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All you ever needed to know about the recently departed hurricane:

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“You might blow away.”

Out of the mouths of babes. . .Love it!

Yesterday, the American financial media colossus, the Wall Street Journal, published an op/ed titled, “A Short Primer on the National Debt” that was written by John Steele Gordon, “author of numerous books.” The third paragraph states the following:

The intra-governmental debt is the sum of Treasury bonds held by agencies of the federal government, principally the so-called Social Security Trust Fund. The liabilities equal the future pensions, health care, Social Security payments, etc., that are promised under current legislation.

This is unequivocally incorrect. If I were more inclined to post a “somewhat lengthy” primer, I would explain each of the items mentioned in Mr. Gordon’s statement. However, correcting the information regarding Social Security will suffice to make my point.

You might ask how it is that I’m so certain of having the correct interpretation of the “intragovernmental debt” figures and that Mr. Gordon doesn’t. The short answer is that a few years ago, when I was unsure of how to interpret any number of budget items, I often confirmed my understandings by assembling periodic totals from annual data. Some of the result can be seen here.

Here’s the long answer.

The Social Security Trust Fund has absolutely nothing to do with “future” payments. The Trust Fund is the running total of the excess monies collected from workers and employers but spent on whatever else Congress fancied at the time.  The Treasury wrote a marker for that amount, plus interest, and then bumped-up the Trust Fund total to hide this bit of fiscal chicanery. To pay benefits, the Treasury still must 1) collect more taxes, 2) borrow more money, or 3) crank up the virtual printing presses by means of a process innocuously termed “Quantitative Easing.” The following spreadsheet illustrates the Social Security Trust Fund total-building process. (Click to enlarge image.)

Please note that the item termed “interest” comprises just about half of the Trust Fund total. You can confirm the total for the end of fiscal 2010 here or directly from the GAO here (report page 26). The totals differ by a few million which we should probably attribute to a rounding error of 4 million somewhere along the line.

But the Journal isn’t the only financial publication to step in it. That recent faux pas reminded me of one by Investors Business Daily a few years back.

In an editorial dated May 9, 2008, but no longer available on-line, IBD had the following to say:

Get Over The Gap
By INVESTOR’S BUSINESS DAILY
Posted Friday, May 09, 2008 4:20 PM PT

[snip] 

Journalists and pundits call the smaller deficit an “improvement,” or “good news.” It isn’t. We run a trade deficit not because we’re uncompetitive or others protect their markets, two great economic myths; we run deficits because we’re such an attractive place for investors from around the world to park their money. The deficit, in other words, is a sign of strength.

As any economist can tell you, the flip side of our trade deficit is our capital surplus, which measures foreign investment flows into and out of the U.S. When we run a trade deficit, by definition we must run a capital surplus — and vice versa.

Last year, for instance, we rang up a record $708.5 billion deficit for both goods and services. But we imported the equivalent of $738.6 billion in investment capital to offset that. This was used to buy Treasury notes, bonds and stocks, and to fund real estate, plants, equipment and worker training.

I was quite stunned by this assertion because it directly contradicted my understand of what’s called the “Current Account Balance.”  Of course, I just had to find out from whence came those IBD numbers, and decided to check my interpretation with the Bureau of Economic Analysis. So, I emailed the following to the boys in Washington:

* * *

For those of you not familiar with the life, times and travails of Lord Black, let me say that he is probably the ultimate personification of why the very wealthy so overwhelmingly support Progressives and their agenda. Do otherwise, and they’ll get you one way or another. Make an example of you so that others will not even attempt similar trespass.

Conrad Black was once-upon-a-time Mark Steyn’s boss. Mr. Steyn, who unabashedly, but not entirely inappropriately, terms himself a “One-man global content provider,” has often defended his former employer by pointing out the ludicrously pernicious nature of Mr. Black’s envelopment by the “vagaries of U.S. justice.” A few details of Steyn’s view of the media mogul’s falls from grace and the legal gymnastics employed to precipitate it may be found here and here.

