Report: U.S. bracing for possible downgrade from S&P; Update: “Expecting and preparing”; Update: S&P bungles numbers? Update: Calculations off by trillions

posted at 4:59 pm on August 5, 2011 by Allahpundit

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Just a headline right now at CNBC, but stand by. Business Insider heard a rumor about this before lunch but discounted it when they couldn’t substantiate it with analysts. There must be something to it, though; it’s unthinkable that CNBC would toss this grenade without something very solid to support the story. Needless to say, the fact that news is breaking within an hour after the market closed suggests that they held it back to avoid a panic and to let investors digest it over the weekend.

A downgrade, not a default, was always the real worry during the debt-ceiling saga. Moody’s and Fitch reaffirmed the U.S. as AAA (albeit with a negative outlook) a few days ago but S&P was conspicuously silent. Negotiators on the Hill believed early on that the debt package had to reduce the deficit by $4 trillion to avoid a downgrade, but S&P’s president told a congressional committee on July 27 that it wasn’t true and that some alternate plans would be acceptable.

Updates are coming. While we wait for details, read this NYT piece from last weekend speculating that the economic fallout from a downgrade would actually be modest since, after all, treasuries are still comparatively safer than any other investment. The fact that Moody’s and Fitch disagree with S&P will soften the blow too. And frankly, if there’s anything that can force the Super Committee and Congress to get serious about entitlement reform, this may be it. Or am I just putting lipstick on a very smelly pig? We’ll know soon!

Update: A government source tells Tapper they’re “expecting and preparing” for a downgrade to either AA+ or AA. Unbelievable. Here’s the spin:

Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited.

Of course, of course. Any rather large elephants in the room missing from that litany of excuses? Here’s a hint: It rhymes with “shmentitlements.”

Update: CNBC says the downgrade could come as early as this evening. In spite of everything, I’ve never really believed that America is in decline because, well, America simply doesn’t decline. Tonight I believe it.

Update: Lots of tough talk this week from Democrats about the Super Committee, with Reid hinting that they might walk away if Republicans don’t appoint anyone willing to agree to tax hikes and Pelosi promising much harder hardball during the next round of negotiations. Let’s see what they say now.

Update: Karl from the Greenroom e-mails to remind me that S&P’s track record is a bit of a joke given that they failed to see the subprime crisis coming. True enough. Last week Zachary Karabell at the Daily Beast wondered why anyone cares what S&P thinks:

To those who say that it’s unfair to blame the messenger—and that on the whole, these agencies are simply calling it as they see it and drawing attention to real risks—there is the pesky fact that they have a legacy of either being chronically late (the mortgage crisis) or then too eager to downgrade (overreaction to the mortgage crisis). And even if they were as good as they could be, they are still simply three companies with a few hundred unelected people making calls that drive the entire global financial system.

There is one last glaring question: should these agencies even be rating a sovereign entity such as the United States? The dollar is now a global currency of commerce, and U.S. Treasuries are a form of safe-haven currency. It’s not as if the world is unaware of the economic issues of the U.S. The Chinese don’t need Moody’s to tell them about the risks of holding a trillion dollars of U.S. bonds. Shouldn’t the “creditworthiness” of the United States, or the viability of a European debt plan for Greece, be left to the determination of investors large and small worldwide along with the governments of those countries and their electorates? The success or failure of their plans will be evident soon enough, and subject to the thumbs up or down of the people, without the ratings agencies piling on or offering a view.

Mark Steyn has the counterargument to that:

Nobody in Greece, Portugal, Spain, or Ireland is talking about “out years” and exciting plans for spending cuts in 2020. They’re getting on with it now — and they’re still being downgraded.

By contrast, both U.S. political parties are playing croquet on the lawn in August 1914 — and the ratings agencies are stringing along with them. Whatever the comparisons of debt-to-GDP ratios between Greece, Ireland, and the U.S., the actual hard dollar amount involved here is of an entirely different order. The Boehner plan tells us that real fiscal discipline is impossible within the U.S. political system. At some point, the ratings guys have to call them on it — or render their system meaningless.

