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Good news if you or your fund own any U.S. government bonds.
N.Y. Times - http://www.nytimes.com/2013/10/04/us/politics/debt-limit-impasse.html?_r=0 "Mr. Boehner’s comments, recounted by multiple lawmakers, that he would use a combination of Republican and Democratic votes to increase the federal debt limit if necessary appeared aimed at reassuring his colleagues — and nervous financial markets — that he did not intend to let the economic crisis spiral further out of control."
I've been following this item all day, as I find this sort of political play fascinating to watch. Evidently he hasn't said this to anyone other than his "staff". Now, do you suppose that he told the "staff" to keep this top secret? I very much doubt that- if he did in fact say this he probably let the "staff" know that he'd sort of appreciate it if they "leaked" it here and there.
To what end? Some sort of wink and nod to Obama? A warning shot across the bow of his favorite people, the "Tea Party"? I wonder just where his breaking point really is, with respect to his desire to be Speaker vs the terrible price he's paying in stress. Maybe he's announcing his personal bottom line: "I ain't gonna do that, if you don't like it then get yourself another speaker, please!".
This seems like a pretty big deal, though he isn't quoted. All that's left is to find some face saving way out of the shutdown and we can go back to not quite escaping sub par growth when we likely could have.
My thoughts. May be a tad controversial. May be muddled.
One: the tea party works as a great place to place blame. I think a party that started off with a message and purpose that people may have agreed with got sold out to special interests as much as anyone else in Washington not that long after it started. The tea party has barely been in the news for a while. Placing blame on the tea party actually gives them more power in a way, and more power and influence than I think they may actually have.
Two: What I think may be the issue is that the Republican party has played to its base (which partly includes, as Bush infamously noted in that speech, "the haves and the have mores") while not realizing that its base was shrinking and changing due to the economy, changes in demographics and many other factors. I don't know if I agree with all of the approach, but the democrats have either smartly (or just found themselves) playing to a base that has expanded over the last maybe 7-10 years for multiple macro/big picture reasons.
If the Republicans genuinely have an issue with Obamacare, they should have played the long game, but there apparently is no such thing as a "long game" in DC because people have the patience and attention span of a fruit fly. If it is bad and people hate it, let it be bad and people hate it, then next election play up your party's dislike (hey, we told you it was bad!) and that you will try to overturn it. Ride that into office.
Instead, you have a party that is playing as it really doesn't have anything in particular to lose. Due to demographics and other issues (and how they are currently playing things), I don't think they really have any chance in 2016, who knows about 2014. I do not agree with what either side is doing in this mess at all, but I question the reasoning why the Republican party is doing what they're doing.
I'm not sure it's the tea party as much as a Republican party as a whole that is scrambling to stay relevant to a base that I think is probably not as sizable as it once was. If that's the case, I think that's just horrendous from the standpoint of a broken political system that will see the country waste another few years arguing instead of trying to make some actual progress. We'll (hopefully) work out this situation before defaulting, but we will continue going from crisis-to-crisis and not accomplishing anything in-between.
As I've said in other threads, I'm not as concerned about this debt debate (although they may take it further than I'd thought) as much as the effect of a few more years of a government that just goes from one of these crisis situations to the next. The cumulative effect of a broken system is - I think - far more concerning over the next few years if nothing changes.
I also think you're creating a larger group of younger people in this country who will probably not participate in politics - as is - in this country because both sides have become terrible and show an inability to lead, agree or just about anything. Do you eventually - down the road - create enough of a group (maybe young people) demanding change in politics as we know it? I don't know. Probably not, or at least not until things get bad enough.
I think it should become increasingly apparent that neither party has the best interests of the people as a priority. As I've said here in the past, I think people should stop being so concerned about what either party is doing and focus one's energy on yourself and your own best interests. The hatred between the two parties (in Washington, in the media, everywhere in this country) is so stunning to me - it's almost old-fashioned anger between differing religions. Having politics become so horrifically divisive - I mean, anyone hoping for progress on anything should dial back their expectations.
I am interested to see what the political stage looks like 10 years from now because I think (and kinda hope) that it may look significantly different than it does today.
As I noted in another thread, CNBC was going on and on about all the oil being found in this country. Anyone think government can come together on any sort of energy policy? I don't.
What this is saying, in a muddled way in the morning and no Diet Cokes yet, is that you have a Republican party that, much like Microsoft, did not see and adapt to and play to changes going on in the country. Now they're doing the political equivalent of buying Nokia.
I think people have to ask themselves what do they feel strongest about in terms of the macro and the micro (what do you find exciting, compelling, promising?) and be there and have a long-term view because the noise of the last few years is not going to get any better.
This 1992 Eddie Murphy movie covers the whole smelly mess. The overview of money and power is well portrayed in this movie, although this trailer doesn't reflect the big picture and direction. This movie is available for viewing on YouTube.
Reply to @scott: A very thoughtful and interesting appraisal. I particularly like your comparison to Microsoft with respect to "not seeing, adapting, and playing into the changes".
Another of your observations, "The hatred between the two parties (in Washington, in the media, everywhere in this country) is so stunning to me - it's almost old-fashioned anger between differing religions" bears much thought. I hadn't thought of it like that, but you're right. This depth of antagonism isn't really new to the US, though- a close read of the early formative years of the republic will reveal much the same vituperative political relationship between the Federalists and the (then named) Democrats. This manifested itself again during the Civil War era, seems to have quieted down a bit afterwards, and is now back with us again.
