Monday, July 18, 2011

Both Sides Suck

I've been listening, as most of the people in America who are at all cognizant of the political happenings in the country, to the partisan debate about raising the debt ceiling. I have voiced my own thoughts and opinions, of course, but this post isn't going to be able what I think should or should not be done, nor is it going to address any particular statement. Rather, I'd like to criticize the approach to "resolving" the problem taken by both sides. I realize that typically I find myself more angry with Democrats than Republicans, however in this instance, I think the approach coming out of both sides stinks.

First, let me address the Republicans. It's true that the country had a huge spending problem, and your party would seem poised to capitalize on the growing realization of such among the slow-witted populace, and the rising sentiment that something needs to be done to stop the slow bleeding to death. You started out well, opposing the increase without corresponding tax cuts; I would have liked to see more, but it was a much more rational compromise than the Democrats' position. Now, though, you've stooped to worthless posturing motions which you know cannot pass, and simple political bickering. If you want to take a hard line against raising the limit, I could respect that, but playing this immature and transparent political games just makes you appear to not be taking this issue seriously, and not only weakens your current position, but your future political capital for a leadership role in tacking this problem. It's just moronic.

Allow me to suggest an alternative, if I may. Instead of handing the Democrats exactly what they want and turning an easy win into a crippling loss, why don't you pass a reasonable bill which cuts easy spending targets, and raises the debt ceiling by a commiserate (and hopefully smaller amount). I realize that's what Obama asked you not to do, but let me clue you in on something: he doesn't have your political best interests in mind when he gives advice, and clearly he's better at playing the political game than you are. Writing a bill which cut, say, $100 billion annually, and increased the debt ceiling by $100 billion, shouldn't be too hard, and although it would only let the country go another month or so at current spending levels, it would do a lot to reinforce the image that you are trying to do something, even if that something was far less that what Obama and his allies wanted. If the Senate or Obama were to veto such a package, you could then at least reasonably claim that you tried to compromise on something, and make sure the checks kept going out. Moreover, who knows: if you could pass one of those a month for a year or so, we could actually get the finances of the country under control, and eventually solve the real problem.

Now for the Democrats, and Obama in particular, since he has become the spokesperson for the party on this issue. Saying you want to do anything to avert the crisis while refusing to compromise on including tax hikes is asinine: the only reason you can get away with it is that the predominantly liberal media doesn't call you out on it repeatedly for the idiotic premise that it is. You're not going to be able to get tax hikes through the house right now, and hinging your "solutions" on them is just dumb. Moreover, as much as you'd love to get the ceiling high enough to spend like it's going out of style for the next two years like you have for the past two, that's probably not going to happen either.

However, at the risk of helping "the enemy", you're missing a political opportunity. You should be offering a standard "raise the limit" bill, with nothing attached, for the Senate to pass and the House to vote down. Then, don't do anything. When we hit the debt ceiling, have a plan in place to reduce spending arbitrarily through Treasury, probably starting with Social Security. Then, go on TV at every opportunity with carefully constructed, conciliatory speeches which make it clear that you are only doing what you must, and that you regret having to make the decisions at all, since it's Congress' job under the Constitution to allocate spending based on the amount of money Treasury is allowed to borrow, and if Congress was doing their job, you wouldn't have to be hurting people. In the meantime, prioritize spending however you like, since it's your prerogative. Your talking points will ring true with the American people, because unlike most of your normal talking points, these would actually be true and not misleading. Just try not to mess up the delivery, since it will be a new experience for most of you.

Sure, the debt ceiling is a big deal, and the US missing $100+ billion in payments per months could be a huge disruption. Like any other challenge, though, it's both an opportunity to do the right thing, and a chance to show people your "true colors", so to speak. So far, both sides are coming out looking like shit; which I suppose is appropriate, given the state of American politics. If we are going to address any of the large problems facing the country, we the people must find a way to get better people running the country.

