The debt ceiling discussion as a household family meeting

Friday, Standard & Poor’s downgraded the rating on the United States of America from AAA to AA+. Regardless of how you spin this or what you believe in the reputation of S&P’s ratings in light of their performance during the housing bubble with their ratings on the derivatives, the fact is that the markets depend on the ratings for investment decisions and it will matter. Let’s not dance around that fact.

But that is all for the media and politicians to argue about. We’re going to examine this in a slightly more pedestrian way.

It seems like the GOP loves to talk about the US economy in terms of a household. To keep in step with that metaphor, let’s peek in on the secret tapes of a family meeting that just adjourned at one of my neighbors down the street.

Dad: Ok, is everyone here? Mom, kids? The mortgage loan officer and credit card card companies? ….. do you want more tea?

Mom: Can we just get on with this meeting? I have a blog to write….

Dad: Ok, ok. As you know, 42% of our budget is dedicated to the mortgage. Since we’re cutting spending, we’re going to quit paying that. We might just send in the interest payment but we’re gonna have to crunch those numbers. And we’re going to further devalue the collateral value of our house by not repairing that gaping hole in the roof or patch the driveway. We’re probably not going to pay the credit cards, though.

And we’re spending far too much in food, so we’re cutting way back on everything….

Kids: But daaaaaaddddddd….

Dad: Hey, we have to cut the spending. The malnutrition that will set in may affect your ability to learn in school and I may get weak and fall down on the assembly line, but we have to cut that spending.

We’re also cutting off our medical insurance so if anyone catches anything, you’re just gonna have to ride out the symptoms. If it kills you, well, you just should have had stronger genes. Cable and telephone is going, to…

Mom: But what about emergencies? We’ll have no way to know if a tornado is coming or have 911 to call…

Dad: That is all in God’s hand now. If God wants us to survive a natural disaster, His hand will move us out of harm’s way.

…….

And the mortgage officer goes back to the bank and immediately draws up papers to call in the mortgage and the credit card companies cut the credit limit and raises the interest rate on the existing balances and any future spending.

Are we surprised that Standard & Poor’s lowered our credit rating in light of the people who claim to be the most responsible members of Congress were publicly debating whether or not the United States should pay its bills? That the GOP front-runner for the presidency publicly claimed to support default as a viable action? That the president who has been widely regarded as being able to win re-election in 2012 is now being reported by the media as having a plummeting approval rating and this challenger could win?

If you were a creditor of the United States, would you sit by and wait to see what happens?

Yeah, me neither.

There is no right or left, only power. The real debt ceiling crisis

us constitution article one

Before I begin, I would like to disclaim that I am not a Constitutional lawyer nor do I pretend to be. But I am an avid reader, one who has read a lot of literature surrounding the pre-Civil War through Reconstruction period. The “mood” of the country, including its values about government, is richly portrayed in these works. I can also read the Constitution, especially the plain language parts that have not been seriously mangled by case law.

Since the end of the mid-term elections last year, the media and Tea Party have been debating this issue of the debt ceiling, mostly as a taunting device against the Tea Party debt and deficit ideology. It made for a good story line of hypocrisy. Most Americans had never heard of such a thing before this, but it sounded bad. Real bad. And for the Tea Party, it also sounded like something that could be used for political leverage.

But since few Americans have ever read the Constitution, fewer still have any idea what the issue is really about. The issue has nothing to do with debt or deficits; it has everything to do with the separation of powers. Congress needs to avoid forcing the Supreme Court to “fix” a glaring hole that House Speakers have been successful at covering over since 1787.

John Boehner knows that. So does president Obama. And by sending a letter to the Speaker in January asking for a clean debt ceiling vote, Timothy Geithner demonstrated that he also supected how the markets would react if it were ever seriously brought to their attention.

And the Tea Party has done just that. Oops. Really, really big oops.

The Constitutional issue:
Article I, Section 8 gives Congress the “Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts” and “To borrow Money on the credit of the United States.” In short, it gives Congress and Congress alone the power to tax, pay debts and borrow. Despite what the Republicans would like all of us to believe, the president has no taxation, spending or borrowing power. Zip, nada, nothing.

Article 1, Section 9 says specifically, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” That means that not even one dollar can be spent that is not appropriated by Congress. The president may have a discretionary budget for the various executive branches, but all of them exist and get paid for through the laws Congress passes.

The US Treasury is responsible for managing the money and cutting the checks, but it can only do so under the authority of the Congress. Blaming the president for spending is like beating up the newspaper boy for bringing me a paper with bad news in it. It is dumb and misdirected. But, since he is right there, he’s smaller than me, and there is only one of him, not 535, it is easier to focus my rage. The bottom line is the president has no legal authority to spend money the Treasury does not have.

Or does he?

