[Posted by Karl] Clingy. Desperate. That phrase is the sort of emotional extortion that usually prefaces a request for something you don’t really want to do, e.g., an odious household chore, an unusual sex act, etc.: President Obama continued pushing his jobs bill in battleground states on Wednesday, telling a fired-up crowd of students at North Carolina State University that, “If you love me, you’ve got to help me pass this bill!” The Artist Formerly Known As The One also would like to go on a dinner date with you… if you’re buying. Mr. President, America’s just not that into you . Really . Your appeals to what remains of your cult of personality increasingly make you look like Sally Field’s character in Soapdish , running out to some mall in New Jersey for an ego boost from gullible fans while the ratings dwindle. People will start to talk . –Karl
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If You Love Me…
More bad news. (Rasmussen) — The economy remains the top issue on the minds of voters while perceptions of President Obama’s handling of the issue has fallen to a new low. A new Rasmussen Reports national telephone survey finds that just 29% of Likely U.S. Voters believe the president is doing a good or an excellent job on the economy. That’s down from 30% in each of the last two weeks, down from 36% three weeks ago and the lowest ratings on the economy yet recorded for this president. Fifty-one percent (51%) give Obama poor marks on the economy. That’s up a point from a week ago and the most pessimistic assessment of his economic performance to date. Platinum Members receive weekly updates on this and other measures of the president’s performance. On national security issues, 42% give the president good or excellent marks, while 34% rate his performance as poor. That’s similar to the ratings earned in April before Osama bin Laden was killed. Following that event, 53% gave the president positive marks in the national security area. That fell back to 46% a month ago.
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Rasmussen Poll: Only 29% Give Obama Good Or Excellent Marks On Economy, New Low…
A splash of cold water on a hot summer day. Conquering the Storm In the coming days we’ll sort through the repercussions of S&P’s downgrade of our credit rating, including concerns about the impact a potential interest rate increase would have on our ability to service our suffocating $14.5 trillion debt. I’m surprised that so many people seem surprised by S&P’s decision. Weren’t people paying attention over the last year or so when we were getting warning after warning from various credit rating agencies that this was coming? I’ve been writing and speaking about it myself for quite some time. Back in December 2010, I wrote : “If the European debt crisis teaches us anything, it’s that tomorrow always comes. Sooner or later, the markets will expect us to settle the bill for the enormous Obama-Pelosi-Reid spending binge. We’ve already been warned by the credit ratings agency Moody’s that unless we get serious about reducing our deficit, we may face a downgrade of our credit rating.” And again in January, in response to President Obama’s State of the Union address I wrote : “With credit ratings agency Moody’s warning us that the federal government must reverse the rapid growth of national debt or face losing our triple-A rating, keep in mind that a nation doesn’t look so ‘great’ when its credit rating is in tatters.” One doesn’t need a Harvard Law degree to figure this out! Just look across the pond at Europe. European nations with less debt and smaller deficits than ours and with real “austerity” plans in place to deal with them have had their ratings downgraded. By what magical thinking did we figure we could run up perpetual trillion dollar deficits and still somehow avoid the unforgiving mathematics of a downgrade? Nothing is ever “too big to fail.” And there’s no such thing as a free lunch. Didn’t we all learn that in our micro and macro econ classes? I did at the University of Idaho. How could Obama skip through Columbia and Harvard without learning that? Many commonsense Americans like myself saw this day coming. In fact, in June 2010, Rick Santelli articulated the view of independent Tea Party patriots everywhere when he shouted on CNBC , “I want the government to stop spending! Stop spending! Stop spending! Stop spending! STOP SPENDING!” So, how shamelessly cynical and dishonest must one be to blame this inevitable downgrade on the very people who have been shouting all along “stop spending”? Blaming the Tea Party for our credit downgrade is akin to Nero blaming the Christians for burning Rome. Tea Party Americans weren’t the ones “fiddling” while our country’s fiscal house was going up in smoke. In fact, we commonsense fiscal conservatives were the ones grabbing for the extinguishers while politically correct politicians and their cronies buried their heads in what soon became this bonfire. With S&P and others now warning that we could face another downgrade if we don’t get serious about our debt problem (i.e., recklessly spending money we don’t have), Washington needs to wake up before things get worse! We’re already hearing murmurs about QE3, which is just madness and will further debase our currency at a time when the dollar’s