August 1, 2011
In process DRAFT
Polarized thinking, false choices, false dichotomies, either or thinking, primal thinking, false dilemma, black and white thinking)
Blumenthal, Paul. 2011-07-29. “Debt Limit Stalemate Has Roots In Campaign Money, Earmarks, Social Media.”
2011-07-31 On National Public Radio last week, Rep. Tom Cole, a Republican deputy whip, was giddy about the potential for calamity. Asked if it was a mistake to try to cut spending by threatening the U.S. economy, Cole replied: “No, I don’t think so. Frankly, I think it’s one of the good things that’s come out of this. We’ll never have a debt-ceiling increase again without serious efforts to deal with the long-term spending (source).”
2011-07-18 A CNN Survey found that 64% of Americans supported spending cuts and tax increases. The question in the survey was worded: “In those discussions, several budget plans have been proposed that would reduce the amount the government owes by trillions of dollars over the next ten years. If you had to choose, would you rather see Congress and President Obama agree to a budget plan that only includes cuts in government spending, or a budget plan that includes a combination of spending cuts and tax increases on higher-income Americans and some businesses (source)?” 52% of Americans felt that President Obama acted responsibly in reply to the question: “Based on what you have read or heard about the discussions between Congress and Barack Obama on the debt ceiling, do you think Obama has or has not acted responsibly?” To the question: “Based on what you have read or heard about the discussions between Congress and Barack Obama
on the debt ceiling, do you think the Republicans in Congress have or have not acted responsibly?” 63% of Americans answered “No, have not 63%.” In response to the question regarding potential cuts in government spending and increasing taxes that have been suggested as part of the discussions on the debt ceiling. 66% opposed cutting federal subsidies to farmers; 68% opposed cutting pensions and benefits for retired government workers; 52% opposed cutting defense spending; 77% opposed cutting the amount the government spends on Medicaid; 77% opposed cutting the federal health program for the poor; 87% opposed cutting the amount the government spends on Medicare; 87% opposed cutting the federal health program for the elderly; 84% opposed cutting the amount the government spends on Social Security; 73% were in favor ncreasing the taxes paid by oil and gas companies by ending
federal subsidies for those businesses 73% 26% 1%
Increasing the taxes paid by businesses that own private jets 76% 23% *
Increasing the taxes paid by people who make more than
250 thousand dollars a year 73% 26%
2011-05-01 Republican is Michael Grimm, elected in November 2010 argued that Medicare was not sustainable. “What this debate has turned into is class warfare — let’s be honest about it,” he said. Lower taxes across the board would increase government revenue, he maintained, in the face of loud catcalls from those who pointed out that that economic theory has long since been discredited [. . .] We need a strong national defense.” (source).”
2011-04-11 President Obama called for allowing the Bush tax cuts to expire for individuals making $200,000 or more a year and couples making $250,000 or more. Some conservatives, such as Sen. Tom Coburn (R-Okla.) have voiced support for tax increases.
Representative Paul Ryan’s (R-WI) proposed a controversial budget plan which included a proposal to turn Medicare into a voucher-like system.
Speaker John Boehner (R-Ohio proposed a new debt limit to the Republicans. They required 216 votes.
Below is a snapshot of This group of Republicans votes against Speaker John Boehner’s proposed bill to raise the debt ceiling.
Michele Bachmann, Minnesota – The Tea Party stalwart and presidential candidate said she would not vote for any bill that raised the debt ceiling.
Paul Broun, Georgia – Elected in 2007, Broun has on several occasions referred to President Barack Obama as a “socialist.”
Jason Chaffetz, Utah – Chaffetz has staked out turf as a Tea Party-friendly conservative since being elected in 2008. He is weighing a primary challenge to Senator Orrin Hatch.
Chip Cravaack, Minnesota – A former Navy pilot, Cravaack was elected last year with Tea Party support but declined to join official Tea Party group in Congress.
Scott DesJarlais, Tennessee – A doctor first elected last year with Tea Party support, he had not held any previous elected office.
Trey Gowdy, South Carolina – Gowdy won election last year with Tea Party support after winning the Republican primary by accusing the incumbent of working too often with Democrats.
Tim Huelskamp, Kansas – Elected in 2010 with Tea Party support, Huelskamp was raised on a farm.
Tom Graves, Georgia – Won his seat in a special election last year with Tea Party support.
Tim Johnson, Illinois – Johnson has compiled a moderate voting record since he was elected in 2000.
