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April 4th 2005 - The tightly disciplined, Republican-controlled Congress that gave President George W. Bush key pro- business victories in the first few months of his second term may now put political survival ahead of party unity.
Bush has outlined an aggressive agenda -- including restructuring Social Security, cutting a record budget deficit and easing immigration policies -- that he hopes will secure his legacy for posterity. His party's lawmakers have a simpler goal: winning re-election and maintaining or enlarging their House and Senate majorities in 2006.
``Bush sees himself as a consequential president in history who accomplished big things,'' says Bill McInturff, a Republican pollster. ``Most members of Congress can be very happy just strolling along saying, 'Here is all the money I delivered to my district.'''
Congressional Republicans are pushing for legislation to allow drug imports from Canada, a measure opposed by Bush and drug makers such as Pfizer Inc. and Merck & Co. Bush also faces resistance on his plan to ease immigration laws, which food- service companies such as Outback Steakhouse Inc. and Wendy's International Inc. support. And Wall Street analysts and economists hoping for measures to restrain the budget deficit are concerned that lawmakers facing re-election won't be inclined to cut spending.
``There are some great challenges,'' White House spokesman Trent Duffy says. ``This president is a big-game hunter. The process is just beginning.''
The Republicans, who gained expanded majorities in both chambers of Congress in the November elections, gave Bush some early successes this year with measures that curbed class-action lawsuits, rewrote bankruptcy laws and paved the way for oil drilling in Alaska's Arctic National Wildlife Refuge.
Easy Wins
These ``were easy wins that were left over from the last Congress,'' says Ethan Siegal, president of the Washington Exchange, which tracks policy for institutional investors. ``Everything else Bush has on the table is very difficult, and the discipline in his party is breaking apart.''
The first stirrings of dissent were heard when lawmakers took up Bush's 2006 budget, which calls for trimming federal benefits and other domestic programs while extending portions of his first-term tax cuts.
Last month, Senator Gordon Smith, an Oregon Republican, led six other Republicans in blocking Bush's plan to cut $14 billion from the Medicaid health program over five years. And when a Senate committee approved Bush's $284 billion highway bill, Senator James Inhofe of Oklahoma assured his fellow Republicans that the funding may be increased later.
Drug Imports
Republicans are also at odds with Bush's position on allowing Americans to import cheaper drugs from Canada. Senator Charles Grassley of Iowa, the powerful chairman of the Finance Committee, is pushing for legislation that would allow the imports, which Bush and drug makers oppose.
Representative Jo Ann Emerson, a Missouri Republican, says she is confident the bill allowing imports can clear the House. Lawmakers' ``constituents are saying, find any means possible to bring down the cost of drugs,'' she says.
Drug makers such as New York-based Pfizer, Whitehouse Station, New Jersey-based Merck and Madison, New Jersey-based Wyeth say the measure won't adequately address these concerns. ``We don't believe that re-importation is a solution to the problems of access and affordability of medications,'' Wyeth spokeswoman Natalie De Vane says. ``And it does pose a safety risk.''
Bush's call for a guest-worker visa program aimed at allowing migrants to fill low-skilled jobs may be the toughest to pass, because so many Republicans are opposed to it, says Bruce Josten, the head lobbyist at the U.S. Chamber of Commerce in Washington.
Opening Floodgates
Representative John Hostettler, an Indiana Republican who heads the House Judiciary Subcommittee on Immigration, said he wouldn't allow any bill easing immigration to be brought before his panel for a vote. ``It is my concern and others' concerns that if you legalize those who have illegally obtained residency here, you will open the floodgates,'' he said in an interview March 31.
The National Restaurant Association, which represents companies such as Tampa, Florida-based Outback Steakhouse and Dublin, Ohio-based Wendy's International, backs Bush's plan. The food-service industry is the largest U.S. employer of undocumented workers -- about 1.4 million of the nation's 8 million immigrants.
Second-Term Blues
These kinds of defections are common in a president's second term, particularly when his party is in power in Congress, says Stephen Wayne, a government professor at Georgetown University in Washington. In four of five second-term mid-term elections since World War II, the party that controlled the White House has lost seats in both chambers, says Jennifer Duffy, an analyst at the Cook Political Report, which tracks political races.
Most lawmakers are aware of this phenomenon, called the ``sixth-year itch,'' Duffy says, and Republicans will cast their votes on Bush's agenda items with this precedent in mind. ``It's a self-preservation issue,'' she says.
There are 15 Republican-held Senate seats on the ballot next year. In the House, where all members are up for re-election, 24 Republicans won their 2004 elections with 55 percent of the vote or less.
This dynamic is already evident in the voting behavior of Senator Rick Santorum of Pennsylvania, the No. 3 Senate Republican leader, who is expected to face a tough re-election contest in 2006 from Democrat Robert Casey Jr., the state treasurer.
Good for Pennsylvania
Santorum has parted ways with the president at least twice in the last month. He proposed a $1.10-an-hour increase to the $5.15-an-hour minimum wage, and voted in favor of an amendment to a 2006 budget plan that rejected Bush's call to cut nearly $2 billion from the Community Development Block Grant program and other economic development programs that are popular in his state.
``You're going to see him deviate on things that make sense for Pennsylvania,'' Duffy says.
Perhaps most significant for Bush's legacy, his plan to establish private Social Security accounts has failed to generate a critical mass of support. The proposal has proved unpopular in the polls, and Republican lawmakers including Representative Jim Nussle of Iowa and Representative John Mica of Florida have not made commitments to support it.
Wall Street Worries
Some Republicans share Wall Street's concern over the effect of the proposal on the budget deficit, which reached a record $412 billion last year. Any plan to create the accounts would add $1 trillion to $2 trillion to the deficit over the next 10 years, according to the Congressional Budget Office.
``The longer we continue to allow the public debt to rise, the more painful the ultimate cuts will be,'' says Lou Crandall, chief economist at Wrightson ICAP LLP, a research firm in Jersey City, New Jersey, that analyzes the effects of federal economic policies.
For many Republicans, though, concern about the deficit is mitigated by the desire to avoid the political pain that spending cuts or moderating Bush's tax cuts would entail.
During last month's Senate debate on Bush's request to extend his $1.85 trillion in tax cuts, only five Republican senators joined the chamber's 44 Democrats and one independent to demand that further reductions be offset by tax increases or spending cuts. While the Senate rejected, 50-50, an amendment to the fiscal blueprint requiring offsets, some Republicans plan to fight again this summer when party leaders advance the legislation.
30 Eylül 2012 Pazar
Deficit cracking GOP's solidarity
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November 27th 2005 - More than a decade after the Republican Revolution, when Newt Gingrich became House speaker on the promise to downsize government, Republicans are facing another revolution.
This one is from within.
When Congress returns next month from its Thanksgiving recess, Republican leaders who have never failed to marshal their forces on big party-line votes face the prospect of defeat on tax cuts and spending restraint -- the core issues that have united the party since President Ronald Reagan and gave them their House majority in 1994.
They have lost some tax and spending votes already, and postponed others because of the specter of losing. After a five-year spending spree on everything from the Iraq war to Medicare, deficits are now jeopardizing the tax cuts that were the centerpiece of President Bush's first term.
A move to preserve tax cuts on capital gains and dividends -- the gemstone of the Bush tax cuts for conservatives -- is in trouble in both the House and the Senate. For the first time since George W. Bush took office, House Democrats are united against tax cuts, and Republican moderates are bucking their party leadership.
GOP leaders are pushing a measure to control entitlement spending by shaving Medicaid and food stamps for the poor. But the combination of investor tax cuts and reductions in poverty programs has already led to a series of embarrassing defeats in committee and on the House floor. Republicans are headed for a pre-Christmas showdown that could turn into a political disaster.
Hurricane topples plans
Hurricane Katrina last summer was a tipping point. The storm forced Republicans to ditch the estate tax repeal because it was deemed unseemly to end a wealth tax after poor people had lost their homes. Sensing a public relations disaster, Republican leaders also postponed extending the investor tax cuts until the end of the year.
Congress quickly passed $62 billion in emergency disaster relief. But Bush's promise to "do whatever it takes" to rebuild the Gulf Coast set off a rebellion among conservatives, who demanded spending cuts to pay the bill.
"I think they blinked after Hurricane Katrina," said Brad Woodhouse, a liberal activist who helped defeat Bush's Social Security overhaul and has turned his fire on the Republican budget, heading a liberal alliance called the Emergency Campaign for American Priorities.
"It was such an acknowledgment of how inappropriate these spending cuts to finance tax cuts are," Woodhouse said. "It was like blood dripping in the water for us."
The budget outlook -- and the problems facing the GOP -- promise to get much worse. Medicare's costly new prescription drug benefit, an $18 trillion unfunded liability sponsored by the White House and Republican leadership, starts in January. Just two years from now, in 2008, the enormous Baby Boom generation will begin retiring, ceasing income tax payments and starting to collect benefits, leading to a budget squeeze unprecedented in U.S. history.
"We're seeing the future," said Bruce Bartlett, a former Treasury official in the George H.W. Bush administration and tax-cut advocate. "The decisions that have been made over the last five years have resulted in the chickens coming home to roost."
Total spending increases under the current President Bush closely rival those of President Lyndon Johnson, a Democrat famous for conducting the Vietnam War while simultaneously increasing domestic spending.
Discretionary spending rose 48.5 percent in Bush's first term, according to an analysis by the libertarian Cato Institute, twice as much as in two terms under President Bill Clinton, when spending rose 21.6 percent. Adjusted for inflation, Bush has increased total spending at an annualized rate of 5.6 percent, compared with 1.5 percent under Clinton.
"It's only a matter of time before we stop talking about cutting taxes for a very long period of time and talk basically about increasing taxes," Bartlett predicted. "The end of the era of tax cutting is going to put tremendous strain on the Republican coalition, just as the end of the era of big spending put tremendous strain on the Democratic coalition" in the 1980s. "You're hearing more and more people on the Republican side talking about major losses in the congressional elections next year and about 2008 being a really, really bad year for Republicans."
In the two months since Republicans pulled their tax cut bills, the atmosphere has only gotten worse. Republicans lost two important off-year gubernatorial elections in Virginia and New Jersey. Bush's popularity has hit new lows, with the public now decidedly opposing the Iraq war. Leading GOP candidates, including Sen. Rick Santorum, a conservative member of the Senate leadership who faces a tough re-election fight in Pennsylvania, have refused to appear with Bush at campaign events.
"Republican members of Congress recognize that the president can't help them very much any more," said Cato Institute Chairman Bill Niskanen, a former Reagan administration economist. In addition, the indictment of former House Majority Leader Tom DeLay seriously weakened party discipline in the House and exposed deep divisions between fiscal conservatives and moderates.
"There is a substantial ideological split, particularly among House Republicans, on fiscal responsibility," Niskanen said. "A lot of them have gone along with a high rate of growth of spending but have done so without any enthusiasm."
As the post-Katrina conservative revolt gelled, the Republican leadership turned to Medicaid, food stamps and student loans for spending restraint. The Senate is proposing $35 billion in reductions and the House $50 billion; both chambers are also seeking between $56 billion and $59 billion in tax cuts.
Large gap to cross
There are enormous differences between the House and Senate on both measures. Reconciling them will be very difficult in the two weeks Congress has left before adjourning for Christmas.
Combined, the measures increase the deficit. The spending restraint appeased conservatives but provoked an outcry from Democrats and GOP moderates. Efforts to console moderates by dropping a measure for oil exploration in the Arctic National Wildlife Refuge and adding subsidies for home heating costs and dairy farmers have done little but stoke more controversy.
The Medicaid and food stamp cuts have attracted the most fire, and barely passed the House 217-215 before Thanksgiving, with no Democratic support. Republicans recessed before attempting to pass the tax cuts.
Much of the roughly $11 billion in cuts over five years proposed by the Senate for Medicaid, a health care program for the poor that many elderly use to pay nursing home costs, were recommended by state governors. They contend the program is becoming burdensome for the states, which must come up with money to match federal funding. Democrats have portrayed the reduction in the growth of Medicaid spending as dire, but even liberal analysts concede they are not severe. One provision would increase co-payments from $3 to $5, and another would allow elderly nursing home residents to shield $750,000 in home equity, raised from $500,000 after Republican moderates objected.
The cuts are "not awful," said Jason Furman, a former adviser to Democratic presidential candidate John Kerry now at the liberal Center for Budget and Policy Priorities.
"It's less about the magnitude and more about why should you be asking poor people to pay anything more for health care at the same time that you're giving brand-new tax cuts to the most fortunate," Furman said. "That is what is just completely wrong with this picture.
"A go-it-alone Republican strategy works when you're trying to cut taxes or increase spending, but when you're trying to make tougher choices, the only way to do it is to work together with the other party for shared sacrifice," Furman said. "Budget reality is starting to catch up with the Republican Party."
Heavy U.S. borrowing with much more on the horizon is stoking concern about a potential financial crisis. Any one of several big economic imbalances -- including looming pressures on the federal budget, the zero U.S. savings rate, the historically high trade deficit, a real estate boom that has supported consumer spending -- could provoke a sudden financial shift, economists say.
"It's not unrealistic to think that if we continue to delay -- and the Baby Boomers do start to retire as early as 2008 -- that sooner or later the lenders to this country may decide it's not the best place to park all their savings," said Maya MacGuineas, director of fiscal policy for centrist New American Foundation.
Bartlett warns of a "financial Katrina."
"It's just a matter of time before we have some kind of economic event that I think is just going to change the political situation 180 degrees and make deficit reduction the order of the day," he said. "I don't know what it will be. I just know that when you've got gasoline spilling onto the floor of your house, it doesn't really matter where the spark comes from."
This one is from within.
When Congress returns next month from its Thanksgiving recess, Republican leaders who have never failed to marshal their forces on big party-line votes face the prospect of defeat on tax cuts and spending restraint -- the core issues that have united the party since President Ronald Reagan and gave them their House majority in 1994.
They have lost some tax and spending votes already, and postponed others because of the specter of losing. After a five-year spending spree on everything from the Iraq war to Medicare, deficits are now jeopardizing the tax cuts that were the centerpiece of President Bush's first term.
A move to preserve tax cuts on capital gains and dividends -- the gemstone of the Bush tax cuts for conservatives -- is in trouble in both the House and the Senate. For the first time since George W. Bush took office, House Democrats are united against tax cuts, and Republican moderates are bucking their party leadership.
GOP leaders are pushing a measure to control entitlement spending by shaving Medicaid and food stamps for the poor. But the combination of investor tax cuts and reductions in poverty programs has already led to a series of embarrassing defeats in committee and on the House floor. Republicans are headed for a pre-Christmas showdown that could turn into a political disaster.
Hurricane topples plans
Hurricane Katrina last summer was a tipping point. The storm forced Republicans to ditch the estate tax repeal because it was deemed unseemly to end a wealth tax after poor people had lost their homes. Sensing a public relations disaster, Republican leaders also postponed extending the investor tax cuts until the end of the year.
Congress quickly passed $62 billion in emergency disaster relief. But Bush's promise to "do whatever it takes" to rebuild the Gulf Coast set off a rebellion among conservatives, who demanded spending cuts to pay the bill.
"I think they blinked after Hurricane Katrina," said Brad Woodhouse, a liberal activist who helped defeat Bush's Social Security overhaul and has turned his fire on the Republican budget, heading a liberal alliance called the Emergency Campaign for American Priorities.
"It was such an acknowledgment of how inappropriate these spending cuts to finance tax cuts are," Woodhouse said. "It was like blood dripping in the water for us."
The budget outlook -- and the problems facing the GOP -- promise to get much worse. Medicare's costly new prescription drug benefit, an $18 trillion unfunded liability sponsored by the White House and Republican leadership, starts in January. Just two years from now, in 2008, the enormous Baby Boom generation will begin retiring, ceasing income tax payments and starting to collect benefits, leading to a budget squeeze unprecedented in U.S. history.