status as the world’s reserve currency is already being questioned . The loss of the dollar’s reserve currency status would adversely impact us in every conceivable way. Our standard of living would decline as imports become more expensive (including imports of foreign oil), government wouldn’t be able to finance deficits as cheaply, and American corporations — employers — would lose a competitive edge. It would be another crack in our status as a financial superpower. Last May, I gave a speech at Westhills Community College in Lemoore, California, to an audience that included farmers from California’s Central Valley. I tried to paint a picture for them of where all of this was heading. The following is an excerpt from my prepared remarks: Now we’re all getting hit with rising food prices too. Back in November of last year, I predicted this would happen when the Federal Reserve dropped a $600 billion money bomb called QE2 on us! That’s short for “quantitative easing 2.” It’s a fancy term for running the printing presses and creating money out of thin air — which drives down the value of the dollar and makes the price of everything more expensive. As I predicted six months ago, these policies will lead us down a path where for the first time in our history our fate will be taken out of our own hands and placed in the hands of the world’s capital markets. They will force us to make the responsible decisions that our leaders are unwilling to make. Just as the destinies of the Central Valley farms have been taken out of your hands by the federal government’s overreach into your water rights, so the destiny of our nation will be taken out of our hands because our leadership has failed to get our financial house in order. This isn’t some theoretical threat any more. It’s already happening. The world’s biggest bond investment fund PIMCO announced last month that it was dumping U.S. Treasury bonds. The head of PIMCO, Bill Gross, one of the world’s preeminent debt investors, warned that the U.S. is in serious risk of default with our trillion dollar deficits and no end in sight. And last week, credit rating agency Standard & Poor’s downgraded our credit outlook to “negative” — that’s the first time that has happened to us since the attack on Pearl Harbor. The IMF has even given us formal notice that, unless we do something to deal with our debt problem, we could tip the world economy into another recession. It is a disgraceful and embarrassing situation when the United States finds itself justifiably chastised in the same tone normally reserved for near-bankrupt economies. And in this, like in shutting off your water, the federal government has failed you. Their reckless spending and destruction of the dollar will make access to available credit for farmers and small business owners harder to get. And it will make transportation costs higher because it will hit everyone at the gas pump. You see, because the Obama White House won’t let us drill domestically, we’re forced to import oil that we pay for in dollars. So, when the value of the dollar drops, the price of gas goes up. And if you think $4 a gallon is bad, wait till you see what life is like at $6 or $7 a gallon. Last November, the so-called smart people all laughed at me when I warned them of this. They told me not to make such a big deal about rising prices. Well, guess what — it became a big deal all on its own. In fact, there was an editorial in the New York Sun that said — and I quote: “As gasoline is nearing six dollars a gallon at some pumps, the cost of groceries is skyrocketing, and the value of the dollars . . . has collapsed to less than a 1,500th of an ounce of gold. Unemployment is still high. Shakespeare couldn’t come up with a better plot. But how in the world did Mrs. Palin, who is supposed to be so thick, manage to figure all this out so far ahead of the New York Times and all the economists it talked to?” Well, I’m sure the New York Times writers will remember the famous line: “You don’t need a weatherman to know which way the wind blows.” And right now the American economy is in the howling, hot headwinds of a gathering storm. We’re printing up and buying up our own notes at an unprecedented rate, and the Fed is artificially holding interest rates down to nearly zero. Anyone with commonsense could see what was coming. Unfortunately, common sense is in short supply among our leaders. It’s like they never believe that the rules of common sense apply to them. They think somehow we’ll escape from the consequences of their policies. It’s the same magical thinking that allows them to run up trillion dollar deficits and still think that we can “win the future.” Every other generation has weathered recessions by sacrifice and belt tightening. But our leaders today decided that they could magically paper over the tough decisions by running the printing presses. A little history lesson might have showed them how well that worked out for Germany in the 1930s. The Weimar Republic inflated its currency so much that it took a wheel barrel full of paper money to buy a loaf of bread. That might be the main thing I remember from Mr. Crum’s history class at Wasilla High, but it told me all I needed to know about the inflationary dangers of a weak currency and why we must avoid it. What a shame Mr. Crum