Friday, January 7, 2011

To understand what happens if we fail to raise the Debt Ceiling requires thinking that Teabaggers aren't capable of

"Debt bad. Debt wrong. Spending bad.  Spending wrong.  Debt limit must not be raised."

Hulk SMASH!!!

This, unfortunately, is the level of intellect that's the driving the demand of many grass-roots conservatives not to raise America's Debt Ceiling.

But like many things about the Economy, dealing with the Nation's debt is counterintuitive (my personal word of the year in 2010), and things that are counterintuitive require a degree of thinking that it seems the Tea Party is just not capable of.

To Tea Partiers, not raising the Debt Ceiling is a statement of personal responsibility, it shows that America is going to "get serious" with the National Credit Card, and finally start to get it's "act together".

It also shows that the Teabaggers are completely divorced from reality, because here's what's gonna happen (take it away, Ezra Klein!):

Think back to the financial crisis. The underlying cause was that various financial entities stopped believing that their loans would be repaid, and so they stopped making loans, or began demanding such high prices for making loans that credit became unaffordable. The result was economic catastrophe.

If the federal government defaults on its debt, the same thing will happen. But in this case, it will happen to the full faith and credit of the United States, not just to Wall Street.

The basic unit of borrowing in America is the debt that the Treasury sells to finance the government. Much of the rest of the debt in the country -- even when it has no direct connection to the government -- is benchmarked against Treasurys. Treasury debt normally goes for very good prices because it's considered a virtually riskless investment: Modern America has never defaulted on its debt. If that changes, then so too will the prices the market charges to loan the government money.

What happens then? As Geithner explains, "because Treasuries represent the benchmark borrowing rate for all other sectors, default would raise all borrowing costs. Interest rates for state and local government, corporate and consumer borrowing, including home mortgage interest, would all rise sharply. Equity prices and home values would decline, reducing retirement savings and hurting the economic security of all Americans, leading to reductions in spending and investment, which would cause job losses and business failures on a significant scale."

And the damage done by a debt default won't be temporary. Instead, it will permanently introduce a new variable into the market's calculation of America's risk: Right now, the market doesn't believe that our political system would ever allow a debt default. The morning after a default happens, the market will have been proven wrong, and it will have been proven wrong permanently: If it can happen once, it can happen again in 20 years. In that world, the cheap debt that America enjoys and relies on is gone forever, and our economy is likely to be permanently worse off for it.

Thursday, January 6, 2011

The Bill Daley rundown...

Jonathan Bernstein:

When I was describing Rouse's strengths, I listed: "he's a problem-solver, he doesn't cultivate enemies, he knows the Washington landscape well, he has an excellent working relationship with the president." As far as I know, those all apply to Daley, as well, with the possible exception of an as yet unproven working relationship with Barack Obama. I'd say it's also a plus that Daley knows his way around a presidential campaign, since keeping the presidency running during one of those is going to be one of his challenges over the next two years. I like the idea that when the campaign demands that Obama absolutely, positively needs to be in San Dimas tomorrow or else California is lost, Daley will have a good idea of how to evaluate that request.

I can also say that my biggest hesitation about Rouse, enough to make me suggest at the time that Obama would be better off seeking someone else, was that Rouse does nothing to address the administration's biggest weakness, which is its administration of the executive branch departments and agencies. Daley, as a former cabinet secretary, should be more oriented towards that side of the presidency than the numerous former Hill staffers in the Obama WH (and, perhaps more to the point, the former Senator in the Oval Office) tend to be.

Greg Sargent:

This has all been argued already at length by others, but here goes. Obama's approach to the crises he inherited were by any sane measure mostly moderate and reasonable. The stimulus was smaller and less ambitious than most liberals wanted. The health care plan he adopted jettisoned the most liberal elements and embraced solutions once championed by Republicans. The Wall Street reform bill was the most sweeping overhaul of financial regulations in generations, but as observers across the spectrum have noted, it wasn't fundamentally transformative. Obama is winding down the Iraq War, but he escalated in Afghanistan. And he has embraced some controversial Bush policies on civil liberties and terrorism. And so on.

Despite all this, Republicans and conservatives have uniformly condemned the Obama administration as in the grip of unrepentant leftism run amok. Yet what's actually happened is that in so doing, Republicans have moved to the right, and we've all agreed to move what we arbitrarily call the "center" to the right in order to accomodate this.

The pick of Daley, however, will reinforce the conventional narrative that Obama has recognized the error of his ultraliberal ways and has picked a "seasoned Beltway hand" to steer the adminstration back to the center. Obviously this is only one of many things to consider about the Daley pick, and there may be many other good reasons to pick him that outweigh this problem.

