Friday, July 22, 2011 2:31:08 AM
Credit agencies warn GOP of 'death spiral'
Rep. Nan Hayworth walks with other members following a meeting with S&P economists.
AP Photo
7/22/11
House Republicans were cautioned Thursday in a closed door meeting with credit rating agency officials that a “death spiral” in the bond market was one of the possible outcomes in the event of default.
One official warned of a worst-case scenario in which a default on the nation’s credit could result in a rapid drop in bond values, sparking chaos in the markets — a dramatic warning ...
[...]
http://www.politico.com/news/stories/0711/59612.html [with comments]
===
Dear House Republicans: Raise the debt limit for your hero Ronald Reagan’s sake
By Greg Sargent
Posted at 01:26 PM ET, 07/20/2011
Dana Milbank had a provocative column this morning arguing that on the debt ceiling, Dems have become the new party of Ronald Reagan, and that Republicans only honor their alleged hero Reagan in the breach and not the observance. After all, Reagan presided over 18 debt ceiling hikes as President. But for a large swath of today’s House conservatives, the drive to prevent the debt ceiling from being hiked has replaced the now-forgotten push to repeal Obamacare as their number one ideological cause celebre.
Now House liberals have hit on a fun new way of emphasizing this point: They are sending a letter today to every House Republican asking them to raise the debt limit. Only the letter wasn’t written by House liberals. It was written by Reagan himself.
Here’s the text of the letter Reagan wrote to then-Senate Majority Leader Howard Baker in 1983, a copy of which is being hand delivered from the Congressional Progressive Caucus to every House Republican this afternoon:
Dear Howard:
This letter is to ask for your help and support, and that of your colleagues, in the passage of an increase in the limit on the public debt.
As Secretary Regan has told you, the Treasury’s cash balances have reached a dangerously low point. Henceforth, the Treasury Department cannot guarantee that the Federal Government will have sufficient cash on any one day to meet all of its mandated expenses, and thus the United States could be forced to default on its obligations for the first time in its history.
This country now possesses the strongest credit in the world. The full consequences of a default or even the serious prospect of default by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the cost, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.
I want to thank you for your immediate attention to this urgent problem and for your assistance in passing an extension of the debt ceiling.
Sincerely,
Ronald Reagan
Call this a gimmick if you must, but it’s in keeping with the Dems’ broader strategy: Appropriating Reagan’s legacy in the debt limit fight as their own. Dems recently released audio of a 1987 radio address in which Reagan urged a debt ceiling hike. ”The United States has a special obligation to itself and the world to meet its obligations,” Reagan says in the address. For good measure, Reagan even cast avoiding default as key to — wait for it — American exceptionalism.
I don’t imagine that House Dems actually think the words of Reagan will sway some of today’s Tea-infused House conservatives. But they are hoping that the specter of Reagan repeatedly urging a debt ceiling hike for the good of America will emphasize to everyone else just how extreme and ideologically rigid the House conservative position has become.
© 2011 The Washington Post
http://www.washingtonpost.com/blogs/plum-line/post/dear-house-republicans-raise-the-debt-limit-for-your-hero-ronald-reagans-sake/2011/03/03/gIQARRv3PI_blog.html [with embedded links, and comments]
===
My Last Good Nerve
Jared Bernstein
Jul 21, 2011
Standard and Poor’s are seriously workin’ my last good nerve.
According to the WSJ [ http://blogs.wsj.com/marketbeat/2011/07/21/debt-deal-momentum-eases-worries-on-u-s-aaa/ ],
“If no deal is struck and the U.S. fails to repay bondholders on maturing debt or misses interest payments, the rating would be moved to default. If the ceiling is raised without a long-term plan to get the U.S. debt load back in balance, S&P might lower the AAA rating to AA+.”
I get the first part and we’d of course deserve the downgrade and worse if we default.
But the second part is maddening. Lemme get this straight: if these credit raters, whose razor-sharp assessments graded toxic mortgage-backed securities as triple-A, don’t think the deficit-reduction plan goes far enough, they’re going to take us down a notch!?