Right. What’s ominous about the S&P downgrade isn’t that it comes out of left field, haphazardly, but that it doesn’t. Given the long-term outlook for U.S. sovereign debt even after this week’s deal, why wouldn’t they downgrade us? Why wouldn’t anyone else? What have you seen over the past year that makes you think America’s political class is remotely equal to the task of dealing with this problem before we have a Greece on our hands?

Update: Tapper updates his post with quotes from another government official who says they’re not sure when — or even if — the downgrade will come.

Update: It goes without saying that between the downgrade and polling showing 60+% support for tax increases on the rich, the GOP will be under intense pressure during the Super Committee phase to add some new revenue to the package. That doesn’t necessarily mean tax hikes; it does necessarily mean tax reform, which might involve lower rates but many fewer loopholes. Krauthammer floats a few ideas about that today, starting with getting rid of the mortgage interest deduction.

Update: Greg Pollowitz of NRO notes that, if the downgrade happens, the U.S. will technically be a greater credit risk than Britain, Germany, and France. Given the debt contagion spreading in Europe first from Greece and now Italy and Spain, does anyone seriously believe that’s true?

Update: No idea yet if this is the truth or White House spin, but if S&P actually botched its analysis on a matter as explosive and closely watched as this, then whatever’s left of their credibility is gone for good:

A third official says that S&P made a “serious mistake” in its analysis, “based on flawed math and assumptions,” so the Obama administration is pushing back. But even though “S&P has acknowledged its numbers are wrong, it’s unclear what they’re going to do.,” the official said.

S&P refused to comment.

Update: You’ve got to be kidding: “S+P was set to downgrade. Obama admin. said their analysis off by ‘trillions’. Now S+P revising figures. Downgrade still poss.”

Update: Still waiting for S&P’s side of this, but if the White House was lying in accusing them of a trillion-dollar error, you’d expect vehement pushback. Instead, silence.

Standard & Poor’s told the U.S. government Friday afternoon that it was preparing to downgrade the U.S.’s triple-A credit rating but U.S. officials notified the S&P that they had made a mathematical error that was off by “trillions,” an administration source told CNBC.

Apparently the error was in the calculation of the U.S. debt-to-GDP ratio over time and was based on a misreading of what the correct congressional baseline was…

An S&P spokesman declined to comment on any possible plans for a downgrade or statement later Friday.

If it’s true, they’ll never recover. They’ve barely recovered from the subprime mess as it is. Then again, it could be that their math is fine and the White House is simply challenging them on a conceptual point, much like how Dems and the GOP argued this week over what tax baseline is appropriate for the Super Committee. In that case it wouldn’t be a math error, it’d be an accounting dispute.

A question from Megan McArdle, though: Who leaked this report? She wonders if the White House might have done it “just to get people yelling at the GOP,” but if that were true, why is the White House pressing so hard to get S&P change its numbers? It’s hard to yell at the GOP when the math is wrong.

Update: The Journal describes it as a “mathematical error” and claims S&P copped to it privately:

After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.

S&P officials later called administration officials back to say they agreed about the mistakes, though they didn’t say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do…

A downgrade by S&P could serve as a psychological haymaker for an American economic recovery that can’t find much traction. It could lead to the prompt downgrades of numerous companies and states, driving up their costs of borrowing. Policymakers are also feeling anxious about the hidden icebergs that the move could suddenly reveal.

Imagine if this had happened during trading hours.

Report: U.S. bracing for possible downgrade from S&P; Update: “Expecting and preparing”; Update: S&P bungles numbers? Update: Calculations off by trillions

posted at 4:59 pm on August 5, 2011 by Allahpundit
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Just a headline right now at CNBC, but stand by. Business Insider heard a rumor about this before lunch but discounted it when they couldn’t substantiate it with analysts. There must be something to it, though; it’s unthinkable that CNBC would toss this grenade without something very solid to support the story. Needless to say, the fact that news is breaking within an hour after the market closed suggests that they held it back to avoid a panic and to let investors digest it over the weekend.

A downgrade, not a default, was always the real worry during the debt-ceiling saga. Moody’s and Fitch reaffirmed the U.S. as AAA (albeit with a negative outlook) a few days ago but S&P was conspicuously silent. Negotiators on the Hill believed early on that the debt package had to reduce the deficit by $4 trillion to avoid a downgrade, but S&P’s president told a congressional committee on July 27 that it wasn’t true and that some alternate plans would be acceptable.

