Sometimes I think along these lines: if the Obama presidency were a prize fight, the ref would have stopped the thing three rounds ago. What we're witnessing now is really not very pretty. It's become a kind of blood sport, like bear-baiting or bull fighting. The Republicans, who appear to navigate without any moral compass at all, are in the sadistic process of seeing how far they can push this debt ceiling game to extract concessions from the President. Can they get Obama to agree to legislation simply abolishing Medicare and Social Security? Can they eliminate all functions of the federal government other than defense and spying on the American people?
I don't know what to do with the guy. He seems to have found a unique style which succeeds at (a) caving into his GOP tormentors without producing any compromise whatsoever while (b) completely alienating his own base by breaching every single one of his campaign promises on civil liberties, the war on terror, the Patriot Act, the Surveillance State, Guantanamo, medical marijuana, transparency in government, and prosecution of whistle blowers. The list goes on, but it becomes tiring to delineate. I don't even understand how it's possible to be that inept. Simple random probabilities would suggest that occasionally Obama would stumble and do something heroic. Say, for example, when he was addressing a crowd of same-sex advocates recently in New York. Why not just come out and say it? "Yes, I support, wholeheartedly, the concept of equality in marriage." Case closed. What could he possibly have to lose at this point? Does he think that Michele Bachmann and her crowd of drooling sycophants might still come around to his side if he keeps co-opting, caving, debasing himself with weasel-talk?
Sheesh. "Carbon dioxide is portrayed as harmful. But there isn't even one study that can be produced that shows that carbon dioxide is a harmful gas." -Rep. Michelle Bachmann, April, 2009. This is the favor that Mr. Obama is attempting to curry. This is the leader of the Tea Party Caucus in the House, the dominant force du jour in American politics. Chris Matthews has another tingle up his leg because Michele Bachmann really says what's on her mind, no holds barred. What mind would that be? His insane boosterism is the kind of media spotlight which takes marginal candidates and gives them national credibility. "There are hundreds and hundreds of scientists, many of them holding Nobel Prizes, who believe in intelligent design." - Michele Bachmann, advocating the mandatory teaching of alternatives to evolution in public schools.
There have been to date 189 Nobel laureates in physics, 160 in chemistry, the two fields to which Michele might be referring, if Michele had any idea to what she was referring. However, it must be noted that the first Nobels were awarded in 1901 and of these 349 scientists, "hundreds and hundreds" of them are already dead and cannot be asked about their belief systems. Hundreds and hundreds of these scientists would probably not agree that carbon dioxide is always a completely harmless gas. For example, to conduct an Einsteinian (Einstein, Nobel Prize Physics, currently dead, non-believer in intelligent design) thought experiment, if you placed a human being in a sealed room that contained, as its atmosphere, only CO2, then carbon dioxide could definitely be harmful. Admittedly, this is not a "study," but in general really smart scientists, including hundreds and hundreds of Nobel Prize winners, don't spend their time on really dumb experiments to disprove stupid hypotheses advanced by airheads. Similar claims, after all, could be made for H2O (and I wouldn't be surprised if Michele had somewhere made them). Yet if you're 5'6" tall and standing in 7' feet of water, H2O becomes "harmful" in the same way that CO2 levels in the atmosphere, rising from their present 380 parts per million to 550 ppm, say, could also suffocate, in effect, the entire human race. Kind of a numbers game.
Contemplating such inanity coming from a "serious" candidate for the Presidency gives me the chills, and naturally makes me wonder whether any sort of Obama criticism is really a good idea. That's the parlous state at which we've arrived in this great Republic of ours. Barack got his law degree from Harvard, Michele from Oral Roberts University. I wish Barack would make the difference more obvious sometimes. Or maybe that's the problem at this point. Mistrust of the elites and embrace of the yahoos. Michele Bachmann: a complete ninny who talks like America. Oy vey iz mir.
Notes & Errata on Debt Ceiling for Dummies: I stand corrected. The amount of maturing debt which the Treasury must handle in August is closer to $470 billion than it is to $30 billion, the number I erroneously used based on a misinformed source. Thus, Uncle Sam is in very much the same boat as Bill Zup D'Wazoo, insolvency-wise. There is no way the USA can raise half a tril in one month without borrowing money beyond the current ceiling, so we're looking at default, for the first time in history, if the United States does not resume Treasury auctions in the near future.
July 02, 2011
June 30, 2011
Let us see if we cannot simplify the current, bad-faith-based debate on the debt ceiling.