Thursday, July 14, 2011

Hypocrite in Chief

Obama recently told Congress that, with respect to making a deal to raise the debt ceiling, they needed to suck it up, "rip the bandaid off", and deal with making the hard choices which were beneficial for the country in the long run. Personally, I tend to agree with the sentiment, even as I take issue with the specifics: although I'm not at all convinced that writing another blank check we can't possibly afford to the spend-happy democrats is either "right" or "necessary", it does seem to me that it would be the job of Congress, and the President, to do what's best for the country overall, rather than what's most politically expedient and popular at the time. However, to see if Obama is serious about the sentiment, and is not just using it in this case to push his political agenda (and the title might have some foreshadowing as to which it is), it's important to look at some other instances where Obama and/or his party in Congress had the chance to "rip the bandaid off", and do the right thing for the country.

Banking Industry

As banks got incredibly leveraged leading up to the collapse of Lehman Brothers, Congress and the Treasury Department were both well aware of the pending problems. Congress had ample opportunity to fix the laws to prevent catastrophic collapse, but did nothing. Treasury had ample opportunity to intervene in ways which stabilized the markets, but did not reward the participants, but did not. Congress could have instructed the fed to end the leveraging practices through oversight, but did not. Instead, the administration first selectively let some institutions fail, then saved others, creating the concept of "too big to fail" and a nightmare for future generations.

So... a big failure on that one, but it might be an isolated incident. There were certainly more opportunities to show leadership, and do what was right even if it was hard.

Auto Industry

As GM collapsed under the weight of non-competitiveness brought on by years of mismanagement, union largess, and a brazen lack of care for customers, the administration was faced with a decision point. Would they follow the law, and allow GM to fail as the market forces dictated, preserving the legal rights of the various creditors and the integrity of private enterprise in the US? Or would they bow to the pressure of their primary political supporters, subvert the entire legal system by creating new quasi-legal bankruptcy measures to confiscate and transfer wealth, and prop up the company using taxpayer dollars which they were certain to lose, while preserving all the factors which drove the company into the ground and virtually guaranteeing that the company is never competitive again?

Yeah, well... I guess we had another abject failure there. Perhaps the record will get better as we look further.

Housing Market

Ah, yes, the housing market; I great example of a golden opportunity to do the "right" thing, even if it's not the "popular" thing. Back when the country was inflating the bubble, there was ample evidence that the so-called "innovative" financial products which were allowing people to borrow way more than they could afford had the potential to blow up; Warren Buffet even noted it publicly. The Fed was well-aware that banks were under-capitalized for the leveraged risks they were taking, and could have easy used its oversight authority to make sure they were resilient against a decline in asset values. Failing that, Congress could have taken steps to ensure that a default in one or more of those banks would not threaten the financial system as a whole.

Okay, so they failed there, but there was still time to make it up. As the bubble started to burst, it became clear that the GSE's (Fannie and Freddie) were taking too much risk, getting away from their role of providing an exchange market for stable safe mortgages in pursuit of higher profits. Congress could have stepped in and made sure they didn't take on too much risk, or made it clear to investors that if they failed, their bonds would not be covered by the US government. The president could have urged Congress to ensure that if they failed, the taxpayers wouldn't be in the hook. Hm, I wonder what happened... oh, right: Congress and the administration raised their limits so they could do even more damage, socialize more losses, and disrupt more of the market! Then, as if that wasn't enough, Congress also explicitly guaranteed their bonds, inducting them into the "too big to fail" debacle.

Dear god, they really f-ed that one up... but there was still one more chance to do something right. As the bubble started to burst, the housing market essentially froze up: nobody knew how many people were going to default, how long it was going to take, or what "real" prices should be. Development and commerce basically stopped, as people waited for the market to fix itself, and establish a new normal. This was the quintessential opportunity to take some short-term pain for long-term prosperity: flush all the "bad" loans, turn the properties back around (through foreclosure as appropriate), expedite the correction process by streamlining the bureaucracy, get rid of all the subsidization, and get the entire housing industry working again, as fast as possible. Tell, me, please, Mr President, you at the very least did this.

