This page has been archived and commenting is disabled.
White House Saturday Night Special – Another $50 billion of Debt
Last night the White House sent a letter
to lawmakers asking them for legislation to (primarily) assist
states. The plan is to distribute the states money so that they can
defer job cuts of teachers, police and fireman.
-I hate it when these things get snuck onto the table in the dark hours
of a weekend. Doing it this way is a measure of just how unpopular the
“spend more” economic policies are both in D.C. and in the country.
-This request is about politics. The President wants to spend an extra
$50b between now and the November elections. The thinking is that that
the 300,000 state workers who will keep their jobs for another half year
will all vote for Democrats. That might be the case. My guess is
another million or so voters will pull a non-Democrat lever as a result.
-This additional spending bill will happen. The votes are there. It will
probably end up as a technical adjustment of the 2009 ARRA stimulus
legislation. The result will be a future year budget impact but nothing
new on the books in 2010.
The letter from the President strikes me odd. Last week the head of the
Fed, Ben Bernanke, went out of his way to tell us that things were on
the mend. The MSM pushed this thinking broadly. Many suggested that the
better tone to the markets recently was a product of the “soothing”
words from the Fed maestro. The President’s Treasury Secretary, Tim
Geithner has been on the airwaves as well, touting the recovery that he
and the Administration has created. Others like Christine Romer and
Larry Summers have been talking the same line. With that in mind a few
lines from the Presidents letter:
“We are at a critical
juncture on our nation’s path to economic recovery.”
“Given the urgency
of the continued economic challenges we face…”
“address the
devastating economic impact of budget cuts at the state and local levels
that are leading to massive layoffs of teachers, police and
firefighters.”
“if
additional action is not taken hundreds of thousands of additional
jobs could be lost.”
“Because the urgency
is high these provisions must be passed as quickly as possible”.
“We must take these emergency
measures.”
“ I know you
share my sense of urgency as we continue our efforts to jumpstart
job creation and restore fiscal discipline in Washington”.
The pundits (and political leaders) out there who are selling the story
that we are in a sustainable V shaped recovery are wrong. The economy
struggles to create 40,000 jobs a month. But budget cuts are about to
lay off 300,000 high paid workers. The President’s proposal will pass
the buck forward a few months on these layoffs. But by January they will
be back on the table. We are less than six months away from another
significant slowdown. The President no longer has the money to avoid
that reality.
»
- advertisements -
A ref to Bruce's work in the WashDC Examiner.
http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/Soc...
Are you guys serious? This thing is going to pass and the public won't even bat an eye. Nobody's going to even know or care about it. Ask your neighbor/co-workers if they have a clue! I guarantee you they don't. They will just go back to playing Farmville on FaceBook. Besides, they have no clue who their congressman is. I doubt the media even reports it after they passed another $50b on us...
Trav7777 19:02 comment maybe could be the equiv of the Santelli rant. Let them agree to decreased wages/benefits and they will all of a sudden be affordable to the communities they "serve".
Naturally this spending has to be classed as an emergency and therefore there will be no hearings etc.
Thanks Bruce, for standing. Your work is one of the reasons I keep coming back.
pssshhhhhhh its gonna be Bailout 2
Ah, the HOLY TRINITY of police, firefighters, and teachers.
Not a fucking mention that we have TOO MANY COPS, TOO MANY FIREMEN, and TOO MANY people in "education"! We're wasting our fucking money.
The cops are out playing with military weapons and writing fucking speeding tickets for fuck's sake! The firemen? They are riding around answering fender benders like it's a 5-alarm fire. The schools? Packed CHOCK FULL of administrators who are "necessary" but do not actually educate! They're there to be the gay kids' counselor or teach about black history or something.
CUT THEM ALL. End the freaking drug war. End the schools' war on boys, war on western society, all the fluff and bullshit. End the gold-plated firemen in CA making 200k a year.
Borrowing to pay PUBLIC SECTOR wages is the most ABSURD thing ever conceived; NONE of these are productive investments, they create NOTHING.