Reply to @ Scott & Old_Joe: I think you're both right on-target here. This echoes some of what Hank Paulson said on CNBC yesterday morning. He particularly mentioned how when he was young we all tended to get our information from a few more broadstream news outlets (ie: Cronkite, Brinkley, Reasoner) - but how now the "news" has crystallized into highly segmented ideological corners. The far right listens to their side and hears nothing else. Same for the far left. Never the twain shall meet. For me it was refreshing to hear one of the nation's preeminent "numbers crunchers" able to display that kind of sensitivity into such a matter. (Sometimes you wonder if this type even has a pulse:-) fwiw
Reply to @Investor: As you well know, I'm not a great fan of the Republican agenda. But in fairness, you have to look at the tools normally available to congressional leaders.
Among those tools are disciplinary removals from key committees, curtailment of "special funding" for federal projects in their home states, and ultimately, a threat to work against the reelection of those uncooperative or disruptive members.
• many of the "tea party" types don't care about committee assignments, as they regard those committees (and Congress itself) as the enemy.
• "Special funding", aka "pork-barrel" spending or "earmarks" have been severely curtailed in recent years, making this tool much less effective.
• Under the heading of "unanticipated results" we have the success of tightly gerrymandering congressional voting districts. The idea was to make those districts impervious to challenge by Democrats or other "outsiders". Ironically, they did exactly that, but also made them unchallengeable to Republicans of the more moderate variety.
The concept of political leadership, on either side, assumes an adroitly administered mix of carrots and sticks, as well as a strong personality. I'm pretty sure that Mr. Boehner is actually a reasonably capable potential leader- I say "potential", because without much in the way of carrots or sticks, personality alone won't cut it. For any potential leader.
Reply to @hank: I think you have an incredibly divisive media that plays to one side or the other and it just feeds into the problem. They think they're providing some kind of service, but they're just adding to the problem.
You'd think new media (I'm not going to give examples, I'm sure people know kind of what I'm talking about) would see the opportunity to try to position themselves as "different", but I think in many cases it's similarly playing to one side or the other.
Does media change? I don't think it does until change has happened around it. CNBC plays to Wall Street interests and I think while there's other elements at play, you have ratings for the network as low as they've ever been and the network appears to have no clue as to how to change or even that it should. CNBC's answer to their night shows not working is to replace it with reality shows. That's not the answer (although I will say I did kinda like "The Profit".)
There have been so many instances of media companies running from change rather than trying to figure out how to make change work for them (the music industry, the list goes on and on.) Comcast is comfortable being Comcast while Google Fiber is on one side and on the other, you have people dropping cable and going with Netflix, Hulu or something else. Microsoft was comfortable being Microsoft (and Ballmer laughed at Android/Google and Apple.) It becomes who has vision? Who is an innovative leader in business?
The hope is that people in this country stop spending such a ridiculous amount of energy hating the "other side" and start demanding actual progress (and not the excuse that it's "the other side's fault." If people throughout the history of this country just said "it's the other guy's fault" rather than making the effort of working out our problems and disagreements, where would we be?) I said it before and will say it again - I'm more concerned about the cumulative effect of three more years of having absolutely no progress in this country (and beyond that, just going from crisis-to-crisis) than this debt debate.
Gerrymandering is partially responsible for reducing the number of moderates in the House of Representatives. There are many "safe" districts which give us barbell representation- too many representatives on the far left and far right and not enough in the middle. But figuring out a better way to assign Congressional districts is a challenging problem- no easy answers, since people with the same views often tend to live in the same neighborhoods.
It has been fascinating to watch the budget showdown. I have a few thoughts about the debt ceiling default threat and that is exactly what it is. This behavior should not be institutionalized if the president rewards this behavior it will be used over and over again by both parties and will make for bad governing going forward. Second I wonder what Congress is going to concede to the president if the president came out and said I refuse to raise the debt ceiling. What is stopping him from extracting a pound of flesh from Congress after all turnabout is fair play. Can you see how ridiculous this road could become. The president could ground all flights and start marshaling assets and delay SS payments tomorrow but he hasn't.
Reply to @Hogan: There will likely be some sort of agreement, worked out closer to the last minute than anyone could believe. However, any agreement will not change the underlying tone between the two parties and we will continue going from crisis-to-crisis in this country.
" it will be used over and over again by both parties"
It's already been used over-and-over for the last 2-3 years and will be for the next 2-3 years.
OK, lengthy rant to follow. Nothing investment, mutual fund or smart beta related here. I apologize as everyone on this forum seems well educated, follows the news, and probably knows all this already. But this really has angered me, and I feel like it is important to make the point that there is blame to be definitively placed here because the people at fault are threatening how we govern ourselves.
I've spent most of my adult life working in or studying Federal politics. It is certainly correct that the roots of the shutdown and debt ceiling debates are in the nation's current deep political division, and that gerrymandering has exacerbated that intensely. But the shutdown itself is of a different kind than politics as usual. It is entirely the fault of those GOP members of Congress who refuse to admit defeat on the ACA, and their leadership which is craven in the face of losing power. If the Congressional Democrats and the President give in to them, it will fundamentally change the way democracy is practiced in America.
A couple of facts to keep in mind. Barack Obama was elected President by a majority of Americans twice while running primarily on healthcare reform. That reform was successfully legislated three years ago and has since withstood a Supreme Court challenge. By any measure, America has said it wants this. Repeatedly. Also, if the CR were brought to the House floor right now, it would pass overwhelmingly and with bipartisan support. theatlantic.com/politics/archive/2013/10/the-two-basic-facts-that-should-be-in-every-shutdown-story/280179/
People say they want Congress to negotiate and compromise. Hell, I want Congress to negotiate and compromise because politics is the art of compromise. But there are two problems with this: 1) There is nothing to compromise on here. What these 32 people are asking is to strip previously passed legislation using only procedure, something which has never been done in American history to the best of my knowledge. 2) The Congressional Tea Party delegation has no interest in compromise as a principle: nationalaffairs.com/publications/detail/rescuing-compromise
Many polls find that today's Republicans differ in their attitude toward compromise from both Democrats and independents. Depending on how the question is asked, they are either significantly less supportive of it (they were split down the middle in the 2011 Gallup poll, with its compromise-friendly wording) or downright hostile to it (as with Pew's more neutral 2013 wording, which found Republicans preferring "stick to positions" over "make compromise" by a strong margin of 55% to 36%).
