The Republican Right Wing Extremist Tea Party continues to hold the US Government hostage. Looking like this could go on a while with the House crazies looking to link raising the Debt Ceiling to Obamacare. Speaking of those crazies, I though you might like the following song that describes them pretty well…………
Mo Brooks, our Congressional Representative here in North Alabama, is one of those fanatics. Hopefully that will not be the case after next year.
Shutting down the US Government is not enough for the Right Wing Extremist Tea Party. They’re now intent on causing the US to default by preventing the US Congress from raising the debt limit. These people are insane and this latest gambit has the potential to plunge the US, and the rest of the world, into another Recession (or even worse) a Depression.
The Republican Right Wing Extremist Tea Party continues to hold the US Government hostage. Looking like this could go on a while with the House crazies looking to link raising the Debt Ceiling to Obamacare. First up today a little humor. Following that is a great article from Business Week highlighting the likely impacts of the Tea Party forcing the US into defaulting on its debt. Really scary stuff!
Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.
Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.
The $12 trillion of outstanding government debt is 23 times the $517 billion Lehman owed when it filed for bankruptcy on Sept. 15, 2008. As politicians butt heads over raising the debt ceiling, executives from Berkshire Hathaway Inc.’s Warren Buffett to Goldman Sachs Group Inc.’s Lloyd C. Blankfein have warned that going over the edge would be catastrophic.
Lehman Aftermath
“If it were to occur — and it’s a big if — one would expect a series of legal triggers, potentially transmitting the default to many other markets,” said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., the world’s largest fixed-income manager. “All this would add to the headwinds facing economic growth. It would also undermine the role of the U.S. in the world economy.”
The U.S. stock market lost almost half its value in the five months following Lehman’s failure. The country had its worst recession since the Great Depression (INDU), taking the global economy down with it. Unemployment (USURTOT) surged to 10 percent, the highest in three decades.
Another depression was prevented only by unprecedented action by the Federal Reserve, which pumped $3 trillion into the financial system. The U.S. Treasury provided about $300 billion of capital for the nation’s banks.
“If we miss an interest payment, that would blow Lehman out of the water,” said Tim Bitsberger, a former Treasury official under President George W. Bush and now a New York-based managing director at BNP Paribas SA. “Lehman was an isolated company, and now we are talking about the U.S. government.”
‘Nuclear Bombs’
Buffett has asked politicians to stop using the debt limit as a weapon in policy debates. Morgan Stanley CEO James Gorman urged employees to contact their congressmen to remind them about the “unacceptable consequences” of a default.
“It should be like nuclear bombs, basically too horrible to use,” Buffett, 83, said in an interview published by Fortune magazine last week.
The yield on 10-year U.S. bonds dropped to a two-month low of 2.58 percent on Oct. 3. It was 2.61 percent at 10:25 a.m. in New York trading today. While short-term bill rates and the cost to insure against a default have risen, volatility in Treasuries has fallen, a sign that investor confidence in the Fed’s bond-purchase program is outweighing worries over the budget battle.
Bond prices didn’t foretell Lehman’s default either. Ten days before the bankruptcy, Lehman bonds were trading at about 95 cents on the dollar, the same level as JPMorgan Chase & Co. debt at the time.
‘Holy Cripes’
One unexpected consequence of Lehman’s collapse was the seizing up of the repurchase agreement, or repo, market — a form of secured, short-term borrowing used by Wall Street banks and investment firms. Many of Lehman’s trading counterparts discovered the collateral they believed was backing their loans wasn’t there to grab as rules allowed. That scared investors in the rest of the market, closing off other trades and leading to fire sales of securities and further price declines.
A government default could freeze the repo market more than Lehman’s collapse because U.S. debt forms its backbone. At least $2.8 trillion of Treasuries serve as collateral for repo and reverse-repo loans, according to Fed data.
In the event of a default, Treasuries might no longer be eligible as collateral for repo agreements, according to James Kochan, Wells Fargo Funds Management LLC’s chief fixed-income strategist. The cheap funding for the holdings lowers the yields demanded on the investments, and unwinding the positions could amplify losses for lenders and borrowers.
