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On the Cliff
Absent some earth shaking event between now and November, Obama is going to win, the House will remain in the hands of the Republicans and the Senate will continue to be equally divided. The war between Reds and Blues will be just as bad as it was a year ago. The day after the election, the fight over the fiscal cliff will commence. I expect it will be ugly.
-I think there is zero probability that all of the issues now on the cliff will be pushed off to some future period. (Ultimate-can-kicking) Some of the cutbacks/tax increases that are now scheduled, will happen.
-I put the odds on falling off the cliff without any compromises at 40%. This scenario comes about if the Reps and Dems can’t agree on anything. If that is the case, we fall very hard on January 2. (No-can-kicking)
-Therefore, I see a 60% chance of a compromise that softens the consequences of the fiscal cliff, but does not eliminate it entirely. (Semi-can-kicking, but still kicking ourselves in the face)
If there is to be a compromise, it will be interesting to see who gets what, and who gives up what. It might play out with the following results:
I) The 2% reduction in FICA taxes is history. As of 1/1/13 every worker is getting hit with a 2% tax increase. This is a very regressive tax increase.
II) The Bush tax cuts for those making more than $250k are gone. This is a very Progressive tax increase.
III) The Bush tax cuts for those making less than $250k will be retained. This “centrist” compromises is the result of the "give" on #s I and II. Both sides will be able to claim that they did their best for “Middle Class Workers”.
IV) The Alternative Minimum Tax will be adjusted for inflation and will be fully phased in over a period of three years. This tax will hit 40m taxpayers (up from only 4m today). This is most definitely a middle class tax increase.
V) The capital gains tax rate is going to go up to at least 25%.
The result of I – V is that everyone who works, or has investment income is going to be paying more. No one will escape higher taxes.
Then there is the spending side of the ledger. The so-called, “sequestered” amounts. Here is where the real horse-trading will happen. Keep in mind that the timing of this critical argument debate will be in November and December. What else will be happening in those months that will influence the budget compromises? Talk of War.
It is almost certain that post the election, Iran is going to be front and center. Israel has promised to hold off on an attack of Iranian nuke facilities until after America votes. After November 6, the headlines will be about war. There will be big NATO/US Navy activity all over the Straits of Hormuz. This will shape the debate on military cutbacks.
With this as a backdrop, I don’t see the mandatory cuts for the military sticking. Most of the promised cutbacks will get eliminated, or pushed forward. Obama would welcome this, as it would allow him to trade more military spending for a deferral of the cuts in non-defense spending.
We will get a half loaf of spending cuts and increased taxes. The results will not significantly change the trajectory of the deficit, it will create an additional drag on the economy.
If all of the tax increases/spending cuts now pending are allowed to happen (we fall off the cliff) it will result in a drop in economic activity of at least 1.5%. It will bring about a recession that will last a minimum of six-months. The compromises that I outline above will still result in a contraction of economic activity. If we get (more or less) of what I see coming, then ¾% of annual GDP will be lost; for a long time.
What does a lousy ¾% mean? It means sub-stall speed. It means GDP will be well below 2% for 2013 and beyond. It could mean that growth falls below 1%. (Functional recession; unemployment up, tax receipts down)
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There are two issues related to the "cliff" that are of interest to me. These are minor matters (in the scheme of things). They are Wall Street related. They go by the odd names of:
GARVEEs
&
BABs
Grant Anticipation Revenue Vehicle (GARVEE) bonds are tax free, issued by states and are backed by anticipated future revenues from D.C. for dedicated highway construction. The Fed backing (not a guarantee) makes these bonds trade rich relative to straight state debt.
The federal money to pay Garvee bondholders is at risk. Future payments from Washington are part of the sequestered amounts that will be on the negotiating table come November 7.
The rating agencies have been downgrading Garvees because of the risk of repayment. There is only $10B of Garvee bonds outstanding. I think this problem will be patched up (it's too small a matter to cause muni defaults). I also think that there will be no more Garvees issued. The fiscal cliff showed the flaw in the construction of these “bullet proof” bonds.
