From National Journal:

This is the worst-case scenario from Europe, and it just might come true: Italy defaults on its debts. Every major Italian bank collapses. Recession grips the eurozone. Sovereign defaults and bank failures ripple across the Continent. Saddled with bad loans to nations and lenders in Europe, American banks hemorrhage cash. Credit freezes in the United States. Multinational companies, unable to raise money, curb U.S. investment and hiring. Wall Street demands, but fails to get, new bailouts. The entire developed world plummets into recession and, quite possibly, depression.

This, in contrast, is the placid warning that President Obama gave Americans about the threat: “If Europe is contracting,” he said on Monday, “then it’s much more difficult for us to create good jobs here at home.” There’s still a chance that Europeans, through some combination of fiscal and monetary action, can stop the crisis before it shatters the feeble U.S. recovery. But the worst case is so much worse than Obama’s description, and Washington has failed to prepare voters for the possibility. “The [potential] shock we’re talking about is of very large magnitude,” says Viral Acharya, a New York University professor who studies financial risk extensively. “If you’re just having an Armageddon coming your way, [America’s] buffers may not be adequate.”

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From Reuters:

Chu, a bookish physicist and Nobel laureate, took full responsibility for decisions on the loan, but did not apologize. He said his department did its due diligence on the risks, and was not influenced by Solyndra investor George Kaiser, an Obama donor.

He tried to give long and detailed answers, irking Republicans running the hearing.

“I don’t want you to take all of my time – can you just give a really short answer?” said Cliff Stearns, the Florida Republican who has led the committee’s probe.

Republicans argue the government could have pulled the plug earlier, but instead restructured the deal.

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Moody’s Credit Rating Service just announced the ominous trend that credit quality in the municipal bond market is falling at the fastest rate since the collapse of Lehman Brothers in 2008. Data released showed that 5.3 times as many municipal bonds were credit downgraded over the three last months than were upgraded. Moody’s emphasized that: “Downgrades dominated rating revisions across all public finance sectors except for healthcare,” said Assistant Vice President-Analyst Dan Steed, author of the report. “A rapid deterioration in credit metrics led to a higher-than-average 14 multi-notch downgrades.” Often sold to individuals as “conservative investments with tax free income”, munis in states like California, Illinois, New Jersey, and Pennsylvania are increasingly looking like high risk rolls of the dice.

This credit implosion comes after a sustained period when muni bonds were performing much better than corporate bonds. During the credit crisis; corporate bonds prices dropped by 30%, while muni bonds suffered very modest losses. The main reason for this stability was bail-out money showered on state and local governments by the Obama Administration. But fed money has dried up and property reassessments are falling for the first time since the 1970s. Strains on core operating expenses and revenue sources will likely persist, according to Moody’s: “This will be mostly due to economic stagnation, high unemployment, declining home values, and low consumer confidence,” said Steed. “We expect downgrades to continue exceeding upgrades in upcoming quarters.” This is polite ratings speak for: “duck and cover”.

The state revenues fell by $14.3 billion, even as the national economy has seemed to stabilize. The quarter ending September 30th saw 163 ratings reductions, the second highest 90 total in history. Over 100 of those downgrades were cities and school districts where falling property-tax collection is playing catch-up on the downside to the 30% fall in real estate values.

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From the Associated Press:

Greece is relying on rescue loans to remain solvent. But lagging efforts to tame a bloated budget deficit and enforce reforms are threatening that lifeline, which is conditional on fiscal progress.

Athens is trying to convince international creditors that it deserves to get the next, sixth tranche of money due from a bailout fund. Government spokesman Elias Mossialos said late Monday that Greece will get the bailout money.

Despite over 20 months of austerity and two international bailouts each worth about euro110 billion ($150 billion), Greece’s finances remain in a parlous state.

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I’ve made some uncannily accurate predictions in the past 3 years.

Back in 2008, as I ran for Vice President of the United States on the Libertarian Presidential ticket, I made a prediction I’m very proud of today. I said, “Voting for McCain is voting for four more years of Bush. But voting for Obama is voting for four years of Karl Marx.” How’s that working for you?