The Constitution makes no mention of what to do if the Federal Government has run up bills because of laws enacted by Congress for which there is no money to pay. The Constitution says that only Congress can borrow money, but it does not obligate them to make sure money is there.

But then along came the Fourteenth Amendment that cemented the obligation of the United States to pay its bills for laws enacted by Congress. “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Still, it does not spell out specifically what to do if the United States Treasury runs out of money.

That, specifically, is the glaring hole raising the debt ceiling covers over and has for a very long time. Neither the Congress nor the President really wants the Supreme Court to decide how to fix this Constitutional issue. For each branch, it would be ceding power to the third branch; something that is even more loathsome to Republican legislatures (actually, all of them regardless of their party) than taxes.

More than likely, the Supreme Court would rule to compel Congress to act by either raising taxes or borrowing money to cover the shortage. And the debt ceiling approval from Congress would be lost forever as leverage. The House does not want to risk that.

But the Supreme Court could also rule that the Treasury Department can continue cutting checks without the approval of Congress, adopting the Gephardt Rule that had long been in place as law. Basically, the Gephardt Rule says by default, Congress is authorizing an increase in the debt ceiling when it enacts a new law. (More complicated than that, but you get the general notion. Google has more info.) That would put the president in the undesirable position of being responsible for increasing the debt and deficit of the United States of America. No more blame game. It would also destabilize the “borrow” powers, much like “declare war” and “wage war” is right now. Congress does not want to risk that.

The effect of pledges
I always found it somewhat perplexing that George W. Bush did not advocate to raise taxes after 9/11 to fund the War in Afghanistan when he clearly had the political capital to do so. Instead, Congress opted to borrow the money, mostly by selling US Treasuries to China. As it turns out, since most Representatives and Senators signed Grover Norquist‘s Taxpayer Protection Pledge, raising taxes was not politically possible. But borrowing money was. The pledge allowed for drunken spending by incurring unsustainable debt, but not increased taxes.

That was the first major step in plunging the United States into the debt it now finds itself. Add another unfunded war, Iraq and Medicare Part D on borrowed funds coupled with revenue reductions that Bush tax cuts created , the largely unregulated banking and mortgage industries and in short order, you clearly have a growing debt issue that is not easy to hide.

Follow the money
The first Secretary of the Treasury, Alexander Hamilton understood the United States of America was only as powerful as its ability to pay its debts. As a new country, the States could bluster all they wanted about life, liberty, pursuit of happiness, blah, blah, blah, but if it could not pay its debts, none of that mattered. The policy has held up well throughout history. We are after all, a market-driven race, sprinkled here and there with altruism. Sparingly.

But times have changed. The stock markets have gotten more global. There is no patriotism in corporations, only profit. The goal is to make money, whether you bet on or against the US Government. From what we have learned with the collapse in 2008, a lot of people can make a lot of money betting against the United States.

What has held and made Congress blink first in years past when the debt ceiling card was played with the threat of the Constitutional hole being exposed and the ability of the president to be able to clearly articulate the issue to the American people. Newt Gingrich tried it and quickly learned how skilled Bill Clinton was in talking plain language with ordinary folk. George Bush was never really challenged on raising the debt ceiling as he operated mostly with a GOP Congress, bound by the Norquist pledge.

But Barack Obama was something new. The GOP leadership — while apprehensive about going to the mat on the the debt ceiling issue — gambled that Obama would not be able to articulate the issue clearly enough to get the American people on his side. And they are kinda right. But what the “mature” GOP leadership did not understand fully is how cancerous and ideological the Tea Party would be.

I’m not sure if the legislators the Tea Party got elected are oblivious on the Constitution, are singularly focused on debt, deficit and taxes to the exclusion of their other responsibilities or are just stooges for the greater monied bosses that got them elected. I don’t believe in conspiracy theory, but I do believe in the power of mobs and the infectious contagion of simple ideology in favor of nuanced, reasoned thought. We are, after all, the country of fast food, the sound byte, CNN Headline News, Twitter and Snooki.

But the markets have become spooked, whether by sheer stupidity brought on by ignorance of the Tea Party-backed legislators or a long-formulated master plan I don’t know. And since we have ceded power of our credit over to the world-wide credit rating agencies (and kinda pissed them off with things like Dodd Frank) the great power of the United States of America is no longer really in charge of its own destiny.

What I do know is to follow the money and to ask who is likely to profit exponentially from the credit downgrading of the United States of America. I’m sure that is where we will eventually find our answer to what is really motivating the Tea Party, whether they are complicit or not.

Me and the Wall Street Journal finally broke up

I have had a long-standing relationship with the Wall Street Journal. We’ve been through my business career together, traveled the country hand-in-hand and kept each other company in many lonely airport lounges when flights were delayed or during long layovers. I could always find a story I had not explored fully in her ample pages.

