Let's Index the Federal Budget to Existing Housing Prices

Existing housing prices are down roughly 32 percent from the highs (see here). Many are underwater on their mortgages, but people are making do, muddling through, because they have no other choice.

Why can't government do the same?

A 32 percent cut to federal spending currently at $3.819 trillion dollars would be $1.22 trillion. That would reset the budget to $2.6 trillion.

Freeze the federal budget there and index it to the Case-Shiller housing price index. When housing recovers in value, the feds can have a similar raise. If housing values continue to decline, the feds get a similar cut.

Linking the federal budget to the health of the American dream?

Sounds fair to me.

Maybe those SOBs might do their jobs for a change.

Stabilizing Debt to GDP Ratio Requires $1 Trillion in Cuts Per Year, Not $400 Billion

So says John Chambers of Standard and Poor's Sovereign Ratings Committee here. The ratio stabilized at the current level of 75 percent would remain consistent with a AAA debt rating going forward.

The $1 trillion per year represents about 7.5 percent of GDP. With the latest report of current dollar GDP running at $15 trillion, 7.5 percent is $1.13 trillion.

Viewed another way, if we simply threw out baseline budgeting, which builds in increases to the budget each year at a rate near 7 percent, we'd be nearly home free without having to do anything.

And another way to put that is, just freeze the damn budget at current levels for a decade.

Sort of like what the average working Joe has experienced since 2000: no real wage progress. If he can do it, government certainly should.

Obama Caused the Panic, Not the Media

So says Jim Cramer. And he voted for the guy.

Video here:

"He came out and panicked the heck out of us.

"He talked about the higher interest rates for mortgages, he talked to spiking credit cards, he talked about how hard it's going to be to get a student loan. It took us all aback because we felt that he'd be a compromise leader.

"Instead, he created tremendous fear. Tremendous fear means uncertainty. Uncertainty means no spending. Uncertainty means no spending by businesses. It means no hiring. It was a setback.

"He caused the panic, not the media."


Obama went outside the experience of his enemy, Jim Cramer.

George Will Defends the Font of Serial Marriage and Other Destructive Behaviors

Here:

[T]he libertarians' argument. ... The essence of which is the commonsensical principle that before government interferes with the freedom of the individual, and of individuals making consensual transactions in markets, it ought to have a defensible reason for doing so. It usually does not.

Obama Plays 'You Choose' at The Washington Post: How Obama Can Default on Treasuries to Hurt His Enemies and Help His Friends, and Get Re-elected

I'm drinking gin on a hot Saturday afternoon, putting on my 'Evil Obama' hat and playing 'You Choose' here at The Washington Post.

Imagine you are Obama.

You want to transform America into a European socialist welfare state. The Republicans are standing in your way. They want to freeze the debt ceiling where it is to deprive you of the opportunity to follow through with your dramatic spending increases, which have tripled the annual budget deficits.

The monthly revenue stream will leave you short by something around $125 billion on average without the freedom to sell new debt.

The people who will vote for you need to get their money in a government shutdown.

The people who will not vote for you anyway must not get theirs.

You'll make your choices, and when your enemies complain they're not getting their dough, you can plausibly blame the Republicans for tying your hands.

In the process you can destroy the full faith and credit of the United States and cut her down to size, and finish the (crony) capitalists once and for all.

You can end the wars and bring home the troops (saving tons of money and improving your popularity at the same time).

You can tank the economy and get sweeping powers to spend the trillions of dollars Paul Krugman wanted you to spend in the first place (on people who will vote for you).

Does he have the guts? Or does he just want to play golf for the rest of his life?

The Tea Party Has Already Made The Democrats Blink on Tax Increases

"They’ve moved in other words, the Senate Majority Leader, far in their direction."

-- George Will, here

An excellent point, the premise of which is that politics is the art of the possible.

In point of fact not just once, either. The extension of the Bush tax rates from this crowd of left wing fanatics was no mean achievement.

The Tea Party speaks for many in wanting the deficit spending to stop. In view of the fact that deficit spending and enthusiasm for taxation are the cornerstones of the opposition, getting Democrats to relent on taxes late last year and again now is pretty good for just 20 or 30 fiscal extremists in the US House.