Updates are coming. While we wait for details, read this NYT piece from last weekend speculating that the economic fallout from a downgrade would actually be modest since, after all, treasuries are still comparatively safer than any other investment. The fact that Moody’s and Fitch disagree with S&P will soften the blow too. And frankly, if there’s anything that can force the Super Committee and Congress to get serious about entitlement reform, this may be it. Or am I just putting lipstick on a very smelly pig? We’ll know soon!

Update: A government source tells Tapper they’re “expecting and preparing” for a downgrade to either AA+ or AA. Unbelievable. Here’s the spin:

    Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited.

Of course, of course. Any rather large elephants in the room missing from that litany of excuses? Here’s a hint: It rhymes with “shmentitlements.”

Update: CNBC says the downgrade could come as early as this evening. In spite of everything, I’ve never really believed that America is in decline because, well, America simply doesn’t decline. Tonight I believe it.

Update: Lots of tough talk this week from Democrats about the Super Committee, with Reid hinting that they might walk away if Republicans don’t appoint anyone willing to agree to tax hikes and Pelosi promising much harder hardball during the next round of negotiations. Let’s see what they say now.

Update: Karl from the Greenroom e-mails to remind me that S&P’s track record is a bit of a joke given that they failed to see the subprime crisis coming. True enough. Last week Zachary Karabell at the Daily Beast wondered why anyone cares what S&P thinks:

    To those who say that it’s unfair to blame the messenger—and that on the whole, these agencies are simply calling it as they see it and drawing attention to real risks—there is the pesky fact that they have a legacy of either being chronically late (the mortgage crisis) or then too eager to downgrade (overreaction to the mortgage crisis). And even if they were as good as they could be, they are still simply three companies with a few hundred unelected people making calls that drive the entire global financial system.

    There is one last glaring question: should these agencies even be rating a sovereign entity such as the United States? The dollar is now a global currency of commerce, and U.S. Treasuries are a form of safe-haven currency. It’s not as if the world is unaware of the economic issues of the U.S. The Chinese don’t need Moody’s to tell them about the risks of holding a trillion dollars of U.S. bonds. Shouldn’t the “creditworthiness” of the United States, or the viability of a European debt plan for Greece, be left to the determination of investors large and small worldwide along with the governments of those countries and their electorates? The success or failure of their plans will be evident soon enough, and subject to the thumbs up or down of the people, without the ratings agencies piling on or offering a view.

Mark Steyn has the counterargument to that:

    Nobody in Greece, Portugal, Spain, or Ireland is talking about “out years” and exciting plans for spending cuts in 2020. They’re getting on with it now — and they’re still being downgraded.

    By contrast, both U.S. political parties are playing croquet on the lawn in August 1914 — and the ratings agencies are stringing along with them. Whatever the comparisons of debt-to-GDP ratios between Greece, Ireland, and the U.S., the actual hard dollar amount involved here is of an entirely different order. The Boehner plan tells us that real fiscal discipline is impossible within the U.S. political system. At some point, the ratings guys have to call them on it — or render their system meaningless.

Right. What’s ominous about the S&P downgrade isn’t that it comes out of left field, haphazardly, but that it doesn’t. Given the long-term outlook for U.S. sovereign debt even after this week’s deal, why wouldn’t they downgrade us? Why wouldn’t anyone else? What have you seen over the past year that makes you think America’s political class is remotely equal to the task of dealing with this problem before we have a Greece on our hands?

Update: Tapper updates his post with quotes from another government official who says they’re not sure when — or even if — the downgrade will come.

Update: It goes without saying that between the downgrade and polling showing 60+% support for tax increases on the rich, the GOP will be under intense pressure during the Super Committee phase to add some new revenue to the package. That doesn’t necessarily mean tax hikes; it does necessarily mean tax reform, which might involve lower rates but many fewer loopholes. Krauthammer floats a few ideas about that today, starting with getting rid of the mortgage interest deduction.