Build America Bonds are taxable state debt issues. This hybrid security was a child of the crisis of 2008. It died in 2010 after $180B of BABs were issued. Republicans hated BABs, Democrats (led by Tim Geithner) loved BABS.
There is an odd feature to BABs; they become callable if sequestration takes place:
BABs were issued in the terrible days of 2009/10. Recall that the likes of Meredith Whitney were calling for massive muni defaults back then. As a result, the $181b of BABS that were issued all had nice fat coupons on them. The States would love to call that paper at par; they could replace it with much cheaper debt today. The losers would be the bondholders. They would see their nice yielding bonds called away. No one cares about bondholders anymore, so BABS are dead.
Garvees and BABS are inventions of Wall Street. They are structured financial transactions that allow states to borrow more money by accessing different investor bases (tax vs tax exempt). In the end, Garvees and BABS will be throwaways in the horse trading. Their loss does not add up to much. However, if you are thinking that the solution to America’s economic problem is a major infrastructure build out, forget it.
A program big enough to create a few million jobs and modernize our roads, bridges, seaports and airports can’t be done with more federal borrowing. It has to come from the states. Shutting down BABs and Garvees is also saying “no” to that infrastructure plan.
The worst case outcome would be that there are no compromises; and we fall off a fifty-foot cliff, and die. The best case is that we fall off a twenty-five foot cliff, and only suffer a few broken bones and a concussion. Options that were once available to the country to dig out of an economic hole will have been lost. A long period of economic mediocrity is the most likely outcome.
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At best the USA after the elections will be applying makeup to a comatose patient. This is understandable given that the government has also been intent on ressurecting dead horses by blowing hot air up their back passage. This of course has not worked as housing and other beneficiaries of this hot air stimulus are till not showing signs of any sustainable momentum.
It's time to admit to the American people the true state of the nation so that any attempted re-birth can be founded on truth and a market that is minimally manipulated.
Morticians make good money making the deceased look good. Maybe we can send a few to DC to make over congress and the supremes too.
In fact, doesn't the court go back in session in a few days? Maybe a mortician's makeover is just the lift the annointed nine need.
If that doesn't (JAR), some memories, nothing will! Then again, todays traders think a "PIT" is red mark on their face!
Nice connection Bruce. Be/careful this week.
The prickly personality of WePollock has the ability to come up with a few Gems
www.youtube.com/embed/TdwPgg79mHw
The money you have in the system is already lost.
Autobahn / highway construction seems to be the modern trigger for Imperial overreach.
The failure of the Colorado Railcar company and the reuse of 1950s Budd railcars by
"From the start of the first serious discussions of the idea,[4] it took thirteen years and $166 million to get WES operational" This is not a very complex task......its essentially a 19th century technology.http://en.wikipedia.org/wiki/Westside_Express_Service The inability to operate a service to Salem with a urban pop of 150,000~ despite the fact a freight line exists today suggests that there is a deep sickness withen America.
Dagny?
Not even. He thinks the government should step in and doesn't see how the government can be part of the problem.
The big problem with a lot of the operating freight lines in this neck of the woods is that they're in such lousy shape that the average passenger would toss their cookies if they had to ride 30 minutes at 30 MPH.
We've really let the rail lines go to hell slowly.
Private utilties don't work after a few decades.......
Private companies express a profit on the commons by simply running down the capital base.
Now roads are not a good investment as it requires a hyperinflation of bank consumer credit to produce the cars that drive on them but rail merely requires fiscal funds.
In simple terms they require less real resourse inputs.
But this says it all
"Equipment failures and periodic maintenance on the agency's Colorado Railcar DMUs resulted in TriMet substituting buses for some runs on several occasions since the service began.[34] To provide backup equipment for the line, TriMet purchased two Budd Company Rail Diesel Cars (RDCs) from the Alaska Railroad in 2009.[34] The cars were originally built in 1953, and had been taken out of service in 2008.[34] TriMet refurbished the cars, and planned to operate them as a backup for the Colorado Railcar units when they are out of service.[34] They entered service on 24 January 2011"
What other Industry brings back 1950s vehicles from the Graveyard ?
www.youtube.com/watch?v=zCScJdmMUgc
Admittedly without having researched this area in any depth, it seems to me that road and rail are not really comparable.