This is how fucking perverse things have become that we actually BELIEVE now that a JOB paid for by debt has some kind of "magnifying" effect simply because all the extra transactions appear to create GDP.
GDP is a freaking JOKE as a metric of actual productive activity.
You are missing the point. All these schemes are just to hand out payments to the American public for make work. A significant part of the actual products purchased by the USD is supplied by rest of the world. So, as long as the rest of the world is happy to supply for mere dollars, what is the problem. Let us enjoy the free gifts while it is still being offered. The joke is on the rest of the world.
plus 1 with a shitload of zeroes after it.
Not a fucking mention that we have TOO MANY COPS, TOO MANY FIREMEN, and TOO MANY people in "education"
You got it. When I was a teenager I'd see a cop on the road every couple weeks. Now I see one 4-5 times a day on the road. Too many of them.
F-ing-A.
Well of course we need to teach all those illegal aliens.
Yep, he needs to keep as many police and firefighters on payroll as possible. See, afterall he did at least learn a little something from the Greeks.
Yeah, someone's going to need to put out all the burning cops when the bureaucrats go on strike along with the permanent student class.
“We are at a critical juncture on our nation’s path to reinstall the Ponzi based recovery and pull the joke on the US bond holders.” Wise, very wise.From the President's letter;
If we allow these layoffs to go forward, it will not only mean hundreds of thousands fewer teachers in our classrooms. firefighters on call and police officers on the beat, it will also mean more costs helping these Americans look for new work, while their lost paychecks will mean less tax revenues and less demand for the products and services provided by other workers.
That is why the actual cost of saving state and local jobs is likely to be 20 to 40 percent below their budgetary cost. The increased matching for Medicaid FMAP currently being considered in the Senate as well as the Teacher Firing Prevention Fund that I have called for would help prevent these layoffs at the state and local level while keeping classroom sizes down and maintaining vital education, health and public safety services. These measures are among the most cost-effective ways of promoting economic growth, as measured by the Congressional Budget Office and numerous independent experts. And they can be designed with appropriate safeguards to ensure that they acheive their objective of keeping people working, rather than rewarding states for poor past policy choices.
----------
Bruce is correct about the political talk, although I would catagorize it as pro Union aid. Obama is about as pro Union as I have ever seen from any President.
But lets take a close look at his reasoning.
----------
Overall what is missing from the President's discourse is why, at this present time with ARRA in operation, is there fundamental pressure on funding at the state level for Teachers wages?
The problems at the state level, today, have evolved since the financial banking crisis of 2008. The old reasons for spending unlimited sums to fix troubled banks no longer applies politically due to subsequent actions taken to support State's budgets.
The Union issue is not tied specifically to recession, it is tied to legacy costs and contracts.
----------
The most disturbing thing about the President's letter is in his political use of fiscal policy. It shows that he is irresponsible for political reasons, and as the political crowd does, lives in a different fiscal world to promote his, and his party's agenda.
It is clear that the money would pay for prior Union contracts to temporarily extend, not save, Union costs.
The costs are set between the State and the Union. It is a private negotiation. DC cannot save anything. All that it can do is extend the negotiation process. What jobs are lost or saved is dependent on the market rate for labor, and legacy costs tied to this labor.
----------
Some points:
First his overal cost saving argument about paying someone with borrowed wages through inefficiencies of the Federal Government will increase net revenue is rediculous. The revenue collected is just the money borrowed at a very very poor return, due to costs.
We see this all the time, that somehow the Central Government can magically create net revenue through a handout. This mental picture of fiscal policy is the key element in the confiscation of citizen wealth. The system is closed for costs. And every day a greater percentage is the cost of borrowing.
----------
The real question is why do we have this fundamental pressure on Union wages at the State level. Why are the costs too high?
The inability to control costs, has produced systemic pressure due to debt. This pressure results, ultimately, on Government acquisition and use of limited resources. Basically, there is a limited amount of tax on labor, revenue, with its primary leverage for benefits being held by the central government.
