The Obama administration spent 60% of the increase in the debt ceiling in one day. 

In case you have the slightest doubt over how bad this is, read the following:

Bank of NY Mellon [BK  24.06    -0.59  (-2.39%)   ] announced it will start charging “large depositors” to hold cash due to a sudden increase in dollar deposits prompted by fears among its customers.

That’s right; the Bank of NY Mellon has so many people depositing dollars that it is going to start charging people for holding their deposits.  When people are choosing investment options that guarantee a loss, because they believe a small loss is better than a big loss, it doesn’t get any worse than that.  Frankly they would get a better return putting it under their mattress.

The stock market dropped over 500 points yesterday.   Today could be better, it could be worse.  Ultimately, a crash is evitable.  The White House is gloating over a job report showing the creation of 117,000 new jobs.  However, it turns out those are primarily government jobs and the private sector lost 38,000 jobs.  In addition, even if it was true, it would not be enough to reduce the unemployment rate. 

This may get worse.  In a typical recession stocks lose 33% of value.  Some people are predicting a decline even higher than that.  We aren’t even close to those numbers yet.

But here is the really good news.  This crash has been coming for a long time.  The government has been trying to “manage” the economy by smoothing out the curves.  Instead, they just made things worse.  A financial crisis in the United States is not a unique event.  That has happened many times before in our history.  It just didn’t happen in our life time.  A lot of people are ignorant of events that took place before color television.  If they didn’t see it, it didn’t really happen.  The worst crash in U.S. history did not take place in 1929.  There were several crashes that were far worse.  The crash in 1920 was worse.  The difference was that in 1920 the federal government did not intervene and instead just adjusted by cutting spending.  The economy recovered in less than a year, resulting in the roaring twenties.   

In 1929 a progressive President, Herbert Hoover, tried to “manage” the crash.  Then FDR came in and doubled down with the “New Deal.”  The result was the great depression that only ended with the start of World War II.

We have to experience a crash.  It is inevitable.  The economy has no hope of recovering without it.  Only a real crash causes enough pain to force people to make the difficult choices and change behavior.  Addicts do not begin recovery until they reach rock bottom.  But the good news is that once this happens, real recovery is just around the corner.  Remember; the deeper the crash the stronger the recovery.

A lot of people fear Obama is destroying this country.  He isn’t.  Instead, he may have inadvertently saved us all.  He did not destroy our economy by himself.  We have been on the path to destruction for years.  Obama, in his total ineptitude, may have done us a big favor.  He pushed us over the brink, into the crash that was coming anyway, and ironically his incompetence may be the best catalyst for the real change that was needed.  It is always darkest just before dawn.  We are headed for a big crash.  That could be the best thing to happen.  There will be joy in the morning.

TDM

The victory over the liberal left with the debt ceiling debate is far more significant than most people realize.  It is important to understand that this is merely the continuation of what is happening all over Europe.  Following is an article from the UK Telegraph:

http://blogs.telegraph.co.uk/news/tobyyoung/100099357/the-real-story-of-the-us-debt-deal-is-not-the-triumph-of-the-tea-party-but-the-death-of-the-socialist-left/

Our media has not been reporting the truth about the fate of socialism in Europe.  In country after country socialism has led to financial meltdown and disaster.  The following quote describes what has happened all over Europe:

Labour was punished by the British electorate last year, polling its lowest share of the vote since 1983, but not as severely as the Social Democrats were by the Swedes, polling their lowest share of the vote since universal suffrage was introduced in 1921…

The same picture emerges wherever you look. In the European election in June, 2009, the Left took a hammering. In Germany, the Social Democrats polled just 20 per cent of the vote, their worst result since the Second World War. In France, the Socialist Party only mustered 16.5 per cent, its lowest share of the vote in a European election since 1994. In Italy, the Democrats polled 26.1 per cent, seven percentage points less than they received at the last Italian election. As David Miliband pointed out in a recent lecture: “Left parties are losing elections more comprehensively than ever before. They are fragmenting at just the time the Right is uniting. I don’t believe this is some kind of accident.”

