Meet David Rosenberg: Tea Partier

Tyler Durden's picture

That David Rosenberg - the skeptic - threw up all over the Q2 (and revised Q1) GDP in his note to clients yesterday is no surprise. Even Joe Lavorgna did it (which makes us quietly wonder if America is not poised to discover cold fusion, perpetual motion, nirvana, a truly edible iPad, and peace on earth). That David Rosenberg - the deflationist - makes light fare ("ceiling will be raised") of the ongoing debt debacle is also no surprise: after all should the US default, the long bond strategy the Gluskin Sheff strategist has long been espousing will go up in a puff of smoke. What, however, is surprising, is the fact that as of yesterday's Breakfast with Rosie we get to put a political face to the financial man, and it very well may be... David Rosenberg - Tea Partier.

While it is a rare event for a reputable financial commentator to interject political observations into a client note, that is precisely what Rosie did last night, by essentially espousing the (correct) Tea Party advocacy of a balanced budget. To wit: "You know what — I am sick and tired of all the so-called mainstream pundits out there lambasting the Tea Party. Those who know me, and know me well, know that I am not some right-wing nutbar but come on. Why is everyone so scared about committing to a balanced budget amendment? Why is there so much fear about admitting that living within your means is not a terrible thing? Government spending, in the United States, is simply out of control." Hear, hear. We hope more bond commentators step up and say the same thing (except for Jim Caron of course: we expect him to say the opposite, just as we keep expecting him to admit after 3 years of wrong calls that he may have been in fact a little off in his expectations of an economic recovery and the whole bull steepener thing). What we are confused by is that according to some of the more virulent(ly amusing) neo-Keynesian theories, the more debt issued by the monetary reserve authority, the lower the prevailing interest (in a nutshell) due to more demand, or some such perversion of supply and demand. By advocating a balanced budget approach Rosie is basically saying cut the debt issuance. Could it be that, gasp, lim ? infinity debt does not equal lim ? zero interest rates? And could Rosenberg be saying that, gasp, infinite debt supply does not mean infinite +1 demand? We sure hope to find out.

In the meantime, here is the relevant section from Rosenberg on the topic of the Tea Party and the Balanced Budget:

You know what — I am sick and tired of all the so-called mainstream pundits out there lambasting the Tea Party. Those who know me, and know me well, know that I am not some right-wing nutbar but come on. Why is everyone so scared about committing to a balanced budget amendment? Why is there so much fear about admitting that living within your means is not a terrible thing? Government spending, in the United States, is simply out of control.


Over the past decade, federal expenditures rose at an average annual rate of 6% while the growth rate in the number of households has risen at a 0.8% annual rate. At around 25% of GDP, spending is higher now than at any other time since 1946. That is an outlier. Admittedly, revenues at 15% of GDP are abnormally low as well, and while a partial by-product of the recession and sluggish recovery, loopholes galore and endless tax gimmicks are also at play — in the 1991 economic downturn that ratio was around 18% and in the severe economic decline in the early 1980s, it was 19%. Revenues have to go up and there's a cool trillion sittin' right there in loopholes — oh, sorry, deductions and "tax expenditures", we don't want to offend anybody — that could be eliminated without sacrificing growth while reducing the ridiculous complexity of the tax code. A few less lawyers and IRS staff would be just fine by us.


But to think that the U.S. government cannot manage to deliver effective and essential services with a $2.5 trillion revenue base is absurd. If that is what spending has to ultimately equal, so be it. Isn't 21 grand per household of government benefits enough? Before 2005, such a level of government expenditure per household was unheard of (in Bill Clinton's final days as President, that ratio was barely above $16,000). At the height of LBJ's "Great Society" glory, government spending per household didn't even approach $3000.


So indeed, the problem is more with this massive spending infrastructure. Even the word "entitlement" is so grotesque. Entitled to what? Taxpayer funds? Come on, man! Tighten the belt and make the move towards fiscal integrity. After all, the shift towards austerity is already occurring at the state and local government levels. Households have been paring debt and raising their savings rates for two years. And Congress and the President should actually start behaving more like children (that's right) because the Denver Post just ran a story titled Tooth Fairy Gets Frugal in Shaky Economy. Indeed, the "going rate" for that loose tooth that made it under the pillow has declined from $3 on average a year ago to $2.60 today. And guess what? The kids are all right.