I also predicted that Obama’s entire Presidency would be devoted to saving the union- the teachers union, government employees union, and auto union. Sure enough, the White House now comes adorned with a union label. If you look closely at Obama’s forehead, you’ll find it’s stamped SEIU. Obama’s signature initiative Obamacare affects every American citizen, except union members. Real life under Obama is more shocking than fiction.

A year ago, while economists and Obama administration lackeys talked of a recovery, I publicly stated we’d never left the last recession and the worst was yet to come. I predicted that “Obama’s Axis of Evil” policies of taxation, regulation, government strangulation, unionization, litigation and illegal immigration would turn a serious economic crisis into The Greatest Depression Ever. It’s all unfolding before our very eyes on a daily basis.

As conditions got progressively worse during 2010, I predicted the Tea Parties would pull off one of the great landslide victories in U.S. political history that November.

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Florida Attorney General Pam Bondi is joining her Kentucky colleague Jack Conway in waging a war on for-profit colleges – with taxpayer funds – while turning a blind eye to problems in non-profit and state schools.  Except, in Bondi’s case, there are demonstrable instances of mismanagement, fraud, and abuse in those taxpayer-funded colleges that she appears to be ignoring for the time being.

A few examples of taxpayer waste that Bondi should be focusing on:

• State-funded Daytona State College, Florida A&M University, Edison State College, and Miami-Dade College all currently face losing their accreditation due to issues ranging from low performance standards to admitting students without required courses to employing too few professors.

• Florida’s biggest state universities are under fire for rampant abuses within their athletic programs.  Numerous Florida State University athletic teams have been forced to vacate wins due to academic misconduct, while University of Miami athletes have been discovered accepting illegal gifts and money.  The University of Central Florida is also under investigation for recruiting misconduct.

• The Florida state college corruption extends all the way up to state elected officials; former Florida House Speaker Ray Sansom came under fire for securing funding for a building at Northwest Florida State College that was in fact an airport hangar for political donors’ private jets.

Sounds like enough material for some high-profile state investigations, right?  Actually, Attorney General Bondi is focusing her government investigation on a handful of small, for-profit schools.  The charges against the schools largely revolve around allegedly false claims used by recruiters leading to enrollment of students who were under-qualified and/or unable to repay their loans upon completion.

Could it be that Bondi and others, including federal regulators, are attacking for-profit colleges chiefly because they have taken a piece of the higher education pie in recent years that was traditionally serviced by state-run community colleges and vocational schools?  The fervor with which state officials in Florida, Kentucky, Texas, and other states are going after for-profit schools suggests motivation beyond the desire to prevent a few gullible students from falling for glitzy ad campaigns.

At the federal level, the Department of Education’s proposed ‘Gainful Employment’ rule would create new narrow metrics to define “gainful employment” based on student debt-to-income levels and loan repayment rates.

What the DOE’s formulaic approach is missing is that these institutions serve student communities with significant risk factors such as low incomes, full-time employment, and delayed enrollment which adversely impact degree attainment and account for their having a higher loan default rate than less inclusive institutions.  Even with these challenges, the fact remains that for-profit colleges have a better record of graduating low-income and minority populations than public institutions and private, not-for-profit schools, at a substantially lower total government and taxpayer cost.

Am I the only one who grew quite tired of seeing John Kerry this weekend on the MSM talk show circuit deriding the Tea Party and what he is proffering as their responsibility for the S&P action Friday?  “This is without a doubt a Tea Party downgrade,” he fumed on Meet The Press. The common narrative being offered by Mr. Kerry et. al. is that the right-wing GOP held the prospect of not raising the debt ceiling—thus forcing a default—like a gun to the head of a hostage government.  They then defiantly maintained their ideological rigidity by rejecting any revenue increases as part of the debt compromise.  Faced with the Scylla of spending cuts with no  tax hike but the necessary debt ceiling increase, or the Charybdis of a default and potential ruin, the Democrats caved and the GOP won a pyrrhic victory while irresponsibly selling the nation’s future down the river to inevitable downgrade.

To all of the 63,239,109 citizens who voted against Kerry’s bid to be president in 2004, I thank you.  One weekend of this man was bad enough.  Only one driven by blind partisanship could blame the Tea Party for a downgrade that was, as economics professor Steve Horowitz rightly pointed out: “50 to 75 years in the making.  Us spending beyond our means, trying to do things we simply can’t do, and not having the revenues to support that spending. Spending that just shouldn’t be there in the first place.”  Indeed, the moment the New Deal kicked in, the clock started ticking.  S&P’s message was clear.  Welfare statism, the kind of pay-as-you go ponzi schemes masked as social safety nets that John Kerry pines for, is a fool’s bargain.  Ask Europe.

