Transparency? Nah, Who Needs That?

Apparently having an Inspector General tasked with catching sticky little hands in the TARP cookie jar is too much government for the Obama Administration. At the end of January, the IG released its report on TARP, stating that it had failed to meet many objectives. Apparently that hit a little too close to home.

'While the administration has not yet finalized its legislative proposal for the $30 billion program, Allison indicated to Barofsky last week that his office would not have any oversight of the program. "I was surprised to learn from you Wednesday that Treasury is contemplating excluding SIGTARP from the oversight provisions of its legislative proposal concerning the Small Business Lending Fund, contrary to what you previously told us," Barofsky wrote in his letter to Allison. Only two weeks ago Allison had indicated to Barofsky that the watchdog would "expressly have jurisdiction over" the small business effort, but that all changed last week. The about-face, Barofsky said, was "a curious change". To exclude Barofsky's office from oversight, he warned, would be "contrary to the best interests of the taxpayer."'

This presents the same kind of Administrative thinking that allows the President to declare he wants an open, transparent, bipartisan dialogue on health care reform (live on Thursday), while simultaneously setting up to go the reconciliation route. One wonders how far the Congressional Democrats will let him go before refusing to be cannon fodder for a plan and way of thinking the public has rejected.

Ceiling? What Ceiling?

Politico reports:

'In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.'

Of course, they haven't quite succeeded in beating the New Year's deadline, and the loss of the Massachusetts Senate seat to Scott Brown, may change the calculus, but this would be the third time to raise the debt ceiling since President Obama took office. From The Hill:

'Both the White House and the independent Congressional Budget Office last month said that they expect the debt to increase by another $9 trillion over the next decade. Should the Senate follow the House's lead and set the new debt limit at $13 trillion, lawmakers would probably have to raise the limit again next year, when the Obama administration expects to run a $1.5 trillion deficit.'

On Christmas Eve, the Senate raised the ceiling marginally by $290-billion, buying a little more time, but the Senate will raise the ceiling in February. Presumably, they hope that voters are too stupid to notice this come November. Perhaps they hope to stage "Hope - The Obama Musical Story," at the Kennedy Center, by way of distraction.

Tales from the Other Side of the Crypt

As I wrote yesterday, I think it's important that Republicans take care to not over-reach following the the phenomenal win by Scott Brown in the Massachusetts special election. Hubris has brought the party low very recently. Nonetheless, the win should clearly signal that the public thinks that the Obama administration and Congressional leadership have moved too far to the left, and is particularly discontented with the health care reform bills, lack of transparency and the economic recovery proposals. Repeated polling, by non-partisan polling organizations, have demonstrated that voters are royally angry at the health care bill, security failures and general direction of the country.



Strangely, some on the left have reached the crazy conclusion that blue-Massachusetts elected a center-right candidate because Congress has not gone far enough left. If the administration buys 'move-left' drive, they may very well drive voters to vote for the GOP out of sheer reactionary anger. Those reaching this conclusion are calling for health care reform to pass through reconciliation, whereby the bill would be passed only on budgetary issues. Such a process would eliminate many of the current special arrangements in the bill, but arguments are being made to re-insert a public option, under the assumption that it could be massaged to (at least in the short term) be fiscally neutral under CBO assessment.

Visit msnbc.com for breaking news, world news, and news about the economy

Where does the GOP go from here? Elections over the last four years have repeatedly demonstrated that the voters do not want the extremes from either side. The majority of the country has been for some time, and looks likely to remain, center-right. This can play against both parties, where the tendency is to move to the extremes. Brown campaigned (and his voting record as a state senator bears this out) as a center-right candidate. He effectively captured voter anger over the economy, security issues and the health care reform proposals. He has never suggested that health care reform should be abandoned, but rather that Congress and the administration are going about it the wrong way. The GOP needs to do more than just say no to the left, it needs to formulate successful, well-thought out, counter proposals. If considered, detailed proposals are put up for debate by the public, we will have a much better chance of effectively moving policy, and of gaining seats in November.

They're Baaaaaack!