"We're seeing the future," said Bruce Bartlett, a former Treasury official in the George H.W. Bush administration and tax-cut advocate. "The decisions that have been made over the last five years have resulted in the chickens coming home to roost."
Total spending increases under the current President Bush closely rival those of President Lyndon Johnson, a Democrat famous for conducting the Vietnam War while simultaneously increasing domestic spending.
Discretionary spending rose 48.5 percent in Bush's first term, according to an analysis by the libertarian Cato Institute, twice as much as in two terms under President Bill Clinton, when spending rose 21.6 percent. Adjusted for inflation, Bush has increased total spending at an annualized rate of 5.6 percent, compared with 1.5 percent under Clinton.
"It's only a matter of time before we stop talking about cutting taxes for a very long period of time and talk basically about increasing taxes," Bartlett predicted. "The end of the era of tax cutting is going to put tremendous strain on the Republican coalition, just as the end of the era of big spending put tremendous strain on the Democratic coalition" in the 1980s. "You're hearing more and more people on the Republican side talking about major losses in the congressional elections next year and about 2008 being a really, really bad year for Republicans."
In the two months since Republicans pulled their tax cut bills, the atmosphere has only gotten worse. Republicans lost two important off-year gubernatorial elections in Virginia and New Jersey. Bush's popularity has hit new lows, with the public now decidedly opposing the Iraq war. Leading GOP candidates, including Sen. Rick Santorum, a conservative member of the Senate leadership who faces a tough re-election fight in Pennsylvania, have refused to appear with Bush at campaign events.
"Republican members of Congress recognize that the president can't help them very much any more," said Cato Institute Chairman Bill Niskanen, a former Reagan administration economist. In addition, the indictment of former House Majority Leader Tom DeLay seriously weakened party discipline in the House and exposed deep divisions between fiscal conservatives and moderates.
"There is a substantial ideological split, particularly among House Republicans, on fiscal responsibility," Niskanen said. "A lot of them have gone along with a high rate of growth of spending but have done so without any enthusiasm."
As the post-Katrina conservative revolt gelled, the Republican leadership turned to Medicaid, food stamps and student loans for spending restraint. The Senate is proposing $35 billion in reductions and the House $50 billion; both chambers are also seeking between $56 billion and $59 billion in tax cuts.
Large gap to cross
There are enormous differences between the House and Senate on both measures. Reconciling them will be very difficult in the two weeks Congress has left before adjourning for Christmas.
Combined, the measures increase the deficit. The spending restraint appeased conservatives but provoked an outcry from Democrats and GOP moderates. Efforts to console moderates by dropping a measure for oil exploration in the Arctic National Wildlife Refuge and adding subsidies for home heating costs and dairy farmers have done little but stoke more controversy.
The Medicaid and food stamp cuts have attracted the most fire, and barely passed the House 217-215 before Thanksgiving, with no Democratic support. Republicans recessed before attempting to pass the tax cuts.
Much of the roughly $11 billion in cuts over five years proposed by the Senate for Medicaid, a health care program for the poor that many elderly use to pay nursing home costs, were recommended by state governors. They contend the program is becoming burdensome for the states, which must come up with money to match federal funding. Democrats have portrayed the reduction in the growth of Medicaid spending as dire, but even liberal analysts concede they are not severe. One provision would increase co-payments from $3 to $5, and another would allow elderly nursing home residents to shield $750,000 in home equity, raised from $500,000 after Republican moderates objected.
The cuts are "not awful," said Jason Furman, a former adviser to Democratic presidential candidate John Kerry now at the liberal Center for Budget and Policy Priorities.
"It's less about the magnitude and more about why should you be asking poor people to pay anything more for health care at the same time that you're giving brand-new tax cuts to the most fortunate," Furman said. "That is what is just completely wrong with this picture.
"A go-it-alone Republican strategy works when you're trying to cut taxes or increase spending, but when you're trying to make tougher choices, the only way to do it is to work together with the other party for shared sacrifice," Furman said. "Budget reality is starting to catch up with the Republican Party."
Heavy U.S. borrowing with much more on the horizon is stoking concern about a potential financial crisis. Any one of several big economic imbalances -- including looming pressures on the federal budget, the zero U.S. savings rate, the historically high trade deficit, a real estate boom that has supported consumer spending -- could provoke a sudden financial shift, economists say.
"It's not unrealistic to think that if we continue to delay -- and the Baby Boomers do start to retire as early as 2008 -- that sooner or later the lenders to this country may decide it's not the best place to park all their savings," said Maya MacGuineas, director of fiscal policy for centrist New American Foundation.
Bartlett warns of a "financial Katrina."
"It's just a matter of time before we have some kind of economic event that I think is just going to change the political situation 180 degrees and make deficit reduction the order of the day," he said. "I don't know what it will be. I just know that when you've got gasoline spilling onto the floor of your house, it doesn't really matter where the spark comes from."
Bush's Budget Sparks Bipartisan Protest
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February 7th 2006 - The administration defended President Bush's $2.77 trillion budget plan on Tuesday against congressional attacks that the cuts it sought to deal with exploding budget deficits would unfairly harm government efforts in education, health care and farm programs.
Treasury Secretary John Snow, among leadoff witnesses in a series of congressional hearings, said the administration had made the tough choices to fund programs that were working and eliminate those that were not.
"This budget represents the president's dedication to fiscal discipline, an efficient federal government and the continuation of a thriving U.S. economy," Snow told the Senate Finance Committee.
But critics noted that the deficit for the current budget year would rise to an all-time high of $423 billion and they questioned Bush's projections for declining deficits in future years.
Democrats said Bush's proposed budget for Fiscal 2007, beginning Oct. 1, was seriously understating spending that will be needed to fight wars in Iraq and Afghanistan and did not include the billions of dollars needed in future years to make sure the alternative minimum tax designed for the wealthy does not pinch more and more middle class taxpayers.
Sen. Max Baucus, D-Mont., said the explosion of federal deficits was adding to the national debt, requiring the administration to come to Congress in the next few weeks to raise the $8.18 trillion debt ceiling. He said all of that debt is being financed more and more by foreigners.
"America is borrowing 80 percent of the world's annual savings. We are handing our children and our children's children a set of obligations they will owe to foreign central banks," Baucus told Snow.
Sen. Kent Conrad, D-N.D., produced charts showing that the amount of federal government debt held by foreigners before Bush became president totaled $1 trillion and now in the first five years of his administration has more than doubled.
Snow said the ability of the United States to pay interest on the debt was a function of the economy's size and the vitality of the nation's bond markets.
"There is no doubt given the deep and liquid capital markets of the United States, that we will continue to attract capital from investors around the world," the Treasury secretary told the committee.
Testifying separately before the Senate Armed Services Committee, Defense Secretary Donald H. Rumsfeld said the military must continue to change in order to defend against terrorists who could get a nuclear weapon or launch a biological attack.
"No nation, no matter how powerful, has the resources or capability to defend everywhere, at every time, against every conceivable type of attack," Rumsfeld said. "The only way to protect the American people, therefore, is to provide our military with as wide a range of capabilities, rather than preparing to confront any one particular threat.
Bush's budget, which was sent to Congress on Monday, has faced predictable criticism from Democrats but it is also facing attacks from Republicans.
Sen. Arlen Specter, R-Pa., called Bush's proposed cuts in education and health "scandalous" while Sen. Olympia Snowe, R-Maine, said she was "disappointed and even surprised" at the extent of the administration's proposed cuts in Medicaid and Medicare.
Bush's spending blueprint for the 2007 budget year that begins Oct. 1 would provide large increases for the military and homeland security but would trim spending in the one-sixth of the budget that covers the rest of discretionary spending. Nine Cabinet agencies would see outright reductions with the biggest percentage cuts occurring in the departments of Transportation, Justice and Agriculture.
And in mandatory programs _ so-called because the government must provide benefits to all who qualify _ the president is seeking over the next five years savings of $36 billion in Medicare, $5 billion in farm subsidy programs, $4.9 billion in Medicaid support for poor children's health care and $16.7 billion in additional payments from companies to shore up the government's besieged pension benefit agency.
Senate Finance Committee Chairman Charles Grassley noted that Congress has just completed a yearlong battle to achieve far smaller savings in Medicaid and Medicare and "any more reductions of a significant scope could be difficult this year."
Bush's budget would meet his twin goals of making permanent his first-term tax cuts, which are set to expire by 2010, and cutting the deficit in half by 2009, the year he leaves office.
Democrats, hoping to wrest control of Congress from the Republicans in this year's election, charged that Bush was forced into an austere spending plan because of the estimated $1.35 trillion over the next decade that it will cost to extend his first-term tax cuts, which Democrats claim primarily benefit the very wealthy.
In addition to strict limits on most discretionary, non-security spending in the budget, Bush sought drastic cuts or total elimination on 141 programs that would produce savings of nearly $15 billion in 2007.
The targeted programs included 42 in the area of education ranging from drug-free schools to federal support for the arts, technology and parent-resource centers.
Even previously favored agencies such as the National Institutes of Health were not immune from the budget knife with overall funding essentially frozen and many individual programs seeing budget cuts. That brought objections from groups ranging from the American Heart Association to the American Diabetes Association.
Bush's budget submission is just the opening round in what opponents are promising will be a spirited fight in Congress over spending priorities.
"The president's budget slashes resources for exactly the priorities we should be supporting _ groundbreaking medical research, health care for our seniors, and education for our kids," said Sen. Tom Harkin, D-Iowa.
Treasury Secretary John Snow, among leadoff witnesses in a series of congressional hearings, said the administration had made the tough choices to fund programs that were working and eliminate those that were not.
"This budget represents the president's dedication to fiscal discipline, an efficient federal government and the continuation of a thriving U.S. economy," Snow told the Senate Finance Committee.
But critics noted that the deficit for the current budget year would rise to an all-time high of $423 billion and they questioned Bush's projections for declining deficits in future years.
Democrats said Bush's proposed budget for Fiscal 2007, beginning Oct. 1, was seriously understating spending that will be needed to fight wars in Iraq and Afghanistan and did not include the billions of dollars needed in future years to make sure the alternative minimum tax designed for the wealthy does not pinch more and more middle class taxpayers.
Sen. Max Baucus, D-Mont., said the explosion of federal deficits was adding to the national debt, requiring the administration to come to Congress in the next few weeks to raise the $8.18 trillion debt ceiling. He said all of that debt is being financed more and more by foreigners.
"America is borrowing 80 percent of the world's annual savings. We are handing our children and our children's children a set of obligations they will owe to foreign central banks," Baucus told Snow.
Sen. Kent Conrad, D-N.D., produced charts showing that the amount of federal government debt held by foreigners before Bush became president totaled $1 trillion and now in the first five years of his administration has more than doubled.
Snow said the ability of the United States to pay interest on the debt was a function of the economy's size and the vitality of the nation's bond markets.
"There is no doubt given the deep and liquid capital markets of the United States, that we will continue to attract capital from investors around the world," the Treasury secretary told the committee.
Testifying separately before the Senate Armed Services Committee, Defense Secretary Donald H. Rumsfeld said the military must continue to change in order to defend against terrorists who could get a nuclear weapon or launch a biological attack.
"No nation, no matter how powerful, has the resources or capability to defend everywhere, at every time, against every conceivable type of attack," Rumsfeld said. "The only way to protect the American people, therefore, is to provide our military with as wide a range of capabilities, rather than preparing to confront any one particular threat.
Bush's budget, which was sent to Congress on Monday, has faced predictable criticism from Democrats but it is also facing attacks from Republicans.
Sen. Arlen Specter, R-Pa., called Bush's proposed cuts in education and health "scandalous" while Sen. Olympia Snowe, R-Maine, said she was "disappointed and even surprised" at the extent of the administration's proposed cuts in Medicaid and Medicare.
Bush's spending blueprint for the 2007 budget year that begins Oct. 1 would provide large increases for the military and homeland security but would trim spending in the one-sixth of the budget that covers the rest of discretionary spending. Nine Cabinet agencies would see outright reductions with the biggest percentage cuts occurring in the departments of Transportation, Justice and Agriculture.
And in mandatory programs _ so-called because the government must provide benefits to all who qualify _ the president is seeking over the next five years savings of $36 billion in Medicare, $5 billion in farm subsidy programs, $4.9 billion in Medicaid support for poor children's health care and $16.7 billion in additional payments from companies to shore up the government's besieged pension benefit agency.
Senate Finance Committee Chairman Charles Grassley noted that Congress has just completed a yearlong battle to achieve far smaller savings in Medicaid and Medicare and "any more reductions of a significant scope could be difficult this year."
Bush's budget would meet his twin goals of making permanent his first-term tax cuts, which are set to expire by 2010, and cutting the deficit in half by 2009, the year he leaves office.
Democrats, hoping to wrest control of Congress from the Republicans in this year's election, charged that Bush was forced into an austere spending plan because of the estimated $1.35 trillion over the next decade that it will cost to extend his first-term tax cuts, which Democrats claim primarily benefit the very wealthy.
In addition to strict limits on most discretionary, non-security spending in the budget, Bush sought drastic cuts or total elimination on 141 programs that would produce savings of nearly $15 billion in 2007.
The targeted programs included 42 in the area of education ranging from drug-free schools to federal support for the arts, technology and parent-resource centers.
Even previously favored agencies such as the National Institutes of Health were not immune from the budget knife with overall funding essentially frozen and many individual programs seeing budget cuts. That brought objections from groups ranging from the American Heart Association to the American Diabetes Association.
Bush's budget submission is just the opening round in what opponents are promising will be a spirited fight in Congress over spending priorities.
"The president's budget slashes resources for exactly the priorities we should be supporting _ groundbreaking medical research, health care for our seniors, and education for our kids," said Sen. Tom Harkin, D-Iowa.
Bush's Legacy: Debt
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September 25th 2008
UNITED STATES - The Bush legacy is going to include a nasty four-letter word: debt.
On second thought, make that staggering, long-term debt, perhaps in excess of $11 trillion, that will tie the hands of the next president and Congress, to say nothing of imposing a crushing burden on taxpayers.
Just a few months ago, the Iraq war looked like the biggest thing in the eight-year era of the second President Bush, during which his party controlled Congress for six years.
Just a couple of Sunday mornings ago, Bob Woodward of the Washington Post said on national television that the war in Iraq “is probably the most important thing going on right now,” adding that in January the war in Iraq will be topic one in the next administration, and topic two will be the war in Afghanistan.
Now the country suddenly is facing a financial crisis fraught with the possibility of unprecedented economic disaster.
If that isn’t enough to make you reach for the antacid tablets, the president still has about three months left in office, plenty of time for yet another calamitous turn of events.
The national debt was about $5.7 trillion when Bush took office in January 2001. Today, after almost eight years and a couple of wars, the debt has risen to about $9.7 trillion.
And, by the way, that figure might rise another $1 trillion or so before Bush steps down on Jan. 20.
The national debt ceiling today is $10.6 trillion. Treasury Secretary Henry Paulson wants Congress to raise that to $11.3 trillion to clear the decks for massive borrowing to deal with the nation’s financial crisis.
A national debt of $11.3 trillion would come to more than $37,000 each for every man, woman and child in the United States.
And all this comes during an era of allegedly conservative, fiscally responsible Republican domination in Washington.
UNITED STATES - The Bush legacy is going to include a nasty four-letter word: debt.
On second thought, make that staggering, long-term debt, perhaps in excess of $11 trillion, that will tie the hands of the next president and Congress, to say nothing of imposing a crushing burden on taxpayers.
Just a few months ago, the Iraq war looked like the biggest thing in the eight-year era of the second President Bush, during which his party controlled Congress for six years.
Just a couple of Sunday mornings ago, Bob Woodward of the Washington Post said on national television that the war in Iraq “is probably the most important thing going on right now,” adding that in January the war in Iraq will be topic one in the next administration, and topic two will be the war in Afghanistan.