It should remind us all that imagination is important to political success. Michael Steele didn't have any in early 2010 when he opined that Republicans probably couldn't take back the House. Boy was he mistaken.

It would be a mistake to stop imagining that we can reduce spending. The only caveat is whether Obama  possesses enough character to refrain from defaulting on the debt. If he doesn't and does default, it could be blamed on overreaching by the Tea Party.

At a minimum, Obama's persistent extreme rhetoric threatening such a default should trouble more people. Even left of center types here and there are upset by his behavior, which is a good sign. It is nothing short of disgraceful that a president should talk this way, and it gives everyone over the age of forty pause.

I say that's a tactic, not a promise. Obama is going outside the experience of the enemy, one of Alinsky's rules.

The Tea Party should keep pressing the issue. And Republicans need to buck up and go on the rhetorical offensive. The farthest they should go is a clean debt ceiling increase of $1 trillion, which buys more time but doesn't give the president the space he wants, and needs.

The next crisis date is October 1, by which time we must have a budget agreed to by the Democrats to fund the next fiscal year. 

GDP Revisions Beg The Question: Did Obama Really Avert a Depression?

I don't see how anyone can believe that nonsense.

GDP 2008: - 0.3 percent

GDP 2009: - 3.5 percent

GDP 2010: +3.0 percent

There's a nice summary here.

Despite the unprecedented way in which George Bush and then Barack Obama jettisoned capitalism, unleashing torrents of bailouts, credit and federal manipulation during the market meltdown in 2008 and 2009, GDP ended up posting back to back years of negative growth anyway.

When you have back to back quarters of negative growth, they call it a recession.

When you have back to back years of negative growth, they call it a depression.

We had a depression.

One can plausibly argue that 2010's + 3.0 percent GDP imprint is evidence that the federal deluge got us out of the depression, but it didn't avert it. We had a depression. We spent gobs to get out of it. And now for the first half of 2011 GDP is stalled at 0.4 and now 1.3, jobs aren't coming back, housing continues to sink, prices of essentials are rising, kai ta loipa.

Krugman and company thought we didn't spend anywhere near enough to get out. Well, we did, just not enough to get Obama out to 2012, that's all!

A quick, dirty depression arguably would have been better. Instead, we've got this, including a nasty argument about paying for all the borrowing to finance it.

'Things Always Look Darkest Before They Go Completely Black'

Yves Smith at Naked Capitalism here has a fairly low opinion of the regime's default scare tactics:

[U]tter failure of the Treasury or Fed to make any reassuring noises or discuss contingency plans is making rattled nerves much worse than they need to be.

Come Over to the Debt Side

Q2 2011 GDP at 1.3 Percent, Q1 Revised Down Into the Tank to 0.4 Percent

Just how does Q1 go from 1.8, to 1.9, to 0.4? That's an error of only 79 percent.

Q4 2010 also was revised down, to 2.3 percent from 3.1 percent. That's an error of 26 percent.

And revisions going back to 2007 when the Dems took over the Congress under George Bush are even worse, saved for the end of July while everyone's on vacation and not paying attention. And of course it's Friday.

Which reminds me. I neglected to do Bank Failure Friday last week. There were some, but sometimes reporting on it feels like writing an obituary, and last Friday was filled with too much death already.

The GDP story is here.

Obama Regime's Default Alarmism is Straight out of Saul Alinsky

Caroline Baum notices that the Obama regime is acting strangely:

Instead of dangling the default threat every chance they get, Obama and Geithner should be telling the world that the U.S. has every intention, and the resources, to meet its debt obligations. They should shout it from the rooftops, put a banner on the Treasury Direct website, and use the Sunday talk shows to reassure investors, not frighten them.

Rule 3 for Radicals: Whenever possible, go outside the experience of the enemy.

And make no mistake about it, you are the enemy.

Another Voice Wrongly Claiming 'The Money is in the Middle'

Brian Wesbury at The DC, here:

What most people don’t realize is that the U.S. has gorged so much (boosting spending from roughly 18% of GDP in 2000 to 24% of GDP today), that the only way to pay for it is to tax the middle class. ...

The money is in the middle. And the only way our politicians can get it is to follow Europe’s lead and institute a national sales tax or Value-Added Tax (VAT). This is the elephant in the room that is never talked about. Those who are using the debt ceiling in an attempt to cut spending are actually saving the middle class from tax hikes — not the millionaires and billionaires.


