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The Sunday Political Brunch – January 6, 2013

My weekly political analysis!


(Providence, Rhode Island) – So one year ends in chaos; and another begins as a total mess in the world politics. This stuff keeps political analysts like me in business. So, on to 2013!

Sausage, Please! – Famed German politician Otto von Bismarck is often quoted as saying, “No one should see how laws or sausages are made.” Nowhere was that more true this week than in the halls of Congress where separate bills to solve the fiscal cliff and another to address Hurricane Sandy relief became tied in knots. It was ugly, and there will be fallout for quite some time. But, both did get done despite the process looking like a train wreck when it was all over.

Circular Firing Squad – Some of the most caustic quotes of the week came from Republicans attacking fellow Republicans. When the House recessed Tuesday morning without passing the $60 billion dollar Sandy aid package, Republican New Jersey Governor Chris Christie was furious. "There is only one group to blame for the continued suffering of these innocent victims,” Christie said Wednesday. “The House majority and their speaker, John Boehner.” Christie also blamed what he called, “toxic internal politics” in the House majority. He wasn’t alone. Rep. Peter King (R-NY) was furious Wednesday morning after the bill was tabled. "I'm saying that anyone from New York or New Jersey who contributes one penny to the Republican Congressional Campaign Committee should have their head examined," said King. "I would not give one penny to these people based on what they did to us last night." Ouch! The new Congress passed the bill on Friday, but the wounds may take a long time to heal.

Candid Camera - Governor Chris Christie’s candor is probably his biggest asset, but it could also be his biggest liability. One political writer this week called Christie the “presumptive nominee” of the GOP in 2016 (which is an erroneous overstatement). His combative charm polls well in his native New Jersey, but it will be hard to amass the kind of broad appeal nationally if he hopes to be a unifying force in his party. At some point – in what is likely to be a very competitive primary – Christie will need to find a way to effectively unload on the Democrats. He also has a 2013 reelection campaign for governor to get through first.

Presumptive Nominee? – As I mentioned, one writer called Christie the “presumptive nominee” this week, which is wrong. A presumptive nominee is a person who has amassed enough delegates to win the nomination, but has yet to be formally nominated at the party’s convention. For example, on July 1, 2012, Mitt Romney was only the presumptive GOP nominee, subject to a vote of delegates at the August convention. The distinction is important, because Christie will have a long and difficult journey in 2016. Possible challengers include Jeb Bush, Condoleezza Rice, Paul Ryan, and Marco Rubio. Christie may be the frontrunner in some polls, but that’s a far cry from being the nominee-in-waiting. He also needs to watch what happens to fellow Republican Chuck Hagel later this week.

Haggling for Hagel – This week President Obama will nominate former Republican Senator Chuck Hagel of Nebraska to be Secretary of Defense. There is no guarantee he will be approved by the Senate. That’s because Hagel – a decorated Vietnam War hero – was an outspoken critic of President George W. Bush and the Iraq War. It’s payback time, at least among several fellow Republicans, who felt Hagel was too disloyal to his fellow Republican, Bush. People have long memories in Washington, D.C. So, we will have the odd scenario of Republicans backing Democratic Senator John Kerry to be Secretary of State, while Democrats may give former Republican Senator Hagel the votes he needs to be Secretary of Defense. Yes, they are making sausage again this month on Capitol Hill!

In or Out? In or Out! – He was retired for just one day, but now former Rep. Barney Frank (D-Mass.) wants back in Congress. Frank would like to be appointed Senator, temporarily, until a special election can be held to replace John Kerry after he becomes Secretary of State. Frank has already asked Governor Deval Patrick for the appointment, but has promised not to actually run for the office. Rep. Ed Markey (D-Mass.) is likely to be the Democratic nominee, and former Senator Scott Brown will likely be the Republican nominee. Since the special election probably won’t be held until June, it’s possible we could have Senator Barney Frank (D-Mass.) for several months. You can’t make this stuff up!

As always, I welcome your questions, opinions and disagreements. Just click the comments button at www.MarkCurtisMedia.com.