Time for the guys in Washington to follow on the heels of that generation. All it takes is for the President to sign on to a balanced budget amendment, and this whole fiasco is over.


Then again, and we hope we're not too harsh, but if Mr. Obama thought they actually did have a spending mismatch, he would have offered up some restraint on that score when he unveiled his budget six months ago.

Source: Gluskin Sheff

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Ahmeexnal's picture

China has already labeled the "debt ceiling debate" for what it is: a fraud.

Fasten your seatbelts.

sun tzu's picture

No, he's simply being logical. No entity can have expenses that are 50% higher than revenues into perpetuity.

We've had three consecutive years of $1.5 trillion deficits. 

Zero Govt's picture

MarkMotive  -  the link to your article lays out a simplistic 'Black or White?' argument that inflationists are right and deflationists are wrong. I'm not trying to argue for a gray in-between as i dislike smudge and sitting on the fence. The fact is we have a complex and confusing mix of both black and white, both inflation and deflation is on the rampage something economists and academics have never discribed before

Inflation: your US Dollar buys 50% less petrol, 60% less Gold, 30% less carrots and beans, 40% less red meat, 50% less stocks in the Dow, Nasdaq and S&P since the March 2009 bottom etc etc 

Deflation: GDP is contracting, credit is contracting (despite Bernanks tripling of the Fed balance sheet), Govt tax revenues are contracting, your US Dollar buys 30% more real estate than 2006 etc etc

So there you have it, all the tell-tale signs of BOTH inflation AND deflation at work in the economy. Why is it so hard to deal with facts (the economic reality) rather than stupid Black or White arguments trying to fit our economy into 2 slots, err it's gotta be inflation or deflation?

Regards the articles other simplistic proposition that in a deflationary enviroment Govt Bonds, like cash, should be increasing in value that's unless of course Govt revenues are declining and debt levels increasing that they aren't worth jack shit!

Welcome to the complex real world of in-de-stag-flation, not described in any simplistic Handbook for Academic Economic Dummies 101 (is there aything real or useful in all the ivory tower discriptions of waffling academia? I've yet to find to find it) 

markmotive's picture

You missed the point.

The article highlights one of the grey areas that many deflationists are unaware of.

trav7777's picture

Anyone who talks about living within means in a system of DEBT money exposes themselves as a fool.

there is NO ROOM for living within means in this monetary system.  If credit does not grow, the system will implode.  It is a matter of basic mathematics, ok? 

trav7777's picture

China has no debt ceiling...all their bad debts are buried behind the opacity of local and regional governments and the PBoC.  Who gives a fuck what a nation with empty cities and ponzi fraud says?

Popo's picture

I think it's important to note that there are two different Tea Parties:


There's the one that's primarily Libertarian,  and believes in small government,  responsible financing,   civil liberties and an end to the government "dole".

And there's the newer,  corrupted version, which gets money from the Koch brothers and has tried to abandon it's early "anti bank" stance  while shrieking loudly about "God, Gays and Guns"


Rosenberg as a member of the former, is completely believable.    And if the Tea Party as a whole can ignore the uneducated idiocy of the latter -- I think many here at ZH would probably align themselves as well...



??'s picture

Put another way I think it would be safe to say that in the House of representatives there are only 22 members who could truly be called members of the Tea Party as in those who voted against Boener's bill

and here's the list of the 22 no votes


sun tzu's picture

Yes, those evil blue collar people clinging to their religion and guns. Let's just do away with the 1st and 2nd amendments to spite them. We all know that the flyover states like Tennessee and Oklahoma caused this economic mess

snowball777's picture

First, they are the ones attempting to pervert the establishment you can take their assault on the 1st up with them.

