Debt Ceiling Negotiators Propose a "Super Congress" To Do the Dirty Work and Avoid the Wrath of VotersSubmitted by George Washington on 07/25/2011 02:39 -0400
I call super B.S.
The debt ceiling debate that has dominated the headlines over the past month has been thoroughly infused with a string of unfortunate misconceptions and a number of blatant deceptions. As a result, the entire process has been mostly hot air. While a recitation of all the errors would be better attempted by a novelist rather than a weekly columnist, I’ll offer my short list.
As we enter the overnight futures market open, there is still no resolution on the ongoing debt ceiling open question. Which is why we present SocGen's handy summary of the three scenarios that are currently in the running for a consensual resolution, together with the possible market reactions to each. The three plans are the McConnell-Reid plan, which as per latest news is in the frontrunning currently, not least (and probably only) due to the immediate beneficial impact it would have on stocks. The 2nd plan is a large deficit reduction plan, whose primary impact would be a significant drag on GDP. Stocks, and bonds, are likely to both rally on the news of this plan, at least in the short-term until the market realizes that some economic growth is actually necessary for the hopium illusion to continue. Lastly, the worst case outcome is no increase in the debt limit, which, logically, would mean that every illusion collapses and the emperor is finally exposed to be naked.
Latest In The Debt Ceiling Crisis: Reid To Offer $2.5 Trillion In Deficit Reductions And No Tax IncreasesSubmitted by Tyler Durden on 07/24/2011 16:54 -0400
Just out from CNN's Lisa Desjardins
- BREAKING - NEW Dem. debt plan: Reid to offer at "least $2.5 Trillion" in deficit redux w/ no revenue increases, Dem. source tells CNN.
- NEW REID PLAN: "At least $2.5 T in deficit redux" w/ no revenue increases. BUT, unclear what baseline he's using and what he'd cut.
- REID PLAN: Dem aide tells our @tedbarrettcnn they think it meets GOP call for dollar-for-dollar spending cuts with debt increase.
And we are confident that the spending "cuts" will take place over 10 years, back-end loaded, which means no spending cuts any time soon. Said otherwise, no spending cuts, no tax hikes. And yes, $2.5 trillion debt ceiling increase. Just as we predicted two weeks ago.
"I'll not have you tampering with this delicate user interface!
Following a resumption of the "failed" debt ceiling discussion at 11 am this morning, John Boehner has just released the following broad statement: “As I said last night, over this weekend Congress will forge a responsible path forward. House and Senate leaders will be working to find a bipartisan solution to significantly reduce Washington spending and preserve the full faith and credit of the United States." So much for the debt talks breaking down. And with so many "deficit-cutting" loose ends, all of which will eventually be resolved, probably by the time Asia opens tomorrow, here is Bloomberg's latest attempt at summarizing what is currently going on and why for Obama getting a solution before the market opens bidless on Monday is the most important thing right now.
I am not sure when U.S. politicians changed from being elitist, self-serving, perk enjoying, hypocrites, to teenage girls, but it has happened. Boehner sends a Dear John letter. Obama complains that phone calls aren't being returned. Reid is pulling petals from a flower repeating, 'he loves me', 'he loves me not'. We have had to listen to stories about getting homework done on time and eating our peas. I have seen this story before, actually multiple times a day, just turn on Disney network and you can watch the same story unfold over and over. We all know how those shows end, everyone agrees that the other side wasn't totally wrong, there is an awkward group hug, and everyone is happy, until the next episode.