 

 

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Jack Baillargeron January 11, 2013 at 05:37 PM
The problem I see Mark is that it does not matter what the Administration, Congress or the whole population of the US thinks about that coin. It is what the debt holders think about it. With it only being one denomination it would reqire Contries that hold the debt like China (35%) i believe and Japan ( 15%) I think who are the largest single debt holders. If they do not consider it collateral the status quo is maintained not enhaced concerning the debt ceiling. Not to mention it would be in the Supreme Court 2 seconds after he order from the Adminitration to have it minted.
Ted Geisel January 11, 2013 at 06:10 PM
"Instead we got two grossly expensive unfunded wars." Very true. Both parties share responsibility though. Certainly GB was in charge but he needed the approval of congress. The AUMF for Afghanistan passed 420 Ayes, 1 Nay and 10 Not Voting in the house and 98 Ayes, 0 Nays, 2 Present/Not Voting in the Senate. I'd call that overwhelming support by both parties. VP Biden voted Aye. The Iraq war was more heavily favored by Republicans. Only 40% of Democrats in the house voted for it but a majority, 58%, of the Democrat Senators voted for it. Again including VP Biden.
Naome Lixes January 11, 2013 at 10:48 PM
"The sad part is that some people actually believe that." - Small Change Perhaps you know something we don't? Do tell... http://www.ssa.gov/oact/trsum/index.html
Naome Lixes January 11, 2013 at 10:50 PM
Where do you suppose the money went, Joe? Lotsa yamma about "entitlements" no mention of the Naval Base YOU work on... Defense has been quietly siphoning from the Treasury for 30 years. Are you incapable, or just unwilling to see this as THE major drain on the Treasury?
Naome Lixes January 11, 2013 at 10:56 PM
China owns 8% of US debt, not 35%. Where do you get these SWAGs, Jack - it takes seconds to search for facts. The real problem is the inter-agency "ownership" of debt which is derived from FICA and OSADI payroll deductions. This is effectively a forced investment in programs which cannot support themselves, and run at a deficit. This hides the true cost of dark programs that operated without oversight, and it's a recipe for ruin. Remember Dwight Eisenhower? He was right. First and foremost on that list is the DoD. They're not running bake sales. http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-Debt-Does-China-Own.htm
Joe Sousa. January 11, 2013 at 11:51 PM
Foreign - $5.311 trillion Federal Reserve - $1.66 trillion State and Local Government, including their pension funds - $709.1 billion Mutual Funds - $864.9 billion Private Pension Funds - $605.2 billion Banks - $305.2 billion Insurance Companies - $259.1 billion U.S. Savings Bonds - $184.7 billion Other (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) - $1.14 trillion. (Federal Reserve as of Januray 2, 2013; All others as of June 2012. Source:
Joe Sousa. January 11, 2013 at 11:59 PM
China tops the list with $1.2 trillion in Treasury securities at the end of August 2012. But the U.S. government has become less reliant on China to fund its gaping budget hole over the past two years, even as the political rhetoric over borrowing from China has heated up.
Joe Sousa. January 12, 2013 at 12:04 AM
15. Taiwan U.S. debt holdings: $184.4 billion Taiwan's holdings of U.S. debt have increased gradually over the last year, but in the past two years it has surpassed both Russia and Switzerland in total holdings. To date, Taiwan holds $184.4 billion in Treasury securities, compared with Russia's $146.7 billion and Hong Kong’s $138.8 billion.
Joe Sousa. January 12, 2013 at 12:08 AM
We owe $16 Trillion dollars Just shameful
Jack Baillargeron January 12, 2013 at 12:19 AM
Gee NL sorry, it was suppose to read 25% and 15%. You are using the total debt holders including Americans. I was talking about foreign Countries in respect to them having to believe in the so called coin ignorance that Obama will never even attempt. It is a fools folly. I was also doing it off the top of my head hense the "I believe and I think"; though the estimates for 2012 it is now 26% china and 20% for Japan as Japan has been buying more and China less. Foreign governments hold about 46 percent of all U.S. debt held by the public, more than $4.5 trillion. The largest foreign holder of U.S. debt is China, which owns more about $1.2 trillion in bills, notes and bonds, according to the Treasury. Oh thats from the same link you have by the way which was the one I was trying to remember when I posted. geesh http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-Debt-Does-China-Own.htm
Jack Baillargeron January 12, 2013 at 12:31 AM
