Friday, February 17, 2012

Quick Hits - February 17, 2012

Rapidly rising gasoline prices welcome us this morning.  The average price of gasoline in San Diego, California hits $3.992 per gallon.  This is an increase of 4.8 cents in the last day, 16.2 cents in the last week, 26.7 cents in the last month, and is 49 cents per gallon higher than it was exactly one year ago.  Come President's Day on Monday, expectations are that the prices will top $4.00 per gallon.  This as the country is on its way to $5 per gallon prices this summer.

File:Line at a gas station, June 15, 1979.jpg

What impact do you think these prices will have on the economy - GDP growth and unemployment?  We may not see the gas lines of 1979 under President Carter - but skyrocketing prices will still have a huge impact on the country.

One of the problems we face is that the President, and his Administration, like high gasoline prices.  High gasoline prices, they believe, will influence the American people to accept / adopt their policies...
During his presidential campaign, Obama admitted he didn't have a problem with sky-high gasoline prices, he just "would have preferred a gradual adjustment."

His choice for energy secretary, Steven Chu, certainly doesn't mind them. Before joining the administration he said that "somehow we have to figure out how to boost the price of gasoline to the levels in Europe."

And last year, Chu claimed "the price of gasoline over the long haul should be expected to go up."

At the same time, Obama has repeatedly feigned an inability to do anything about oil prices. Last April, he said: "I'm just going to be honest with you. There's not much we can do next week or two weeks from now."

But this simply isn't true.

The country is virtually awash in oil, with as much as 1.4 trillion "recoverable" barrels now available, thanks to new discoveries and advanced drilling technologies, according to the Institute for Energy Research.

That's about twice the proved reserves in all of OPEC. But much of it is off-limits due to federal restrictions.
This is part of that 'fundamental change' we're experiencing.

We've referenced some of the clueless comments made by the WH Budget Director Jeff Zients over the last couple of days when faced with questioning from Congress over the President's FY2013 budget.  Yesterday, Treasury Secretary Timothy Geithner was on 'The Hill' to face questioning - and he also did not disappoint when questioned about the President's 2013 budget, spending, and fiscal reality.

Geithner makes two claims. First, that the president's 2013 budget meets the "critical test" of "restoring our deficits to a more sustainable position." As I wrote earlier this week, the closest this budget ever comes to balancing is in 2017, when our national balance sheet will witness an annual deficit of over $600 Billion -- more than double President Bush's average deficit. Geithner's idea of responsible sustainability also entails spending $47 Trillion over ten years and adding $11 Trillion to the national debt, which is already approaching $16 Trillion. Good to know. Second, Geithner says that Obama's new budget and Ryan's 2012 budget aren't too far apart ("it's a pretty small gap") when it comes to debt levels over the next ten years. Although Ryan's budget offers a significantly lower spending trajectory over Geithner's cherry-picked ten year window (as the second graph Ryan pulls up demonstrates), Geithner's point isn't entirely inaccurate. The Ryan budget, as you may recall, leaves the current entitlement spending regime intact for current and soon-to-be seniors. Only those 54 and younger would experience Ryan's necessary reforms, so the gargantuan difference doesn't start developing until the "out years" of future decades ...

...Treasury Secretary Timothy Geithner, speaking on behalf of the Obama White House, to Rep. Paul Ryan: "You are right to say we're not coming before you today to say 'we have a definitive solution to that long term problem.' What we do know is, we don't like yours."

To help visualize the issue - here's the chart based on the Obama budget showing the fiscal irresponsibility around the ever increasing debt levels -

We don't really have to extend this that far out to see the next crisis point.  That will be occurring around late September - mid October of this year when we hit the debt limit ceiling once again.

Last summer, during contentious debates and negotiations, a debt ceiling compromise plan was agreed upon that supposedly would defer any new challenges with the debt limit ceiling until after the November 2012 elections...
“Following the contentious debt ceiling last August, President Obama promised that he would take action to address the country’s fiscal crisis. He has failed to do that," Portman said. "In fact, his new budget increases spending and projects that Washington will be hitting the debt ceiling again in mid-October – burning through a $2.1 trillion debt limit increase in just over 14 months."

Portman's office notes that according to Obama's budget, total debt subject to the statutory debt will reach limit will reach $16.334 trillion by September 30, 2012. This is just $60 billion below the 16,394,000,000,000 debt limit. Since the federal government is adding to the national debt at a rate of $132 billion a month, the debt ceiling is on schedule to be reached by October 15, 2012.
$2.1 trillion in 14 months. And what President Bush did was 'irresponsible' and 'unpatriotic'?