Whatever his political predilections may be, Conrad Black possesses a first-class, if infrequently quirky, intellect. You can find his recent contributions to the National Review Online here. His ruminations on the title subject of this post fill the first 15:30 of the video given below. Black’s view regarding America’s future is guardedly optimistic though we are, as he says, currently without the requisite leadership.

For the balance, Lord Black discusses recent developments regarding his pas de duex with The Law.

Ciao,
Dennis

Here’s a little something to chew on the occasion of the Pentagon finally releasing — several months late — its report on the ‘China threat.’ Nothing to worry ’bout here, right? “Move along, folks. Keep moving, please. Nothing to see here.”

However, some assembled short clips from last night’s broadcast of the FOX News “Special Report” would seem to indicate otherwise.

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Who’d a thought? Certainly not me. You?

Ciao,
Dennis

My dissatisfaction with the GOP runs very deep. The birth of the Tea Party and the subsequent criticism of same by numerous establishment Republicans are strong indications that I am not alone in my opinions nor reasons for them.

The recent debt limit debacle is merely the most recent example of what I call ‘Kick the Can’ politics. Waffle long enough, and just about any issue – other than the economy, gay rights, abortion, education, climate change plus other miscellaneous environmental issues, evangelical Christians and self-detonating Islamists, of course – will fade from the consciousness of the electorate as newly minted crises and disasters become the coin of daily political exchange. All that generally remains in the collective memory of the electorate is a fuzzy image of an unsettled issue that was formed by a concurrent media barrage. Then it’s out-of-sight, mostly-out-of-mind, until someone decides to write a book that repaints the picture. Make the New York Times best seller list and you’ve created history almost out of thin air.

Bill Kristol, Harvard Ph.D. and former instructor at its Kennedy School of Government, was honored in 2005 by that esteemed institution when it recognized the 10th anniversary of Mr. Kristol’s founding of Weekly Standard magazine. On stage and taped, with Fred Barnes delivering the punch line, he confirmed my suspicion that political can kicking is not strictly unintentional:

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“That sums it up, pretty well.” Yes, indeed. A question I ask myself is, “Are there any Bush Presidency loose ends not left untied?” You may consider that unfair. However, the Bush II Administration’s taking of the path to inconclusiveness seemed fairly obvious to me back in 2002.

In April of that year, Laura Ingraham wrote a piece that was published in the Jewish World Review chiding conservatives for being ill at ease with the apparent course of the Administration:

April 24, 2002
The good news about conservatives versus Bush
by Laura Ingraham

It’s a story over which America’s left-leaning press has always salivated–Republican in-fighting.

The Washington Post goes front page Monday with an article titled “Bush Faces Sustained Dissension on the Right.” The article describes “a sense of disappointment” spreading across the GOP after President Bush seemed to undercut his own moral clarity in the war against terror by coming down hard on Israel for trying to beat back its own problems with terror.

Similar pieces chronicling a growing divide between Bush and conservatives on this and other issues (immigration, steel industry protections) have popped up elsewhere. Political reporters are positively gleeful, of course, since they’ve had precious little anti-Bush sustenance to feed on since 9/11.

[snip]

So while there may be some near-term political costs from the fire the Administration is catching from the right, long-term it’s a healthy thing because it forces the Bush Administration to stay on its toes. And it’s working — more Americans see the GOP as the party of ideas. Meanwhile, the unified Democrats parrot the same tired slogans.

Problem is, parrots are rather long-lived.

Undeterred by my future standing as an amateur, neophyte political know-it-all, I immediately retorted in a letter sent via the editor of JWR:

April 24, 2002

Ms. Ingraham:

In addition to your Jewish World Review article of 24 April, “The good news about conservatives versus Bush,” I’ve read a few op-eds regarding conservative dissatisfaction with the Bush Presidency, specific decisions, or where policy appears headed.  There are reports of White House “spokespersons” making assertions minimizing the degree of dissent within conservative ranks.  I assert they’d be better off keeping their ears more open to the murmur before the chorus grows much louder.