didn’t teach at Harvard. That was just three months ago, and things have already gotten worse. We have to face this storm head on. It won’t be easy, but there are real solutions to grow our economy and reduce our debt. First, we need to get serious about our deficit. No more accounting gimmicks. No more cuts in “out-years” that never materialize. The permanent political class in D.C. might be fooling themselves with these Enron-like accounting games, but they’re not fooling the world’s capital markets. And we don’t need any more happy talk from the White House about “investing” in solar shingles and really fast trains. The White House shouldn’t even bother floating these new spending programs. We can’t afford them. Period. We need to stop this deficit spending, balance our budget, repeal Obamacare, cancel all unused stimulus funds, and reform our entitlement programs. We have to have an adult conversation about our spending commitments; circumstances have changed, and we must adapt. I know none of this will be easy, but, “thick” or not, the average American outside the D.C. politico bubble knows that we no longer have a choice! We will have entitlement reform and a balanced budget; it’s just a matter of how. We can do it ourselves in a calm, methodical, and responsible manner, or we can wait for the world’s capital markets to ram it down on us. Let’s be responsible and do it ourselves. And let’s get serious about reducing the size of government across the board and rooting out waste. How many more reports (that today are destined to merely gather dust on the shelf) do we need about duplicative and unnecessary programs before we actually do something about government waste? We need to get this economy moving again, and the real stimulus we’ve been waiting for is domestic energy development. We must reduce our dangerous dependence on foreign oil by responsibly developing natural resources here. This will provide good paying jobs, reduce our trade deficit, increase federal and state revenue, ensure environmental standards, and actually stimulate our economy without incurring any debt. That’s real stimulus! Affordable, plentiful, and secure energy is the foundation of every thriving economy. Let’s make it the foundation of ours. Let’s do the opposite of President Obama’s manipulation of U.S. energy supplies. Let’s drill here, build refineries, and stop kowtowing to foreign countries in asking them to ramp up energy production which makes us even more beholden to them as we rely on their foreign product. Let’s move on tapping our massive domestic natural gas reserves. Natural gas is the perfect “bridge fuel” to a future when more renewable sources are available. It’s clean, it’s green, and we’ve got a lot of it. Let’s drill. Let’s build an infrastructure for natural gas cars and power plants. Energy development can help kick start our economic engine. In addition to energy security, I embrace a pro-growth agenda that can make American corporations far more competitive on the global stage. (I will be writing more about this in the coming days.) We need to tell the world, “America is open for business again!” And let’s welcome industry by reducing burdensome regulations. The Obama administration keeps strangling businesses in red tape. From the EPA’s rulings to that nightmare known as Obamacare, the Obama administration is hanging one regulatory albatross after another around the private sector’s neck. Let’s get government out of the way and give the private sector room to breathe, grow, and thrive. We can provide businesses confidence to expand and hire Americans in a stable environment. Be wary of the efforts President Obama makes to “fix” the debt problem. The more he tries to “fix” things, the worse they get because his “solutions” always involve spending more, taxing more, growing government, and increasing debt. This debt problem is the greatest challenge facing our country today. Obviously, President Obama doesn’t have a plan or even a notion of how to deal with it. His press conference today was just a rehash of his old talking points and finger-pointing. That’s why he can’t be re-elected in 2012. Our economic news is disheartening and the task before us can seem daunting, but we must not lose our sense of optimism. People look around today and may see only the negative. They see a culture and a nation in decline, but that’s not who we are! America must regain its optimistic pioneering spirit again. Our founders declared that “we were born the heirs of freedom.” We are the heirs of those who froze with Washington at Valley Forge, who held the line at Gettysburg, who freed the slaves, carved a nation out of the wilderness, and allowed reward for work ethic. We are the sons and daughters of that Greatest Generation who stormed the beaches of Normandy, raised the flag at Iwo Jima, and made America the strongest and most prosperous nation in the history of mankind. By God, we will not squander what has been given us! Our destiny is still in our own hands if we pick ourselves up and act responsibly and quickly. We must all get involved. Concerned Americans must seek truth, work harder than ever, and be willing to sacrifice today to ensure freedom tomorrow. Please get engaged in 2012 electoral politics and support experienced, vetted, pro-free market fiscal conservatives who will dedicate all to preserving our Republic and protecting our Constitution. — Sarah Palin
