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Gregg Easterbrook tells us what will happen if the super committee fails.
Action by the debt-reduction ‘super committee’ is due in less than a week. You will not be surprised to learn the super committee may only announce grandiose goals, while “deferring” specifics to some unspecified future point.
If, after months of hype, the super committee turns out to be a Potemkin committee, taking no action against the tide of government red ink, here is what will happen: Absolutely nothing.
That’s why falling dangerously arrears on national fiscal policy is so seductive – in the short term, nothing happens. Greece, Italy, Portugal – their governments made irresponsible decision after irresponsible decision, and nothing happened. So the irresponsible decisions continued.
America’s political leadership can continue to act irresponsibly about money for years to come, and absolutely nothing will happen … until it’s too late.
Consider an analogy to household finances. My wife and I are squares about money. We borrow conservatively, repay early, plan cautious budgets and won’t buy anything unless we know we can cover the cost within a short time. The result is a nice house that’s mostly our own equity, plus retirement savings and a strong credit rating. In fiscal terms, we are pretty much where the United States was a quarter century ago.
Suppose I ran out and bought a high-end sports car for me and a diamond brooch for her. This would be irresponsible, especially from the standpoint of our three children. What would happen the next day?
Absolutely nothing. I could break years of rigorous self-discipline about debt and short-term outlook, but pay no penalty at all. …
And George Will on the committee.
Born during what is mistakenly called the debt-ceiling “debacle” last summer, the congressional supercommittee may die without agreeing to a 10-year, $1.2 trillion (at least) deficit-reduction plan. This is not properly labeled a failure. Committee Democrats demanded more revenue; Republicans offered $500 billion; Democrats responded with the one-syllable distillation of liberalism: “More!” So the committee’s work has been a clarifying event that presages a larger one — next November’s elections.
The messiness surrounding the debt-ceiling increase was what democracy looks like when belatedly confronting big problems. Remember, Barack Obama demanded, until doing so became politically untenable, a “clean” ceiling increase — no supercommittee or other threat to his spending torrent.
The supercommittee should by now have sent its plan to the Congressional Budget Office for “scoring” — calculation of the fiscal consequences of its proposals. The law establishing the committee requires any proposal to be published in legislative language 48 hours before Nov. 23. Not that law has much to do with fiscal matters: The Democratic-controlled Senate has not produced a budget in more than 930 days. This is just one way existing budget law is ignored.
Regarding the supercommittee, Harry Reid’s and Obama’s interests diverge. Imitation is the sincerest form of politics, and Obama needs congressional failure as he seeks reelection by emulating Harry Truman in 1948, running against a “do-nothing” Congress. Reid, however, wants to remain Senate majority leader. In 2012, Democrats will be defending 23 seats, Republicans only 10. Republicans need to gain just four seats to control the Senate. Reid’s members cannot relish running while Obama is denouncing the “Republican Congress.” As if the Democratic-controlled Senate has been temporarily disassociated from Congress. …
Spengler turns his attention to MF Global and corruption in DC.
Jon Corzine’s MF Global is missing $600 million of customer money, and the bankruptcy trustee has no idea when it might be found or when investors might be paid back, if ever. The New York Times today says that the investigation points to the conclusion that the firm simply misappropriated (that is, stole) customer money to back up failing bets on the distressed bonds of failing European governments.
The former head of Goldman Sachs and Democratic governor of New Jersey presided over a firm that may turn out to have been a criminal enterprise. Maybe the Occupy Wall Street movement should shift venue to the headquarters of the Democratic Party, which has a long pattern of involvement in outright corruption.
If this is the case — and I will patiently await the results of investigation by the proper authorities before coming to any conclusion — the only proper thing to do would be to throw the book at Corzine and his colleagues and put some people in jail for a very, very long time. In response to corporate malfeasance and Wall Street’s misbehavior in the advent of the 2008 crisis, we have had a raft of new legislation and regulation — Sarbanes-Oxley, Dodd-Frank, the Volcker rules, and more minutiae than the battery of corporate lawyers hired by the banks can follow. My few friends still employed in the investment banking industry are making a fraction of what they once did, but their lawyers are getting fat. The last hiring bubble in Wall Street, I’m told, is in risk management and legal services. Remember what Mother used to say: “You can’t have any new laws until you use the old ones!”
There is overwhelming documentation that key Democratic Party figures used government sponsored enterprises — the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) — to corrupt Congress on a grand scale in order to pay themselves spectacular sums. Last year Gretchen Morgenson and Josh Rosner told the sordid story in their book Reckless Endangerment: …
Just for grins, David Warren lists some of the Occupiers’ demands.
… “Repeal the Taft-Hartley Act. Unionize ALL workers immediately. … Raise the minimum wage immediately to $18/hr. … Institute a moratorium on all foreclosures and layoffs immediately. … Open the borders to all immigrants, legal or illegal. … Tax the very rich at rates up to 90 per cent. … Allow workers to elect their supervisors. …
Lower the retirement age to 55. Increase Social Security benefits. …
Ban the private ownership of land. … Immediate debt forgiveness for all. … Release all political prisoners immediately. … End the ‘War on Drugs’.”
That was a fairly representative sampling, from a very wide field, across which one might reply to every single demand, “You and whose army?” For, after all, the encampment in Zuccotti Park was unable to defeat even New York City bylaws. …
Roger Simon wants us to pay attention to foreign policy.
… I am leery of a president who is a foreign policy novice.
We have seen the results of that with the incumbent. America’s foreign policy has been between non-existent and disastrous during his administration. Our leadership in the world has diminished drastically, probably intentionally, and that is horrendous for the human race.
The examples are myriad (going after Ghaddafi while virtually ignoring the far more dangerous Assad; allowing, even encouraging, the fall of Mubarak leading to the rise of the Muslim Brotherhood in Egypt and elsewhere; playing footsie with increasingly Islamist Turkey; putting undue pressure on Israel and repeatedly disrespecting her prime minister; etc.) but I can’t recall a more despicable behavior by an American president in my lifetime than Barack Obama’s reaction — or should I say non-reaction — to the democracy movement in Iran. Who can forget the brave demonstrators in the streets shouting “Obama, Obama, are you with us or against us?”
Obama didn’t hear them, choosing instead to negotiate with Ahmadinejad. This ideologically ignorant and narcissistic decision, devoid even of basic human compassion, has helped put us in the position we are today with an Islamofascist Iran on the brink of nuclear weapons.
So what does this mean in terms of the Republican candidates? …
Regarding the cost of the GM bailout, Shikha Dalmia gets to say, “I told you so.”
Am I allowed to say, I told you so?
The Treasury Department yesterday revised its loss estimate for the Government Motors bailout from $14.33 billion to $23.6 billion, thanks to the company’s sinking stock price. GM’s Sept. 30 closing price, on which the new estimate is based, was $20.18, about $13 less than its December IPO price and $35 less than what is needed for taxpayers to break even.
The $23.6 billion represents a 25 percent loss on the feds $60 billion direct “investment” in GM. But that’s not all that taxpayers are on the hook for. As I explained previously, Uncle Sam’s special GM bankruptcy package allowed the company to write off $45 billion in previous losses going forward. This could work out to as much as $15 billion in tax savings that GM wouldn’t have had had it gone through a normal bankruptcy. Why? Because after bankruptcy, the tax liabilities of companies increase since they have no more losses to write off.
This means that the total hit to taxpayers, who still own about a quarter of the company, could add up to $38.6 billion. That’s even more that the $34 billion on the outside I had predicted in May.