Update: Greg Pollowitz of NRO notes that, if the downgrade happens, the U.S. will technically be a greater credit risk than Britain, Germany, and France. Given the debt contagion spreading in Europe first from Greece and now Italy and Spain, does anyone seriously believe that’s true?

Update: No idea yet if this is the truth or White House spin, but if S&P actually botched its analysis on a matter as explosive and closely watched as this, then whatever’s left of their credibility is gone for good:

    A third official says that S&P made a “serious mistake” in its analysis, “based on flawed math and assumptions,” so the Obama administration is pushing back. But even though “S&P has acknowledged its numbers are wrong, it’s unclear what they’re going to do.,” the official said.

    S&P refused to comment.

Update: You’ve got to be kidding: “S+P was set to downgrade. Obama admin. said their analysis off by ‘trillions’. Now S+P revising figures. Downgrade still poss.”

Update: Still waiting for S&P’s side of this, but if the White House was lying in accusing them of a trillion-dollar error, you’d expect vehement pushback. Instead, silence.

    Standard & Poor’s told the U.S. government Friday afternoon that it was preparing to downgrade the U.S.’s triple-A credit rating but U.S. officials notified the S&P that they had made a mathematical error that was off by “trillions,” an administration source told CNBC.

    Apparently the error was in the calculation of the U.S. debt-to-GDP ratio over time and was based on a misreading of what the correct congressional baseline was…

    An S&P spokesman declined to comment on any possible plans for a downgrade or statement later Friday.

If it’s true, they’ll never recover. They’ve barely recovered from the subprime mess as it is. Then again, it could be that their math is fine and the White House is simply challenging them on a conceptual point, much like how Dems and the GOP argued this week over what tax baseline is appropriate for the Super Committee. In that case it wouldn’t be a math error, it’d be an accounting dispute.

A question from Megan McArdle, though: Who leaked this report? She wonders if the White House might have done it “just to get people yelling at the GOP,” but if that were true, why is the White House pressing so hard to get S&P change its numbers? It’s hard to yell at the GOP when the math is wrong.

Update: The Journal describes it as a “mathematical error” and claims S&P copped to it privately:

    After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.

    S&P officials later called administration officials back to say they agreed about the mistakes, though they didn’t say whether it would affect the rating. White House officials remained waiting Friday evening to see what the company would do…

    A downgrade by S&P could serve as a psychological haymaker for an American economic recovery that can’t find much traction. It could lead to the prompt downgrades of numerous companies and states, driving up their costs of borrowing. Policymakers are also feeling anxious about the hidden icebergs that the move could suddenly reveal.

Imagine if this had happened during trading hours.

Palin knocks it out of the park

posted at 10:05 am on August 9, 2011 by J.E. Dyer
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Few people in the public eye have said anything useful about the recent unpleasantness with the national debt and the national credit rating.  The president hasn’t.  The vice president hasn’t.  Surprisingly few of the declared Republican candidates have.  The MSM haven’t.  They’re busy trying to make the expression “Tea Party downgrade” go viral.

Indeed, at this hour of reckoning, with the Dow plunging and markets in turmoil around the world, the MSM have achieved another playground-taunt triumph with the silly Newsweek cover featuring an unflattering photo of Michelle Bachmann.  These people seem to have no sense of proportion, no judgment, no recognition that things have become serious and the time for sophomoric media jabs is past.

Who cares how they can make Bachmann look on a magazine cover?  The tabloids demonstrate several times a year that they can make the world’s most beautiful women look like something from the back of the refrigerator, if they photograph them in bad light with a telephoto lens.  The Bachmann cover is the equivalent of a slam-book entry, about as intelligent as holding your nose and chanting “You smell!” at a classmate.  Ridicule is the cheapest thing there is – and in politics, it’s usually deployed to shift the focus from a needed debate to specious topics and emotion.  I’d call it a reversion to high school, but it would be an insult even to middle-schoolers to pin it on their age group.

Meanwhile, Marco Rubio and Paul Ryan have had good, inspiring, on-target things to say about the US fiscal crisis.  Michelle Bachmann has had good things to say.  John Bolton had an important piece making the case that national security is inextricably linked with fiscal security, a much-needed point in the context of the recent debate.