Second, maybe they've earned a humble after having elected the shitbag neocons that all but did away with the 4th and 5th.


sun tzu's picture

I'm glad 0bozo reversed all of Bush's policies with his hope and change. Oh no, he killed off the 4th and 5th amendments, but you have no problem with that since the shitbag liberals voted for  him  

redpill's picture

But the former already had a label before the Tea Party ever existed.  Ron Paul supporters.  And he has my vote.

FlyPaper's picture

My experience with the 'tea-party' is that a lot of the people are middle-class, generally pro-business; and they know what is at stake here.   There are fiscal conservatives and fiscal + social conservatives; libertarians and working-class folks.

They are genuinely concerned about the country's fiscal problems because they know what will happen if they are not resolved in a timely manner.

Frankly, as long as we agree on the fiscal policies/issues, we're good.  I don't have to agree with the social conservatism.  In fact, the latter won't matter if the socialist/marxist push toward collapse occurs via uncontrolled spending...  (something I wish some of the social conservatives would understand better).

GWBush was a fiscal disaster.  Obama is a fiscal disaster.  The latter has much to account for on his watch: starting the largest or 2nd-largest Socialist push (Obamacare) in the country's history; exploding federal hiring; over-regulating; ignoring the law and the courts.   (Could say much the same of Bush).

Hell, Lincoln turned on the printing press as did our revolutionary forefathers in time of war; as did Roosevelt via gold confiscation; as did Johnson when he decided to raid SS for funds to pay for Vietnam and his New Society.  Roosevelt had actuarial information and he knew full well SS would blow up.

Wars and social programs will be the end of this country.  We need to dial them back.

The Federal Reserve is an arch-contributor/player in the overspending binge - and they must be targeted as much as the political class.  If we don't clear that nest of vipers and their associates in Treasury.  We are kidding ourselves if we think we can get back to sound money until we reform both institutions.



trav7777's picture

speaking of Federal hiring...the employee rolls at FNM and FRE are roughly half blacks.  In a nation where blacks are 12% of the population, I can tick down the federal agencies who have hired vastly disproportionate amounts of one type of people.

Does this sound like real "diversity" to you?  Does it look like America?  The hiring push was not for everybody and diversity isn't really diversity.

Flore's picture

Rosie will find out there will never be deflation in the USSA...

mailll's picture

USSA? Didn't you mean USE? United States of Enron?  Their fudge figures showed that they were doing great also, until it all collapsed.

TwelfthVulture's picture

USE?  Don't you mean USM?  United States of Madoff.  A couple percentage points decrease in annual revenue and a corporation the size of the United States can't pay its bills.

sun tzu's picture

USFM = United States of Fannie Mae

USFM = United States of Freddie Mac

USBS =  United States of Bear Stearns

 USLB = United States of Lehman Bros


The list goes on and all roads lead to Wall Street and DC


Popo's picture

Well... we'll have inflation until gas closes in on $5/gal again ... at which point we implode

Pay Day Today's picture

And it's not just inflation which is going to take gas to $5/gal. Or $6/gal.

equity_momo's picture

Deflation is the ultimate result. Maybe Rosenberg holds too much faith in Capital Markets to control the value of fiat but ultimately everyone ends up with zero purchasing power and ultimately thereafter is a deflationary collapse.

Stocks and cookie cutter houses will not do well however we get there. The only assets that will hold purchasing power will be precious metals and direct control over industry providing food and energy , ie , you own the company or the land and directly recieve cash flow from labour .I wouldnt bank on being safe as a minority stock holder in anything  - plenty of black swans to come and rape paper investors.


Corn1945's picture

People are afraid of a balanced budget because it means they will lose their goodies. How many government employees will be fired if we have a balanced budget? How much will Medicare/Medicaid/Social Security be cut if we have a balanced budget? How much will foodstamps/School lunches/Section 8 housing be cut if we have a balanced budget?

Now add up all of those people and tell me what % they are of the total voter pool. That is why nothing is getting reformed.

JustPrintMoreDuh's picture

Precisely.  Once a critical mass of the voting public have become dependent on the Federal Beast, elections are officially meaningless.  Hmmm, almost as if by design.   Serfdom Bitchez!