Now the country suddenly is facing a financial crisis fraught with the possibility of unprecedented economic disaster.
If that isn’t enough to make you reach for the antacid tablets, the president still has about three months left in office, plenty of time for yet another calamitous turn of events.
The national debt was about $5.7 trillion when Bush took office in January 2001. Today, after almost eight years and a couple of wars, the debt has risen to about $9.7 trillion.
And, by the way, that figure might rise another $1 trillion or so before Bush steps down on Jan. 20.
The national debt ceiling today is $10.6 trillion. Treasury Secretary Henry Paulson wants Congress to raise that to $11.3 trillion to clear the decks for massive borrowing to deal with the nation’s financial crisis.
A national debt of $11.3 trillion would come to more than $37,000 each for every man, woman and child in the United States.
And all this comes during an era of allegedly conservative, fiscally responsible Republican domination in Washington.
Obama's Achilles Heel: China
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UNITED STATES - The US National Debt continues to go up $3.87 billion USD per day and is currently hovering around $12.4 trillion.
The problem is its going to continue to skyrocket as long as the United States is fighting off a recession, two wars and high oil prices. US President Barack Obama thus has his work cut out for him, problems left behind by George W. Bush, and his problems are quantified by the statement that "Most Americans don't buy American, they buy Chinese."
That is peanuts when you realize the USA only exports an average of $65 billion to China annually. The end result is an annual trade deficit of $235 billion taken out of the American economy and bolstering China's economy.
China is not the only country that enjoys a trade deficit with the United States. Japan, South Korea and numerous other countries trade heavily with the USA, often in products that Americans "need" in terms of electronics, but also a lot of products that could be made in North America but has been outsourced instead.
What the USA needs is more factories inside America that is hiring people, making products Americans can use (preferably products and equipment that will make them more competitive internationally) and are priced fairly.
Otherwise what we're opening ourselves up to is to communism... Oh dear, I said it. The dreaded C-word.
If the USA cannot shake off the recession and high unemployment rate America's economy will continue to flounder and will eventually be forced to create a more socialist-based economy as capitalism falls apart. This means government "work-fare programs", huge cutbacks to arts & culture funding (including Hollywood), an increase in food stamp usage, and a skyrocketing crime rate as Americans become more desperate for survival.
The 1st thing the USA needs to do is put a halt on all free trade discussions with Asia. America isn't ready for such big trading partners. The economy is too fragile right now.
The 2nd thing the USA needs to do is find cheaper alternatives to expensive oil. Oil prices are simply too high and its hampering transportation costs of materials/products. Hydrogen power perhaps.
The 3rd thing the USA needs to do is cut taxes on the poor, increase taxes on the rich. The poor will spend every dollar they have anyway, whereas the rich have a tendency to stick their money in the bank and sit on it.
The 4th thing is create tax breaks for companies that operate solely in the USA. This will benefit small businesses and new startups.
The 5th thing the USA needs to do is enforce mandatory retirements. Old people who keep working when they should be retired are essentially stealing jobs from younger Americans. Exceptions can be made for industries that have a shortage (ie. doctors), but otherwise these people need to be put out to pasture.
The end goal is to get more Americans working and building things again, creating opportunities for a new generation of hard working Americans.
The problem is its going to continue to skyrocket as long as the United States is fighting off a recession, two wars and high oil prices. US President Barack Obama thus has his work cut out for him, problems left behind by George W. Bush, and his problems are quantified by the statement that "Most Americans don't buy American, they buy Chinese."
"Most Americans don't buy American, they buy Chinese."That is not completely true. What is true that on average the USA imports $2 trillion USD worth of products every year of which approx. $300 billion is from China (approx 15%).
That is peanuts when you realize the USA only exports an average of $65 billion to China annually. The end result is an annual trade deficit of $235 billion taken out of the American economy and bolstering China's economy.
China is not the only country that enjoys a trade deficit with the United States. Japan, South Korea and numerous other countries trade heavily with the USA, often in products that Americans "need" in terms of electronics, but also a lot of products that could be made in North America but has been outsourced instead.
What the USA needs is more factories inside America that is hiring people, making products Americans can use (preferably products and equipment that will make them more competitive internationally) and are priced fairly.
Otherwise what we're opening ourselves up to is to communism... Oh dear, I said it. The dreaded C-word.
If the USA cannot shake off the recession and high unemployment rate America's economy will continue to flounder and will eventually be forced to create a more socialist-based economy as capitalism falls apart. This means government "work-fare programs", huge cutbacks to arts & culture funding (including Hollywood), an increase in food stamp usage, and a skyrocketing crime rate as Americans become more desperate for survival.
The 1st thing the USA needs to do is put a halt on all free trade discussions with Asia. America isn't ready for such big trading partners. The economy is too fragile right now.
The 2nd thing the USA needs to do is find cheaper alternatives to expensive oil. Oil prices are simply too high and its hampering transportation costs of materials/products. Hydrogen power perhaps.
The 3rd thing the USA needs to do is cut taxes on the poor, increase taxes on the rich. The poor will spend every dollar they have anyway, whereas the rich have a tendency to stick their money in the bank and sit on it.
The 4th thing is create tax breaks for companies that operate solely in the USA. This will benefit small businesses and new startups.
The 5th thing the USA needs to do is enforce mandatory retirements. Old people who keep working when they should be retired are essentially stealing jobs from younger Americans. Exceptions can be made for industries that have a shortage (ie. doctors), but otherwise these people need to be put out to pasture.
The end goal is to get more Americans working and building things again, creating opportunities for a new generation of hard working Americans.
29 Eylül 2012 Cumartesi
First Deflation, Then Inflation
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American workers have seen a 0.5 percent decline in the inflation-adjusted value of their paychecks over the past year. That decline is a worrisome development since the Consumer Price Index increased 1.7 percent over the 12 months ending in June.
Both data points are indicators of a struggling economy and raise the specter of deflation.
Though the inflation rate averaged 2.35 percent over the first six months of the year, the rate has gone down each and every month, dropping from 2.93 percent in January to 1.66 percent in June. That decline has paralleled the slowdown of the economy.
The inflation rate was below 2 percent in both May and June, a slower pace than the Federal Reserve would like. Historically, from 1914 to 2012, the United States inflation rate has averaged 3.36 percent.
Europe is already in recession, the U.S. economy has been slowing for six months, and the larger global economy is gradually losing steam right along with it. Recessions are, by definition, deflationary. That's the primary concern of the Federal Reserve at present.
While the falling prices associated with deflation might not seem like such a bad thing to the average consumer, falling wages are another thing altogether. Falling wages make debt repayment all the more difficult, and Americans are still saddled with onerous debts. Though total household debt fell from $12.7 trillion in 2008 to $11.4 trillion as of the first quarter of 2012, it is still enormous by any measure.
Given that the Fed has pumped trillions into the economy and banking system over the past few years, the typical concern should be price inflation. Yet, it is rather tame at the moment and is, in fact, declining.
To fend off signs of a double-dip recession, the Fed will continue to print money — lots of it. And it will continue buying Treasuries as well — lots of them. QE3 is just a matter of time. Through its purchases of additional government debt, the Fed hopes to prevent money from draining out of the financial system in a deflationary spiral.
But after lowering short-term rates to nearly zero, funneling oodles of money into the Big Banks and buying enough mortgage-backed bonds to drop mortgage rates to record-low levels, the question is, What more can the Fed do?
Even if money is made cheap and readily available, the Fed cannot force Americans to borrow. People with huge debts, falling wages, no jobs, or the fear of becoming unemployed, will not be persuaded to borrow.
And therein lies the problem: our entire economy is predicated on borrowing and lending for economic growth to occur. Money is created through borrowing. Without borrowing, there is less money and no growth. Absent growth, there are no jobs. And without jobs, there is no recovery.
The fear of so many economists is that the U.S. might be following Japan's path into a "lost decade" of our own.
That is a disturbing and worrisome possibility.
At some point, the Fed will have to mop-up, or extract, all those trillions of dollars in excess liquidity from the economy. If it is unable to do that quickly enough, and at will, then the focus will shift back to inflation — perhaps lots of it.
American workers have seen a 0.5 percent decline in the inflation-adjusted value of their paychecks over the past year. That decline is a worrisome development since the Consumer Price Index increased 1.7 percent over the 12 months ending in June. Both data points are indicators of a struggling economy and raise the specter of deflation.
Though the inflation rate averaged 2.35 percent over the first six months of the year, the rate has gone down each and every month, dropping from 2.93 percent in January to 1.66 percent in June. That decline has paralleled the slowdown of the economy.
The inflation rate was below 2 percent in both May and June, a slower pace than the Federal Reserve would like. Historically, from 1914 to 2012, the United States inflation rate has averaged 3.36 percent.
Europe is already in recession, the U.S. economy has been slowing for six months, and the larger global economy is gradually losing steam right along with it. Recessions are, by definition, deflationary. That's the primary concern of the Federal Reserve at present.
While the falling prices associated with deflation might not seem like such a bad thing to the average consumer, falling wages are another thing altogether. Falling wages make debt repayment all the more difficult, and Americans are still saddled with onerous debts. Though total household debt fell from $12.7 trillion in 2008 to $11.4 trillion as of the first quarter of 2012, it is still enormous by any measure.
Given that the Fed has pumped trillions into the economy and banking system over the past few years, the typical concern should be price inflation. Yet, it is rather tame at the moment and is, in fact, declining.
To fend off signs of a double-dip recession, the Fed will continue to print money — lots of it. And it will continue buying Treasuries as well — lots of them. QE3 is just a matter of time. Through its purchases of additional government debt, the Fed hopes to prevent money from draining out of the financial system in a deflationary spiral.
But after lowering short-term rates to nearly zero, funneling oodles of money into the Big Banks and buying enough mortgage-backed bonds to drop mortgage rates to record-low levels, the question is, What more can the Fed do?
Even if money is made cheap and readily available, the Fed cannot force Americans to borrow. People with huge debts, falling wages, no jobs, or the fear of becoming unemployed, will not be persuaded to borrow.
And therein lies the problem: our entire economy is predicated on borrowing and lending for economic growth to occur. Money is created through borrowing. Without borrowing, there is less money and no growth. Absent growth, there are no jobs. And without jobs, there is no recovery.
The fear of so many economists is that the U.S. might be following Japan's path into a "lost decade" of our own.
That is a disturbing and worrisome possibility.
At some point, the Fed will have to mop-up, or extract, all those trillions of dollars in excess liquidity from the economy. If it is unable to do that quickly enough, and at will, then the focus will shift back to inflation — perhaps lots of it.
You Can't Expect Justice in a Corporatocracy
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For any society to survive, much less thrive, it must be rooted in trust. The citizenry must trust the government and, most importantly, the justice system. It also helps if the people trust the banks that hold their money and finance their nation's economy.
However, that sort of trust is now virtually non-existent in our society.
According to a Gallup poll, only 18% of Americans — an all-time low — have confidence in banks. And a Pew Research survey found that Americans' trust in government is only marginally higher, at 22%.
Perhaps Americans have come to the conclusion that their government is colluding with the banks against their best interests. The examples are far and wide. In fact, they are so numerous that listing them all would be tedious, and reading them all would be cumbersome.
But, just to make the point, here are a few less than shining examples:
The SEC charged Wells Fargo with selling products tied to risky mortgage securities, causing municipalities and non-profits to suffer substantial losses as a result.
In response, Wells Fargo, the nation’s biggest consumer bank, recently agreed to pay a $6.5 million fine for these offenses without admitting or denying the charges.
Wells Fargo reported second-quarter pre-tax profits of $8.9 billion. This means that Wells Fargo will cough up a $6.5 million penalty from the nine-thousand-million dollar profit it made in just the second quarter of this year alone. That's about 0.07 percent of a single-quarter's profit.
Does this sound like justice to you? Will such a fine cause Wells Fargo to change its behaviors and practices? That's a rhetorical question.
A Senate report issued in July found that a "pervasively polluted" culture at HSBC allowed the bank to act as financier to clients moving shadowy funds from the world's most dangerous and secretive corners, including Mexico, Iran, Saudi Arabia and Syria.
The report said large amounts of Mexican drug money was likely to have passed through the bank. HSBC's U.S. division provided money and banking services to some banks in Saudi Arabia and Bangladesh that are believed to have helped fund al-Qaida and other terrorist groups.
The U.S. unit of the London- based HSBC, Europe’s biggest bank, “offers a gateway for terrorists to gain access to U.S. dollars and the U.S. financial system,” according to the report.
Laundering money for criminal enterprises, including drug cartels, is nothing new for the Big Banks.
In 2010, Wachovia Bank (now owned by Wells Fargo) paid $160 million to resolve a criminal probe that Mexican cartels were using currency-exchange firms to launder cash through the bank.
British bank Standard Chartered recently agreed to a settlement of $340 million with New York’s top banking regulator, Benjamin Lawsky, over claims that it laundered hundreds of billions of dollars in tainted money for Iran and lied to regulators in the process.
The New York Department of Financial Services charged that the bank schemed with Iran for nearly a decade to hide from regulators 60,000 transactions worth $250 billion.
Lawsky’s office threatened to revoke the bank’s state license at a hearing scheduled this week, prompting Standard Chartered to settle. Such a move would have been a death knell for the bank.
For a bank that announced record profits of $6.78 billion in 2011, a $340 million fine is nothing more than a slap on the wrist. In fact, it amounts to just 5 percent of last year's profits. That sort of expense is simply calculated into the cost of doing business.
According to the New York Times, a trove of e-mails and memos detail an elaborate strategy devised by the bank’s executives to mask the identities of its Iranian clients and to thwart American efforts to detect money laundering.
In light of all this, it's tough for anyone to reasonably claim that justice was served because Standard Chartered paid a $340 million fine. Sadly, that sort of outcome is the rule, rather than the exception.
The report issued by the Financial Crisis Inquiry Commission nearly two years ago found that, by 2006, Goldman Sachs traders knew that they were selling dangerous investments packed with subprime home mortgages. Goldman was making big profits on these toxic investments, which they privately characterized as "junk," "dogs," "big old lemons" and "monstrosities."
These mortgage investment products eventually collapsed in value, bringing down the housing market and very nearly the American economy along with it.
Despite misleading investors about the risks of a mortgage-backed investment product known as Abacus (which Goldman was in fact betting against), Goldman Sachs was allowed to settle with the Securities and Exchange Commission for just $550 million.
Goldman had revenue of $28.8 billion and net income of $4.44 billion in 2011. Once again, the fine was merely a slap on the wrist that will not dissuade or prevent the Wall St. bank from similar behavior in the future. Such a penalty is merely calculated into its cost of doing business.
The SEC has also dropped its investigation into Goldman Sachs over a $1.3 billion mortgage bond known as Fremont Home Loan Trust 2006-E, even though it indicated earlier this year that charges were likely. Moreover, the Federal Housing Finance Agency had filed a lawsuit against Goldman alleging that it knew that Fremont, a subprime lender, was selling it mortgages certain to fail.
The Department of Justice also announced that it is ending its own Goldman investigation, launched after a congressional investigation chaired by senators Carl Levin (D-Mich.) and Tom Coburn (R-Okla.) issued a report that found Goldman Sachs sold investments "in ways that created conflicts of interest with the firm’s clients and at times led to the bank's profiting from the same products that caused substantial losses for its clients.”
In May, the SEC dropped its probe of Lehman Brothers, even though an independent examiner appointed by the bankruptcy court of the defunct bank concluded that there were "actionable claims" against senior Lehman officers for using an accounting tool known as Repo 105 to book billions of dollars in phony sales to disguise the true extent of the bank's financial woes.
These are just the latest indications that the federal government has been neutered by Wall St. The revolving door between Washington and Wall St. has created a good old boys network, a corporate/political alliance that now controls our government. Our alleged leadership has been bought and paid for.
Regulation is dead. The industry's complaints about the burden of regulatory rules are absurd and fantastical.