[snip]

The more the President tries to please everyone the less he’s going to please anyone.  Support remains high because of 9/11.  However, if Bush continues to whittle away at his conservative support by making more politically rather than philosophically motivated decisions, he will, in the long run, do neither himself nor the Republican Party much good.  A large contingent of the American public is totally fed up with “spin”, “continuous campaigning”, and all the rest of the political skulduggery.  It’s coming out of their ears!  Do what’s right because it’s right.  Not because you’re buying votes.

That’s what we have the Democrats for.

The rest is history.

But President Dubya outdid himself when he kicked the can, not just down the road but over to the Supreme Court, by signing the McCain-Feingold campaign finance reform legislation into law. This was an undisguised breaking of a specific Bush campaign promise. If there’s ever been a more egregious trashing of the First Amendment, I’ve no idea what it is. As I lamented during the presidential campaign of 2008:

The implications, ramifications and direct results of McCain-Feingold are legion and as yet not fully known or understood. The law not only provides a multi-faceted means of suppressing free speech, but adds another arrow to the litigation quiver of federal, state and local governments that have already grown too large, too expensive and too oppressive. We don’t have a Human Rights Commission on the order of the one in Canada that has triggered outrage amongst Canadians for its inquisition of writer Mark Steyn. But who can say in what form will next appear the reform avatar? We would be wise to remember that the Reform Institute is hard at work cooking up another political witches brew.

Presidential candidate John McCain has over the years said and done much. His military record and conduct as a prisoner of war are beyond reproach. He has earned his country’s respect and its undying gratitude. However, in and of itself, that is not fully qualifying for this nation’s highest office. We don’t owe John McCain the presidency. He is asking that Americans place their faith in him and that he will confirm their trust when he is in office. But we should require no assurance, nor need be given any promise, other than that offered when a President elect stands, takes the oath of office, and swears to “preserve, protect, and defend the Constitution of the United States.”

Unfortunately, when it comes to Mr. McCain and his record regarding McCain-Feingold, I have some nagging doubts.

I fear that the Republican can kick regarding the debt limit, and their failure to impose any immediate spending discipline, will prove to be another regrettable GOP failure to act decisively in the face of a propaganda onslaught by the Democrats. How can we tell that kicking the can one more time won’t be once too often? And if we won’t try, time has already run out.

[flowplayer src=’http://constitutionalley.us/wp-content/uploads/2011/08/Women-say-Obama-deserves-vacation.flv’]It’s been another active week on Wall Street. . .in the negative direction, that is. But we do love minuses. Otherwise, why would we run an ever-accumulating gargantuan trade deficit for 25 years? Perhaps, with our national head being buried in the sand, it’s the only direction we can look in.

Presidential hopeful Michele Bachmann is certainly with the nadir-pointing program. She wants to see gas prices come down, and is telling anyone who’ll listen that they will be below $2 when she’s elected to the nation’s highest office. Good for her.

From FOX News:
Michelle Bachmann Promises $2 Gas Prices
Aug 19, 2011 – 1:51 – GOP presidential candidate vows to reduce fuel costs

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“I don’t think she can control gas prices. She can’t control what comes out of her mouth, let alone gas prices.” Ouch!

Meanwhile, barely out of his starting gate, Gov. Rick Perry of Texas ran into some difficulty while tutoring a New England future-voter in the finer points of Darwinism. The kid’s mother aided her prodigy by suggesting, to what appears to be a ten-or-so-year-old, added talking points. Meanwhile, America’s boisterously verbal political tradition was in evidence.

From CBS News “Washington Unplugged”:
Perry heckled in New Hampshire, asked about evolution
August 18, 2011 1:52 PM
At an event in Portsmouth, New Hampshire Thursday, a mother urged her son to ask Gov. Rick Perry (R-Tex.) about evolution.

