Wednesday, August 3, 2011

Dissed By The Debt Ceiling Fiasco

Just when you thought the American political class could not stoop any lower or act any more in incompetently, along comes the debt ceiling crisis and we are all amazed that again, the political class has failed to exceed any standards of quality performance. And, as always, its the citizens of this country and the nation itself that gets dissed and abused. Getting "dissed" is certainly the right word when you consider the following apt adjectives to describe this fiasco:

Disallusioning - The characters in the White House and Congress out did themselves when it came to embarrassing themselves and the nation in the eyes of the world. The whole process was so disillusioning when viewed from a problem solving process since there was no process. There was no plan, there was no analysis, there was just a chaotic lurching towards the eventual deal.

How can you think you can competently run a country with over 300 million people, a massive government bureaucracy, and an economy worth over $14 TRILLION when you cannot even maturely and intelligently address a singular budget issue? So disillusioning.

Disgusting - There are many people in this country that honestly and intelligently believe that the national debt crisis is one of the few issues in our country's history that has a credible chance of destroying our nation, our democracy, and our future. Many of them made their concerns known by voting for and electing dozens and dozens of people to the House Of Representatives last November to represent their heartfelt fears and concerns. This is their right and duty as American citizens living in a democratic nation.

And how were their elected House Representatives treated when the debt ceiling debate was raging? Senate Majority Leader Harry Reid publicly called those who opposed a meager early version of the debt ceiling deal "extremists." House Minority Leader Nancy Pelosi publicly told John Boehner to act like an adult after a meeting at the White House. In a Democratic party meeting, Congressman Mike Doyle accused those in favor of getting out-of-control government spend under control "terrorists: "We have negotiated with terrorists. This small group of terrorists have made it impossible to spend any money." Isn't that what one should do if one was spending way too much? Pretty simple concept, Congressman Doyle.

These attitudes are disgusting and despicable on any number of levels. While Reid, Pelosi, people like Doyle, and Obama have been in charge of the White House and Congress, they have incurred over $5 TRILLION worth of national debt and we have nothing to show for it. $5 TRILLION is extremist by any measure of spending, whether it is total spending or out-of-control spending as a percentage of the nation's GDP. I contend their extreme damage to our national debt and economy, under their watch, make these people the real extremists and certainly not adults. Adults would have done a much better budget management job than the job Pelosi and Reid did.

And the worst name calling was by Doyle. To associate House members, who are representing their constituents to the best of their ability, with terrorists that murder, torture, and terrorize innocent people is the lowest of low when it comes to political rhetoric. It has absolutely no place in any kind of adult political discussion. It contributes nothing to a viable solution to any of our problems and certainly did not contribute anything positive to this meager debt ceiling deal. Disgusting.

[Side notes to the "terrorist" statement. Numerous news reports, quoting several sources (i.e. more than one source) who were actually in that meeting, concur that Vice President Joe Biden also contributed ot the "terrorist" language,  reportedly stating that these House Of Representative members  "have acted like terrorists." Several days after the reports, Biden's office denied that he mentioned anything like these words, despite the observation of several at the meeting. For the first time in his tenure in the White House, Obama spoke out and chided those that carelessly toss around words like "terrorists." Doyle does not deny he stated the characterization. Thus, there are conflicting stories of whether or not the Vice President stooped as low as Doyle.]

Dismal - Despite the teeth gnashing, the embarrassment of the country in the worlds' eyes, the inability to execute a credible problem solving process, and the degeneration of the Democratic Party leaders into kindergarten level name callers, the end product of the fiasco is not much better than dismal. The agreement calls for the Federal government to reduce out-of-control spending by about $2.5 TRILLION over the next ten years.