Accountability and an adherence to the law are no longer expected from the Banksters. They do whatever they wish, gutting laws, ripping off their clients and paying meager fines to continue their perverted business as usual. Justice is only for regular people.
Ethics, scruples and moral decency are wholly absent. The government refuses to enforce its own laws and it allows bank lobbyists to water down others until they are meaningless.
More than 2,500 banking lobbyists are swarming the halls of Congress each week, fighting reform, meaning that the Big Banks now have five lobbyists for every member of Congress.
The Justice Department refused to pursue cases against Angelo Mozilo, the former head of the defunct mortgage giant Countrywide and Joseph Cassano, who ran the financial products division at AIG. These two men were central figures in the financial collapse, which led to the crisis that continues to destabilize our economy. And yet they remain free men.
I could go on and on with examples of paltry fines, dropped charges and cases that were never even opened. It's all so disgusting and disheartening. How can this nation claim to observe the rule of law when it refuses to uphold and enforce its laws?
How did the mega banks and corporations become exempt?
This nation's Supreme Court has upheld the absurd notion that corporations are people, due all the same rights under the law. While such a suggestion is absurd on its face, the deeper problem is that corporations — such as banks — are afforded an entirely separate set of rights and privileges that are not afforded to real, living, breathing, human citizens.
This nation's judicial, executive and legislative branches of government are all corrupt. How can anyone reasonably expect Wall St. or big business in general (Big Media, Big Energy, Big Agriculture, Big Pharma, Big Insurance, etc. ) to be otherwise? They are all part of the corruption.
The heart of the problem is that corporate financing of political campaigns has led to corporate control of our country. Corporations have bought our government and they now own it. They control the country and the government.
This nation is now a corporatocracy. We are officially the United States of Corporate America.
For any society to survive, much less thrive, it must be rooted in trust. The citizenry must trust the government and, most importantly, the justice system. It also helps if the people trust the banks that hold their money and finance their nation's economy.However, that sort of trust is now virtually non-existent in our society.
According to a Gallup poll, only 18% of Americans — an all-time low — have confidence in banks. And a Pew Research survey found that Americans' trust in government is only marginally higher, at 22%.
Perhaps Americans have come to the conclusion that their government is colluding with the banks against their best interests. The examples are far and wide. In fact, they are so numerous that listing them all would be tedious, and reading them all would be cumbersome.
But, just to make the point, here are a few less than shining examples:
The SEC charged Wells Fargo with selling products tied to risky mortgage securities, causing municipalities and non-profits to suffer substantial losses as a result.
In response, Wells Fargo, the nation’s biggest consumer bank, recently agreed to pay a $6.5 million fine for these offenses without admitting or denying the charges.
Wells Fargo reported second-quarter pre-tax profits of $8.9 billion. This means that Wells Fargo will cough up a $6.5 million penalty from the nine-thousand-million dollar profit it made in just the second quarter of this year alone. That's about 0.07 percent of a single-quarter's profit.
Does this sound like justice to you? Will such a fine cause Wells Fargo to change its behaviors and practices? That's a rhetorical question.
A Senate report issued in July found that a "pervasively polluted" culture at HSBC allowed the bank to act as financier to clients moving shadowy funds from the world's most dangerous and secretive corners, including Mexico, Iran, Saudi Arabia and Syria.
The report said large amounts of Mexican drug money was likely to have passed through the bank. HSBC's U.S. division provided money and banking services to some banks in Saudi Arabia and Bangladesh that are believed to have helped fund al-Qaida and other terrorist groups.
The U.S. unit of the London- based HSBC, Europe’s biggest bank, “offers a gateway for terrorists to gain access to U.S. dollars and the U.S. financial system,” according to the report.
Laundering money for criminal enterprises, including drug cartels, is nothing new for the Big Banks.
In 2010, Wachovia Bank (now owned by Wells Fargo) paid $160 million to resolve a criminal probe that Mexican cartels were using currency-exchange firms to launder cash through the bank.
British bank Standard Chartered recently agreed to a settlement of $340 million with New York’s top banking regulator, Benjamin Lawsky, over claims that it laundered hundreds of billions of dollars in tainted money for Iran and lied to regulators in the process.
The New York Department of Financial Services charged that the bank schemed with Iran for nearly a decade to hide from regulators 60,000 transactions worth $250 billion.
Lawsky’s office threatened to revoke the bank’s state license at a hearing scheduled this week, prompting Standard Chartered to settle. Such a move would have been a death knell for the bank.
For a bank that announced record profits of $6.78 billion in 2011, a $340 million fine is nothing more than a slap on the wrist. In fact, it amounts to just 5 percent of last year's profits. That sort of expense is simply calculated into the cost of doing business.
According to the New York Times, a trove of e-mails and memos detail an elaborate strategy devised by the bank’s executives to mask the identities of its Iranian clients and to thwart American efforts to detect money laundering.
In light of all this, it's tough for anyone to reasonably claim that justice was served because Standard Chartered paid a $340 million fine. Sadly, that sort of outcome is the rule, rather than the exception.
The report issued by the Financial Crisis Inquiry Commission nearly two years ago found that, by 2006, Goldman Sachs traders knew that they were selling dangerous investments packed with subprime home mortgages. Goldman was making big profits on these toxic investments, which they privately characterized as "junk," "dogs," "big old lemons" and "monstrosities."
These mortgage investment products eventually collapsed in value, bringing down the housing market and very nearly the American economy along with it.
Despite misleading investors about the risks of a mortgage-backed investment product known as Abacus (which Goldman was in fact betting against), Goldman Sachs was allowed to settle with the Securities and Exchange Commission for just $550 million.
Goldman had revenue of $28.8 billion and net income of $4.44 billion in 2011. Once again, the fine was merely a slap on the wrist that will not dissuade or prevent the Wall St. bank from similar behavior in the future. Such a penalty is merely calculated into its cost of doing business.
The SEC has also dropped its investigation into Goldman Sachs over a $1.3 billion mortgage bond known as Fremont Home Loan Trust 2006-E, even though it indicated earlier this year that charges were likely. Moreover, the Federal Housing Finance Agency had filed a lawsuit against Goldman alleging that it knew that Fremont, a subprime lender, was selling it mortgages certain to fail.
The Department of Justice also announced that it is ending its own Goldman investigation, launched after a congressional investigation chaired by senators Carl Levin (D-Mich.) and Tom Coburn (R-Okla.) issued a report that found Goldman Sachs sold investments "in ways that created conflicts of interest with the firm’s clients and at times led to the bank's profiting from the same products that caused substantial losses for its clients.”
In May, the SEC dropped its probe of Lehman Brothers, even though an independent examiner appointed by the bankruptcy court of the defunct bank concluded that there were "actionable claims" against senior Lehman officers for using an accounting tool known as Repo 105 to book billions of dollars in phony sales to disguise the true extent of the bank's financial woes.
These are just the latest indications that the federal government has been neutered by Wall St. The revolving door between Washington and Wall St. has created a good old boys network, a corporate/political alliance that now controls our government. Our alleged leadership has been bought and paid for.
Regulation is dead. The industry's complaints about the burden of regulatory rules are absurd and fantastical.
Accountability and an adherence to the law are no longer expected from the Banksters. They do whatever they wish, gutting laws, ripping off their clients and paying meager fines to continue their perverted business as usual. Justice is only for regular people.
Ethics, scruples and moral decency are wholly absent. The government refuses to enforce its own laws and it allows bank lobbyists to water down others until they are meaningless.
More than 2,500 banking lobbyists are swarming the halls of Congress each week, fighting reform, meaning that the Big Banks now have five lobbyists for every member of Congress.
The Justice Department refused to pursue cases against Angelo Mozilo, the former head of the defunct mortgage giant Countrywide and Joseph Cassano, who ran the financial products division at AIG. These two men were central figures in the financial collapse, which led to the crisis that continues to destabilize our economy. And yet they remain free men.
I could go on and on with examples of paltry fines, dropped charges and cases that were never even opened. It's all so disgusting and disheartening. How can this nation claim to observe the rule of law when it refuses to uphold and enforce its laws?
How did the mega banks and corporations become exempt?
This nation's Supreme Court has upheld the absurd notion that corporations are people, due all the same rights under the law. While such a suggestion is absurd on its face, the deeper problem is that corporations — such as banks — are afforded an entirely separate set of rights and privileges that are not afforded to real, living, breathing, human citizens.
This nation's judicial, executive and legislative branches of government are all corrupt. How can anyone reasonably expect Wall St. or big business in general (Big Media, Big Energy, Big Agriculture, Big Pharma, Big Insurance, etc. ) to be otherwise? They are all part of the corruption.
The heart of the problem is that corporate financing of political campaigns has led to corporate control of our country. Corporations have bought our government and they now own it. They control the country and the government.
This nation is now a corporatocracy. We are officially the United States of Corporate America.
Our Economy Was Just an Illusion of Prosperity, Fueled by Debt
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The U.S. continues to be burdened by the fallout from the 2008 financial meltdown. That collapse, and the subsequent recession, took many people by surprise because, aside from the bursting of the dot-com/internet bubble in 2000, the economy had appeared to be humming along quite smoothly.
But that appearance was the byproduct of a lot of smoke and mirrors.
Much of the growth in corporate profits leading up to our economic collapse was driven by the financial sector. After-tax corporate profits in the financial sector were considerably better than the non-financial sector from 1997 to 20007. So the supposed "economic boom" during this period was largely limited to the financial sector, which doesn't produce anything — other than debt.
As a result, all of that financial sector growth was a sham. Our economy was nothing more than a paper tiger. Wages were stagnant for many years and Americans lived on cheap and easy credit (or debt) to make up for that fact. It made people feel prosperous, as if we were all benefitting from the supposed "economic boom."
From 1948 to 1985, the financial sector accounted for around 12 percent of American corporate profits, never reaching 20 percent nor dipping below 5 percent. After 1985, however, the profits of the sector rose dramatically, going from 19 percent in 1986 to 41 percent in 2000.
That meant that more than 40 cents out of every corporate dollar of profit was paper profit, not created by actual wealth-generating activity, but by monetary inflation and corporate gambling.
The earnings of typical Americans couldn't (and still can't) keep up with the rate of inflation. From 1914 until 2010, the average inflation rate in United States was 3.38 percent. This means that inflation has been running at roughly 33 percent per decade over the past century.
Since wages weren't keeping up in recent decades, the only way to maintain consumer spending — the engine of our economy — was to continually expand available credit, putting Americans into ever deeper debt.
With the cost of living outstripping wage and salary increases, Americans began draining their savings just to keep up. During the previous decade, the U.S. savings rate reached its lowest level since the Great Depression and actually turned negative for a couple of years. The cost of living had simply exceeded incomes.
According to Census figures, the median annual income for a male, full-time, year-round worker in 2010 was $47,715. Adjusted for inflation, that was less than in 1973, when it was $49,065. This means that the American male's income is now negative after four decades.
Yet, the problem seems to be accelerating.
Across the country, in almost every demographic, Americans earn less today than they did in June 2009, when the recovery technically started. As of June, the median household income for all Americans was $50,964, or 4.8 percent lower than its level three years earlier, when the inflation-adjusted median income was $53,508.
That's nearly double the 2.6 percent drop during the recession, which means that — when it comes to incomes, at least— our supposed recovery has been even worse than the recession.
The decline looks even worse when comparing today’s incomes to those when the recession began in December 2007. Then, the median household income was $54,916, meaning that incomes have fallen 7.2 percent since the economy last peaked.
This decline is critical because 70 percent of all U.S. economic activity (GDP) is the result of consumer spending, and retail sales account for about half of that.
For many years, Americans used credit to buy whatever they couldn't afford — including houses — which masked the decline in incomes. But now that the bubble has burst, the lingering hangover remains debilitating.
Falling home prices have slashed home equity 49 percent, from $13.2 trillion in 2005 to $6.7 trillion early this year. One-third of homes with a mortgage are underwater. And roughly 27 million workers—or about one out of every six U.S. workers—are either unemployed or underemployed.
All of this is killing demand and consumption.
Decades of easy credit resulted in significant increases in the American standard of living. But the reality is that all of those debts need to be serviced. However, there isn't enough income to do that while also maintaining past rates of spending. Consequently, less disposable income is being directed back into the economy, which is stunting economic growth.
The Federal Reserve was well aware of all of this. The Fed is responsible for the erosion of the dollar and the average American's savings by continually creating money from nothing and holding interest rates at historically low levels. That's because it has to keep us all spending in order to uphold the economy.
So, lending practices were loosened and money made cheap and easy. People were made to feel affluent by going ever further into debt, spending money they didn't actually have. But the sobering reality it that all of those debts eventually need to paid back — with interest.
This is how the masses, the common folks, were allowed to participate in the consumption economy along with the truly affluent. It was simply an illusion of wealth for millions. Accompanying the continual expansion of credit/debt was the seemingly perpetual increase in home prices.
However, all of it has now finally, depressingly, come to a crushing end. There is no re-inflating the debt bubble that propped up our phony economy. The lifestyle we maintained for more than a quarter of a century was simply unsustainable, and our crash inevitable. To double-down on our debt binge would only be an attempt to forestall the necessary de-leveraging of our economy and be even more crippling in the long run.
A recent report from the Federal Reserve Bank of New York shows that total household debt declined from nearly $12.7 trillion in 2008 to $11.4 trillion as of the first quarter of 2012. Yet, much of that has been due to foreclosures and defaults. If you default on your mortgage, you no longer have that liability, which makes total household debt look better.
Mortgage debt makes up the vast majority of Americans' household debt, so a decline in home ownership means less debt, even though it also results in a drag on the economy, as salable homes sit empty.
Yet, this decline in household debt hasn't stopped the Fed and its fellow banker cronies from trying to reinflate the bubble. The federal funds rate has been held at a range of between zero to 0.25 percent since 2008. Most incredibly, total outstanding consumer credit has increased to $2.7 trillion from $2.55 trillion when the financial crisis struck in 2008.
Economic growth is predicated on debt, so unless Americans keep on borrowing the economy will move from stagnation back to recession. The standard of living for millions of Americans has already declined considerably over the past four years. Considering the long term decline in wages and salaries, something has to give.
Either Americans realize they can never repay all of their incurred debt and stop adding to it, or they try to forestall an even lower standard of living by attempting to borrow their way into a false prosperity once again.
For many years, our national economic growth has been fictitious — an illusion of prosperity rooted in debt.
We've consumed more than we produced. We've imported more than we exported. We've borrowed more than we saved.
We've done all this for a quarter-century, and now we remain mired in day of reckoning that just won't end.
The U.S. continues to be burdened by the fallout from the 2008 financial meltdown. That collapse, and the subsequent recession, took many people by surprise because, aside from the bursting of the dot-com/internet bubble in 2000, the economy had appeared to be humming along quite smoothly. But that appearance was the byproduct of a lot of smoke and mirrors.
Much of the growth in corporate profits leading up to our economic collapse was driven by the financial sector. After-tax corporate profits in the financial sector were considerably better than the non-financial sector from 1997 to 20007. So the supposed "economic boom" during this period was largely limited to the financial sector, which doesn't produce anything — other than debt.
As a result, all of that financial sector growth was a sham. Our economy was nothing more than a paper tiger. Wages were stagnant for many years and Americans lived on cheap and easy credit (or debt) to make up for that fact. It made people feel prosperous, as if we were all benefitting from the supposed "economic boom."
From 1948 to 1985, the financial sector accounted for around 12 percent of American corporate profits, never reaching 20 percent nor dipping below 5 percent. After 1985, however, the profits of the sector rose dramatically, going from 19 percent in 1986 to 41 percent in 2000.
That meant that more than 40 cents out of every corporate dollar of profit was paper profit, not created by actual wealth-generating activity, but by monetary inflation and corporate gambling.