If Treasuries were ejected from the market, “Well, holy cripes,” Kochan said in an interview.
Congressional Gridlock
In 2011, the last time Congress was gridlocked over the extension of the debt ceiling, repo rates rose as money-market funds pulled back because they didn’t want the risk of holding a security in default.
“A lot of this is about fear of the unknown,” said Scott Skyrm, a former head of repo and money markets for Newedge USA LLC and author of “The Money Noose: Jon Corzine and the Collapse of MF Global.” “There is no upside to being in the market in that environment, so people pull out.”
The U.S. didn’t default on its debt in 2011. Republicans and Democrats reached a last-minute deal to raise the borrowing limit. Even so, the posturing hurt consumer confidence and wiped out $6 trillion of value from global stocks.
Historical Lessons
While none of the people interviewed for this story expect the world’s largest economy to default this time either, most say the chances of it happening now are higher than in the past.
“It would be insane to default, but it’s no longer a zero-percent probability,” said Simon Johnson, a former chief economist of the International Monetary Fund who teaches economics at the Massachusetts Institute of Technology and is a columnist for Bloomberg View.
The U.S. hasn’t defaulted since 1790, when the newly formed nation deferred until 1801 interest obligations on debt it assumed from the states, according to “This Time Is Different,” a history of financial crises by Carmen Reinhart and Kenneth Rogoff.
In 1933, the U.S. refused to make payments in gold to redeem bonds that gave holders the option of requesting the precious metal instead of cash. While investors were paid on time and in full, some argued it was a default because they couldn’t claim payment in gold. The Supreme Court ruled that the government was within its rights to deny such claims as long as it paid the dollar amounts.
Technical Default
In 1979, the U.S. was late to make payments on about $122 million of bills, in part because of “severe technical difficulties” that the Treasury said stemmed from a word-processing failure, according to the Financial Review’s August 1989 issue. While payments were made after a short delay, including with interest for tardiness, the hiccup caused yields to rise by half a percentage point and stay there for months.
A default today could be deemed “technical” because it would be the result of the government’s unwillingness to pay, not its ability, JPMorgan analysts including Alex Roever said in a report last week.
In a technical default, only the prices of Treasury bonds that mature or have coupon payments would fall, according to the analysts. Money-market funds wouldn’t be forced to sell government bonds, and the Fed probably would continue accepting them as collateral for emergency cash.
That distinction is nothing more than an effort to downplay the danger of default, according to MIT’s Johnson. Sovereign defaults are always about the political will to pay because most governments can print money to make payments if they want to, Johnson said.
Insufficient Funds
Labeled technical or not, a default is still a default, said Jim Grant, founder of Grant’s Interest Rate Observer.
“People have typically turned to Treasuries as a safe haven, but what will happen when they realize it’s not safe anymore,” said Grant, who has followed interest rates since the 1970s. “Financial markets are all confidence-based. If that confidence is shaken, you have disaster.”
Treasury Secretary Jacob J. Lew has said the government will have only $30 billion of cash left by Oct. 17 to meet its commitments. Those can run as high as $60 billion a day, which means the Treasury will need to borrow more to meet its liabilities, Lew said. Goldman Sachs expects the Treasury’s cash balance to be depleted by Oct. 31 and “possibly quite a bit sooner,” analysts at the bank wrote in an Oct. 5 report.
Borrowing Costs
The Treasury has $120 billion of short-term bonds coming due on Oct. 17, according to data compiled by Bloomberg. An additional $93 billion of bills are due on Oct. 24. On the last day of the month, $150 billion needs to be paid back, including two-year and five-year notes that mature. The total due from Oct. 17 through Nov. 7 is $417 billion.
While some expect a 2013 default will drive up yields only on Treasury securities coming due, others including former Deputy Treasury Secretary Roger Altman see a wider impact in bond yields, pushing up borrowing costs.
“That would be higher interest costs over some considerable period of time for the U.S. and for U.S. taxpayers,” said Altman, who’s chairman of New York-based investment bank Evercore Partners Inc.