InconvenientCounterParty's picture

-->China and Iran benefit if the U.S defaults

-->A balanced budget will elevate the U.S. back to the military and moral superpower it once was.


sun tzu's picture

China holds over $1 trillion of US debt. Over 30% of their exports ship to the US. How will they benefit?

trav7777's picture

yes..they REQUIRE more debt here to fund more bullshit growth there.  More idle factories, more "high speed crash rail" and more empty cities.

Look at the homebuilders and what THEY did with easy credit...multiply that times ten and you have China

ElvisDog's picture

Except what all of those programs depend on a productive middle class to pay the bills. Current Fed/Government policies are systematically killing off the middle class. That is why, balanced budget or not, the U.S. welfare state will fail just like it did in the Soviet Union.

Pay Day Today's picture

Indeed. The top 1% do well. The 9% after that get by. And the 90% below them live in the wars.

goldsaver's picture

Sadly, as much as I would like the .gov to live by their means, most of us forget they are really living within our means. If a balanced budget amendment passes (it wont, the States will not ratify) the only recourse left to politicians would be a massive increase in Income tax, SS tax and Medicare tax to cover the cost of the transfer payments to their voter blocks.

Lets not forget that they have been plundering our production via direct taxation and indirect taxation (inflation) and that a balanced budget amendment would force them into direct taxation only since they could not issue bonds to create new money.

No my friends, the beast will not stop the plunder. Too profitable.

sun tzu's picture

A massive increase in taxes will collapse the economy. How many middle class families are barely treading water now? Increase their taxes by $5000 and the mortgage or electric doesn't get paid. Increase taxes on business owners and you end up with more layoffs and more people on unemployment and welfare, further burdening the taxpayers. You can't get blood out of stone. 

Pay Day Today's picture

Just start by making sure GE, Apple and the oil majors pay their fair share of taxes eh?

"You can't get blood out of stone. "

Well they seem very good at getting IRS refunds out of Uncle Sam.

Marco's picture

There are quite a few industries making record profits due to market distortion created by government. No reason to target the middle class at all ... just target anything big and making supra-normal profits, it's just like shooting ducks in a barrel at the moment.

sun tzu's picture

1. Roll spending back to 1999 levels adjusted for inflation

2. Let the Bush tax cuts expire

3. End the wars and get rid of foreign aid and homeland security. We are borrowing money to give to others. That would be like you taking a loan out to donate to the needy. It makes no sense.

There's your balanced budget. 

There are a few other things that can be done like getting rid of trusts. The blueblood families escape paying taxes on investments because they keep putting their investments into trusts and passing it down the familiy line. When a person dies, taxes must be paid on any investment gains within 5 years. Small businesses and partnerships would be exempt.

Tax investment income at marginal levels like we do to ordinary income. John and Jane Doe investor who make $10,000 on an investment via capital gains or dividends would face a 15% rate. Lloyd Whittaker who makes $10,000,000 on an investment would face a 38% rate. 



ATM's picture

I have a much better idea. Let's roll spending back to 1799 levels and dump the income tax. fica tax, medicare, medicaid, SSI, welfare and all other government sponsored charity and simply provide at the federal level the basic services that the Constitution allows the Feds to perform.

Then let's dump the Fed and require that Congress coin money and regulate the value thereof. That simple act would end so much of the abuse our government reigns on us. 

The power to control the value of money is far to great to be left to unelected Fed totalitarians.

Free the people. Kill the Federal govt beast.

Savyindallas's picture

Great idea  -I could probably live live 1829 levels  -might have needed a little more federal money when the Brits sacked and burned the White House in 1811- Thank God Dolly madison saved all our national treasures. Clinton , Bush and Obama would have been scurying around looking for their coocaine, rather than GW's portrait. But the again maybe t would be good for a foreign army to sck Washington-  you know to clean up things a bit. Maybe the Tea party can align with a few State militias to do the job  -maybe the french will help us out again- Let's start talking to the Quebec-ians 

Marco's picture

Fine, remove the ability to own land as well ... then we can call it even.

