Sunday, July 31, 2011

Ms. Pelosi, They Are Getting Ready for Your Appearance; Mr. Boehner, You May Have Been Had

See The Amazing Boehner Man Try to Escape From This Trap

A tentative deal to raise the debt ceiling and cut federal spending over a 10 year period emerged Sunday.  The deal, which has the approval of Mr. Obama, Mr. Reid who is the Senate Democratic majority leader and Mr. McConnell who is the Senate Republican minority leader looks something like this.

  1. An immediate increase of $400 billion in the Treasury’s borrowing authority.

  1. A second increase of $900 billion later this fall.  It would take a 2/3 vote in each branch of Congress to prevent this borrowing.

  1. A third increase of $1.2 trillion with cuts identified by a bi-partisan Congressional committee.  If the cuts were not made, $1.2 trillion would be automatically cut from discretionary programs, with half from defense, half from social programs.

Who Got Left Out?

While specific cuts have not been identified (that would throw the whole process out) it also appears that Social Security and Medicaid would not be subject to cuts.  Medicare will, however.  The Dismal Political Economist expects major cuts in Education, Energy, and Health Care.

Noticeably silent in all of this is Republican Speaker of the House, John Boehner.  As noted earlier by The Dismal Political Economist, Mr. Boehner could be in real trouble.  First of all Mr. Boehner snookered the radical tea party members of the House into supporting his earlier bill by including a provision that no subsequent debt ceiling rise could take place without adoption of a Balanced Budget Amendment, the infamous BBA.

Who got Left Out?

Mr. Boehner knew this provision would never hold, and he went into negotiations with the rest of the cast and immediately tossed it aside.  The radicals, divorced from reality and believing their own press clippings were probably surprised and angered that the final agreement contained only a promise to vote on the BBA, something the House has already done and failed to pass.

Now Mr. Boehner must make the dreaded call to Ms. Nancy Pelosi, Minority Leader of the House Democrats and beg her for votes.  Ms. Pelosi has been totally out of the picture thus far, because the House of Representatives operates on a total and complete majority rule basis, and Ms. Pelosi is not the majority any more.  She could be and has been safely ignored so far, not only by Mr. Boehner but also by her own party.  Until now she has been irrelevant.

The Speaker now recognizes
Ms. Pelosi - and thanks her for
her paitence

Once Mr. Boehner has the approximate number from Ms. Pelosi, he must now find the rest of the votes from Republicans.  He must also convince his second in command, Majority Leader Cantor to support him and not do what Mr. Cantor so desperately wants to do, which is stab Mr. Boehner in the back and take over the Speakership. 

So Mr. Boehner who suckered the tea party radicals into saving his leadership position last Friday now finds himself set up by the Senate leader Mr. McConnell.  (He was warned by The Dismal Political Economist)

At stake is both the deal itself but also the speaker. If Mr. Boehner has to pass the vote by relying on Democratic votes—and if he loses more than half of GOP lawmakers in the process—he might avert default while imperiling his effectiveness as a leader.

Can Mr. Boehner get the votes he needs to keep Republicans from being blamed for a default? If he does, does he lose the support of his caucus down the road and lose the Speakership in January?  If he does not, does he take 100% of the blame for a default on the nation’s debt and lose his Speakership in January? 

Calling Ms. Pelosi and Mr. Boehner, you’re on stage in five minutes (give or take 48 hours).

Go ahead, Mr. Boehner, get this done and remain Speaker and you will have earned the admiration of your policial skills by The Dismal Political Economist.  But just until September 30, because you know what is coming October 1.

Senate Republicans Prevent Vote on Bill to Raise Debt Ceiling

When You Don’t Have the Votes, Don’t Allow a Vote

Earlier today the Senate voted on ending debate on Senator Reid’s bill to raise the debt ceiling.  The vote was 51 to 48 (recorded 50 to 49 with Sen. Reid voting no for procedural reasons) in favor of ending the debate and then moving forward to a vote on the bill itself.  The vote on cloture gives every indication that Sen. Reid’s bill would have passed by that 51 to 48 margin.