Gas prices, unemployment, and national debt will be HUGE issues in this fall's election campaign.  I just hope the GOP candidates learn to articulate a viable and responsible vision towards addressing these - while contrasting the evidence of what we've seen in the last 3+ years.

More evidence of the fiscal and economic irresponsibility of this Administration?  How about excessive regulations which are having a major negative influence on economic growth in the US?

The center-left weekly publication 'The Economist' even notes the effects of over-regulation in the United States...
The home of laissez-faire is being suffocated by excessive and badly written regulation.… The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively. America is meant to be the home of laissez-faire. Unlike Europeans, whose lives have long been circumscribed by meddling governments and diktats from Brussels, Americans are supposed to be free to choose, for better or for worse. Yet for some time America has been straying from this ideal.
One of the major culprits - the Dodd Frank Banking Reform bill that was rammed through the Democrat majority Congress in 2009 and signed into law by President Obama..
SECTIONS 404 and 406 of the Dodd-Frank law of July 2010 add up to just a couple of pages. On October 31st last year two of the agencies overseeing America’s financial system turned those few pages into a form to be filled out by hedge funds and some other firms; that form ran to 192 pages. The cost of filling it out, according to an informal survey of hedge-fund managers, will be $100,000-150,000 for each firm the first time it does it. After having done it once, those costs might drop to $40,000 in every later year.

Even Dodd-Frank’s creators can bring no similar clarity to its intentions. In 2009 Mr Frank attempted to frame the new law’s goals under four heads: securitisation, compensation, liquidation and systemic risk. But in a single speech his ambitions overflowed to consumer protection and the reform of ratings agencies, too. Ambition is often welcome; but in this case it is leaving the roots of the financial crisis under-addressed—and more or less everything else in finance overwhelmed.
Do you know who Richard Cordray is?  He's the head of the Consumer Financial Protection Bureau created by Dodd Frank - and was, according to Republicans, unconstitutionally recess appointed to lead the CFPB by President Obama while the Senate was in pro-forma sessions in early January 2012.  [Courts will determine if this is the case]

He's decided that what he needs most to do his 'job' at the CFPB is more power...
When Senate Republicans blocked the confirmation of Richard Cordray to run the Consumer Financial Protection Bureau, they did so in protest of the ambiguous and open-ended power granted to CFPB by the previous Democratic-controlled Congress. Barack Obama blasted Republicans for obstructionism, defended Cordray as a mainstream, responsible choice to lead the CFPB, and gave him a recess appointment [see update below]. Now that he’s ensconced at the CFPB, Cordray’s first action is to demand even more power at CFPB, including new federal oversight on collection agencies...
More power for government.  Democrat National Committee chair, Congresswoman Debbie Wasserman-Schultz is all for this.   In an appearance with Fox News anchor Megyn Kelly yesterday on the debate over the Obamacare / Administration mandate that religious organizations have to provide contraception, sterilization, and abortaficients to their employees even if those services violate their religious beliefs, the vapid DWS argues that she opposes the thought that religious organizations can impose their values on their employees - but having the government impose its values on anyone or any entity is perfectly acceptable...

As noted by Hot Air in their post on DWS's interview...
Well, here’s the solution to that: if you don’t subscribe to the doctrines of the religious organization for which you work, find another job. Benefit packages are a competitive part of compensation, and those who don’t like the package at one employer can vote with their feet by working elsewhere. Believe me, as a hiring manager for 15 years, those competitive practices do work, and businesses are constantly calculating their competitive position on all forms of compensation. That’s the nature of voluntary, market-based associations like employment.

Even besides that point, going off onto a harangue about the evils of imposing one’s values while demanding compliance with a government mandate that forces religious organizations to subordinate their doctrine to the values of this President is about as good a demonstration of irony as one will see.
While we're not quite ready for today's 'This Day in History' segment, did you know that on this day in 2009, President Obama signed into law his Stimulus legislation which was supposed to turn the economy around...but instead utterly failed.
Three years ago today, President Barack Obama signed into law his trillion-dollar stimulus plan, a measure that he promised would save or create 3 million jobs by the end of 2010 and would prevent unemployment from ever going above 8 percent. And though the President today will likely claim that thanks to his efforts, the U.S. economy is surging, don’t believe him. The verdict is in: Obamanomics has failed.
But you don’t have to take our word for it. Yesterday, the Congressional Budget Office (CBO) released a report offering an analysis of the last three years of the Obama economy. In short, the stimulus did not live up to the President’s promises.
The CBO writes that America’s unemployment rate has exceeded 8 percent since February 2009, making this the longest stretch of high unemployment since the Great Depression. To make matters worse, unemployment will remain above 8 percent until 2014. And the level of long-term unemployment — those looking for work for more than six months — is over 40 percent, the highest since at least 1948, when that data was first collected.
Tying all of this together, we have one item of breaking news that notes Congress has passed the Temporary Social Security Payroll Tax 2% Reduction bill and sent the bill to President Obama for his signature.  The House passed the bill by a vote of 293 - 132, with 91 Republicans and 41 Democrats opposing the bill.  In the Senate, Senate Majority Leader Harry Reid announced that he was going to use the reconciliation process on the bill in order to bypass the need for a cloture vote.  The Senate, needing only a simple majority to pass the bill, approved it by 60 - 36.