In any case NL it matter not what the numbers are in respect to who the 4.5 trillion. What matters is how to solve it and just saying cut the DOD is insanity. You cannot cut that much from the DOD without doing great harm to our national security. It must be cut from everywhere and yes including DOD. All you ever talk about is the DOD. We live on a planet in a global society and cannot be isolationist and ignore the rest of the world. I am for billing every Country for services rendered when it comes to the use of DOD in foreign Country's. But if we do not look at the unsustainable social programs it will never be accomplished either. The regulations for enviroment and crippling businesses also need to be redone. There is no simple answer but there are a lot of tough love answers that people better get use to. So many infact that we could put together a 50,000 page book just listing them I am sure. But instead we will look at taking guns from honest people, gay marriage, anti and pro abortion, class warfare, tax, tax tax, and a million other hings that have nothing to do with solving the deficit and putting the econmy back on track, namely Business creation with JOBS.
Jack Baillargeron January 12, 2013 at 12:36 AM
Nothing erases debt other than paying it off and not over spending anymore than you take in simple as that.
Mark Loomis January 12, 2013 at 01:55 AM
Turns out, there was an even earlier author to the coin-my bad: http://www.wired.com/business/2013/01/trillion-dollar-coin-inventor/
Robert Trager January 12, 2013 at 05:03 AM
All government spending is wasteful, even military spending. It probably costs us $10k or more per combatant killed. Afgans and Iraqis were using IEDs that probably killed our troops for $50 each. That being said, I would rather equip our troops to the hilt and spend the money for superior firepower, than save money and lose our edge on the battlefield. I'd like to hear how much people would be screaming at our government if the price of gasoline spiked to $10/gal and heating oil was rationed, or commercial shipping interupted, because the U.S. couldn't send a carrier group to the Persion Gulf. It is extremely unfortunate that we entered the last 2 wars, but 3000+ deaths on September 11th, 2001 had something to do with that. National defense is part of the Constitution; writing checks to everyone with a hand out, is not.
Baywatch January 12, 2013 at 06:00 AM
Back what up? That absolute values of entitlement costs over revenues are close to equal and climbing? 2012 Entitlements are $2.05 trillion. Total revenues are $2.43 trillion. http://www.heritage.org/research/reports/2012/10/federal-spending-by-the-numbers-2012 Did you even read the Trustees report that you posted? Are you being humorous? It's difficult to discern sarcasm over the internet but that trustee report is pretty awful. From the trustees report that you linked to... "In 2011, the HI fund used interest income ($12 billion) and assets ($28 billion) to help finance expenditures. This report anticipates a $38 billion deficit in non-interest income for 2012, followed by a period of declining deficits (2013-18) as the growth in taxable earnings accelerates. The projected trust fund exhaustion date is 2024 (unchanged from last year). Under current law, scheduled HI tax and premium income would be sufficient to pay 87 percent of estimated HI costs in 2024 and 69 percent by 2086" Yikes!
Baywatch January 12, 2013 at 06:10 AM
"It's apparent that lower tax rates on capital gains encourage ever riskier investment in financial instruments (as with AIG) and less in the industries that employ Americans." What? How? Riskier investments cost more, risk isn't free. Losses cost real money. You seem to only be including gains, for every high beta winner there are a series of losers, and that isn't free.
Joe Sousa. January 12, 2013 at 11:01 AM
This idea is a Ponzi scheme and will continue to devalue the dollar. When gas is $10 a gallon and your grocery bill is half you monthly wage maybe people will catch on . Debt causes Inflation Inflation and Debt > Publications > National Affairs www.nationalaffairs.com/publications/detail/inflation-and-debt
Naome Lixes January 12, 2013 at 01:31 PM
"I'd like to hear how much people would be screaming at our government if the price of gasoline spiked to $10/gal and heating oil was rationed, or commercial shipping interupted, because the U.S. couldn't send a carrier group to the Persion Gulf." - RT This very neatly illustrates my point; the size of the Fifth fleet appears inversely proportional to the scope of our (absent) National energy policy. I'm not so naive as to believe opposing National interests would not fill any vacuum left by a reduced US Military presence, but remaining embedded on the Arabian peninsula and patrolling the Gulf of Hormuz effectively subsidizes a business interest. In effect, we're already paying closer to $15/gallon for gas if the security premium paid to military protection services, subsidy for prospecting, tax rebates to the industry, regulation and oversight as hidden costs. There are those that would argue for LESS oversight and regulation, and to them I would point out the aftermath in the Louisiana gulf coast when a state of the art facility failed. A more realistic look at unregulated oil production is found in Nigeria. The tightening spiral of increased military presence in the Gulf and therefore, increased military consumption of oil seems counterproductive, and expensive. It's a poor return on our investment. http://www.energyandcapital.com/articles/oil-gas-crude/461
