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

Democrats continue to demand an increase in taxes on the rich as critical to reducing the deficit.  This sound great, it ignores economic principles.  All tax payers are not created equal.  The average Joe reports his income, pays his tax and moves on.  He has no real alternative.  He must use nearly all of his income for living purposes.  He has little real disposable income.  But people with higher incomes are very different.  A much higher percentage of their income is disposable.  Since they don’t  need most of their real income for day to day living expenses, it is much easier for them to hide it.

The classic example is our hero, John Kerry.  How many of you remember his new $7 million sail boat.  Many of us are familiar with how he tried to dodge Massachusetts sales tax by berthing the boat in Rhode Island:

http://www.masslive.com/news/index.ssf/2010/07/sen_john_kerry_docks_new_boat.html

But while the main stream media picked up on the sales tax hypocrisy, they missed the main point.  Although the article refers to this as John Kerry’s yacht, it doesn’t actually belong to John Kerry.  It also doesn’t belong to his wife, Theresa Heinz.  The boat is owned by Great Point, LLC.  The following article shows how the ownership of this boat was structured to avoid paying tax:

 http://www.futureofcapitalism.com/2010/07/explaining-kerrys-yacht-tax-dodge

This is why people like John Kerry, who are filthy rich, are so willing to accept raising taxes on the rich.  They know they won’t pay them.  It is also why raising tax rates on the rich does not result in higher tax revenues.  Revenues will go up for a short period of time, but only long enough for the really rich to find a way to avoid them.  The more money you have, the easier it is to avoid taxes.  Closing tax loopholes is a joke, because rich people can always afford to hire an expert to find a replacement.  

When George W. Bush lowered tax rates on the wealthiest Americans, they actually ended up paying a higher percentage of total tax.  It’s just plain economic sense.  Just this week an MSNBC Reporter sneered at a Republican congressman and asked him if he had a degree in economics.  It turns out, to her horror, that he did.  Perhaps someone should ask Obama this question.  Personally I don’t think you have to have a degree in economics to understand common sense principles.  But, to provide full disclosure, I do have a degree in Economics and yes I did graduate with honors.

TDM 

http://www.examiner.com/starbucks-in-national/did-starbucks-raise-or-lower-prices-bothJoh

Republicans were finally unified enough to force a showdown with Obama.  By standing up for their principles and opposing new taxes, Republicans were poised for a great victory.  When all is said and done, if Republicans refuse to raise the debt ceiling, Obama will have to decide what to pay and what to cut.  No matter what decision he makes, it will be a political disaster.  However, RINO Senators are rushing in with another brilliant plan guaranteed to lose the day.  Once again a handful of RINOs, who think they are the smartest people on earth are sabotaging the best efforts of our conservative leaders: 

http://www.politico.com/news/stories/0711/59377.html

The first clue should be that Obama likes it.  Earth to RINO’s:  If Obama likes it, he either doesn’t understand it or it’s a really bad idea. 

Even if this is a great idea, it is still extremely damaging to Republicans.  It allows the main stream media to portray conservative Republicans as stubborn fools who refuse to consider reasonable proposals.  It is a “lose-lose” situation for Republicans and it just another in a long list of examples where conservatives have been royally screwed by RINOs.  Obama who has shown no leadership skill and who has been unwilling to consider compromise will come out smelling like a rose.  Republicans never gain from compromising with those who are determined to keep us on the path to destruction.    

This is more proof as to why we need to remove RINO’s from office.  They are more dangerous than liberal Democrats, because at least with liberal Democrats we know which side they are on. 

This proposal may be great.  It may be horrible.  It doesn’t really matter.  Ultimately all of these deals  turn out different than anyone predicts.  What counts is removing people like Nancy Pelosi, Harry Reid and Barack Obama from positions of power.  As long as they remain in power nothing will change.  Taxes will go up, the economy will go down and they will continue to tax and spend until the inevitable financial meltdown makes it impossible to continue.

I am not a particular fan on Ron Paul, but he sure gets it right in the following speech:

http://www.realclearpolitics.com/video/2011/07/19/ron_paul_we_will_default_because_the_debt_is_unsustainable.html

I greatly fear that once again RINOs have swooped in with the best of intentions only to do nothing more than snatch defeat from the jaws of victory.

