

Actually, the bad news in Italy has been going on for about as long as Greece, and possibly longer. It’s just been quiet lately, comparatively. But, in case you haven’t been paying attention the last few days, things have heated up again. This is even worse news for the U.S. and the world than what’s been coming out of Greece, simply because the Italian economy is far larger.

But the contagion that started in the euro zone’s smaller countries is suddenly moving to some of its largest. As Greece teeters on the brink of a default, the game has changed: Investors are taking aim at any country suffering from a combination of high debt, slow growth and political dysfunction — and Italy has it all, in spades.

Sound familiar?

In recent days, Italy has become Europe’s next weak link after Greece, Ireland, Portugal and Spain, harmed in particular by a power struggle between Prime Minister Silvio Berlusconi and his finance minister, Giulio Tremonti. The dispute threatens to turn the euro zone’s third-largest economy, after Germany and France, into one of its biggest liabilities.

[…]

For Italy, the biggest worry right now is that its fate may rest as much in Athens, Brussels and Berlin as it does in Rome. Only a week ago, it looked as if Greece might be turning a corner on its problems, after the government managed to push through an austerity package and French and German banks worked on ways to help Greece avoid default.

But the plan by banks fell apart over the weekend, and policy makers are at an impasse on how to require contributions from private creditors as part of a second Greek bailout.

Italy’s biggest worry is everyone’s biggest worry, including the United States. Forget dominos, the world economy is currently based upon a huge house of cards.  Look at the pic below. Click on it for a full-size view.

When Greece falls (yes, I said “when”, not “if”), the effects will be felt all over Europe. It’s hard to see how some of the teetering economies there will be able to survive. Spain in particular is very weak, perhaps the weakest card on the table. One of the many problems is that everyone has been financing everyone else’s debt, like paying off one credit card with another. Eventually that stops working and the debt comes due. That time is now for Europe and the United States.

Greece is back in the news because, despite their reluctant acceptance of the European austerity plan, it wasn’t good enough for the credit agencies.

However, because the proposals left bondholders nursing losses, S&P yesterday ruled that they would amount to a default on the debt.

This sets up Germany and France for a clash with the ECB. The proposals are contingent on Greece not defaulting on its debt, because the central bank has said it will not accept defaulted bonds as collateral for loans. But any deal that satisfies German demands that bondholders take a share of the losses is doomed to failure since, based on the S&P ruling, it would trigger a default.

In fact, Greece defaulting on at least part of their debt seems unavoidable at this point. That has always been the most likely scenario, as even the austerity measures were just kicking the can down the road a few months. S&P’s statement that they won’t accept the current plan just moves the can back up the road. In other words, to now.

The outlines of the new rescue emerging this morning pitted Germany against the European Central Bank, with elements of the deal designed to accommodate both camps. Bailout fund buybacks are supported by the ECB, while private creditor losses are a German condition.

Accepting that a Greek default was now impossible to avoid, EU governments are hoping it will be brief and "selective", not triggering a "credit event" on the financial markets that could wreak havoc on the credit default swap markets, also in the US, and unleash contagion.

As the picture above shows, there are firestorms now all over Europe. It’s hard to say which one is the “lynchpin” as they’re all interdependent. Perhaps a selective default in Greece is survivable. I’m not sure. Almost certainly, an Italian collapse is not. I believe that they’re going to need a huge amount of external funding to avoid collapse, from China, the United States, Russia, or Japan. The problem is that all of these countries have problems of their own, and are unlikely to invest hundreds of billions of dollars in what is clearly a bad risk, even if they had the funds to do it.

I’ve been saying for a while now that the real problem that U.S. faces is not the debt ceiling, but when we reach the point where no one will buy our debt. Clearly, no one in Europe is going to be buying any in significant quantities in the foreseeable future. That’s got me thinking about the debt ceiling talks again. At first I thought that the idea of not raising our debt ceiling was crazy. Then I began to think it wasn’t quite so crazy after all. Now I’m starting to wonder if that might be the only solution. We have to have our financial house in order in the event of a European collapse, to avoid one here. Regardless, if that happens, it’s going to wreak havoc on our economy. But, if we have our own finances in order by then, and we’re not spending like there’s no tomorrow, then we can probably pull through.

