After weeks of hard negotiation a compromise deal is has been drafted and will be voted on by both houses before the end of the day tomorrow. This deal does give a political victory for some of the players and more importantly can even lead to a victory for the country provided that GOP leadership of both houses consider this as a starting point, and make certain steps to keep the pressure coming. The bill will not forestall a ratings download, but honestly I don’t believe that anything could as even a bill that cut $4 trillion doesn’t cut the deficit but merely slows down its growth.

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.

(more…)

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Francis Cianfrocca to discuss the McConnell – Obama debt deal, how we got screwed, and the weak GDP report.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Erick Erickson: Not Playing the Fool
Obama, Congressional Leaders Reach Debt Deal
Monday Look Ahead: Debt Deal Rally Could Be Short-Lived
PIMCO CEO Mohamed El-Erian: Budget Deal Will Only Bring Short-Term Relief
The Q2 US GDP report – just terrible
Economists React: ‘Recovery? What Recovery?’

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From Major Garrett at National Journal:

In many respects, the deal will, if approved by all parties, resemble the contours of a short-lived pact negotiated last weekend by House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev. Obama rejected that deal, forcing Congress to wrestle with other inferior legislative options throughout the week.

Among the newest wrinkles, according to informed sources, is an agreement to extend the current $14.3 trillion debt ceiling very briefly to give the legislative process time to work without resorting to emergency, hurry-up measures.

President Obama has said he would only sign a short-term extension (days, not weeks) if it were linked to an extension of borrowing authority that lasts beyond the 2012 election.

According to sources, the Senate would use the military construction appropriations bill, one currently available for action, as the vehicle for the short-term extension. This element of the arrangement, like everything else, is subject to modification. But those close to the negotiations expect Congress to slow things down without jeopardizing the nation’s full faith and credit. A debt extension of days would achieve that goal. (more…)

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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Circular firing squads are very helpful…when they’re done on the other side of the aisle. That is why Democrats are so happy lately, sitting back and watching all the Republican in-fighting over deft ceiling deals. Sadly, Republicans have been all too happy to oblige. It’s time for them to stop and shift the onus to Democrats in the Senate and the White House, where it belongs.

The normal way passing legislation works is the House passes a bill, the Senate passes a bill on the same subject, they come together in a conference committee to hammer out the differences to form one bill, then both chambers vote again on the finished product. The way this debt negotiations have been going is the House passes a bill, the Senate and the President say they don’t like it. The House passes another bill, the Senate and the President say they don’t like it. Lather, rinse, repeat.

While this kabuki dance goes on, Republicans keep offering more and more plans, fighting amongst themselves and the media reports it as if they are the ones being unreasonable. This needs to stop.

It’s too late to stop a vote on the latest plan introduced by Speaker Boehner, it’s out there and everyone is expecting a vote on it. But that should be the last vote the House takes on the issue until the Senate acts on something.

What good will that do?

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OBAMA:  Ryan’s the one who’s giving their caucus spine.  And he still won’t budge?

VALERIE JARRETT:  No, sir.  His family . . .  release them?

OBAMA:  Not yet.  Give it another day or two.  Let Mrs. Ryan have formula for the baby, though.

BILL DALEY:  What about Kucinich?  He’ll block the House from doing anything that passes muster with Senate Democrats.

OBAMA:  Get him on the horn.

[Daley dials, hands phone to President]

Hey Dennis, how ya doin’?  Look, if the Boehner plan blows up in the House, we think we can get the Senate to swallow the Reid Plan.  But first we have to get it through your chamber, and as long as you don’t . . . .  Well, yes, I remember our discussion.  [sighs] Yes, I agree to your terms.  [hangs up]

DAVID PLOUFFE:  What did you just promise him, sir?

OBAMA:  On my next overseas trip, we’ll install a booster seat in Air Force One’s co-pilot chair, and he’ll pretend to fly the plane.

JARRETT:  Well, that’s not too bad.

JOE BIDEN: I hate to bring it up, Boss, but I busted my butt with the Gang of Six, and uh, you said . . . . (more…)

With Sen. Harry Reid (D.-Nv.) leading the charge that killed the Cut, Cap and Balance Act (it apparently was the “worst piece of legislation” he’d ever seen),  and a new deal to break the impasse over raising the debt ceiling looming, it’s appropriate to ask why Democrats hate the idea of a balanced budget amendment.

Americans are forced each day to live with a balanced budget – families can only spend more than their income for a short time without ultimately going into default.  Firms in a private market must live with a balanced budget or they’ll quickly exit industry.

So, why do Democrats hate the idea of a balanced budget amendment?  Such an amendment would force Congress to spend within its means.  What’s the problem with forcing expenses and revenue to equal each other?  It seems to make sense in the absence of some mechanism (like profits and losses in the private market) to incentivize a prudent use of resources, that politicians should be bound to spend within their means.