Some point to Standard & Poor’s 2011 downgrade of the U.S. credit rating, which led to an increase in Treasury prices, not a drop. Even after the rating was lowered by one level to AA+ from AAA, investors continued buying U.S. government bonds as they flocked to safety, according to Joe Davis, chief economist at Vanguard Group Inc.
Disappearing Liquidity
A downgrade to default rating would be different, said Peter Tchir, founder of New York-based TF Market Advisors. Investors, structured vehicles, collateral agreements, derivatives contracts and other trading covenants have ratings-based rules that could force the replacement of Treasuries in a trade or portfolio, he said.
“Once the system starts to break down related to settlement and payments, then liquidity disappears, as we saw after Lehman,” Tchir said. “Perhaps the things we’re worried about now will be fine after a U.S. default, but who knows what others will not be.”
Treasuries are among the most popular forms of collateral pledged at derivatives clearinghouses, including the one owned byCME Group Inc. (CME:US), the world’s largest futures market. Government agencies such as Freddie Mac and Fannie Mae, which use interest-rate swaps and derivatives to hedge mortgage portfolios, would be affected by a downgrade because it could lower their counterparty ratings and result in more collateral being demanded by trading partners.
‘Create Chaos’
“We can’t even imagine all the things that might happen, just like Henry Paulson couldn’t imagine all the bad things that might happen if he let Lehman go down,” said Bill Isaac, chairman of Cincinnati-based Fifth Third Bancorp and a former chairman of the Federal Deposit Insurance Corp., referring to the former U.S. Treasury secretary. “It would create chaos in financial markets.”
Higher borrowing costs could slow the housing recovery. If 30-year mortgage rates climbed to 6.5 percent from 4.5 percent, a borrower who can now afford the monthly payment on a $200,000 loan would only be able to take on about $160,000 of debt when buying a property, forcing down sale prices.
It would be “bad — both for affordability and for consumer confidence,” said Jed Kolko, chief economist for Trulia Inc., an online property-listing service.
Banks would have to write down securities on their books that are losing value and face capital shortfalls, according to MIT’s Johnson.
“The government wouldn’t have the cash to rescue the banks this time either,” Johnson said.
China, Japan
About half of the U.S. debt is held by foreign governments, central banks and other overseas investors, according to Treasury data. A default would throw those holdings into question as well as the dollar’s status as the world’s reserve currency, Johnson said. During the 2011 debt-ceiling scare, foreign investors shunned Treasury auctions for about three months, according to data compiled by JPMorgan.
China is the largest holder of U.S. Treasuries, with $1.3 trillion in July, according to Treasury data. Japan follows with $1.1 trillion.
Even if Treasury prices aren’t affected by a default, the damage in other markets could be devastating. U.S. stocks fell 7 percent in one day when Congress rejected the government’s bank-rescue package in 2008, before passing it a few days later.
Market Shocks
The market shocks would be enough to tip the U.S. back into recession and drag the world economy down, according to Desmond Lachman, a fellow at the Washington-based American Enterprise Institute. The event could prove to be the trigger that reverses a weak and fragile recovery, said William Cunningham, head of credit portfolios for the investment arm of Columbus, Ohio-based Nationwide Mutual Insurance Co. Lehman’s collapse was a similar spark, he said.
“Is this the straw among other things that tips an economy without drivers of growth back down into a negative spiral?” Cunningham said.
While a short-lived default might be fixed without major damage to the global economy, drawing a line between short and long isn’t easy, according to Evercore’s Altman.
“If you missed an interest payment by two hours, the markets might look entirely beyond that and forgive you,” Altman said. “If you miss an interest payment by two days, four days, six days, that’s a different story. It’s very difficult to be scientific about this.”
‘Flying Blind’
During the final days of Lehman Brothers, Wall Street firms set up war rooms to chart the potential impact of the firm’s demise and prepare strategies to cope with the consequences. Their scenarios, which focused on credit-default swaps, didn’t forecast the contagion that quickly spread after the bankruptcy.