Socialism has never been successful anywhere it was tried.  The results are always the same.  At some point they run out of money.  Margaret Thatcher said it best:

 “The problem with Socialism is that eventually you run out of other people’s money.”

 In a totalitarian state socialism can survive for a long time.  The people are miserable, but they can’t do anything about it.  Cuba is the classic example of that.  But in a democracy, socialism always fails and ultimately socialists are voted out of power.  Ironically Europe was able to survive socialism for a long time because the United States was the economic engine of the world.  But the U.S. elected a socialist government in 2006 when Nancy Pelosi took over as Speaker of the House and Harry Reid took over as Majority Leader in the Senate.  When Barack Obama was elected President of the United States in 2008, socialists controlled all three branches of government.  The only difference between the U.S. and Europe is that socialism brought down this economy far faster than anyone predicted.  Perhaps that is because the U.S. is the economic engine of the world.  While we bailed out socialist failures all over the world, there was no one available to bail us out.  Those of us who understand the history of socialism knew it would be bad, but not this soon, and not this bad! 

I now believe that the economic decline in the United States, directly rooted in our slide toward socialism, has ironically proved to be the catalyst to defeat socialism all over the world.  There is a world- wide political tsunami sweeping socialists out of office.  It has already reached our shores and no one should underestimate its strength.

TDM

The deal is almost done.  McConnell, Reid, Boehner and Obama are on board.  The only thing certain is that Obama has taken an enormous hit.  It became increasing clear that Obama was out of the loop and the people who deserve the credit/blame for this legislation are McConnell and Reid.  The President’s speech in announcing the deal was beyond pathetic.  He couldn’t resist moaning about the need for tax increases on the wealthy when everyone else had moved on to spending cuts. 

This deal is not even the down payment on a sound fiscal policy.  That is not possible while Obama is President of the United States and Democrats control the Senate.  It will take ten years to have any real impact and we will be insolvent long before then.  But the pendulum has stopped swinging toward “tax and spend” and is beginning to swing toward cut, cap and balance.  I think the best way to describe this situation is to quote Winston Churchill after the battle of El Alamein:

Now, this is not the end. It is not even the beginning to the end. But it is, perhaps, the end of the beginning

Churchill was pointing out that defeating Rommel at El Alamein did not end World War II, but it did demonstrate that the allies were ready, willing and able to fight back.  Prior to El Alamein, Hitler had an unbroken chain of victories.  After El Alamein, the allies were the ones on the offensive.

On March 18, 2010, about 16 months ago, Democrats were gloating about all their achievements and Nancy Pelosi was swaggering across the mall carrying an oversize gavel to celebrate their great victory in passing Obamacare.  Major legislation was being passed with no republican input and no republican votes.  The Democrats had super majorities in the House and the Senate and had the most liberal President in our history.

Today, Nancy Pelosi is rarely mentioned and Obama is spending most of his time trying to explain why this disastrous mess is not his fault.  There are many more battles to be fought and we are far from achieving final victory, but the movement toward socialism has been stopped and the momentum is swinging the other way.

The Tea Party has reason to be proud.  This historic change was only possible because of a grass roots movement of individuals who stood up against the establishment and said enough is enough.  When one considers all those RINOs that were defeated in the Republican primaries and the massive victory in the House last fall, keep in mind that no one predicted any of this before the Tea Party exploded on the national stage.  It is the end of the beginning, and while that is a far cry from total victory, it is a very good thing.

TDM

The Obama administration is praying for panic.  Obama made up an arbitrary deadline to try and pressure Republicans into passing irresponsible legislation.  There was no real deadline, other than in the deluded mind of Obama.  The United States is not at risk of defaulting on its debt any time soon.  There is plenty of revenue available to pay that.  There is also no risk of defaulting on social security, Medicare and/or veterans benefits.  There is also enough money to do that and more. 

