Whose Fault?

To believe politicians in Washington and pundits in the media, the national debt has become the most important political issue of the day. (Whether it should be–as opposed to, say, jobs–is another question.) The Republican argument is, basically: “Big deficits! Democratic president! His fault!” The Obama administration argument, by contrast, is “No way! George W. Bush’s fault!”

I generally side with Obama on this one, mainly because of the two Bush tax cuts and the unfunded Medicare prescription drug benefit. Keith Hennessey, Bush’s last director of the National Economic Council, has a counterargument. Some of his points are good. OK, well, one point–the fourth one down. Hennessey is right that what initially transformed the Clinton surplus into the Bush deficit was the 2001 recession, which was beyond Bush’s control–just like what transformed the large Bush deficits of 2007-2008 into the enormous Obama deficits of today was the 2007-2009 recession.

The other points are good debating, but I don’t buy them. This could take a while.

1. Obama: Unfunded Medicare prescription drug benefit? Hennessey: Why don’t you repeal it instead of complaining about it? You could even use reconciliation.

OK, if Obama were king. Hennessey admits that his administration created a mess and says Obama should clean it up. But cleaning up the mess means either reducing entitlements or increasing taxes, would be incredibly unpopular, and would obviously be filibustered by the Republicans, the new Defenders of Medicare. There’s no way Obama could get 51 Democrats with him on this, and if he could, it would mean an end to Democratic majorities in Congress and to Obama’s hopes for re-election. I believe there are times when you should take a political hit to do the right thing (because the point of a majority is to govern, not to extend your majority), but asking the Democrats to commit political suicide to repair a Bush-era mistake is a bit rich.

2. Obama: Unfunded wars in Iraq and Afghanistan! Hennessey: Get out, then.

In this case, the Bush administration began a war in Iraq on false (or at least wrong) pretenses and made that country much more dangerous, while neglecting the war in Afghanistan. Obama opposed the Iraq War–that’s a major reason why he’s president today instead of Hillary Clinton. But he can’t simply say that the last six years never happened and pull out immediately. Colin Powell was right (even if he was wrong about Pottery Barn’s policy): “You break it, you own it.” And if he did pull out, the Republicans would crucify him politically. National security issues, like entitlements, only go one way politically–it’s much easier to be a hawk than a dove when it comes to fighting wars in the Middle East.

3. Obama: Tax cuts! Hennessey: Let them lapse, then.

See 1 and 2 above. Republicans are already positioning letting tax cuts lapse on the super-rich as “tax increases.” It’s a lot easier as a politician to give away candy than to take it back. The Republicans have cleverly played the game of enacting policies when in power that are politically difficult to repeal. (Note: The Democrats are trying the same thing with health care reform.) The goal is to force the government to shrink via spending cuts.

Hennessey also says that bracket creep will cause taxes as a percentage of GDP to climb above the long-term average. But it’s natural and good for taxes to climb upward as a society becomes wealthier, because the government does more. Entitlements go up as people’s conception of what an adequate minimum living standard is. Regulatory costs go up as businesses and products become more complex. Defense costs go up as the amount we are willing to invest in minimizing the risk of death to soldiers goes up. That’s a good thing.

Hennessey also says that the long-term problem is Medicare and Social Security. He’s right (about Medicare, at least). But then he says that therefore the tax cuts don’t matter. This is clever misdirection, since the political issue is why the deficits are so big today–and they are big today, in large part, because of the Bush tax cuts.

5. (Remember, I agreed with 4.) Obama: I inherited a $1.3 trillion deficit! Hennessey: Yes, but that was due to the recession. And then you passed an expensive stimulus package.

Hennessey’s first point is unobjectionable. But insofar as the argument is over why we have big deficits today, it’s also irrelevant. The trilion-dollar deficits we have today are the result of pre-Obama policies, just like the initial descent into deficit under Bush was due to pre-Bush policies.

His second point is just silly. In the face of a collapsing economy, the right thing is a stimulus package. The insistence in budgetary balance at the beginning of the 1930s is one of the most cited causes of the Great Depression (along with tight monetary policy and the gold standard).