But Sarah Palin came through today with a Facebook post that strikes the right tone and is at once simple, direct, and comprehensive.  It doesn’t rail at past mistakes, nor does it come across as a raised-voice, you’ve-got-to-get-this-people communication.  Palin takes it for granted – with refreshing common sense – that we are in a crisis, its features are obvious, and the task now is to deal with it, not continue to argue whether it’s really a crisis or how big it is or whose name we can pin on it.

She makes no bones about the significance of the problem we face.  I am particularly impressed with her point that if we don’t square ourselves away, the specter hangs over us of IMF staffers showing up on our doorstep with China and France and Germany arrayed behind them, ready to throw folders on a desk and start telling us how much we can spend on cable TV and incidentals each month.  Whether things would really play out for the US as they are playing out for Greece and Ireland is a valid question, but Palin is quite correct that the pitched confrontation is on the horizon now, as it was not six weeks ago – and she has the courage to face that possibility head-on.  It’s not pleasant to mention it, but it’s the right thing to do.

The last third of Palin’s post is devoted to laying out what we need to do.  Grow the economy by releasing the regulatory clamps on it, starting with the energy sector.  Cut spending and reform entitlements.  She doesn’t pretend the latter would be easy, but she faces head-on the fact that it is inescapably necessary.  I urge you to read her post for the discussion of particulars.  It is material and convincing without being in the weeds.

The piece is positive and encouraging for its forthrightness.  There is nothing “clever” to be done in this situation; it’s all straightforward.  The US federal government has to cut spending and let the economy grow, even if that means breaking the stranglehold of unions on the public trough and overruling advocacy groups and government bureaucrats who don’t want the economy to grow.  Pretending that the federal budget is too complex to be governed by the ordinary rules of accounting – or that the US is too special to be limited by the ordinary definition of fiscal solvency – is a dodge, not a sign of insight or expertise.

Palin focuses like any good executive on the big picture.  We have to cut spending and get government out of the economy’s way so it can start pumping out revenues again.  These things are increasingly obvious to everyone, and moreover, they constitute a plan.  Talking ourselves into corners about other, tangential things isn’t even interesting any more.  It feels so wrong that it’s hard to watch anyone’s news program at the moment: no one seems to be talking about what matters.

What is interesting is how few in our national political life have put the case together, as Palin has, without temporizing or bloviating.  I haven’t heard anyone else do what she does with this post.  She acknowledges the actual, enormous scope of the problem, envisions a solution, and outlines what to do to achieve it, with encouragement that it can be done.  It is sad and a little frightening that so many Americans have become unable to see this for what it is:  leadership.  Almost everyone else is focused more narrowly, on one aspect of the problem or another, and a good few commentators don’t seem to even have the vocabulary or the mental infrastructure to address the problem itself; they can only express opinions about the impossibility of the politics surrounding it.

It is the opposite of stupid to recognize the problem’s stark and simple outlines when all around you are swinging blindfolded at piñatas.  We spend too much, and we suppress economic growth and revenues with regulation.  Palin articulates that clearly.  Her ability to reach out directly through social media, and put her case in her terms, is a net positive for our current political climate.  She remains one of the best reasons to not let the MSM dictate our ideas and preferences to us.

J.E. Dyer’s articles have appeared at The Green Room, Commentary’s “contentions,” Patheos, The Weekly Standard online, and her own blog, The Optimistic Conservative.

This post was promoted from GreenRoom to HotAir.com.
To see the comments on the original post, look here.

London rioter: “We’re just showing the rich people that we can do what we want”

posted at 4:45 pm on August 9, 2011 by Allahpundit
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Two clips to usher in night four of Droogfest 2011. The common thread is that in both cases you’re watching rampaging cretins behave in a quasi-civilized manner. In the first, two giggly girls chat calmly with the BBC about the “mad fun” they’re having; in the second, rioters handle a wounded boy gingerly … before proceeding to rob him. Maybe we can let the lot of them off easy with a modified version of the Ludovico technique.

