Monthly Archives: June 2012

Ballot Box Stuffing the Chicago Way

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From the city so democratic even the dead get to vote to the nation so democratic even illegals get to vote.  This is the goal of the Progressive administration, led by that Chicago community organizer.  Ballot box stuffing is so critical to this administration that it’s even suing states for trying to protect the sanctity of an American’s vote by eliminating the ineligible from the roles so that a citizen’s vote is not diminished or canceled by vote fraud.

Progressives even go so far as to argue, with a straight face, that there is no voter fraud, it’s a phantom problem.  We didn’t hear that, though, about the Florida Presidential election outcome a while back.  We saw the power of it in a Minnesota US Senate race in 2008, and in a recent Washington Governor election, where the recounts were repeated until the right candidate won.  And in some jurisdictions, it’s simply a way of life.

And so, we have the Obama jurisdiction suing Florida for trying to remove Mickey Mouse from the voter rolls.  Certainly, in a massive effort like Florida’s we get the occasional outlier case like the war vet whose citizenship was questioned in that same Florida drive.  However, this just demonstrates the cynical hypocrisy of Obama’s administration: the Department of Homeland Security refuses to let Florida officials bounce their list off the DHS databases—the most current we have—as another check of who is a citizen and who is not eligible to vote.

Permitting ballot box stuffing by allowing anyone to vote—even white guys claiming to be Eric Holder—is the broadened Chicago Way to preserve Progressive incumbency.

Whither Responsibility?

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The financial crisis threatening the Spanish government deepened Thursday as its borrowing costs hit a new euro-era high, touching levels that previously forced other euro-zone countries to seek sovereign debt bailouts.

So writes Jonathan House in a recent Wall Street Journal article.  Emese Bartha echoed the sentiments in her own WSJ article.

The Italian government’s borrowing costs soared at a bond auction Thursday, a development that will make it more difficult for Prime Minister Mario Monti to avoid having to seek financial help from other euro-zone members.

And just what are these nose-bleed borrowing costs that send whole nations scurrying for OPM?  They’re in the range of 6.0%-7.5% interest rates.  The Spanish 10-year bond, for instance, now runs for 6.96%, “a new euro-era record,” while the Italian 10-year bond goes for 6.23%.

What were the interest rates in another one-among-twenty or so nations (which august club includes these nations of the EU), the US at  the end of the Carter/beginning of the Reagan era?  In 1980, the US 10-year bond rate peaked at 12.84%; in 1981, it got as high as 15.32%.  Our 10-year bond rates had been above 6.96% since early 1974, and they didn’t fall below that level again until mid-1992.

Who bailed us out when we had such trouble?  We did.  We handled our own problems.

But there was a sense of responsibility in those days.  Today, it’s all OPM, and that’s a bottomless piggy bank from which every nation should be able to draw.

America’s Debt

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Deloitte & Touche, through their Deloitte University Press, have published a study called The untold story of America’s debt.  The pamphlet describes the dire straits in which we find ourselves through our exploding national debt; their high points from their opening summary are quoted below.

  • The debt crisis is likely bigger than you think: Current baseline projections make a host of optimistic assumptions [used by the CBO] that very well may not come to pass, that the Bush tax cuts will expire and the cuts to Medicare are allowed to go through. If any of these are reversed by Congress, the debt becomes much larger. Further, current debt levels are significantly higher when the government’s unfunded commitments, particularly around Medicare, are taken into account.
  • The magnitude of the debt is highly sensi­tive to economic fluctuations: America’s reliance on short-term debt makes it highly vulnerable to interest rate fluctuations. If rates return to historical levels, this would significantly increase interest payments on U.S. debt. If GDP fails to match expected growth levels it would further drive up the debt.
  • The debt could adversely impact American competitiveness: The U.S. is on track to spend at least $4.2 trillion in interest payments over the next decade, a significant amount of money that will be diverted from investments that could other­wise boost America’s competitiveness.
  • The rising debt could impact the inde­pendence of monetary policy: As interest payments on U.S. debt consume a growing share of the national budget, the pressure will increase for Congress and the executive branch to apply political pressure on the Federal Reserve in hopes of realizing pre­ferred fiscal policy outcomes.
  • The demand for and composition of America’s debt isn’t just America’s deci­sion: Foreign lenders own nearly half of publicly held U.S. debt. It is assumed that such debt holders have insatiable appetites for U.S treasuries. Should lenders stop buy­ing treasuries and invest their money else­where, this would force abrupt, and painful, changes in government spending.

They make a couple of additional points, also:

[I]f the Federal Reserve was forced to unexpectedly raise interest rates by 3 percent in 2016 (as occurred in 1981, 1994, and 2004), the total impact would shortly be in excess of $200 billion in additional costs to the U.S. treasury, or more than the annual costs of the wars in Iraq and Afghanistan combined at their peak in 2008.

Who among you out there in readerland think it unlikely, against the present backdrop of near-zero Fed interest rates, that the Fed won’t raise/be forced to raise rates to 3% (which still would be below our historic interest rate levels)?  I didn’t think so.