6. Obama: When I took office, there were already $8 trillion in projected deficits. Hennessey: You changed the rules–it was only $3 trillion. “The President’s first budget played games by redefining the baseline to make the starting point look as bad as possible so that Team Obama could claim their policies would reduce the deficit.”

Well, we might never agree here, but I would say that Team Obama reversed out the games that the Bush administration (and previous administrations) had been playing all along. According to The New York Times, the “gaming” that Hennessey accuses Obama of is this:

  • Ending the Bush practice of keeping Iraq and Afghanistan out of the budget and using supplemental appropriations instead.
  • Assuming that AMT will be patched by Congress each year (as it is), rather than pretending that it will be allowed to encompass the middle class.
  • Ending the Bush practice of budgeting artificially low Medicare payments and then allowing higher payments during the year.
  • Adding a budgetary line for disaster relief; historically the government paid for disaster relief, but never budgeted for it.

Secondly, Hennessey’s charge doesn’t make logical sense. Changing the rules would only help Obama claim to reduce the deficit in the future if he were planning to change the rules back in the future. Unless Hennessey thinks Obama had a secret plan to stop assuming AMT fixes at some point in the future (or something similar), his argument not only isn’t true, it can’t possibly be true.

Hennessey’s major point is to say that Obama should stop playing the “blame game” (defined, in Washington, as someone else pointing out something you did wrong):

“I suspect that many Americans are tired of the blame game, especially more than one year into a new Administration.  Whatever your view of President Bush, his policies, and their results, America needs to look forward.  We have big challenges ahead of us, and we need to propose, debate, vote on, and then implement solutions.”

I agree that blaming everything on George W. Bush is neither good policy nor good politics. But there are some issues on which it is not only relevant, it is necessary to point out why we are in the mess we are in. One is tax cuts. The Republican attack line is “Tax increases bad. Hurt economy.” Now, the empirical evidence for that is weak. But more important, pointing out that you just want to repeal the Bush tax cuts means that we are going back to the marginal tax rates of the Clinton years, when the economy was booming. This is different from raising taxes to a level that the economy has not seen before–that might be risky. Simply undoing a policy is politically and substantively different from putting in place a new one.

Similarly, when people attack you for increasing government spending, it makes perfect sense to point out that they voted for the unfunded Medicare prescription drug benefit, because it is relevant whether they are deficit hawks or deficit peacocks. Deficit peacocks should simply be ignored, and that is relevant to public debate. Hennessey himself may be a hawk and not a peacock. But this whole “America wants to move forward” line, by obscuring the reasons why we face the problems we face, only makes it more likely that we will end up with the wrong solutions–or, more likely, no solutions at all.

By James Kwak

35 responses to “Whose Fault?

  1. The complete picture is much better and uniquely presented at a short but definitive Analysis of what is Wrong With America Today, because it pin points the……

    “Democrat’s Economic “Assumption-of-Death”.

    “The fatal flaw that produced stagflation in Europe in the 20th C is taking hold of America, mistakenly promoted by the erroneous and perverted economic policy – or non-economic policy – of the Obama administration.”……

    They continue….“All good comes from economic success, and all success comes from the creation of profits. There is no stronger disincentive to profits than taxation.”…….

    They are saying,………no need to punish “profits”, and if you don’t, jobs will come back.

    This is the thesis to debate on. Read all at;

    http://www.robbingamerica.blogspot.com

    Think about it until 2010…there is still time “to survive”!

  2. How about arguing for a “better government” instead of pinning the blame on others. Shared sacrifices instead of just cutting the deficit from only a one side of the general ledger. Educating through teaching moments regarding taxes instead defending the misguided anger of the ill-informed. Since the political will continues to be absent from Washington regarding financial reform, shareholder/investor grassroots efforts could be another effective end to the means of getting there, along side the suggestion already mentioned of moving your personal lines of credit to smaller, community-oriented banks.

  3. So let me get this straight.

    Bush enacts policy X because it was politically popular.

    Obama continues policy X because discontinuing it would be… Politically unpopular.

    Therefore, Bush is 100% responsible for the continuance of policy X.

    Have I got that right?