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Sarah Palin: “‘You don’t need a weatherman to know which way the wind blows’”
Within 24 hours, the Obama administration went from attacking Standard & Poor’s first-ever downgrade of U.S. debt to almost embracing it. On the Friday night after it was issued, a Treasury department official made public a dispute about an error in which S&P had overstated U.S. liabilities. S&P acknowledged the error, but said it didn’t matter in the overall analysis. Despite the administration’s earlier dismay, S&P’s statement contained a lot of bones for Democrats to chew on. While not recommending specific tax hikes, S&P griped that “the majority of Republicans in Congress continue to resist any measure that would raise revenues.” The report also bemoaned “the prolonged controversy over raising the statutory debt ceiling” and echoed media complaints about the supposed problem of partisan gridlock and divided government. No wonder that when the White House took over PR from Treasury Department wonks, the government reactions became political. “On Saturday,” the Associated Press noted , “the administration appeared to soften its tone.” White House press secretary Jay Carney said President Barack Obama believes Washington “must do better” and set aside “our political and ideological differences” in tackling the deficit. Senate Majority Leader Harry Reid gloated that the downgrade “reaffirmed the need for a balanced approach,” meaning tax hikes. Then on Sunday, former Obama adviser David Axelrod charged that “this is essentially a tea party downgrade” While there were some gripes on the Left that noted (correctly) S&P’s dismal record at rating mortgage securities, most progressive bloggers and pundits joined Axelrod in sticking to their tried-and-true pastime of blaming the GOP and conservatives. In the coming days, coming weeks, and probably the coming years, look for liberal politicos and the media to use the downgrade and threat of a further one as a bludgeon for higher taxes. Advocates of limited government, while making the obvious point that the downgrade is in large part a result of uncontrolled federal spending that accelerated massively under the Obama administration, must be careful to keep the focus on restoring economic growth, rather than maintaining a subjective measure of the nation’s credit rating. For S&P and the other big rating agencies, long beneficiaries and enablers of big government policies, are experiencing somewhat of a market downgrade themselves. Given the alternative of Eurozone debt, the doom and gloom scenarios of a U.S. downgrade may be vastly overstated. And even if a lower rating does lower demand for U.S. Treasuries, this may have with the benefit of more investment in the private, as opposed to the government, sector. Indeed, come Monday, we may find that the markets had already factored in a potential S&P downgrade. S&P was actually a Johnny-come-lately at marking down U.S. debt, as two upstart credit rating agencies, Egan-Jones Rating Co. and Weiss Ratings, had already done so. Unlike S&P, these firms made clear that their ratings were about long-term prospects, rather than the debt ceiling fight, and emphasized spending over taxes. When Egan-Jones, widely respected for its early downgrades of Bear Stearns and Lehman Brothers , changed its rating of U.S debt from AAA to AA+ on July 16, it explained: “The major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending. We are taking a negative action not based on the delay in raising the debt ceiling but rather our concern about the high level of debt to GDP.” Similarly, Weiss, which lowered its rating in April from C to C-, offered this explanation: “Our downgrade today is not contingent on the outcome of the debt-ceiling debate.” By contrast, a closer look at the S&P downgrade shows that the firm may have been motivated by its desire to remain a political player. Fox Business correspondent Charlie Gasparino argued on-air Saturday that the firm “boxed itself in” by demanding $4 trillion in cuts and encouraging tax hikes. When Congress passed cuts of less than this amount in a package that contained no tax hikes, S&P likely felt that it had to make good on its threat but do so in a way that curried some favor with the administration in power. The ratings cartel of S&P, Moody’s, and Fitch was created by decades of government regulation blocking meaningful competition. In 1975, the Securities and Exchange Commission (SEC) created the designation of “nationally recognized statistical rating organization” (NRSRO) for credit rating firms. Regulatory agencies soon began requiring that banks, brokerage firms, pensions, and insurance companies carry mandated levels of securities rated AAA from an SEC-approved NRSRO. From the 1990s until 2003, only the “Big 3″ had been approved by the SEC to be NRSROs. And when these firms would rate a new security as AAA, financial firms would rush to buy it to satisfy their regulatory capital requirements. This is what helped created the bubble in AAA-rated mortgage-backed securities. But slowly and surely, the state-backed financial ratings cartel began to crack. Prodded to increase