Seeing Red

The filibuster is an ancient Senate tradition and has it purpose in rare instances.  Democrats have used it

extensively, just not nearly as extensive as Republicans.  To filibuster a vote as crucial as this one seems no much against national interest that even Republicans should be embarrassed.  And one would surely expect the national press to weigh in heavily against this Republican tactic.

Republicans are not embarrassed, they are proud that they used this tactic in this instance. That the American public and the media accepts this says that the U. S. has the government it deserves, and that it should not complain about the dysfunctional process, because it approves of the dysfunction and votes for those whose abuse the process.

Finally, for those Democrats who abhor the constant use of the filibuster so that 60 votes are required to pass any legislation in the Senate, don’t worry.  In 2013 when Republicans take control of that body you will find that they severely restrict it use.   Not playing by the "Most of the Time Majority Wins" rules of Democracy is something only Conservatives are allowed to do.

While Republican Ponder Whether or Not the U. S. Should Pay Its Bills, Economic Conditions Worsen

Is Anyone Paying Attention? No, Guess Not

Buried in the Friday July 29 debt ceiling/deficit reduction fiasco was the other fiasco that is the U. S. economy  The 2nd quarter GDP numbers were released and not only did they show very low growth in the quarter just ended, the growth for the previous quarter was revised downward by a significant degree.

The combined growth for the first six months of the year was the weakest since the recession ended two years ago. The government revised the January-March figures to show just 0.4% growth — down sharply from its previous estimate of 1.9%.

The weakness in the economy is broadly based.  Consumer spending is weak, investment spending is weak, government spending is weak and personal income is not rising.

The revision also showed that the Great Recession was worse than previously reported

The government also revised data going back to 2003. The data show the recession was even worse than previously thought. The economy shrank 5.1% during the recession, which lasted from December 2007 through June 2009, compared to the earlier estimate of 4.1%. Both figures represent the worst downturn since World War II.

Debt ceiling photos obama boehner unemployment wallstreet foreclosure homeless stocks 14 20110209
Job Applicants - Not Worried About
the Debt Ceiling

Yes, you are reading that correctly.  The Great Recession ended two years ago.  Really, that’s what all the experts said.  That’s why they are called experts.

Ok, but somebody needs tell that to these people.

Even Wall Street Journal Editorial Writers Understand This Basic Principle: When Radical Conservatives Change Something They Make It Worse

Conservatives Sabotaging the Politics of Debt Reduction in the House

The initial John Boehner (R, Oh), Speaker of the House, Deficit Reduction Plan had almost zero chance of being enacted into law.  Its killer clause was a requirement that in six to eight months another debt ceiling vote would have to be taken.  This would have totally defeated one purpose of a large increase in the debt ceiling, namely to calm markets and at least give the possibility of creating an environment where economic growth could take place.

Radical conservatives forced Mr. Boehner to amend his plan to make a second debt increase contingent upon both the House and Senate passing a Balanced Budget Amendment.  This took the very small possibility that the initial Boehner plan could pass the Senate and turned it into an impossibility.  This result was so obvious that even the editorial pages of the Wall Street Journal recognized this folly.

. . . after John McCain quoted our July 27 "tea party hobbits" line on the Senate floor. Senator (sic) Sharron Angle responded that "it is the hobbits who are the heroes and save the land." Well, okay, but our point was that there's no such thing as a hobbit. Passing a balanced budget amendment this year is a similar fantasy. Yet outfits like the Club for Growth used the amendment as an excuse to flip from opposing the Boehner plan to supporting it. Maybe it should be the Club for Futile Fiscal Gestures.

The hobbits  in their natural habitat (really)
The whole process illustrates the utter insanity that passes for economic and fiscal policy initiatives by the Conservative movement.  It also illustrates, and probably in a painful way for Ms. Angle, that there are no hobbits.

Sorry Ms. Angle, those hobbits in the movie were really actors, small actors, but actors all the same. 