Significantly, the Tea Party movement is several notches more hostile to compromise than are Republicans in general. In 2010, when the Tea Party was in full flower, Pew found Republicans preferring "stick to positions" over "make compromise" by 59% to 36%. Among Tea Party sympathizers, however, the margin was an even more lopsided 71% to 22%.
That is backed by data suggesting that the while the partisan divide is growing in America, it is growing asymmetrically on the right, and that GOP is more conservative than at any point in its history: voteview.com/blog/?p=494
Any legislative democracy only functions because minority and losing factions willingly abdicate claims to power. People lose elections, they leave office. People lose votes on legislation, they move on. In any healthy and functional democracy, if one side lost a fight, they'd either give up, or rally for the next election. But the Tea Party, in insisting there are still negotiations over the ACA, is abrogating that social contract. If the President and Congressional Democrats break down and negotiate anything over this, then the political system we've spent 237 years trying to make more perfect is no longer. This is such an essential fact of our democracy that something like what is happening now has only been tried once in our history, by John Calhoun in 1832, and was eventually a contributing factor to the Civil War: en.wikipedia.org/wiki/Nullification_Crisis
In grade school we all learned that the three branches of government were coequal, that the Congress makes laws and that the executive enforces them. What we've arrived at is a situation where a minority group within a Congressional political party is refusing to allow the executive the means to do its job. That is an unprecedented power grab to my mind. Congress certainly controls the purse strings, and that is an important check to Presidential power, especially his power as Commander-in-Chief. But this is refusing to allow the implementation of passed legislation for which a majority of Americans voted. That's dangerous stuff.
Great post mrdarcey. I had more to say but in the end I deleted my rant. But I will say, and I know it's a stretch to call these political-obstructionists political-terrorists, but at times that's the way I see them. They hold us all hostage.
I'm usually pretty immune to political machinations as a reason to take action in re-allocating my accounts away from a general 60/30/10 ratio.
I'm thinking this time may be different.
I see disturbing comments from some indicating that a shut-down is nothing to be concerned with, and a failure to not increase the debt limit mid-month is just another bit of nonsense to disregard. I am thinking that the adults are not in charge.
A short-term sell off into cash for the next 3 weeks may be reasonable insurance against Congressional juvenile behavior. I will be spending Sunday reviewing all of my accounts and the rules for transfers to see what my options may be. Not increasing the debt limit has such catastrophic consequences that I will gladly swallow my pride if my fears would be unfounded. I plan to retire in the next 12 months, and I wouldn't want to see a 60% haircut at this point.
With regard to US government debt obligations, name one person in our current political class in the legislative or executive branch that you think ever intends to pay back so much as a dollar of the roughly 17 trillion dollar debt.
Apologize for ending previous thoughts so quickly but had unexpected guests show up. To resume my thoughts, even if the political class intend to pay back the debt, the dollars will not have the same purchasing power as the Fed has a stated goal of 2% inflation. Any successful manager knows to forge consensus from as many employees/people as possible, with all ideas discussed. Reach a group consensus in this manner and then your point about the minority giving way to the majority is the way that America has generally functioned. Our health care act had little if any minority party input, had to be approved in a hurry , and had to be passed to find out what was in it. Even then it was "deemed to pass" by the majority party and signed by the President. The Chief Justice ruled that the law was constitutional as the Federal Government has the right to raise taxes. How many of the political class would have voted for this healthcare act if it had been advertised as a tax increase? Why should anyone- minority or majority party, President or Chief Justice want to go forward with any law that divides the country even more than we are divided now. The 2012 congressmen that are holding things up were elected in part because the healthcare plan doesn't have popular support due to the way it was passed and because we now know some of the provisions in it. We will be dealing with this divide for quite some time. Should the Speaker try to , in the short term ,starve the spending beast a bit while insisting that we all live under this law rather than some of us be granted political exemptions ? Or should he fold his hand, accept the accolades of the press and his political opponents, and let our long term debts pile up even quicker for our children and grandchildren? I say keep talking and see if we can find a better plan.
Reply to @MourningStars: >> ever intends to pay back so much as a dollar
It is probably best to avoid politics on this forum, and probably best not to respond, but this is an ignorant and profoundly damaging notion, that our national self-funding is anything like family debt to a bank or credit card or loanshark whatever. You will have to read Krugman and others on the self-dealing nature of our economy to get it, but what chiefly matters is debt as a percentage of GDP (among much else, related), and while it is good not to do heeyuge wars without paying for them and good to get a grip on many defense and subsidy and other expenditures, panicking over 'paying back something owed' in the conventional senses is missing the point and the picture and the opportunity to think thoughtfully about it all, and without panic.
Well, a little under two weeks until 10/17, and pretty much no progress has been made. Now Boehner is making comments about default on the Sunday news shows. Boehner Says We Are "On The Path To Default", "It Is Time For Us To Stand And Fight". What I think he said that is more concerning that people did not seem to highlight is: "The president is risking default by not having a conversation with us."
Bank of America: "Agreement is almost impossible as long as Obamacare is on the table."
Another long, rambling response to a post, again written at 6 in the morning.
Reply to @davidrmoran: I'll agree with you that there is certainly a greater level of complexity, but:
1. Let's take debt-to-GDP. According to the CBO, we're at 73% of GDP (http://www.marketwatch.com/story/us-debt-now-about-73-of-gdp-cbo-says-2013-09-17-1091240). By various measures people may come up with other results I'm sure, but we'll go with that. That is twice the amount that it was at the end of 2007. Lets say that's what matters, when does it get concerning? It's twice what it was at the end of 2007, and where are we now? Muddling along and with a government going from crisis-to-crisis. How about we go over 100% and aren't much better off than we are now.