Now, some banks are preparing contingency plans for a possible U.S. default, such as stocking retail branches with more cash, the New York Times reported last week. Those preparations might prove useless once again.
“Nobody knows what would happen if there were a default because the reality is there’s never been even a technical default in the U.S.,” said Russ Koesterich, chief investment strategist at BlackRock Inc., the world’s largest asset manager. “Everyone’s flying blind.”
Enacting the same fiscal policies in this country would, presumably, induce the same effects. Yet despite their enthusiasm for extreme austerity, the Republican, tea party and assorted media soothsayers almost never want to discuss what has happened in Europe as a result of those same policies. It is not always possible to ignore the unhappy reality of renewed recession, from England to Italy.
Just last weekend, the British were jolted by news that Moody’s had downgraded investments in their country’s sovereign debt from its traditional AAA status.
Why would the bond-rating agency do something like that? Principally because the miserable budgeting of Tory Prime Minister David Cameron’s government has mired the United Kingdom in negative growth, with no prospect of reducing its debt, which keeps growing. So the scheme that was supposed to improve the fiscal outlook for the British has merely lowered their credit rating. That wasn’t supposed to happen—in fact, the austerity plan was designed to preserve Britain’s AAA rating—but it was inevitable as soon as Downing Street chose budget-balancing over growth.
The same downward trajectory can be marked wherever the leaders of dominant Germany have forced austerity plans onto indebted governments.
So damaging has this process become for all of Europe that the Germans finally began suffering the ironic consequences in the last quarter of 2012. Their export-led growth strategies cannot work when their neighbors, reduced to poverty, can no longer purchase German goods. If German exports pick up again this year, it will only happen because customers in the U.S. and China remain exempt from the effects of austerity.
Until now, the United States has escaped the fate of Europe, remaining the “sole bright spot” of steady growth in the global economy because President Obama resisted the fiscal extremism of his Republican adversaries and contrived to ward off recession with necessary spending. Now sequestration, with all of its dire social and economic effects, will provide a taste of what is to come under Republican austerity: a shrunken nation with a dim future.
© 2013 Creators.com (Thanks to expressmilwaukee.com for this article)
President Obama and his allies predict dire consequences, for the economy and for a wide array of government services. On Sunday, they released a report detailing how the cuts would play out in particular states. Kids in Georgia wouldn’t get their vaccines, defense contractors in Texas would lose work, teachers in Ohio would end up on furlough—the list goes on. Republicans and their allies have answered by suggesting the administration is exaggerating. “Over the next ten years, the sequester amounts to a $1.16 trillion cut, or roughly 3 cents on every federal dollar,” National Review editor Rich Lowry wrote on Friday. “If we can’t squeeze a couple of pennies out of every dollar, we might as well begin our great national bankruptcy proceedings right now.”
Sorry, but squeezing a couple of pennies out of every dollar in the next year is a terrible idea. In absolute terms, government spending is significantly higher than it was a decade ago. But that’s largely a product of two factors. One is health care, the cost of which the government shoulders mostly through Medicare and Medicaid. The other is a temporary burst of spending from the Recovery Act, which was designed to stop the economy from collapsing in 2009. That spending is mostly finished anyway. And the sequester cuts woudln’t meaningfully reduce health care spending, though they would cut Medicare reimbursements. They would primarily affect “discretionary” spending, which includes everything from workplace safety inspections to defense spending to Head Start. As the graph here shows, discretionary spending—measured as a percentage of gross domestic product—is already lower than it was when Obama took office. The sequester cuts would reduce it further. At those historically low levels, severe cuts to government services are virtually inevitable, whether or not they are precisely the ones that the administration is predicting.
The effect on the economy could be equally blunt. The recovery is already pretty weak. Taking money out of it, which is what the sequester cuts would do, would make it weaker. Non-partisan analysts, including those at the Congressional Budget Office and private firms like Macroeconomic Advisers, predict that the sequester cuts would reduce growth by anywhere from a half to a full percentage point in the next year. That would probably reduce the number of jobs in the economy by a few hundred thousand. The unemployment rate, which has been slowly dropping, would probably remain at around 8 percent. By the way, it’s entirely possible the economy is already suffering because of the sequester cuts: Many analysts believe that decline in defense spending, in anticipation of the automatic cuts, are the reason the economy unexpectedly (and distressingly) shrunk in the final quarter of 2012.