While the main stream media, including people like Bill O’Reilly, bought this artificial disaster date hook, line and sinker, the real experts didn’t.  It is becoming more and more obvious that the rating agencies and the investment community are far more concerned about the size of our debt, than the size of our debt ceiling. 

The problem isn’t that the U.S. isn’t borrowing enough; the problem is we have borrowed too much already.  I now believe that August 2^nd will come and go and the rating agencies and the investment community will adopt a wait and see attitude.  It will soon become apparent that Obama’s doomsday prediction has the same credibility as the preacher who predicted the end of the world. 

I may be surprised, but I don’t expect to see any legislation passed before the August 2 deadline.  While Boehner, McConnell, Reid and Obama might be willing to cut a deal, Boehner is facing a near revolt from the Tea Party caucus.  He can cut any deal he wants, but that does not mean he can get the House to agree.  They are not in the compromising mood.  

Obama is likely to wake up Tuesday morning to discover that the only people experiencing panic are those in his own administration.  He has limited options.  He could just ignore congress and raise the debt limit himself, but unless there is a legitimate worldwide financial meltdown, that would be an act of political suicide.  In spite of his rhetoric, he can’t arbitrarily stop paying our debt.  He certainly can’t try and solve the problem by stopping social security checks, Medicare checks or Veterans checks.  Odds are he will try to solve the problem by printing more money, by selling some assets and ultimately by shutting parts of the government down.  He could shut down the EPA, the Commerce Department, Housing & Urban Development, the Department of the Interior, and the Department of Education and it would be weeks if not months before anyone noticed.  He needs to be very careful, because he held accountable for his decisions. 

Ironically, Obama and the Democrats are panicking over the lack of panic.  I don’t know how this will work out, but I do know who is praying for panic.

 TDM

If you listen to CNN, MSNBC,CBS,ABC or even FOX News, the Tea Party is a fringe party with extreme right wing views.  While some on the liberal left have made outrageous charges of racism etc. for the most part the main stream media views the Tea Party as a harmless distraction.  But, they also consider them to be naïve amateurs. 

But to other people the Tea Party is the best thing to happen to American politics in a long time.  To them the Tea Party is a grassroots movement fueled by people who are sick and tired of politics as usual.  The principles of the Tea Party are really quite straight forward.  They want a solid fiscal policy.  They want the government to lower taxes and cut spending.  They want a government that abides by the constitution and does not intrude on personal freedom.  They also want a free market where there is much less unnecessary governmental regulation.

To the main stream media these Tea Party core values may be radical, but they are not radical to most Americans who understand them. 

Something amazing is going on in Washington today.  In spite of tremendous pressure from the political establishment and from the main stream media, including Fox News, the Tea Party candidates are standing their ground.  The results are astonishing.  They would not give Boehner the votes to pass an increase in the debt ceiling without including a balanced budget amendment provision.

To RINO’s like John McCain and commentators like Bill O’Reilly these Tea Party Republicans are committing political suicide.  I am not so sure.  Every poll that I have read shows that the American people are tired of the spending, they are tired of tax burden, and they are tired of politics as usual in Washington.  They are also tired of people who always find a way to break their promises for the greater good of compromise.  They are very supportive of a balanced budget amendment.

This one is hard to call.  It sure looks like the Tea Party candidates are going to call everyone’s bluff.  I don’t think they are going to compromise with Harry Reid to save Obama’s bacon.  That means there are two show downs coming right now.  The first is in the U.S. Senate.  There are two and only two proposals that have passed the house.  While Democrats hunger for some compromise legislation to support, it doesn’t look like that option is even on the table.  That means they either vote against the only two pieces of legislation that can solve the problem, or they vote for them.

If nothing is passed and Tuesday passes with no financial meltdown, Obama loses the last shred of credibility.  I doubt seriously that he will unilaterally raise the debt ceiling because he will be risking impeachment.  Part of the problem is that he personally said he didn’t think he had the authority to do that.  He might declare a state of emergency and do it anyway, but that would be very risky.  That is particularly true when he rejected Republican plans that could have avoided the problem.