The earnings of typical Americans couldn't (and still can't) keep up with the rate of inflation. From 1914 until 2010, the average inflation rate in United States was 3.38 percent. This means that inflation has been running at roughly 33 percent per decade over the past century.
Since wages weren't keeping up in recent decades, the only way to maintain consumer spending — the engine of our economy — was to continually expand available credit, putting Americans into ever deeper debt.
With the cost of living outstripping wage and salary increases, Americans began draining their savings just to keep up. During the previous decade, the U.S. savings rate reached its lowest level since the Great Depression and actually turned negative for a couple of years. The cost of living had simply exceeded incomes.
According to Census figures, the median annual income for a male, full-time, year-round worker in 2010 was $47,715. Adjusted for inflation, that was less than in 1973, when it was $49,065. This means that the American male's income is now negative after four decades.
Yet, the problem seems to be accelerating.
Across the country, in almost every demographic, Americans earn less today than they did in June 2009, when the recovery technically started. As of June, the median household income for all Americans was $50,964, or 4.8 percent lower than its level three years earlier, when the inflation-adjusted median income was $53,508.
That's nearly double the 2.6 percent drop during the recession, which means that — when it comes to incomes, at least— our supposed recovery has been even worse than the recession.
The decline looks even worse when comparing today’s incomes to those when the recession began in December 2007. Then, the median household income was $54,916, meaning that incomes have fallen 7.2 percent since the economy last peaked.
This decline is critical because 70 percent of all U.S. economic activity (GDP) is the result of consumer spending, and retail sales account for about half of that.
For many years, Americans used credit to buy whatever they couldn't afford — including houses — which masked the decline in incomes. But now that the bubble has burst, the lingering hangover remains debilitating.
Falling home prices have slashed home equity 49 percent, from $13.2 trillion in 2005 to $6.7 trillion early this year. One-third of homes with a mortgage are underwater. And roughly 27 million workers—or about one out of every six U.S. workers—are either unemployed or underemployed.
All of this is killing demand and consumption.
Decades of easy credit resulted in significant increases in the American standard of living. But the reality is that all of those debts need to be serviced. However, there isn't enough income to do that while also maintaining past rates of spending. Consequently, less disposable income is being directed back into the economy, which is stunting economic growth.
The Federal Reserve was well aware of all of this. The Fed is responsible for the erosion of the dollar and the average American's savings by continually creating money from nothing and holding interest rates at historically low levels. That's because it has to keep us all spending in order to uphold the economy.
So, lending practices were loosened and money made cheap and easy. People were made to feel affluent by going ever further into debt, spending money they didn't actually have. But the sobering reality it that all of those debts eventually need to paid back — with interest.
This is how the masses, the common folks, were allowed to participate in the consumption economy along with the truly affluent. It was simply an illusion of wealth for millions. Accompanying the continual expansion of credit/debt was the seemingly perpetual increase in home prices.
However, all of it has now finally, depressingly, come to a crushing end. There is no re-inflating the debt bubble that propped up our phony economy. The lifestyle we maintained for more than a quarter of a century was simply unsustainable, and our crash inevitable. To double-down on our debt binge would only be an attempt to forestall the necessary de-leveraging of our economy and be even more crippling in the long run.
A recent report from the Federal Reserve Bank of New York shows that total household debt declined from nearly $12.7 trillion in 2008 to $11.4 trillion as of the first quarter of 2012. Yet, much of that has been due to foreclosures and defaults. If you default on your mortgage, you no longer have that liability, which makes total household debt look better.
Mortgage debt makes up the vast majority of Americans' household debt, so a decline in home ownership means less debt, even though it also results in a drag on the economy, as salable homes sit empty.
Yet, this decline in household debt hasn't stopped the Fed and its fellow banker cronies from trying to reinflate the bubble. The federal funds rate has been held at a range of between zero to 0.25 percent since 2008. Most incredibly, total outstanding consumer credit has increased to $2.7 trillion from $2.55 trillion when the financial crisis struck in 2008.
Economic growth is predicated on debt, so unless Americans keep on borrowing the economy will move from stagnation back to recession. The standard of living for millions of Americans has already declined considerably over the past four years. Considering the long term decline in wages and salaries, something has to give.
Either Americans realize they can never repay all of their incurred debt and stop adding to it, or they try to forestall an even lower standard of living by attempting to borrow their way into a false prosperity once again.
For many years, our national economic growth has been fictitious — an illusion of prosperity rooted in debt.
We've consumed more than we produced. We've imported more than we exported. We've borrowed more than we saved.
We've done all this for a quarter-century, and now we remain mired in day of reckoning that just won't end.
Rigged Markets Have Driven Out Retail Investors
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"You could buy and hold a company for 15 years and then have everything you've built up disappear in five minutes. No one can take that kind of risk anymore. There's no such thing as a widows-and-orphans stock anymore." — Professor Perry Glasser, in the Wall St. Journal
Over the past few years, a series of alarming incidents and events have eroded — if not completely destroyed — the average investor's trust in the stock markets. This is a critical development since markets are founded on trust, and they don't function very well without it.
Historically, transparent markets helped raise capital, build business and create jobs. But that system, which had worked fairly well for more than a century, has been jeopardized by recent events.
Most of them have been caused by high-frequency trading, in which supercomputers trade more than a billion shares a day at lightning speed. These trades have obliterated the age old strategy of "buy and hold." High-frequency trading is about buying and then quickly selling in a matter of minutes, seconds, or even mili-seconds.
By some estimates, "high frequency trading" is responsible for close to 70% of all volume in US markets. Computers can track hot stocks and immediately buy up all available shares. Since volume moves markets, this is quite advantageous. Almost instantly, these shares are then sold at higher prices. Millions of shares can be dumped in just milli-seconds.
High frequency trading has tripled market volume, giving a false sense of the size and activity of markets.
In August, the investment firm Knight Capital Group lost $440 million and was brought to the brink of bankruptcy due to erroneous trades caused by a software malfunction. Knight's trading algorithms went haywire, creating twice the normal volume the New York Stock Exchange. It was just the latest example of high-frequency trading gone awry.
In May, a technical error at Nasdaq (caused by high-speed trading) delayed the start of trading for Facebook’s initial public offering, limiting the ability of some investors to identify whether they had successfully purchased or sold their shares. Moreover, the offering price had also increased to $38 from an initial target of $28 - $31. Additionally, the number of shares had increased by 25 percent just days before the offering, diluting overall share value.
Ultimately, Facebook saw its stock collapse 32 percent in just 12 trading days.
Though top investors got word that research analysts at the banks underwriting the IPO had all cut their earnings estimates for Facebook just days before the stock went public, that news didn't reach the average investor until it was too late.
High frequency trading also helped drive the liquidity crisis and set in motion the ‘Flash Crash’ that rattled the markets worldwide in May 2010. In a matter of minutes, the Dow Jones Industrial Average plummeted a jaw-dropping 1,000 points.
But high-frequency trading isn't the only concern. There's also the matter of collateralized debt obligations (CDOs), credit default swaps (CDSs), interest rate swaps and derivatives. Credit default swaps were the things that got Wall St. behemoth JP Morgan Chase into so much trouble last spring.
In May, JPMorgan Chase suffered a multi-billion dollar trading loss that shook investor confidence. A single trader at the bank's chief investment office in London took huge positions in credit default swaps that resulted in massive losses. The threat of systemic risk in the banking sector was once again on full display, a reminder of its threat to the wider economy.
Each of these events undermined the essence of the markets; investor confidence. But cumulatively, they have had a most pernicious effect.
In June, the TABB Group, a financial research and advisory firm, released a report indicating that 31 percent of those polled said they had "weak" or "very weak" confidence in the stock market, compared to 15 percent after the Flash Crash.
In TABB's survey, a group of "market participants," including hedge funds, investment managers, exchanges and brokers, were asked to pick which recent market snafu did the most damage to the confidence of mom-and-pop investors in the stock market. Thirty-seven percent picked the Facebook IPO. Thirty-nine percent picked the Flash Crash.
Not surprisingly, retail investors have abandoned the stock market, moving their money into savings accounts, bond funds and annuities. Over the last few years, all of their suspicions have been confirmed that the stock market is a rigged game and they have largely refused to play anymore.
This is no small matter. Investors have been fleeing the stock market in droves due to a loss of confidence. The Investment Company Institute says that investors are pulling billions out of stock mutual funds on a weekly basis. In fact, investors have been consistently pulling money out of stock funds for five years running.
During the week ended Sept. 5, U.S. stock mutual funds bled another $2.9 billion, according to the Investment Company Institute, bringing the 2012 outflow total to more than $79 billion. By comparison, those funds lost in the neighborhood of $70 billion during the first eight months of 2011, and just $52 billion during the first eight months of 2010.
Vast numbers of Americans no longer understand the stock market and they certainly don't trust it. People would rather hide their money under the mattress than hand it over to Wall St.
According to the June Fed survey, just 15.1% of American families had any stock holdings in 2010, down from a peak of 21.3% in the 2001 survey. And just 8.7% of families had direct ownership of pooled investment funds (mostly mutual funds) in 2010.
Clearly, the ballooning stock market is not a reflection of the financial well-being of the vast majority of Americans. Most of them aren't even invested. The markets are simply Wall Street's betting games.
Joseph Saluzzi, a founder of the institutional brokerage firm Themis Trading, has long been an outspoken critic of high-frequency trading. In fact, Saluzzi thinks the practice is ruining the stock markets. He says it has created a loss of confidence that is scaring off mom-and-pop investors.
Here's what Saluzzi told the Huffington Post:
"The purpose of the stock market is supposed to be capital raising and capital formation. Investors are supposed to come, see what’s going on and say, "You know what, I like that company, I can invest and I’m going to hold the stock." Fifteen or 20 years ago, that’s what you had. Now ... the whole model for capital formation has gotten twisted into a short-term trading [system] where an average holding period for a high-frequency trader is seconds, not days or years... It turns it into a casino... You’ve lost the whole point of what a stock exchange is supposed to do. Which is identify undervalued assets, identify stocks that you think are going to grow... [The result is] a continued loss of trust and confidence in the stock markets. And that is the worst thing you can do. Because you don’t build trust and confidence overnight, but when you lose it, it goes quick."
The problem has been brought to the attention of Congress, yet nothing has been done to curb high-frequency trading and other risky practices that place undo risk on retail investors and the economy as a whole.
SEC Commission chair Mary Schapiro told a House Oversight subcommittee in June that investors have a "concern about the integrity of the marketplace," and U.S. markets are currently threatened with "an unwillingness [on the part of investors] to ever engage in the markets again."
People are unsure "whether they're getting accurate and honest information from [companies looking to list on exchanges]," Schapiro said, and unsure "whether the market structure itself is tilted against the individual investor and in favor the institutional investor." She added, "At the end of the day, investor confidence is the oxygen markets survive on, and if we lose it, it is extraordinarily hard to regain it."
Rather than curbing risky practices, government regulators are allowing them to spread. High frequency traders are now moving into currency and commodity markets.
This is an ominous development. Capitalism requires transparency and truly free markets to function properly. What we have, instead, are rigged markets.
Wall Street's intention has been to make the capital markets so opaque and so complex that no one — not even the regulators — can understand them. It's all been by design, and they've succeeded.
In the view of Wall St. bankers, they are the Masters of the Universe and no one should dare question them. They claim to know things the rest of us will never even understand. But in truth, their game is so convoluted that it's become incomprehensible even to them. They wrote the rules to this game and made it far too complex for anyone to follow or comprehend — even themselves.
Millions of individual investors have paid for that, and the price has been their savings — as well as their faith in the markets. That's a shameful development.
"You could buy and hold a company for 15 years and then have everything you've built up disappear in five minutes. No one can take that kind of risk anymore. There's no such thing as a widows-and-orphans stock anymore." — Professor Perry Glasser, in the Wall St. JournalOver the past few years, a series of alarming incidents and events have eroded — if not completely destroyed — the average investor's trust in the stock markets. This is a critical development since markets are founded on trust, and they don't function very well without it.
Historically, transparent markets helped raise capital, build business and create jobs. But that system, which had worked fairly well for more than a century, has been jeopardized by recent events.
Most of them have been caused by high-frequency trading, in which supercomputers trade more than a billion shares a day at lightning speed. These trades have obliterated the age old strategy of "buy and hold." High-frequency trading is about buying and then quickly selling in a matter of minutes, seconds, or even mili-seconds.
By some estimates, "high frequency trading" is responsible for close to 70% of all volume in US markets. Computers can track hot stocks and immediately buy up all available shares. Since volume moves markets, this is quite advantageous. Almost instantly, these shares are then sold at higher prices. Millions of shares can be dumped in just milli-seconds.
High frequency trading has tripled market volume, giving a false sense of the size and activity of markets.
In August, the investment firm Knight Capital Group lost $440 million and was brought to the brink of bankruptcy due to erroneous trades caused by a software malfunction. Knight's trading algorithms went haywire, creating twice the normal volume the New York Stock Exchange. It was just the latest example of high-frequency trading gone awry.
In May, a technical error at Nasdaq (caused by high-speed trading) delayed the start of trading for Facebook’s initial public offering, limiting the ability of some investors to identify whether they had successfully purchased or sold their shares. Moreover, the offering price had also increased to $38 from an initial target of $28 - $31. Additionally, the number of shares had increased by 25 percent just days before the offering, diluting overall share value.
Ultimately, Facebook saw its stock collapse 32 percent in just 12 trading days.
Though top investors got word that research analysts at the banks underwriting the IPO had all cut their earnings estimates for Facebook just days before the stock went public, that news didn't reach the average investor until it was too late.
High frequency trading also helped drive the liquidity crisis and set in motion the ‘Flash Crash’ that rattled the markets worldwide in May 2010. In a matter of minutes, the Dow Jones Industrial Average plummeted a jaw-dropping 1,000 points.
But high-frequency trading isn't the only concern. There's also the matter of collateralized debt obligations (CDOs), credit default swaps (CDSs), interest rate swaps and derivatives. Credit default swaps were the things that got Wall St. behemoth JP Morgan Chase into so much trouble last spring.
In May, JPMorgan Chase suffered a multi-billion dollar trading loss that shook investor confidence. A single trader at the bank's chief investment office in London took huge positions in credit default swaps that resulted in massive losses. The threat of systemic risk in the banking sector was once again on full display, a reminder of its threat to the wider economy.
Each of these events undermined the essence of the markets; investor confidence. But cumulatively, they have had a most pernicious effect.
In June, the TABB Group, a financial research and advisory firm, released a report indicating that 31 percent of those polled said they had "weak" or "very weak" confidence in the stock market, compared to 15 percent after the Flash Crash.
In TABB's survey, a group of "market participants," including hedge funds, investment managers, exchanges and brokers, were asked to pick which recent market snafu did the most damage to the confidence of mom-and-pop investors in the stock market. Thirty-seven percent picked the Facebook IPO. Thirty-nine percent picked the Flash Crash.
Not surprisingly, retail investors have abandoned the stock market, moving their money into savings accounts, bond funds and annuities. Over the last few years, all of their suspicions have been confirmed that the stock market is a rigged game and they have largely refused to play anymore.
This is no small matter. Investors have been fleeing the stock market in droves due to a loss of confidence. The Investment Company Institute says that investors are pulling billions out of stock mutual funds on a weekly basis. In fact, investors have been consistently pulling money out of stock funds for five years running.
During the week ended Sept. 5, U.S. stock mutual funds bled another $2.9 billion, according to the Investment Company Institute, bringing the 2012 outflow total to more than $79 billion. By comparison, those funds lost in the neighborhood of $70 billion during the first eight months of 2011, and just $52 billion during the first eight months of 2010.
Vast numbers of Americans no longer understand the stock market and they certainly don't trust it. People would rather hide their money under the mattress than hand it over to Wall St.
According to the June Fed survey, just 15.1% of American families had any stock holdings in 2010, down from a peak of 21.3% in the 2001 survey. And just 8.7% of families had direct ownership of pooled investment funds (mostly mutual funds) in 2010.