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S’pose Texas politicians don’t usually play well in Portsmouth. I’m not sure he’ll play well in Texas after confessing his evolutionary ignorance.

While deftfully avoiding the political viper pits and basking in the accolades of the progressive American electorate, President Obama got in his first full day of rest and relaxation on Martha’s … Vineyard, that is.

Again from FOX News:
President Enjoys Vacation Time
Aug 19, 2011 – 2:57 – Ed Henry reports from Martha’s Vineyard

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At least we’ve been reassured that Obama’s doing the very best he can.

There are those who feel that the President really does deserve his R&R.

Again from CBS News:
Women say Obama deserves vacation
August 19, 2011 12:02 PM
President Obama has drawn criticism for his 10-day trip to Martha’s Vineyard, but several women also vacationing on the island said he deserves time off.

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Must be something in the water.

Ciao,
Dennis

Update: From CBS News, here’s some raw video of Obama’s Martha’s Vineyard ‘compound’ as it was labeled by one of the ladies in the above video. There’s no sound, so try to suppress any urge to reach for the volume controls.

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I like this better than Bush’s Texas compound. Have always been a water person. After all, I am a Pisces. I know. That explains a lot. :)

Perhaps, at least, when it comes to the “Tea Party” and the budget. Let me explain.

As Mike Razar today exclaims at AT:

I am sick of the debt ceiling fiasco and yet I can’t let it go. Post mortems abound identifying winners and losers. Some are pleased that we dodged a bullet while others on both sides bemoan their own lack of backbone. The truth is that nothing was accomplished by either side. The debt ceiling had to be raised. Sorry Tea Party, but it was a tactical error to use it as leverage. The cuts are trivial and unenforceable.

True. But I don’t think that was the purpose of what turned out to be a rather short-lived recalcitrance on their part.

Mr. Razar seems to agree with Mr. Barack, who on Tuesday had a little something to say about those pesky Tea Party-ers as reported by the Washington Times:

Obama: Tea-party GOP blocking U.S. recovery

PEOSTA, Iowa — A day after clashing with a tea party activist, President Obama Tuesday told crowds here that it was “a faction in Congress” that was to blame for blocking economic progress.

At a rural jobs forum, Mr. Obama ticked off a list of pending bills that he said would create jobs.

“The only thing that’s preventing us from passing the bills I just mentioned is the refusal of a faction in Congress to put country ahead of party,” the president said in a thinly veiled reference to House Republicans backed by the tea party. “That has to stop.”

I seriously doubt that the Tea Party has anything whatsoever to do with the notion that “our economy can’t afford it” (applause) when it comes to not, not spending more stimulus dollars.

Once again from Mr. Razar: “S&P are idiots.”

During his August 9th interview on NPR, yours and my favorite legislative financial wizard, Congressman Barney, put it a shade less pointedly though still non-numerically:

Standard & Poor’s, frankly along with Moody’s – although Moody’s was more responsible this time – has an extraordinary record. They have consistently overrated private debt. They have told people – and they were one of the reasons we got into a terrible crisis – that it was safe to buy junk, to buy subprime bonds. The people who read, for instance, Michael Lewis’s “The Big Short” will see how shockingly inadequate they were.

At the same time, they’ve had a history, less well known, of undervaluing the debt of governments. They have these ratings, and if you look at any given rating – double A, double B, whatever – at any given level, municipalities are much, much, much less likely to default than corporate…

Listen to all of Mr. Frank’s dulcet recital here.

This is from the man who once assured that Fannie and Freddie were both just peachy-keen financially. At least he finally managed to change his mind. Finally. But there’s no questioning his judgment, is there?

A smidgen of enlightenment: S&P didn’t pull the downgrading of U.S. debt out of thin air nor their butts. Ratings, of both public and private debt, are based on a very detailed analysis of numerical information. Without knowledge of that information and the methods used by S&P to evaluate the capacity of the United States to service its debt, assigning S&P the rating of “Idiots” seems to be going a bit, shall we say, overboard?