Probably.

If we have our own finances in order.

Yeah, I know. I still believe in Santa Claus too.

Anyway, I’m still not quite ready to jump on the “don’t raise the debt ceiling” bandwagon. But I am checking to make sure there’s a spot aboard for me. I have a feeling it may get crowded there over the next couple weeks.

27 June, 2011

Debt-Once More Into The Breach

On the theory that a picture paints a trillion words, I’m going to present some U.S. debt info one more time, to show just where we’ve been, and where we’re heading. USDebtClock.org allows you to look at the debt on this day in the past, and into the future. The meat of this post is the pictures. I have very little to say.

On this day, 2000:

onthisday2000

Today:

today

On this day, 2015, at current rates:

onthisday2015

Ok, I do have a couple comments.

Repeat the following until it sinks in. “Unsustainable”, “Economic collapse” & “Failure of Keynesian economics”.

When those sink in you might try “Death of America”.

Greece Fire

When I was in college, I remember hearing often that American knowledge of world events was very poor. There were even several studies released about that time which asked random Americans simple questions about current events all over the world. The results were depressing, to say the least.

I admit that I’m not without fault here, myself. Particularly at the time, I remember that my geography skills were somewhat lacking, and that I wasn’t always aware of why we were involved in various political situations around the globe. I did score much higher than the average American when I took the tests used for those studies, and I suppose that I should be consoled by that. I wasn’t. I knew before I took the quizzes that my knowledge wasn’t good. It appeared that most of my peers were blissfully unaware of their ignorance.

But now we have the internet. News from everywhere is right in front of us all day long. Things should be much better, right?

Sadly, I don’t see any indication of that. If that was the case, America, and certainly our political class, would be paying much more attention to what’s going on in Greece. The fire has already been lit, and the politicians are just trying to decide what to throw on it. I see them reaching for the water now…

 

As I said just last week, America is at the tipping point. Want to see what will happen when we tip over? Watch Greece. But we’re obviously not watching Greece. We’re not learning from them, and we’re certainly not adopting any sort of defensive posture to prepare ourselves against the coming Greece fire. When (and it is almost certainly “when”, not “if”) Greece falls, the effects will be felt far and wide.

See this from Stacy McCain at the Greenroom at HotAir.

One U.S. analyst said that the “downside” risk, if European leaders can’t come up with a bailout deal, “is effectively a financial system meltdown.”

The political situation in Greece is not encouraging. The Greek parliament will vote this week on an austerity plan — which bankers are demanding in order to extend the country further credit — and it is by no means certain that the unpopular cost-cutting measures will pass: “If Greece refuses to accept more austerity measures, the consequences for Greece, the EU and indeed the global economy could be dire.”

I don’t know about you, but seeing the words “financial system meltdown” and “consequences for…the global economy could be dire” don’t exactly inspire me with confidence. Nor do words like this:

A European debt crisis is likely once again to make banks fearful of lending to one another bringing about the freezing of financial markets similar to the credit crisis in 2009.  And this time a huge stimulus package will not be in the offing.  Nor can Greece resort to the age-old beggar they [sic] neighbor approach of devaluing its currency since it is on the euro and not the drachma.

From that same article:

The broader implications for the U.S. are set forth in a Congressional Research Service Analysis in 2010.  The report concluded there were five major implications.

First, many expect that if investors lose confidence in the future of the Eurozone, and more current account adjustment is required for the Eurozone as a whole, the value of the euro will weaken.  A weaker euro would likely lower U.S. exports to the Eurozone and increase U.S. imports from the Eurozone, widening the U.S. trade deficit.

