The Morning Grumpy – August 8th

8 Aug

Welcome to the Monday Edition of the morning grumpy, recently downgraded from its AAA bullshit rating.

1. The US stock market is going to take a shit today after Standard & Poor’s lowered America’s credit rating late on Friday. By and large, most sane economists think the decision to lower the credit rating was a political one. In 2009, S&P maintained our AAA credit rating and projected maintaining it as such even though they projected a debt-to-GDP ratio of 90%. Now, in 2011 with a projected debt-to-GDP ratio of 75%, they lower our credit rating?

Of the other countries with a AAA credit rating from S&P, what are their debt-to-GDP ratios? Australia 95% Austria 200% Denmark 180% Finland 155% France 182% Germany 142% Hong Kong 334% Luxembourg 3443% Netherlands 471% Norway 538% Sweden 187% Switzerland 229% United Kingdom 400%

The media seems to have taken a “pox on both houses” narrative for this story, even though the history as described above and the S&P credit report tell a different story. S&P changed their rating based on our extreme long term debt, yes. However, until this past 60 days, the United States always demonstrated an ability to raise money at will to pay debts due to our stable political system and willingness to raise and collect taxes to secure the debt.  Not so much anymore.

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.

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

With several members of the GOP leadership openly welcoming default, it’s not a shock that the credit rating agencies have taken them seriously. Heckuva job, tea party.

2. Ladies and Gentlemen, your GOP frontrunner for the 2012 Presidential nomination, Gov. Rick “Pray For Rain” Perry!

This weekend, he capitalized on the political and economic uncertainty in America with a good ol’ fashioned prayer revival in Houston.

“This is the first time a governor, one of the highest-ranking officials in the government, made a stand and said: We need this,” says Finn. “It says in 1 Peter that we should submit to governors. As true believers, as Christians, when the governor wants us to be here, we’re really required to be here.”

Fucking hell, his plan is to hand it all over to god? Pity this poor nation…

3. Ever heard of the New Apostolic Reformation? Their plans for “spiritual warfare” in America? They make up Rick Perry’s base of support and several other leading Republicans are either part of the movement or court their support, including Palin, Bachmann, etc. They are a force to be reckoned with in this country so, get to know them.

4. A song for Monday, Part 1. “Video Games” by Lana Del Rey

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5. Here’s a cool map that illustrates how much the United States owes to foreign countries and to whom. For example, placing your mouse over the large dot on China shows that Chinese lending to the United States has gone from $59 billion ten years ago to more than $1.15 trillion today, or one quarter of the total foreign owned debt of $4.45 trillion

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6.  Many major U.S. companies are making big plans to expand overseas even as some of them announce new layoffs at home, and there’s a chilling reason why: They’re beginning to give up on the American consumer as a source of future growth.

Major layoff announcements by big corporations already have begun to rise again in the U.S., hitting a 16-month high of 66,414 jobs to be shed in coming months, according to the outplacement firm Challenger, Gray & Christmas Inc.

Strikingly, the largest layoff actions last month were accompanied by disclosures that the same companies planned to ramp up their operations — including hiring — in emerging economies.

An ambitious jobs plan from President Obama would be to offer a tax amnesty for overseas earnings if those companies were to reinvest a significant portion of that money into expanding their workforce and onshore manufacturing facilities. A corporate friendly way to solve our demand problem in this country…

7. Grover Norquist, Soul of the New Right Wing Machine.

Norquist calls it the “Leave-Us-Alone Coalition,” a grouping of gun owners, the Christian right, homeschoolers, libertarians, and business leaders that he has almost single-handedly managed to unite. The common vision: an America in which the rich will be taxed at the same rates as the poor, where capital is freed from government constraints, where government services are turned over to the free market, where the minimum wage is repealed, unions are made irrelevant, and law-abiding citizens can pack handguns in every state and town.

8. A song for Monday, Part 2, “The Pursuit of Happiness” by Lissie – A favorite of mine on Mondays.

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9. Finally, a piece in the NY TImes which is being debated all over the web, “What happened to Obama?”

THE real conundrum is why the president seems so compelled to take both sides of every issue, encouraging voters to project whatever they want on him, and hoping they won’t realize which hand is holding the rabbit. That a large section of the country views him as a socialist while many in his own party are concluding that he does not share their values speaks volumes — but not the volumes his advisers are selling: that if you make both the right and left mad, you must be doing something right.

The article does feel a little like an indictment of the hostage rather than the extremist right hostage takers, but I generally agree with the sentiment of the article. Obama doesn’t know how to handle bullies, sees every issue as an opportunity for negotiation and sees himself as the “legislator in chief” rather than the President. If I had to do it all over again, I would’ve voted for Hillary. She knows how to deal with the insane right.

Have a day!

15 Responses to “The Morning Grumpy – August 8th”

  1. Leo Wilson August 8, 2011 at 7:44 am #

    Thanks for not polluting the grumpy with overflow from that other pointless story, Chris.

    I suspect the answer to credit woes are smple: Legislate a plan in which we owe 4 trillions less in 10 years rather than one in which we’re still on track to be an additional 10 trillions in debt in 10 years. What just passed didn’t get there. It is a “grow the debt more” plan.

  2. Jesse August 8, 2011 at 10:01 am #

    Nothing better than watching the losing team start whining about “hostages” and calling the other side “terrorists”. 

    You’re either with us or against us!  Yeeehaw!

    Leo, you’re right on.  A few years ago it didn’t look as rotten as it does now.  And the tea party apparenly doesn’t mind some (monetary) bloodshed on its way to revolution.  It’s not as if the R or D parties were going to solve our spending problem on their own.