Jim Jordan, Ohio – A leader of the party’s conservative wing, Jordan was first elected in 2006.
Steve King, Iowa – A veteran leader of the party’s social conservatives, he gained notoriety for saying Obama’s election would lead to radical Islamists “dancing in the streets.”
Connie Mack, Florida – Elected in 2004, Mack started an anti-tax freedom caucus while serving in the Florida House.
Tom McClintock, California – Elected in 2008, McClintock gained some national prominence when he ran for governor going up against movie-star Arnold Schwarzenegger in 2003.
Mick Mulvaney, South Carolina – Elected in the Republican wave in 2010, he is the first Republican to represent his district since 1883.
Ron Paul, Texas – A long-time favorite of groups that want to drastically shrink government, the presidential candidate said he would not vote for any legislation that raised the debt ceiling.
Tim Scott, South Carolina – A leader of the party’s freshman class, he is the first black American to win national office from South Carolina since the Civil War era.
Steve Southerland, Florida – Elected in 2010, Southerland is owner and president of a family funeral home business.
Rep. Joe Walsh (R-Ill.) won his seat in 8th Congressional District in Chicago’s north and northwest suburbs in an out-of-nowhere victory 2010-Fall. He accused President Obama of being a liar on the debt-ceiling issue. He maintained uses cable television and social media like Twitter to maintain a high level of visibility.
Joe Wilson, South Carolina – A veteran lawmaker best known for shouting “You lie!” at President Obama during the 2009 State of the Union address.
(Reporting by Andy Sullivan and Kim Dixon; editing by Anthony Boadle)
July 19, 2011
Who owns the $14.3tn debt?
US Government owes itself $4.6tn
Remaining $9.7tn owed to investors
They include banks, pension funds, individual investors, and state/local/foreign governments
China: $1.15 tn, Japan: $0.91tn, UK: $0.33tn
Deficit is annual difference between spending and revenue, $1.29tn in 2010
America raised its debt ceiling 140 times since World War II without controversy.
2011-07-29The “Republican-controlled House of Representatives passed a stopgap bill by 218-210. Two hours later, the Democratic-controlled Senate voted to kill it by 59-41. The Senate, keen to have a deal in place before the markets open on Monday, with the potential for huge falls in share prices, is proposing a bill of its own scheduled to go to a vote on Sunday [. . .] The standoff between the Republicans and Democrats – the biggest ideological collision between the parties for decades – enters its final phase [. . .] The US stock market has just had its worst week for a year and Obama, in a Gallup poll published on Friday, saw his approval ratings drop to a new low, from 45% to 40%.” MacAskill, Ewen. 2011-07-31. “US debt crisis: Tea Party intransigence takes America to the brink.” Washington: The Observer.
2011-05 The US Treasury reported that the US Government has a debt of $14.3 trillion.
2011-04-18 “The influential credit-rating firm Standard & Poor’s which assigns ratings to guide investors on the risks involved in buying debt instruments changed its ratings of U.S. Treasury securities to “negative” from “stable” but left the overall rating as AAA. As a result the struggle intensified between President Obama’s Democratic administration and his Republican opponents in the House to get control over a nearly $1.4 trillion budget deficit and $14.27 trillion debt burden (Johnson, Steven C. 2011-04-18. “S&P threatens to cut U.S. credit rating on deficit.” New York: Reuters).” The U.S. debt cap was $14.294 trillion cap. The debt continues to rise. Probable causes include costs for health care, retirement and other so-called entitlement programs, and the interest on existing debt. The stock market response included:
The Dow Jones Industrial Average fell 140.24 points, or 1.14%, to 12201.59, its biggest decline in a month, after earlier tumbling almost 250 points. Stocks in Britain, Germany and France fell more than 2%, with most of the declines coming after the S&P news, and in early trading Tuesday, Japan shares fell 1%. Gold surged to just below $1,500 an ounce.
2011-01 A U.S. congressional report entitled “The Financial Crisis Inquiry Report 2011-01” blamed ratings companies such as S&P and Moody’s Corp for triggering the financial crisis when they cut the inflated ratings they had applied to complex mortgage-backed securities. “Moody’s, the
Commission’s case study in this area, relied on lawed and outdated models to issue erroneous ratings on mortgage-related securities, failed to perform meaningful due diligence on the assets underlying the securities, and continued to rely on those models even after it became obvious that the models were wrong (FCIR 2011:126).” The Commission investigated institutions included American International Group (AIG), Bear Stearns, Citigroup, Countrywide Financial, Fannie Mae, Goldman Sachs, Lehman Brothers, Merrill Lynch, Moody’s, and Wachovia. “26 million Americans who are out of work, cannot ind full-time work, or have given up looking for work. About four million families have lost their homes to foreclosure and another four and a half million have slipped into the foreclosure process or are seriously behind on their mortgage payments. Nearly 11 trillion in household wealth has vanished, with retirement accounts and life savings swept away.” “The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public (The Financial Crisis Inquiry Report 2011-01:xvii).”