That’s nuts. Even amidst the turmoil of the last few months, markets are still treating US debt as the safest investment out there. And the debt ceiling is a totally manufactured crisis. Once we get it behind us, no one should have any doubt that the US will back its obligations as reliably as it has for hundreds of years.
Whatever deficit package we come up with, we have the institutions, the wealth, the tax collection and market infrastructure to service our debts the same way we always have. This should not even be an issue.
And that’s especially the case given the costs of a downgrade, even one notch to double-A. Investors would automatically seek a risk premium on gov’t debt, and remember, every basis point equals about $1 billion of annual debt service. What’s more [ http://jaredbernsteinblog.com/when-riskless-gets-risky/ ], given the amount of global debt benchmarked to US Treasuries, such a careless move by S&P has negative implications for growth throughout the world.
They need to quickly pull a Grover (see update here [ http://jaredbernsteinblog.com/people-saying-interesting-things/ ]).
© 2011 by Jared Bernstein | On the Economy
http://jaredbernsteinblog.com/my-last-good-nerve/ [with comments]
===
Pledge Kludge
Just another day in the debt-ceiling debate: Did Grover Norquist really say that?
By John Dickerson
Posted Thursday, July 21, 2011, at 11:14 PM ET
Washington is always thick with rumors—you can almost see them on the local Doppler. On Thursday afternoon a rumor surfaced that President Obama and House Speaker John Boehner were close to a deal on raising the debt ceiling. The story was splashed across the home page of the New York Times. The markets appeared to react positively. When White House spokesman Jay Carney said there was no deal, he was then asked about a negative market reaction. Meanwhile, Boehner took to Rush Limbaugh's show to say there wasn't a deal. It was barely past lunch, but this rumor had already gone through three iterations: surface, backtrack, denial. And this was the second piece of speculation of the day: The morning had been dominated by talk about whether longtime anti-tax activist Grover Norquist had given House Republicans an opening to reach a deal with the president over tax increases.
It's not just the heat. The atmosphere in Washington is particularly charged at the moment—almost to the point of general madness. Negotiators are working on a deal to avert a shutdown while simultaneously rushing to tamp down rumors about what they may or may not have agreed to. Much of the president's meeting Wednesday with Democratic leaders was spent assuring them that the rumors they had heard about the size of spending cuts were not true.
The closer the Aug. 2 deadline for default, the more frantic all constituencies become. Everyone wants to get a jump on whatever might be in the deal so they can get it taken out. Democrats worry the president will stick them with drastic cuts to government services and entitlements. Republicans worry the speaker is agreeing to tax increases. Both sides worry they'll be presented with a last-minute deal they'll have to support or risk sending the country into economic ruin.
The Norquist controversy that started the day marked a new stage in the Norquist's already colorful career. For the last 25 years, Norquist, the president of Americans for Tax Reform, has encouraged Republican candidates to sign a pledge that they won't raise taxes. Some 236 members of the House have signed it. Many people (most of them Democrats) believe that this pledge is all that is blocking a debt limit deal between House Republicans and the White House. No House Republicans dare break the pledge by agreeing to any tax increases, or Norquist will punish them in the next election.
Late Wednesday, a Washington Post editorial said that Norquist had essentially offered to let Republicans off the hook: The pledge, the editorial said, does not require signers to oppose the expiration of the Bush tax in 2012. Obama has been trying to get Republicans to agree to allow those tax cuts to expire in exchange for deep cuts in spending programs. Republicans have refused vehemently. Norquist said allowing these tax cuts to lapse "would not technically violate the pledge." If Republicans agree to let the cuts expire, the Post suggested, it would make a deal much easier and avert the crisis.