Clearly, the ballooning stock market is not a reflection of the financial well-being of the vast majority of Americans. Most of them aren't even invested. The markets are simply Wall Street's betting games.
Joseph Saluzzi, a founder of the institutional brokerage firm Themis Trading, has long been an outspoken critic of high-frequency trading. In fact, Saluzzi thinks the practice is ruining the stock markets. He says it has created a loss of confidence that is scaring off mom-and-pop investors.
Here's what Saluzzi told the Huffington Post:
"The purpose of the stock market is supposed to be capital raising and capital formation. Investors are supposed to come, see what’s going on and say, "You know what, I like that company, I can invest and I’m going to hold the stock." Fifteen or 20 years ago, that’s what you had. Now ... the whole model for capital formation has gotten twisted into a short-term trading [system] where an average holding period for a high-frequency trader is seconds, not days or years... It turns it into a casino... You’ve lost the whole point of what a stock exchange is supposed to do. Which is identify undervalued assets, identify stocks that you think are going to grow... [The result is] a continued loss of trust and confidence in the stock markets. And that is the worst thing you can do. Because you don’t build trust and confidence overnight, but when you lose it, it goes quick."
The problem has been brought to the attention of Congress, yet nothing has been done to curb high-frequency trading and other risky practices that place undo risk on retail investors and the economy as a whole.
SEC Commission chair Mary Schapiro told a House Oversight subcommittee in June that investors have a "concern about the integrity of the marketplace," and U.S. markets are currently threatened with "an unwillingness [on the part of investors] to ever engage in the markets again."
People are unsure "whether they're getting accurate and honest information from [companies looking to list on exchanges]," Schapiro said, and unsure "whether the market structure itself is tilted against the individual investor and in favor the institutional investor." She added, "At the end of the day, investor confidence is the oxygen markets survive on, and if we lose it, it is extraordinarily hard to regain it."
Rather than curbing risky practices, government regulators are allowing them to spread. High frequency traders are now moving into currency and commodity markets.
This is an ominous development. Capitalism requires transparency and truly free markets to function properly. What we have, instead, are rigged markets.
Wall Street's intention has been to make the capital markets so opaque and so complex that no one — not even the regulators — can understand them. It's all been by design, and they've succeeded.
In the view of Wall St. bankers, they are the Masters of the Universe and no one should dare question them. They claim to know things the rest of us will never even understand. But in truth, their game is so convoluted that it's become incomprehensible even to them. They wrote the rules to this game and made it far too complex for anyone to follow or comprehend — even themselves.
Millions of individual investors have paid for that, and the price has been their savings — as well as their faith in the markets. That's a shameful development.
Derivatives Market a $1.2 Quadrillion Time Bomb
To contact us Click HERE
Financial jargon is often arcane and perplexing to the average person. While even casual observers have surely heard of derivatives, most are unlikely to know what exactly they are.
Derivatives, or swaps, are basically bets between companies and banks that are designed, in essence, to be insurance policies.
The problem with derivatives is that since they often involve highly leveraged bets, they can be very dangerous. A small change in market conditions can mean huge losses.
Such losses can occur because derivatives use extraordinary leverage, or borrowing. Derivatives allow investors to earn large returns from small movements in the underlying asset's price. However, investors can also lose large amounts if the price of the underlying asset moves against them significantly.
In fact, derivatives were used to conceal credit risk from third parties while protecting derivative counterparties, which contributed to the financial crisis in 2008.
That threat still lingers today. If interest rates were to rise unexpectedly, for example, it could result in a financial bloodbath on Wall Street.
Derivatives are used to make the really big money on Wall St. They can be many things, but are basically contracts or bets that derive their value from the performance of something else — an interest rate, a bond or stock, a loan, a currency, a commodity, virtually anything.
For traders, derivatives are a perfect product. They can also be highly lucrative to financial institutions. Over the last five years, banks earned an estimated $20 billion selling derivatives just to school districts, hospitals, and scores of state and local governments across the country.
Yet, as Warren Buffett famously stated, derivatives are "financial weapons of mass destruction."
The global derivatives market is highly complex, totally unregulated and freakishly large. According to one of the world’s leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University, the so-called notional value of the worldwide derivatives market is $1.2 quadrillion.
A quadrillion is an incomprehensibly massive figure: 1,000 times a trillion. The market's notional value is 20 times the size of the global economy.
The annual gross domestic product of the entire planet is between $50 trillion and $60 trillion.
Even if Congress decided to regulate the stunningly massive derivatives market, regulators wouldn't be able to assess the risks of derivatives because they don't understand them. Congress doesn't understand them either.
That's by design. The whole market is set up to be incomprehensible to anyone other than those who arranged it, making it beyond regulation.
Insured U.S. banks and savings institutions held $222 trillion worth of derivatives in the second quarter of 2012, according to the Office of the Comptroller of the Currency. Yet, the total U.S. economy is approximately $15 trillion.
Most disturbingly, another financial crisis is inevitable because the causes of the previous one have never been resolved.
The "Big Six" U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America's gross national product. If that doesn't sound healthy, it's because it isn't.
If any of these six banks fails, the repercussions to the U.S. and global economies would be disastrous.
What is particularly troubling — and appalling — is that the Dodd-Frank law places taxpayers as the backstop behind Wall Street derivatives trading.
As the Wall Street Journal reported:
So, once again, American taxpayers have been set up as the bailout agents for Wall St. banks and the wider financial industry.
The question is, given the size of our economy relative to the derivatives market, where will all the necessary bailout money come from when that market eventually implodes?
Undoubtedly, the Fed will just print it. That has always been its solution to every crisis.
Financial jargon is often arcane and perplexing to the average person. While even casual observers have surely heard of derivatives, most are unlikely to know what exactly they are.Derivatives, or swaps, are basically bets between companies and banks that are designed, in essence, to be insurance policies.
The problem with derivatives is that since they often involve highly leveraged bets, they can be very dangerous. A small change in market conditions can mean huge losses.
Such losses can occur because derivatives use extraordinary leverage, or borrowing. Derivatives allow investors to earn large returns from small movements in the underlying asset's price. However, investors can also lose large amounts if the price of the underlying asset moves against them significantly.
In fact, derivatives were used to conceal credit risk from third parties while protecting derivative counterparties, which contributed to the financial crisis in 2008.
That threat still lingers today. If interest rates were to rise unexpectedly, for example, it could result in a financial bloodbath on Wall Street.
Derivatives are used to make the really big money on Wall St. They can be many things, but are basically contracts or bets that derive their value from the performance of something else — an interest rate, a bond or stock, a loan, a currency, a commodity, virtually anything.
For traders, derivatives are a perfect product. They can also be highly lucrative to financial institutions. Over the last five years, banks earned an estimated $20 billion selling derivatives just to school districts, hospitals, and scores of state and local governments across the country.
Yet, as Warren Buffett famously stated, derivatives are "financial weapons of mass destruction."
The global derivatives market is highly complex, totally unregulated and freakishly large. According to one of the world’s leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University, the so-called notional value of the worldwide derivatives market is $1.2 quadrillion.
A quadrillion is an incomprehensibly massive figure: 1,000 times a trillion. The market's notional value is 20 times the size of the global economy.
The annual gross domestic product of the entire planet is between $50 trillion and $60 trillion.
Even if Congress decided to regulate the stunningly massive derivatives market, regulators wouldn't be able to assess the risks of derivatives because they don't understand them. Congress doesn't understand them either.
That's by design. The whole market is set up to be incomprehensible to anyone other than those who arranged it, making it beyond regulation.
Insured U.S. banks and savings institutions held $222 trillion worth of derivatives in the second quarter of 2012, according to the Office of the Comptroller of the Currency. Yet, the total U.S. economy is approximately $15 trillion.
Most disturbingly, another financial crisis is inevitable because the causes of the previous one have never been resolved.
The "Big Six" U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America's gross national product. If that doesn't sound healthy, it's because it isn't.
If any of these six banks fails, the repercussions to the U.S. and global economies would be disastrous.
What is particularly troubling — and appalling — is that the Dodd-Frank law places taxpayers as the backstop behind Wall Street derivatives trading.
As the Wall Street Journal reported:
Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading — not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net...
The authority for this regulatory achievement was inserted into Congress’s pending financial reform bill by then-Senator Chris Dodd...
Specifically, the law authorizes the Federal Reserve to provide “discount and borrowing privileges” to clearinghouses in emergencies.
To get help, they only needed to be deemed “systemically important” by the new Financial Stability Oversight Council chaired by the Treasury Secretary.
So, once again, American taxpayers have been set up as the bailout agents for Wall St. banks and the wider financial industry.
The question is, given the size of our economy relative to the derivatives market, where will all the necessary bailout money come from when that market eventually implodes?
Undoubtedly, the Fed will just print it. That has always been its solution to every crisis.
28 Eylül 2012 Cuma
Bush's agenda faces opposition from election-wary Republicans
To contact us Click HERE
April 4th 2005 - The tightly disciplined, Republican-controlled Congress that gave President George W. Bush key pro- business victories in the first few months of his second term may now put political survival ahead of party unity.
Bush has outlined an aggressive agenda -- including restructuring Social Security, cutting a record budget deficit and easing immigration policies -- that he hopes will secure his legacy for posterity. His party's lawmakers have a simpler goal: winning re-election and maintaining or enlarging their House and Senate majorities in 2006.
``Bush sees himself as a consequential president in history who accomplished big things,'' says Bill McInturff, a Republican pollster. ``Most members of Congress can be very happy just strolling along saying, 'Here is all the money I delivered to my district.'''
Congressional Republicans are pushing for legislation to allow drug imports from Canada, a measure opposed by Bush and drug makers such as Pfizer Inc. and Merck & Co. Bush also faces resistance on his plan to ease immigration laws, which food- service companies such as Outback Steakhouse Inc. and Wendy's International Inc. support. And Wall Street analysts and economists hoping for measures to restrain the budget deficit are concerned that lawmakers facing re-election won't be inclined to cut spending.
``There are some great challenges,'' White House spokesman Trent Duffy says. ``This president is a big-game hunter. The process is just beginning.''
The Republicans, who gained expanded majorities in both chambers of Congress in the November elections, gave Bush some early successes this year with measures that curbed class-action lawsuits, rewrote bankruptcy laws and paved the way for oil drilling in Alaska's Arctic National Wildlife Refuge.
Easy Wins
These ``were easy wins that were left over from the last Congress,'' says Ethan Siegal, president of the Washington Exchange, which tracks policy for institutional investors. ``Everything else Bush has on the table is very difficult, and the discipline in his party is breaking apart.''
The first stirrings of dissent were heard when lawmakers took up Bush's 2006 budget, which calls for trimming federal benefits and other domestic programs while extending portions of his first-term tax cuts.
Last month, Senator Gordon Smith, an Oregon Republican, led six other Republicans in blocking Bush's plan to cut $14 billion from the Medicaid health program over five years. And when a Senate committee approved Bush's $284 billion highway bill, Senator James Inhofe of Oklahoma assured his fellow Republicans that the funding may be increased later.
Drug Imports
Republicans are also at odds with Bush's position on allowing Americans to import cheaper drugs from Canada. Senator Charles Grassley of Iowa, the powerful chairman of the Finance Committee, is pushing for legislation that would allow the imports, which Bush and drug makers oppose.
Representative Jo Ann Emerson, a Missouri Republican, says she is confident the bill allowing imports can clear the House. Lawmakers' ``constituents are saying, find any means possible to bring down the cost of drugs,'' she says.
Drug makers such as New York-based Pfizer, Whitehouse Station, New Jersey-based Merck and Madison, New Jersey-based Wyeth say the measure won't adequately address these concerns. ``We don't believe that re-importation is a solution to the problems of access and affordability of medications,'' Wyeth spokeswoman Natalie De Vane says. ``And it does pose a safety risk.''
Bush's call for a guest-worker visa program aimed at allowing migrants to fill low-skilled jobs may be the toughest to pass, because so many Republicans are opposed to it, says Bruce Josten, the head lobbyist at the U.S. Chamber of Commerce in Washington.
Opening Floodgates
Representative John Hostettler, an Indiana Republican who heads the House Judiciary Subcommittee on Immigration, said he wouldn't allow any bill easing immigration to be brought before his panel for a vote. ``It is my concern and others' concerns that if you legalize those who have illegally obtained residency here, you will open the floodgates,'' he said in an interview March 31.
The National Restaurant Association, which represents companies such as Tampa, Florida-based Outback Steakhouse and Dublin, Ohio-based Wendy's International, backs Bush's plan. The food-service industry is the largest U.S. employer of undocumented workers -- about 1.4 million of the nation's 8 million immigrants.
Second-Term Blues
These kinds of defections are common in a president's second term, particularly when his party is in power in Congress, says Stephen Wayne, a government professor at Georgetown University in Washington. In four of five second-term mid-term elections since World War II, the party that controlled the White House has lost seats in both chambers, says Jennifer Duffy, an analyst at the Cook Political Report, which tracks political races.
Most lawmakers are aware of this phenomenon, called the ``sixth-year itch,'' Duffy says, and Republicans will cast their votes on Bush's agenda items with this precedent in mind. ``It's a self-preservation issue,'' she says.
There are 15 Republican-held Senate seats on the ballot next year. In the House, where all members are up for re-election, 24 Republicans won their 2004 elections with 55 percent of the vote or less.
This dynamic is already evident in the voting behavior of Senator Rick Santorum of Pennsylvania, the No. 3 Senate Republican leader, who is expected to face a tough re-election contest in 2006 from Democrat Robert Casey Jr., the state treasurer.
Good for Pennsylvania
Santorum has parted ways with the president at least twice in the last month. He proposed a $1.10-an-hour increase to the $5.15-an-hour minimum wage, and voted in favor of an amendment to a 2006 budget plan that rejected Bush's call to cut nearly $2 billion from the Community Development Block Grant program and other economic development programs that are popular in his state.
``You're going to see him deviate on things that make sense for Pennsylvania,'' Duffy says.
Perhaps most significant for Bush's legacy, his plan to establish private Social Security accounts has failed to generate a critical mass of support. The proposal has proved unpopular in the polls, and Republican lawmakers including Representative Jim Nussle of Iowa and Representative John Mica of Florida have not made commitments to support it.
Wall Street Worries
Some Republicans share Wall Street's concern over the effect of the proposal on the budget deficit, which reached a record $412 billion last year. Any plan to create the accounts would add $1 trillion to $2 trillion to the deficit over the next 10 years, according to the Congressional Budget Office.
``The longer we continue to allow the public debt to rise, the more painful the ultimate cuts will be,'' says Lou Crandall, chief economist at Wrightson ICAP LLP, a research firm in Jersey City, New Jersey, that analyzes the effects of federal economic policies.
For many Republicans, though, concern about the deficit is mitigated by the desire to avoid the political pain that spending cuts or moderating Bush's tax cuts would entail.
During last month's Senate debate on Bush's request to extend his $1.85 trillion in tax cuts, only five Republican senators joined the chamber's 44 Democrats and one independent to demand that further reductions be offset by tax increases or spending cuts. While the Senate rejected, 50-50, an amendment to the fiscal blueprint requiring offsets, some Republicans plan to fight again this summer when party leaders advance the legislation.
Bush has outlined an aggressive agenda -- including restructuring Social Security, cutting a record budget deficit and easing immigration policies -- that he hopes will secure his legacy for posterity. His party's lawmakers have a simpler goal: winning re-election and maintaining or enlarging their House and Senate majorities in 2006.
``Bush sees himself as a consequential president in history who accomplished big things,'' says Bill McInturff, a Republican pollster. ``Most members of Congress can be very happy just strolling along saying, 'Here is all the money I delivered to my district.'''