Roads are pretty much 'baked into the cake' along with property ownership; when land is divided up, sellers need to put in paths as they go (usually along property boundaries) so their buyers can access their new plots. These paths link up with the existing road network.
Railway creation is more problematic from a free-market, property-owning perspective, unless all the land owners geographically located between the start and finish can agree to selling their land to the railway builders. Railways typically run in straight lines through private land, and getting them set up requires a great deal more government intervention (via the mechanisms of eminent domain forfieture). Furthermore, the land owners between stations will see the value of their land decrease if they have a railway running through their land, so will resist its imposition; whereas, having a path running past your property improved will typically increase the value of that land, so land owners will be more inclined to agree to losing a small amount of their peripheral land in return for better access (within limits, obviously; no one likes a huge bypass suddenly imposed on their doorstep)
Private utilties don't work after a few decades.......
Private companies express a profit on the commons by simply running down the capital base.
This is no more the case with private entities than it is with (so-called) public entities that have some kind of control over some kind of natural monopoly. For a start, many of the run-down 'publically-owned' utilities that we complain about now came by their assets through the nationalisation of private utilities in the first place. And, empirically, privately owned roads and infrastructure tend to be better maintained, so you need to rethink your thesis.
The US has railroad lines already in place. The biggest reason that the train tracks are in a state of minimal repair is that the US has been subsidizing and encouraging trucks in recent decades. Trains are much more fuel efficient than trucks, if the price of fuel rises the railroads will have a competitive advantage. Between keeping the price of fuel low and allowing larger trucks on the roads the railroads have essentially been reduced to the hauler of last resort except for very heavy and bulky loads such as coal.
Perhaps ( wild ass guess) the increased size and number of trucks on the roads in the US contributed to the desire to own big SUVs.
Hollywood. Have you seen Joan Rivers?
Funny to think about the Obama - Romney election vote count -
If you think the counting is legitimate - despite US votes being 'black box' counted with no transparency, by a company owned by billionaire George Soros -
Then it's good to recall the election of 1980 in the US. A week before the vote, Carter was ahead by 6 points. The 'smart guys' were laughing about the movie actor who had no chance to win.
Reagan won by 9 points ... 15 points diff off the polls.
- - -
Re fiscal cliff ... They can get the US Congress to nearly unanimously agree on all sorts of stupid things, voting 430-5 in favour of supporting Israel
Passing TARP bailout when US citizens were 100-to-1 against it
Is it really reasonable to think the two fake US political parties are 'gridlocked' ... rather than being TOLD to be 'gridlocked' by the guys who fund all of them?
The stupidity of the American voter is mind-boggling. There is no more ill-informed, stupid, illogical, non-critical thinking voter than the American voter. It amazes me how so many other countries have voters who understand the issues, know when they are being lied to, and are willing to take a stand against tyranny. In America, all we care about is voting for the black guy cuz he gave me a phone, or as JayZ, Morgan Freeman, Chris Rock, Spike Lee, Jesse Jackson, Al Sharpton, and 95% of the black population say, cuz he's black. The very definition of racism is making decisions and determinations based on the color of one's skin. Yet in America, the only racists are white. And yet, this too is part of the plan - divide and conquer, and do it before the idiots realize what is happening. So sad, so ignorant, so pathetic.
tiresome.
even if every "black" person in the country voted for Obama, the fact that "black" people only make up 13% of amrkns still exists - and the fact that many "black" men can't vote because of felony charges, and some of those 13% are not of eligible voting age, means that you & your currently 48 upvoting friends are still allowing yourselves to be skillfully manipulated by the noise.
either you understand that "voting" doesn't make a damn bit of difference, and having a "black" or "white" or fucking GREEN figurehead for the Corporation is not going to change anything, and certainly at this point. . .
or you're one of those people who have yet to acknowledge what is actually going down.
concerning this black-white divide in USA which is both social and racial; it goes back to that civil war. If the US had been on that page that racial issues are not criteria for deciding who gets first class treatment in the federated nation that emerged in 1865, it would not be an issue today.