It’s not that Democrats don’t believe in fiscal discretion or think there are no consequences to amassing a massive debt for future generations to pay.  President Obama has repeatedly stated that deficit reduction is a priority, and he favors a “big deal” to both raise the debt limit and reduce spending by billions.  Democrats in Congress have supported these goals of working hard to reduce the deficit over the next decade.  Listening to lawmakers speak about their desire to cut spending, one would expect wide-spread bipartisan support for a balanced budget amendment.

Not so fast.

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From Jennifer Rubin in The Washington Post:

A Republican aide e-mails me: “The Speaker, Sen. Reid and Sen. McConnell all agreed on the general framework of a two-part plan. A short-term increase (with cuts greater than the increase), combined with a committee to find long-term savings before the rest of the increase would be considered. Sen. Reid took the bipartisan plan to the White House and the President said no.”

If this is accurate the president is playing with fire.

(more…)

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the latest debt ceiling negotiation developments from this weekend, and how the markets will react if no deal is reached in time.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

It’s Time to End the War on Salt
Debt-limit compromise elusive as separate strategies take shape in House, Senate
In Other Words, House Republicans Should Hold the Line on Cut, Cap, and Balance
Stocks Slump as Debt Talk Worries Continue

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“We inherited a mess…”

How many times have we heard this tired mantra, usually offered as a rebuttal to suggestions that Obama and his party are responsible for our ongoing economic doldrums? It seems reflexive, almost unconscious. How else can one explain how liberals continue to defend themselves against the indefensible?

The explanation is both psychological and political.

Psychology has long sought to comprehend and explain these tendencies. One of the hallmarks of Sigmund Freud’s psychoanalytic theory is the concept of defense mechanisms. These are unconscious maneuvers that a person’s ego utilizes to protect one’s personal sense of integrity. Students who passed  Psychology 101 likely recall some of the well-known defense mechanisms: denial (such as Jay Carney’s  recent insistence that “The economy is vastly improved…”), regression (the infamous tantrums of Rahm Emanuel and Alan Grayson), and repression (Harry Reid conveniently “forgetting” that he had railed against raising the debt limit just a few years ago). But the most infantile— and therefore common— defense of the Left is projection.

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From The Financial Times:

Barbara Mikulski, Democratic senator from Maryland, best captured the turn of events in the critical US debt talks.

After emerging from a lunch meeting on Thursday with members of her party and Jack Lew, the White House budget director, Ms Mikulski said her colleagues were feeling “volcanic” about the prospect of a $3,000bn deal to cut deficits and raise the debt ceiling that did not include any higher taxes, adding that it was “like Mount Vesuvius” in the room.

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In 2006, every Democrat Senator (including Senator Barack Obama) voted against raising the debt ceiling. Among the reasons Obama listed for voting against it was that doing so would be “a sign that the U.S. government can’t pay its own bills” and “a sign that we [were dependent] on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.”

Of course, that was under George W. Bush. But now that Obama is president, and the debt ceiling of $14.3 trillion is about to end the spending spree Democrats have been on since January 2009, Obama has reversed course. Now, he not only favors raising the debt ceiling but also talks as if our nation’s very continuance depends upon doing so.

The truth, of course, is that Obama’s legacy and re-election are on the line and he knows it.

Thus everything we’re hearing from him about raising the debt ceiling is nothing more than the cry of a president who has spent his country into oblivion and is looking for a way to avoid the blame for doing so.

Senate Majority Leader Harry Reid (who also voted against raising the debt limit in 2006) is doing his best to lie to the public to save Obama from the consequences of reckless spending by pressuring Republicans into supporting he idea of raising the debt limit. To do this, he is giving them a fictional narrative of what life will be like if we decide to live within our means instead of continuing to spend money as fast as we can print it:

Default won’t just roil the financial markets, pushing interest rates higher, and tank the stock markets; it will affect every American’s wallet as well. Here are a few things that will happen. Social Security checks and veterans’ benefits and paychecks to our troops would stop.

Folks, think about it: This is a grand slam for Republicans. They can win by simply saying “no.”

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ABANDON ALL HOPE OF CHANGE

PALIN DELENDA EST

Democratic National Committee

Unposted Principals’ Meeting

July 5, 2011

OFFICERS PRESENT

Debbie Wasserman Schultz, National Chair

Mike Honda, Vice Chair

Linda Chavez-Thompson, Vice Chair

OFFICER NOT TOLD OF MEETING

Donna Brazile, Vice Chair

INVITED GUESTS

Harry Reid, Senate Majority Leader

Nancy Pelosi, House Minority Leader

John Zogby, Pollster

Brian Williams, Network Liaison

George “Daddy Warbucks” Soros

WASSERMAN SCHULTZ: John, what’s the latest?

ZOGBY:  No change.  A commenter picked at random from Breitbart’s biggovernment.com would thrash President Obama next year in all 57 states, despite ACORN’s Get-Out-the-Dead-Vote project.  The down-ticket effects would be equally catastrophic. (more…)

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Pejman Yousefzadeh and Elizabeth Blackney to discuss what a debt ceiling deal might look like, if Republicans should even take it, and what impact it may have on 2012.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

The Mother of All No-Brainers
Harry Reid Moves Forward With “Shared Sacrifice” Bill
McConnell rallies, invites Obama to Hill again
2 Republicans Open Door to Increases in Revenue

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[White House exercise facility]

MICHELLE:  Well, come in, people.  Geithner, Carney–get your skinny butts over here and spot for me while I press 250.  Everybody else, pull up a mat and sit so we can start.

