Deal Has Something for Everyone to Hate

Were we perhaps too hasty in condemning the debt-ceiling bill? Evidence surfaced yesterday that it may not be such a bad piece of legislation after all. First, stocks took their steepest dive in recent memory, sending the Dow Industrials 266 points lower.  It was like watching a little brat who enjoys setting the curtains on fire and torturing toads get a good spanking.  Then we came across the news story Tycoons Laughing All the Way to the Bank linked at the blog of one of our oldest, dearest – and most politically Progressive — friends, Glenn Klotz.  “The wealthy and their huge international corporations own Washington now and do as they please,” wrote Glenn, a conscientious man of the left — although perhaps no longer an Obama supporter. “Democracy is DEAD. The Republic is DEAD. In its place is a Corporate Plutocracy.”  In other words, the status quo has been nicely preserved, snatched from the jaws of a Congress that briefly appeared hell-bent on – ugh! – fiscal reform.

So, if Wall Street fears the bill, and the hard left thinks Obama and the Democrats have sold out to “the rich,” then how bad can it be, really?  A law that we can all hate for one reason or another sounds a lot better to us than one that has pleased, for starters, Harry Reid’s flock. And did we mention that Rep. Bernie Sanders, the only declared socialist in Congress, voted against it?  That kind of news deserves to be celebrated with a shot and beer, not debated.  And consider a side-benefit we’ll all enjoy once Mr. Obama has signed the bill into law:  The story will be off the front page, finally – replaced by news that the polar ice caps are still melting, that politicians and movie stars are still cheating on their wives, and that the tide of revolution in the Middle East still is not going well for the insurgents.

No Actual Cuts

We’re not sure what to make of the deal ourselves, but the prospectus that appeared here yesterday by Doug Behnfield drew many illuminating and provocative responses. Perhaps the most commented-on aspect is that it really doesn’t cut spending – it simply establishes a commission to make suggestions on how to forgo spending increases that would ordinarily be rubber-stamped by Democrats and Republicans alike.  “I’m pretty certain that in the months to come, the so-called spending cut will turn out to be another case of a new spending increase that wasn’t allowed to happen,” wrote Benjamin, a regular contributor to the Rick’s Picks forum. Another regular, Robert, concurred:  “Didn’t you read the Bill? That’s exactly what it is. There is not a single reduction in there, only the pledge to over spend less in some far-distant future.  All anchored by this Super Congress abomination.”

Once again, we ask:  If there’s something in this bill for each and every voter to hate, as would appear to be the case, can it really be that terrible?

***

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

  • Chris T. August 3, 2011, 10:00 pm

    It’s surprising that Glen Klotz sees the situation so clearly, but is still unable to see, that progressivisim as an ideology, is the tool exactly of what he points out, not its enemy.
    It was created by the people he blames, as an incredibly useful smokescreen for their machinations.
    The committed-left agenda Rick mentions, is one opposed to private property and independence.
    Until people such as Glen come to realize that their beliefs are the enabling thing, nothing will change.

    But the internet is helping, in the last decade the single most important variance vs. the past, because it has destroyed/is destroying the gatekeeping so successfully used by the rulers for so long (why people like Bill Clinton can be heard advocating for Inet control).

    As to the holy land comment:
    “but they’re justified about wanting their land that was given to them by God himself.”

    Have you ever actually read those passages that describe how the taking of the gift was accomplished?
    You might want to reread that.
    Especially what happened when the Israelites showed mercy in that taking, and didn’t cull every head around.

    But, it is indefensible to base any claim on only one document that is ahistoric (because the Old Testament is not a history).

    In the cumulation of claims, the only thing that matters is the most recent, not the furthest ago, and it comes down to might makes right.
    No one in the west, whether you agree with it or not, other than such nutjobs as Rumsfeld and believers like him, bases the legitimacy on the Old Testament, but on the UN resolutions post 1945, including the State of Israel itself.

    There also is no problem with a one-state solution, other than the fact, that a sometime-to-be minority of the population, but majority now, would lose political control (if a one man, one vote democracy is maintained).
    The State of Israel would (probably) cease to be a jewish state, but would not have ot cease being a state.

    But it is mere speculation, because Israel knows how to take care of itself, even if sometimes that requires being blunt.

    • DS August 7, 2011, 12:32 am

      I’d second many of your observations, Chris T, but just a ‘point of order’ regarding demographics in the region. The original projections of birthrates for Arab and Jewish populations ‘between River and Sea” were based on grossly flawed counts of Arab residents of Judea, Shomron [and Gaza] (a good part of the data via UNWRA – big surprise there), and roughly-speaking, 1.5 million extra ‘refugees’ were created ‘on paper’. These demographic studies are now several years gone throughly discredited (and disavowed), while accurate counts and extrapolation of actual pop. trends show in fact the reverse – that between emmigration and overall decline in birthrates in most of the sectors of Arab community and the growing birthrate in the religious-zionist and haredi nationalist communities (the majority, lest we forget – +60%) within the Jewish polity, projections of growth show substantive Jewish majority in the region within 20 years – including Gaza (for now, out of the counting).
      However, the original ‘studies’ have somehow been transformed into ‘accepted dogma’, employed by various to support disparate positions on the issues: – they’re not true.