Naome Lixes January 12, 2013 at 01:44 PM
"But if we do not look at the unsustainable social programs it will never be accomplished either." - JB Which do you consider unsustainable? Put a dollar value on their cost. "The regulations for enviroment and crippling businesses also need to be redone. " American business does not have a positive track record for cleanliness. Acid rain was denigrated as a scientific fiction, until fish stock plummeted up East. http://e360.yale.edu/feature/global_warming_deniers_and_their_proven_strategy_of_doubt/2285/ What we're seeing in OUR lifetime is the maturation of America as a Nation that has just begun to look past the current exploit to the consequences for several generations yet to come. That implies some curbs to the generous lifestyle offered in the 20th century. If we're to balance sensible spending cuts with judicious revenue increases - while we're being serious, we'll also have to consider our personal responsibilities as well as our individual freedoms. "But instead we will look at taking guns from honest people, gay marriage, anti and pro abortion, class warfare, tax, tax tax, and a million other hings that have nothing to do with solving the deficit..." You said it - and who's focused on these? This is a diversion, plain and simple. If the GOP is to be again taken seriously it needs to abandon the culture wars and deliver the goods. As it stands, it sounds like nostalgic white guys complaining about The Help.
Just Another Taxpayer January 12, 2013 at 02:16 PM
Two unfunded wars,unpaid prescription drug benefits for those on Medicaid and tax cuts all of which took place during "W's" eight years as president. Place the blame for the national deficit where it belongs, which is the Republican Party. By the way Joe, what programs would you cut to help reduce federal spending?
Mark Loomis January 12, 2013 at 02:52 PM
This idea is a Ponzi scheme and will continue to devalue the dollar. When gas is $10 a gallon and your grocery bill is half you monthly wage maybe people will catch on . Debt causes Inflation Joe, PLEASE read the link from my first post... http://www.correntewire.com/wake_up_progressives_the_trillion_dollar_coin_can_be_game_changing If a coin were minted, be it 10, 20, 30 or 60 Trillion dollars, it would be deposited in the Treasury. It would not flood the money supply immediately. Some would be used to cancel the debt, and then spent accordingly, for years to come.
Jack Baillargeron January 12, 2013 at 06:14 PM
NL; What does a dollar amount have to do with this? Unsustainable is unsustainable. It is mathematically impossible to fund something when the revenue cannot be raised no matter how much you take from the people no matter what the number is. When output exceeds input you’re all done. They call that Bankrupt. Funny how social programs are based on the “needs of the many, out weight the needs of the few”. But when it comes to business supply the need of the many it does not. Not going to get into Global warming as it is still to this day a theory on both sides and undecided on what the total effect of humans have verses the effects of nature itself. Both contribute to it obviously. The answer needed is how much. Please do not start posting arguments of it as for every pro opinion there are just as many con ones. Empirical evidence does not exist on either side. No different when the “Flat Earth” argument was around in my opinion.
Jack Baillargeron January 12, 2013 at 06:15 PM
No diversion by me on the gun thing, it is the diversion of anti-gun crowd and the politicians using an evil act to move an agenda against the Constitutional right to bear arms and will not prevent evil acts of criminals. Neither should the other things be on the table at this time either as they also are diversions by agenda driven people. The culture war is the guilty pressure of both sides period, not just GOP but DEMS also. What race has to do with it is yet another diversion to push an agenda oh so called social justice and shameful in my opinion by anyone who would use it.
Jack Baillargeron January 12, 2013 at 06:18 PM
Time to prepare for Patriot Game party tomorrow, feel free to start the name calling and dirogitory statements against posters opinion rather than have a respectful debate you seem incapable of NL.
Joe Sousa. January 12, 2013 at 11:38 PM