If you missed it in Headlines this morning, read Brendan O’Neill’s essay on the riots as a byproduct of welfare-state decay. At the Corner, Iain Murray elaborates:

    Another left-wing friend of mine in the UK has another interesting theory — that the particular targeting of electronics and clothes shops represents an explosion of consumerism. Stay with me, because I think he has a point and I’d like to explain why. Much of the British underclass has had easy access to credit over the past decade or so — and why not, when they are on a secure income stream of state benefits — and they have spent this for the most part on TVs, video games, and “chav” fashion. That easy credit — which I should emphasize was encouraged by the loose monetary policy of Gordon Brown and Tony Blair — has now dried up, so they are looking to take for free what they previously got for nominal sums. There is more evidence for that conclusion in this BBC recording of two girls saying that the riots were about taking what they wanted, for free…

    I think what we are seeing in Britain is a conflation of two liberal dreams — that of the 1960s, in which parenting and tradition went out the window, and that of the 2000s, in which self-help was replaced by easy credit, benefits, and an all-mighty “health and safety” bureaucracy — together with the unfinished nature of the Thatcher revolution. Mrs. T enabled economic Thatcherism but was unable to finish the project of what I termed social Thatcherism, whereby a free society recognized the importance of what once were called manners.

    The result is a feral underclass without any understanding of tradition from right or left.

O’Neill ends by laying into British cops for their paralysis, a ubiquitous critique in stories about the riots after three days of window-smashing. There are a lot of reasons for that. The police have in fact held back, only now considering water cannons and plastic bullets after millions in damage. The prime minister and the mayor of London were both on vacation when the riots began and Scotland Yard’s leadership recently resigned over the phone-hacking scandal, so for several days there’s been no one in charge. The Home Secretary, who was also on vacation, is prone to saying moronic things like, “The way we police in Britain is not through use of water cannon, the way we police in Britain is through consent of communities,” even as young degenerates ransack local communities without their consent. And of course it’s comforting in a moment of chaos to focus on the failings of the police, who are, unlike the rioters (oops, I mean “protesters”), accountable to the public. Build a better force and in theory you ensure this can’t happen again. In theory:

    Business owners accused police of adopting a softly-softly approach which left their shops and businesses vulnerable to attack by baying mobs.

    While police were criticised in some quarters for being far too slow to get to riot scenes, officers were accused by shopkeepers in Hackney of standing just yards away from looters as windows were smashed and armfuls of goods were scooped up…

    Firearms units trained to use the rubber bullets are braced in case they are needed. It would be the first time ever the baton rounds have been used in British disturbances.

    Mr Kavanagh said Scotland Yard was ‘not going to throw 180 years of policing with the community away’ as the prospect of using the ammunition for the first time at a British disturbance was raised.

Imagine how bad things could get if they did that. There might be riots.

There are many ways to measure the awfulness of what’s happening but chew on these two while you watch. According to residents in Birmingham, looters are literally stealing the clothes off of people’s backs, stopping them and forcing them to strip. The Daily Mail has a too-bad-to-check photo via Twitter. Beyond that, in the Middle East and elsewhere, there’s gloating going on both by authoritarian governments, who are mocking the Brits for not liquidating all of their troublemakers on the spot, and by the victims of those authoritarian governments, who are mocking the rioters for turning their “protests” into a pretext to steal DVD players. All of which is to say, this is a complete fiasco by any yardstick.

Onto the videos. I’ve included a third (audio) clip below as a little bonus; yes, that is indeed Hulk Hogan’s voice you’re hearing. Click the image to watch.

Breaking: Reid appoints John Kerry, Patty Murray, and Max Baucus to Super Committee

posted at 6:05 pm on August 9, 2011 by Allahpundit
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That’s precisely what we need to reach a grand bargain. Hard-left dial tone Patty Murray and a guy who spent the past Sunday muttering in front of TV cameras about a “tea-party downgrade.” Bonus fun fact about Murray via Amanda Carpenter: She’s the head of the DSCC this election cycle, which means there ain’t no way no how no chance she’s signing off on any deal that involves even minor Medicare reform.

Not sure what to make of Baucus, though.

    Murray is expected to co-chair the committee, officially named the Joint Select Committee on Deficit Reduction, along with a still unnamed House Republican. A spokesman for Reid did not respond to a request for comment.

    Reid’s decision to tap Murray will likely be met with scrutiny, as she is also chairing the Democratic Senatorial Campaign Committee for the 2012 election cycle. But she is also a member of leadership, a senior member of the Budget Committee, and a woman on what is likely to be a male-dominated committee.