    I also love this morsel of “logic”:

    His second point is just silly. In the face of a collapsing economy, the right thing is a stimulus package.

    Now remember, the question you are answering is:
    Who is to responsible for the deficit? For the portion of the deficit from the Obama stimulus package, your answer is “George Bush”, because the stimulus package is the “right thing”? Fascinating.

    As amusing as these examples of the modus bogus are, it is a little sad how blind ideology can take an otherwise intelligent mind and render it incapable of logical thought.

    The reality is that Obama is responsible for his budget, just as Bush was responsible for his. There, see how simple that was?

  4. In crisis management the blame game is only useful for understanding what the real problems are and formulating actions to prevent recurrence – pointy fingers take focus off the important stuff and should be surgically or otherwise removed. When you have real leadership, folks step up and say, “Here’s where I goofed, how do we fix it?” before any fingers get pointed.

  5. Well put.

    I dare say the 2001 recession could have even been turned around if it had not been used as another excuse on top of the 9/11 saga to declare war to half of the world.

    For the rest I believe Keith Hennessey is (still) living on the wrong side of the time bar and yes, it is necessary to address where, why and when mistakes happen(ed). Compared to the question “who was it” the answers to “where?“, “why?” and “when?” could add to that chapter “do your homework and learn from experience, even history!”

    “Could” that is, as we all know.

    The “who?” question will not necessarily be fruitful but dirty as you could watch last week when Tony Blair had his story time.

  6. It’s clear that the establishment in both parties equally support all the biggest policy items and the spending for them and the way the money is derived.

    So it’s bogus to focus on who passed this or that. If you validate something which already exists, you take full ownership of it. That’s why the whole “Obama inherited this-and-that” is such a lie.

    The point is he seized personal ownership of the Bailout and the war with great glee. He owns them just as much as Bush.

    The right way to deal with an unwanted inheritance is to refuse to accept it. Blaming Bush for everything would indeed have been good policy and good politics if Obama had come in as a cleansing whirlwind against all things Bush, as he was elected to be.

    Instead from day one he made it clear that he admired everything Bush had done, and that he especially idolized Reagan and trickle-down.

    In particular, the day he appointed Summers and Geithner he retroactively embraced and validated, and took personal ownership of, all financialization and deregulation going back to the 90s at least, and of all the consequences which followed.

    All hack attempts to apologize for Obama shipwreck immediately on that stark, brutal fact. Summers and Geithner. That’s it.

    I agree that “let’s move forward” is always the slogan of a scoundrel. I can’t remember ever hearing that where it wasn’t a criminal or a flack saying it.

  7. Sadly you are wrong. It is the people who are responsible.

  8. What is the Number 4 that you agree with?

  9. Beth is onto the heart of the matter. Move from the past and into the present and future. What made our past politicians different from the present is that they were actually adults. We have children running the show and it shows by their temper tantrums, finger pointing and unwillingness to accept responsibility. The voters would respect and vote for the adult that would fix the problems we have. Where are leaders?
    The voters themselves suffer from the “child/adult” problem as well. There are too many out there that out for their own self interests and stick to their own egotistical ideology instead of sticking up for the common good. Your diatribe here about bush vs obama is childish. Economists and politicians alike need to go back and read the federalist papers. Our founding fathers were the greatest gathering of mind, spirt, and will that the world has seen. Unfortuatly their children have forgot the principals that they laid down for us.
    Ok, Bush was bad president but does that mean Obama can get excused from judgment of his own presidency because of the problems of his former. Ronald Reagan came to office and did something about the problems that this country accumulatled over years of mismanagement.(also think Paul Volker here) And throughout the past, Presidents have risen above the rest by taking control of their own situations. Obama must address his own situation as an Adult.

  10. I would like to present a slightly different take. Specifically, Lawrence Lessig who appeared on Moyer’s Friday night… The “funder’s” (special interests) need to be disconnected or at least filtered some from the system. They have too much power: capitalism with no soul. Snake eating itself. Gov’t handouts won’t stop until this cycle is stopped.

    http://www.pbs.org/moyers/journal/02052010/profile.html

  11. Agoraphobic Kleptomaniac

    “All good comes from economic success, and all success comes from the creation of profits. There is no stronger disincentive to profits than taxation.”