But in interpreting the Daley pick, many commentators will be pointing to Daley's interpretation of the first two years as if it's, well, true. They'll assert that Obama has internalized it. And maybe the President has internalized the Daley interpretation of his young presidency. But that doesn't mean it has anything to do with what actually happened.

Ezra Klein (same article as before, but still...):

Perhaps Daley is simply an obscenely good executive vice president type: He seems to have impressed everyone who could one day promote him, alienated virtually no one (or at least no one who has come forward publicly) and effectively advocated for the interests of whoever happened to be paying him at the time.

Or maybe the answer is that the Obama administration has simply decided to tack right, and they figure the way to do that is to hire someone who legitimately believes that tacking right is a good idea. I don't find Daley's theory of politics persuasive, but if you wanted to get credit in the media for moving to the right, it'd help to hire someone who had publicly and clearly attacked your moves to the left.

But the evidence here really doesn't add up. Dean wanted more a vastly more progressive administration, but he likes the guy who wanted a vastly less progressive administration. The administration likes its own record but appears interested in hiring someone who doesn't. There's a widespread perception that the White House is too close to Wall Street, but the leading candidate for chief of staff is a top executive at J.P. Morgan. Oh, and he was on the board of Fannie Mae, too.

The Daley pick seems like a bad idea to me. The particular theory of politics he espouses seems woefully detached from the realities of the modern partisan environment.

Ezra went on to quote Jonathan Chait, so I'll go ahead and save you the trouble:

And there is the problem. I don't know what easy method there is to respond to McConnell's tactics. But Daley's method, allowing extreme positions to redefine the parameters of the debate, is almost surely the wrong way.

I think liberal criticism of some potential Obama nominees is overblown -- the fact that Gene Sperling got paid a lot of Wall Street money to run a charitable program doesn't bother me. But putting a figure like Daley in a position of strategic importance seems like a major blunder.

Andrew Sullivan (however briefly):

Look: he's chief-of-staff. That's about management more than policy. Let's judge him on that when we have the data.

When it comes to Bill Daley, there is only one thing I'm am surer of (other than Boehner crying in the next 24 hours)

What was it I said about Bill Daley? Oh yeah:

I'm not wild about William Daley coming into the White House as Chief of Staff, but I'm not that opposed to it happening either. (It's not impossible, but...) He seems qualified enough for the job, which is more than I can say for Ed Rendell (cough-cough, Joe Klein) In any case, I have my doubts about it happening.

Euuuhhh, shoulda stopped one sentence earlier than that.

First off, I've got to learn about these wide release trial balloons the Administration floats up. Whenever they make a decision, there's a wide release about who the choice is. There is a flurry of complaints (i.e. a flurry of activity on Huffington Post and Firedoglake), the Administration denies any hire has happened (which is technically true), then the hire happens anyway.

I'm not sure what the purpose of this procedure is? Other than a classic trial balloon to get any opposition to show its cards in advance. I think the White House would be better served in skipping step two, the denial portion, and just going ahead, making their decision, and living with the consequences.

Anyway, here's Ezra's piece on the New Chief of Staff, he expresses for me my own mixed feelings better than I ever could. (Thank you, Mr. Klein!)

Imagine I told you that one of the candidates President Obama is considering for chief of staff opposed the creation of the Consumer Financial Protection Bureau, opposed doing health-care reform and led the Chamber of Commerce's effort to loosen the post-Enron regulations on the accounting and auditing professions. His major qualification for the job is that he's extremely well liked by the business community, in part because he routinely advocates for their interests and in part because he's a top executive at J.P. Morgan. His theory of politics is that the Democratic Party has become too liberal and needs to tack right. Last year, he doubled down on that argument by joining the board of Third Way.

Now imagine I told you that one of the candidates President Obama is considering for chief of staff has been endorsed by Howard Dean as a "huge plus" for the Obama administration and previously chaired Al Gore's 2000 presidential campaign. Dean, of course, was the great liberal hope in 2004, and has been a key voice for progressives ever since. Gore's 2000 campaign was a notably populist effort, in tone if not in content.

Now imagine I told you they were the same guy.

This is the mystery of William Daley. Reports suggest that he'll be named Obama's chief of staff fairly soon, perhaps as early as tomorrow. But how is it that a centrist banker who opposed the Obama administration's signature initiatives has such a large constituency among liberal political types both inside and outside the White House?

Daley certainly has his backers. The Obama administration, home to many liberals, clearly likes him. So does Howard Dean, and so did Al Gore. He's apparently quite popular among business leaders, as well. His performance shepherding NAFTA through the Congress certainly sounds like it was an impressive political feat, whatever you think of the underlying legislation.