.... and so is the ModCon - just in time for the MA senatorial election. The next person to hold one of the two senatorial seats in Massachuetts will be decided within the hour, bickering not withstanding. While the DNC may be hoping against hope, much of the country is deciding that hope and change lie in different direction than envisioned by the administration. Should Scott Brown (the Republican candidate) win, much of the focus from the left will be on who to blame, while many on the right will focus on resurgence (even with a Brown loss).

But I think that we on the right need to focus on something else entirely. It's quite clear that, while turnout will be important in determining the outcome of the race, it is the turnout among independents that will be the most important. Lost in all the coverage is the blunt fact that the majority of voters in MA, while leaning left, are actually registered Independent. Independents are the ones who have really pushed the Brown campaign forward, and their ire has been raised against Republicans and Democrats alike. Independents were also largely responsible for Obama's win last year, and their dramatic shift away from he, and the Congressional leadership, can not necessarily be attributed to a sympathy with all things Republican. Republicans would do well to take as much of a lesson from the outcome of this election, whatever it may be, as Dems - failure to support economic revival and to protect the country will not be tolerated from anyone, regardless of party.

More will be posted as election results come in.

Does the White House Know How to Strategize?

This is third week in a row that Jake Tapper (ABC News) seems utterly mystified at the lack of any real strategy originating from the White House for any of the administration's major policy initiatives.

'TAPPER: Robert, is it the opinion of this White House -- has it been conveyed by this White House to Senate Democrats that the trigger mechanism for the public option would be a better way to get to 60 votes than the opt-in provision?

GIBBS: The President, when Senate Democrats were here last week, the President listened to what their strategy was for moving health care forward.

TAPPER: Robert, did he convey to them, one way or another, what he thought would be a more likely way to get the bill passed?

GIBBS: We listened to what their thoughts were there in the Senate and wanted to hear their strategy.

TAPPER: Seriously, you're not -- okay, so you listened, but the President didn't convey any --

GIBBS: Not that I'm aware of, no.

-jpt'

It would be funny if it weren't so disconcerting.

Debt, Deficit and the Health Care Debate

(I apologize for the extended posting delay - multiple ill family members (including myself) kept me away from the laptop along with frantic dissertation work. On to the topic at hand):

I'm refraining from posting anything about Sen. Kennedy. There is more than enough material out there, and it seems more fitting to leave his memory to those who knew him. Instead, we return to a familiar topic at The ModCon, deficit and the national debt, and in particular, their impacts on the health insurance/health care (depending on the week) debate. This post begins a series of discussions between BMG and a more liberal friend who will be posting counter-point (or at least, alternative ideas).

A recent article by David Gergen at the CNN AC360-blog site, was entitled "Deficits: Why they might threaten health reform - and what Obama might do." The implied question - "Can the President win the health reform debate given the dramatically increasing deficit and debt burden?' - is an excellent one. Putting aside the merits of particular aspects to the five bills circulating through the two houses of Congress, the very fact that the deficit and total national debt have grown so dramatically in the last eight months, is a large factor in much of the opposition to the proposals. The heart of Gergen's musings are laid out in four paragraphs:

'Yet even the Bernanke story cannot fully deflect attention from the other economic story engulfing the administration today: its official announcement of new economic projections – in particular, its acknowledgment that deficits over the coming decade will be even higher than it said only three months ago. Now, the administration is predicting that instead of $7 trillion in new deficits, the country will rack up a staggering $9 trillion in new deficits for the 2010-2019 period. (The Congressional Budget Office has published its own numbers today that are largely parallel.). Deficits of that magnitude would be extraordinarily dangerous and irresponsible for the country. They would double the national debt, risk much higher inflation, saddle future taxpayers with annual interest payments of over $900 billion, make us even more reliant upon China as a creditor, and over time would weaken us as a great nation. Talk about trend lines that are unsustainable! ... In view of all this, President Obama has a choice. He can push forward with health reform efforts, giving short shrift to these deficit concerns. If so – if he continues to insist that Washington is just too “wee-weed up” — he will find that some of his strongest allies will become more reluctant on a big health reform bill this year. Or he can come to grips with these grim forecasts and present to the nation a credible, comprehensive plan for reining in long-term deficits before Congress acts on health reform. The second path demands more courage – and is also the one of real leadership.'