    Baucus is chairman of the powerful Senate Finance Committee with jurisdiction over many areas, including entitlement programs, that the committee is expected to examine. Kerry, meanwhile, was selected for his stature and Senate tenure.

None of the three were members of the Gang of Six, but Baucus was part of the Biden deficit group that Cantor walked away from over taxes. Could he potentially be the seventh vote for a deal on the Super Committee? He comes from a red state, he’s an institution in the Senate, and he’s not up for reelection until 2014. He’s as insulated from a tough vote as one can be. He’s also, as noted in the quote, chairman of the Finance Committee, so if he blessed a deal, that would give it added credibility in the Senate. And he’s been reasonably good on taxes, so he might side with Republicans on tax reform. The bad news? He duly wet himself over Paul Ryan’s budget and he’s earned some fans at AARP for supporting “doctor fix,” which contributes mightily to Medicare continuously running over budget. He’s probably not signing off on any serious entitlement reform, in other words, although if the GOP can come up with some revenues via tax reform, that might encourage him to join them in a modest first step. He floated that idea himself, in fact, after Biden’s group melted down, proposing new Medicare cuts in return for new revenues. Then again, Baucus was on Obama’s Deficit Commission and ended up voting no on the final plan. Of course, so did Paul Ryan.

I’ll leave you with this thought, in case you’re under the mistaken impression that anything will be accomplished by this process:

    Congress may undermine the deal that raised the U.S. debt ceiling by failing to agree on a plan to curb the deficit and then softening the impact of automatic spending cuts that would kick in to achieve the budget targets.

    That’s the view of five former directors of the Congressional Budget Office…

    While the cuts are supposed to be automatic, Congress can delay or override them if they prove too painful — defense spending would be reduced by 9.1 percent over a decade while non-defense programs would be cut 7.9 percent. That’s what lawmakers did with the 1985 Gramm-Rudman-Hollings Balanced Budget Act, the template for the trigger.

Update: Weigel sees a new “the Democrats caved again!” narrative brewing on the left over Baucus. “So the Democrats will have one of their compromisers on the committee. Unless the GOP puts up one of its compromisers — a neo-Gang of Sixer, or someone like Bob Corker — the Baucus move alone means a committee that leans right.”

Fed statement a vote of no confidence in economy through 2013?

posted at 10:05 am on August 10, 2011 by Ed Morrissey
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The current historically-loose monetary policy will continue, according to a Federal Reserve statement last night — for two more years.  The Fed normally doesn’t offer projections with such unambiguously lengthy timelines, preferring to keep its options open.  These, however, are not normal times — nor do we have normal leadership:

    The Federal Reserve announced on Tuesday that it plans to hold the benchmark interest rate at “exceptionally low levels” through at least mid-2013, breaking from the central bank’s usual less precise timelines.

    The action — which sent the Dow Jones Industrial Average swinging wildly up and down — signals the Federal Open Market Committee sees the path to economic recovery as longer and slower than anticipated even a few months ago.

    With the Fed’s decision, the target interest rate will stay flat at between 0 and 0.25 percent for close to the next two years, if not longer.

This appears to be the Fed’s alternative to another round of quantitative easing, a currency-devaluing exercise that remains the only real tool left in the Fed’s bag these days.  So far, the pledge seems to have helped calm global markets, at least for now:

    A pledge by the Federal Reserve to keep extremely low interest rates for another couple of years has calmed investors’ jitters, sending stock markets around the world higher Wednesday.

    The Fed’s surprise announcement Tuesday that it would likely keep its Fed funds rate at near zero percent through 2013 to help the ailing U.S. economy helped Wall Street surge late in the session — the Dow Jones industrial average rallied 6 percent just in the final hour of trading, one of the biggest turnarounds ever seen.

    That continued into the Asian and European trading sessions, although traders remained nervous after the market turmoil of recent weeks, which has sent many global markets officially intobear market territory — falling 20 percent from recent peaks.

This prompts the question, though, of what the Fed does next week or next month if markets get jittery again.  A QE3 won’t make investors any happier, and the Fed has nothing else to do now that they have made a two-year commitment on monetary policy.  Adding a third year in September or October, for instance, won’t have much impact on investment in the short term.