Perhaps Daley is simply an obscenely good executive vice president type: He seems to have impressed everyone who could one day promote him, alienated virtually no one (or at least no one who has come forward publicly) and effectively advocated for the interests of whoever happened to be paying him at the time.

One more point, I say this to remind the Professional Left fans out there who think that this is the President tacking right, or that Daley will "manipulate" the President like they think Rahmbo manipulated Obama.

Right, the guy the President hires has somehow put the President under his sway. Now that's a Jedi mind trick!

As the Attorney General is the guy or gal who runs the Justice Department, as the Treasury Secretary is the guy or gal who runs the Treasury Department (and so on), the White House Chief of Staff is the guy who runs the White House. That is not the same as the guy who runs the Country. William Daley is guy who makes sure the ship runs smoothly, but the Captain (that'd be Obama) ultimately charts the course.

If I am sure of any one thing, other than Boehner crying sometime in the next 24 hours, is that some of my ideological colleagues are going to make the asinine assumption that Daley is somehow tacking this country rightward. He won't. If White House policy tacks rightward, it'll be Obama. Granted, it may be the consequence of a deal with the GOP, but it won't be Daley.

Wednesday, January 5, 2011

Rep. Ron Paul is a blithering idiot. (VIDEO)

Sorry, I take that back. Calling Ron Paul a blithering idiot would give blithering idiots a bad name.

I wouldn't trust Dr. Ron Paul give me first aid. It's probably a safe bet that if you go to his son, the Senator from Kentucky, you'd probably go blind.

The following should serve as testament once and for all about this man's complete inability to understand even the most basic of economic concepts. Thank you Stephen Colbert, you may have done as big a service as Jon's recent efforts to get the 9/11 Health Bill passed. You exposed Ron Paul as a fraud.

Problem is, most people (especially his supporters) don't know it, or won't acknowledge it.

Well, watch the two clips...and learn something.

The Colbert ReportMon - Thurs 11:30pm / 10:30c
Gold Faithful
Colbert Report Full EpisodesPolitical Humor & Satire Blog</a>March to Keep Fear Alive

The Colbert ReportMon - Thurs 11:30pm / 10:30c
Gold Faithful - Ron Paul & David Leonhardt<a>
Colbert Report Full EpisodesPolitical Humor & Satire Blog</a>March to Keep Fear Alive

I was only pissed off at New York Times writer David Leonardht for not just cutting to the chase and calling Rep. Paul a @#$%ing moron to his face.

Did Rep. Paul really suggest utilizing Gold "Certificates" to represent how much gold you have?

And the difference between than the Federal Reserve Notes (Dollar Bills) in your pocket is...what exactly??

Don't expect an answer. Ron Paul's got his ideology...that and a room temperature IQ.

Tuesday, January 4, 2011

The Washington Post delivers the most shocking bit of news on the Tea Party...evah!

By the way, my tongue is so deep into my cheek, I'm practically chewing on it.

Tea party supporters [surveyed by Roanoke College] included more men (60 percent) than women (40 percent) and were overwhelmingly white (94 percent). Interestingly, 79 percent of those who said they disagreed with the tea party also were white. It's worth noting that the college said nearly 84 percent of those polled overall were white, 11.5 percent were black and 2 percent were Hispanic/Latino.

By the way, what's the formal, journalistic way to say "No Duh" in print?

A great post about the William Daley non-hire, and how to feel about it by Ezra Klein

I'm not wild about William Daley coming into the White House as Chief of Staff, but I'm not that opposed to it happening either.  (It's not impossible, but...) He seems qualified enough for the job, which is more than I can say for Ed Rendell (cough-cough, Joe Klein) In any case, I have my doubts about it happening. The Citibank stench, at the end of the day, will overwhelm. Added to that, its supposed purpose probably won't work for the reasons Erzabelow outlines :

It's frankly slightly insulting to business leaders to say that their relationship with the White House relies on how many close personal friends they have in the building. It's not that that stuff doesn't matter, but what really matters, as you'd expect, are actual policy decisions. And the reason Daley is well liked by business, at least right now, is that he has been siding with them on major disputes. If he gets to the White House and stops doing that, he won't be as well liked among them.

If the administration wants more support from the business community, that's going to mean giving the business community more things that it wants, or at least fewer things that it doesn't want. So far, that's not happened because the administration has thought that good policy meant pushing some high-profile changes -- such as the Consumer Financial Protection Bureau -- that the business community really didn't like. If the administration decided it was wrong about that, and has resolved to not do things business doesn't like going forward, it can build a better relationship with the business community even without Daley. Conversely, if the administration plans to keep pushing policy it likes even if business doesn't like it, then relations with corporate America will be icy even if Daley is working the phones morning, noon and night.

You know the old saying, "nothing personal, this is just business"? Well, the business community knows it, too.