Democrats reacted to the editorial only slightly slower than Wendi Deng Murdoch. On Thursday morning White House Communications Director Dan Pfeiffer highlighted the editorial. House Minority Leader Steny Hoyer told reporters it was a major development. Sen. Chuck Schumer issued a press release and spoke about it on the Senate floor. "This is a development the significance of which should not be underestimated. It is a recognition from Norquist that the House Republicans are increasingly isolated, and have painted themselves into a corner. Norquist is trying to signal to the House GOP that their no-compromise position is untenable, deteriorating, and bad for their party and the country."
Here's a good rule of thumb: When the Washington Post editorial board and the Democratic hierarchy agree on their textual analysis of a Republican stalwart, there's a pretty good chance it might not meet laboratory standards for dispassionate assessment. Still, Boehner at his morning news conference was asked two questions about the Norquist remarks. Boehner said he was not going to allow the Bush tax cuts to expire.
What had Norquist actually said? The Post helpfully provided the audio later on Thursday. Norquist was making a narrow point about the language of the pledge. Written 25 years ago, it says that members promise not to vote for a net tax increase. It is silent on supporting legislation to block the expiration of cuts. But just because there is no sign saying you can't shoot your neighbor does not mean that you are free to do so.
The expiration of the Bush tax cuts would mean a marginal tax rate increase, which Republicans believe is the most evil of all tax increases. You may remember the vigor with which Republicans fought Obama over letting these tax cuts expire last year. Norquist was a central combatant.
Reducing marginal rates is the cause for which Norquist was called into this world. As Norquist said in the Post interview, the expiration of the Bush tax cuts would "raise taxes from where they are" and would "be a very bad thing to do." When the Post offered a hypothetical situation of a politician like Mitt Romney using the technicality to support the expiration, Norquist said he would "denounce him as a tax increaser and a bad guy."
This is why all the activity Thursday morning was overheated. It is not realistic to think that a Republican member of Congress—formerly cowed by the Norquist pledge—would use this technicality as an opportunity to leap into newfound bravery. Nor is it realistic to think that he or she would do very well in the face of Norquist's promised denunciations. This kind of strict textual interpretation of the promise may have saved Antonio from losing his pound of flesh, but the laws of politics are a little looser than those of Venice. As Norquist said in the Post interview, "You may get me to say technically you've done x,y, or z, but it doesn't pass the laugh test with the American people."
Norquist's pledge has power because Republicans who vote in primaries and conservative GOP districts don't want their members to vote for tax increases of whatever flavor. As he put it in an interview with me yesterday: "The modern Republican Party is a different party than it was 10 years ago, it was a party that has got kinda slapped and said, 'Hey you, hear us: Spend less.' So those Democrats and moderate Republicans who are hoping for the good old days when Republicans would raise taxes for you are very old, because that happened 20-plus years ago and hasn't happened since."
Norquist shapes and uses that power—but he didn't create it, and he can't suddenly reverse course even if that were his intention (which it's not). If Obama is going to work out a deal with Republicans that wrings some savings out of changing the tax code, he's going to have to convince conservative Republicans that they won't get punished. At the moment that still looks about as easy as convincing people that the weather in Washington is lovely this time of year.
© 2011 The Slate Group, LLC
http://www.slate.com/id/2299724 [ http://www.slate.com/id/2299724/pagenum/all/ ] [with embedded links, and comments]
*
Grover Norquist Contradicts Grover Norquist
July 21, 2011
http://www.npr.org/blogs/itsallpolitics/2011/07/21/138586589/grover-norquist-renounces-grover-norquist [with comments]
===
Your credit card could get ugly if the debt ceiling isn't raised
July 14, 2011
http://www.cardratings.com/creditcardblog/2011/07/your-credit-card-could-get-ugly-if-the-debt-ceiling-isnt-raised.html [with comments] [also at http://www.foxbusiness.com/personal-finance/2011/07/15/your-credit-card-could-get-ugly-if-debt-ceiling-isnt-raised/ (comments at http://www.foxbusiness.com/personal-finance/2011/07/15/your-credit-card-could-get-ugly-if-debt-ceiling-isnt-raised/#comment )]
Rep. Nan Hayworth walks with other members following a meeting with S&P economists.