"Our debt is not an issue because of debt/gdp, because of any number of things" often seems to me like an excuse to find new ways to justify spending and status quo (we in government can still make all the promises and spend how we like on what we want because debt is not an issue, given x metric) and then it doesn't surprise me when the goalposts as to "what is excessive or concerning" (that's when any sort of specific levels are even presented) are moved. Again, I'm not saying entirely disagreeing with you on complexity, just disagreeing a little on intent and that where we are are at in terms of debt - and the trajectory of the growth of the country's debt - is worthy of little or no concern.
"and while it is good not to do heeyuge wars without paying for them and good to get a grip on many defense and subsidy and other expenditures"
Well, you have people who think any spending is good spending, unless it involves things like the nation's deteriorating infrastructure or education - those things cannot be agreed upon. I'll say there's a lot "not good" beyond what you have mentioned.
2. This philosophy that "We'll just print the money" (how many times this has been said on CNBC, I've lost count) without any concern over the implications and potential negative aspects of that is more than a little concerning. People say "We'll just print the money" the same way that they say, "The sky is blue today." Well, what if a day comes along - maybe a year from now, maybe 10 - when we can't just print? How would we fare in that scenario? People can go, "That's just unpossible!" It's certainly not. Is it extreme? Certainly, but not impossible (unpossible, either.)
To quote from above: "name one person in our current political class in the legislative or executive branch that you think ever intends to pay back so much as a dollar of the roughly 17 trillion dollar debt."
It's not that they don't intend to pay back a dollar of the debt, it's this philosophy that more (and to use a popular internet emphasis, "moar") debt is not a problem (and if it ever is, by that time, the politician thinks, it'll be someone else's problem to deal with.) Our mentality as a country when it comes to money is - I think - profoundly concerning and I think on a path for - if not a crisis, a gradual (managed?) erosion of our standing in the world.
It's not that the US government has to balance their finances like a household, but we can also spend in a manner that is haphazard and problematic. This philosophy that any spending is good spending, and when so much of that spending has been funneled to special interests and cronies and we're not far from where we started, we look for the do-over button, or try cntrl-p when the do-over button is found to be broken.
The fact that we've done what we've done over the last few years - which has succeeded in boosting assets but hasn't done much for the rest of the economy is an issue the financial media has only started to discuss. We're an economy with a gold-plated surface and a core that is gradually being hollowed out. Can we start strengthening the core with the government the way it is? No. Three more years of no progress because the government can't work together? Underlying problems build and build and new problems emerge from it.
What will be the answer from government then? Tell the Fed to do more QE because they still can't agree on anything?
Hank Paulson said on CNBC regarding the debt ceiling and shutdown that, more or less, "You can't get that done, it shows the government can't work." I'll say it again, what concerns me is not as much the debt ceiling debate (although I can't believe it's getting as far as it is - as Andrew Ross Sorkin said on CNBC this morning, we might default because the mistake is maybe thinking that these are rational people, and maybe he's right) but the ultimate effect of a government system that is broken.
We cannot manage a country - monetarily or otherwise - with a government that is in this much disarray and that has this level of anger towards the other side. We cannot manage a country (fiscally or otherwise) with a government that is going from one crisis to another and shows no willingness to come together. "It's the other side's fault" is a terrible excuse. I mean, if political leaders throughout this nation's history sat on their hands during times of disagreement and just said, "It's their fault", where would we be?
There is no agreement, there is no sense of leadership and one gets the feeling that even the hint of working with the other side is "showing weakness." How can one not be concerned with government and financial management of the country when the two sides of government are effectively having a war between each other that shows no sides of ending? If they cannot work together on some of the nation's most pressing issues - healthcare, debt ceiling, whatever - how is this system working? How can we have confidence in a government to manage spending when they cannot appear to manage anything. The idea that Senator Schumer could say something along the lines of "Get to work, Mr. Bernanke" just illustrates the idea of "We can't do anything, so go do what you do and we'll hope for the best."
Is being in government so incredibly lucrative now that they are willing to risk default in some bizarre attempt to do whatever it takes to stay in office?
3. Paul Krugman? No thanks, for a multitude of reasons (none of them political, before that easy comment is made.)
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"The dollar is the most remarkable achievement in the history of money. Think of it: this piece of paper with no intrinsic value - costs nothing to produce, nothing behind it except for the goodwill of Ben S. Bernanke and - let us not forget - the US Congress. This piece of paper somehow still commands value and respect. How can the dollar be anything except the world's greatest monetary brand, the Coca-cola of money? How could it be anything else but? Well, you just watch." - Jim Grant.
People are probably - certainly, I'm guessing, actually - going to disagree with this statement. We proceed as a country in a manner that suggests, "How could the dollar be anything BUT the world's reserve currency?" We do not appear to take the reserve currency status as requirement to lead by example (although leading by example requires leadership, which is a quality not really being displayed by anyone in our government currently), we appear to take it as a license to proceed as we please.
It may very well continue to be for years and years. The President said the other day actually, "The dollar is the reserve currency of the world. We don't mess with that." The way that we proceed - from a spending standpoint, from the standpoint of a government that I think is acting like anything BUT an example for the rest of the world - we've been messing with our status, little-by-little in the world for a while now.