Notable Quotes from Barry Ritholtz, Yves Smith, Paul Krugman and Others

Because Sometimes Someone Other Than The Dismal Political Economist Can Say Things Best

Come what may, the US will always be the least dirty shirt in the hamper, despite Washington’s best efforts.

---Barry Ritholtz on why a downgrade in the U. S. debt rating won’t matter a lot.

It is hard to come up with words that are strong enough to describe what an appalling display of misguided ego, inept negotiating postures, bad policy thinking, and utter disregard for the public interest are on display in this fiasco. But as a friend of mine likes to say, “Things always look darkest before they go completely black.”

---Yves Smith on the Debt Ceiling Issue

So given a stagnant economy suffering from falling government spending, what is all our political debate about? Spending cuts! After all, we have to appease those invisible bond vigilantes, who are suckering us in by cutting long-term rates to 2.87% as of right now.

---Paul Krugman on future macro-economic policy

Conservatives are on a winning streak because they have a Big Idea that serves as an animating, Eugene Robinsonmotivating, unifying force. It happens to be a very bad idea, but it’s better than nothing — which, sadly, is what progressives have.

---Eugene Robinson

Your Moment of Panic

---Aaron Carroll from The Incidental Economist

Here is what he is referring to

"I made you some charts based on their data. First up is total national health care (NHE) spending. Remember, this is TRILLIONS of dollars:"

Here’s NHE per person:

And finally, NHE as a percentage of GDP:

"Anyone who doesn’t think that our NHE isn’t the real problem with future spending and deficits isn’t paying attention."

The Heritage Foundation Report on Poverty Wins the Coveted “Odie” for July 2011

Even With a Particularly Terrible Month, Nothing Can Top This

[Editor’s Note:  The Dismal Political Economist has his version of the movie award “Oscar".  In this case the award is called the “Odie” which is given to the most odious writing or statements on economic and political issues during a given month.  The July 2011 award goes to the Heritage Foundation for the following reasons.]

The Heritage Foundation is a Conservative Think Tank (emphasis on Tank, not on Think) that for some reason has gained credibility in American Conservative community, that  reason being their conclusions always support preconceived Conservative ideas. 
rush limbaugh and sean hannity

 This July their “scholarship” reached its zenith with the report, 

Air Conditioning, Cable TV, and an Xbox:

It turns out the concept of poverty in American is wrong, that the poor in America are really quite well off, lead lives relatively free of economic want and in fact they are really not poor at all!  Really, they do, at least according to the Heritage Foundation.  Here is what they determined.

• The typical poor household, as defined by the
government, has a car and air conditioning,

two color televisions, cable or satellite TV, a
DVD player, and a VCR. If there are children,
especially boys, the family has a game system,
such as an Xbox or PlayStation.

• In the kitchen, the household has a refrigerator,
an oven and stove, and a microwave.

Heritage Foundataion-Typical Home
of Poor Family
Other household conveniences include a
clothes washer, clothes dryer, ceiling fans, a
cordless phone, and a coffee maker.

• The home of the typical poor family is in
good repair and is not overcrowded. In fact,
the typical average poor American has more
living space in his home than the average
(non-poor) European has.

• By its own report, the typical poor family was
not hungry, was able to obtain medical care
when needed, and had sufficient funds during
the past year to meet all essential needs.

So it turns out that the conditions of poverty in the U. S. are highly exaggerated.  And why is this important to the Heritage Foundation?  Well here is the reason.

Over the long term, exaggeration has the potential to promote a substantial misallocation of limited resources for a government that is facing massive future deficits.

Now who needs that translated for them? Well not Conservatives, that’s for sure because they know that this is saying,

“There is no poverty, no suffering and no problem.  By exaggerating the poverty problem we will devote government resources to helping poor people who do not need help, instead of having more tax cuts for the very wealthy.”