AP Photo
7/22/11
House Republicans were cautioned Thursday in a closed door meeting with credit rating agency officials that a “death spiral” in the bond market was one of the possible outcomes in the event of default.
One official warned of a worst-case scenario in which a default on the nation’s credit could result in a rapid drop in bond values, sparking chaos in the markets — a dramatic warning ...
[...]
http://www.politico.com/news/stories/0711/59612.html [with comments]
===
Dear House Republicans: Raise the debt limit for your hero Ronald Reagan’s sake
By Greg Sargent
Posted at 01:26 PM ET, 07/20/2011
Dana Milbank had a provocative column this morning arguing that on the debt ceiling, Dems have become the new party of Ronald Reagan, and that Republicans only honor their alleged hero Reagan in the breach and not the observance. After all, Reagan presided over 18 debt ceiling hikes as President. But for a large swath of today’s House conservatives, the drive to prevent the debt ceiling from being hiked has replaced the now-forgotten push to repeal Obamacare as their number one ideological cause celebre.
Now House liberals have hit on a fun new way of emphasizing this point: They are sending a letter today to every House Republican asking them to raise the debt limit. Only the letter wasn’t written by House liberals. It was written by Reagan himself.
Here’s the text of the letter Reagan wrote to then-Senate Majority Leader Howard Baker in 1983, a copy of which is being hand delivered from the Congressional Progressive Caucus to every House Republican this afternoon:
Dear Howard:
This letter is to ask for your help and support, and that of your colleagues, in the passage of an increase in the limit on the public debt.
As Secretary Regan has told you, the Treasury’s cash balances have reached a dangerously low point. Henceforth, the Treasury Department cannot guarantee that the Federal Government will have sufficient cash on any one day to meet all of its mandated expenses, and thus the United States could be forced to default on its obligations for the first time in its history.
This country now possesses the strongest credit in the world. The full consequences of a default or even the serious prospect of default by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the cost, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.
I want to thank you for your immediate attention to this urgent problem and for your assistance in passing an extension of the debt ceiling.
Sincerely,
Ronald Reagan
Call this a gimmick if you must, but it’s in keeping with the Dems’ broader strategy: Appropriating Reagan’s legacy in the debt limit fight as their own. Dems recently released audio of a 1987 radio address in which Reagan urged a debt ceiling hike. ”The United States has a special obligation to itself and the world to meet its obligations,” Reagan says in the address. For good measure, Reagan even cast avoiding default as key to — wait for it — American exceptionalism.
I don’t imagine that House Dems actually think the words of Reagan will sway some of today’s Tea-infused House conservatives. But they are hoping that the specter of Reagan repeatedly urging a debt ceiling hike for the good of America will emphasize to everyone else just how extreme and ideologically rigid the House conservative position has become.
© 2011 The Washington Post
http://www.washingtonpost.com/blogs/plum-line/post/dear-house-republicans-raise-the-debt-limit-for-your-hero-ronald-reagans-sake/2011/03/03/gIQARRv3PI_blog.html [with embedded links, and comments]
===
My Last Good Nerve
Jared Bernstein
Jul 21, 2011
Standard and Poor’s are seriously workin’ my last good nerve.
According to the WSJ [ http://blogs.wsj.com/marketbeat/2011/07/21/debt-deal-momentum-eases-worries-on-u-s-aaa/ ],
“If no deal is struck and the U.S. fails to repay bondholders on maturing debt or misses interest payments, the rating would be moved to default. If the ceiling is raised without a long-term plan to get the U.S. debt load back in balance, S&P might lower the AAA rating to AA+.”
I get the first part and we’d of course deserve the downgrade and worse if we default.
But the second part is maddening. Lemme get this straight: if these credit raters, whose razor-sharp assessments graded toxic mortgage-backed securities as triple-A, don’t think the deficit-reduction plan goes far enough, they’re going to take us down a notch!?