To be fair, even conservatives don’t think the sequestration is a smart way to pare the budget. “It’s a terrible way to cut spending,” Senator Tom Coburn, Republican of Oklahoma, said on Fox News Sunday. But he and his allies obviously think the sequester cuts are preferable to Obama’s alternative, which would replace the sequester cuts with a mix of spending cuts (spread more carefully across discretionary spending and entitlements, including health care) and tax increases (via tax reform that closes loopholes benefiting the wealthy). In much the same way, Obama and the Democrats hate the sequester cuts less than they hate the Republican alternative, which would significantly reduce spending on programs for low-income people in order to protect the defense budget.
On balance, the public’s preferences are probably closer to Obama’s. That’s why Republicans are arguing the sequester cuts won’t hurt so much. Of course, within a week or two, political rhetoric may matter a lot less than longer lines at airport security, smaller unemployment checks, and other reminders that less government spending also means fewer government services.
(Thanks to Huffington Post for the Headline and article!)
Republicans keep pushing….pay no attention to the waterfall………..
By: Eugene Elander
With exquisite timing, during these final stages leading up to our pending federal Sequestration self-inflicted disaster, the Cold War’s notorious movie “Dr. Strangelove, or How I Learned to Stop Worrying and Love the Bomb” has been airing on Blockbuster TV. In that bizarre film, a few deranged generals and a mad scientist start World War III through evading, avoiding, and destroying all of the safeguards against nuclear war, in an act of self-immolation which, unfortunately, takes the world with them. Much the same process has emerged during the countdown to a Sequestration disaster of epic proportions. In the present circumstances, however, America will suffer “the death of a thousand cuts” rather than a nuclear disaster.
Watching the Sequestration Waltz play out in this final week before the event occurs, nearly all observable effort is being placed on the usual blamesmanship between Republicans in Congress and the President in the White House. It makes little real difference which side has done more to cause this pending disaster, which will essentially shut down the Federal government — with consequences including the vast reduction of most vital government services, from air traffic control to the safety inspection of our food supply to the provision of essential funding to state and local governments. What is obviously needed is a sensible compromise between the Democratic requirement for both revenue increases and measured spending cuts, and the Republican determination that only spending cuts occur, with no tax increases on anyone — not even on any giant corporations which have essentially escaped meaningful taxation for decades.
Sadly, just as there was no possibility of compromise over all-out nuclear war in “Dr. Strangelove,” there appears to be zero willingness on the part of our two major political parties to compromise to avoid this Sequestration disaster. As the rhetoric becomes more and more heated, while the countdown to fiscal armageddon continues, leaders of both parties pour gasoline on the Sequestration fire in order to score futile political points against the opposition. Instead of reasoned debate, what America observes is essentially on the level of a third-grade food fight in the school cafeteria — a fight which nobody is going to win!
There are only a few days left to avoid so-called Sequestration, which would better be termed: The Death of a Thousand Cuts. The irony here is that, at the time when we were approaching the Federal debt limit at the end of 2011, Sequestration was nor really proposed as any sort of remedy. Rather, it was proposed as being so awful that our federal government would never, ever let it occur — the idea then was that we would be forced to solve our fiscal problems by this Sword of Damocles hanging over us. Whoever came up with that high-risk approach (and there are numerous versions of just how this faulty concept emerged) failed to understand the deep enmity between our political parties.
This enmity is nothing very new; not long after President Obama was elected to his first term, such Republican leaders as Senator Mitch McConnell stated publicly and frequently that the main goal for their party should be to block Obama from re-election while preventing any of his initiatives, such as what has come to be known as Obamacare, from passing in Congress. There is, however, a very significant difference between the two Parties on the matter of Sequestration. While the Republicans seem willing to go to any extreme in damaging the nation if they think it will damage our President, the Democrats continue to propose reasonable and balanced alternatives to a federal government shutdown. Now, America is waiting for those alternatives to be taken seriously.