And they offer this table, concerning the sensitivity of our debt size to the underlying assumptions made by the CBO:

Category

Current CBO Target

Realistic Alternative

Increased 10- year deficits
Nominal Annual GDP Growth 4.7% 3.7% ~ $3T
10-Year Treasury Note Interest Rates 4.2% 5.8% ~ $2T
Continuation of Hard Cuts/Taxes Current law is enacted Current policy (extending Bush tax cuts, suspending Medicare cuts) continues unabated ~ $6T

Impacts of altering CBO assumptions

And this:

When the government runs large deficits, it competes for funds that could be invested in the private sector.  Higher costs for capital and limited access to investment will impact the borrowing costs of companies as well.   As Harvard Business School professors Richard H.K. Vietor and Matthew Weinziert write, “…If the cost of bor­rowing rises for the US government, it will rise for private-sector borrowers as well.

And a hint of the impact of interest payments on our fiscal capacity, from the Italian example:

[F]or every percent increase in the interest rate, 1.2 percent more of Italy’s GDP is diverted to paying interest on the national debt.

Notice that: GDP is diverted to service the debt rather than committed to productive activity.  And it’s diverted in greater amounts than the simple increase in debt.

Unfortunately, the present administration has shown itself wholly incapable of addressing this threat, as it has demonstrated throughout these last three years, and as President Obama demonstrated again in his hour-long reading last Thursday.

Deloitte & Touche’s full report can be found here.

 

h/t Power Line

Progressives, Unions, and Taxpayers

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James Sherk and Todd Zywicki described, in a recent Wall Street Journal op-ed, a rather shocking and blatant sweetheart deal between this administration’s Progressives and the United Auto Workers, at the expense of two car companies’ other unsecured creditors and us taxpayers.  I’ll just summarize the numbers; RTWT.

The UAW were unsecured creditors of GM and Chrysler via the UAW’s Voluntary Employee Beneficiary Association: the two companies owed VEBA $20.6 billion and $8 billion, respectively, stemming from why VEBA was created—to transfer to the union responsibility for its pension fund.  Other unsecured creditors also were owed some $29 billion by these two companies.  Under bankruptcy law, these two sets of creditors would have received equal shares of the bankrupts’ assets in situations where the assets were insufficient to make everyone whole.  But under the Obama bailout, the UAW’s VEBA got 17.5% of the new GM and $9 billion in preferred stock and debt obligations, while the other creditors got 10% of the new GM and warrants to purchase 15% more in preferred stock.  At today’s stock prices, that’s over $12 billion more than the other creditors got.  With Chrysler, the imbalance was even greater: Chrysler’s non-union unsecured creditors were completely shut out—they got nada while the union got half the company and billions of dollars in a 9% promissory note.  So much for equal treatment.

It gets “better.”  Bankruptcy law allows bankrupts to improve their post-bankruptcy competitiveness by renegotiating union contracts to competitive rates.  The Obama bailout didn’t allow this.  New hires will come in, for now, at reduced wages, but the existing union employees retain their old highest-in-the-industry wages—higher by $9 an hour than their nearest competitor.

One outcome of this sweetheart deal is that, together with a little understood decision by GM to throw $1 billion at another company’s (Delphi) pension obligations, Sherk and Zywicki estimate the bailout cost was

increased…by $26.5 billion.

and

The Treasury expects the auto bailout to ultimately cost taxpayers $23 billion.  The funds diverted to the UAW account for the taxpayers’ entire net loss.

Hmm….

How is this Possible?

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In an apparent attempt to obviate the need to move forward with a Congressional contempt citation of the Attorney General of the United States, that AG, Eric Holder, last Thursday sent a letter to the Chairman of the House Committee on Oversight and Government Reform, Congressman Darrell Issa (R, CA).  In this letter, Holder offers to provide to the Committee many of the “Fast and Furious” documents subpoenaed and heretofore withheld by Holder, and Holder offered personally to brief Issa in the subject.

This is a good start, but there’s more to this story.  Here’s an amazing paragraph from that letter [emphasis added].

The record in this matter reflects that until allegations about the inappropriate tactics used in Fast and Furious were made public, Department leadership was unaware of those tactics.  Indeed, as the documents we provided to the Committee relating to the drafting of the February 4 letter reflect, Department leaders were assured by the heads of Department components in the best position to know the true facts that the allegations being made were “categorically false.”  However, over a period of months in 2011, as documents to be provided to the Committee were collected and reviewed, and as witness testimony before the Committee was evaluated, Department leadership learned more and began to assess the facts of this matter independently.  The Department’s understanding of the facts underlying Fast and Furious became more developed, particularly as evidence came to light that was inconsistent with the initial denials provided to Department personnel.  Over time, Department leadership came to recognize that Fast and Furious was fundamentally flawed, as I noted in my October 7, 2011 letter to you and other members of Congress….

This fast and Furious operation was conducted under the auspices of the DoJ.  These data, concerning the misbehavior, were in the DoJ’s hands all along.  “Department leadership” (read: Holder) didn’t know these data?  How is he leading his Department if he can’t even get his own subordinates to talk to him?  How is he leading his Department if, alternatively, he chooses to be ignorant of the data in his subordinates’ hands until outside agencies force him to look at them?

What level of competence produces this quality of performance?

Finally, keep in mind that the House Committee didn’t begin its own investigation until well after Agent Terry’s murder.  Holder could have put this whole matter to rest—indeed he could have avoided all of  this hoo-raw, all of this expenditure of taxpayer money—if only he’d listened to the Clue Bird when it presented him with the murder of a government agent, presented him with a murder victim with weapons his own Department was turning over to drug cartels near the body.

The complete Holder letter can be seen here.