How dare Kerry deride representatives for following through with their commitments to their electorate?  The sweep of the House for the GOP in 2010 was as clear a mandate as can be offered by the American public that the reckless spending had to stop—a mandate to which the Tea Party representatives especially remained faithful.  They were sent to Washington to stop the out-of-control spending bus cold.  The entrenched interests like Kerry wanted the bus to continue heading off the cliff at 60 mph.  Yet, because the Tea Partiers did not want to “compromise” and slow the bus down to 30 mph they were labeled “extremists.”  They understand what Europe is learning.  The nanny state experiment that has lasted for a mere three generations is already collapsing under the weight of mathematics as so cleverly encapsulated in Margaret Thatcher’s famous quote…“you eventually run out of other people’s money.”

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Don’t you just love it when a political figure opens up his or her mouth and out comes STUPID?

Unfortunately, the blubbering of absolute absurdity happens on the left AND the right, but former DNC chairman Howard Dean, appearing this week on ‘Face the Nation’, barfed up something so ridiculous it spawned many Google searches on my part.

In discussing this nation’s debt crisis, Dean joined John Kerry, Charlie Rangel and even John McCain to some extent, in throwing the Tea Party Conservatives under the proverbial bus, blaming them for the inability to reach better deal on the debt ceiling. Dean’s comment went a little somethin’ like this:

“I think this is [the] Tea Party’s problem. I think they’re totally unreasonable and doctrinaire and not founded in reality. I think they’ve been smoking some of that tea, not just drinking it,” Dean said …

Smoking tea … Well, call me sheltered (and not many do …) but I certainly hadn’t heard of any such thing … Smoking tea? Do people do that?

And if they do, what kind?

Lipton? Nestea? Celestial Seasonings? Herbal?  Green tea? Will a Target generic brand suffice? I just had to find out exactly what would happen if one did actually fire up a tea doobie instead of steeping and drinking tea (I’m a journalist … don’t knock me for being curious.).

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Can you even imagine blaming a rape victim for being raped, or a terrorist victim for being murdered by terrorists? Of course not. In a sane world, it is the rapist and terrorist that is blamed for the crime, not the victim. But amazingly, this is exactly what Obama and his socialist cabal are now doing in the midst of the debt ceiling crisis- blaming the victims.

These out of control D.C. spending addicts are exactly like drug addicts who have abandoned their spouse, kids, and job to snort crack cocaine 24 hours a day. Even though they’ve stolen from us, we do all we can to help, doing our best to get them into rehab. But since they don’t want to stop snorting their drugs, what we get in return is hate, anger and blame. They accuse us of being horrible people for not willingly handing over more money to feed their spending addiction. They absurdly assert it’s all our fault and that we’ve forced them to rob us at gunpoint. And they scream that we are “extreme” while they keep snorting.

Only seriously delusional enablers can close their eyes to the fact that Obama and his fellow addicts have spent us to the edge of economic Armageddon, and blindly refuse to see that it is the addicts on Capital Hill who are irresponsible, dangerous, self-destructive, and suicidal. They can’t stop…they want more money…they deny they have a problem…and they think the answer to their addiction is more money, to buy more drugs.

Like all addicts they don’t blame themselves for their addiction, it has to be someone else’s fault. In this case they blame the taxpayers and the Tea Party. It’s our fault because we won’t willing give them more money, to buy more drugs. Just like the crack addict, in their mind the answer to their drug problem is holding up the taxpayers at gunpoint for more money. The addicts are sick. Insane. Delusional. And headed for death.

The only difference between a crack addict and the addicts in D.C., is that the crack addict is suicidal, hurting only himself. Unfortunately, the addiction of Obama and Congress is destroying the American economy and enslaving our children and grandchildren to unimaginable debt for decades to come. This is a murder-suicide.

In the midst of this crisis, madness and economic disaster, the Tea Party has come to the rescue. The Tea Party is trying to save America and put the government in rehab by cutting off the money that feeds the addiction. Like all addicts, Obama’s response, supported by his enablers- the progressive left and the biased leftist media- is to attack and blame the Tea Party.

