The budget battles

[luke warm]

I find it interesting (and rather bizarre) that politicians actually campaign for the opportunity to negotiate with fools and crooks.

surely this isn't news to you, and surely you know that this isn't limited to any one group

[PassedOut]

surely this isn't news to you, and surely you know that this isn't limited to any one group

No, I've long been fascinated by it.

 

Like you, I'd like to see substantial spending on our crumbling infrastructure, which would provide needed jobs and bolster business. And, like you, I'd have much preferred single-payer healthcare reform. But no matter how clear and objective the advantages of these (and other) options are, our numbskull congress cannot bring themselves to choose them.

 

And it's not just one party at fault, which is why I'm an independent conservative voter. However, it should be clear to everyone that modern republican ideology has fostered fiscal irresponsibility to a much greater degree than that of the democrats.

 

Aside from opposing ill-considered wars, my biggest issue is fiscal responsibility. So on the national level, I'm usually -- but not always -- practically forced to vote for a democrat. On the local level I hardly pay attention to political party.

[hotShot]

Around here poeple agree that President Obama has lost but they think the Candidate Obama won.

 

His prize was a premium theme for the re-election campaign.

If the Republicans pick a candidate that is not from the Tea Party, the question will be can this candidate control the Tea Party?

If the candidate is from the Tea Party, the question would be, can the US carry the burden of a president incapable to compromise, to the extend to let the county default.

[Winstonm]

No, I've long been fascinated by it.

 

Like you, I'd like to see substantial spending on our crumbling infrastructure, which would provide needed jobs and bolster business. And, like you, I'd have much preferred single-payer healthcare reform. But no matter how clear and objective the advantages of these (and other) options are, our numbskull congress cannot bring themselves to choose them.

 

And it's not just one party at fault, which is why I'm an independent conservative voter. However, it should be clear to everyone that modern republican ideology has fostered fiscal irresponsibility to a much greater degree than that of the democrats.

 

Aside from opposing ill-considered wars, my biggest issue is fiscal responsibility. So on the national level, I'm usually -- but not always -- practically forced to vote for a democrat. On the local level I hardly pay attention to political party.

 

I wish I had said this but I have to give credit where it is due - from Barry Ritholtz at The Big Picture:

 

I keep saying I am not a Democrat because I have no idea what their economic policy is, and I am not a Republican because I know EXACTLY what their economic policy is. That is our policy choices: Inept cluelessness on one side, and hapless fantasy-based lunacy on the other.

 

And in the middle stands Obama, trying to form a compromise between the inept and the delusional.

[kenberg]

This Ritholz guy may be on to something.

[PassedOut]

I wish I had said this but I have to give credit where it is due - from Barry Ritholtz at The Big Picture:

 

I keep saying I am not a Democrat because I have no idea what their economic policy is, and I am not a Republican because I know EXACTLY what their economic policy is. That is our policy choices: Inept cluelessness on one side, and hapless fantasy-based lunacy on the other.

And in the middle stands Obama, trying to form a compromise between the inept and the delusional.

The US political system is completely dominated by two firmly entrenched political parties, but there are very many political viewpoints. With the republicans demanding more and more ideological purity, it seems inevitable that the democrats become more fragmented and that the bloc of independent voters grows.

 

This would not pose so much of a problem if the modern republican ideology were rational.

[PassedOut]

A few posts back I said that the "triggers" set to force a deficit-reduction agreement between the two parties this year are not so disastrous as a default would have been. A negotiated agreement with revenue increases would be better, of course, but if the republicans remain intransigent on taxes, we can be sure that the automatic military cuts won't damage US security at all.

 

Fareed Zakaria discussed this in the Post yesterday: Why defense spending should be cut

 

Serious conservatives should examine the defense budget, which contains tons of evidence of liberalism run amok that they usually decry. Most talk of waste, fraud and abuse in government is vastly exaggerated; there simply isn’t enough money in discretionary spending. Most of the federal government’s spending is transfer payments and tax expenditures, which are — whatever their merits — highly efficient at funneling money to their beneficiaries. The exception is defense, a cradle-to-grave system of housing, subsidies, cost-plus procurement, early retirement and lifetime pension and health-care guarantees. There is so much overlap among the military services, so much duplication and so much waste that no one bothers to defend it anymore. Today, the U.S. defense establishment is the world’s largest socialist economy.

Although much of that spending is useless from a defense perspective, the defense budget is a large part of the social safety net in the US, providing make-work jobs that put money into the hands of folks who would otherwise add to the unemployment problem we face today.

 

It would be more effective to redirect that money from make-work defense establishment jobs to real infrastructure enhancements. But that approach would make sense, no doubt excluding it from congressional consideration.