In other words, no matter what the cost pressures, union, materials or labor, the states will always be forced to reconcile these costs before the central government.
The inability to control costs at the federal level, will eventually cripple the states. The states cannot pay unlimited rising costs without access to the FEDs ability to print.
The system will collapse from within.
Mark Beck
What do you want? Idiocracy? there is one group of people that I do not want to see unemployed: teachers.
I am new here, but you are being sarcastic, right? The idiocracy is created by the teachers.
The idiocracy is created by the PARENTS
Its not about what I want.
ZH is not really about sugar coating reality.
I am trying to convey that the system has degenerated to realization of costs. Just look at the state budget mess we have today.
It is not about teachers, it is not about one group over another, its about costs. Limited resources. Disproportionate costs on labor and the inability to provide services.
----------
This is just the beginning of what we will see in the US.
Soon it will not be about how grand any particular profession is, or the ability to strive for this or that, it will be how much does it cost.
This is the essence of austerity.
The essence of uncontrolled debt.
The essence of unsustainability.
The essence of cost cutting.
The essence of firing teachers.
Mark Beck
P.S. I am just the messenger.
Parents make excellent teachers of their own children, if you haven't noticed.
Seriously though, our public school system is badly flawed, one of my sons was taught to make screws. Wow, that was really helpful - not. So he needed extra classes just to qualify for college. Lunacy.
Mo Money has been poured into schools for 40 years, and they got worse, not better. Money has led to the corruption we see.
Time to trash and burn baby.
And then there's the pension liabilities on the horizon...
The math simply doesn't work, TPTB are getting more and more, ah shit what's the word, all in plain sight.
TPTB are streaking in public!
Soon Bazooka's will give way to Howitzers.
Obama wants to prolong what I call "The Goldilocks Depression", where despite 18 million unemployed there are very few foreclosures, and very little deflation or decrease in home prices, energy prices are back to boom time levels, there's not too much economic expansion and not too little. Despite a Wall Street catastrophic bust there are few changes in pay scale and executive employment. And despite most states and many municipalities being broke there have been few layoffs and cuts to essential services.
Yeah, like having one bank take over two others via the FDIC and everyone keeps their chair. Only in Obamanation do mergers create inefficiencies. Think about it.
Transparency. Pay as you go. Recovery. LOL... How much B.S. do we need to be spoon fed before we stop believing the lies.
Man, I hear you.
I think at least part of the answer lies in this quote:
"Most propaganda is not designed to fool the critical thinker, but only to give moral cowards an excuse not to think at all"
- Michael Rivero
AR, the problem is not with folks here believing the lies. I wonder when the average Joe will wake up? Will it take the banks and stores shuttered?
The average joe knows it is a scam. He always has. He just doesn't have an escape vehicle, so he tries to work his own to keep up, and thanks to the teachers, he can't articulate the intricacies of the scam to protect himself.
What the hell is a "Teacher Firing Prevention Fund"? (Page 2 of the letter.)
Is there a "Real Estate Agent Firing Prevention Fund"? "House Painters...", "Plumbers...", "Waitresses..."?
None of those? Hmmm.
Watch for the Election Prevention Fund, coming soon.
I would have a perverse sort of respect for Obama if he would be open about this and say,
(looks to teleprompter left) "I believe in a two tiered America"
(turns to teleprompter right) "My political allies, especially government labor union members"
(back to teleprompter left) "Are more important than average americans"
(back to teleprompter right) "That is why, I'm asking for 50 billion dollars more to save unionized government worker jobs"
(back to teleprompter left) "Does this show comparative indifference to the great majority of you who are not union workers or not 'connected'?"
(back to teleprompter right) "Yes. So what? I won. Get used to it."
“If elected I promise to command the armed personnel of the federal government to compel those who make over a million dollars a year to surrender a higher portion of their money than they already surrender. After skimming off an appropriate amount, I will have the remainder distributed to the people whom I am counting on to vote for me.”
http://www.fff.org/comment/com0407a.asp
He said it, just not in so many words.