Those proposals, however, seem to fall on very deaf ears and very blind eyes across the Congressional aisle. Yes, there is plenty of blame to go around — and, yes, it does indeed take “two to tango.” Still we must recognize that there is one major difference here: the Democrats devoutly seek to save America from a fiscal disaster, while the present crop of Congressional Republicans seem perfectly willing to impose The Death of a Thousand Cuts, Sequestration, as they believe it will damage their opponents more than themselves. Dr. Strangelove would indeed have understood.
By: John Nichols
There is a great deal of talk about how Republican senators have gone off the rails in their opposition to the nomination of former Senator Chuck Hagel to serve as Secretary of Defense. And there have been some bizarre deviations, with senators making pronouncements based on internet rumors and unfounded speculation.
But none of the fantastical filibustering of the Hagel fight can compare with the delusional dialogue regarding the federal budget.
To hear the billionaire proponents of austerity tell it, America is teetering on the brink of economic ruin. America, we are told, is broke. And the only answer is to “Fix the Debt” with deep spending cuts followed by the radical reordering of Social Security, Medicare and Medicaid.
But America is not broke.
America has broken priorities.
That’s what the billionaire proponents of cuts-at-any-cost economics won’t acknowledge as they advance a “Fix the Debt” agenda that imposes austerity on everyone else, while stacking the deck in their favor.
It is vital to understand that there is an economically and socially viable alternative to austerity cuts. It’s a growth agenda that addresses waste, fraud and abuse while finding new revenues to invest in job creation, education and expansion of access to healthcare.
The growth agenda, as proposed in the “Balancing Act” advanced by leaders of the Congressional Progressive Caucus, asks billionaires to pay their fair share in order to expand employment and opportunities.
The austerity agenda asks everyone but the billionaires to pay: via cuts not just to benefits and services but to jobs.
The anticipated March 1 sequestration, which proposes across-the-board cuts, is an example of austerity.
It continues a two-year-long process of slashing federal programs that are of value to Americans.
But it demands nothing new of billionaires and corporations that are on the winning end of rapidly expanding income inequality.
If we have learned anything from cuts in Europe it is that with austerity comes unemployment.
Even Barack Obama’s critics tend to shy away from arguing against the reality that the president was right when he said: “These cuts are not smart, they are not fair, they will add hundreds of thousands of people to the unemployment rolls. This is not an abstraction. People will lose their jobs. The unemployment rate might tick up again.”
The only place for quibbling is with the word “might.”
Austerity, in the form of the sequestration of federal spending that is set to begin March 1, will result in job losses.
Austerity in the the form of a renewed push by Alan Simpson, Erskine Bowles and the billionaire-backed “Fix the Debt” campaign to assault Social Security, Medicare and Medicaid, has the potential to lead to even more significant job losses.
How many jobs? The most hopeful estimates begin in the range of the 700,000 losses predicted by the Macroeconomic Advisers research group. But they could go much higher, according to an October report to Congress by the Congressional Research Service.
But the sequestration is not the worst of it.
The sequestration is the start, not the finish, of a process that undoes economic recovery and causes job losses to spike by even greater numbers.
Simpson and Bowles are back, promoting schemes such as “chained CPI,” the slashing of cost-of-living increases for Social Security recipients that will squeeze the buying power of seniors and people with disabilities and further impede economic growth.
That will cost even more jobs. And why?
In the case of the sequestration fight, to preserve tax loopholes that benefit millionaires and billionaires and multinational corporations that shift jobs overseas.
In the case of Simpson-Bowles, to lower top marginal tax rates that benefit millionaires and billionaires and multinational corporations that shift jobs overseas.
This is what austerity is all about: exploiting fiscal challenges in order to redistribute the wealth upward.