How much money do poor people have?  Well the threshold for a two person household is about $1,250 a month.  So the message to the authors of this study, Robert Rector and Rachel Sheffield is this. Go live together on less than that for a couple of years and then come back and tell us how you had a great home, air conditioning, medical care, adequate food, a couple of TV’s etc. 

 And if you don’t want to do that, then just go.  We won’t miss you.

Saturday, July 30, 2011

President Obama and Republicans Have Entered Into Talks on the Debt Ceiling and Deficit Reduction – Few Things Are Scarier Than That

Wondering What Will Mr. Obama Give Away Now

It is Saturday evening at the end of July.  The debt ceiling crisis will either be resolved, or some time between August 2 and August 10 the U.S. will start to shut down federal government operations and default on obligations under its outstanding debt.

So far two things have happened in recent times.

  1. The Republicans in the House have passed a bill that should be totally unacceptable to any rational person.  It requires a second debt ceiling vote early next year, and requires adoption of a Constitutional amendment in order to raise the debt ceiling. 

  1. The Republicans in the Senate will filibuster any Democratic efforts to pass a Democratic plan.  And so that no one misunderstands what that is, the Republicans who cannot defeat a Democratic plan in an up-or-down vote will not allow that vote. (Republicans have a problem with this “democracy” thing.)

The review of all this in the press, it is somehow the fault of both Democrats and Republicans.  Yes, the concept of the unbiased, objective press corps takes another blow.

Philip Scott Andrews/The New York Times
Senator Mitch McConnell and
Speaker John A. Boehner spoke at a press conference on Saturday.

Senator Mitch McConnell (R, Ky) the minority leader of the Senate, who has stated repeatedly that his highest political priority is the defeat of Mr. Obama in the 2012 election has demanded that Mr. Obama become involved (again).  Reports are now out that indeed the Republican leaders are meeting with Mr. Obama.

WASHINGTON — The top two Republicans in Congress said Saturday that they had begun new talks with President Obama and their fellow Congressional leaders to try to find a way to end the debt limit fight.

Now the last time Mr. Obama became involved in these talks he was ready to cut Medicare, to cut Social Security, to cut Medicaid and to cut just about every other social program that Democrats have fought to enact over the last thirty years.  The only thing that saved beneficiaries (read the old, the sick, the student, the disabled, the poor) was that the Republicans were too ________ (fill in the blank test, choose from “stupid”, “rigid”, “idiotic”, “stubborn”) to accept the proposal.

So with Mr. Obama involved again, once again a great risk to the government enters the picture.  It is not the risk of default, that will be settled either now or at some time in the future.  The once again risk is that Mr. Obama will try to give away programs that are essential the national welfare.  The only hope may be that once again Republicans are too recalcitrant to accept an even more complete victory in this debacle than they already have achieved.

How much longer can Mr. Obama count on Republicans to save his presidency and keep his re-election chances reasonable? 

[Follow Up:  Senate Minority Leader McConnell opened talks with Vice President Biden on a compromise.  A Democratic official with knowledge of the talks said that Mr. McConnell called Mr. Biden early Saturday afternoon, the first conversation between the two men since Wednesday. The official said the two men talked four more times on Saturday as they tried to work out an agreement.

The deal they were discussing, this person said, resembled the bill that Mr. Boehner won approval for in the House more than it did the one that Mr. Reid had proposed in the Senate.

No surprise there, is there?]

Oil Company Profits Surge; So No Reason to End Their Special Tax Breaks

If That Makes Sense, Count Yourself a Conservative

Profits up 43%!

Two of America’s largest oil companies reported huge gains in second quarter profits. One of them, was pleased to announce that

Chevron reported a profit of $7.73 billion, or $3.85 a share, up from $5.41 billion, or $2.70 a share, a year earlier. Revenue climbed 30% to $68.9 billion

The second, the always popular Exxon-Mobil was just as happy.

Exxon, based in Irving, Texas, said profit rose to $10.68 billion from $7.56 billion a year earlier, buoyed by high oil prices and increased production. The results rivaled the company's all-time record earnings of $14.83 billion from the third quarter of 2008, when oil prices hit $147 per barrel, but missed analyst expectations in part due to continued low natural-gas prices. Revenue climbed 36% to $125.49 billion.