No, it makes sense from a criminal perspective.
The criminals must simultaneously release massive stimulus and raise taxes to confiscatory levels while slashing programs and eliminating low-level employees.
The housing bubble gets reinflated to support one final rape-fest for the commercial banks.
The top of the pyramid is rocketing off into space and then shooting its laser beams at the people on the low end of the ponzi.
This is the ugly suicide of the Keynsian and Chicago schools of economic theft.
"The housing bubble gets reinflate..."
That's the "Fannie, Freddie, Revamp FHA, Extend the Idiot Home Buyers Tax Credit Screw Amerika Plan"
Or HR: 5507
If I Bet My ENTIRE Political Future on a Housing Recovery and Reducing Unemployment...
Then the budget cuts/collapse of several TBTF states and the widespread layoffs of public workers that would lead to...
Further foreclosures and declining private sector economic activity leading to greater unemployment than the quoted 300k public workers...
Which would lead to...
A surge in unemployment beyond the ability of the BLS and the Birth/Death model to lie about...
Would Call My Deficit Reduction Bluff
And force me to bailout the states to save my own political ass...
Life's A Bitch When You ARE Wall Street's Bitch
So how's that working out for you Obummer?
So is this a band aid? Won't the states be bailed out soon? They would have to do that before the election too right?
Quite a few states have already gotten billions in federal "loans" to cover unemployment programs: (http://www.economicpolicyjournal.com/2010/05/32-states-have-borrowed-fro... )
Here in California, we're up to $6.9 billion, so far. More, much more, to come.
Strikes me as a Particularly Good Idea. If any Governor is going to go hat in hand to DC, now'd be the Perfect time to do so, particularly say, California, what with the size, visiblilty and "importance" of the DC contingent; Pelosi, Boxer, Waters, Waxman just to name a few.
T'would be an Opportune time!
And oh, the Outcry and Infighting that'd begin. Be Glorious to Behold.
The US has defaulted multiple times. That's a complete myth.
TPTB's elementary school textbooks say 'no default.' Myth problem -- solved.
"In an interview with the Washington Post, White House Chief of Staff Rahm Emanuel "said the letter is intended to settle the growing debate over the opposing priorities of job creation and deficit reduction and 'where you put your thumb on the scale.'"
Ok, so what this does is it maintains the excess of unproductive jobs through deficit spending while doing nothing to provide incentive for jobs growth in the private sector. Seems like a failure on three fronts...
"In an interview with the Washington Post, White House Chief of Staff Rahm Emanuel "said the letter is intended to settle the growing debate over the opposing priorities of job creation and deficit reduction and 'where you put your thumb on the scale.'"
Government creates no jobs. It's pretty clear what the scumbags are up to. Buying votes.
inflating the money supply is a defacto default. end of discussion
"Seems like a failure on three fronts..."
That would make it a win-win-win for Rahm-baby and Obummer...
----"The U.S. has never defaulted on a debt obligation"-------
I was under the impression there were defaults after the Civil War and the 1776 War.
And after the Civil War there was the creation of the US in 1776-1786.
So any default before 1786 wasn't actually made by the US.
Also America "defaulted" after American Civil War (1861–1865). but again that is quite normal. The war needed to be financed by both sides. So when the south lost, they defaulted on their debt because they stopped existing.
This in turn was also the root of the financial problems of the French who supported the south and which started a inflation. At that moment there was also a lot of pressure on the monarchies of Europe and they started to go into decline. That decline ran to it's peak in 1914.
"Closing the gold window" in l971 was probably the most significant default in Western history, leading, as it did, to the unpayable debt we have now and the collapsing fiat system. And Rosevelt defaulted on gold bonds around 1934, so the US also has a tradition of default when push comes to shove. And didn't the Supreme Whores ... sorry, Court, support that default, effectively saying the govenment has a right to break its contracts, which is also a scared tradition.
We are all Greeks now and you know what that means.