Second, the United States has a large financial stake in the EU.  The EU as a whole is the United States’s [sic] biggest trading partner and hundreds of billions of dollars flow between the EU and the United States each year.  Widespread financial instability in the EU could impact trade and growth in the region, which in turn could impact the U.S. economy.

Third, a Greek default could have implications for U.S. commercial interests.  Although most of Greece’s debt is held by Europeans (more than 80%), $14.1 billion of Greece’s debt obligations are owed to creditors within the United States.

Fourth, the global recession has worsened the government budget position of a large number of countries.

Fifth, debates over imbalances between current account deficit and current account surplus countries within the Eurozone are similar to the debates about imbalances between the United States and China.  These debates reiterate how the economic policies of one country can affect other countries and the need for international economic cooperation and coordination to achieve international financial stability.

People have been predicting this since late 2009, and it’s quite easy to see that America is following the same path. Yet we haven’t done anything at all. We may have to join in the European financial bailouts just to keep the entire system from collapsing. But who’s going to bail out us? We don’t have the money to do this. We decided to spend it on stimulus and health care instead. If I had confidence in our own government to solve the fiscal problems here, I might be less worried. I’d be hopeful that we could throw the weight of the U.S. dollar behind some assistance to Greece and to the euro. That kind of confidence would be criminally insane at this point, however.

Here’s why:

The … government must also contend with a political and social crisis. The main political parties remain poles apart and the prospects of reform by consensus appear close to zero. Opposition also comes from the powerful public-sector unions, an increasingly fearful public, and disparate political forces maintaining constant street protests.

[…]

Added to these conflicts is an institutional weakness that questions the ability of any government … to deliver serious reform. Many parts of the public bureaucracy verge on the dysfunctional. Their staffs are too big — the result of parties in power using public jobs as electoral favors — too unskilled, too rigid from confused and archaic legal procedures, too hierarchical, and lacking morale. Too often, the [person] in charge lacks efficient means, information and technical know-how from those he or she seeks to direct. Such problems are all the more grave when policies are highly controversial and uncertain to be sustained.

What country is being discussed in that section? Did you think of the United States? No, it’s Greece again. Eerily similar description though, wasn’t it? Was this on some right wing site like HotAir? No, it’s in today’s New York Times. Things could go south as early as this week in Greece. More likely, the politicos will find a way to stave off the crisis for another few months, perhaps a year. That’s if Greece government manages to survive that long. A military coup or civilian overthrow is not out of the question. What happens then? I don’t know. And no one else does either, no matter what they claim.

When I was growing up, I remember that it seemed like just about every day there was some government being toppled in Africa or the Middle East. It always seemed so remote. It was just something I saw on TV that didn’t really matter (to me, anyway…I’m sure it was vitally important to those living through it). Our Keynesian economics debt ruled world isn’t like that anymore. When Greece falls, it’s going to at the very least, worsen the “economic downturn” worldwide. And that’s an absolutely hopelessly optimistic best-case scenario. Worst case scenario? I’m the doom-n-gloom guy lately, and even I don’t even want to think about it. Wars have started over less. Much less.

But I’m sure President Barack Obama (D-USA) can handle this. After all, he’s been incredible at crisis management so far, hasn’t he?

20 June, 2011

I’m Not Worried About The Debt Ceiling Anymore

Ok, that might be an exaggeration. But it’s definitely dropped farther down my worry list. Much farther.

Why? Because it’s too late to worry about it. Speaker Boehner could agree to a debt ceiling increase to $30 trillion tomorrow (the current limit is about $14.3 trillion) and it wouldn’t matter all that much. The debt crisis isn’t coming. It’s here.

As I’m sure you know, recently several credit organizations have threatened to lower the United States’ credit rating from AAA, including Moody’s and Standard & Poor. S&P even went a little farther than just threatening and lowered the outlook from ‘stable’ to ‘negative’.  The Moody’s statement does say a bit about the debt ceiling, but it’s what else they say that’s important (emphasis mine).