While it is always good to hear grizzled veterans explain what we all know, namely that the US debt situation is untenable and America will eventually collapse under the weight of its obligations, we wonder: where were these same people while the debt was being accumulated and everyone was shiny and happy (there is a reason why the correlation between US GDP and debt is about as close to 1 as they come) and without a care in the world about America's long term solvency? Yes: we do enjoy the writings of Oaktree's Howard Marks who has chosen to dissect the US debt ceiling and more specifically America's untenable deficit spending as the topic of his latest letter, although we can't help but wonder: why now? Why not a year ago? Or, better yet, a decade ago? Furthermore, as last night's explosive announcements by the president and Boehner demonstrated the debt hike story has so many moving parts that staying on top of it is virtually meaningless. Indeed, it would have been much more useful for America if financial luminaries as Marks had actually spoken up while the US Treasury was accumulating trillions in debt, instead of all the Monday Morning quarterbacking we seem to be getting each and every day from all the "fiscally prudent" ones who rode the train of America's "great moderation" runaway debt to stratospheric wealth and were all very silent then...
No deal... for now. From Reuters: "Speaker of the U.S. House of Representatives John Boehner told fellow Republicans on Friday there's still no deal to avert a debt default, but that talks continue, a senior party member said. Boehner's message at a closed-door House Republican meeting was: "There's no deal, and we'll continue to work to get resolution to the problem," said Republican Congressman Tom Latham." They have less than 14 hours now.
The speculative headlines on the debt ceiling status are now coming in fast and furious. The latest is from Reuters according to which President Barack Obama and U.S. House Speaker John Boehner are discussing a possible deal that would include $3 trillion in spending cuts over 10 years to avert an unprecedented U.S. default, a senior Democratic congressional aide said on Thursday. Their potential agreement would include a promise of tax reform in 2012, the aide said. In other words, this is not a deal at all, but merely promises of cuts at some point in the future, coupled with tax reform...in 2012.
Time for the hourly update on the Congressional soap. The Hill reports that "Congressional Democratic leaders are headed back to the White House on Wednesday for more talks on raising the debt ceiling. White House press secretary Jay Carney announced House and Senate Democratic would meet with Obama at the White House at 2:50 p.m. Obama called Senate Majority Leader Harry Reid (D-Nev.), Senate GOP Leader Mitch McConnell (Ky.), Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.) on Tuesday night." It adds that after the release of a new proposal Tuesday by the bipartisan Senate Gang of Six, Obama told reporters it was time for leaders to "talk turkey" and work to reach a deal. And while there has been a recent increase in voices against the $3.7 trillion "plan", the fate of the McConnell fall back plan, which as expected is the most likely to pass as it is completely toothless, is also looking shaky:"House Democratic leaders are attacking Senate Minority Leader Mitch McConnell’s (R-Ky.) debt-ceiling fallback plan, characterizing it as a political ruse intended to scapegoat Democrats and taint them at the polls. “I’m not a fan of the McConnell proposal,” Rep. Chris Van Hollen (Md.), the senior Democrat on the House Budget Committee, said Tuesday during a press briefing in the Capitol. “It’s designed to protect mostly Republican members of Congress from taking responsibility for votes that they’ve already made." How this plan makes sense in light of Obama's earlier statement that the House would not compromise a debt ceiling plan based on one time increases to the limit, without a long-term debt ceiling extension is unclear, nor is it clear how any of these plans which are simply window dressing will pass muster from the rating agencies, where even Fitch earlier announced any plan would have to be comprehensive for no downgrade of the US to occur. Translated: the CRAs need more stuffing for the Christmas stockings.