competition by the bipartisan Credit Rating Agency Reform Act of 2006, there are now ten firms approved by the SEC to be NRSROs, including Egan-Jones. And over the weekend, financial regulators prudently waived the NRSRO requirement so that financial firms holding U.S Treasuries would not have to substitute “safer” bonds of AAA-rated countries such as France to satisfy their regulatory capital requirements. These developments augur less disastrous results from the downgrade than predicted, and even some positive effects. Interest rates probably won’t rise much more than they did when Treasuries were downgraded by Weiss and Egan-Jones. The main reason is that, given events in the European Union, there isn’t a safer Treasury bond than the American one to which a “flight to safety” would occur. As noted in a June 22 analysis by the Financial Times , “With the eurozone engulfed in a debt crisis and emerging market economies, such as China, years away from becoming legitimate global financial entities, investors insist there is really no alternative to the U.S. at the present time.” As Jim Paulsen, chief investment strategist at Wells Capital Management, told the paper, “A downgrade for the U.S. would mean the new triple A is double A.” But even if there were slightly higher interest rates and slightly less demand for U.S. bonds as a result of the downgrade, would that really be so bad? After all, this would mean fewer inflationary pressures and higher costs for the government to borrow money to create new bureaucracies. A more honest evaluation of the risks of government securities also means a more even playing field for entrepreneurs to raise capital. The AAA rating for U.S. and other government securities has given sovereign debt an advantage over private debt. Given the profligate behavior of many of the world’s governments, this advantage was often undeserved. If the AAA were gone for the U.S. and European countries, “investors seeking a fixed and totally safe return would no longer look towards governments, but to the most stable and profitable private companies,” argues financial analyst Martin Hutchinson at PrudentBear.com In the meantime, the U.S. should slash spending, taxes, and regulation. Not for the purpose of restoring S&P’s AAA rating, but to restore the quadruple-A capitalist system that allowed investors and entrepreneurs to propel America to economic greatness. Prediction: Defying all conventional “wisdom,” the U.S. stock market will be up for the day on Monday. Maybe by 10 points, or maybe 100, but it will end the day in positive territory.
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S&P’s Regulatory Politics
Read this: Here was the question to S&P exec John Chambers, and his reply: Q: “There’s been a figure of $4 trillion dollars circulating as an example of the scope of fiscal consolidation measures that could work to stabilize the U.S. debt-gdp ratios. Could you explain how that figure was arrived at since it was mentioned in S&P’s reports and where it figures in S&P analysis?” A: “First of all, that figure comes initially from the Bowles-Simpson fiscal commission, and it was embraced by President Obama in his April 13 speech and Paul Ryan in his counter-budget proposal. And so you had policy makers converging around the amount. Now actually the $4 trillion, depending on whether it is front-loaded or back-loaded, is not going to do the trick in terms of stabilizing U.S. government debt-to GDP ratios. But it takes you pretty far along. And I think a grand bargain of that nature would signal, you know, the seriousness of policy makers to address the fiscal issues of the United States, to actually stabilize the debt-to-GDP. The IMF says it takes 7.5% of GDP consolidation. I think we have more than that.” The U.S. annual budget deficit is now around 9% of GDP. Chambers adds: “But $4 trillion would be a good down payment. We thought that..if policy makers could deliver the goods on that, then that would be a strong sign on our political scores and eventually on our projections on the fiscal side.” S&P has already said it may slash the Triple-A rating if a debt ceiling deal is not accompanied by what it deems is a credible plan to cut the $14.3 trillion federal [debt] by $4 trillion. The plan has “to have bipartisan support,” Chambers said. “If you have a plan that is only backed by one side or the other, even if you got it through, you would be faced with the prospect of it being unwound.” So, S&P’s Chambers is saying the ratings agency wants to see at least a $4 trillion deal, one that would come with bipartisan support, too, because the ratings agency fears without that support, Congress will upend any debt-cutting plan. There was only ever one plan that did what S&P said was required — $4 trillion in cuts with bipartisan support. That’d be Cut, Cap, and Balance — a plan that cut $4 trillion and got bipartisan support in the House of Representatives. As Democrats tonight, and some Republicans, lash out and blame the Tea Party for causing the United States to lose its credit rating, it is worth pointing out that only the Tea Party offered up a plan to avoid what happened. This is precisely why the GOP should have held the line.
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Only the Tea Party Had a $4 Trillion Plan