TDM

The United States currently has revenue of approximately $2.2 trillion against expenses equal to about $3.8 trillion.  Keep in mind that Obama increased spending by over $1 trillion.  This means that our expenses are approximate 172% of revenue.  Another way to state this is that our current revenue is only adequate to pay 55% of expenses, hence, the 55 or double nickel.

Obviously, at the current rate of spending, we have to borrow an additional 45% in addition to our current revenue just to avoid default.

Let me put this in perspective.  Suppose someone has an income of $5,500 per month.  Their expenses are $10,000 per month.  They borrow $4,500 each month so they can pay the bills.  Obviously every time they borrow money their expenses increase the next month.  How long do you think they will last?

If you knew someone in this situation, would you loan them more money?  The answer is no, because you know that loaning them more money would not solve their problem.  All loaning them more money would accomplish is to delay bankruptcy for another month or so.  Letting them borrow more money just results in a bigger and bigger problem.  The only possible solution for these people is to double their income, or to half their expenses.  Which is more likely?  How many people do you know who have doubled their monthly income lately?

The sad reality is under Obama’s leadership we are already insolvent.  The only question is when the day of reckoning arrives and who gets blamed.  Extending the debt limit does not solve the problem it only delays the problem for a short period of time.  Raising taxes might help solve the problem; if raising taxes resulted in more revenue.  But the problem is that raising taxes is likely to kill the economy, resulting in even less revenue.

Virtually every state run by Democrats has raised taxes and increased spending and virtually every state run by Democrats is on the verge of bankruptcy.  Think California.  California dreaming takes on a whole new meaning.  Virtually every state run by a conservative Republican has reduced taxes and cut spending and those states are already starting to recover.  Think Texas.

Republicans are seriously considering caving in to the President and raising the debt limit, through one deal or another, primarily because they are afraid of the political fallout.  I wish just one Republican would stand up and tell the truth.  We are already in default, we are already insolvent and the longer we delay in recognizing this; the more painful it will be for everyone.  If anyone wants to see what is just around the corner look at Greece, look at Ireland and look at Italy. 

I have learned that the best way to analyze any situation is to read the New York Times and do the exact opposite of what they recommend.  Here is a NYT article from February 22, 2011.

http://www.nytimes.com/2011/02/23/business/economy/23leonhardt.html?_r=1

Less than two months later, a record even for the NYT, their analysis was proven wrong:

http://uk.reuters.com/article/2011/04/07/uk-germany-institutes-idUKTRE7362RW20110407

Now, in July, less than 5 months after the NYT explained why cutting expenses can’t work, Germany appears to be on the path to recovery and is even talking about lower taxes?

http://online.wsj.com/article/BT-CO-20110706-702324.html

If, and it is a big if, the Obama administration would agree to big cuts in spending, than raising the debt limit might be a good idea.  It would buy us enough time to do the necessary, which is cut spending.  But Obama clearly lives in a dream world where all he has to do is raise taxes on corporate jets and all his problems will fly away on streams of soaring tax revenue.  Mitch McConnell got it right when he said no real deal to cut spending is possible while Obama is President.

So why does McConnell want to give Obama the ability to raise the debt limit?  The answer is because that is a political decision, not an economic decision.  McConnell knows that default is coming and his most important consideration is in making sure that Obama is not successful in falsely blaming this on Republicans.  He is right to be concerned, because the main stream media is still fully in the tank for Obama. 

To me the worst case scenario is that Obama drive this country into bankruptcy and with the help of the main stream media finds a way to blame everything on Republicans.  There is precedent for that.  George Bush and Republicans are blamed for lack of regulation in the financial markets even though that was done by Bill Clinton before Bush took office.  Bush is blamed for letting Fannie Mae and Freddie Mac take down the housing market in spite of the fact that it was primarily Democrats who facilitated that disaster and Bush went to congress on 11 separate occasions warning them about this.  George Bush is blamed for all our economic woes, although the economy was doing just fine until January of 2007, when Nancy Pelosi became Speaker of the House and Harry Reid became Senate Majority Leader.  Democrats are unfortunately very skilled at blaming Republicans for problems they created.

Perhaps McConnell got it right.  We really can’t avoid the financial train wreck that is coming as long as Obama is President.  There is no hope of fixing this problem with this man in office.  You cannot engage in mental combat with an unarmed opponent.  But what we can do is force him to take ownership so the American people know who to blame.  It is time to call his bluff.  Put the leadership responsibility squarely on Obama so we can finally, finally, finally fix the real problem.  If our financial ship of state has to go down, at a minimum we need to make sure we get rid of the Captain that steered us into the rocks.