One of the proposals supported by the President was to remove special tax incentives and tax breaks provided to the oil industry to help reduce the deficit.  The proposal was rejected by the Republicans and was never seriously considered as part of the deficit reduction package, although to be fair, on a scale of 1 to 10 the President’s effort would be rated a strong minus 1.2.

Did House Republicans Score a Big Win and House Speaker Boehner Score a Big Loss?

Look Out Mr. Speaker, Another Vote is Coming 

On Friday the Speaker of the House of Representative, John Boehner (R, Oh) amended his debt ceiling/deficit reduction bill to require that a future increase in the debt ceiling would only take place if the Congress passed and sent to the states a Balanced Budget Amendment.  This won him enough votes from the radical Conservative group of House members to narrowly pass his bill. 
Why is this man smiling?

Mr. Boehner’s Speakership was saved, but that may have been temporary.  The issue has not been settled, and one of the following three outcomes must take place.

  1. The Senate and the President accept the House bill.  This is the outcome that Mr. Boehner and his colleagues based their strategy on.  They apparently believe, against all evidence to the contrary, that if their bill was the only game in town, the Senate and the President would be forced to accept it in order to avoid default and avoid the political blame that would go with it.  This is a possible but still extremely unlikely outcome.

  1. There is no further raising of the debt limit, the country defaults, government spending is cut so that the budget is balanced beginning August 2.  This outcome appears to be impossible.

  1. The Senate passes a compromise bill which must be approved by the House.  This is Mr. Boehner’s nightmare, he may just not know that yet.  To pass a debt ceiling bill Mr. Boehner will need 30 to 50 Republican votes because not all the Democrats will vote to raise the debt ceiling, and even if they did he is still 28 votes short of a majority. 

For Mr. Boehner to have to corral this many Republican votes will be difficult and will put him once again on the wrong side of his party’s radical Conservative group.  Complicating matters will be his second in command, Mr. Eric Cantor the Majority Leader who certainly has designs on Mr. Boehner’s Speakership. 

Oh, and even if Mr. Boehner can get the votes to pass a revised debt ceiling bill, there is always the October 1 problem.  What, you don’t know about the October 1 problem.  Well things are too depressed right now to go into that, we all want to have a nice weekend.

Will Mr. Cantor support Mr. Boehner?  Will Any Republicans Support Mr. Boehner?  Will Mr. Boehner end up with the blame that was going to Mr. Obama and the Democrats?  Those questions and many more will be answered in the August edition of “Idiots in Government”.

Peggy Noonan of the WSJ Gets It Right Again – Then Goes Too Far

She Cannot Help It – It’s What Conservatives Do

In her latest column Ms. Noonan muses on the popularity and appeal of Mr. Obama.  She find that as a political animal, Mr. Obama is sorely wanting.

Ms. Noonan

The secret of Mr. Obama is that he isn't really very good at politics, and he isn't good at politics because he doesn't really get people. The other day a Republican political veteran forwarded me a hiring notice from the Obama 2012 campaign. It read like politics as done by Martians. . . .

He went into the 2008 general election with a miraculously unified party and took down another machine, bundling up all the accrued resentment of eight years with one message: "You know the two losing wars and the economic collapse we've been dealing with? I won't do that. I'm not Bush."

Now saying that Mr. Obama is not very good at politics is like saying the Chicago Cubs are not very good at getting into the World Series.  Mr. Obama is terrible at politics.  More importantly Ms. Noonan recognizes, as so few in the Obama campaign do or did, that he won in 2008 because he was not the other guy.

But then Ms. Noonan goes overboard and uncharacteristicly turns a little mean, unable to resist the internal boiling hatred that all Conservatives have for Mr. Obama.

He is not a devil, an alien, a socialist. He is a loser. And this is America, where nobody loves a loser.

