Debt, Default, and Downgrade

Here’s my take on the recent “debt crisis” in the US.

For the most part, I support Obama’s position, though there are significant differences in the details. For example, I see the COLA (cost of living adjustment) for Social Security to be a terrible thing, as this in itself generates an expectation of inflation; and now would be a good time to do away with that, considering the total of inflationary pressures lying in wait. For that reason, I see linking the COLA to a variant calculation as being somewhat misguided, though good for reducing the overall growth of entitlement spending. Confining the COLA to three-year adjustments based on incoming revenues would be my choice.

And so, the devil is in the details. Nevertheless, I do prefer the “balanced approach,” whether it’s a 25-75 or 20-80 split.

I don’t place any stock in complaints from the Right that Obama failed to make specific proposals. He already had the Simpson-Bowles commission. As much as Nixon could be said to be void of leadership for advocating block grants to the states, then this same criticism could be said to hold water. But I’m not buying it. Obama is no micro-manager; that’s all.

Nor should he be. The role of management is to delegate authority; and Obama did this well, according to his own management style.

The President also got to make some great speeches. He got a column published in USA Today. Good work. Obama got to play the adult in the room.

His leadership proved to be somewhat ineffective, though I’m not inclined to hold this against him, for reasons I explain below. The radical elements in his own party have undermined his effectiveness. To be clear, these wackos try to define the Democratic Party, but work against every principle of building a “big tent” in their attempts to thrust their unpopular radical agenda on the rest of the nation. Those people are essentially the mirror image of the social conservatives (ie the SoCons) that had their day with the Geo. W Bush presidency. Personally, I would rather have the SoCons.

Boehner did well, too. His stake was much like Obama’s at the end. He presented better leadership than position, but still the radical element in his own party undermined his leadership. Boehner has the potential to be a great. He did well with negotiations.

The rejection of the Boehner plan by the House proved to be a turning point. The addition of a balanced budget amendment ensured that. Now Boehner, like Obama, needs to gain more control over the fringe within his own party. Assessing the matter frankly, I would say that the both of them have little hope in that regard.

Basically, the main issue with a balanced budget amendment is that the calendar year is an arbitrary measure of time to an economic cycle; that is, recessions do not come only in the cold of winter, nor boom times with late spring. Again, perhaps tying something to a three-year span, or to a general statement of principles could suffice. But amendments are a difficult thing to come by, to be sure.

The Senate Leader, Harry Reid, showed profound leadership, mostly by staying quiet and out of the way most of the time. In general, the Senate came out of it looking good, even Mitch McConnell. In fact, it could be said that the Tea Party is so rotten that they make even Mitch McConnell look good.

Which brings me to Michele Bachmann. Loon. Pretty much says it all. Wonder how she’s thinking about default with the huge drop in the Dow after the downgrade. Clueless loon.

Which brings me to the House Democrats. Make no mistake about it— any party stupid enough (ie the House Democrats) to elect the same leader (ie Nancy Pelosi) after losing the majority when that leader was campaigned against so heavily on the national level (as in “the Obama-Reid-Pelosi agenda”) fully deserves to be in the minority. And true to form, Pelosi demonstrated why they deserve to remain in the minority. To her credit, she was willing to compromise for the sake of being able to legislate— at first. Still, the presence of persons such as Pelosi and Wasserman-Schultz in leadership positions necessitates the reactivity of the Tea Party— it practically demands it.

And it occurred to me, that if all this trickle-down bunkum was anything other than hogwash, then tax everyone making less than $500k/yr at an 80% rate, while making everyone with an income over $5 million exempt. Think of what a grand place the world would be! If they really believed that it would make all that much of a difference, they would have done it already.

As for the downgrade, it can be seen as either over-wrought or past due. The depth of the greenback remains unparalleled. When OPEC determines that it would be within their means to issue a common currency for member states, stand back; until then, ho-hum.

From my view, in seeing all of this take place over the past few weeks, what I see in it is the ascendancy of China as the world’s sole superpower; neither good nor bad in itself, just a different method of doing things. In fact, I see a benefit to the West having to reckon with China under her own terms.

And while the news was all abuzz with the downgrade from S&P, quietly and without much to-do at all, China launched her first aircraft carrier into the cool Pacific waters. The earth slightly and almost imperceptibly shifted on its axis, bringing summer to some and winter to others. Prayers were offered up to farmers whose crops had failed in the drought and victims of the heat wave.

The cycle begins anew.