 TDM

Mitch McConnell is either the dumbest member of congress, or the smartest.  At first I leaned toward dumbest when he proposed giving Obama the ability to raise the debt limit.  Then I read the proposal and realized that this is a brilliant solution.  The following article explains it:

http://www.washingtonpost.com/blogs/ezra-klein/post/mitch-mcconnells-surprising-proposal-to-empower-barack-obama/2011/07/11/gIQA4RDBBI_blog.html#url=http%3A%2F%2Fwww.washingtonpost.com%2Fblogs%2Fezra-klein%2Fpost%2Fmitch-mcconnells-surprising-proposal-to-empower-barack-obama%2F2011%2F07%2F11%2FgIQA4RDBBI_blog.html&size=small&count=fal

First, Obama would submit a request for a $700 billion increase in the debt ceiling, along with a nonbinding proposal to cut spending. That would automatically trigger a $100 billion increase in the debt ceiling to give Congress time to consider the request. Congress could then vote to either approve or disapprove of the president’s request. If they disapprove of it, however, Obama could veto their disapproval, and unless two-thirds of both chambers voted to overturn his veto — a virtually unthinkable outcome given that Democrats control the Senate — he could raise the debt ceiling anyway.

The same thing would happen, albeit in $900 billion increments rather than $700 billion increments, in fall 2011 and summer 2012. Take it all together, and Republicans would almost completely forfeit their leverage over the debt ceiling. In return, they’d get to make Democrats vote repeatedly to first raise the debt ceiling and then to “approve” of raising the debt ceiling. As Sen. Lamar Alexander (R-Tenn.) said, this “gives the president 100 percent of the responsibility.”

Republicans ought to accept this, because it puts the spotlight and the responsibility solely on Obama.  McConnell is right, this President will never agree to a reasonable deal to raise the debt ceiling.  Instead he will hold sham meetings and repeatedly use the debt ceiling to take cheap political shots at Republicans, without having to offer any solutions himself.  He will use the threat of the debt ceiling to extort outrageous concessions from Republicans.  This would turn the tables on him.  He and only he would be responsible for raising the debt ceiling.  He and only he would be responsible to propose spending cuts to support that decision.

Unfortunately the conservatives are looking at this as surrender to Obama, without realizing that instead it is the ultimate poison pill for Obama.  My prediction is that if congress did pass this, the White House would reject it.  If this was such a great deal for Obama you would be hearing a lot of Democrats praising it.  They aren’t.  That is because they know the truth.  This deal will expose Obama and ultimately expose Democrats.  The reason is that Obama is very unlikely to propose real spending cuts.  That means when he requests an increase to the debt ceiling congress will almost certainly vote no.  Obama will then have to veto the legislation and Democrats in the Senate will have to block any attempt at over-ride. 

This is absolutely brilliant, but my hunch is that it will never happen.  Instead we will continue on the same path, which is the road to nowhere.

TDM

Obama just announced that he cannot guarantee that Social Security, veterans and disability checks will be issued if Congress cannot agree on a deal that would raise the governmnet debt ceiling by August 2nd.  This is a sure sign that he is not making much progress with the Republicans who are actually showing signs of growing a spine.  It is an act of desperation.

Now he has resorted to the classic Democratic trick of always trying to cut benefits for the most vulnerable people and then blame it on the Republicans.  I sure hope Republicans call his bluff.   There is more than enough money to pay the interest on our debt, to fund our military and to pay social security and veterans benefits.  It is unfortunate that President Obama has chosen the most vulnerable citizens in our society as his first choice to cut spending.

They need to make it clear that this is Obama’s decision, because it is.  If Republican allow Obama to dump the blame for his irresponsible actions on them, they lose.  If they put it where it belongs, solely in Obama’s court, they win.  It is as simple as that.

TDM

The Canadian Free Press has some interesting articles.  They despise Obama so I generally read their articles with a grain of salt.  In this particular case, however, everything they are reporting is consistent with known facts: 

http://canadafreepress.com/index.php/article/38374

This story has the potential to be beyond explosive.  The NRA is one of the strongest political forces in this country.  They not likely to be amused!  Just think about this.  During the last election John Kerry had a picture taken of himself pretending to duck hunt.  John Kerry?  Duck hunting?  Please!  It was so bad that even David Letterman could not resist a shot:

“John Kerry went duck hunting and he’s doing that to fulfill his campaign pledge to hunt down the ducks and kill them wherever they are. Kerry did pretty well; he came back with four ducks and three Purple Hearts.” —David Letterman

Kerry did that because, like a lot of Democrats, he knows he cannot afford to be targeted by the NRA.  Harry Reid only won re-election because of NRA support.  Even if you’re a democrat, being targeted by the NRA in much of the country is a fast track to retirement.