It's a frequently repeated claim that the money is in the middle, but it's just not true, no matter how often  it is said.

If all the (reported) income in America were poured into a giant hour glass, you'd have to start it and wait about twenty minutes to begin to visualize how all the money is actually distributed.

A snapshot taken at that moment would show $5.7 trillion in adjusted gross income still in the top, and $2.8 trillion in AGI in the bottom. The kicker is that 35 million tax returns split what's on top, while the remaining 105 million tax returns, 75 percent of the total, divvy up what's on the bottom.

The money's definitely not "in the middle."

It's hard to get agreement on what's middle class in America, especially since it is a conceit of our society that everyone is middle class. The rich aspire down to it to escape notice, the poor up to it to escape the indignities of dependence.

But no matter what smoke anyone tries to blow up your bottom, the biggest single pile of money remains with the top 25 percent:

Top 10 percent = 14 million tax returns (10 percent of the total) = $3.9 trillion in AGI
The next 25-10 percent = 21 million tax returns (15 percent of the total) = $1.8 trillion in AGI

The next 50-25 percent = 35 million tax returns (25 percent of the total) = $1.7 trillion in AGI
The bottom 50 percent = 70 million tax returns (50 percent of the total) = $1.1 trillion in AGI.

It's ridiculous to think that a VAT tax will somehow generate huge piles of new tax revenue on the backs of the middle class.  The VAT will hurt them just like Social Security and Medicare taxes hurt them because it's regressive, not because they have a lot of untapped money they're going to be parting with.

Considering how much tax evasion there already is in America of the unreported income variety, variously estimated (here at $2 trillion, resulting in a tax gap of $500 billion), a VAT will fail simply because it will drive more and more of the economy underground where cash is king and credit cards, checks, invoices and receipts are anathema. Think of it as the inverse of how the rich escape high rates of taxation, for example by shifting to capital gains away from ordinary income. A quicker way to become Greece I cannot think of.

Setting money free to move around openly is the key to an effective tax policy. But bringing it out into the open where it can be captured and taxed depends on perceptions of fairness.

As long as too many people think some people should pay taxes at a higher rate just because they have more, we're not going to get there. 

Gro Harlem Brundtland, Left Wing Anti-Semitic Fanatic, Was Breivik's Target

The following was reported here:

"Anders Behring Breivik had plans to come to Utoeya (island) while Gro Harlem Brundtland was visiting on Friday, but claims under interrogation that he was delayed," Aftenposten reported on Monday, citing unnamed sources.

The newspaper said the 32-year-old right-wing fanatic wanted to "hit Gro".

Breivik's Target at Utoya, Gro Harlem Brundtland, A Long-Time Norwegian Anti-Semite

From Preachers of Hate: Islam and the War on America by Kenneth R. Timmerman (2004):

"The Nazi references emerge frequently and easily in today's Norway, and they are directed mainly at Israel, but also at the United States. At a huge demonstration in central Oslo to protest Israel's independence on April 20, 2002, former Labor Party prime minister Jens Stoltenberg addressed pro-Palestinian groups waving Nazi flags. Without blinking, he endorsed their cause. 'There is one occupant, and one occupier,' he told them. (It was his party, under the leadership of Gro Harlem Brundtland and Foreign Minister Johan Holst, that oversaw the Oslo Declaration of Principles in September 1993.) The former leader of the center-left Center Party, Gunnar Stalsett, now the state-appointed Lutheran bishop of Oslo, addressed a crowd of anti-Israeli demonstrators waving Nazi flags on April 6, 2002. 'He asked that they pull down the swastikas before he spoke,' an Israeli diplomat in Oslo told me. When the crowd kept on waving them, he spoke anyway. ...