Congressional Republicans are pushing for legislation to allow drug imports from Canada, a measure opposed by Bush and drug makers such as Pfizer Inc. and Merck & Co. Bush also faces resistance on his plan to ease immigration laws, which food- service companies such as Outback Steakhouse Inc. and Wendy's International Inc. support. And Wall Street analysts and economists hoping for measures to restrain the budget deficit are concerned that lawmakers facing re-election won't be inclined to cut spending.
``There are some great challenges,'' White House spokesman Trent Duffy says. ``This president is a big-game hunter. The process is just beginning.''
The Republicans, who gained expanded majorities in both chambers of Congress in the November elections, gave Bush some early successes this year with measures that curbed class-action lawsuits, rewrote bankruptcy laws and paved the way for oil drilling in Alaska's Arctic National Wildlife Refuge.
Easy Wins
These ``were easy wins that were left over from the last Congress,'' says Ethan Siegal, president of the Washington Exchange, which tracks policy for institutional investors. ``Everything else Bush has on the table is very difficult, and the discipline in his party is breaking apart.''
The first stirrings of dissent were heard when lawmakers took up Bush's 2006 budget, which calls for trimming federal benefits and other domestic programs while extending portions of his first-term tax cuts.
Last month, Senator Gordon Smith, an Oregon Republican, led six other Republicans in blocking Bush's plan to cut $14 billion from the Medicaid health program over five years. And when a Senate committee approved Bush's $284 billion highway bill, Senator James Inhofe of Oklahoma assured his fellow Republicans that the funding may be increased later.
Drug Imports
Republicans are also at odds with Bush's position on allowing Americans to import cheaper drugs from Canada. Senator Charles Grassley of Iowa, the powerful chairman of the Finance Committee, is pushing for legislation that would allow the imports, which Bush and drug makers oppose.
Representative Jo Ann Emerson, a Missouri Republican, says she is confident the bill allowing imports can clear the House. Lawmakers' ``constituents are saying, find any means possible to bring down the cost of drugs,'' she says.
Drug makers such as New York-based Pfizer, Whitehouse Station, New Jersey-based Merck and Madison, New Jersey-based Wyeth say the measure won't adequately address these concerns. ``We don't believe that re-importation is a solution to the problems of access and affordability of medications,'' Wyeth spokeswoman Natalie De Vane says. ``And it does pose a safety risk.''
Bush's call for a guest-worker visa program aimed at allowing migrants to fill low-skilled jobs may be the toughest to pass, because so many Republicans are opposed to it, says Bruce Josten, the head lobbyist at the U.S. Chamber of Commerce in Washington.
Opening Floodgates
Representative John Hostettler, an Indiana Republican who heads the House Judiciary Subcommittee on Immigration, said he wouldn't allow any bill easing immigration to be brought before his panel for a vote. ``It is my concern and others' concerns that if you legalize those who have illegally obtained residency here, you will open the floodgates,'' he said in an interview March 31.
The National Restaurant Association, which represents companies such as Tampa, Florida-based Outback Steakhouse and Dublin, Ohio-based Wendy's International, backs Bush's plan. The food-service industry is the largest U.S. employer of undocumented workers -- about 1.4 million of the nation's 8 million immigrants.
Second-Term Blues
These kinds of defections are common in a president's second term, particularly when his party is in power in Congress, says Stephen Wayne, a government professor at Georgetown University in Washington. In four of five second-term mid-term elections since World War II, the party that controlled the White House has lost seats in both chambers, says Jennifer Duffy, an analyst at the Cook Political Report, which tracks political races.
Most lawmakers are aware of this phenomenon, called the ``sixth-year itch,'' Duffy says, and Republicans will cast their votes on Bush's agenda items with this precedent in mind. ``It's a self-preservation issue,'' she says.
There are 15 Republican-held Senate seats on the ballot next year. In the House, where all members are up for re-election, 24 Republicans won their 2004 elections with 55 percent of the vote or less.
This dynamic is already evident in the voting behavior of Senator Rick Santorum of Pennsylvania, the No. 3 Senate Republican leader, who is expected to face a tough re-election contest in 2006 from Democrat Robert Casey Jr., the state treasurer.
Good for Pennsylvania
Santorum has parted ways with the president at least twice in the last month. He proposed a $1.10-an-hour increase to the $5.15-an-hour minimum wage, and voted in favor of an amendment to a 2006 budget plan that rejected Bush's call to cut nearly $2 billion from the Community Development Block Grant program and other economic development programs that are popular in his state.
``You're going to see him deviate on things that make sense for Pennsylvania,'' Duffy says.
Perhaps most significant for Bush's legacy, his plan to establish private Social Security accounts has failed to generate a critical mass of support. The proposal has proved unpopular in the polls, and Republican lawmakers including Representative Jim Nussle of Iowa and Representative John Mica of Florida have not made commitments to support it.
Wall Street Worries
Some Republicans share Wall Street's concern over the effect of the proposal on the budget deficit, which reached a record $412 billion last year. Any plan to create the accounts would add $1 trillion to $2 trillion to the deficit over the next 10 years, according to the Congressional Budget Office.
``The longer we continue to allow the public debt to rise, the more painful the ultimate cuts will be,'' says Lou Crandall, chief economist at Wrightson ICAP LLP, a research firm in Jersey City, New Jersey, that analyzes the effects of federal economic policies.
For many Republicans, though, concern about the deficit is mitigated by the desire to avoid the political pain that spending cuts or moderating Bush's tax cuts would entail.
During last month's Senate debate on Bush's request to extend his $1.85 trillion in tax cuts, only five Republican senators joined the chamber's 44 Democrats and one independent to demand that further reductions be offset by tax increases or spending cuts. While the Senate rejected, 50-50, an amendment to the fiscal blueprint requiring offsets, some Republicans plan to fight again this summer when party leaders advance the legislation.
Deficit cracking GOP's solidarity
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November 27th 2005 - More than a decade after the Republican Revolution, when Newt Gingrich became House speaker on the promise to downsize government, Republicans are facing another revolution.
This one is from within.
When Congress returns next month from its Thanksgiving recess, Republican leaders who have never failed to marshal their forces on big party-line votes face the prospect of defeat on tax cuts and spending restraint -- the core issues that have united the party since President Ronald Reagan and gave them their House majority in 1994.
They have lost some tax and spending votes already, and postponed others because of the specter of losing. After a five-year spending spree on everything from the Iraq war to Medicare, deficits are now jeopardizing the tax cuts that were the centerpiece of President Bush's first term.
A move to preserve tax cuts on capital gains and dividends -- the gemstone of the Bush tax cuts for conservatives -- is in trouble in both the House and the Senate. For the first time since George W. Bush took office, House Democrats are united against tax cuts, and Republican moderates are bucking their party leadership.
GOP leaders are pushing a measure to control entitlement spending by shaving Medicaid and food stamps for the poor. But the combination of investor tax cuts and reductions in poverty programs has already led to a series of embarrassing defeats in committee and on the House floor. Republicans are headed for a pre-Christmas showdown that could turn into a political disaster.
Hurricane topples plans
Hurricane Katrina last summer was a tipping point. The storm forced Republicans to ditch the estate tax repeal because it was deemed unseemly to end a wealth tax after poor people had lost their homes. Sensing a public relations disaster, Republican leaders also postponed extending the investor tax cuts until the end of the year.
Congress quickly passed $62 billion in emergency disaster relief. But Bush's promise to "do whatever it takes" to rebuild the Gulf Coast set off a rebellion among conservatives, who demanded spending cuts to pay the bill.
"I think they blinked after Hurricane Katrina," said Brad Woodhouse, a liberal activist who helped defeat Bush's Social Security overhaul and has turned his fire on the Republican budget, heading a liberal alliance called the Emergency Campaign for American Priorities.
"It was such an acknowledgment of how inappropriate these spending cuts to finance tax cuts are," Woodhouse said. "It was like blood dripping in the water for us."
The budget outlook -- and the problems facing the GOP -- promise to get much worse. Medicare's costly new prescription drug benefit, an $18 trillion unfunded liability sponsored by the White House and Republican leadership, starts in January. Just two years from now, in 2008, the enormous Baby Boom generation will begin retiring, ceasing income tax payments and starting to collect benefits, leading to a budget squeeze unprecedented in U.S. history.
"We're seeing the future," said Bruce Bartlett, a former Treasury official in the George H.W. Bush administration and tax-cut advocate. "The decisions that have been made over the last five years have resulted in the chickens coming home to roost."
Total spending increases under the current President Bush closely rival those of President Lyndon Johnson, a Democrat famous for conducting the Vietnam War while simultaneously increasing domestic spending.
Discretionary spending rose 48.5 percent in Bush's first term, according to an analysis by the libertarian Cato Institute, twice as much as in two terms under President Bill Clinton, when spending rose 21.6 percent. Adjusted for inflation, Bush has increased total spending at an annualized rate of 5.6 percent, compared with 1.5 percent under Clinton.
"It's only a matter of time before we stop talking about cutting taxes for a very long period of time and talk basically about increasing taxes," Bartlett predicted. "The end of the era of tax cutting is going to put tremendous strain on the Republican coalition, just as the end of the era of big spending put tremendous strain on the Democratic coalition" in the 1980s. "You're hearing more and more people on the Republican side talking about major losses in the congressional elections next year and about 2008 being a really, really bad year for Republicans."
In the two months since Republicans pulled their tax cut bills, the atmosphere has only gotten worse. Republicans lost two important off-year gubernatorial elections in Virginia and New Jersey. Bush's popularity has hit new lows, with the public now decidedly opposing the Iraq war. Leading GOP candidates, including Sen. Rick Santorum, a conservative member of the Senate leadership who faces a tough re-election fight in Pennsylvania, have refused to appear with Bush at campaign events.
"Republican members of Congress recognize that the president can't help them very much any more," said Cato Institute Chairman Bill Niskanen, a former Reagan administration economist. In addition, the indictment of former House Majority Leader Tom DeLay seriously weakened party discipline in the House and exposed deep divisions between fiscal conservatives and moderates.
"There is a substantial ideological split, particularly among House Republicans, on fiscal responsibility," Niskanen said. "A lot of them have gone along with a high rate of growth of spending but have done so without any enthusiasm."
As the post-Katrina conservative revolt gelled, the Republican leadership turned to Medicaid, food stamps and student loans for spending restraint. The Senate is proposing $35 billion in reductions and the House $50 billion; both chambers are also seeking between $56 billion and $59 billion in tax cuts.
Large gap to cross
There are enormous differences between the House and Senate on both measures. Reconciling them will be very difficult in the two weeks Congress has left before adjourning for Christmas.
Combined, the measures increase the deficit. The spending restraint appeased conservatives but provoked an outcry from Democrats and GOP moderates. Efforts to console moderates by dropping a measure for oil exploration in the Arctic National Wildlife Refuge and adding subsidies for home heating costs and dairy farmers have done little but stoke more controversy.
The Medicaid and food stamp cuts have attracted the most fire, and barely passed the House 217-215 before Thanksgiving, with no Democratic support. Republicans recessed before attempting to pass the tax cuts.
Much of the roughly $11 billion in cuts over five years proposed by the Senate for Medicaid, a health care program for the poor that many elderly use to pay nursing home costs, were recommended by state governors. They contend the program is becoming burdensome for the states, which must come up with money to match federal funding. Democrats have portrayed the reduction in the growth of Medicaid spending as dire, but even liberal analysts concede they are not severe. One provision would increase co-payments from $3 to $5, and another would allow elderly nursing home residents to shield $750,000 in home equity, raised from $500,000 after Republican moderates objected.
The cuts are "not awful," said Jason Furman, a former adviser to Democratic presidential candidate John Kerry now at the liberal Center for Budget and Policy Priorities.
"It's less about the magnitude and more about why should you be asking poor people to pay anything more for health care at the same time that you're giving brand-new tax cuts to the most fortunate," Furman said. "That is what is just completely wrong with this picture.
"A go-it-alone Republican strategy works when you're trying to cut taxes or increase spending, but when you're trying to make tougher choices, the only way to do it is to work together with the other party for shared sacrifice," Furman said. "Budget reality is starting to catch up with the Republican Party."
Heavy U.S. borrowing with much more on the horizon is stoking concern about a potential financial crisis. Any one of several big economic imbalances -- including looming pressures on the federal budget, the zero U.S. savings rate, the historically high trade deficit, a real estate boom that has supported consumer spending -- could provoke a sudden financial shift, economists say.
"It's not unrealistic to think that if we continue to delay -- and the Baby Boomers do start to retire as early as 2008 -- that sooner or later the lenders to this country may decide it's not the best place to park all their savings," said Maya MacGuineas, director of fiscal policy for centrist New American Foundation.
Bartlett warns of a "financial Katrina."
"It's just a matter of time before we have some kind of economic event that I think is just going to change the political situation 180 degrees and make deficit reduction the order of the day," he said. "I don't know what it will be. I just know that when you've got gasoline spilling onto the floor of your house, it doesn't really matter where the spark comes from."
This one is from within.
When Congress returns next month from its Thanksgiving recess, Republican leaders who have never failed to marshal their forces on big party-line votes face the prospect of defeat on tax cuts and spending restraint -- the core issues that have united the party since President Ronald Reagan and gave them their House majority in 1994.
They have lost some tax and spending votes already, and postponed others because of the specter of losing. After a five-year spending spree on everything from the Iraq war to Medicare, deficits are now jeopardizing the tax cuts that were the centerpiece of President Bush's first term.
A move to preserve tax cuts on capital gains and dividends -- the gemstone of the Bush tax cuts for conservatives -- is in trouble in both the House and the Senate. For the first time since George W. Bush took office, House Democrats are united against tax cuts, and Republican moderates are bucking their party leadership.
GOP leaders are pushing a measure to control entitlement spending by shaving Medicaid and food stamps for the poor. But the combination of investor tax cuts and reductions in poverty programs has already led to a series of embarrassing defeats in committee and on the House floor. Republicans are headed for a pre-Christmas showdown that could turn into a political disaster.
Hurricane topples plans
Hurricane Katrina last summer was a tipping point. The storm forced Republicans to ditch the estate tax repeal because it was deemed unseemly to end a wealth tax after poor people had lost their homes. Sensing a public relations disaster, Republican leaders also postponed extending the investor tax cuts until the end of the year.
Congress quickly passed $62 billion in emergency disaster relief. But Bush's promise to "do whatever it takes" to rebuild the Gulf Coast set off a rebellion among conservatives, who demanded spending cuts to pay the bill.
"I think they blinked after Hurricane Katrina," said Brad Woodhouse, a liberal activist who helped defeat Bush's Social Security overhaul and has turned his fire on the Republican budget, heading a liberal alliance called the Emergency Campaign for American Priorities.
"It was such an acknowledgment of how inappropriate these spending cuts to finance tax cuts are," Woodhouse said. "It was like blood dripping in the water for us."
The budget outlook -- and the problems facing the GOP -- promise to get much worse. Medicare's costly new prescription drug benefit, an $18 trillion unfunded liability sponsored by the White House and Republican leadership, starts in January. Just two years from now, in 2008, the enormous Baby Boom generation will begin retiring, ceasing income tax payments and starting to collect benefits, leading to a budget squeeze unprecedented in U.S. history.
"We're seeing the future," said Bruce Bartlett, a former Treasury official in the George H.W. Bush administration and tax-cut advocate. "The decisions that have been made over the last five years have resulted in the chickens coming home to roost."
Total spending increases under the current President Bush closely rival those of President Lyndon Johnson, a Democrat famous for conducting the Vietnam War while simultaneously increasing domestic spending.
Discretionary spending rose 48.5 percent in Bush's first term, according to an analysis by the libertarian Cato Institute, twice as much as in two terms under President Bill Clinton, when spending rose 21.6 percent. Adjusted for inflation, Bush has increased total spending at an annualized rate of 5.6 percent, compared with 1.5 percent under Clinton.