That’s nuts. Even amidst the turmoil of the last few months, markets are still treating US debt as the safest investment out there. And the debt ceiling is a totally manufactured crisis. Once we get it behind us, no one should have any doubt that the US will back its obligations as reliably as it has for hundreds of years.
Whatever deficit package we come up with, we have the institutions, the wealth, the tax collection and market infrastructure to service our debts the same way we always have. This should not even be an issue.
And that’s especially the case given the costs of a downgrade, even one notch to double-A. Investors would automatically seek a risk premium on gov’t debt, and remember, every basis point equals about $1 billion of annual debt service. What’s more [ http://jaredbernsteinblog.com/when-riskless-gets-risky/ ], given the amount of global debt benchmarked to US Treasuries, such a careless move by S&P has negative implications for growth throughout the world.
They need to quickly pull a Grover (see update here [ http://jaredbernsteinblog.com/people-saying-interesting-things/ ]).
© 2011 by Jared Bernstein | On the Economy
http://jaredbernsteinblog.com/my-last-good-nerve/ [with comments]
===
Pledge Kludge
Just another day in the debt-ceiling debate: Did Grover Norquist really say that?
By John Dickerson
Posted Thursday, July 21, 2011, at 11:14 PM ET
Washington is always thick with rumors—you can almost see them on the local Doppler. On Thursday afternoon a rumor surfaced that President Obama and House Speaker John Boehner were close to a deal on raising the debt ceiling. The story was splashed across the home page of the New York Times. The markets appeared to react positively. When White House spokesman Jay Carney said there was no deal, he was then asked about a negative market reaction. Meanwhile, Boehner took to Rush Limbaugh's show to say there wasn't a deal. It was barely past lunch, but this rumor had already gone through three iterations: surface, backtrack, denial. And this was the second piece of speculation of the day: The morning had been dominated by talk about whether longtime anti-tax activist Grover Norquist had given House Republicans an opening to reach a deal with the president over tax increases.
It's not just the heat. The atmosphere in Washington is particularly charged at the moment—almost to the point of general madness. Negotiators are working on a deal to avert a shutdown while simultaneously rushing to tamp down rumors about what they may or may not have agreed to. Much of the president's meeting Wednesday with Democratic leaders was spent assuring them that the rumors they had heard about the size of spending cuts were not true.
The closer the Aug. 2 deadline for default, the more frantic all constituencies become. Everyone wants to get a jump on whatever might be in the deal so they can get it taken out. Democrats worry the president will stick them with drastic cuts to government services and entitlements. Republicans worry the speaker is agreeing to tax increases. Both sides worry they'll be presented with a last-minute deal they'll have to support or risk sending the country into economic ruin.
The Norquist controversy that started the day marked a new stage in the Norquist's already colorful career. For the last 25 years, Norquist, the president of Americans for Tax Reform, has encouraged Republican candidates to sign a pledge that they won't raise taxes. Some 236 members of the House have signed it. Many people (most of them Democrats) believe that this pledge is all that is blocking a debt limit deal between House Republicans and the White House. No House Republicans dare break the pledge by agreeing to any tax increases, or Norquist will punish them in the next election.
Late Wednesday, a Washington Post editorial said that Norquist had essentially offered to let Republicans off the hook: The pledge, the editorial said, does not require signers to oppose the expiration of the Bush tax in 2012. Obama has been trying to get Republicans to agree to allow those tax cuts to expire in exchange for deep cuts in spending programs. Republicans have refused vehemently. Norquist said allowing these tax cuts to lapse "would not technically violate the pledge." If Republicans agree to let the cuts expire, the Post suggested, it would make a deal much easier and avert the crisis.
Democrats reacted to the editorial only slightly slower than Wendi Deng Murdoch. On Thursday morning White House Communications Director Dan Pfeiffer highlighted the editorial. House Minority Leader Steny Hoyer told reporters it was a major development. Sen. Chuck Schumer issued a press release and spoke about it on the Senate floor. "This is a development the significance of which should not be underestimated. It is a recognition from Norquist that the House Republicans are increasingly isolated, and have painted themselves into a corner. Norquist is trying to signal to the House GOP that their no-compromise position is untenable, deteriorating, and bad for their party and the country."