"Anti-Israel demonstrations and Israeli 'misdeeds' in the West Bank and Gaza get extensive coverage in a Norwegian press whose brazen anti-Semitism goes way beyond any tolerable expresssion of a political disagreement with Israel. For years, Norwegian reporters and cartoonists have compared Israel to Hitler's Third Reich and have used classical anti-Semitic themes that arguably should be outlawed under Norway's 1975 hate crimes legislation." (pp. 239f)

"Labor Party heavyweights began traveling to Lebanon to pay homage to Arafat. Among them were Thorvald Stoltenberg, the future foreign minister, and Gro Harlem Brundtland. Although she was older than the 1968 generation radicals, Brundtland took them under her wing. Under her leadership, many of the former Socialist Left Party activists joined the Labor Party. She promoted them to the party leadership, while adopting their anti-Israel agenda. In April 1983, when Brundtland headed the Association of Scandinavian Labor Parties, she invited Arafat to visit Stockholm. It was a major diplomatic coup that broadened his support in Europe. After an eight-month initial stint as prime minister in 1981, Brundtland twice returned to power, from May 1986 to October 1989 and, again, from September 1990 to October 1996, when Oslo was negotiated and implemented.

"One of the former Socialist Left Party activists promoted by Brundtland was Einar Foerde, who eventually became head of the Norwegian National Broadcasting Company. Until his retirement in 2001, "Foerde continued the tradition of picking key persons who shared his political views and placing them throughout the NRK," says Jan Gregersen. Another hard-leftist Brundtland brought into the Labor Party fold was Terje Roed-Larsen, the anti-Israel Communist from the Palestinian Front." (p. 245)

Why Isn't Sen. Reid's Bill DEAD ON ARRIVAL IN THE HOUSE?

Well, why isn't it?

The Republicans haven't been doing this right at all. They continue to act like earnest young men who believe if they keep acting, keep trying, keep changing, keep talking, they'll somehow convince the upper chamber to move.

Instead all they've proven is that they don't mean business.

They pass a budget which gets tabled in the Senate, A BUDGET WHICH ISN'T BALANCED, and assumes a revenue shortfall of $1 trillion in fiscal 2012.

Then they suddenly feel compelled to pass a debt-ceiling measure to cut spending, which gets tabled in the Senate. The time to cut spending and balance the budget was in the budget phase, not the debt-ceiling phase. Had they passed a balanced budget, they could have legitimately claimed to have no need even to address the debt-ceiling issue. 

Now they're going to pass an alternative to the debt-ceiling measure, which is going to get tabled in the Senate, after which the Senate will finally pass something of its own.

The House should declare it dead on arrival, pass a simple debt-ceiling increase of, say, $1 trillion in response, adjourn and call it a day.

Let the Senate table that. Or Obama veto it. Either way, the LACK OF SERIOUSNESS of the Dems and this regime would finally be exposed.

That's how you play chicken, and win. 

Employment Deterioration Under Obama More Than 2 Times Worse Than Under Bush

Louis Woodhill has the numbers here:

Over Bush 43′s two terms in office (96 months), America lost ground with respect to full employment by an average of 94,000 jobs per month, for a total of 9.1 million positions. During Obama’s first 29 months in office, the U.S. moved an additional 6.0 million jobs away from full employment, equivalent to an average rate of 206,000 per month.

So, in terms of the rate of employment deterioration, Obama’s presidency has been more than twice as bad as George W. Bush’s. ...

In June 2011, America had 2.9 million fewer people working than when Obama was inaugurated.

The Home Appraisal Business Has Been Screwed Up Since the 1930s

For all the gory details of yet one more long, failed experiment in fascism, American style, see the story by Steven Malanga, here.

Some Money Market Funds Increase Liquidity By Over 40 Percent, Lighten Up On Treasuries

As reported here:

Money market funds are avoiding the one-month Treasury notes which mature on August 4 and August 11. “Those are the securities most vulnerable to some sort of change,” said Joseph Abate, strategist at Barclays Capital. ...

Money market funds, which hold $338 billion of US government debt, according to Citigroup, are also reducing the amount of time they are willing to lend. This could raise funding concerns for banks, as they are reliant on short-term borrowing in the repurchase or repo market.

Crimes Against Humanity Conviction Would Net Breivik An Extra 9 Years in Jail!

The maximum of 21 years behind bars would go all the way up . . . to 30.

As reported here.

Those Norwegians really know how to hurt a guy.

In a country that wasn't itself completely insane, the preparations for the execution of the self-confessed murderer would already be underway.

John Sununu: Protecting 3 Million From Obamacare With Waivers Proves It's a Clinker

Here.