    Why are they starting with a logical fallicy to base a debate on? Heck, it’s not even a logical fallicy, each of those statements by itself is wrong. Either they are very bad at conveying their overall point, or they are idealogical hacks, I’m not clicking through the link to figure it out either.

    “Stones float on water. Ducks are made of wood. Therefore, Stones and Wood are money.”

  12. You said it. Kwak’s brain just turns right off when it comes to St Obama doesn’t it?

    It’s like Obama claiming he “inherited” the problem. Inheritance is when someone dies and you get stuff whether you want it or not. Obama actually RAN for office.

  13. The earlier a problem is recognized the easier it is to fix. Unfortunately it looks like several years were wasted messing with symptoms rather than understanding the underlying problems and owning up to them.

  14. James, I love yours and Simon’s economic insights, but you’re tilting at windmills by taking issue with your Republican political opponents. No one takes the Republican economic plan seriously right now, because there isn’t one. So save your intelligence and energy for comments about proposals that matter.

  15. Look, most of all I an’t agree on thisone: “it’s natural and good for taxes to climb upward as a society becomes wealthier, because the government does more” – for a) the society has NOT gotten wealthierat least since trhe last ten years. A bubble building houses in wrong places is, if anything, wasting land and building material and labour that could just as well done better things. And b) why on earth must the government do more and more? All it has so far managed to do, bipartisan, is to bankrupt the Union and most states if you apply normal accounting standards. It’s already impossible to ever repay that debt.

  16. With regard to #6, one could make the argument that “changing the rules” helps Obama because he continues to claim that Bush inherited projected surpluses (under the old assumptions), while he inherited projected deficits (under the new assumptions).

    Put another way, if you could somehow use the same new assumptions at beginning of the Bush years, the result would likely be lower projected surpluses.

    I’m not sure that’s the point that Hennessey is making, though.

  17. Deck chairs. I am starting to think I am wasting my time following this site.

  18. And of the people the more educated and prepared they are the more responsible they should be held. How can we blame second class politicians for something that first class citizens did not speak out against? Or is it that they are in fact not the first class citizens they present themselves to be?

  19. Aside:

    If you haven’t listened to Michael Hudson’s February 3rd interview on the radio program “Guns & Butter,” it’s a must listen.

    ~ http://www.kpfa.org/archive/id/58336

    The show was titled “Obamas Republican Class War Presidency.”

  20. some guy in a cube

    The staged hang-wringing over the national debt is merely in preparation for a full bore attack on the last of the great social welfare programs. You know which ones I’m talking about.

    The social darwinists and morally-challenged among the ruling and governing classes just won’t be satisfied until you are forced to work until you literally drop dead.

    Meanwhile, it goes without saying that even considering minor, cosmetic tweaks to the grotesquely bloated budget of the war machine is simply not to be discussed in polite company.

  21. Q. Is there any trace about any politician, whether republican or democrat, having ever been asked to opine on the wisdom of capital requirements for banks that discriminate against risk taking based on risks of default as perceived by some few human fallible credit rating agencies? Did congress approve that?

    I ask it because in my mind that is one of the most misguided concepts ever and that clearly impacts a society by creating incentives to turn risk-takers into wimps.

    These regulations also included that the banks do not need any equity, zero, zilch, when lending to the government and this is of course a prime driver in helping to build up government debt.

  22. It would be an interesting research project, but Congress must have opined on rating agencies, in some manner, as far back as the Roosevelt Administration. Regulations in the 1930′s forced reliance on rating agency opinions for banks and other financial institutions. This regulation was covered in finance courses in the 1950′s. The ratings agencies were treated as infalliable.

    The bad habit of giving up your own opinion for a published scorecard was well entrenched by the 1950′s. One simply did not argue against a rating. They defined everything and were backed by regulation. Consequently, the debates over the Roosevelt Era financial laws are probably filled with Congressional discussion about ratings primacy being implied by the laws that were passed.