Maybe we are a brand - US Inc (apparently a rather generically titled one, but it's too early for me to think of something) - and we cannot coast on the faith and goodwill of the rest of the world to maintain their belief in that brand, we have to demonstrate its continued value. I don't think we are.
reply to davidrmoran: was trying to address our latest national crisis from a management rather than a political standpoint by using the terms minority/majority/President/Chief Justice rather than actual names. Shall we remain a house divided based on the most recent elections or shall we reach some agreement that lets us all go forward together ? Not ignorant of Mr. Krugman's guidance regarding public debt at all. I just happen to reject his ideas and the degree to which he still wishes to employ them. I read and hear quite a bit of short term rather than long term thinking from Mr. Krugman. Meant to just point out that others are coming behind us and Mr. Krugman's positions will cause later generations enormous pain. There is a reason the summer movement in the 10yr - hardly long term - will keep the Fed in the market. There is a reason Mr. Geithner made a supplicant's please buy our bonds pilgrimage to the Far East during our most recent crisis. I would suggest that you let Mr. Krugman buy all the US government bonds he wishes for the both of you.
Reply to @MourningStars: In regards to your first question, I would hope every single elected official in DC cares about the U.S. paying its debt obligations. Otherwise the raison d'etre of this whole board is pretty meaningless and we should all go long shotguns and canned goods.
In reply to your second point -- without trying to impugn or discuss specific political positions -- my broader point isn't about the ACA (or even the size of our government and its spending), but America's own ability to govern itself as a constitutional representative democracy. I don't care that this starts with the ACA or how it was passed. If this were a law funding private gun ownership being blocked by Pelosi in contravention of her party's wishes I would still consider it a Constitutional crisis. Yes, Congress controls the purse strings and that is an important check in our federal system, particularly to the President's use of his Commander-in-Chief authorities. But that assumes a majority voting for using that power to defund something. Here you have approximately 7.5% of Congress holding their leader hostage so that Congress can't vote to fund the government, something approximately 80-85% of Congress wants to do. Like it or not Obama won two elections that were essentially referendums on health care, the ACA passed both houses of Congress and the law withstood a Supreme Court challenge. There is no more to debate. If you want to get rid of it, get together, draft legislation, run on that in the next general election and get it passed. Democracy works by public records of popular support, not by people simply proclaiming that something is popular or not. For a minority to hold up passed legislation on procedural grounds any time it doesn't like that legislation is anarchy. At that point, just rip up the Constitution and start over.
This isn't just me. Here's a former GOP Senate staffer, Mike Lofgren, writing to James Fallows:
For God’s sake, how many times do we have to refight the Civil War? You suggested a House discharge petition (which Pelosi is pursuing); I suggest taking off the kid gloves. How about drawing up articles of impeachment against the House and Senate instigators of the shutdown, since they are clearly nonfeasant with respect to their oaths of office, and their actions are causing substantive harm to the public interest?
Reply to @scott: There is a lot there, some of which I commented on above, particularly in regards to where the general discord may be coming from in regards to data suggesting the asymmetrical growth of "conservatism" in the GOP and their aversion to compromise. But yeah, at a basic level, if you can't have a conversation, for whatever reason, with the person sitting across from you, government breaks down.
With regards to "brand America," there are, apparently, already investment consequences to the shutdown. The Commerce Dept. has been trying to bring in foreign businesses to a conference later in the month, primarily pitching America's stability. Oops. theatlantic.com/politics/archive/2013/10/your-sunday-shutdown-reader-2/280322/
In regards to rational actors, a generous reading of Boehner's actions is that he knows he only gets one shot to stand up to the Tea Party, and its far better to use that on default than funding the government, since the latter will happen eventually while the former has disastrous consequences. If that's the case, good for him.
Comments
To what end? Some sort of wink and nod to Obama? A warning shot across the bow of his favorite people, the "Tea Party"? I wonder just where his breaking point really is, with respect to his desire to be Speaker vs the terrible price he's paying in stress. Maybe he's announcing his personal bottom line: "I ain't gonna do that, if you don't like it then get yourself another speaker, please!".
One: the tea party works as a great place to place blame. I think a party that started off with a message and purpose that people may have agreed with got sold out to special interests as much as anyone else in Washington not that long after it started. The tea party has barely been in the news for a while. Placing blame on the tea party actually gives them more power in a way, and more power and influence than I think they may actually have.
Two: What I think may be the issue is that the Republican party has played to its base (which partly includes, as Bush infamously noted in that speech, "the haves and the have mores") while not realizing that its base was shrinking and changing due to the economy, changes in demographics and many other factors. I don't know if I agree with all of the approach, but the democrats have either smartly (or just found themselves) playing to a base that has expanded over the last maybe 7-10 years for multiple macro/big picture reasons.
If the Republicans genuinely have an issue with Obamacare, they should have played the long game, but there apparently is no such thing as a "long game" in DC because people have the patience and attention span of a fruit fly. If it is bad and people hate it, let it be bad and people hate it, then next election play up your party's dislike (hey, we told you it was bad!) and that you will try to overturn it. Ride that into office.
Instead, you have a party that is playing as it really doesn't have anything in particular to lose. Due to demographics and other issues (and how they are currently playing things), I don't think they really have any chance in 2016, who knows about 2014. I do not agree with what either side is doing in this mess at all, but I question the reasoning why the Republican party is doing what they're doing.
I'm not sure it's the tea party as much as a Republican party as a whole that is scrambling to stay relevant to a base that I think is probably not as sizable as it once was. If that's the case, I think that's just horrendous from the standpoint of a broken political system that will see the country waste another few years arguing instead of trying to make some actual progress. We'll (hopefully) work out this situation before defaulting, but we will continue going from crisis-to-crisis and not accomplishing anything in-between.
As I've said in other threads, I'm not as concerned about this debt debate (although they may take it further than I'd thought) as much as the effect of a few more years of a government that just goes from one of these crisis situations to the next. The cumulative effect of a broken system is - I think - far more concerning over the next few years if nothing changes.
I also think you're creating a larger group of younger people in this country who will probably not participate in politics - as is - in this country because both sides have become terrible and show an inability to lead, agree or just about anything. Do you eventually - down the road - create enough of a group (maybe young people) demanding change in politics as we know it? I don't know. Probably not, or at least not until things get bad enough.