Here's a good rule of thumb: When the Washington Post editorial board and the Democratic hierarchy agree on their textual analysis of a Republican stalwart, there's a pretty good chance it might not meet laboratory standards for dispassionate assessment. Still, Boehner at his morning news conference was asked two questions about the Norquist remarks. Boehner said he was not going to allow the Bush tax cuts to expire.
What had Norquist actually said? The Post helpfully provided the audio later on Thursday. Norquist was making a narrow point about the language of the pledge. Written 25 years ago, it says that members promise not to vote for a net tax increase. It is silent on supporting legislation to block the expiration of cuts. But just because there is no sign saying you can't shoot your neighbor does not mean that you are free to do so.
The expiration of the Bush tax cuts would mean a marginal tax rate increase, which Republicans believe is the most evil of all tax increases. You may remember the vigor with which Republicans fought Obama over letting these tax cuts expire last year. Norquist was a central combatant.
Reducing marginal rates is the cause for which Norquist was called into this world. As Norquist said in the Post interview, the expiration of the Bush tax cuts would "raise taxes from where they are" and would "be a very bad thing to do." When the Post offered a hypothetical situation of a politician like Mitt Romney using the technicality to support the expiration, Norquist said he would "denounce him as a tax increaser and a bad guy."
This is why all the activity Thursday morning was overheated. It is not realistic to think that a Republican member of Congress—formerly cowed by the Norquist pledge—would use this technicality as an opportunity to leap into newfound bravery. Nor is it realistic to think that he or she would do very well in the face of Norquist's promised denunciations. This kind of strict textual interpretation of the promise may have saved Antonio from losing his pound of flesh, but the laws of politics are a little looser than those of Venice. As Norquist said in the Post interview, "You may get me to say technically you've done x,y, or z, but it doesn't pass the laugh test with the American people."
Norquist's pledge has power because Republicans who vote in primaries and conservative GOP districts don't want their members to vote for tax increases of whatever flavor. As he put it in an interview with me yesterday: "The modern Republican Party is a different party than it was 10 years ago, it was a party that has got kinda slapped and said, 'Hey you, hear us: Spend less.' So those Democrats and moderate Republicans who are hoping for the good old days when Republicans would raise taxes for you are very old, because that happened 20-plus years ago and hasn't happened since."
Norquist shapes and uses that power—but he didn't create it, and he can't suddenly reverse course even if that were his intention (which it's not). If Obama is going to work out a deal with Republicans that wrings some savings out of changing the tax code, he's going to have to convince conservative Republicans that they won't get punished. At the moment that still looks about as easy as convincing people that the weather in Washington is lovely this time of year.
© 2011 The Slate Group, LLC
http://www.slate.com/id/2299724 [ http://www.slate.com/id/2299724/pagenum/all/ ] [with embedded links, and comments]
*
Grover Norquist Contradicts Grover Norquist
July 21, 2011
http://www.npr.org/blogs/itsallpolitics/2011/07/21/138586589/grover-norquist-renounces-grover-norquist [with comments]
===
Your credit card could get ugly if the debt ceiling isn't raised
July 14, 2011
http://www.cardratings.com/creditcardblog/2011/07/your-credit-card-could-get-ugly-if-the-debt-ceiling-isnt-raised.html [with comments] [also at http://www.foxbusiness.com/personal-finance/2011/07/15/your-credit-card-could-get-ugly-if-debt-ceiling-isnt-raised/ (comments at http://www.foxbusiness.com/personal-finance/2011/07/15/your-credit-card-could-get-ugly-if-debt-ceiling-isnt-raised/#comment )]
Greensburg, KS - 5/4/07
"Eternal vigilance is the price of Liberty."
from John Philpot Curran, Speech
upon the Right of Election, 1790
F6
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