  3. Leo Wilson August 8, 2011 at 11:17 am #

    No idea if this blockquote thing will work…

    In the near term horizon, by 2015, the U.S. net general government debt with the new assumptions were
    projected to be $14.5 trillion (79% of 2015 GDP) versus $14.7 trillion (81% of 2015 GDP) with the initial
    assumption – a difference of $345 billion.
    In taking a longer term horizon of 10 years, the U.S. net general government debt level with the current
    assumptions would be $20.1 trillion (85% of 2021 GDP). With the original assumptions, the debt level was
    projected to be $22.1 trillion (93% of 2021 GDP).
    The primary focus remained on the current level of debt, the trajectory of debt as a share of the economy,
    and the lack of apparent willingness of elected officials as a group to deal with the U.S. medium term fiscal
    outlook. None of these key factors was meaningfully affected by the assumption revisions to the assumed
    growth of discretionary out lays and thus had no impact on the rating decision.

    What seems obvious to me is that the problem is increasing debt. Maybe tax increases might have helped… but, that isn’t what guided the decision. Intransigence rules both parties, and the result is unsustainable amounts of staggering debt.

    • admin August 8, 2011 at 11:34 am #

      Yes, the problem is debt, but S&P clearly said (as quoted in the article) that the removal of revenues from the platter of options and the political brinksmanship of the right has forced the downgrade. IOW, We have a problem, yes. It’s the same problem we had three months ago when S&P reaffirmed our AAA rating. After three months of Republicans threatening the world with default and refusing to negotiate like rational players, S&P downgraded the debt, because we can no longer guarantee we have a functional system of government.

  4. Mike In WNY August 8, 2011 at 12:37 pm #

    The threat of default is/was a bipartisan effort. The Dems failed to put any rational plan forward to address spending and out of control entitlements.

  5. Leo Wilson August 8, 2011 at 1:21 pm #

    admin – that’s the spin. What I saw was similar or duplicate intransigence on the other side of the aisle, too. The specter of default was raised by our President in the first place, essentially saying, “The unspent stimulus monies are off the table. We’ll default before using that slush fund.” The same is true of repaid TARP monies that have never been repaid to our creditors despite legislation (TARP again) that requires exactly that.

    And, we still have the example of history, in which promises of fiscal discipline in exchange for tax increases have never been honored.

    I understand the mission and goals of this blog, as reiterated by Marc in another thread that’s still up today, and I respect that. However, Nero is playing the same old tune again and again…

  6. Black Rock Lifer August 8, 2011 at 2:35 pm #

    Lets stop pretending the problem is all spending, its just as much about revenue. Those that have benefitted from the resources and infrastructure of our country simply have not paid for that priviledge. The obscene and growing disparity of wealth has undermined our tax base by concentrating wealth in the hands of people that refuse to accept their obligations as citizens. The only way out is to rebuild the middle class, a group willing and able to pay their own way as well as contribute to the common good.

  7. jimd August 8, 2011 at 5:15 pm #

    Revenue is at a 50-60 year low. Unemployment is at 9.1-2%. How the hell can a rational human being believe this is strictly a spending problem? Cutting = job loss which is exactly what we don’t need now. I know this is a shit sandwich but I think the Prez has it right, get people to work, get the economy moving and then make the cuts. The caveat being MAKE THE FUCKING CUTS

  8. Leo Wilson August 8, 2011 at 5:59 pm #

    I never once pretended the problem is all spending… but, it is mostly spending, and there’s a historic record to review and provide guidance. Both Reagan and GHW Bush were promised fiscal discipline in return for tax increases, and the fiscal discipline never arrived after the taxes were increased in fact.

    Who lacks credibility are the folks that renegued on promises of fiscal discipline in the past. If you want balance, prove your part first.

    I also remember some other things, like a president saying, “Instead of punishing China over human rights violations, we should be investing in their infrastructure.” and another presidential candidate saying, “If I were starting a business today, Beijing is looking pretty good!” (parphrasing, I don’t have citations).

    And still, the people who have lost their unionized industrial jobs run like lemmings towards that same old cliff that put them out of work in the first place. Revenues aren’t at an all-time low because of rich people, they’re at an all-time low because some leaders threw the middle class’ jobs, incomes and tax revenues to the dragons.

  9. Leo Wilson August 8, 2011 at 6:03 pm #

    Tell yourself the truth: if we still had a thriving industrial sector that employed millions of Americans, would we even be having this debate about what to cut?

  10. Leo Wilson August 8, 2011 at 6:08 pm #

    Ask yourself another (much more scarey) question: What is going to replace those millions of industrial sector jobs in a way that will make up all that lost revenue and provide economic mobility to the poor and undereducated the way the industrial sector used to, too?

  11. jimd August 8, 2011 at 7:43 pm #

    @12, that’s a great question. Some how or another we need menial labor. I’ve worked amongst the undereducated enough to know they are willing to work, are good workers but lack the fortitude to be self sufficient. Maybe Chris’ idea about tax amnesty for overseas investment needs a good look.

  12. Leo Wilson August 8, 2011 at 8:43 pm #

    The middle class we all remember was always a stepping stone. Those jobs were how people moved up the ladder to better lives. They allowed a building to become a family’s home and paid for the kids to go to college, allowing those children to have better opportunities than their parents had. Without them, there’s no possibility of economic mobility other than those with money losing it.

    Today, when I hear a politician trying to establish creds by claiming a blue-collar background (John Edwards’ story about his father working in a mill comes immediately to mind), I have to ask: Is the mill still open with another American worker providing opportunity to his kid, or did the trade policies you (the politician) support today move them offshore and curse that worker to lifelong poverty?

  13. jimd August 8, 2011 at 9:35 pm #

    Amen

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