    I remember discussions about the subject in finance classes fifty years ago. Even a crass student understood the awe attached to ratings agencies.

    Judgement is frowned on as being litigable when you may CYA using a formula that takes the place of judgement.

  23. Yes they have been around a long time… and that is not the real issue here.

    When were the regulators authorized to give the credit rating agencies so much regulatory power… and when were the regulators authorized to impose a regulatory layer of discrimination of risk on top of the markets´ normal discrimination of risk? Those are the questions.

  24. Almost surely, ratings agencies were never authorized by law. That is not necessary in the US. In the US , it is politically abhorrent to operate under the rule that you may not until authorized by law. Instead our political rule is that you may unless prohibited by law. That is why a lot statutes say ” It shall be unlawful to….” It is lawful until it becomes unlawful.

    Prior restraint is the bugaboo of all conservative politics.

    The ratings agencies sprang into being on their own without the need of law prescribing them. If one goes into the Congressional debates about financial laws way back when, I bet the issue was heavily aired.

  25. The Regulators were given authority to regulate by the usual inclusion in the statute of the following typical language. ” The Secretary (or other person) or his Delegate are authorized to prescribe regulations to implement this act.”

    When dealing with regulations on an adversarial basis , the first thing you do is look for regulatory overreach to invalidate the regulation.

  26. Again I am not talking about the right of credit rating agencies to operate… I have no problem whatsoever with that…though I might have a problem with them hiding behind the free speech rights in the case that they gave credit rating opinions when they themselves did not believe in them.

    What I am talking about is the discrimination present in bank regulations that demand from a bank to have 8 dollars in equity when it lends 100 dollar to a ordinary citizen, a small business or an entrepreneur, it is required to put up 8 dollars in equity; but only 1.6 dollars when lending or investing to anything anointed with a triple-A rating by the credit rating agencies.

    Who authorized the official regulatory discrimination?

  27. In the 1950′s, that is, pre-Civil Rights, pre-Vietnam War, and pre-Kennedy and Johnson’s democratic social policies, we had a Republican President, a famous general, who arguably was the most significant battlefield leader to lead the victory by the Allies in WWII. That much everyone knows. Get it, a Republican President in the days before the proliferation of TV politics and a bloated K Street. We had to balance the budget (comparitively), and we had a top marginal tax rate (when income taxes were still somewhat of a social issue) of 90%. And, we grew!! Manufacturing grew, construction grew, small business grew. How could this happen? America had not yet ascended (and wouldn’t for the next 40 years (maybe) into the world’s largest Plutocracy with greedy wall-to-wall oligarchs littering the landscape, buying Capital Hill, and providing endless election funding and lobby funding substantially supported by it’s plutocratic media. Ah, Opie, where are you? Beaver, my vote is for you and not desperate housewives (most of the real ones are desperate to hold one to homes now in foreclosure largely due to the plutocratic policies of the ruling apparachiks).

  28. Whoa !!! Try some facts, and dates—-then try the arguement?
    The recessions are what your all speaking too—Obama did not cause this 2007–?? (current one), Nor did Geo. Bush cause the 2000-2003 recession

    First both recessions were clearly in the cards and or sent coming by many people! The Federal Reserve saw them coming, and most Financially trained people saw them coming.

    This leaves out both or maybe all Presidents, NOT their advisors.

    The Federal Reserve always is aware of the Yield curve, as they set the short end of the curve.

    Below please see the Federal Reserve study as to this was clearly able to be seen coming actually several years in advance! Yes several years, these recessions did not sneak up on us.
    ——————————————————————————–

    Jonathan Wright, a research economist at the Federal Reserve, in his paper titled “The Yield Curve and Predicting Recessions”, tested the ability of various models to predict recessions. While his study confirmed a significant and relatively stable relationship between the yield differential (or spread) and subsequent recessions, Wright found an important second variable that substantially improved predictive ability. When the federal funds rate is low, Wright’s model showed that chances of recession are significantly less than when the funds rate is high, even if the yield differential is negative. This is best illustrated by comparing output from the model with the fed funds rate set at 3.5% and at 5.5%. The spread is calculated as the difference between ten-year and three-month US Treasury securities.