The CBO's economic projections for the next decade were grim to begin with, and have been revised further downward over the last month. Spending $1 trillion on overhauling 1/6 of the economy, when the debt has been revised upward to $9 trillion (and the deficit to $1.6 trillion) and within months of TARP 2, the stimulus package and the largest budget in US history, is going to be a tough sell even to supporters.

Many of the Congressional leadership, and in the Administration, seems completely unwilling or incapable of accepting that much of the anger expressed in the Town Hall meetings is not about racism, gasping conservatism, or even plain contrariness, but rather a deep, abiding dislike of governmental creep and stratospheric debt. Dan Gerstein, a former adviser to Sen. Lieberman, recently published a telling article in Forbes.

'In the best-case scenario, the cumulative toll of all this spending and intervening would test most voters' tolerance for another major government expansion on health care. But for many already anxious Americans, it has rapidly resuscitated their skepticism about government and its competence in managing one-sixth of the economy. The fact that so much of what has come out of Congress is every bit as partisan and one-sided as the last eight years is only compounding those doubts--particularly for swing voters.'

The concept that the President and Congress are trying to sell, that one will lower the long-term deficit and debt by increasing government involvement and spending, is ludicrous to most voters. They're well-aware that increasing spending, and increased involvement leads to increasing debt, and therefore the increased need to pay for that debt. There are only two ways to pay the bill: increase taxes, decrease spending. The latter is the principle reason there is so much concern over rationing and a loss of Medicare benefits. The former is already being floated by multiple Administration officials. The more sordid aspects (cronyism and favoritism in particular) of pushing a bill this large are not helping sweeten voter temperaments. Neither is the 'tone-deaf' aspect of the sales pitch coming from the President. Until 'listening' to these real concerns becomes important to the Administration and Congress, the people are going to continue to push back. They desperately need a new tact and fresh ideas; in fact, they should scrap all the current bills under discussion and begin anew. I doubt they have the sense, guts or humility enough to try.

Oh, is that all? - a $1.84 trillion deficit

The White House prediction for the deficit is growth to $1.84 trillion. The LA Times reports:
'The projected deficit for 2012 stands at $557 billion in the new report, which still will represent a larger dollar figure than any deficit the former administration projected in setting its own records during the eight years of George W. Bush's presidency. The new record deficit this year -- driven by the federal government's efforts at bailing out financial institutions and automakers, the $787-billion economic stimulus act that Congress approved one month into Obama's term and slumping federal tax revenue -- will amount to 12.9% of the nation's Gross Domestic Product.'

Of course these numbers are significantly higher than originally predicted by the Obama Administration, and much higher than any other administration including the final Bush term. For crying out loud, a deficit equivalent to 12.9% GDP, and they think they'll fix it by the end of the term? What fantasy land are they living in? And of course, these are the rosy predictions by the WH-OMB. Other, somewhat more sober, analyses place the deficit much higher.

The Congressional Budget Office predicts that the economy will not recover at the pace that the OMB predicts, and that the massive growth in spending will consume any recovery that does occur for quite some time. In fact, the CBO's predictions look downright gloomy next to those of the OMB. The CBO Director's blog does a nice job of summarizing their outlook, and is worth reading in full, but the this morning's report ('Budget and Economic Outlook: Fiscal Years 2009 to 2019') gives the full details. A small snapshot encapsulating surplus vs/vs deficit is at right (click to enlarge). Not a pretty picture.

One Step Closer to Nationalization

This evening's Marketplace (NPR) spent a great deal of time on an interview between Kai Ryssdal and John Dimsdale. Their discussion raised my hackles almost immediately, mostly because they nailed the Obama Administration's moves to take control over large banks. It's probably a violation of copy right laws to copy the entire inteview (I strongly suggest you read and listen to it), but I'll comment on some key moments.