Moody's Investors Service said today that if there is no progress on increasing the statutory debt limit in coming weeks, it expects to place the US government's rating under review for possible downgrade, due to the very small but rising risk of a short-lived default. If the debt limit is raised and default avoided, the Aaa rating will be maintained. However, the rating outlook will depend on the outcome of negotiations on deficit reduction. A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody's to change its outlook to negative on the Aaa rating.

The bold area mirrors what S&P said exactly. The credit agencies aren’t just worried about the current debt limit, but about the future ability of the United States to pay it’s debt. And they’re right to be so. Unless we both a) grow the economy, and b) make serious progress in reigning in government spending, we won’t be able to pay our debt. A point I’ve made before.

UPDATE: @drewwill points out that I should say that the credit agencies are also and possibly primarily worried about the risk of the no political deal occurring, thus forcing the U.S. to default. I was a little sloppy here and left that out, as I really don’t think that is going to happen. There are still things Bernanke can do to buy us more time, and in the end, Congress will raise the debt limit. Boehner may try to get as much out of it as he can, but he knows that in the end, the limit will be raised. Still, this is a risk that Moody’s and S&P examine, and it’s in the quote above “very small but rising risk of a short-lived default”.

So, what happens when credit agencies get skittish about the ability of a debtor to pay off it’s debts? The investors get skittish as well. Which finally brings me to my point. As I predicted back at the beginning of May:

It won’t matter how high we raise our debt ceiling, if we can’t get anyone to buy our debt.

As Ed Morrissey says:

We are rapidly approaching a moment of truth.  While we debate the finer points of raising debt limits and calculating just how many hundreds of billions of dollars in annual deficits we’ll tolerate, the truth is that the money to fund any deficit spending may soon run out.  Fiscal sanity may wind up being imposed on us if we don’t choose that path willingly.

We’re there. Right now. Today. China isn’t buying anymore of our debt, and is trying to dump what it already has. Japan isn’t buying any. And now Russia plans to lower its U.S. debt holdings according to the Wall Street Journal.

Everyone thinks the problem will be when the credit agencies lower our credit rating. They keep talking about what will happen then, interest rate increases, economic woes, etc. I’m sorry to be the one to say this, but that’s the optimistic outlook. We don’t hit the crisis when our credit rating is lowered, but when investors pull out over that fear. In other words, now. We are at the tipping point. The debt ceiling is no longer the crisis. Our ability to pay off our debt is.

In just a few days, QE2 will end. More and more people are expecting a QE3.  Unless we get the economy moving, and take steps to reduce our future debt, the investors aren’t coming back.  Frankly, I put the likelihood of either of these occurring before January, 2013 at very close to 0. And, until the investors come back, then we are facing either forced austerity or a succession of QE’s, each less successful than the last. Or possibly some combination. None of these scenarios will be at all pleasant to live through. You may to start hearing the words “Great Depression” and/or “Weimar Republic” often. Or possibly, “Greece”.

Europe is a doom-monger's paradise at the moment. Riots in Greece; summary Cabinet reshuffles; meetings between Merkel and Sarkozy to save the single currency — and there's still the potential for things to get worse, much worse. If the Greek government defaults on its debts, then there's no knowing where the contagion will spread, only that it it will spread wide: from Spain and Portugal to markets across the world. Share indices have already been trembling at the prospect, although many of them rallied slightly today.

One consolation, however scant, is that all this crystallises just what can happen to governments who operate beyond their means. Indeed, this seems to be the point that Jean-Claude Trichet, the President of the European Central Bank, makes in an interview with the Times (£) today. As he puts it, "We were not at ease with the idea that, in the heat of the crisis, all countries were called to spend as much as possible, embark on deficits as much as possible." And he concludes the argument with a sober warning: "I believe that the tensions we are observing in Europe today are part of a much more global phenomenon."

And we can look to the riots in Greece as an example of what will happen here when forced austerity happens. People tend not to like it all that much when their free handouts disappear. Greece and several countries in the EU, as well as the United States have arrived at Margaret Thatcher’s predicted socialistic crisis.