She was the third newspaper I ever read. The Saint Paul Pioneer Press was the first, the Dispatch was the second. They got merged in the mid ’80s and it got a bit awkward, as these things usually do. So, I picked up the Wall Street Journal just in case… well, you know.

And the Journal did some good reporting from a capitalist point of view. They didn’t wade too far afield into politics, knowing that both Democrats and Republicans were equally capitalistic. Both believed in making money regardless of their politics.

But when Rupert Murdock bought the Journal in 2007, I was skeptical but hopeful that the newspaper could maintain its reporting above the fray of politics and focus on stories as it pertained to business, reporting the political climate but not taking sides or laying blame.

My friends tried to warn me I would get my heart stomped on, but I remained loyal. Good business operates in any environment. Good businesspeople know this as David Rich points out in his blog post today. There are no “bad environments,” just bad business people who can’t see the upside.

Mr. Murdoch told the Bancrofts that ‘any interference — or even hint of interference — would break the trust that exists between the paper and its readers, something I am unwilling to countenance.’ … Mr. Murdoch and the Bancrofts agreed on standards modeled on the longstanding Dow Jones Code of Conduct.

In the ensuing years, I noticed slight changes in editorial word use as more and more “adjectives” entered the stories. As the health care debate ramped up, the Journal broke with AP style and started referring to the Affordable Care Act as “Obamacare.” All sorts of red flags started rising.

But the stories were still compelling enough to continue reading as I categorically ignored the editorial pages and OpEd pieces by Karl Rove and his ilk.

Last Tuesday, the Journal ran a story on the state of college education in India. Several paragraphs into the story, they printed this:

India’s economic expansion was supposed to create opportunities for millions to rise out of poverty, get an education and land good jobs. But as India liberalized its economy starting in 1991 after decades of socialism, it failed to reform its heavily regulated education system. Business executives say schools are hampered by overbearing bureaucracy and a focus on rote learning rather than critical thinking and comprehension.

Subtle, until you recognized the general environment of the country. In Wisconsin, Ohio, Florida and other states the Republican governors were waging a war on education, demonizing teachers as bureaucrats and the public school system as “heavily regulated.” Across the country, the Tea Party stirred up hate against President Obama by calling him a socialist. The Republicans joined the chant and FOX News amplified the drum beats.

Any good copyeditor would have struck those lines out in her sleep. I assume the editors at the Journal are not stupid nor careless, so the editorial comments in the story and the inference that the United States will be in the same state as India given our current “socialist” political climate were intentional, making the Journal reckless, incendiary and irresponsible. According to its point of view, to be a capitalist in the United States is to also be a social conservative, aligned with the ideological positions of the GOP and Tea Party.

That was too much to swallow.

It is one thing to take an editorial position on the Editorial pages, but it is quite another to weave your political views throughout the stories. It was skillfully done, but done nonetheless. I suppose the average reader would not have picked up the reference as readily as someone who has worked at a newspaper and has an APStylebook resting on the corner of his desk. As the discriminating readers leave quietly, one by one, the Journal will be left with those who either agree with their political position or who can’t discern the difference between capitalism and zealous conservatism. In the end I suppose public education will win out, but not because it is socialist, but that the conservatives will have driven out the best and brightest. But that is an argument for another day.

As I was talking with the Journal rep who was begging me to stay with every possible turn, I found myself getting angry with her. She was the one who had changed. She was the one who wanted to remake me. She was the one who failed to accept me for who I am and respect my differences while appreciating what we had in common.

I hung up the phone in a mingled state of loss and anger.

I’m sure I will move on, but it won’t be the same. Long-term relationships change a dog and the next newspaper will suffer the pangs of betrayal, my inability to get close and trust and my issues with intimacy. I will forever be asking “what does she want from me?” as I read each story printed in any newspaper.

The Wall Street Journal kicked this poor puppy right in the ribs. It kicked hard, harder than any newspaper should have kicked a dog. I may not recover from this one.

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None of your reality is really real

North Clayton Village, Clayton Ohio

This is the town center of North Clayton Village in Clayton, Ohio. It has a nice wide Main Street, store front shops, a coffee shop, a park around the corner and apartments on top of the shops. It has everything you would ever want in a village.

Only it is a fake.

….

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The difference between the Left and the Right in America

While listening to John Boehner’s interview with the Pittsburgh Tribune-Review on his description of the Tea Party protests, the following occurs to me. Even if not entirely true, it is the perception that is most prevalent.

The RIGHT shows up with guns and signs, backed by the Second Amendment and attempts to force others to their will.

The LEFT shows up with pens and blogs, backed by the First Amendment and attempts to convince others of their position.

Guns and force win in the short term. Thought and conversation is tenacious.