2009-05 The National Commission on the Causes of the Financial and Economic Crisis in the United States was established as part of the Fraud Enforcement and Recovery Act (Public Law 111-21.) passed by Congress and signed by the President. This independent, 10-member panel was composed of private citizens with experience in areas such as housing, economics, inance, market regulation, banking, and consumer protection. Six members of the Commission were appointed by the Democratic leadership of Congress and four members by the Republican leadership.
2008-09/10 Fed Chairman Ben Bernanke told the FCIC, “As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression. If you look at the firms that came under pressure in that period . . . only one . . . was not at serious risk of failure. . . . So out of maybe the 13, 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two (The Financial Crisis Inquiry Report 2011-01:354).”
2008-09 An extra digit was added to the US federal debt clock when the debt exceeded $10 trillion (Durst). The deficit problem intensified since the 2008 financial crisis.
2003-2007 Between “2003 and 2007, as house prices rose 27% nationally and $4 trillion in mortgage-backed securities were created, Wall Street issued nearly $799 billion in CDOs that included mortgage-backed securities as collateral. Collateralized debt obligations (CDOs), structured financial instruments that purchase and pool financial assets such as the riskier tranches of various mortgage-backed securities, came into existence in the first decade of this century [...] The key players involved in the creation, management and sales of CDOs were Securities firms, CDO managers, rating agencies, investors, and financial guarantors who took risks but made huge profits [...] CDO managers and investors are derivative folks not mortgage professionals or real estate professionals (The Financial Crisis Inquiry Report 2011-01:128).
2007 From 1978 to 2007, “the amount of debt held by the inancial sector soared from $3 trillion to $36 trillion, more than doubling as a share of gross domestic product. The very nature of many Wall Street irms changed—from relatively staid private partnerships to publicly traded corporations taking greater and more diverse kinds of risks (The Financial Crisis Inquiry Report 2011-01).” “Money washed through the economy like water rushing through a broken dam. Low interest rates and then foreign capital helped fuel the boom. Construction workers, landscape architects, real estate agents, loan brokers, and appraisers proited on Main Street, while investment bankers and traders on Wall Street moved even higher on the American earnings pyramid and the share prices of the most aggressive inancial service irms reached all-time highs. Homeowners pulled cash out of their homes to send their kids to college, pay medical bills, install designer kitchens with granite counters, take vacations, or launch new businesses. They also paid off credit
cards, even as personal debt rose nationally. Survey evidence shows that about 5% of homeowners pulled out cash to buy a vehicle and over 40% spent the cash on a catchall category including tax payments, clothing, gifts, and living expenses. Renters used new forms of loans to buy homes and to move to suburban subdivisions, erecting swing sets in their backyards and enrolling their children in local schools (The Financial Crisis Inquiry Report 2011-01:5).” . Overall mortgage indebtedness in the United States climbed from $5.3 trillion in 2001 to $10.5 trillion in 2007. The mortgage debt of American households rose almost as much in the six years from 2001 to 2007 as it had over the course of the country’s more than -year history. The amount of mortgage debt per household rose from $91,500 in 2001 to $149,500 in 2007 (The Financial Crisis Inquiry Report 2011-01:6).”
2006 Home sales volume started to increase, and average home prices nationwide climbed, rising 67% in eight years by one measure and hitting a national high of $227,100 in early 2006. (The Financial Crisis Inquiry Report 2011-01:5).”
2006 On the eve of the crisis in 2006, financial sector proits constituted 27% of all corporate proits in the United States, up from 15% in 1980 (The Financial Crisis Inquiry Report 2011-01: xvii).”