Socialist governments traditionally do make a financial mess. They always run out of other people's money. It's quite a characteristic of them.

I suppose we can take some solace in the fact that as we go down, we’ll take down most of the rest of the world with us. The whole world depends on American dollars. Misery loves company, after all. The unspoken corollary to that statement, however, is “company does not reciprocate”.

Of course, there’s always the possibility that I’m just being overly pessimistic today. President Barack Obama (D-USA) and the Democrats in Congress (and even a lot of the Republicans) seem to think so, and surely they’re smarter than me, right?

Right?

14 June, 2011

Want To See LBJ’s “Great Society”?

Watch this. The most depressing video you’ll see this week year.

 

Think Crowder was just picking out the few things that supported his story? Think again.

 

I hate to sound heartless, but the question must be asked. Is it time to essentially raze Detroit?

Think this can only happen in Detroit? No. This is where we’re all headed if President Barack Obama (D-USA) is re-elected. This is where progressivism leads. It’s the only possibly destination on this road.

05 June, 2011

Is QE3 In Our Future? You Better Hope Not

As I’ve mentioned many times previously on this blog, quantitative easing is the Keynesian admission “we’ve run out of arrows in our quiver”. If you try to control the economy through a central bank (as we unfortunately do, in the United States), your best control is through the raising and lowering of interest rates. However, when rates begin to approach zero, that option is taken off the table. In a rare instance of economic policy accuracy, Wikipedia gets this one right:

Ordinarily, a central bank conducts monetary policy by raising or lowering its interest rate target for the inter-bank interest rate. The central bank achieves its interest rate target through open market operations – where the central bank buys or sells short-term government bonds in exchange for cash.[5][7] When the central bank disburses or collects payment for these bonds, it alters the amount of money in the economy, while simultaneously affecting the price (and thereby the yield) for short-term government bonds. This in turn affects the interbank interest rates.[33][34]

In some situations, such as with very low inflation, or in the presence of deflation, the central bank can no longer lower the target interest rate, as the interbank interest rates are either at, or close to, zero.[8][9] In such a situation, referred to as a liquidity trap, quantitative easing may be employed to further boost the amount of money in the financial system.[10] This is often considered a "last resort" to stimulate the economy.

Yes, it’s a last resort. It increases inflation risk, especially in an economy that isn’t growing, and the way we’re using it, it increases our credit risk as well. During this last round of quantitative easing, QE2, the Fed was the largest purchaser of U.S. debt, acquiring nearly 70% of it. QE2 ends at the end of this month, and the Fed has said repeatedly that there will not be a QE3.

However, I’ve read several articles in the last week saying that such an event is not just likely, but inevitable. At the risk of being redundant, I will point out again that former Governor Sarah Palin (R-AK) predicted this quite some time ago. And as she said then:

Do we have any guarantees that QE2 won’t be followed by QE3, 4, and 5, until eventually – inevitably – no one will want to buy our debt anymore? What happens if the Fed becomes not just the buyer of last resort, but the buyer of only resort?

I discussed this problem before as well, here.

Like so many problems we face today, the big part of the problem here is admitting to ourselves what the problem is. By having a QE3, we’re admitting that QE2 has failed. So, why should we think QE3 would succeed? In fact, the inflationary effects of successive QEs make their ongoing failure more likely, rather than less. Unless we admit the failure and put that arrow back in the quiver, we end up with a failed economy and a $100 cheeseburger at McDonald’s.

Some are already predicting a bear market, should a QE3 occur, and a bear market combined with a devalued dollar is indescribably bad.

“We become excessively bearish if the Fed goes to QE3,” Belski said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “We do not want to see QE3,” the New York-based chief investment strategist said. “We think that only prolongs the inevitable when the Fed has to eventually sell these securities that they have been buying.”

But who’s going to buy these securities? Anyone? Let’s review what the Fed is holding.