The interview started by referencing a New York Times article from this morning that explained that the government may convert its preferred shares in banks into common stock.
And not helping at all was a story in The New York Times today that the Treasury Department's thinking about changing the terms of the investment it made in the big Wall Street banks as part of the bailout package. Our Washington Bureau Chief John Dimsdale is here to explain what might be happening. And why.

According to the NYT article, the Obama Administration is touting this as a means of sparing Congress from putting more funds out:
President Obama’s top economic advisers have determined that they can shore up the nation’s banking system without having to ask Congress for more money any time soon, according to administration officials.

It's probably true that the Administration would have trouble getting Congress to agree to more TARP funds at this point (they're taking enough flack on TARP 1 & 2). But is the Administration being honest?
In a significant shift, White House and Treasury Department officials now say they can stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, simply by converting the government’s existing loans to the nation’s 19 biggest banks into common stock.

Kai and John certainly don't seem to think so.
DIMSDALE: Right, common shares are voting shares. The government can easily become the biggest shareholder of some banks and decide who is going to be on the board. It'll influence other decisions, business decisions. Not to mention the potential conflicts of interest when the nation's lawmakers become big shareholders of a company. Buying common shares is much closer to nationalizing the banks.

That's right boys and girls, the Administration is pushing all the buttons to make conservatives hot under the collar, but depsite the nasty 'n' word being thrown around, it's not the worst thing that could come out of the Administration's strategy:
DIMSDALE: Well, there's no guaranteed return with common stocks. And there are no dividends. Taxpayers are not at the head of the line to be paid back. There is more of an upside potential if banks turn around, and that would be good for government revenue and the taxpayers, but that dilutes the returns for private, common-share investors. Which is why the banks that have the ability will try to, as soon as possible, get out from under the government investments. Jeff Davis thinks that in the near future some of the stronger banks, perhaps Goldman Sachs, J.P. Morgan, BB&T Bank, will raise private capital, buy back the government investments, and that would be good for them, Davis says, but not for others.

So, under this strategy, the government buys the largest shareholder position, using our tax dollars, and we're less likely to get repaid. The banks obviously don't want this happening, so they're going to try to repay the TARP funds just as quickly as they can, but:
Ryssdal: The government is going to be left with wards of the state, or quasi zombies. And the J.P. Morgans and the BB&Ts are saying, in effect, we don't want to be part of that crowd.
Ryssdal: Yeah and of course the next big battle is whether or not the banks are even going to be allowed to repay back that TARP money, right?

Thanks, Kai! You made my drive home so much more acid-inducing than it already is!

Money Grows on Trees in the Land of Nod

UPDATE:
The GOP is raising important questions about the foreclosure plans.


The Obama Administration apparently thinks that money grows on trees!

Doubling the aid to Fannie and Freddie, propping up failing industries no matter the cost, $75 billion in foreclosure backing (separate from the Fannie/Freddie bailout), a stimulus bill with little in the way of direct stimulus spending - it never ends.

The President has made it clear that this is only the beginning.

We're transparent - really. Trust me!

This is so funny and somewhat scary! How long do you think it'll take to fire the Gibbster?

Change we can believe in?

On President Obama's first full day in office, he signed strict new 'transparency' rules, including regulations on the revolving door between K Street and government. Apparently those rules were signed a little too quickly because he turned around two days later to request an exception to these new rules to allow William Lynn to be the new Deputy Secretary of Defense. Mr. Lynn was a lobbyist until last month. This about face turned out to be too much for Campbell Brown on CNN, who pleaded with the Obama Administration to enact 'actual transparency.' On a slightly less serious note, The Technology Liberation Front is griping that the administration is violating transparency commitments by not immediately posting documents related to meetings with non-governmental entities.

So what do you think? Is this the kind of change the voters were hoping for?

In the meanwhile, the proposals for a 'Bad Bank,' to absorb all bad (or potentially bad) holdings by major banks (in the hopes of freeing up the credit markets) have now risen to as high as $6 trillion. These allocations would be on top of the stimulus proposals (running between $700 billion and $1 trillion), and on top of the allocations from last year. At this rate, the debt burden from the 2008 - 2010 fiscal years won't be paid for at least six generations. That's not the kind of change I'm hoping to pass on down to my child and future generations.