However, let's do a little math:
  • The current Federal government national debt level is about $14.3 TRILLION.
  • Obama's long range budget, that he submitted in the spring, called for the Federal government to add an additional $9 TRILLION to the national debt level.
  • Thus, without changes to the Obama's long term budget plan, the national debt is estimated to grow to over $23 TRILLION in the next ten years, the equivalent of over $200,000 per U.S. household.
  • This meager debt ceiling agreement would theoretically reduce the country's national debt to $20.5 TRILLION or about $178,000 per household.
Obviously, either number, with or without this settlement, is a dismal disaster for America and for America's families. The country will not be able to handle such massive debt no matter how much Obama wants to tax the rich and close tax loopholes. The numbers, even with this agreement, are still overwhelming despite any "solutions" the White House has proposed. Dismal.

Disappointing - Despite all of the ugliness that was incurred during the past few weeks, it probably will not make any difference when it comes to the dreaded downgrading of America's debt rating by the major credit agencies:

1) Last week in a Bloomberg News report, Standard and Poor's (S&P) chairman, John Chambers, issued a video that stated how much the political class needed to reduce government spending: "$4 TRILLION wold be a good down payment. A grand bargain of that nature would signal the seriousness of policy makers to address the fiscal situation in the U.S." In other words, the $2.5 TRILLION that was agreed to is not even a good down payment on debt reduction in the eyes of a major credit ratings agency.

S&P has given a top rated AAA ranking to U.S. government debt since 1941, through world wars, smaller wars, recessions, and various political antics in the White House and Congress. But the current set of politicians may be able to do what all other politicians before them could not do: get U.S. debt downgraded.

Chambers went on to say that "The $4 TRILLION, depending on whether it's front loaded or back loaded, is not going to do the trick in terms of stabilizing the U.S. government debt to GDP ratio. But it takes you pretty far along."

2) One of the most respected investors in the country, Pimco Co-Chairman Bill Gross, has publicly stated that the deal will not eliminate the danger of a credit ratings downgrade: "Eventually there's a downgrade coming, it just depends on Moody's, S&P, and Fitch and they're very slow moving."

Gross went on to state the obvious: the total, unfunded liabilities of the United States, Social Security, Medicare, and Medicaid, puts the country among the most debt-laden countries int he world. He feels that the debt load and crisis has had negative impacts on the country's economic growth, interest rates, and financial markets.

3) Bill Nuti, who is the CEO of NCR, warns that: "a downgrade to the U.S. credit rating will have widespread deleterious effects. Our economy will transition from a slow growth scenario to a no growth scenario and we could likely find ourselves in a double dip recession."

4) One would have thought that once the debt ceiling agreement was signed and some uncertainty from the world removed that the stock market would respond favorably. However, that is not what happened:
  • The day after the agreement was signed, the Dow Jones Industrial Average was down well over 200 points, down 2.2%. The Dow is down 6.7% in just the past eight days.
  • Every one of the companies in the Dow Industrials average was down the day after the signing.
  • The S&P 500 dropped 2.6% after the signing while the NASDAQ was down 2.7% in one day. The Russell 2000 index of small businesses was down 3.3%.
4) The price of an ounce of gold went up 1.4% to $1645 an ounce on news that the agreement had been signed while domestic stock prices dropped substantially.

Thus, the people that depend on knowing and understanding the econcomy and financial markets have shown their disdain for the agreement by fleeing the domestic stock market for other, safer investment options. Disappointing.

Disillusioning, disgusting, disappointing, and dismal, no mater how you cut it, we have been dissed by the debt ceiling situation, the debt ceiling childish name calling, and the final debt ceiling agreement. While this agreement has slowed down the row boat as it heads for the waterfalls, it has not stopped the forward progress towards those fatal falls.

Much work still has to be done and if the childish, immature, cowardly, and shallow behavior and analysis of the political class that was exhibited during the past few weeks is any indication of future behavior, we are still in critical condition. As a result, tomorrow we will take a look at a detailed way to reduce government spending, not by a meager $2.5 TRILLION, but by three or four times that much without fear mongering like Obama has done over the past month. I believe that the Federal government can get its financial house in order without starving the poor, bankrupting the needy, and leaving the country defenseless.

No more dissing, let's start respecting and problem solving before  a much larger financial and economic fiasco envelopes the whole country. That would be the ultimate DIS.

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