But beginning in late 2008, as financial institutions careened towards insolvency, the alphabet soup of Fed lending facilities (TAF, TSLF, PDCF and the CPFF just to name a few) bought all kinds of assets that the Fed never before held. Through quantitative easing efforts alone, Ben Bernanke has added $1.8 trillion of longer term GSE debt and Mortgage Backed Securities (MBS). (In fact, the Fed now holds more of these mortgage instruments than their entire balance sheet before the crash.) This has drastically changed the complexion of the assets it must now sell.

But as the size of the Fed's balance sheet ballooned, the dollar amount of capital held at the Fed has remained fairly constant. Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet. While the size of the portfolio expanded three fold (and the quality of its assets diminished), the Fed's equity ratio plunged from 6% to just 2%. Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30 to 1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51 to 1! If the value of their portfolio were to fall by just 2% the Fed itself would be wiped out.

Anybody got a spare $3 trillion lying around that they’re willing to invest in toxic assets? No? Hmm. What a surprise.

24 May, 2011

Democratic Strategy? Abdication

For the better part of the last two years, indeed, for the better part of President Barack Obama’s (D-USA) administration, the game plan of the Democrats has been simple: abdication of responsibility.

The Democrats apparently believe that the best political policy is to do nothing, and to blame the Republicans when things go wrong, or attack the Republicans when they actually attempt to do something.

Don’t believe me? Let’s look at a few examples, shall we?

A search of “Obama blames Bush” on Bing is a good place to start. 96,000 results. You see, nothing bad that happens to Obama is his fault. It’s always Bush’s. He’s abdicated complete responsibility for anything bad in his administration.

Then there’s Obama’s signature piece of legislation, the so called Affordable Health Care Act. Despite campaigning about it for over a year, and consistently saying “my plan does” and “my plan does not”, he never offered up a single plan. Instead he abdicated that responsibility to Senator Harry Reid (D-NV) and former Speaker Nancy Pelosi (D-CA-08). They in turn abdicated that responsibility to any and every special interest that could claim to have any interest in socialized health care.

Then, after it was written, Congressman John Conyers (D-MI-14), voiced the opinion of all Democrats when he laughed at the idea of actually reading it.

“I love these members, they get up and say, ‘Read the bill,’” said Conyers.

“What good is reading the bill if it’s a thousand pages and you don’t have two days and two lawyers to find out what it means after you read the bill?”

Senator Tom Carper (D-DE) had essentially the same statement.

So, once again, Democrats abdicated their congressional responsibility of actually reading the legislation before passing it. And they thought it was funny that anyone would even suggest that they read it.

In a similar exchange, Madame Pelosi couldn’t care less whether the bill was constitutional.

CNSNews.com: “Madam Speaker, where specifically does the Constitution grant Congress the authority to enact an individual health insurance mandate?

Pelosi: “Are you serious? Are you serious?"

Want more abdication? I’m still in 2010. How about Democrats in congress avoiding their constituents?

A New York Times article is reporting that the leaders of the Democrat party urged members of congress not to engage in any town hall meetings during the latest break so that legislators wouldn’t have to face the voters in what could be a heated argument on the issues.

Democrats heeded the advice of party leaders and tried to avoid unscripted question-and-answer sessions

Instead of actually facing their constituents, the following is what the Democrat leadership proposed:

hold events in controlled settings — a bank or credit union, for example — or tour local businesses or participate in community service projects

Of course you remember that 2010 was an election year. And that Democrats received a “shellacking”. The Democrats, however, did everything they could to limit the shellacking. They even avoided not only passing a budget, but writing one. This is the one Constitutionally mandated duty of the House of Representatives. And yet, somehow, Madame Pelosi and her party couldn’t find time to write one.

But, 2011 has brought us new, unbelievable levels of abdication of responsibility.

Democrat lawmakers in Wisconsin and Indiana decided that rather than do the jobs they were elected to do, and are paid to do, it would be better to leave the state in an attempt to shutdown the government. Give the Democrats in Washington, D.C. some credit. They at least still show up for work. For now.