Mr. Obama, after spending the trillions of dollars we’ve given you in our hard earned taxes and then spending trillions more you didn’t have on things we don’t want, you’re actually blaming us? Seriously? You want taxpayers to pay more of our hard-earned money to feed your addiction? If the victims feeding your addiction finally say “enough” you define us as “extreme?”

Taxes aren’t the problem. Heavy federal, state, local, sales, property, and corporate taxes are already choking the entire U.S. economy. The addiction to spending is the problem. Raising taxes hasn’t helped Europe. The PIIGS (Portugal, Ireland, Italy, Greece, and Spain) are all insolvent and bankrupt despite much higher taxes than America. More money has never helped a single addict in world history. Only tough love, discipline and rehab solves the problem. And only hitting rock bottom starts the healing process and saves their lives.

Obama is the mother of all spending addicts. He has an illness. Obama needs to stand up in front of America and say, “My name is Barack Obama and I am an addict. I apologize to the taxpayers, all of whom I have wronged. I apologize for spending our economy into insolvency and bankruptcy. I apologize for the historic levels of unsustainable debt. I apologize for trying to blame the victims (taxpayers) for my illness.”

It all starts with admitting you have a problem. You have to hit rock bottom. Obama and the Congress are addicts. They are ill. They need help. Taxpayers must refuse to pay more for their illness. We must not accept one dollar in new taxes.

Obama and Congress must learn to live with the money they’ve got. No more blaming the victim. The Tea Party and the taxpayers are the heroes here. We are the only sane ones in the room. We understand a spending addiction can’t be solved with more spending. It’s time to force the addicts to get help, or let them crash. It’s time to stop blaming the victim.

History repeats itself again and again. Obama and his spending-addicted socialist cabal is casting the Tea Party as radicals, going so far as to accuse them of treason for refusing to raise taxes or the debt ceiling. I’d like to remind Mr. Obama that is exactly what King George and his House of Lords called the original American Tea Party patriots. That didn’t work out so well for the king the first time.

From The Associated Press:

The deal reached by Congress to raise the debt ceiling and cut more than $2 trillion in public spending should have only a minor impact on the economy for the next two years.

Almost all the cuts would be made in 2014 or beyond. The approach heeds a warning by Federal Reserve Chairman Ben Bernanke and many private economists: Cutting too much too soon could harm the weak economic recovery.

Yet the deal won’t do much to help the economy, either, at least in the short term, economists said.

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With more than 90 votes from Democrats, the House has passed the recently announced deal to hike the debt ceiling. From The Associated Press:

With barely a day to act, the polarized US House of Representatives have approved a massive austerity plan to avert a debt default that would have wreaked havoc through the global economy.

After eight months of often angry negotiations, the Republican-led House voted 269-161 on a package backed by President Barack Obama to raise the limit on US borrowing and enact at least $2.1 trillion in spending cuts over the next decade.

The Democratic-led Senate was expected to approve the emergency measure in a noon (1600 GMT) vote Tuesday — scarcely 12 hours before a midnight deadline by which the world’s richest nation would run out of cash to pay its bills.

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As we issue this week’s essay, the leadership of both parties and the White House have announced agreement to end the debt ceiling crisis.  The deal, which still requires congressional approval, will increase the nation’s debt ceiling by $2.4 trillion while, over the next ten years, cutting an equivalent amount in government spending. It is a complex and convoluted deal that will make few people happy, but it will end the default nightmare…at least for two years.  The process attested to Otto Von Bismarck’s famous lament over a hundred years ago, “Laws are like sausages, it is better not to see them being made.”

The spectacle, leading up to the agreement, of leaders from both houses of congress taking turns bloviating before the TV cameras about the stubbornness of the other side did not, in our opinion, inure to the credit of anyone or of either party.  It became an exercise of “pathetic” condemning “more pathetic.”

Incumbents, Republicans and Democrats (including the President), may, we believe, pay a stiff price when they face the voters next year.  The political jockeying over the debt ceiling crisis may well result in a plague on both houses as voters contemplate the stress to which Washington subjected them.  Most grating to most voters, we believe, is that the crisis didn’t have to be a crisis. Every party to the debate has staked out positions that are politically motivated, unhelpful and laden with risk to ordinary Americans throughout the land.