[kenberg]

I don't doubt at all that there could be substantial cuts in defense spending that would not jeopardize national security. Most if not all programs, in and outside the military, get a lot of flab on them. However, making effective cuts requires judgment, that's the problem. An unneeded military base in the district of a powerful Congressman may be safe from elimination, adequate body armor may not have a corresponding support system.

 

Or, for another example, it is my understanding that medical care for our returning soldiers, both physical and psychological, is in need of an increase, not a decrease.

 

Maybe the trigger should make automatic cuts in the salaries of Congress.

[luke warm]

But that approach would make sense, no doubt excluding it from congressional consideration.

you mustn't forget a congressman's prime directive - ensure at all costs re-election

[PassedOut]

you mustn't forget a congressman's prime directive - ensure at all costs re-election

For sure. Regardless of party, the incumbent invariably insists that all government-funded jobs in his or her district -- no matter how objectively useless -- are absolutely vital to the security of the nation.

 

Similarly for business subsidies and blocking the regulation of dominant industries. My voting residence is in Michigan, for example, and it is a given that anyone sent to Washington from Michigan, regardless of party, protects the auto industry at all costs.

[luke warm]

My voting residence is in Michigan, for example, and it is a given that anyone sent to Washington from Michigan, regardless of party, protects the auto industry at all costs.

that's gonna be tough when the u.s. starts its own auto company and comes out with a 250+ mpg vehicle (probably released just prior to election day)

[kenberg]

Lowering the nation’s rating one-notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.”

 

I can see how they might come to that conclusion.

[Winstonm]

Lowering the nation’s rating one-notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.”

 

I can see how they might come to that conclusion.

 

In a related story, the U.S. government lowered S&P to junk status for their part in rating subprime MBS crap as AAA because banks paid them to do so. B-)

[kenberg]

In a related story, the U.S. government lowered S&P to junk status for their part in rating subprime MBS crap as AAA because banks paid them to do so. B-)

 

Yes, you have a point.

[PassedOut]

In a related story, the U.S. government lowered S&P to junk status for their part in rating subprime MBS crap as AAA because banks paid them to do so.

With the budget crunch, the US could no longer afford to pay for S&P's AAA rating.

[Winstonm]

From the FWIW Department, here is what S&P said concerning the downgrade:

“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy … [This] weakens the government’s ability to manage public finances”

 

We would like to thank the Tea Party once again for this revolutionary downgrade of U.S. credit rating.

[luke warm]

From the FWIW Department, here is what S&P said concerning the downgrade:

 

We would like to thank the Tea Party once again for this revolutionary downgrade of U.S. credit rating.

you are an incredibly naive man... if the bill was disagreeable, don't sign it... this bill (according to the DNC) does all these marvelous things:

 

• Removes economic uncertainty surrounding the debt limit at a critical time and prevents either party from using a failure to meet our obligations for political gain.
  
• Makes a significant down payment to reduce the deficit -- finding savings in defense and domestic spending while protecting critical investments in education and job creation.
  
• Creates a bipartisan commission to find a balanced approach to continue this progress on deficit reduction.
  
• Establishes an incentive for both sides to compromise on historic deficit reduction while protecting Social Security, Medicare beneficiaries, and programs that help low-income families.
  
• Follows through on President Obama's commitment to shared sacrifice by making sure that the middle class, seniors, and those who are most vulnerable do not shoulder the burden of reducing the deficit. As the process moves forward, the President will continue to insist that the wealthiest Americans share the burden.
  

not only that, the DNC also believes obama won the negotiations... not sure how you can blame the tea party when it "lost"... it seems a tad disingenuous for one party to take credit for something and then turn around and blame another for supposed shortfalls

[PassedOut]

not only that, the DNC also believes obama won the negotiations... not sure how you can blame the tea party when it "lost"... it seems a tad disingenuous for one party to take credit for something and then turn around and blame another for supposed shortfalls

Seems to me that Winston was reacting to S&P's downgrade of the US credit rating rather than to the bill that was signed on August 2, which all sides inevitably try to spin their way.

 

S&P's statement that Winston quoted blamed the "political brinksmanship" whereby a group of politicians (the tea party group, as we all know) threatened to prevent the US from paying its legitimate debts. According to Winston's quote, that irresponsibility created a degree of uncertainty that resulted in the downgrade.

[Winstonm]

Let's analyze the S&P comment a little further.

 

The political brinksmanship of recent months highlights what we see as Americas governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed."

 

I certainly don't know everything, and admit even to not knowing a lot, but I am aware that it was the Tea Party Republicans who held the country hostage over the debt ceiling and created the scenario where "policymaking becoming less stable, less effective".