As I have indicated numerous times on this blog, we are facing an impending economic crisis. Congressman Paul Ryan (R-WI-01) has offered up his Path to Prosperity to head off this crisis. Democrats response? You guessed it. Abdicate. Do nothing. Demonize the opposition.

See, the Democrats aren’t completely stupid. They know the crisis is coming. But they’re caught between a rock and a hard place.  Their core constituency will abandon them if they attempt the serious entitlement reforms necessary to stave off the crisis. Their only other option is to raise taxes on every single person in America by about 30-50%. They know if they do that that the GOP will likely claim veto proof majorities in both chambers of Congress. And they know that there will be an even louder cry to repeal ObamaCare if they admit there’s a financial problem. The Democrats need for power is far greater than their need to preserve the United States. Plus, they figure that when the end comes, there will be someone else to blame it on. So, we have Nancy Pelosi saying:

It is a flag we’ve planted that we will protect and defend. We have a plan. It’s called Medicare.

No, Ms. Pelosi, Medicare is the reason we need a plan. It’s not a plan. But she knows the Democrats can’t create a plan of their own. They only thing they can do is attack anyone who does.

Senator Reid is on board with Pelosi to the bitter end:

“There’s no need to have a Democratic budget, in my opinion,” Reid told the Los Angeles Times last week. “It would be foolish for us to do a budget at this stage.” Instead, Reid wants to wait to see if the deficit-reduction meetings led by Vice President Biden bear any fruit. Before that, Reid wanted to wait for the Gang of Six — now nearly defunct — to come up with something.

Sessions was appalled when he read Reid’s words. “It was a fundamental statement that they’re playing politics,” Sessions said. “They don’t think it’s politically smart to produce a budget. They’d rather produce nothing and attack Paul Ryan and the Republicans and think they’re going to gain politically by avoiding their fundamental statutory responsibility. It’s pretty breathtaking to me.”

Reid isn’t alone. The chairman of the Senate Budget Committee, Kent Conrad, is also happy to not produce a budget. Last week, he told reporters that he planned to “defer” work on a 2012 budget indefinitely.

As the above article notes, it has been, as of 5/24/2011, 755 days since the Senate Democrats passed a budget. Abdicate and attack. It’s the Democrat way:

At Reid’s instigation, the Senate will engage this week in a meaningless faux debate over the budget. Reid wants the Senate to vote on the House-passed GOP/Ryan budget, so that Reid and fellow Democrats can accuse Republicans of voting to kill Medicare. In return, Minority Leader Mitch McConnell will likely force a vote on President Obama’s proposed budget from a few months ago that did virtually nothing to reduce the deficit, so Republicans can accuse Democrats of ignoring the fiscal crisis.

[…]

The most amazing thing about all this, to Republicans, is that Reid’s abdication of responsibility has attracted so little attention. In a country drowning in debt, where’s the outrage?

Well, I’m outraged. But, I’m not surprised that the issue isn’t attracting much attention. If the last 2 1/2 years have taught the Democrats anything, it’s that abdicating responsibility is their best play.

09 May, 2011

An Open Letter to Speaker Boehner & My Congressman

TO: House Speaker John Boehner (R-OH-08)
CC: Congressman Dan Burton (R-IN-05)
Mr. Speaker,

I realize that the election of 2010, while historic, granted the Republican party very limited power in Washington, D.C. We still have to deal with President Barack Obama (D-USA) and Senate Majority Leader Harry Reid (D-NV). However, I wonder if you are making proper use of even what limited power you have. Like Velma Hart, I am exhausted of defending you. I stood by you after the budget deal over the CR for the rest of fiscal year 2011. I understand the difference between appropriations and allocations, and I realize that you probably got all you were going to be able to get out of that deal. I think you got played on the “czars” part of the deal, but I have faith you won’t let that happen again, and will punish Obama for bargaining in bad faith.