What value will the coin have since it is not backed by gold. Our dollars are not backed by gold. They are paper with denominations printed on them. The debt we carry devalues the dollar . Printing more money regardless of the denomination is just more debt. It didn't always work this way. In the past money was in the form of coins, generally composed of precious metals such as gold and silver. The value of the coins was roughly based on the value of the metals they contained, because you could always melt the coins down and use the metal for other purposes. Until a few decades ago paper money was based on the gold standard . This meant that you could take some paper money to the government, who would exchange it for some gold or some silver based on an exchange rate set by the government. The gold standard lasted until 1971 when President Nixon announced that the United States would no longer exchange dollars for gold. This ended the Bretton Woods system . Now the United States is on a system of fiat money, which is not tied to any other commodity. So these pieces of paper in your pocket are nothing but pieces of paper.
Naome Lixes January 13, 2013 at 01:07 AM
This last batch of comments from Jack has been at least thoughtful - he's trying. It's difficult to have a meaningful discussion when so many talking points are thrown together. I think the general grasp of macroeconomics is tenuous in this thread - mine included. The Devil being in the details, I think it crucial to put a dollar value on all departments to view the scale and scope of our current accounts problem. This is as good a place as any to hear the reservations, from both sides. Joe is quoting another Prepper website, less as a witness for the prosecution than as evidence of where unexamined suspicion takes you - next to nowhere.
Naome Lixes January 13, 2013 at 01:18 AM
So, is this just a way to rein in The Fed? It seems that this won't shrink the money supply back to a realistic level before the 1987 "DotCom" collapse - and the flood of valueless stock that followed. If getting a handle on National finances is in order, it might be wiser to start with a few Pitbulls at the SEC instead lap dogs. Curb Wall Street, first. Count the coins, later.
Lorraine F January 13, 2013 at 09:51 AM
A meaningful discussion can probably start from looking at where the US stands in the world on the current account balance https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html Yes we are on the list, you simply have to scroll all the way to the bottom. For the non economists, the current account is one step higher in details than the trade imbalance and a more accurate picture of how good or bad the countries economy is doing. I will admit that the list is the "total" and not "per capita" current account. But being at the bottom of any global list where Germany and China are at the top is not a good thing.
Bill the 1st January 13, 2013 at 11:01 AM
Money hasn't been backed by precious metals for a lot longer than that. I believe the last silver certificate was in 1935. Dollars used to have the fact that they could be redeemed for silver printed on them. Silver was removed from quarters in '64. Nickles and pennies can still be melted down for a profit. Of course, that would be illegal. One of the biggest problems to linking the dollar to one commodity is that foreign and domestic entities can be manipulated to destroy the U.S economy. Essentially, though, our dollar is based on the value of the sum total of our tangible productivity, as compared to the rest of the world's tangible productivity. It does all get linked back to something. The big issue with borrowing, in this case, is that we aren't using it to produce. We're using it to extend unemployment and fund retirements and feed the poor non-producers. The value of these things is entirely "social". They don't belong on our Federal expense accounts.
Joe Sousa. January 13, 2013 at 12:03 PM
The hardest thing for you two is to face reality. Our Country is broken and the Tea Party has the fix. The movement toward smaller Government will be driven when interest rates go up. In 2012, the U.S. spent around $220 billion in net interest on its debt, according to the Congressional Budget Office — a figure that is expected to spiral ever higher in coming years. Erskine Bowles, a co-chair of the president's bipartisan deficit-reduction commission known as "Simpson-Bowles," has called the nation's compound interest burden one of the biggest long-term challenges facing the United States. "We'll be spending over $1 trillion a year on interest by 2020. That's $1 trillion we can't spend to educate our kids or to replace our badly worn-out infrastructure," said Bowles at a recent forum hosted by IHS Global Insight. "What makes it doubly bad is that trillion will be spent principally in Asia, because that's where our debt is." The Tax and Spend Liberals think they can continue to pull more money out of peoples pockets. They face a wake up call .

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