So, I got this email from the TEA Party Express people. It starts:
We are saddened to see today that the political establishment in Washington DC continues to do the only thing they seem to know – kick the proverbial can down the road. Instead of repealing, defunding or at least delaying the atrocious Obamacare, the political elites are content to let the "train wreck" happen at the expense of the American people.
Now, look, I’m really sympathetic to the goals of the TEA Party. If it was up to me, the executive departments of the Federal Government would consist of State, Defense, Treasury, Justice, and Interior. We’d have a balanced budget amendment. There would be no federal-level entitlements. Basically, the federal government’s primary responsibility would be sound money and talking to or killing foreigners as required.
But this is just a bit tendentious. It’s not “political elites” that gave us Obamacare, or who are preventing it from being overturned. It’s Democrats. The problem isn’t that Republicans have some secret admiration for Obamacare that prevents them from getting rid of it. The problem is that Republicans control 1/2 of 1/3 of the government. They have no political way to force the repeal of the ACA. They don’t control the senate—or even have a majority in it—and they don’t control the White House. Since we don’t have government by magical pixie dust, but by actual votes in actual legislative bodies and approval by the president, what possible path to ACA repeal was on the table?
The Tea Party and conservatives got short end of the stick on today’s announced budget "compromise." Enough Republicans in the Senate and the House are ready to give the Democrats everything they wanted and rendered the principled stand led by Ted Cruz, Mike Lee, and others a futile effort.
No. It was a futile effort before it began. The principled stands of some Republicans were irrelevant, because they had no power whatsoever to translate their stands into concrete action. Nor, apparently, were the Democrats in the Senate or White House particularly worried enough about negative public opinion to yield. SO, where was this going to go? Partially shutting down the government forever? Stopping Social Security and Medicare payments? I mean, what, precisely, was the end game that got to Obamacre repeal with the current senate and president? Hey, while we’re on the subject, what was the plan that the Republicans had—or that Ted Cruz had—prior to shutting down the government? I mean, other than, you know, hope.
To put it plain and simple: we don’t have enough conservatives in Congress to stop the irresponsible spending in Washington.
Yes. Exactly. Which everyone else knew early in November of 2012, just as they knew the next chance to repeal the ACA, barring its spectacular failure, would be after 2014 at the earliest.
We have seen 5 years of the Obama Administration and no successful negotiations have taken place except the sequester, which was Obama’s idea because he never thought it would actually happen!
So, by what sophistry of reason did anyone assume Obama would negotiate over Obamacare?
This is simply unacceptable. The Republicans have had 5 years to try and make some progress in remedying the financial ills that plague our nation’s future, and have made little to no progress.
I guess that makes you wish you’d had a massive GOTV effort in 2012, huh? But that didn’t happen, and millions of Republican voters stayed home. So we got a Democrat-controlled Senate, and Barack Obama went back to the White House.
The predictable result was that Obamacare was not—and with Democrats controlling the Senate and White House, will not—be repealed in the foreseeable future.
Are there some Republicans who could be described as insufficiently conservative? Yeah. Sure. So what? They aren’t the fundamental problem here. They aren’t the ones who voted for it in the first place, either.
If you want the ACA repealed there’s a simple way to do it: Win elections. Like Cory Booker just did in New Jersey, which sent another Democrat to the Senate.
This week, Bruce, Michael, and Dale discuss the week’s shootings, and the debt limit. Be sure not to miss the hilariously incompetent closing credits.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.
Monty Pelerin, writing in The American Thinker, is thinking about the unthinkable. What would happen if the US held a bond auction..and no one bought any bonds? Even worse, what would happen if we were to default on the $16 trillion in bonds already outstanding?
What occasions this thinking is something he read in Bob Woodward’s new book on the Obama administration, a portion of which is excerpted in the Washington Post. This excerpt discusses last year’s debt ceiling crisis. In it Treasury Secretary Timothy Geithner tries to explain how bad it would be if credit markets stopped buying Treasuries.