 

The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy … [This] weakens the governments ability to manage public finances

 

I am also aware that this is the first time in history there was any threat of default over what is normally an automatic process to authorize payment of what has already been spent, and it was the influence of the Tea Party Republicans in the House of Representatives that created the impasse.

 

you are an incredibly naive man...

 

Naive means believing Ayn Rand had "the answers" but John Keynes was clueless.

 

A President Hoover deja vu in 2011 while trying to escape the affects of Depression Light will do nothing other than recreate the decade of the 1930s.

 

16% of American seeking employment are either unemployed or underemployed.

 

50,000,000 Americans are on food stamps.

 

And we want to go on austerity measures to protect the Bush tax cuts?

[kenberg]

The answer to the question "How can I blame the Tea Party when the DNC says Obama won" is simple. The DNC is whistling in the dark. S&P seems to agree with this assessment, and so do the markets.

 

Admittedly, there are many things that go into stock market swings and ratings. But there is a fundamental unavoidable fact: Until the last few months, no one expected that a significant group of politicians would announce that everything had to be done their way or they would throw the country into default. That would be unthinkably stupid, or so it was believed. It is no longer unthinkably stupid, it is now thinkably stupid.

 

Of course the Tea Party folks say it is thinkably brilliant rather than thinkably stupid. They are entitled to explain why they think this, they are not entitled to claim the idea was not theirs. They embraced it, they shouted it to the rooftops. For better or for worse, they own this idea.

[luke warm]

I am also aware that this is the first time in history there was any threat of default over what is normally an automatic process to authorize payment of what has already been spent, and it was the influence of the Tea Party Republicans in the House of Representatives that created the impasse.

i kinda agree that it makes little or no sense to give congress the right to appropriate the same funds twice (as it were), but let's not forget that this problem could have been forestalled 2 or 3 years ago... let's also not forget that there were other groups in congress, and in the white house, that can share in that very same impasse

 

The answer to the question "How can I blame the Tea Party when the DNC says Obama won" is simple. The DNC is whistling in the dark. S&P seems to agree with this assessment, and so do the markets.

do you believe a default is looming in any event? i personally don't know, but it would not much surprise me if it happened... i don't see how one can borrow oneself into prosperity... but the fact remains that the dnc, by claiming some sort of victory, is eying the political future (as are, admittedly, others)

[blackshoe]

Some are saying the Republicans are at fault. Some are saying the Democrats are at fault. Some blame the Tea Party. Some blame Obama.

 

I say they're all at fault. :angry:

[kenberg]

Blame it on the Rolling Stones

[y66]

S&P is OTL according to PK

 

Treasury has a fact sheet explaining that $2 trillion error by S&P; it may sound technical, but to anyone who follows budget issues, it’s a doozy.

 

When the Congressional Budget Office “scores” policies, it does so relative to a “baseline” — a set of assumptions about what would happen in the absence of that policy. The normal CBO baseline — mandated by Congress — assumes that discretionary spending will rise with inflation, but no more. This isn’t realistic most of the time, since the demands for government services rise both with growing population and in many cases with rising economic activity; that’s one reason CBO always provides an “alternative fiscal scenario” that’s supposed to be more realistic. Under current conditions, however, with Obama already committed, even before the debt deal, to fairly harsh austerity, the zero-real-growth baseline is more realistic — and it’s how the debt deal was scored.

 

But S&P initially assumed that the debt deal was subtracting off a quite different baseline.

 

The point here is not so much the $2 trillion, which makes very little difference to real US fiscal prospects; it’s the fact that S&P stands revealed as not understanding basic analysis of budget estimates. I mean, I don’t think I would have made that mistake; real budget experts, like the people at the Center on Budget and Policy Priorities, certainly wouldn’t have.

 

So what we just saw was amateur hour. And these people are pronouncing on US credit-worthiness?

 

When assessing the downgrade, the question of track record comes up. As I understand it, countries that defaulted in the past were almost always downgraded well before the default happened; but in all such cases, the markets were already signalling big trouble before the rating agencies moved.

 

The question should be, in cases when the markets aren’t signalling worry but the agencies downgrade anyway, how often are they right?

 

The answer, I believe, is never — not for Japan 2002, not for various European countries in the late 1990s, not for Canada 1994. But I don’t have time to do this carefully; I hope someone will.

 

The amateur hour? Decade seems more like it.

[luke warm]

Some are saying the Republicans are at fault. Some are saying the Democrats are at fault. Some blame the Tea Party. Some blame Obama.

 

I say they're all at fault. :angry:

but remember, everyone was told beforehand that at least $4T in cuts had to be made or we'd lose our AAA status... didn't the ryan plan come pretty close to this? so it's not as if they didn't have a chance