Thoughts?

The real tyranny in America

MSNBC Rise fo the New Right Image

I watched MSNBC Chris Matthews’ The Rise of the New Right yesterday. I learned almost nothing new about the Tea Party and the conservative movement, but Alex Jones’ quote, “We’re in deep tyranny. Deep, deep, deep…” keeps ringing through my head. This man is afraid and wants to make everyone else around him fearful. I guess fear sells as his website is chock full of ads. (By the way, everyone advocates for hoarding gold, water, guns and ammo, but nobody thinks a loyal dog would help. Except Hollywood. If this country collapses, I’m sticking with my pack.)

Then I got to thinking about who the real tyrants are in America. Alex Jones, his network and FOX News came to mind right away, but so did a lot of others. I’ve prepared a very short list below to get you thinking about how much non-government tyranny is wielded over us with little oversight and almost no recourse.

FICO Scores and Credit Agencies (TransUnion, Experian and Equifax)
Every American has now been reduced to a non-disputable, three-digit FICO Score between 450-850. A FICO Score is determined by a semi-secret algorithm that is held by a private corporation. Your FICO Score determines if you will get a loan, a job, insurance and an apartment. It determines where you can live, where you can work and how much in interest you will pay on a loan if you are deemed worthy enough to get one. It even determines whether or not you can serve your country in the military and to what capacity. If your FICO Score is too low, you can be denied a security clearance.

If you become unemployed and begin shopping at WalMart to save money, your FICO Score will be adjusted accordingly, thereby affecting your credit limits. If your identity is stolen, your FICO Score will be decimated with little recourse. If the credit bureaus make a mistake reporting your payment history, they do so with impunity and can erode your FICO Score with one typo on an account number, name, amount, etc.

Personal Debt
Nothing in this country paralyzes economic or personal mobility more than personal debt. Yet we embrace it every time we buy something on credit, lease something we can’t possibly afford, charge a new gadget that we have to have or buy something on late night TV for three easy payments. The credit card has become the new handcuff. Try renting a car without a credit card or staying in a hotel by paying cash. Try buying an airline ticket without a credit card (well, now anyway, not before the NYC car bomb thing.)

Homeowner’s Associations
If you think you own your own home, go ahead and try painting it lime green with chocolate shutters. Try putting up a large flagpole and fly an eight-foot American flag in the front yard. Try digging up your back yard and planting a vegetable garden. Try building a chicken coop and raise chickens. Try drilling for oil on your property. Try putting up a radio tower. Try putting up a wind turbine generator. Try doing something as Earth-friendly as hanging your laundry out to dry. You will find out very quickly how much power your homeowner’s association has and how forcefully they will wield it.

Health Insurance Companies
Regardless of how you feel about your health insurance, they are the only “death panels” in this country. Doctors want you to live as long as possible. So do hospitals, health care clinics and drug companies. Dead people don’t generate recurring income. The only ones that want you to die quickly when you are sick are health insurance companies. It is in their best interest to rush you to your end. Healthy people pay premiums; sick people rack up expenses. You do the math.

Parent Associations at Schools
If you think your child will succeed by getting good grades or get a place on the team by working hard and honing skills, you have never had an interaction with a parent association. Their members consist of self-appointed despots who have gone to the school and their parents went there and their parents went there. Getting “in” a parent association requires more humiliation than the worse sorority/fraternity hazing you can imagine. Staying in requires all the vicious deft of a hockey mom and the morals of a soccer mom.

These are just a few “unelected, non-government” groups that wield tremendous power over our day-to-day lives and have far more influence on where we can go, what we can do and to whom we can speak. They control what opportunities our children have, what homes we can buy, where we can live and what jobs we can have.

I could think of a few more like churches, energy corporations, your own employer, etc but I’ll leave those to you and the comments below.

Ironically enough, it is government that is most likely to protect us from these unelected tyrants. Or at least try to. Or want to try to. Or say they want to try to.

Our “free society” is at once our greatest asset and our greatest enemy. It enables us to plunder and pillage resources that belong to all of us for the purpose of personal enrichment. It is the hoarding of power with a select few — be that elected senators like McCarthy or fear-mongering activists like Jones — that is the real tyranny.

We should be vigilant and suspicious of both.

The most offensive Tea Party sign ever

The Huffington Post ran a story with some slide shows, showing the most offensive signs at the recent tea parties. As I was looking through the slide show, I found the sign that was the absolute, most offensive one of all. And, if the words on the sign weren’t enough to get you steaming mad, consider the fact that it was put up by our own government!

Anyway, here is the most offensive tea party sign, outlined in green.

The most offensive Tea Party sign
The most offensive Tea Party sign

What’s next, no peeing on the fire plugs? Who’s with me, Pee Parties April 15, 2010! 🙂