I think it should become increasingly apparent that neither party has the best interests of the people as a priority. As I've said here in the past, I think people should stop being so concerned about what either party is doing and focus one's energy on yourself and your own best interests. The hatred between the two parties (in Washington, in the media, everywhere in this country) is so stunning to me - it's almost old-fashioned anger between differing religions. Having politics become so horrifically divisive - I mean, anyone hoping for progress on anything should dial back their expectations.
I am interested to see what the political stage looks like 10 years from now because I think (and kinda hope) that it may look significantly different than it does today.
As I noted in another thread, CNBC was going on and on about all the oil being found in this country. Anyone think government can come together on any sort of energy policy? I don't.
What this is saying, in a muddled way in the morning and no Diet Cokes yet, is that you have a Republican party that, much like Microsoft, did not see and adapt to and play to changes going on in the country. Now they're doing the political equivalent of buying Nokia.
I think people have to ask themselves what do they feel strongest about in terms of the macro and the micro (what do you find exciting, compelling, promising?) and be there and have a long-term view because the noise of the last few years is not going to get any better.
The overview of money and power is well portrayed in this movie, although this trailer doesn't reflect the big picture and direction. This movie is available for viewing on YouTube.
Another of your observations, "The hatred between the two parties (in Washington, in the media, everywhere in this country) is so stunning to me - it's almost old-fashioned anger between differing religions" bears much thought. I hadn't thought of it like that, but you're right. This depth of antagonism isn't really new to the US, though- a close read of the early formative years of the republic will reveal much the same vituperative political relationship between the Federalists and the (then named) Democrats. This manifested itself again during the Civil War era, seems to have quieted down a bit afterwards, and is now back with us again.
Thanks for your response.
Regards- OJ
He is scared he will lose his 'leadership' position if he goes against that group. So, he is not leading but following.
Among those tools are disciplinary removals from key committees, curtailment of "special funding" for federal projects in their home states, and ultimately, a threat to work against the reelection of those uncooperative or disruptive members.
• many of the "tea party" types don't care about committee assignments, as they regard those committees (and Congress itself) as the enemy.
• "Special funding", aka "pork-barrel" spending or "earmarks" have been severely curtailed in recent years, making this tool much less effective.
• Under the heading of "unanticipated results" we have the success of tightly gerrymandering congressional voting districts. The idea was to make those districts impervious to challenge by Democrats or other "outsiders". Ironically, they did exactly that, but also made them unchallengeable to Republicans of the more moderate variety.
The concept of political leadership, on either side, assumes an adroitly administered mix of carrots and sticks, as well as a strong personality. I'm pretty sure that Mr. Boehner is actually a reasonably capable potential leader- I say "potential", because without much in the way of carrots or sticks, personality alone won't cut it. For any potential leader.
You'd think new media (I'm not going to give examples, I'm sure people know kind of what I'm talking about) would see the opportunity to try to position themselves as "different", but I think in many cases it's similarly playing to one side or the other.
Does media change? I don't think it does until change has happened around it. CNBC plays to Wall Street interests and I think while there's other elements at play, you have ratings for the network as low as they've ever been and the network appears to have no clue as to how to change or even that it should. CNBC's answer to their night shows not working is to replace it with reality shows. That's not the answer (although I will say I did kinda like "The Profit".)
There have been so many instances of media companies running from change rather than trying to figure out how to make change work for them (the music industry, the list goes on and on.) Comcast is comfortable being Comcast while Google Fiber is on one side and on the other, you have people dropping cable and going with Netflix, Hulu or something else. Microsoft was comfortable being Microsoft (and Ballmer laughed at Android/Google and Apple.) It becomes who has vision? Who is an innovative leader in business?
The hope is that people in this country stop spending such a ridiculous amount of energy hating the "other side" and start demanding actual progress (and not the excuse that it's "the other side's fault." If people throughout the history of this country just said "it's the other guy's fault" rather than making the effort of working out our problems and disagreements, where would we be?) I said it before and will say it again - I'm more concerned about the cumulative effect of three more years of having absolutely no progress in this country (and beyond that, just going from crisis-to-crisis) than this debt debate.
" it will be used over and over again by both parties"
It's already been used over-and-over for the last 2-3 years and will be for the next 2-3 years.
I've spent most of my adult life working in or studying Federal politics. It is certainly correct that the roots of the shutdown and debt ceiling debates are in the nation's current deep political division, and that gerrymandering has exacerbated that intensely. But the shutdown itself is of a different kind than politics as usual. It is entirely the fault of those GOP members of Congress who refuse to admit defeat on the ACA, and their leadership which is craven in the face of losing power. If the Congressional Democrats and the President give in to them, it will fundamentally change the way democracy is practiced in America.