JOE BIDEN:  Huh?  Why’s the Boss over in the corner in his PJs staring out the window?

MICHELLE:  Off the record.  He’s stressed out.  I’m running things until his therapist clears him for duty. Anybody got a problem with that?

DAVID PLOUFFE:  No Ma’m, but, uh . . . .

MICHELLE:  What happened?  Yesterday, he had to layup on the first par 5 at Burning Tree and couldn’t choose between a 6-iron and 7-iron.  Told his playing partners he wanted to sleep on it.  At dinner, a steward asked what flavor parfait he preferred for dessert.  Midnight, he was still muttering, “I like the strawberry, but the peach appeals to me, too.”

BILL DALEY:  Deteriorating decision-making skills.  It’s worse than when I came on board.  Hell, CIA knew where bin Laden was hiding since mid-2009.   The President couldn’t pull the trigger.  I had to use his autopen to sign the order okaying the Seal operation on Osama’s compound.

MICHELLE:  Hmmph.  Didn’t have a problem deciding on those chili dogs and stepping on my nutrition message the other day. (more…)

From The Hill:

Senate Democrats were also distancing themselves from the embattled New Yorker on Tuesday. Senate Majority Leader Harry Reid (D-Nev.) paused for several seconds when journalists asked if Weiner should resign.

“I know Congressman Weiner — I wish there was some way I can defend him,” Reid said, plainly not defending the embattled congressman.

When a reporter persisted in asking whether Weiner should resign, Reid said: “I’m not here to defend Weiner. That’s all I’m going to say.”

When another reporter asked what Reid would say if Weiner called him for advice, Reid said he would tell him to “call somebody else.”

(more…)

Senator Rand Paul (R-Kentucky) has filed a simple amendment to the Patriot Act protecting the rights of Americans to lawfully carry a firearm.  His Amendment would stop federal agencies from collecting gun records under the Patriot Act.  The amendment preserves two provisions of current law that protects gun owner privacy from a Patriot Act exemption.

The Paul Amendment (SA 328) states in part “no provision of this Act or an amendment made by this Act shall be construed to authorize access to firearms records in the possession of licensed under Chapter 44 of title 18 of the US Code.”  The purpose of the Amendment is to “clarify that the authority to obtain information under the US PATRIOT Act does not include the authority to obtain certain firearms records.”  Seems like a non-controversial clarification of the powers of the federal government with regard to the 2nd Amendment to the Constitution.

Leadership in both parties disagree and have been doing everything to block consideration of the Paul Amendment. Neil McCabe at Guns and Patriots reported yesterday on Facebook that “finessing arcane procedural tactics, Senate Majority Leader Harry Reid, D-Nev., blocked the amendment by withdrawing his own bill for Patriot Act extension for consideration and then attached it to an unrelated bill.”  McCabe further reported that Reid was overheard on the Senate floor expressing an interest in avoiding this vote.  That was yesterday, now Republicans in the Senate Leadership are actively opposing the Paul Amendment to the Patriot Act.

In an Email obtained by Big Government from a Senate Republican Leadership staffer for Senator Jon Kyl (R-Arizona) to Republican staff below titled “OPPOSE the Paul Firearm Amendment” argues for Republicans to block the Paul 2nd Amendment protection legislation:

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Senate Democrats, flatlining America one budget at time

Think back to April 29, 2011. Was there anything special about that day? Yes, Prince William married Kate Middleton in a regal affair at Westminster Abbey, but there is something more important about that date for Americans. April 29^th, in fact, marked two years since Senate Democrats last summoned the courage to pass a budget funding the Federal government.  That’s two entire years of shirking their constitutionally mandated duty.

Let’s revisit the past few budget cycles. In 2009, Democrats were riding high and controlled the White House and both houses of Congress. They were able to pass a budget for fiscal year 2010 in a timely manner.  It was certainly not a budget that conservatives celebrated, but, hey, let’s give the Democrats points for actually following the directive of the Constitution. Of course, the winds of change were blowing in 2009, courtesy of the tea party movement.

Fast-forward to the spring of 2010, time for Democrats (still controlling both houses of Congress) to unveil their budget for fiscal year 2011 . . . a budget we’ve still yet to see one year later and we are smack dab in the middle of said fiscal year.  Oh yes, let’s not forget that 2010 was a key election cycle, one that was not favorable to Democrats. Harry Reid, Senate Majority Leader, saw his seat as being very much in play and did what is becoming all-too-common for the left these days: he punted. Instead of making the tough decisions required of a leader, particularly during the trying economic times we faced last year and continue to face, Reid simply did nothing. He saw his reelection as being supremely more important than solving the country’s woes.

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