    Probability of recession within the next 4 quarters
    Fed Funds Rate: 3.5% 5.5%
    Spread: 1.0% 4% 16% < this is a normal curve
    Spread: 0.0% 17% 40% < this is a flat curve
    Spread: -1.0% 43% 70% < this an inverted curve

    If the fed funds rate is low, the probability of a recession is also low unless the yield curve becomes inverted. However, if the fed funds rate is high, there is significant (40%) probability of a recession when the yield curve is flat, increasing to high probability when the yield curve is negative (70% at -1.0%).
    ——————————————————————————–

    What made this current recession extra bad was that it caim hand in hand with what is called a "liquidity crisis", why we had to have something??–and it came in the form of the TARP.
    Now this Liquidity Crisis was also clearly far in advance of the onset of the recession, actually in 2006, a liquidity problem or crisis is always available to be seen in what Financial Trained people see as what is called the TED Spread.
    Below a thumb nail decription of the Ted Spread
    ——————————————————————————–

    TED is an acronym formed from T, for T-bills, and ED, for the Eurodollar futures contract.

    What is the spread?
    Originally the spread was between the interest rates for three-month US Treasuries contracts and the three-month Eurodollars contract as represented by the London Interbank Offered Rate (LIBOR).

    However, ever since the Chicago Mercantile Exchange dropped T-bill futures, the spread is calculated as the difference between the three-month T-bill interest rate and three-month LIBOR.

    How is the spread measured?
    As you see in the chart below, the spread ranges from around between “50” and “500.” What do these numbers represent?

    The chart below is in basis points, aka bps. For example, let’s say the T-bill rate is 4% and the ED trades at 4.5%, then the TED spread is 50 bps (.5%).

    For all intents and purposes, between 10 and 50 bps should be viewed as normal. Anything greater can be viewed as a signal.

    What does an increased spread signify?
    When did the TED spread start becoming volatile? Well, by looking at the above chart you can see that it all happened in the second half of 2007.

    And what was the stock market doing at the time? In October of 2007, the DOW was above 14,000 points. By the end of 2007 the DOW was already down to the lower 13,000s.

    Why is this important? A rising TED spread is often looked at as a signal that the US stock market is about to head into a downturn because of an exodus of liquidity. The spread increases because whereas T-bills are pretty much considered risk free, LIBOR represents the risk involved with lending between commercial banks. If banks believe interbank loans are getting riskier because of default risks, they will increase the interest rates (hence liquidity lowers), thus increasing the TED spread.

    How do we fix the TED spread? Or better yet, USE it!
    Leaving all that mumbo jumbo behind, the TED spread is really just calculating the trust level between banks. If that’s what it signifies, then the next logical question is: Why did the TED spread fall so quickly in the above graph?

    That is where the US government did a cash infusion into the banking system. Most people criticized the infusion by posting data that showed consumer lending was still down. And they are right. However, it is worth it to note that interbank lending premiums fell drastically, increasing liquidity in the economy.

    Ripple into the consumer market?
    At the time, it doesn’t seem the decrease in the TED spread is having a ripple effect in the consumer market. Consumer credit limits are being slashed every day, required credit scores for loans are increasing, loan rates are holding pretty constant, and more.

    Why? It’s hard to say, but it could be that financial institutions are unsure of their models that price in risk. The saying goes “All models are wrong, but some are useful.” So they may be trying to re-evaluate some of their practices before extending credit into the consumer market again.

    That’s All
    That’s a pretty basic overview of the TED spread, below a link that will show you where the Spread is currently, it just is an update to the chart above

    http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND

    ——————————————————————————–

    Now Was any of this hidden?—-Not to tough to see in hind site, you say, —This not the first time this has gone on —-All that is being put forth is that Financial storm warnings were sounded, in the Yield curve and here too—in the Ted spread—-
    These yield curve rates, are published daily by the US Treasury for all to see each day, same with the rates that make up the TED Spread.