The only thing certain right now is that the Tea Party is standing tall and not backing down.  They said if we sent them to Washington they would change things permanently.  They were right.  Now we are about to learn the full extent of that change.

TDM

While the nation is fixed on the debate over the debt ceiling, a far more serious problem for the Obama administration is the Fast and Furious fiasco.  This government, which is famous for micro-managing everything, is pretending they were not involved in this major operation.  As you can see from this article, even the folks at CBS are not buying it anymore:

 http://www.cbsnews.com/8301-31727_162-20083772-10391695.html

Darrell Issa is handling this brilliantly.  He is on the case, he is focused and he is not backing down.  There are only three possibilities here: 

1.  A bunch of rogue employees were running this massive scheme without knowledge of their superiors. 
2. This plan was developed and managed by senior ATF management without the knowledge or consent of the White House. 
3. This plan was developed, managed and directed by the Obama administration. 

If 1 or 2 are true, then Eric Holder should be fired for incompetence.  However, it is hard to believe either of the scenarios for several reasons.  There would seem to be no real motive for such a scheme, other than plain stupidity.  In addition it is becoming increasing clear that this program involved several governmental agencies with competing agendas.  Anyone familiar with these agencies knows they are extremely competitive and they don’t play well together unless someone gives them a direct order.

There are, unconfirmed, reports that this was ginned up by the White House, possibly even to the level of Obama, as a way to create a better case for gun control.  The theory is that if the White House could show that guns from the U.S. are being used by the Mexican drug cartels there would be sufficient public outcry to finally get support for the gun control laws demanded by the liberal left.  Anyone remotely familiar with Mexico knows that there are far easier sources of military guns and equipment from other parts of Central American than from the U.S.  So there was an inconvenient lack of a problem.  The solution was to create the problem, then take credit for fixing it.

So this is either a bizarre liberal leftist plot to force gun control laws down our throat, or it was just a record level of stupidity and incompetence.

The police have done this for years, so this is not new.  Child pornographers are routinely caught by specially trained operatives who lure pedophiles into illegal acts.  I am not criticizing that, it seems to be working pretty effectively and innocent people are not attracted by child pornography.  But it is a far different matter when guns are given to criminals knowing they will be used to kill people.

This case is heating up rapidly.  Every day there are new revelations and all of them are pointing more and more at top levels of the White House.  Darrell Issa is a very dangerous man, because he is handling this professionally and efficiently.  He isn’t taking cheap political shots, like Henry Waxman, but he also isn’t backing down.  There is a well-trained blood hound on the scent and the rabbits are in deep trouble.

It appears to me that the Obama administration is desperately trying to stall the investigation to get them by the 2012 election.  The only thing certain is that there is a massive cover-up in process.  It is too bad the main stream media has shown such little interest in a very serious story.

 TDM

I watched Obama’s speech tonight, followed by John Boehner.  My primary reaction was:  “is this really the best we can do?”  Please!  While I thought Boehner was better than Obama the reality is that both stunk.  Obama gave a campaign speech and was primarily interested in fixing blame on everyone else.  It was just plain awful.  On the other hand, Boehner didn’t exactly dazzle.  Why is it that we can’t seem to find a single Republican who can speak coherently?  At a minimum he should have reminded people of how much Obama increased the deficit since taking office.  He should have pointed out that if Obama spent the same amount of money that Bush spent during his last year in office, the deficit would be trillions of dollars less than it is today and there would be no need to discuss raising the debt limit.  He should have closed with a reminder that in 2006 every Democratic Senator, including Barack Obama, voted against raising the debt limit.  Then he should have quoted Obama:

   The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

 He could have drove a stake in his heart by saying Senator Obama said:  “Americans deserve better!”  We agree, which is why Republicans cannot and will not support raising the debt limit without a firm, no nonsense commitment to cut spending. 

 Boehner could have put Obama even more on the defensive by pointing out that Obama has increased spending at a level unprecedented in the history of the United States. 