Self Made Man (left) and Inherited Made Man (right)

No, Mr. Obama is not a loser.  He has won the American dream, and he did it the hard way, as an African American with an alien sounding name and none of the “born with a silver spoon in his mouth” advantages of people like Mr. Bush (Jr). 

He is losing the current political battle because his
governing philosophy, which is a desire to bring civil discourse and compromise and negotiation to a process that is polarized, is thwarted by Conservatives and their.  “win at all costs regardless of damage to the country” position.

But compared to the men and women he has gone up against, he stands tall and strong, and history will accord him that status after the petty attacks and personal hatred by his opponents have been consigned to history's trash pile.   

Technical Market News: Commercial Mortgage Baccked Securities are in Trouble

No Commercial Mortgages, No Real Estate Investing, Bad Economy

Mortgage Backed Securities (MBS’s) are exactly what they sound like.  A group of mortgages are put into a pool, and investors buy bonds issued by the pool.  The appeal of this is that investors can diversify risk, since they own a fraction of each mortgage. Eachpool is given a credit rating, which allows investors to determine the risk of the investment.

Unfortunately things do not always work out as planned.  Sponsors of pools were able to put a lot of “junk” mortgages into these securities, and still get very good credit ratings and when that “junk” tanked, these securities became a large cause of the 2008 financial crisis.

Standard and Poor’s is one firm that took the brunt of the blame.  So on Thursday S&P shocked the financial markets a failure to provide a credit rating at the last minute on a $1.48 billion offering by Goldman Sachs and Citibank.  For most of us, the attitude is doesn’t matter.  

 But Commercial Mortgage Backed Securities give liquidity to commercial lending, and without this tool the economy is severely compromised.  The collapse of the CBMS as shown below has hampered investment.

 For Wall Street, it is monumental.

"This is a debacle of epic proportions," said Paul Norris, head of structured products at Dwight Asset Management in Burlington, Vt., which oversees $54 billion in assets. "Confidence in S&P had already been a bit shaky over how they approached previous deals. I don't see how a dealer or investor in the near term can trust their ratings."

Really, people who invested in supposedly Triple A Mortgage Backed Securities only to find out they were filled with poor credit quality paper may not trust the rating agencies?  What a surprise.

Britain’s Phone Hacking Scandal Get’s Uglier; News Corp’s Paper Gave Phone to Murder Victim’s Mother That May Have Been Hacked


News Corp Former Exec is Shocked, Shocked That People Think She Knew

Britain phone hacking scandal blew up when it was revealed by The Guardian that the phone of a 13 year old murder victim was hacked by an investigator working for a newspaper subsidiary of the News Corp.  News Corp is the Rupert Murdoch owned paper in England.  It is a sister publication to Fox News in the U. S.

It turns out that newspaper in question provided the mother of the murder victim with a cell phone, and that the cell phone is question is on a list of phones that were possibly hacked by an individual working for the paper. The reaction of the mother 

Staff at the News of the World, including editor Colin Myler, centre, leave the building at Wapping for the last time after the final edition of the paper was finished earlier this month

Why Are These People Happy?
Staff at the News of the World, including
 editor Colin Myler, centre, leave the building 
at Wapping for the last time
 after the final edition of the 
paper was finished earlier this month
Ms Payne was "absolutely devastated" when the news was broken to her by officers from Operation Weeting, as the Metropolitan Police's phone hacking inquiry is known, her child welfare group, 

The person who provided the phone was Rebekeh Brooks, then an editor.  Ms. Brooks has had to resign her executive position with the News Corp.  Earlier she stated that it was “inconceivable” that she new of the phone hacking, even though it was extensive and done by a company directly under her control and management.  With the new revelation her reaction is

"The idea that anyone on the newspaper knew that Sara or the campaign team were targeted by Mr Mulcaire is unthinkable. The idea of her being targeted is beyond my comprehension.

No Ms. Brooks, what is beyond comprehension is that you did not know this.  You provided the phone, you were intimately involved in the stories about the case, you became close to the murder victim’s mother. 