    Why Didn't this make front page NEWS, on all Business channels, or in News papers, that we likely in 2006 were going to have a recession per we hade an Inverted yield curve from 2006 thru 2007 when the Federal Reserve started cutting interest rates, –why becuse tthe TED spread Expoded in mid summer of 2007,—–
    ——————————————————————————–

    Now where were you, and where was Predident Bush and President Obama WHEN IN 2006 THESE FINANCIAL SIGNALS WERE FLASHED, FINANCIAL STORM SIRENS GOING OFF ?

    2006,– President Bush was President, confronted with an off cycle election coming, Current President Obama was running to become a Senator, He didn't get elected Senator till Nov 2006, and didn't take his Senate seat till Jan 2007. Now thats where they were, argue that. Now where was Congress, well it was in the hands or control of the Repubican's (both House and Senate) as the house didn't become under the Democrats till the elction of Nov 2006, and the Senate did become a Democratic majority till fall 2008. Argue that!

    Where was the Yield curve in 2006– The below is cut and pasted from YOUR , U.S. Treasury site ( Google Yield curve and see for yourself)

    NOW LOOK !!!!!!!! HERE IN TIME, WHERE THE CURVE WENT
    –INVERTED–
    FROM THE 6 MONTH WHICH IS SHORT TERM,
    TO THE 30 YEAR –WHICH IS LONG TERM–HELLO THIS 2006
    Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr

    06/12/06 4.78 4.93 (5.13) 5.09 5.02 4.97 4.95 4.96 4.99 5.17 5.03
    06/20/06 4.70 4.92 (5.24 5.23 5.19) 5.16 5.13 5.14 5.15 5.33 5.19

    08/01/06 (5.20 5.12 5.18 5.11) 4.97 4.91 4.90 4.92 4.99 5.17 5.07

  29. Blunt Instrument

    Nemo has it right.

    Our President and Congress are supposed to be Leaders. Leaders are supposed to do the right thing, not the politically expedient thing. As long as we continue to make excuses for their gutless behavior, we will continue to get the leaders we deserve.

  30. The regulation writers were empowered by legislation to write rules that implemented or enforced the statute. The statute authorized official regulatory discrimination. It need not be specific but implied. Legislators must make deals to pass laws: that makes implied positions necessary to pass a law. How factions work in a legislature.

    I would not doubt though that the statutes would require recognition of rating agencies as being authoritative on credit valuation decisions. This kind of thing is endemic in US statutes. Tax deficiency interest is statutorily set as an add on to Federal Reserve rates. The Federal rates are targets. The actual daily bank rates are set privately. Some even base their investment on LIBOR.

    I would research this point if I still had full access to a legal library.

    The essential point though is Congress tends to use very general terms. In my view, the best example of a generality is the Full Employment Act of 1946 , as amended. These acts merely state what the economic policy of the United States is. It is up to the executive branch and delegated boards like the Federal Reserve to implement the policy statute.

    The short answer is that Congress would never need to prescribe statutorily that ratings agencies be determinative of banking and other financial decisions. That would be the normal bailwick of the executive branch regulatory structure. The law tells what must be done or accomplished. Regulations are the province of the Prince that does the accomplishing. The Prince and minions could not keep a functioning state going were it any different.

    I do not think the United States is still a healthy functioning state. The healthy state is factions co existing in reasonable harmony. We seem to be at the very bottom of what would be acceptable as reasonable harmony between factions.

  31. “There’s no way Obama could get 51 Democrats with him on this.”

    I. Do. Not. Care.

    Bygones Obama can open his mouth and speak. In fact, he seems to be enjoying that. He just never seems to actually say anything that would put pressure on those 51 or 58 or 59 or 60 (or 100) Senators, he never says anything that changes the consensus, and hence, to get to the Zen stage of this, if Obama speaks, does the forest care?

    But then, the man can’t bring himself to ask the DOJ to investigate the possibility of investigations into torture, illegal war, security and ratings fraud and assorted “bygones” worth tens of thousands of lives and trillions of dollars, so it’s all good. We need some realism – you simply cannot get 51 Senators, so we need to look forward.

  32. I am not arguing the legalities… I am no lawyer and much less an expert on a Constitution that is not of my country.

    But the practical effect of these regulations is that the government is in effect subsidizing whatever is perceived as low risk by some credit rating agencies and, in relative terms, taxing what is not.