For the much better read, just read James Fallow's blog at The Atlantic. He deserves a Pulitzer for the last week: theatlantic.com/politics/archive/2013/09/your-false-equivalence-guide-to-the-days-ahead/280062/
theatlantic.com/politics/archive/2013/09/why-this-is-not-just-washington-breakdown-in-3-graphs-and-1-story/280099/
A couple of facts to keep in mind. Barack Obama was elected President by a majority of Americans twice while running primarily on healthcare reform. That reform was successfully legislated three years ago and has since withstood a Supreme Court challenge. By any measure, America has said it wants this. Repeatedly. Also, if the CR were brought to the House floor right now, it would pass overwhelmingly and with bipartisan support. theatlantic.com/politics/archive/2013/10/the-two-basic-facts-that-should-be-in-every-shutdown-story/280179/
But standing against that are 32 Members of the House who refuse to admit they lost. People like this guy, gawker.com/gop-congressman-makes-park-ranger-apologize-for-shutdow-1440577868, who somehow manages to claim with a straight face that not funding the ACA is "the will of the people." Making it possible for them to do this is John Boehner, who won't do his job and put the CR on the Union Calender. Why? Because if he does, he could lose his Speakership: motherjones.com/politics/2013/10/how-john-boehner-could-lose-his-speakership
People say they want Congress to negotiate and compromise. Hell, I want Congress to negotiate and compromise because politics is the art of compromise. But there are two problems with this: 1) There is nothing to compromise on here. What these 32 people are asking is to strip previously passed legislation using only procedure, something which has never been done in American history to the best of my knowledge. 2) The Congressional Tea Party delegation has no interest in compromise as a principle: nationalaffairs.com/publications/detail/rescuing-compromise That is backed by data suggesting that the while the partisan divide is growing in America, it is growing asymmetrically on the right, and that GOP is more conservative than at any point in its history: voteview.com/blog/?p=494
Any legislative democracy only functions because minority and losing factions willingly abdicate claims to power. People lose elections, they leave office. People lose votes on legislation, they move on. In any healthy and functional democracy, if one side lost a fight, they'd either give up, or rally for the next election. But the Tea Party, in insisting there are still negotiations over the ACA, is abrogating that social contract. If the President and Congressional Democrats break down and negotiate anything over this, then the political system we've spent 237 years trying to make more perfect is no longer. This is such an essential fact of our democracy that something like what is happening now has only been tried once in our history, by John Calhoun in 1832, and was eventually a contributing factor to the Civil War: en.wikipedia.org/wiki/Nullification_Crisis
In grade school we all learned that the three branches of government were coequal, that the Congress makes laws and that the executive enforces them. What we've arrived at is a situation where a minority group within a Congressional political party is refusing to allow the executive the means to do its job. That is an unprecedented power grab to my mind. Congress certainly controls the purse strings, and that is an important check to Presidential power, especially his power as Commander-in-Chief. But this is refusing to allow the implementation of passed legislation for which a majority of Americans voted. That's dangerous stuff.
One last glum point. The situation may not get better. This week Yale political scientist Juan Linz died. His career was built on the observation that Presidential democracies have failure built into them because eventually you reach an impasse between the legitimacy of the legislature and the executive, particularly because of ideologically based parties. The exception has always seemed to be America. Until this week. slate.com/articles/business/moneybox/2013/10/juan_linz_dies_yale_political_scientist_explains_why_government_by_crisis.html
washingtonpost.com/blogs/wonkblog/wp/2013/10/02/the-shutdown-is-the-constitutions-fault/
I'm thinking this time may be different.
I see disturbing comments from some indicating that a shut-down is nothing to be concerned with, and a failure to not increase the debt limit mid-month is just another bit of nonsense to disregard. I am thinking that the adults are not in charge.
A short-term sell off into cash for the next 3 weeks may be reasonable insurance against Congressional juvenile behavior. I will be spending Sunday reviewing all of my accounts and the rules for transfers to see what my options may be. Not increasing the debt limit has such catastrophic consequences that I will gladly swallow my pride if my fears would be unfounded. I plan to retire in the next 12 months, and I wouldn't want to see a 60% haircut at this point.
>> ever intends to pay back so much as a dollar
It is probably best to avoid politics on this forum, and probably best not to respond, but this is an ignorant and profoundly damaging notion, that our national self-funding is anything like family debt to a bank or credit card or loanshark whatever. You will have to read Krugman and others on the self-dealing nature of our economy to get it, but what chiefly matters is debt as a percentage of GDP (among much else, related), and while it is good not to do heeyuge wars without paying for them and good to get a grip on many defense and subsidy and other expenditures, panicking over 'paying back something owed' in the conventional senses is missing the point and the picture and the opportunity to think thoughtfully about it all, and without panic.
Bank of America: "Agreement is almost impossible as long as Obamacare is on the table."
Futures -125.
Reply to @davidrmoran: I'll agree with you that there is certainly a greater level of complexity, but:
1. Let's take debt-to-GDP. According to the CBO, we're at 73% of GDP (http://www.marketwatch.com/story/us-debt-now-about-73-of-gdp-cbo-says-2013-09-17-1091240). By various measures people may come up with other results I'm sure, but we'll go with that. That is twice the amount that it was at the end of 2007. Lets say that's what matters, when does it get concerning? It's twice what it was at the end of 2007, and where are we now? Muddling along and with a government going from crisis-to-crisis. How about we go over 100% and aren't much better off than we are now.
"Our debt is not an issue because of debt/gdp, because of any number of things" often seems to me like an excuse to find new ways to justify spending and status quo (we in government can still make all the promises and spend how we like on what we want because debt is not an issue, given x metric) and then it doesn't surprise me when the goalposts as to "what is excessive or concerning" (that's when any sort of specific levels are even presented) are moved. Again, I'm not saying entirely disagreeing with you on complexity, just disagreeing a little on intent and that where we are are at in terms of debt - and the trajectory of the growth of the country's debt - is worthy of little or no concern.
"and while it is good not to do heeyuge wars without paying for them and good to get a grip on many defense and subsidy and other expenditures"
Well, you have people who think any spending is good spending, unless it involves things like the nation's deteriorating infrastructure or education - those things cannot be agreed upon. I'll say there's a lot "not good" beyond what you have mentioned.
2. This philosophy that "We'll just print the money" (how many times this has been said on CNBC, I've lost count) without any concern over the implications and potential negative aspects of that is more than a little concerning. People say "We'll just print the money" the same way that they say, "The sky is blue today." Well, what if a day comes along - maybe a year from now, maybe 10 - when we can't just print? How would we fare in that scenario? People can go, "That's just unpossible!" It's certainly not. Is it extreme? Certainly, but not impossible (unpossible, either.)
To quote from above: "name one person in our current political class in the legislative or executive branch that you think ever intends to pay back so much as a dollar of the roughly 17 trillion dollar debt."