 Who knows how this will play out.  Even CNN did not exactly give Obama a glowing review.  The standard group of KoolAid drinkers will continue to inhale.  The real question is whether or not independents will buy this nonsense.  If they do, Obama may get thrown a debt increase life line he does not deserve.  But ultimately it won’t matter.  It will just delay the day of reckoning and unless we stop spending, that day is coming sooner rather than later.  We are already technically insolvent and if we don’t cut expenses default is probably inevitable.

 In the ultimate irony, the people putting pressure on the U.S. to get its finances in order are the same people who failed to do their job with regard to the financial meltdown.  A lot of those companies, including Fannie Mae and Freddie Mac that melted down from toxic subprime mortgages on their books had AAA credit ratings from Moody’s and Standard & Poors.  Frankly, in my personal experience, by the time either of these rating agencies downgrades a company’s financial condition it is already too late.    

 Ultimately I don’t think either speech will accomplish squat.  Republicans are going to pass a short term increase in the debt limit.  Democrats are going to hold their nose and vote for it and Obama is extremely unlikely to veto it.  Nothing else really matters.

 TDM

A few years ago some out of control teenagers played a game called chicken.  Two cars would back off a considerable distance and then take off at high speed aiming directly at each other.  The first person to veer off to avoid the head-on collision was the chicken.  Playing Chicken was never a good idea, but in most cases the participants survived being neither participant was really interested in playing suicide.   But what if you found yourself playing chicken with an irrational opponent, someone who would rather die than be called chicken?

 Today Obama is playing chicken with the Republicans in congress.  There are reports that Senator Reid brought a bi-partisan solution to the President, involving a debt limit increase and spending cuts, but Obama said no.

 http://www.washingtonpost.com/blogs/right-turn/post/white-house-stokes-debt-ceiling-crisis/2011/03/29/gIQAvx8DYI_blog.html

 If this is true, then Obama has made a major mistake.  Senator Reid has tried to carry the water for Obama on this issue all along.  It was Senator Reid who had the Senate table the Cut, Cap and Balance Legislation last week without allowing any debate or amendments.  He would not have agreed to Boehner’s short-term deal unless he was sure of support by Democratic senators.  Forget Reid’s proposal, Republicans know who blinked first.

 I believe this is true.  That means that Boehner is almost certainly going to get this bi-partisan deal passed by the House.  He is then going to send it to the Senate, where it is going to be difficult, if not impossible, for Reid to block it.  At that point it will be up to Obama to veto it.  If he signs it, he has a big problem because this will come up again at the end of the year, the economy will be worse, it will be the start of the primary season, and Republicans will be even more determined.  On the other hand, if he vetoes it that will really anger Senators in his own party.  They cannot afford to vote down such a realistic deal when so many are up for re-election next fall.

 It is impossible to predict anything in this environment.  The most likely outcome would be for the House and the Senate to over-ride the veto.  But that will literally mean a full scale revolt by Democrats against Obama’s leadership on the economy.  Once Obama loses a vote like that, he will never recover politically. 

 It is also possible that if the President rejects a straight forward common sense deal, that just might convince members in both parties that Cut, Cap and Balance is the only real long term solution.

 A lot of people think that Obama will swallow hard and sign the bill.  I wouldn’t bet on that.  I think Republicans may be playing chicken with an irrational opponent.  That makes playing chicken a very dangerous game indeed.

TDM

President Obama has boxed himself into a corner.  It was Obama who announced the August 2 sky is falling deadline.  He is the one who says the government will default if the debt ceiling is not raised.  But, he has done nothing.  He has proposed nothing.  Democrats have done nothing.  Democrats have proposed nothing. 

There is only one piece of legislation available to raise the debt ceiling.  That is the Republican’s Cut, Cap and Balance legislation.  The so-called bi-partisan gang of six proposal means nothing because it is a five page summary of a plan, a long way from being a piece of legislation.  The bottom line is that either Republicans cave and throw in some tax revenue to make Obama look good, or he has only bad options.