Louis Brandeis argued in another era of wrangling over economic and fiscal policy: “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”
Today we may say, extending upon the wisdom of Justice Brandeis, that “we must make our choice. We may have a measure of economic democracy and with it job growth, or we may have austerity with the purpose of further concentration of wealth in the hands of a few, but we can’t have both.”
(Thanks to OpEdNews for this article)
Here is a great cartoon about the relationship between the Republicans (i.e. The GOP) and The Rich!
WASHINGTON — Outgoing Transportation Secretary Ray LaHood has a frightening message: Air travel could get worse.
The Obama Cabinet member and former Republican congressman made a surprise appearance at Friday’s White House press briefing to warn that the looming automatic budget cuts set to go into effect on March 1 could lead to even longer air travel delays.
“Travelers should expect delays of up to 90 minutes at peak airports during sequester,” starting on April 1, LaHood said. “It’s going to be very painful for the flying public.”
The sequester’s across-the-board budget cuts will slash $600 million from the Federal Aviation Administration, which will in turn have to furlough air traffic controllers. More than 100 air traffic control towers will be shuttered, LaHood said.
He said airlines would accomodate the cuts by providing less service. “We expect that they will change their schedules and cancel flights,” he said.
Extensive flight delays will occur if the sequester takes place. (Joe Raedle/Getty Images)“Nobody likes a delay, nobody likes waiting in line. If we can’t get our hamburger within 5 minutes, if we can’t get on the plane within 30, 40, 50 minutes of getting through, they’re going to start calling their member of Congress,” LaHood said of air travelers.
The transportation secretary’s solution? Get Republicans back to the negotiating table to hammer out a deal and avert the sequester.
“I suggest my colleagues on the Republican side go see the movie ‘Lincoln,'” LaHood said, noting that in the Spielberg film, people on both sides talked to each other.
President Obama called Sen. Mitch McConnell and House Speaker John Boehner on Thursday, but negotiations to avert sequestration remain at a standstill.
“I would describe my presence here with one word: Republican,” LaHood said. “They’re hoping maybe I can influence some people in my own party.” He added he had been speaking to about a half-dozen Republican members of Congress in hopes that they will agree to a deal.
(Thanks to Huffington Post for this article)
My sequestration posts have been pretty serious recently. Here is something that will hopefully make you laugh…..
Thanks to http://www.cagle.com for this cartoon!
by David Frum Feb 20, 2013 2:34 PM EST
What is the sequester battle? In a nutshell, it’s an attempt to refight the 2012 election, only this time on terms way less favorable to Republicans.
Republicans want to move early to a balanced budget. They want to reach balance through spending cuts only, no tax increases. And they want the spending cuts to fall more heavily on social programs than defense, while exempting Medicare and Social Security for current beneficiaries.
The president wants to move later to a balanced budget. He wants to rely more on tax increases, and he wants the spending cuts to apply to Medicare as well as discretionary spending.
We presented those two options to the American people in November, and the president’s option prevailed. Now Republicans want to present the same choice again.
But this time, they will be presenting the choice under extra disadvantages.
1) President Obama is more popular now than he was in November.
2) Republicans no longer have the coordinated voice and decision-making of a presidential campaign.
3) Because the sequester mechanism grants substantial discretion to the executive to determine where the cuts fall, the president gains powerful new leverage to frame the budget choice in ways maximally embarrassing to Republicans.
4) Because sequester cuts will fall on defense, Republicans will lose the support of important elements of their coalition as the contest continues.
Republicans should not try to reshape the government of the United States from the House of Representatives. That always fails. Instead, they should be focusing on these two missions:
A) Work to temper and mitigate the worst of the president’s agenda – and especially the tax increases and regulations coming in Obamacare, and
B) Begin now to frame the 2014 and 2016 choice in ways advantageous to Republicans.
What they are doing now makes neither tactical nor strategic sense. The likeliest outcome of the sequester fight for Republicans is yet another after yet another political defeat.