    What would happen if the regulator of the health insurance industry for instance would order that all insurance companies that provided health insurance for those that some health rating agencies deemed not healthy enough would have to put up more regulatory capital than compared to what they were required when insuring someone rated AAA on their health? Would this be possible?

  33. Here is where the gop propagandists, perception managers, and disinformation warriors have succeeded. It is the gop, alone, and particularly the fascists in the bushgov, that drove the goodship Amerika onto the rocks.

    Obama inherited this nightmare. Democrats however, including Obama are rank cowards who failed to articulate this truth to the American people and allowed the obstructionists in the gop, and remaining fascists the bushgov still in positions of authority, and thier lockstep partisans in redneck Amerika to obstruct, undermine, mangle, and destroy any policy that would have benefited poor and middleclass Americans.

    The fascists in the bushgov and the gop allowed 9/11 to happen on their watch!!!

    The fascists in the bushgov and the gop then ghoulishly and gleefully exploited the dead and the mayhem of 9/11 (a Pearlharborlikeevent, a Riechstadt fire) to brute and force a mangling, dismemberment, and reengineering of the Constitution and every principle that formally defined America.

    Irag never was, is not now, and never will be a necessary war. Amerika is responsible for attacking without provocation a nation that did not attack us, that had nothing to do with 9/11, and that WAS NOT JIHADI!!! (That would be Saudi Arabia, the bushgov goodfriends, that is jihadi, that is the funding and nurturing tit for all the jihadists massmurder gangs including al Quaida, 15 of whose citizens were DIRECTLOY INVOLVED ON 9/11 you ignorant idiots in redneck Amerika)

    All the dead in Iraq and America died for nothing more than the wanton profiteering of the fascists in the bushgov. The Iraq war was, is, and always will be a crime scene, that was never necessary, or justified, and that will always haunt Americans as the most obscene abuse of power and disinformation in the history of America.

    The fascists in the bushgov and the gop favor, benefit, cloak, and advance the best interests of the predatorclass alone and exclusive, and promote and discourage any and every policy that would benefit poor and middleclass Americans.

    There is a badmoon rising. The divides are vicious and unmendable. There is no compromising or reconciliation possible with the gop in it’s current panjandrum. The gop and their ignorant fascists, biggoted, racist haters in redneck America are our enemies. We either defeat and silence this evil brood and expose their pathological lying, or we allow these beasts to continue dismembering the Constitution, advancing the predatorclass, prosecuting unnecessary, unfunded costly bloody warsofchoice, and destroying what little is left of America’s poor and middleclass
    - or we stand up, call these pathological liars and corporatist obsturctionists on their dirty dealings on the facts and truth, – or we are doomed to witness the inevitable destruction of America.

    A pox on the house of the gop and redneck Amerika. They do not represent America, or decent Americans.

  34. “The fascists in the bushgov and the gop allowed 9/11 to happen on their watch!!!”
    Yeah yeah… just like in Venezuela chavez´ followers are saying that Obama, using something named HAARP, created the earthquake in Haiti, only in order to invade Haiti.
    Have you no respect for yourself?

  35. I have plenty of respect for myself, and though this thread is probably dead, you might want to do a little research in HAARP Per Kurowski, because there far more unanswered questions about what’s really going on in Alaska, then we are told by self-respecting socalled politicians. Quite honestly, I am not aware of any accusations from Chavez’ followers regarding Haiti, – but there were a number of odd atmospheric aberrations in the intensity and eventual trajectory of Hurricane Katrina, that like 9/11, and the fascists in the bushgov pimping and bruting of non-existent imminent threats and stock piles of WMD and ghoulishly used to sell the costly, bloody, noendinsight horrorshow and excuse of wanton profiteering in Iraq, that are never thoroughly investigated, and end simply being wiped off the radar.

    Whatever really happened on 9/11 and who exactly were directly or indirectly responsible for that horror will probably never be know entirely, – but the current fairytale conjured and bruted by the fascists in the bushgov, is a pack of LIES!!!