Yeah... not so much. The government, primarily at the behest of the administration, did virtually the exact opposite of what would have been optimal for the country. Instead of flushing the bad loans, it propped them up, wasting taxpayer dollars prolonging the problems. Instead of turning properties around, it delayed the foreclosure process, stripping lenders of their rights and imposing impediments. Instead of expediting the process, the government imposed barriers, turning a one-year problem into a decade of economic malaise. Instead of getting rid of the subsidization, the government increased it, generating more taxpayer losses through the GSE's, and making the FHA the de-facto standard for subprime lending. Instead of getting people back to work in a functioning market, the market continues to drag, trying to fix itself but being hamstrung every step of the way by a government which is simply incapable of doing anything beneficial in the face of public opinion calling for short-term misguided "fixes".

The Bottom Line

President Obama is a hypocrite. He had many opportunities already to do the "right" thing, and failed to take any of them. Now, only when it's politically expedient to use the terminology as a catch-phrase to push his agenda, is he at all interested in "taking the bandaid off", and even then in word only. If we really wanted to take our medicine, so to speak, we would not do anything, and force Obama to spend only what the country takes in, while prioritizing as appropriate. That's the only real "painful but necessary" choice, and I seriously doubt our government, and especially Mr Obama, has the courage to make it.

Monday, July 11, 2011

The Audacity of Framing the Discussion

Obama infuriates me; this is probably not a surprise to regular readers here. However, in this case it's not his policies, his socialist ideology, or his dictatorial approach which is currently most aggravating. The thing which is currently bugging me is his approach to the debt ceiling debate, and the complacency of the main stream media not calling him out on it.

Now granted, it's a good strategy, and as a shrewd political move I can find no particular fault. Essentially, what he has done is frame the discussion as one where raising the debt ceiling is an inevitability, a fundamental job of Congress, and everything else is partisan politics. From the beginning of his involvement, there was no mention of the "right" or "wrong" of spending without limit, or any mention of deficit reduction, or taxes, or anything else; it was just "this obviously must be done", and nothing else. Only later did he introduce the other issues into the rhetoric, but being careful to label them as "distractions" from the "basic responsibility" of Congress.

Take a moment, and consider the audacity of the position. If you were hundreds of thousands of dollars in debt, and you started a conversation with your credit cards companies by telling them that it was their "obvious, basic, fundamental job" to extended you more credit without hesitation, and any other concerns they had were simply distractions from their responsibility, how do you think they would respond? Yeah... they probably wouldn't share your opinion, and might even laugh at the absurdity. Yet, this is exactly what Obama is doing, and the media, by and large, just goes along.

There was a very informative article from a small publication about what would happen if Congress didn't act. The Treasury (and by extension, the president, since it's in his branch) would need to decide what bills to pay, and which to not pay, based on the actual revenue coming in. Now, there's only a few hundred billion annually in interest on Treasury bonds, which is the "real" national debt service, the part which puts us in actual default if we don't pay. Everything else (social security, medicare, military, government bureaucrat salaries, etc.) is a voluntary obligation, per the laws passed by Congress. If the government doesn't pay those, it's not in default, it just doesn't have the money to pay all its obligations. Sure that's bad, but is it really that bad?

I'm not sure that I want Obama deciding which programs get funding and which don't, but... I really do want the government to not bankrupt itself with the Democrats' reckless spending, and there doesn't seem to be any other way to force reductions in expenditures. If forcing the Treasury to make the hard choices is the only way to actually reduce spending, because Congress is too childish to suck it up, and the president is too irresponsible to sign off on real spending controls... well, there are worse options for the country. It's not chicken, Mr President... it's the last best hope we the people have against you.