First, the debt ceiling is a statutory artifact, not found in the Constitution, which limits the amount of total debt the United States is allowed to take on to finance its day-to-day operations. In theory, once the debt ceiling is reached, and the Treasury Department has exhausted the various games it is allowed to play in "redeeming" other "bonds" held by government workers, and other illusory acts of legerdemain, the government is then, again in theory, allowed to borrow no more. Since the United States government currently borrows about 42% (Paul Krugman believes that 42% is "about a third," but he's an Ivy League economist, not a mathematician, and is not required to know how to divide 2.2 by 3.8, which would tell him that a government which receives $2.2 trillion in taxes and spends $3.8 trillion is funding only 58% of its expenditures; however, this is close enough for tenure at Princeton) of the money it spends, this presents a problem.
Let us analogize to a homelier situation. Suppose we allow the role of America to be played by Bill Zup D'wazoo, a currently unemployed Wal-Mart long haul trucker living in Fontana, California, in a house he purchased (when he was living with his estranged wife Nomo [go ahead and try it with the last name]) in 2006 for $450,00, now worth $175,000, maybe, with a mortgage (unpaid during the last two years) of $575,000 (Bill re-fied a couple of times, had a line of credit-- those were the days!). In other words, a Real American. Bill has been depressed during his 95 weeks of unemployment and has gained a couple of hundred pounds. Inundated during his employed days with credit card offers, Bill has two high-limit cards, with a balance of $8,000 on the MasterCard against a credit limit of $10,000, and $2,000 against a limit of $3,000 on the Visa. Thanks to the tough-on-banks credit card relief rammed through Congress by Obama and Biden, Bank of America and Wells Fargo, the issuers of the cards, have a hard time charging Bill much more than 30% per annum in interest on these balances, and if they do raise the rates to such usurious levels, they have to tell Bill they're doing it. Thank God we have someone in Washington fighting for the Little Guy.
Bill seems, in all respects, a reasonably accurate cognate for the United States itself, fiscally and even physiognomically, if that's a word and who cares if it isn't. But looks can deceive, as will become clear perhaps. By supplementing his UE payments (four weeks to go) with charge card action, and living rent-free (at least until one of his loan servicers can figure out exactly who owns his mortgage), Bill has not had it too bad. Bill, however, now has a completely trashed credit rating and cannot "raise his debt ceiling" by getting another charge card. All he can do, after August 2, when his unemployment checks stop, is charge things to his cards, and get cash advances (suh-weet! while it lasted) with his remaining credit limit of $3,000 on the two cards.
Now you see the problem. By charging against the limit, Bill also slams his ability to borrow money against the cards in order to make payments against those same cards. Plus, BofA and Wells Fargo don't really want Bill to borrow any more money; they're just dying to find some excuse, such as a missed payment, to cancel the cards altogether, because what do you think the odds are Bill are is going to come up with $13,000 when it all goes down the toilet? Exactly. Thus, the excruciating calculus of exponential growth: if Bill makes a minimum payment of $250 against the combined balance of $10,000 at the user-friendly rate of 29% APR, a loan-sharking rate allowed because so many credit card companies are headquartered in Joe Biden's home state of Delaware, then his balance moves to $10,250, the new basis for computing interest, and Bill still has to keep using the cards for necessary expenditures at the grocery store, gas station, and Pyongyang Luau, the Korean massage parlor out near the interstate. In short, the game is rolling up.
By contrast, the United States is in a much better position. The government still has a steady source of income, the income taxes paid by increasingly unemployed Americans. While these taxes only cover 58% of necessary expenses such as blowing up Afghan and Libyan villages, the United States is not going to "default" on its debt in the way that Bill is about to default as soon as he hits the $13,000 top, can't borrow anymore, and has his cards cut in two by Ahmed down at the 7-Eleven. The $10 trillion "public" debt of the USA is financed at a gold-plated average rate of about 2.5% per year, not that loser 29%, and that's only about $250 billion a year. True, there is also the problem of maturing Treasury bonds which must be redeemed (paid off), but in August, for example, that only comes to about $30 billion. (You're probably wondering about the "interest debt" owed to the intragovernmental "trust funds" at Social Security and Medicare, with principal adding up to another $4.5 trillion. God, you're so funny! That's why I like you.) So add it up: about $20 billion in interest, $30 billion in redemptions, we're at $50 billion, or slightly more than 25% of our monthly income. You could qualify for a good 4-br w/den 2.5 ba 3-car gar 3k sq ft like Bill has with a ratio like that.
Our credit rating will be fine, for a long time, as we continue to fund Medicare, Social Security, defense and the Pentagon's current twelve wars with the balance of 75% of income still left after paying China, Japan, and the Federal Reserve, the latter of which will just send the money back to the Treasury because...oh never mind. Or maybe some of those things have to go, a little bit or a lot. A 42% pay cut can impact the lifestyle pretty noticeably. Bill's a case in point: hardly ever gets down to the Pyongyang Luau anymore, and Nomo won't return his calls, except through her lawyer. Something about having to stay at least 50 feet away from her for the next three years.