"It's only a matter of time before we stop talking about cutting taxes for a very long period of time and talk basically about increasing taxes," Bartlett predicted. "The end of the era of tax cutting is going to put tremendous strain on the Republican coalition, just as the end of the era of big spending put tremendous strain on the Democratic coalition" in the 1980s. "You're hearing more and more people on the Republican side talking about major losses in the congressional elections next year and about 2008 being a really, really bad year for Republicans."
In the two months since Republicans pulled their tax cut bills, the atmosphere has only gotten worse. Republicans lost two important off-year gubernatorial elections in Virginia and New Jersey. Bush's popularity has hit new lows, with the public now decidedly opposing the Iraq war. Leading GOP candidates, including Sen. Rick Santorum, a conservative member of the Senate leadership who faces a tough re-election fight in Pennsylvania, have refused to appear with Bush at campaign events.
"Republican members of Congress recognize that the president can't help them very much any more," said Cato Institute Chairman Bill Niskanen, a former Reagan administration economist. In addition, the indictment of former House Majority Leader Tom DeLay seriously weakened party discipline in the House and exposed deep divisions between fiscal conservatives and moderates.
"There is a substantial ideological split, particularly among House Republicans, on fiscal responsibility," Niskanen said. "A lot of them have gone along with a high rate of growth of spending but have done so without any enthusiasm."
As the post-Katrina conservative revolt gelled, the Republican leadership turned to Medicaid, food stamps and student loans for spending restraint. The Senate is proposing $35 billion in reductions and the House $50 billion; both chambers are also seeking between $56 billion and $59 billion in tax cuts.
Large gap to cross
There are enormous differences between the House and Senate on both measures. Reconciling them will be very difficult in the two weeks Congress has left before adjourning for Christmas.
Combined, the measures increase the deficit. The spending restraint appeased conservatives but provoked an outcry from Democrats and GOP moderates. Efforts to console moderates by dropping a measure for oil exploration in the Arctic National Wildlife Refuge and adding subsidies for home heating costs and dairy farmers have done little but stoke more controversy.
The Medicaid and food stamp cuts have attracted the most fire, and barely passed the House 217-215 before Thanksgiving, with no Democratic support. Republicans recessed before attempting to pass the tax cuts.
Much of the roughly $11 billion in cuts over five years proposed by the Senate for Medicaid, a health care program for the poor that many elderly use to pay nursing home costs, were recommended by state governors. They contend the program is becoming burdensome for the states, which must come up with money to match federal funding. Democrats have portrayed the reduction in the growth of Medicaid spending as dire, but even liberal analysts concede they are not severe. One provision would increase co-payments from $3 to $5, and another would allow elderly nursing home residents to shield $750,000 in home equity, raised from $500,000 after Republican moderates objected.
The cuts are "not awful," said Jason Furman, a former adviser to Democratic presidential candidate John Kerry now at the liberal Center for Budget and Policy Priorities.
"It's less about the magnitude and more about why should you be asking poor people to pay anything more for health care at the same time that you're giving brand-new tax cuts to the most fortunate," Furman said. "That is what is just completely wrong with this picture.
"A go-it-alone Republican strategy works when you're trying to cut taxes or increase spending, but when you're trying to make tougher choices, the only way to do it is to work together with the other party for shared sacrifice," Furman said. "Budget reality is starting to catch up with the Republican Party."
Heavy U.S. borrowing with much more on the horizon is stoking concern about a potential financial crisis. Any one of several big economic imbalances -- including looming pressures on the federal budget, the zero U.S. savings rate, the historically high trade deficit, a real estate boom that has supported consumer spending -- could provoke a sudden financial shift, economists say.
"It's not unrealistic to think that if we continue to delay -- and the Baby Boomers do start to retire as early as 2008 -- that sooner or later the lenders to this country may decide it's not the best place to park all their savings," said Maya MacGuineas, director of fiscal policy for centrist New American Foundation.
Bartlett warns of a "financial Katrina."
"It's just a matter of time before we have some kind of economic event that I think is just going to change the political situation 180 degrees and make deficit reduction the order of the day," he said. "I don't know what it will be. I just know that when you've got gasoline spilling onto the floor of your house, it doesn't really matter where the spark comes from."
Bush's Budget Sparks Bipartisan Protest
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February 7th 2006 - The administration defended President Bush's $2.77 trillion budget plan on Tuesday against congressional attacks that the cuts it sought to deal with exploding budget deficits would unfairly harm government efforts in education, health care and farm programs.
Treasury Secretary John Snow, among leadoff witnesses in a series of congressional hearings, said the administration had made the tough choices to fund programs that were working and eliminate those that were not.
"This budget represents the president's dedication to fiscal discipline, an efficient federal government and the continuation of a thriving U.S. economy," Snow told the Senate Finance Committee.
But critics noted that the deficit for the current budget year would rise to an all-time high of $423 billion and they questioned Bush's projections for declining deficits in future years.
Democrats said Bush's proposed budget for Fiscal 2007, beginning Oct. 1, was seriously understating spending that will be needed to fight wars in Iraq and Afghanistan and did not include the billions of dollars needed in future years to make sure the alternative minimum tax designed for the wealthy does not pinch more and more middle class taxpayers.
Sen. Max Baucus, D-Mont., said the explosion of federal deficits was adding to the national debt, requiring the administration to come to Congress in the next few weeks to raise the $8.18 trillion debt ceiling. He said all of that debt is being financed more and more by foreigners.
"America is borrowing 80 percent of the world's annual savings. We are handing our children and our children's children a set of obligations they will owe to foreign central banks," Baucus told Snow.
Sen. Kent Conrad, D-N.D., produced charts showing that the amount of federal government debt held by foreigners before Bush became president totaled $1 trillion and now in the first five years of his administration has more than doubled.
Snow said the ability of the United States to pay interest on the debt was a function of the economy's size and the vitality of the nation's bond markets.
"There is no doubt given the deep and liquid capital markets of the United States, that we will continue to attract capital from investors around the world," the Treasury secretary told the committee.
Testifying separately before the Senate Armed Services Committee, Defense Secretary Donald H. Rumsfeld said the military must continue to change in order to defend against terrorists who could get a nuclear weapon or launch a biological attack.
"No nation, no matter how powerful, has the resources or capability to defend everywhere, at every time, against every conceivable type of attack," Rumsfeld said. "The only way to protect the American people, therefore, is to provide our military with as wide a range of capabilities, rather than preparing to confront any one particular threat.
Bush's budget, which was sent to Congress on Monday, has faced predictable criticism from Democrats but it is also facing attacks from Republicans.
Sen. Arlen Specter, R-Pa., called Bush's proposed cuts in education and health "scandalous" while Sen. Olympia Snowe, R-Maine, said she was "disappointed and even surprised" at the extent of the administration's proposed cuts in Medicaid and Medicare.
Bush's spending blueprint for the 2007 budget year that begins Oct. 1 would provide large increases for the military and homeland security but would trim spending in the one-sixth of the budget that covers the rest of discretionary spending. Nine Cabinet agencies would see outright reductions with the biggest percentage cuts occurring in the departments of Transportation, Justice and Agriculture.
And in mandatory programs _ so-called because the government must provide benefits to all who qualify _ the president is seeking over the next five years savings of $36 billion in Medicare, $5 billion in farm subsidy programs, $4.9 billion in Medicaid support for poor children's health care and $16.7 billion in additional payments from companies to shore up the government's besieged pension benefit agency.
Senate Finance Committee Chairman Charles Grassley noted that Congress has just completed a yearlong battle to achieve far smaller savings in Medicaid and Medicare and "any more reductions of a significant scope could be difficult this year."
Bush's budget would meet his twin goals of making permanent his first-term tax cuts, which are set to expire by 2010, and cutting the deficit in half by 2009, the year he leaves office.
Democrats, hoping to wrest control of Congress from the Republicans in this year's election, charged that Bush was forced into an austere spending plan because of the estimated $1.35 trillion over the next decade that it will cost to extend his first-term tax cuts, which Democrats claim primarily benefit the very wealthy.
In addition to strict limits on most discretionary, non-security spending in the budget, Bush sought drastic cuts or total elimination on 141 programs that would produce savings of nearly $15 billion in 2007.
The targeted programs included 42 in the area of education ranging from drug-free schools to federal support for the arts, technology and parent-resource centers.
Even previously favored agencies such as the National Institutes of Health were not immune from the budget knife with overall funding essentially frozen and many individual programs seeing budget cuts. That brought objections from groups ranging from the American Heart Association to the American Diabetes Association.
Bush's budget submission is just the opening round in what opponents are promising will be a spirited fight in Congress over spending priorities.
"The president's budget slashes resources for exactly the priorities we should be supporting _ groundbreaking medical research, health care for our seniors, and education for our kids," said Sen. Tom Harkin, D-Iowa.
Treasury Secretary John Snow, among leadoff witnesses in a series of congressional hearings, said the administration had made the tough choices to fund programs that were working and eliminate those that were not.
"This budget represents the president's dedication to fiscal discipline, an efficient federal government and the continuation of a thriving U.S. economy," Snow told the Senate Finance Committee.
But critics noted that the deficit for the current budget year would rise to an all-time high of $423 billion and they questioned Bush's projections for declining deficits in future years.
Democrats said Bush's proposed budget for Fiscal 2007, beginning Oct. 1, was seriously understating spending that will be needed to fight wars in Iraq and Afghanistan and did not include the billions of dollars needed in future years to make sure the alternative minimum tax designed for the wealthy does not pinch more and more middle class taxpayers.
Sen. Max Baucus, D-Mont., said the explosion of federal deficits was adding to the national debt, requiring the administration to come to Congress in the next few weeks to raise the $8.18 trillion debt ceiling. He said all of that debt is being financed more and more by foreigners.
"America is borrowing 80 percent of the world's annual savings. We are handing our children and our children's children a set of obligations they will owe to foreign central banks," Baucus told Snow.
Sen. Kent Conrad, D-N.D., produced charts showing that the amount of federal government debt held by foreigners before Bush became president totaled $1 trillion and now in the first five years of his administration has more than doubled.
Snow said the ability of the United States to pay interest on the debt was a function of the economy's size and the vitality of the nation's bond markets.
"There is no doubt given the deep and liquid capital markets of the United States, that we will continue to attract capital from investors around the world," the Treasury secretary told the committee.
Testifying separately before the Senate Armed Services Committee, Defense Secretary Donald H. Rumsfeld said the military must continue to change in order to defend against terrorists who could get a nuclear weapon or launch a biological attack.
"No nation, no matter how powerful, has the resources or capability to defend everywhere, at every time, against every conceivable type of attack," Rumsfeld said. "The only way to protect the American people, therefore, is to provide our military with as wide a range of capabilities, rather than preparing to confront any one particular threat.
Bush's budget, which was sent to Congress on Monday, has faced predictable criticism from Democrats but it is also facing attacks from Republicans.
Sen. Arlen Specter, R-Pa., called Bush's proposed cuts in education and health "scandalous" while Sen. Olympia Snowe, R-Maine, said she was "disappointed and even surprised" at the extent of the administration's proposed cuts in Medicaid and Medicare.
Bush's spending blueprint for the 2007 budget year that begins Oct. 1 would provide large increases for the military and homeland security but would trim spending in the one-sixth of the budget that covers the rest of discretionary spending. Nine Cabinet agencies would see outright reductions with the biggest percentage cuts occurring in the departments of Transportation, Justice and Agriculture.
And in mandatory programs _ so-called because the government must provide benefits to all who qualify _ the president is seeking over the next five years savings of $36 billion in Medicare, $5 billion in farm subsidy programs, $4.9 billion in Medicaid support for poor children's health care and $16.7 billion in additional payments from companies to shore up the government's besieged pension benefit agency.
Senate Finance Committee Chairman Charles Grassley noted that Congress has just completed a yearlong battle to achieve far smaller savings in Medicaid and Medicare and "any more reductions of a significant scope could be difficult this year."
Bush's budget would meet his twin goals of making permanent his first-term tax cuts, which are set to expire by 2010, and cutting the deficit in half by 2009, the year he leaves office.
Democrats, hoping to wrest control of Congress from the Republicans in this year's election, charged that Bush was forced into an austere spending plan because of the estimated $1.35 trillion over the next decade that it will cost to extend his first-term tax cuts, which Democrats claim primarily benefit the very wealthy.
In addition to strict limits on most discretionary, non-security spending in the budget, Bush sought drastic cuts or total elimination on 141 programs that would produce savings of nearly $15 billion in 2007.
The targeted programs included 42 in the area of education ranging from drug-free schools to federal support for the arts, technology and parent-resource centers.
Even previously favored agencies such as the National Institutes of Health were not immune from the budget knife with overall funding essentially frozen and many individual programs seeing budget cuts. That brought objections from groups ranging from the American Heart Association to the American Diabetes Association.
Bush's budget submission is just the opening round in what opponents are promising will be a spirited fight in Congress over spending priorities.
"The president's budget slashes resources for exactly the priorities we should be supporting _ groundbreaking medical research, health care for our seniors, and education for our kids," said Sen. Tom Harkin, D-Iowa.
Bush's Legacy: Debt
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September 25th 2008
UNITED STATES - The Bush legacy is going to include a nasty four-letter word: debt.
On second thought, make that staggering, long-term debt, perhaps in excess of $11 trillion, that will tie the hands of the next president and Congress, to say nothing of imposing a crushing burden on taxpayers.
Just a few months ago, the Iraq war looked like the biggest thing in the eight-year era of the second President Bush, during which his party controlled Congress for six years.
Just a couple of Sunday mornings ago, Bob Woodward of the Washington Post said on national television that the war in Iraq “is probably the most important thing going on right now,” adding that in January the war in Iraq will be topic one in the next administration, and topic two will be the war in Afghanistan.
Now the country suddenly is facing a financial crisis fraught with the possibility of unprecedented economic disaster.
If that isn’t enough to make you reach for the antacid tablets, the president still has about three months left in office, plenty of time for yet another calamitous turn of events.
The national debt was about $5.7 trillion when Bush took office in January 2001. Today, after almost eight years and a couple of wars, the debt has risen to about $9.7 trillion.
And, by the way, that figure might rise another $1 trillion or so before Bush steps down on Jan. 20.
The national debt ceiling today is $10.6 trillion. Treasury Secretary Henry Paulson wants Congress to raise that to $11.3 trillion to clear the decks for massive borrowing to deal with the nation’s financial crisis.
A national debt of $11.3 trillion would come to more than $37,000 each for every man, woman and child in the United States.
And all this comes during an era of allegedly conservative, fiscally responsible Republican domination in Washington.
UNITED STATES - The Bush legacy is going to include a nasty four-letter word: debt.
On second thought, make that staggering, long-term debt, perhaps in excess of $11 trillion, that will tie the hands of the next president and Congress, to say nothing of imposing a crushing burden on taxpayers.
Just a few months ago, the Iraq war looked like the biggest thing in the eight-year era of the second President Bush, during which his party controlled Congress for six years.
Just a couple of Sunday mornings ago, Bob Woodward of the Washington Post said on national television that the war in Iraq “is probably the most important thing going on right now,” adding that in January the war in Iraq will be topic one in the next administration, and topic two will be the war in Afghanistan.
Now the country suddenly is facing a financial crisis fraught with the possibility of unprecedented economic disaster.
If that isn’t enough to make you reach for the antacid tablets, the president still has about three months left in office, plenty of time for yet another calamitous turn of events.
The national debt was about $5.7 trillion when Bush took office in January 2001. Today, after almost eight years and a couple of wars, the debt has risen to about $9.7 trillion.
And, by the way, that figure might rise another $1 trillion or so before Bush steps down on Jan. 20.
The national debt ceiling today is $10.6 trillion. Treasury Secretary Henry Paulson wants Congress to raise that to $11.3 trillion to clear the decks for massive borrowing to deal with the nation’s financial crisis.
A national debt of $11.3 trillion would come to more than $37,000 each for every man, woman and child in the United States.
And all this comes during an era of allegedly conservative, fiscally responsible Republican domination in Washington.
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