It's not that they don't intend to pay back a dollar of the debt, it's this philosophy that more (and to use a popular internet emphasis, "moar") debt is not a problem (and if it ever is, by that time, the politician thinks, it'll be someone else's problem to deal with.) Our mentality as a country when it comes to money is - I think - profoundly concerning and I think on a path for - if not a crisis, a gradual (managed?) erosion of our standing in the world.
It's not that the US government has to balance their finances like a household, but we can also spend in a manner that is haphazard and problematic. This philosophy that any spending is good spending, and when so much of that spending has been funneled to special interests and cronies and we're not far from where we started, we look for the do-over button, or try cntrl-p when the do-over button is found to be broken.
The fact that we've done what we've done over the last few years - which has succeeded in boosting assets but hasn't done much for the rest of the economy is an issue the financial media has only started to discuss. We're an economy with a gold-plated surface and a core that is gradually being hollowed out. Can we start strengthening the core with the government the way it is? No. Three more years of no progress because the government can't work together? Underlying problems build and build and new problems emerge from it.
What will be the answer from government then? Tell the Fed to do more QE because they still can't agree on anything?
Hank Paulson said on CNBC regarding the debt ceiling and shutdown that, more or less, "You can't get that done, it shows the government can't work." I'll say it again, what concerns me is not as much the debt ceiling debate (although I can't believe it's getting as far as it is - as Andrew Ross Sorkin said on CNBC this morning, we might default because the mistake is maybe thinking that these are rational people, and maybe he's right) but the ultimate effect of a government system that is broken.
We cannot manage a country - monetarily or otherwise - with a government that is in this much disarray and that has this level of anger towards the other side. We cannot manage a country (fiscally or otherwise) with a government that is going from one crisis to another and shows no willingness to come together. "It's the other side's fault" is a terrible excuse. I mean, if political leaders throughout this nation's history sat on their hands during times of disagreement and just said, "It's their fault", where would we be?
There is no agreement, there is no sense of leadership and one gets the feeling that even the hint of working with the other side is "showing weakness." How can one not be concerned with government and financial management of the country when the two sides of government are effectively having a war between each other that shows no sides of ending? If they cannot work together on some of the nation's most pressing issues - healthcare, debt ceiling, whatever - how is this system working? How can we have confidence in a government to manage spending when they cannot appear to manage anything. The idea that Senator Schumer could say something along the lines of "Get to work, Mr. Bernanke" just illustrates the idea of "We can't do anything, so go do what you do and we'll hope for the best."
Is being in government so incredibly lucrative now that they are willing to risk default in some bizarre attempt to do whatever it takes to stay in office?
3. Paul Krugman? No thanks, for a multitude of reasons (none of them political, before that easy comment is made.)
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"The dollar is the most remarkable achievement in the history of money. Think of it: this piece of paper with no intrinsic value - costs nothing to produce, nothing behind it except for the goodwill of Ben S. Bernanke and - let us not forget - the US Congress. This piece of paper somehow still commands value and respect. How can the dollar be anything except the world's greatest monetary brand, the Coca-cola of money? How could it be anything else but? Well, you just watch." - Jim Grant.
People are probably - certainly, I'm guessing, actually - going to disagree with this statement. We proceed as a country in a manner that suggests, "How could the dollar be anything BUT the world's reserve currency?" We do not appear to take the reserve currency status as requirement to lead by example (although leading by example requires leadership, which is a quality not really being displayed by anyone in our government currently), we appear to take it as a license to proceed as we please.
It may very well continue to be for years and years. The President said the other day actually, "The dollar is the reserve currency of the world. We don't mess with that." The way that we proceed - from a spending standpoint, from the standpoint of a government that I think is acting like anything BUT an example for the rest of the world - we've been messing with our status, little-by-little in the world for a while now.
Maybe we are a brand - US Inc (apparently a rather generically titled one, but it's too early for me to think of something) - and we cannot coast on the faith and goodwill of the rest of the world to maintain their belief in that brand, we have to demonstrate its continued value. I don't think we are.
In reply to your second point -- without trying to impugn or discuss specific political positions -- my broader point isn't about the ACA (or even the size of our government and its spending), but America's own ability to govern itself as a constitutional representative democracy. I don't care that this starts with the ACA or how it was passed. If this were a law funding private gun ownership being blocked by Pelosi in contravention of her party's wishes I would still consider it a Constitutional crisis. Yes, Congress controls the purse strings and that is an important check in our federal system, particularly to the President's use of his Commander-in-Chief authorities. But that assumes a majority voting for using that power to defund something. Here you have approximately 7.5% of Congress holding their leader hostage so that Congress can't vote to fund the government, something approximately 80-85% of Congress wants to do. Like it or not Obama won two elections that were essentially referendums on health care, the ACA passed both houses of Congress and the law withstood a Supreme Court challenge. There is no more to debate. If you want to get rid of it, get together, draft legislation, run on that in the next general election and get it passed. Democracy works by public records of popular support, not by people simply proclaiming that something is popular or not. For a minority to hold up passed legislation on procedural grounds any time it doesn't like that legislation is anarchy. At that point, just rip up the Constitution and start over.
This isn't just me. Here's a former GOP Senate staffer, Mike Lofgren, writing to James Fallows:
With regards to "brand America," there are, apparently, already investment consequences to the shutdown. The Commerce Dept. has been trying to bring in foreign businesses to a conference later in the month, primarily pitching America's stability. Oops. theatlantic.com/politics/archive/2013/10/your-sunday-shutdown-reader-2/280322/
In regards to rational actors, a generous reading of Boehner's actions is that he knows he only gets one shot to stand up to the Tea Party, and its far better to use that on default than funding the government, since the latter will happen eventually while the former has disastrous consequences. If that's the case, good for him.
I think it maybe better to 'let it go' since you cannot really fix it anyways
http://www.pbs.org/newshour/bb/politics/july-dec13/debtceiling_10-03.html