(Thanks to the Daily Beast for this article)
Before we end today, let’s talk about why the Republican’s are refusing to negotiate…….they are against President Obama’s proposed closing of tax loopholes for the wealthy, such as the one that keeps tax rates on capital gains and dividends low (i.e. they are protecting the likes of Mitt Romney and the rest of the 1%). Here is the punch line….dividends and capital gains are the biggest contributor to income equality is in the United States (see the graph below). In short, the Republican strategy is to continue to ensure that the 1% get richer and richer while the middle class and the poor bear the complete burden of reducing the deficit. There is nothing new to this but I think it is important to continually remind folks what the Republicans are all about.
House Speaker John Boehner (R-Ohio) declared that he has been in the House for 22 years and that we have never cut spending. This from the man who tried to spend$3 billion on an alternative jet engine the military did not want, and never specifies any of the cuts he says are required.
Now, it appears, Republicans will get their sequester. They will also, in the process, shatter any doubt that government spending indeed creates jobs, the only remaining myth that has not been thoroughly debunked by events, at least since 1937-8.
Republicans have perpetrated four major myths about economic policy, aka “RepubliCONomics.” These myths have served their paymasters’ interests, but have brought down a once prosperous country with a large, strong middle class to a nation beset with a shrinking and struggling middle-class and increased concentration of wealth and power at the top.
The first was that cutting taxes on the wealthy fostered economic growth and job creation. That was launched by President Reagan, but all he proved was that cutting taxes + tripling the deficit, about as Keynesian as one can be, may stimulate the economy. Indeed, it is arguable that the impact of low taxes on the wealthy alone is quite the opposite — their idle wealth squirreled away (these days) in off-shore tax havens, extracted from the economy and not doing anything, was one of the causes Galbraith proposed for the Depression (The Great Crash, 1929).
At the very least, the Congressional Research Service report studying 50 years of tax policy finds cutting taxes for the wealthy had negligible impact on job creation, but it ballooned our deficits and increased income inequality. Strike one.
RepubliCONomics’ second myth was that “tax cuts pay for themselves.” This was a necessary corollary of their first myth, because they did not want to be seen as deliberately causing deficits, nor to have to make choices between deficits and feathering their paymasters’ nests. All they caused were deficits and growing income inequality, hollowing out the middle class. The culture of “getting something for nothing” is a RepubliCON invention.
Perpetrating this lie was particularly cruel since it was applied anew just as the boomers were due to retire, with their known impact on government spending needs. The Clinton Administration handed them a projected $5 Trillion surplus that would have shored up our finances and not put this vulnerable part of the population at risk. RepubliCONomic nonsense transformed that surplus into a $4 trillion deficit, an incredible $9 trillion turnaround. Strike two.
Their third canard was that removing regulations would spark a flurry of economic activity, job creation and growth. They were correct on the “flurry” side, there certainly was a lot of “activity,” but it was not sustainable, and resulted in the worst financial and economic meltdown since the Great Depression. Strike three.
Baseball, and in some states our criminal justice system, says three strikes and you are out. But, they do not have lobbyists nor the gerrymander.
Republicans do. Regrettably, they get an “extra swing” before counted out. “Regrettably,” because many more people will have to suffer unnecessarily.
The sequester will demolish their fourth lie, that government spending not only does not create jobs, but is actually inimical to it. The Congressional Budget Office is predicting a loss of 750,000-1,000,000 jobsfrom their folly. Even Republicans are lamenting the projected loss of jobs in the defense industry because of it. Imagine, government spending creating jobs! What a thought!
As job losses rise and economic growth slows, and as key programs — e.g., the National Institutes of Health will lose $2.5 billion, rental assistance for the poor $2.3 billion, nutrition for women and children $0.5 billion, and so forth — that Republicans assume no one cares about get the axe, and real pain in individuals’ lives is felt, not only will the final nail-in-the-coffin of RepubliCONomics have been hammered, but the Republican Party will have sealed its fate.
What, after all, remains for them to yammer about?
(Thanks to Huffington Post for this article)
So……I still think sequestration, and its various projected impacts, are should be avoided but this article makes a good point. Maybe this is the best way to drive a stake through the heart of the Republican party and their ridiculous economic policies. Maybe good can come from bad…..
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