Mr. Razar continues:

How can the quant community take this lying down? Name a safer long term dollar denominated investment than a t-note. It is a good example of bad math and bad statistics spewed out by ignorant self-styled experts. The debt is not about to be paid down tomorrow with freshly minted QE (Quantitative Easing) certificates. It is unnecessary, since the net assets on the US balance sheet, public and private, dwarf the liabilities.

Sure about that? Could I see the balance sheet? And don’t forget Mr. Greenspan’s notion that the U.S. could never default on its debts precisely because it could always print money. I’m sure that was reassuring to the financial markets.

And I didn’t realize that private assets were considered collateral for public debt? Perhaps my notion that we’re selling-off the country and living, for what will probably prove a very short while, on the proceeds, isn’t quite so far-fetched after all. Do remember that Obama really does want to “spread around some of the wealth.” Unfortunately, much of it is going overseas.

In closing, I’ll merely note that Mr. Razar believes:

The powerful economic engine of the United States can support a more frugal government without a sacrifice in the standard of living. 

If that were the case, wouldn’t we all be back on Easy Street by now?

Ciao,
Dennis

Given the current state of affairs in America, the following would have been a credible exchange between Ed and Johnny during Carson’s opening monologue on the “Tonight Show”:

“Well, Johnny, just how bad is it?”

“It’s soooo bad, Ed, that they’re giving 50% discounts at Salvation Army Thrift Stores.”

However, this is not a joke, but an instance of life imitating art. The Salvation Army must also be feeling the need to bolster the Social Security system by offering discounts to those over sixty. But such is not the worst of what we face as a nation.

Yesterday, I had dinner with an independent business owner who happens to also be a former Airborne Ranger with combat experience. During the course of our conversation he expressed a sentiment very similar to one that has been growing within me when he said, “All my life I felt that America was an exceptional country. I don’t feel that way anymore.” And thus was confirmed my gnawing fear that, this time, “declinism” wasn’t just a recurring theme in America’s ongoing and ever boisterous political debate. Americans are losing faith in the country while having already lost faith in most of our leaders and many of our institutions.

The following, while cute and entertaining, is only one of the many pokes-in-the-eye of Obama that daily wash-in over my internet transom (with apologies to the Man in Black):

Yes, that will certainly get the President to change his ways and corral those liberal fools jooz who are running the country.

Time to get serious, Folks. Obama’s a symptom, not the cause, of our travails. And, protestations of Islamists to the contrary notwithstanding, Jews are the very least of our problems.

Most Americans, and I’m no exception, need a long, hard look in the mirror. We’ve lost our once-distinctive character that included honesty, civility and self-reliance. Getting it back won’t be easy. Though I’m not sure we’re up to the task. There are just too many pleasurable distractions pulling at us.

Twitter, anyone?

Update: From CBS News a couple of days ago. . .

Rick Perry enters presidential race with Obama broadside

CHARLESTON, S.C. and AMES, Iowa — Texas Governor Rick Perry announced his bid for the 2012 Republican nomination in South Carolina on Saturday with a speech grounded in attacks on President Obama for “downgrading” America.

“It’s time to get America working again,” Perry told 700 conservative activists packed into at Charleston hotel ballroom. “Page one of any economic plan to get American working is to give a pink slip to the current residents in the White House.”

In South Carolina, host to the nation’s third presidential primary, Perry vowed to apply what has worked in Texas during his ten years as governor to Washington – balancing the budget and cutting government spending.

“America is not broken, Washington, D.C., is broken,” Perry said.

I’m now feeling much reassured. Are you?