2005 Paul McCulley, a managing director at PIMCO, one of the nation’s largest money management firms, told the Commission that he and his colleagues began to get worried about “serious signs of bubbles”. They therefore sent out credit analysts to 20 cities to do what he called “old-fashioned shoe-leather research,” talking to real estate brokers, mortgage brokers, and local investors about the housing and mortgage markets. They witnessed what he called “the outright degradation of underwriting standards,” McCulley asserted, and they shared what they had learned when they got back home to the company’s Newport Beach, California, headquarters. “And when our group came back, they reported what they saw, and we adjusted our risk accordingly,” McCulley told the Commission. The company “severely limited” its participation in risky mortgage securities (The Financial Crisis Inquiry Report 2011-01: 4).”
2005 Convinced that we lived in a less risky world former Federal Reserve governor and National Economic Council director under President George W. Bush Lawrence Lindsey encouraged any rational investor to respond to a less risky world by laying on more risk. The US played with an asymmetric policy that allowed for unfettered, unregulated markets and mortgages and unrestrained growth. If there was a glitch the Treasurer cushioned the impact. (The Financial Crisis Inquiry Report 2011-01: 133).” suggested this could be a “moral hazard.”: “Did the policy encourage investors and financial institutions to gamble because their upside was unlimited while the full power and inluence of the Fed protected their downside (at least against catastrophic losses)? Greenspan himself warned about this in a 2005 speech, noting that higher asset prices were “in part the indirect result of investors accepting lower compensation for risk” and cautioning that “newly abundant liquidity can readily disappear.” Yet the only real action would be an upward march of the federal funds rate that had begun in the summer of 2004, although, as he pointed out in the same 2005 speech, this had little effect. And the markets were undeterred (The Financial Crisis Inquiry Report 2011-01: 133).”
2004 Synthetic CDOs, such as Goldman Sachs’s Abacus 2004-1 deal, were complex paper transactions involving credit default swaps (The Financial Crisis Inquiry Report 2011-01:144).”
2004 A new debt clock was installed at West 44th Street and Avenue of the Americas (Durst).
2000-2003 The Federal Reserve cut interest rates early in the new century and mortgage rates fell, home refinancing surged, climbing from $460 billion in 2000 to $2.8 trillion in 2003, allowing people to withdraw equity built up over previous decades and to consume more, despite stagnant wages (The Financial Crisis Inquiry Report 2011-01: 4).”
2002The debt clock was switched back on (Durst).
2000 During the 1990s the US prospered, the US national debt slowly decreased. The debt clock was temporarily switched off in 2000 (Durst).
1989-02-20 The US national debt was c. $3 trillion. Seymour Durst conceived and installed the first National Debt Clock to call attention to the soaring debt and each family’s share of it. The original Durst clock was installed on Sixth Avenue and 42nd Street(Durst).
1980s Federal Reserve chairman Alan Greenspan championed deregulation and reliance on self-regulation by financial institutions. Deregulation was argued by Greenspan to raise the level of competitiveness, increase productivity and efficiency and therefore lower prices. For 30 years until the crash in 2007, deregulation was supported by successive administrations and Congresses, and actively pushed by the powerful inancial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe. This approach had opened up gaps in oversight of critical areas with trillions of dollars at risk, such as the shadow banking system and over-the-counter derivatives markets. In addition, the government permitted inancial irms to pick their preferred regulators in what became a race to the weakest supervisor (The Financial Crisis Inquiry Report 2011-01: xvii).” “Between 1978 and 1980, Congress and President Carter approved deregulation of airlines, trucking, and railroads. Carter aide Mary Schuman played a crucial role in bringing about airline deregulation. For all the market talk that surrounded transportation politics before and after 1980, however, officials of the American state had been and remained the principal agents creating those markets (Rose et al. 2006.)”
1971 The first comprehensive proposal to deregulate a major industry in the United States, transportation, originated in the Richard Nixon Administration and was forwarded to Congress.
1970s Deregulation gained momentum, influenced by research at the University of Chicago and the theories of Ludwig von Mises, Friedrich von Hayek, and Milton Friedman, among others. Presidents Nixon, Ford, and Carter sought to deregulate transportation with a view toward reversing “stagflation.” (Rose et al. 2006.)
1960s President Johnson sought broad deregulation of rail, truck, and airline firms. Johnson wanted another device to “fine tune” the economy. (Rose, Mark H. Bruce E. Seely, and Paul F. Barrett. 2006. Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century.)
1917 The US Congress enacted a debt ceiling.
Webliography and Bibligraphy
Angelides, Phil; et al. 2011-01. The Financial Crisis Inquiry Report” Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States. Official Government Edition. The Financial Crisis Inquiry Commission. Pursuant to Public Law 111-21.
Rose, Mark H. Bruce E. Seely, and Paul F. Barrett. 2006. Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century.