House Speaker Boehner initially staked out the high ground and than caved on the issue of revenue (even revenue that would be derived from eliminating special interest tax breaks that have long outlived their usefulness or otherwise distort the marketplace).  He had proposed, wisely we think, eliminating almost all tax deductions and then reducing marginal rates as a trade-off even though the revenue derived from that exchange might well exceed current tax revenue.  The elimination of these special interest tax breaks, which we had suggested in an earlier essay, was subsequently pulled off the table. We believe, and have often stated, that taxes, with few exceptions, should be used to raise necessary revenue rather than to influence, or distort, individual or corporate taxpayer behavior. His earlier insistence on a short-term resolution that would have had the country replaying this farce in a few months has been stricken from the deal.

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From The Associated Press:

Ending a perilous stalemate, President Barack Obama and congressional leaders announced historic agreement Sunday night on emergency legislation to avert the nation’s first-ever financial default.

The dramatic resolution lifted a cloud that had threatened the still-fragile economic recovery at home—and it instantly powered a rise in financial markets overseas.

The agreement would slice at least $2.4 trillion from federal spending over a decade, a steep price for many Democrats, too little for many Republicans. The Treasury’s authority to borrow would be extended beyond the 2012 elections, a key objective for Obama, though the president had to give up his insistence on raising taxes on wealthy Americans to reduce deficits.

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Just minutes after Senate Majority Leader Harry Reid (D-NV) tabled (read: killed) the second piece of legislation presented by the House to his chamber addressing solutions to the politically manufactured debt ceiling “crisis” – legislation crafted through not only bipartisan negotiations among members of the House, but bipartisan consultation with Senate members – Mr. Reid had the unmitigated gall to infer that Republicans were being “obstructionist.”

As reported in the Washington Times:

“Republicans offered to let the vote happen Friday night, just minutes after the chamber voted to halt a House Republican bill. All sides expect Democrats’ bill will fail too, and the GOP said senators might as well kill both at the same time so that negotiations could move on to a compromise.

“‘We would be happy to have that vote tonight,’ Sen. Mitch McConnell, Republicans’ leader, offered.

“But Senate Majority Leader Harry Reid objected, even though the vote would occur on his own bill. He instead said the chamber would have to run out the full procedural clock, which means a vote in the early hours Sunday morning.

“He said he would be willing to move up the vote if Republicans didn’t insist on a 60-vote threshold, which has become traditional for big, controversial items to pass the Senate. But the GOP held firm on that demand, so Mr. Reid said he would insist on the full process, which he said would show the country that Republicans were being obstructionist.”

At a time when the American people are screaming – nay, demanding – that those elected to office in Washington stop with the political positioning and gamesmanship, Progressive Democrat Harry Reid, a man whose approval rating is just 27 percent, whose negatives stand at 53 percent, a man whose last election was handed to him not by the people of Nevada but by the union members of Las Vegas, represents the quintessential example of exactly the kind of behavior Americans detest.

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From The Associated Press:

First word of an effort to reach a compromise came at mid-afternoon from Senate Republican Leader Mitch McConnell and House Speaker John Boehner—Obama’s principal Republican antagonist in a contentious new era of divided government. Both GOP leaders said they were in touch with the White House and hopeful of a deal.

Senate Majority Leader Harry Reid heatedly denied their claims of progress on the Senate floor a short while later, but several hours later said events had changed.

“There are many elements to be finalized…there is still a distance to go,” he said in dramatic late-night remarks. “I’m glad to see this move toward cooperation and compromise,” he added.

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From The Associated Press:

Riven by partisanship, the Republican-controlled House approved emergency legislation Friday night to prevent a threatened government default and bundled it off to swift and certain defeat in the Senate.

“We are almost out of time” for a compromise, warned President Barack Obama as U.S. financial markets trembled at the prospect of economic chaos next week.

The final outcome—with the White House and Senate Democrats calling anew for compromise while criticizing Republicans as Tuesday’s deadline drew near—was anything but certain.

The House vote was 218-210, almost entirely along party lines.