The danger to the Obama administration has increased exponentially because of the obvious cover-up.  As with most political scandals, the cover-up often does more harm than the underlying event.  The best example of that was Watergate.  It was, after all, all about nothing.  Some people got caught bugging DNC headquarters.  Who cares?  Does anyone really think Democrats would have passed up on the opportunity to bug the RNC.  (Remember Democrats actually got caught wiretapping Newt Gingrich’s cell phone.)  But the cover-up led to the resignation of Richard Nixon.

Brett Hume is one of the most respected reporters in Washington.  He is an experienced and careful man.  Following are his comments on this issue:

Hume: This is a real scandal. And once again we have the classic question “what did the Attorney General, for example, know and when did he know it.” This Obama Justice Department reminds me of nothing so much as the Nixon Justice Department. You have the scent of high level knowledge, of serious wrongdoing, and you have the smell of cover-up and I think the stench of cover-up on this gunrunning operation is very strong indeed.

 This is one time when the Canadian Free Press  big bang theory may have some real merit.

 TDM

President Obama has said that both political parties must compromise for the greater good.  But what he means by compromise is for Republicans to agree to raise the debt ceiling and raise taxes.  Once again Democrats are playing the class warfare card claiming that Republicans want to give tax cuts to the rich and screw the poor.

This is a classic bait and switch tactic by the liberal left that unfortunately has worked effectively for decades.  Republicans tend to get defensive and mutter comments like “I don’t think we should raise taxes on anyone during a down economy.”  It is pathetic.  What Republicans should do is start telling people the truth.  There is a good reason all those rich Democrats are so willing to support increasing tax rates on the rich. It is because they know they won’t pay them.  Really rich people hire professionals to find ways to avoid tax.

 Republicans need to point out the obvious difference between raising tax rates on the rich and raising the amount of tax actually paid by the rich.  This is an easy argument to win. 

 The following charts shows what percentage of total income tax was actually “paid” by income groups for the period 1980 – 2008

 George W. Bush cut the top tax rate and almost immediately the top wage earners began to pay a higher percentage of total tax revenue.  Even more significantly, the lower tax brackets paid a significantly lower percentage of total tax revenue.  If Bush is to be criticized, it is for allowing half of the population to pay nothing at all.

With regard to raising the debt limit, Republicans can win this debate, if they grow a spine.  They should just refuse to raise the debt limit.  They should tell Obama he cannot borrow any more money, period! 

 The 14^th Amendment says the U.S cannot default on its debt.  It does not authorize the President to borrow more money. If Obama refuses to pay our debt and spends money on anything else, he will be violating the constitution.  Obama is pretending that Republicans will be responsible for any default, but that is untrue.  There is more than enough money to pay the cost of our debt.

 Some things are predictable.  Obama will begin, as Democratic Presidents usually do, by cutting the military.  He may use this as an excuse to just order an immediate withdrawal from Iraq, Afghanistan and Libya and blame the resulting mess on Republicans. This is the only cut that Obama can make that will not infuriate his base. 

 Obama is unlikely to cut Social Security or Medicare.  His plan is to intimidate Republicans into doing that, so he can campaign against them on the subject.  He wants the Republicans to propose cuts.  Then Obama will ride in on his white horse and save the day.  But that is only possible if Republicans are dumb enough to play the game.  Republicans can call his bluff by refusing to raise the debt limit and dumping the ball fully in his court.  That way Obama, not Republicans will have to propose cutting entitlements.  Obama is very good at shifting leadership responsibility to everyone else.  Republicans need to call his bluff.

 I don’t expect it, but I would sure like to see Boehner say:  “enough is enough.”  We aren’t going to increase the debt limit.  We are not going to raise taxes on anyone.  The American people are already taxed too much.  Increasing taxes will only destroy what is left of our economy resulting in even less tax revenue.

 Mr. President, it is time for you to provide the leadership required to cut spending in a responsible manner. It is time for you to stop shifting responsibility to everyone else and do your job.

 TDM