When Michael Moore weighs-in on an issue (pun intended), you know the game is afoot, as Sherlock would say. And as the Washington Times reports, braying for dollars Michael wants the CEO of S&P arrested for his capitalistically piggish downgrading of America’s formerly pristine AAA rating. To wit:

Michael Moore to Obama: ‘Show some guts,’ arrest S&P head

Liberal firebrand Michael Moore called on President Obama to respond to the U.S. credit downgrade by arresting the leaders of the credit-ratings agencies.

On his Twitter feed Monday, the Oscar-winning film director also blamed the 2008 economic collapse on Standard & Poor’s – apparently because it and other credit-ratings agencies did not downgrade mortgage-based bonds, which encouraged the housing bubble and let it spread throughout the economy.

“Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again,” Mr. Moore wrote.

As has on occasion been suspected, Mr. Moore was merely repackaging another’s idea, as is evidenced by the fact that. . .

He went on to link approvingly to an article last week in the Guardian, a left-wing British newspaper, about a police raid in Milan against the offices of S&P and fellow ratings agency Moody’s. Italian police were searching for evidence on whether the rating agencies, in the words of a local prosecutor, “respect regulations as they carry out their work”.

So much for originality. But would we really be better off if American bureaucrats were as scrupulous about “respecting regulations” as the Italians claim to be?

At least Mr. Moore, not even running for election as far as I know, didn’t damage his populist bona fides by taking it out on those pesky Tea Partiers. That was left to Senator Kerry during one of his semi-regular Sunday appearances on network news programs, such as “Meet the Press,” where he explained exclaimed, “I believe this is, without question, the tea party downgrade.”

S&P had previously downgraded its rating of the other political parties but has not, as of this writing, offered any opinion regarding the Tea Party.

A not insignificant segment of the American electorate appears to have an even more negative opinion than the Senator. As reported in a recent Rasmussen survey, 29% of Americans consider Tea Party members “terrorists.” Another 16% are “undecided.” Oh,my!

Following closely with a second attack was a former White Houser and Obama confidant, who, also according to the Washington Times, stayed precisely on message:

David Axelrod, a former senior adviser to President Obama, used the exact same phrase in dubbing the credit rating drop the “tea party downgrade,” as Democrats tried to position themselves as reasonable, pragmatic leaders and conservative Republicans as irresponsible ideologues who caused the downgrade by refusing to accept any new taxes.

At least they manage to keep their stories straight, however ludicrous they may be. Bipartisan protocol seems to require some degree of demonization of the Tea Party by establishment Republicans. It’s nice to see how they can work together on occasion and on some subjects.

However, S&P seems to have anticipated Mr. Moore’s warrantless exhortation of the President with the following preemptive strike:

“Congress and the administration are jointly responsible for the conduct of fiscal policy. So, this is not really about either political party,” David Beers, the head of S&P’s government debt-rating unit, said during an appearance on “Fox News Sunday.”

Mr. Moore probably doesn’t watch FOX News. At least not for pleasure. He therefore Twittered-on fearlessly and with a noticeable frisson. If such as his is what now passes for reasonable political debate in this country, it’s no wonder we’re in such deep doo doo.

On the other hand, the former Head of the Fed, Maestro Greenspan, had this to say during his segment on “Meet the Press”:

DR. GREENSPAN: Very much so. I think there’s–this is not an issue of credit rating. The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default. What I think the S&P thing did was to hit a nerve. . .

As, apparently, was the case with both the Dow and Mr. Moore.

What do they call that “print money” thing? The Quantitative Easing? Wasn’t that invented in Weimar Republic Germany? Trying to remember the name of that mustachioed painter. . .

Ciao, Dennis

Wherever dear ol’ Clara may be, rest her soul, she wouldn’t be asking, “Where’s the beef?” And that certainly isn’t the question Amilya Antonetti, Chairman and CEO of AMA Productions, is asking. She knows where her beef is, it’s leadership she’s looking for:

That gal could hold her own on American Gladiators, let alone toe-to-toe with Obama. Just ask Mr. Cavuto.

How ’bout a little one-on-one, Mr. Prez?