In other breaking and developing news, Federal authorities announced this morning that they have arrested a Moroccan man who was heading towards the US Capital wearing a vest he believed was loaded with explosives in an attempted suicide bombing attack.
The man, in his 30s and of Moroccan descent, was nabbed following a lengthy investigation by the FBI, initiated after he expressed interest in conducting an attack. It's unclear how the FBI learned of his aspirations.
he man thought undercover FBI agents assisting him in his plot were associates of Al Qaeda.
Umar Farouk Abdulmutallab, aka the 'Underwear Bomber', who tried to bring down Northwest Flight 253 over Detroit, Michigan on Christmas Day 2009 said he was 'proud to kill in the name of God' before being sentenced to multiple life sentences yesterday for the attempted attack.
Intelligence officials said that while in Yemen, Abdulmutallab also met with Anwar al-Awlaki. In March 2010, Awlaki released a tape praising Abdulmutallab. He addressed the "American people and said that nine years after the 9/11 attacks, "you are still unsafe even in the holiest and most sacred of days to you, Christmas Day."
al-Awlaki was killed last year in a US drone strike inside Yemen.  He also was connected not only with several of the 9/11 terrorists, but also recruited and motivated Major Nidal Hassan to go on a shooting rampage at Fort Hood, Texas killing 16 and wounding 29 on November 5, 2009.

The Islamic jihad / terror group Boko Haram, responsible for a number of terror attacks inside Nigeria targeting Christians, is suspected in a major attack on a Nigerian prison which resulted in the release of at least 119 prisoners.

The GOP Presidential Primary debate scheduled for March 1, 2012 in Georgia, hosted by CNN, has been cancelled by CNN after all GOP candidates except for Newt Gingrich declined to attend.

German President Christian Wulff resigned earlier today, bowing to pressure in the wake of disclosures over his personal financial deals and the acceptance of financial favors from his political backers.  Prosecutors in Germany are trying to strip Wulff of his Presidential immunity and open a criminal investigation.  This is a major embarrassment for German Chancellor Angela Merkel who postponed a planned trip to Italy on the announcement.

Still no new decisions from the EU, ECB, or IMF regarding the Greek bailout.  The demands of the 'troika' continue to escalate - making it harder for Greece to meet the austerity demands.  There is a certain irony in these escalating demands - which are almost 'Carthaginian' in their nature...
The US, Canada, Britain, France, Greece, and other signatories at the London Debt Agreement of 1953 granted Chancellor Konrad Adenauer a 50pc haircut on all German debt, worth 70pc in relief with stretched maturities. There was a five-year moratorium on interest payments.

The express purpose was to give Germany enough oxygen to rebuild its economy, and to help hold the line against Soviet overreach. This sweeping debt forgiveness caused heartburn for the British - then in dire financial straits, themselves forced to go cap in hand to Washington for loans. The Greeks had to forgo some war reparations.

Yet statesmanship prevailed. The finance ministers of the day agreed to overlook the moral origins of that debt, and the moral hazard of “rewarding” a country that had so disturbed the European order.

The Wirtschaftswunder whittled down the burden of German debts to modest levels within a decade. Germany emerged as a vibrant democracy and a pillar of the western security system.

Greece has less strategic relevance, and must comply with tougher terms.

On This Day in History

1801 - After 1 tie vote in the Electoral College and 35 indecisive ballot votes in the House of Representatives, VP Thomas Jefferson is elected the 3rd President of the United States over his running mate, Aaron Burr.  The election exposed problems in the process as originally defined in the US Constitution which led to the 12th Amendment.

1820 - The US Senate passes the Missouri Compromise - an attempt to deal with the divisive issue of extending slavery into new US western territories.

1966 - Brian Wilson of the Beach Boys, rolls the tape for the first take for the song 'Good Vibrations'

1972 - The 15,007,034th Volkswagen Beetle comes off the assembly line, breaking a world car production record held for more than 4 decades by the Ford Model T - which was produced between 1908 and 1927.

1979 - The Peoples Republic of China invades Vietnam.  Heavy fighting continued for 9 days as China's PLA pushed into Vietnam before withdrawing.

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