Somehow the top 0.1% owning the majority of the land isn't going to just replace the state by feudal land lords which will still take all my money because ... magic?

In a time of opportunity and land to homestead your proposal make sense, in a time of stagnating growth opportunity (peak fucking everything) and vast concentration of land ownership ... not so much. Ultimately there is little difference to the state and a landlord for a serf.'s picture

And how much more unemployment we are going to see? Pushing other people under the bus, while remaining attached to a tit is what inbred ignoramuses do best!

smlbizman's picture

please tell me i'm not the only one who saw the dem. rep. cohen, compare the big o to cleavon little in blazing saddles....that made this entire embarrassment

HungrySeagull's picture

Blazing Saddles was a hoot!

DosZap's picture

Gosh, just what I posted yesterday,what get's PREACHED here daily, FISCAL SANITY,is not(contrary to Dems view) Tea Party Crazy Rednecks.

When men prefer unsound fiscal,mores, and values, that used to mean you were immoral, and a crook.

Somehow Evil has become the New good.

Article on the Politburo(Politico) by Martin Frost(Agent Provacatuer par excellance), and big spending Dem his entire politcal career, calling the Tea Party, Taliban.

If memory serves, a Tailban," Founding Father" said "Government is a neccessary Evil'.

sun tzu's picture

Living within your means is considered extremist, terroristic, and racist.


It's an Orwellian world. 

carbonmutant's picture

Well the moonbats in this "Theater of the absurd" are now filibustering their own bill...

Eireann go Brach's picture

Tyler, Did you see that nonsense penned by that idiot Joey LaVorgna... “Growth recession” is a term that means the economy actually is growing but not at a fast enough pace to head off rising unemployment, which is at 9.2 percent and trending higher.  “The disappointing Q2 GDP results and downward revisions to the prior three quarters lead us to believe that this (growth recession) indeed is the case,” LaVorgna wrote in an analysis.

Seriously, how much does this guy get paid?


LawsofPhysics's picture

No real surprise here.  Many financial fucknuts who have benefitted from the corrupt system know that paper-pushing does not add real value to the economy.  Energy and REAL VALUE are quickly becoming all that matters, why else would we see the rapid appreciation of gold, silver, copper, or anything physical that can be traded or that is of real value to your survival?  The writing is on the wall and I would be very nervous too if I could not create anything of real value and the system that made me rich was collapsing around me.

dxj's picture

Rosy proves himself the typical Tea Partier in being ignorant of the Constitution.The President does not sign an amendment to the Constitution. First, 2/3 of Congress agree and then 3/4 of the States approve. There is no veto.

Having said that, the balanced budget amendment (as written) is a horrible piece of legislation that would delegate the power of the purse to unelected judges or the President. It's already occurring in the States where they have a balanced budget requirement in their constitutions. Someone sues and a judge orders to raise taxes to pay for promises that were not funded.

The bottom line is that Congress can not delegate its power of purse, but the judges and the President will be more than happy to take that power if given a chance.

snowball777's picture

Holy Poop! Someone who mentioned the Constitution and actually knows what they're talking about...the end truly is nigh. ;)

ATM's picture

You have obviously adopted the MSNBC created vision of a Tea Party member.

Too bad.

alexwest's picture

each time I read abnormal revenues/gdp ratio I scream..
is mr roserberg so fat so his brains dont work anymore?

Admittedly, revenues at 15% of GDP are abnormally low as well, and while a partial by-product of the recession and sluggish recovery, loopholes galore and endless tax gimmicks are also at play

listen idiot, heres GDP formula

GDP = private consumption + gross investment + government spending + (exports ? imports),

it does include debt aka federal budget deficit.. US goverment runs 1.7/8 trln deficit .. real GDP (excl debt) is around 10-11 trln... revenues are around 2.2 trln , so ratio is around 20%... its been for last 50 years..

no wonder Merrill Lynch got cooked.. his economist yet dont have a clue..

what a sucker