  • Chris T. August 3, 2011, 9:31 pm

    wanted to save the picture above, love the name of the file.
    Fits to a T!

  • Marketace August 3, 2011, 7:24 pm

    Well congress acted to “save” us, so now all that is left to do is shout, borrow and spend.

    As this is hailed as a great accomplishment, when the smoke and mirrors are removed it is laughable that supposedly intelligent adults could play such games and create such illusions to try and fool us – and the ratings agencies.

    Let’ see how this really works and why congress cannot tell us what they actually cut. Partly because they actually only cut a few pennies from real spending, but “cut” trillions from projected spending as explained below.

    Everything in the US budget is always looked at in ten year increments, which is a waste of time and money since no one knows what will happen during that time. So the current year budget is a fair projection of the revenue and spending of the current year (even though the senate never passes a budget any more) The second year is also a fair idea of what is planned for that year, but years 3 through 10 are simply calculated by applying a percentage increase to all spending (about 7% compounded) and to revenues based on an assumption of a recovered economy growing at 4%. Of course since we now have a large current deficit, additional deficits are projected for as far as the eye can see based on these projections of excess spending over revenues in the current year.

    Now comes the current Debt Ceiling bill that boast of big spending cuts while accomplishing very little in the way of cutting real world spending. All it really does is put “caps” on future discretionary spending to say that instead of the baked in 7% outer year budget increases it may only be only a limit of 5% (or some other number less than 7%) by law. This is a good thing, but still allows spending increases versus real cuts.

    For example they supposedly cut real spending by $21 billion for next year (stop laughing at the absurdity of that right now). This translates into $300 billion of savings when projected out for 10 years compounded at 7%. The second year real cuts are only $46 billion, but again projected out at 7% for nine years “saves” $590 billion. Presto you have $900 billion in savings in their fantasy world.

    So in order to get $67 billion in actual cuts (if you can even believe that) they raised the debt ceiling by $900 billion which is real dollars that we all know will be borrowed and spent. Even Houdini could not pull off illusions like that.

    Then to keep the slight of hand going suddenly hundreds of billions of dollars poured in from Europe last night to buy US Treasuries, thus raising the price and lowering interest rates to try and fool the credit agencies into believing US treasuries were still strong. Obviously it was the invisible hand of the FED and QE 3 was launched to further destroy the dollar, but keeping pretend and extend going a little longer.

    • Benjamin August 3, 2011, 8:49 pm

      Well, if that ain’t a more in depth view into the sausage factory…

      I don’t know that they actually compound the “savings”, but hey I wouldn’t put it past them, either. It becomes even more disgusting when one considers they’ve spent all this time on the big deal, being paid what they are, just playing games with numbers.

      I’ve decided that Abduallah the Butcher would make a better representative. For those who don’t know who he is, let’s just say he knows all about cutting things…

  • dan August 3, 2011, 7:10 pm

    bottom line $ 7 trillion more spending..in 10 years…so all other likes or dislikes were just window dressing….and the only reason the left loon’s(can’t call them loonies or I disrespect Canada) is that they have to wait to raise taxes on everyone…such an impatient lot they are……and on the right we have the corrupted T’s that came in with eyes wide open and ran into the old school ,bought and paid for too long in congress we’ll show you the way Republocrats…
    So something for all to hate,does not make anything ther to love…and the can that they kicked down the road ,just went up are ass..as in BOHICA

  • Brad August 3, 2011, 4:01 pm

    How long has it been since precious metals rallied while the stock market tumbled?

    Is this a sign that the manipulation of gold and silver is ending, perhaps along with absolute control of the stock market?

  • jeff kahn August 3, 2011, 3:11 pm

    I agree with Rick that a secular bear is ordained, and that causation and correlation will be confused regarding yesterday’s moves. But here’s my question: Why did the Banks let the market go in the last ten minutes yesterday? Why didn’t they rally it back to even? It’s been years since that’s happened.

  • Terry S August 3, 2011, 8:46 am

    Toast that ‘boiler-maker’ to Gabby & witness a miracle! Bad guys = 0 , good guys = 1.

  • Benjamin August 3, 2011, 6:25 am

    I hadn’t expected to be mentioned in the commentary today. But hey, cool!

    Anyway, I’m not yet inclined to see the DC reactions as a positive indicator of what the bill is or isn’t. Not that I’m displeased that it’s made hard-lining lefties unhappy (boo hoo…cry me a Nile!). But I’d almost bet both kidneys that at least some portion that they’re unhappy with is for all the wrong reasons.