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As we tick-tock toward August 2nd, the day President Obama and Treasury Secretary Tim Geithner have set as the day the Executive Branch will have to start prioritizing expenditures – establishing what programs are covered exclusively by actual tax revenue and not borrowed money, we approach an artificial deadline for a secondary issue created by a much more systemic national malady. Where the news media and elected officials argue, whine and mislead on the issue of raising the federal debt limit ceiling, the debt ceiling isn’t even close to the issue that all inside the beltway, but for the TEA Party, are refusing to address seriously: overspending.

Many on the Left side of the aisle have been caught rationalizing the need to raise the debt ceiling by noting it has been raised 78 times since 1960 – 49 times under Republican presidents, and 29 times under Democrat presidents, an irrelevant attribution due to the fact that Congress holds the power of the purse, not the Executive Branch. In fact, if one wants to split hairs about which party has presided over the majority of debt ceiling raises, and, consequently, which party has presided over the most deficit spending, it would be more accurate to point out that Democrats, from 1960 to 2010, have held the majorities in the Senate for 36 years and the House for 41 years. Ergo, Democrats and Progressives are far more to blame than Republicans for bringing the nation to the precipice of financial ruin.

Truth be told, both sides of the aisle are to blame for spending beyond their means, the honest man – or woman – recognizes and acknowledges that Congress has been spending more than it takes in for generations, whether under Republican leadership or Democrat leadership. That said, our nation would be infinitely better served if the news media and the elected class abandoned the blame game and political gimmicks – something that Progressives and especially Pres. Obama are not wont to do, to focus on the urgent need for them to commit to balancing the budget.
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From The Associated Press:

An intensive endgame at hand, Republican leaders abruptly postponed a vote Thursday night on legislation to avert a threatened government default and slice federal spending by nearly $1 trillion.

“The votes obviously were not there,” conceded Rep. David Dreier, R-Calif., after Speaker John Boehner and the leadership had spent hours trying to corral the support of rebellious conservatives.

The decision created fresh turmoil as divided government struggled to head off an unprecedented default that would leave the Treasury without the funds needed to pay all its bills. Administration officials say Tuesday is the deadline for Congress to act.

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“Men of experience succeed even better than those who have theory without experience…If, then, a man has the theory without the experience, and recognizes the universal but does not know the individual included in this, he will often fail to cure; for it is the individual that is to be cured.” –Aristotle

Aristotle’s wise words from 2,500 years ago gives us the precise reason why the president’s statist economic policies are failing miserably. Keynesian economists like New York Times columnist and Nobel Prize winner Paul Krugman believe that during times of economic slowdown, it is the government’s responsibility to jump start the economy and spur economic growth by the government itself spending large sums of borrowed money – usually on make work public works projects. The theory goes that when the government spends large sums of money during a slowdown, this will somehow motivate businesses and consumers to spend money as well.

Two years after the president’s ’stimulus’ plan, with consumer confidence at all time lows and with unemployment at 9.2% and rising, the plan has obviously been a failure. That is why it is difficult to understand why someone of Krugman’s stature, as late as July of  this year, would argue for more stimulus spending and downplay the need to address our massive national debt when it’s obvious that the stimulus package has failed:

“What I keep hearing from Washington is one of two arguments: either (1) the stimulus has failed, unemployment is still rising, so we shouldn’t do any more, or (2) the stimulus has succeeded, G.D.P. is growing, so we don’t need to do any more. The truth, which is that the stimulus was too little of a good thing — that it helped, but it wasn’t big enough — seems to be too complicated for an era of sound-bite politics.’

“So no, I mean, the deficit doesn’t matter. The economy matters. And that’s why somehow or other, Obama has got to get jobs being created.”

Again:

“Men of experience succeed even better than those who have theory without experience”

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From The Associated Press:

A fast-approaching deadline is bound to heighten anxiety. That’s what happening on Wall Street as investors grow increasingly uneasy about the political stalemate over raising the nation’s debt ceiling.

The Dow Jones industrial average has closed down for four sessions in a row. And the declines have been steeper each day, reaching almost 200 points Wednesday.

Lawmakers face an Aug. 2 deadline or risk triggering an unprecedented federal default and unpredictable fallout in the economy. As the contentious debate in Washington heated up, initially the stock market didn’t show much reaction. But recent days have reflected signs of greater concern.

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