However, your recent comments regarding Congressman Paul Ryan's (R-WI-01) Path to Prosperity leave me gravely concerned. You seem to agree with Congressman Dave Camp’s (R-MI-04) statement regarding the plan:

"I'm not really interested in laying down more markers," said Rep. Dave Camp (R-Mich.). "I'd rather have the committee working with the Senate and with the president to focus on savings and reforms that can be signed into law."
In fact, your own words on the subject are these:
"My interpretation of what Mr. Camp said is a recognition of the political realities that we face. While Republicans control the House, the Democrats control the Senate and they control the White House," Boehner said at a Thursday press conference.

Again, I understand the political realities we face. I realize that in the end, to pass both chambers and to get the President’s signature, any measure will have to have bipartisan support. I also understand the desire to avoid a vote that will be interpreted by many as purely symbolic. Mr. Camp is correct that the Ryan plan does not have any chance of success in the Senate.

However, I think this path is fraught with peril.

The people that brought you this majority in 2010, did so because we are gravely concerned about the future of this country. Not just for our children, not just for our retirement savings, but we have serious doubts about the next 10 years. We see the headlines about Greece and other countries in the EU, and we wonder if we’re very far behind. Just this weekend it was revealed that the Greece bailout may be failing and that while there is a high risk of default, further bailouts are being considered.

“We have not been discussing the exit of Greece from the euro area. This is a stupid idea. It is in no way - it is an avenue we would never take,” [Head of Eurogroup] Juncker told reporters.
“We don't want to have the euro area exploding without reason. We were excluding the restructuring option, which is discussed heavily in certain quarters of the financial markets.
“We think that Greece does need a further adjustment program,” Juncker said. “This has to be discussed in detail.”
In fact, some economists are not just saying that we’re following Greece, but we’re already there.
[Boston University Economics Professor Laurence] Kotlikoff believes a better benchmark of fiscal fitness is the fiscal gap, or the present value difference between all future expenditures and receipts. His calculations reveal Greece future expenditure at 11.5% of the value of future GDP, after incorporating the new austerity measures.
The US figure, based on the CBO projections--12.2%--is worse than that of Greece, but not by too much.
However, Kotlikoff says the U.S. is in much worse shape than the 12.2% figure suggests, because the CBO’s projections assume “a 7.2% of GDP belt-tightening by 2020,” with "highly speculative” assumptions, such as a substantial rise in tax receipts and wage growth.
A separate analysis by the New York Times also put the U.S. debt--measured by medium term deficit as a percentage of GDP--higher than that of Greece. (See chart)  Furthermore, in a roundabout way, Kotlikoff and Da Gong, the largest credit rating agency in China, seem to be in agreement as to the fiscal position of the United States; although many have dismissed Da Gong’s objectivity when it downgraded the U.S. from AAA to AA.

Mr. Speaker, the time has come to draw a line in the sand. This far. No further. The people that gave you this majority are not interested in bipartisanship. They are interested in saving this country. That will take some hard bargaining on your part, and some strong efforts by Mr. Camp and others, as well as your counterparts in the Senate. We realize that Medicare reform as designed by Chairman Ryan may not pass, but we can not afford to take it off the table without getting something just as significant in return. The Ryan plan should be the starting point in negotiations. We can not move the starting point even further to the left.

We expect you, no, we need you, to stand firm against the destructive plans of Leader Reid and President Obama. We will do our best to give you more tools to work with in 2012, but you have to prove that you’re willing to use the tools that we’ve given you so far.

It’s not entirely your fault, but the citizenry of this country has acquired a high level of distrust for our elected officials. We came out in historic numbers in 2010, not because we suddenly believe in the Republican party, but because of our concerns for the future. We had hope and belief that you understood your mandate and what we expected of you. Then we read things that make it seem as if nothing has changed in Washington, and that you still don’t get it. That doesn’t help your case in attempting to regain our trust. If you want more of our trust and more tools, you’re going to earn it. That means fighting for us, every day, every hour, with every breath you have. We demand, expect, and will accept nothing less. Because we will be doing the same.

If you’re not willing to do that, let us know now. We’re tired of being fooled and we’re tired of waiting for real leadership.