Ms. Brooks and Her  "Dear Friend" Ms. Payne
Ms Payne's daughter was murdered
Ms Brooks Paper is charged with hacking the victims'
cell phone and the cell phone the paper provided
to Ms. Payne
 And finally there is this

Ms Brooks said the latest allegations were "abhorrent" and "particularly upsetting" because Ms Payne was a "dear friend".

Sorry Ms. Brooks, the idea that Ms. Payne was your “dear friend” is what is “beyond comprehension”. Has the concept of an apology and taking responsibility ever occurred to you?

In fact, what is beyond the comprehension of The Dismal Poltical Economist that you were a friend at all.  Do you even know the meaning of the word?

Friday, July 29, 2011

Republicans to the Congress: Pass a Balanced Budget Amendment or The U. S. Defaults on its Debt Obligations: Take It or Leave It

What Are the Choices Again?

It is  Friday July 29 and the Republican majority in the House of Representatives looks like they have finally gotten their act together.  The situation with the Speaker of the House, John Boehner was that he had to get a bill passed in the worst way, and that is what he did.

Mr. Boehner had amended his proposed legislation to require that any subsequent increase in the raising the debt ceiling, which would have to take place in late 2011 or early 2012 would be dis-allowed unless the Congress, both the House and the Senate, passed an amendment to the Constitution requiring the U. S. to have a balanced budget.

Apparently adding this provision was enough to attract enough of the previous “no” voters to give the Speaker enough votes to pass his legislation. 

House Majority Leader Eric Cantor
 is pursued by reporters while
 walking to a GOP caucus
 meeting on Thursday.

With the changes, House Majority Leader Eric Cantor (R., Va.) said Friday the leadership now has enough votes to win passage of the Boehner bill.

Passage of the bill will likely have two results.

  1. The probability of passage of the bill in the Senate and signature by the President has gone from very, very small to zero.

  1. The House Republicans may not be able to provide the 30 to 40 Republican votes needed to pass a compromise debt ceiling increase in time to prevent a default.

That does not matter though.  The Republicans will have achieved their political goal, creating a default and being able to blame it on the Democrats and Mr. Obama.  Their goal for the econopmic well-being of the country, not a consideration.

The interesting thing though is that in winning this vote the Speaker may have lost.  At some point in time either before or after default he will need to pass a debt ceiling increase, mostly but not entirely with Democratic votes.  The "not entirely" thing is the key.  He will need between 30 and 40 Republicans to vote for a compromise plan, assuming that Democrats do not support it unanimously.  Having to get these votes will be difficult, particularly with his number two man, Mr. Cantor, standing behind him ready to stab him in the back and take over the Speakership.  Be careful Mr. Boehner, be very careful.

But meanwhile, congratulations GOP, the U. S. could never default without you.

Former NY Governor George Pataki (who?) Wants to Run for President,

And Comments on Some of the News of the Day

George Pataki was Republican Governor of New York  He was selected to run for Governor by former NY Senator Alphonse D’Amato, and became a “giant killer” by defeating Democratic incumbent Mario Cuomo.  He left office in 2006, succeeded by Eliot Spitzer (that story is for another time) and now is thinking about running for President.  

Former New York Gov. George Pataki said Thursday he's not sure if any of the current fieldThe ex-governor has been hinting for months that he's considering a White House bid. As The Ticket previously reported, Pataki said in June that he felt increasingly "compelled" to jump into the race.
Pataki (Bela Szandelszky/AP)

Mr. Pataki is a decent man and was generally a good Governor, with a strong bent towards conservation.  He should not run for President, it will not serve him nor his party nor the country. 

Gov. Jerry Brown of California has blasted state university officials for increasing salary and benefits for school Presidents while the state budget problems have caused substantial increases in tuition and fees.  The target,

the decision by the Cal State Board of Trustees this month to approve an annual salary of $400,000 for Elliot Hirshman, the new president of San Diego State, at the same time the school increased annual student tuition by 12%.