But, here’s the thing:
Credit markets have (or nearly have) stopped US government debt financing. That’s why we have the Federal Reserve, the counterfeiter of last resort. If government can raise the debt limit, then it would be legal for the Treasury to issue new debt. The Treasury’s sibling, the Fed, would buy it by printing new money. That would allow the government to pay its bills for a while longer…
No one will buy US Treasuries other than the Federal Reserve. Raising the debt limit only puts the government more hopelessly in debt, ensuring that Treasuries will be even more difficult to sell. Without intending it, Geithner admits that Bernanke will be printing money until the electricity is shut off or until hyperinflation shuts everything economic down. In either case, we reach his "indelible, incurable" situation which will "last for generations."
Take a look at the monetary base of the United States, which I would describe simply as all the money of all types floating around in the economy. You know why that number has jumped massively since 2009? Because the Fed has been the major buyer of US treasuries, and it buys them by simply printing new money.
Now, the US Dollar is the world’s reserve currency. What that means is that it is expected to be strong, stable, and plentiful enough—though not too plentiful—to be used as the primary backup currency for the entire world’s global trade.
But, since 2009, we have essentially financed our massive debt, which is now at 104% of GDP by having the Fed print the money to buy the Treasury’s bonds. The chart you see here is the result of two separate rounds of Quantitative Easing of that sort, and the Fed is now considering QEIII.
Now, Greece, the sick man of Europe’s financial system, has a debt to GDP ratio of 128%. At the current rate of spending, we could reach that within a decade. But we won’t, of course, because at some point between 104% and 128% of GDP, we will have so much debt that the US will be the world’s financial sick man. At some point credit markets will simply not bid on US Treasuries, because the specter of inflation or default will loom so large that only the Fed would be stupid enough to show up at a bond auction.
When that happens, current foreign holder of US treasuries will face intense pressure to divest themselves of them. Prices will collapse, and interest rates will skyrocket. If the Fed steps in to buy those treasuries to support the price—which they almost certainly will, because politicians will demand it—we will then be clearly seen as fully monetizing the debt.
At that point, foreign holders of US dollars will demand that some other currency or asset be used as a reserve, at which point foreign holders of dollars will scramble to repatriate those dollars as quickly as they can.
The dollar will then become worthless in foreign trade, and we will face massive hyperinflation in the US.
On our current spending path, with our current level of debt, this is inevitable, and we have no idea when it will happen. We are literally a single bond auction away from a complete and utter collapse of the US financial and monetary system. We just don’t know when, exactly, that bond auction will be. It might be this week. It might be five years from now.
But, I repeat, at this point, barring a massive change to our fiscal and monetary policy, it is inevitable. There is no way credit markets will continue to buy US Bonds as our debt to GDP ratio climbs towards that of Greece. When that happens, we will either monetize that debt or default on it. Either way, the result will be years, if not decades, of American poverty.
And once that process starts, there will be no way to stop it. We can’t come back a week later and say, "hey, we fixed it!" Once it starts…we’re done.
After WWII, the US debt to GDP ratio was 124%. At the end of WWII, we slashed government spending by 50%, and eliminated the most onerous and confiscatory wartime taxes, and, though marginal rates were still high, offered a myriad of exemptions that essentially ensured that no one paid the marginal rates. We also scrapped the entire wartime system of industrial production regulation and eliminated rationing. And, of course, we had the only fully industrialized economy left in the world, as everyone else’s had been bombed, if not back into the Stone Age, at least into the Age of Reason, and we became the world’s chief industrial power, exporter, and global business leader.
To do something similar today, we’d have to completely eliminate the entirety of the Federal government, with the exception of the Departments of State, Defense, Justice, Interior, and Treasury, and cut Social Security, Medicaid and Medicare spending by at least 50%.
That’s not going to happen. I believe the current Republican plan to attack the debt and balance the budget won’t even eliminate the budget deficit until sometime around 2040.
Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha!b That’s rich. Like we have 30 years available to fix this. It is to laugh.
Update: And, this morning, right on time, I see that House Speaker John Boehner says he’s "not confident" that Congress and the administration can reach a debt deal. In which case, Moody’s has already warned that they will downgrade the US credit rating by another step. Meanwhile, the rumor is that the Fed is now preparing for another $840 billion in quantitative easing.
That bond auction just keeps getting closer.
In this podcast, Bruce, Michael, and Dale discuss concerns about Turkey, and the debt limit.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.