Politico reports that the latest development in the constantly changing and oh so theatric "struggle" to find a compromise on how to raise the debt ceiling by $2.5 trillion, is one which will not only not do anything to fix the deficit situation but will in fact set America back, as a key part of the "savings" will come precisely from the same change in the definition of inflation courtesy of the Chained CPI introduction, which the democrats previously blasted, and for good reason: because it will be an implicit theft from Social Security. Recall that the last time this was proposed the AARP started foaming in the mouth within minutes. The broad strokes of the plan are as follows: "The once moribund Senate “Gang of Six” regained new life Tuesday after Oklahoma Sen. Tom Coburn unexpectedly rejoined the group — and more senators are now coalescing around a new proposal that would cut the debt by as much as $3.7 trillion over the next decade. According to a copy of the plan, obtained by POLITICO, the group would impose a two-step legislative process that would make $500 billion worth of cuts immediately followed by a second bill to create a “fast-track process” that would propose a comprehensive bill aimed at dramatically restructuring tax and spending programs. The plan calls for changes to Social Security to move on a separate track, and establishes an elaborate procedure for considering the measures on the floor." And here is the kicker: "The $500 billion in cuts would come from a range of sources, including shifting to a new consumer price index to make cost-of-living adjustments to Social Security." Care to wager what the bulk of this $500 billion will come from: that's right - social security, whose deliverable obligations will plunge as suddenly the inflation variable in the actuarial calculation will very mysteriously be cut courtesy of Senate-endorsed theft.
Ron Paul On "Debt Ceiling Drama" "We Need To Stop Allowing Secretive Banking Cartels To Endlessly Enslave Us"Submitted by Tyler Durden on 07/18/2011 14:40 -0400
The barrage of political statements on the debt ceiling is reaching a crescendo. Following Eric Cantor, here is Ron Paul: "The debt ceiling debate is providing plenty of opportunity for political theater in Washington. Proponents of raising the debt ceiling are throwing around the usual scare tactics and misinformation in order to intimidate opponents into accepting more debt and taxes. It is important to distinguish the truth from the propaganda...Perhaps the most abhorrent bit of chicanery has been the threat that if a deal is not reached to increase the debt by August 2nd, social security checks may not go out. In reality, the Chief Actuary of Social Security confirmed last week that current Social Security tax receipts are more than enough to cover current outlays. The only reason those checks would not go out would be if the administration decided to spend those designated funds elsewhere. It is very telling that the administration would rather frighten seniors dependent on social security checks than alarm their big banking friends, who have already received $5.3 trillion in bailouts, stimulus and quantitative easing...We are headed for rough economic times either way, but the longer we put it off, the greater the pain will be when the system implodes...We need to stop allowing secretive banking cartels to endlessly enslave us through monetary policy trickery.
I know you may think I am crazy, and I am, but it is looking more and moron like this may be the only way to settle it...
It may be time to rebrand Congress as the new CTU, although when it comes to who in D.C. should play agent Jack Bauer we are still unsure. The reason is that this morning we get two diametrically opposing fictions about the latest reality on the debt ceiling. On the one hand we read in the LA Times that, "Republican leaders in the House have begun to prepare their troops for politically painful votes to raise the nation's debt limit, offering warnings and concessions to move the hard-line majority toward a compromise that would avert a federal default. For weeks, GOP conservatives, particularly in the House, have issued demands about what they would require in exchange for their votes to increase the debt limit... Unwilling to risk the economic and political consequences of a federal default, which could come as early as Aug. 2, they have started the difficult process of standing down." That, however is not what The Hill heard: "House Republican leaders have missed a 36-hour deadline President Obama set during a Thursday meeting for lawmakers to give him a plan to avert a national default. The deadline came and went Saturday morning without a response from House Speaker John Boehner (R-Ohio). Instead, Boehner and House Majority Leader Eric Cantor (R-Va.) plan to move the Cut, Cap and Balance Act on the floor next week, which would require passage of a balanced budget amendment to the Constitution before the debt limit is raised. A House GOP leadership aide said at noontime Saturday that Boehner and Cantor did not send Obama a revised proposal to raise the debt-limit, as the president requested." So which is it? And has M. Night Shyamalan been retained to write the surprise twist ending to this nail-biter? We doubt it. Unfortunately, we are still convinced the republicans, under the "wise" defection of Mitch McConnell will fold, Obama will get what he wants, and the republican tough stance will go up in a puff of smoke leading to an even great loss of credibility for the GOP. There is less than 168 hours in which we can be proven wrong. We hope we are, but we doubt it.