Obama admitted today that he cannot just raise the debt ceiling arbitrarily.  His lawyers told him that.  I am sure that behind closed doors the attorneys for Republicans not only told him that, they told him they would impeach him if he tried.  At least one Republican said that publicly.  Bill Clinton advised Obama to do that, but perhaps he just wants company on the “Presidents who have been impeached” list.

If Obama ignores the August 2 deadline it will be obvious that he was using scare tactics to try and get his agenda passed.  On the other hand, if he does not pay our debt, stops sending out social security checks, Medicare checks, veterans checks,  or stops paying our troops, there will be widespread outrage.  Republicans will quickly point out that there is more than enough revenue to do all of the above.  In addition, the constitution REQUIRES him to pay our debt.  I think one could make an argument that the definition of items required to be paid under the constitution includes all of the above.  It would be a violation of the constitution for Obama to default on our debt.

 What Obama will have to do, if the Republican legislation is not passed, or they do not throw him a financial bone, is start shutting down parts of the government.  He will have to send government workers home.  Or, he will do what California Governors had done which is to start sending out IOU’s. 

Obama has to be desperate and will probably agree to almost any deal to raise the debt limit, even for a few days, to buy himself more time.  I sure hope Republicans stand firm behind their current plan.  At a minimum, they should demand that Obama produce his plan with specific cuts.  Since he has no plan, that will be very hard for him to do.   If Republicans hold their ground, the President can scream and holler to the heavens, but he has very few options and all of them are bad.

 Cut, Cap and Balance was tabled by the Senate.  The vote was 54 to 46.  But I wouldn’t rule out seeing some Democrats switch over and support this legislation.  It only takes 5 more votes to pass.  If it does pass, I don’t see how Obama could veto it under the circumstances.

 Republicans could still fold, that has been their pattern, but right now it is Obama who has boxed himself in a corner.

TDM

I am not a fan of soccer.  Several years ago I went to a World Cup soccer match between Cameroon and Brazil at Stanford University.  To soccer fans, this was the greatest event in history.  To me it was really boring.  It looked like some people kicking the ball back and forth in the center of the field for no apparent reason until someone accidentally scored.  However this year the U.S. women were in the World Cup finals and they had pulled off a couple of genuine miracles to get there.  So I decided to watch the game.  The U.S. was doing great and had even pulled ahead with just a few minutes left.  Suddenly the announcers started talking excitedly about how Barack Obama was a huge fan and that he, Michelle and the girls were watching the game in the White House.  They gushed about how he could congratulate the great victory. (Obama even sent Chelsea Clinton over to Germany, at tax payer expense, to help celebrate the expected win.)  Now perhaps it was a coincidence, but as soon as the announcers started talking about Obama, everything went south for the U.S.   Japan scored a miraculous last minute goal, and the U.S. fell apart during the penalty kick contest.  In the course of about 5 minutes the announcers when from celebrating a great victory to trying to absorb a mind numbing loss.

This reminded me of earlier this year when Obama started bragging about how things were looking up.  (No one else was very impressed.)  He bragged about creating 268,000 new jobs, ignoring the fact that over 60,000 of them were at McDonalds.  The same McDonalds Michelle Obama is trying to shut down.  No sooner did Obama start bragging about things getting better when we got hit with all those tornadoes.  This year has already been one of the worst storm years in U.S. history.  State Farm is reporting losses of $1.75 billion.  Allstate is reporting losses of $2 billion and Travelers is reporting losses of $1 billion.  Based on industry reports, it appears that the U.S. insurance industry incurred more losses in April and May of this year than in all of 2010.  The net result is going to have a significant impact on the entire insurance industry.  This does not even count all the floods and the Japan tsunami didn’t exactly help.

So, when Obama had a sliver of better economic news to gloat about, we got hit with these storms.  Then the U.S. soccer team took it on the chin just after it became obvious Obama was going to bask in their celebration.  I have to admit it caused me to ask a simple question:  “does God vote?”   Just saying!

TDM