If fact 1865 changed very little to the social fabric of southern USA, as 1950s Little Rock and subsequent march to freedom in MLK's days proved. And it spilled over to North subsequently in the urban spreads, tarmac jungles of hi-rise USA.
Now the social/ racial issues in first world will get exarcerbated in depression and social revolts, where all these fault lines in society get magnified. On both sides of the first world pond, as in the Japan/China rift on the other side of the world.
We are and stay as species reluctant to learn in times of peace. It takes violence and conflicts to make people realise where their true bread is buttered; what survival and tolerance be all about. And, they forget those very lessons as soon as the sun shines on a new generation...One thing to remember : the rise and fall of ALL empires accelerates the social mix of nations, as the uber-class needs industrial serfs and domestic labour.
The Oligarchs feed the process in economic expansion that they condemn in economic recession; the serf class is the variable of adjustment in history, just like cheap RMs.
you forgot Colin Powell
There will come a point in America's future (and, subsequently it's history) where the Free Shit Army will either WORK, or perish.
Their numbers will likely be greatly depleted, by that time, so they'll get on board (if there's ANY left).
As long as the dollar is the world's reserve currency we will subsidize sloth since the last generation and its children have been tutored by academia's liberal Marxists, we are bound to the philosophy that equality trumps liberty.
A Dollar earned must be a Dollar shared to insure equality of outcomes.
Of course, this will not survive a change in the Dollar's status.
One more time:
" "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,"
If you openly advertise for the dregs of humanity, what can you expect?
but .. but .. Obama gave me phone
ttp://dailybail.com/home/obama-has-my-vote-he-gave-me-free-phone.html
Voters in other countries are stupid too.
"voters from other countries are stupid too" fixed.
Which is why statist like democracy so much. Any idiot can win office and can be controlled by money, and when you have the printing press money is not a problem.
Yeah, yeah but Dancing With the Stars is back on and it's got all the best dancers from previous seasons! I think that Apolo has the best chance, don't you?
Not even close. That tall drink of water, Gilles is going to win. I thought Emmett would have a good chance but he's unfortunately showing his age.
:D
You are only half right because 50% of voters have in fact woken up and at the last election did not vote at all.
Democracy unfortunately has become at best just an averaging process. At worst it is a market place where voters and politicians prostitute themselves for individual benefit.
Unfortunately, far less than 50% have woken up... even slightly. Want proof? Just go to your favorite mall or other reasonably-well randomized location and ask people questions. One of my friends still in the USSA did that, and you won't like the results. Try 5% to 10% are slightly awake, depending on your questions. Furthermore, the vote no longer matters with predator controlled voting machines and vote counting officials (who utterly ignore rules, just like in the recent two conventions).
I take your point, but I think you have a sample-bias issure here. How many 'awoken' people take themselves to a mall in the first place?
Choose any location that you honestly believe is appropriately randomized.
I agree. Only 5% - 10% are plugging in, but it may only take 15% or 20%. As long as our votes are counted on machines owned by a Spanish company (think Soros), and have no paper trail, voting does not matter. As long as most Secretaries of State in America are owned by the Dems and take orders from Soros and his ilk, your vote does not matter. If you think there is any difference between a (D) or an (R) after the candidate's name, your vote makes no difference. Elections are just a way of appeasing the masses and convincing them that they have freedoms and choices.
Elementary - if you think there is no difference between R and D, why bother pointing out that most Secretaries of State are Ds?
I understand what you are saying, but please be consistent. There is more than enough to worry about without the falsely premised things being added.
The polls are oversampled democrat based on the 2008 election results. 2012 will be a different model and most likely different than 2008.
The media is over polling democrats and coming up with the bull shit numbers to get the democrat vote out.
Also this is a warning to republicans that if their guy doesn’t win after the election, after the race riots die down, for the next four years Romney will be painted as a fraudulent president like Bush was.
Oh fuck I can’t wait.
All the Zh’er better be carrying gun the day after the election.
If the Democrats think they have it in the bag they might not bother to vote, either. There is a lot of complacency on that side of the "two party" system.
I carry every day, regardless. Chicago is setting all sorts of records these days for violence.