Hirshman's salary — $350,000 from the state, with an annual supplement of $50,000 from the campus foundation — is $100,000 more than his predecessor's.

Mr. Hirshman’s response

He would not say whether he thought his compensation was fair, nor would he speculate on whether he would have taken the job at a lower salary.

And the state of California has chimed in this way

State Sen. Elaine Alquist (D-Santa Clara) has already drafted a bill that would prevent Cal State from giving current and incoming executives raises above 10% in years when it also increases tuition.

Yes, that will teach them, no more than a 10% raise. 

Do these people just not get it, ever?

Rep. Jim Jordan (R,Oh) has been the leading opponent of Speaker John Boehner’s debt ceiling/deficit reduction package.  Now Roll Call reports that his district might be eliminated as punishment for his taking his stand.

File Photo
Rep. Jim Jordan (left) could find
his district essentially eliminated in redistricting
 after he challenged fellow Ohioan
Speaker John Boehner (center) on his debt limit proposal.

Rep. Jim Jordan (R) might pay the ultimate price for undercutting Speaker John Boehner’s (R-Ohio) efforts to pass a debt ceiling bill, according to a report Thursday in the Columbus Dispatch.

The cost? His safe Republican House seat.

The newspaper cited anonymous sources “deeply involved in configuring new Ohio congressional districts” who said that Jordan’s defiance puts his seat on the chopping block in 2012

Mr. Boehner said

"Jim Jordan and I may not always agree on strategy, but we are friends and allies, and the word retribution is not in my vocabulary,"

Now The Dismal Political Economist is willing to take Mr. Boehner at his word here, in fact, after observing Mr. Boehner in the last few months it appears there are a lot of words that are not in his vocabulary. 

But watch out Mr. Jordan, the words “revenge”, “payback”, “gotcha” and the phrase “sorry about your Congressional seat” are in his vocabulary.

Democratic Governor prospects for 2012 are not good.  Politico reports on the top ten races, and there is no really good news for the Democrats.  North Carolina Gov. Beverly Purdue continues to look like a sure loser, and then there is this comment on the race in North Dakota

No Democrat of significance has yet entered the race.

Remember that phrase, it is going to be applicable for a lot of races in 2012. 

The Current Forecast for the Deficit/Debt Ceiling: "Anyone who says they know exactly what happens next is lying"

Ezra Klein of the Washington Post Summarizes It in One Sentence

As of Friday, July 29 morning here is what is known:

  1. The House of Representatives does not have enough votes to pass the proposal of Speaker John Boehner.

  1. The Speaker will try to change his proposal to attract enough votes to pass.

At this point we have a fork in the road.  Yogi Berra is quoted as saying “when  you come to a fork in the road, take it”.

Fork 1:  The House passes some version of the Boehner bill.  Then

A.     The Senate defeats the Boehner bill.
B.     The Senate defeats a proposal of Democratic Majority Leader Reid.

At this point the Republicans in the House, particularly Mr. Boehner will say that

 “we have passed a debt extension.  If the Senate and the President do not accept the House plan, they and they alone are responsible for the Default.” 

This will have achieved the political goal of the Republicans, namely to place the blame for a Default on the Democrats.  Unfortunately it is hard to see how this strategy achieves the economic goals, mainly avoiding a Default and enhancing economic growth.  The Senate and the President could accept the House solution, but they would be committing political suicide to do so. 

No acceptance and no new compromise (unlikely):  A Default takes place.

Fork 2:  The House is not able to pass any debt ceiling bill and the Senate is unable to pass any debt ceiling bill

At this point a compromise along the lines earlier described could take place.  Passing this compromise will take about seven to eight Republican Senators to accept the compromise (unless the Republicans drop the 60 vote requirement) and about 30 to 40 House Republicans to accept the compromise. 

No compromise, a Default takes place.

And when this is all settled,  what happens on October 1, 2011?  Don’t ask.  The Dismal Political Economist knows, but trust him,  you don’t want to.