    As for Wall Street’s reaction, I know it’s been uncertain (yet defiant of gravity) til the deal was made. But the caption under the Fat Suit Kid there belies WS’s alleged dismay and punishment, and instead expresses confirmation that the deal was indeed a “sell-out to the rich”. I guess there’s some tongue-in-cheek going on in this commentary, huh? But if WS is truly scared, I have to say that is a curve ball to what I expected!

    • Rick Ackerman August 3, 2011, 8:41 am

      The Mother of All Bear Rallies could end with just a small decline in the broad averages, since that would create a very robust, bearish “impulse leg” of daily-chart degree. If it eventually turns out that the market’s recovery highs occurred simultaneously with the debt-limit deal, we’ll be hearing forever about how the two events were related. As far as I’m concerned, a secular downturn was ordained, and it will only make it seem as though the events in Washington were important. The alternative would require us to believe that all attempts at stimulus are about to cease.

    • Benjamin August 3, 2011, 9:20 am

      Understood, Rick. And agreed. It’s just that “disaster avoidance” schemes like these can make it easy to lose sight of the fundamentals (while one sorts through all being said). The fundamental is, of course, that all those bonds were going to default one way or another, be it through a cessation of money printing or through the printing press.

      Oh, and I thought yesterday’s discussions were quite lively and insightful as well. Been a pretty boring summer, conversation wise, so I was glad to have been around yesterday!

  • randy August 3, 2011, 5:49 am

    Isaiah said the daughter of Zion, aka America, would be in captivity for 70 years. That 70th year was up about 3 years ago… which was the 70th anniversary of the social security system.

    Could it be that about 3 years after that Isaiah saw the summer harvest that wouldn’t come in and that over the next three years that whole system implodes?

    I think all leveraged assets will undergo deflation, and all non leveraged assets will undergo price inflation as Babylon gets the boot. IMO, inasmuch as America stands with Israel we will survive, inasmuch as we placate would be tyrants (preWWII style), we are all toast.

    SPY puts anyone?

    • Brad August 3, 2011, 3:59 pm

      There is “no” nation left that actually supports Israel. The US hasn’t fully supported Israel since Bush II told Israel to let Palestine exist. Palestine isn’t mentioned in the Bible. The Israeli’s are correct in their assertion that the land is theirs.

      The Israeli’s have also been making horrible mistakes that are nearly indefensible….but they’re justified about wanting their land that was given to them by God himself.

      This is one of the reasons I’m worried about the US “surviving” the coming problems….we’re “not” taking God’s side of the battle.

  • martin snell August 3, 2011, 5:06 am

    The economic data of the last week or so have made the bill basically irrelevant.

    The 10 year CBO budget forecasts are based upon certain economic assumptions (growth rate, unemployment, interest rates etc). Looking at the latest CBO spreadsheet I was struck by how, to me at least, the assumptions looked overly optimistic. (2011 real GDP +3.1, 2012 real GDP + 2.8, 2013 -2016 3.4% – not to mention a 2013-2016 unemployment rate of 5.3%).

    Now if growth in the first year is below target, guess what? The whole rest of the “projections” become essentially worthless. The growth miss will probably do do more to increase the deficit over the next 10 years than the billion or so they claim to have cut.

    Since growth is unlikely to hit 3.1% this year (since Q1 was 0.4% and Q2 1.3%, that means 2H needs to be about 5% to get to a 3.1% average), all those numbers in the nice long spreadsheet will change for the much worse, especially in the out years.

  • warren August 3, 2011, 4:41 am

    The kid in the photo is wearing a fat suit. The deception almost works.
    Politicians have saved the day. Again, the deception almost works.
    Gold went over 1650. No deception.

  • John Jay August 3, 2011, 4:08 am

    All of the above!
    Super Congress is another brick in the wall of tyranny.
    Super Congress=Politburo
    Gramm- Rudman outlawed deficit spending back in 1985, right? How did that work out?
    Yes, the oligarchs control our government, maybe if Putin runs for POTUS we can have the oligarchs jailed, and their assets seized upon his election. (Why not ignore the citizen requirement, the Constitution is ancient history, right?)
    Now we’ll see the oligarchs show their collective fist to the proles, no more mister nice guy!
    They’ll keep the food stamp program though, I think JPM runs that.

    • Robert August 3, 2011, 6:39 pm

      “maybe if Putin runs for POTUS we can have the oligarchs jailed, and their assets seized upon his election. (Why not ignore the citizen requirement, the Constitution is ancient history, right?)”

      Some would say that Obama the Kenyan has already pavedthe way for Putin to run, right …?

      🙂

  • atoz August 3, 2011, 3:27 am

    I hope our country’s gonna be okay..

    • radicalsquare August 4, 2011, 9:33 am

      I hope so too but some bankers have to go to jail first.