The rather unprecedented move should have people wondering why the Fed feels it has to commit to a loose-money policy for so long.  It was almost certain that they wouldn’t tighten the money supply anyway, not with inflation risks low and the global economy on the cusp of a recession.  Any move to a tighter policy would only come after a period of torrid growth in order to hedge against inflation damaging a full recovery, and that’s obviously a long way off.

So why make this policy so explicit in terms of length?  To calm markets, to be sure, but a six-month statement would have been just as effective.  The only reason to commit to a two-year policy of ultra-loose money is because the Fed doesn’t see any real prospects for economic growth through mid-2013.  They see no real need to have the option of tightening the money supply.  Economic conditions won’t change enough for the Fed to contemplate a change of policy, or so Ben Bernanke and the Fed board appear to say.

That to me sounds like a vote of no-confidence in the American economy, and in American economic leadership.  And, like the S&P downgrade that preceded it, it’s completely understandable, too.

Roseanne Barr: Palin’s stealing my act

posted at 12:50 pm on August 5, 2011 by Tina Korbe
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Looks like somebody is jealous. Former sitcom star Roseanne Barr, who has never betrayed any political ambition beyond supporting President Barack Obama, now sarcastically says she wants to run for president — and cites former Alaska Gov. Sarah Palin as her inspiration:

    “That’s kind of what got me to thinking that I too should run for president if she can,” Barr told host Jay Leno [last night on "The Tonight Show"]. “I wanted to edge her out because I feel like she’s stealing my act anyway.”

    Barr said Palin, who is flirting with a White House bid, was also her motivation for appearing in a reality show. Her Lifetime show “Roseanne’s Nuts,” premiered a few weeks ago and follows the former sitcom star running a Hawaiian nut farm.

    Barr, a former supporter of President Barack Obama, claimed she is “totally serious” about a bid and said she will run as a candidate from the Green Tea Party. No taxes, the forgiveness of student loans and all debts and the use of vegetables instead of money will be the cornerstones of her campaign, she said.

Barr must not have gotten the memo that Palin hasn’t yet declared presidential candidacy (and might not at all). Barr also said she assumes all you have to do to be president is “show up and give a speech.” No, Roseanne, that’s what you have to do to be a sitcom star. Obama is Exhibit A: Charisma and eloquence do not a competent president make.

All of which reminds me: Why, in all of his talk of taxing the rich, does Obama never add “Hollywood entertainers” to his oh-so-redundant list of “corporate jet owners, hedge fund managers and oil company executives”? Seems to me they could pitch in more than a few dimes to reduce the debt and deficit.

Obama: Hey, my “singular focus” is on jobs!

posted at 12:10 pm on August 5, 2011 by Ed Morrissey
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Barack Obama has given a response to the jobs report this morning while speaking at the Washington Navy Yard.  I’ll bet most people have already guessed how the President sought to reassure Americans that “things will get better“:

    “We are going to get through this. Things will get better. We’re going to get there together,” Obama told a crowd of veterans at the Washington Navy Yard Friday, where he was speaking about lowering unemployment among the nation’s veterans. Neither he nor any member of the administration commented after the Dow plunged over 500 points Thursday, and Obama avoided addressing the market crash directly.

    “There is no doubt this has been a tumultuous year,” said Obama. “My singular focus is the American people. Getting the unemployed back on the job.”

First, it’s interesting that Obama didn’t attempt to sell the jobs report this morning as good news.  Wall Street wasn’t impressed by it; after yesterday’s selloff, the Dow Jones was off another 150 points by noon today.  European stocks had a 3-year drubbing this week as well.

But even Obama’s allies aren’t buying the “singular focus” line any longer. Arianna Huffington told Lawrence O’Donnell earlier this week that no one believes Obama when he claims that jobs are his highest priority, but rather think it’s one job in particular, emphasis mine:

But the point is that the most important number going into 2012 is going to be the unemployment number. And there is absolutely no prospect at the moment that would make us believe that unemployment number is going to be below nine percent. Now that is really the greatest fear for the White House. And of course Mitt Romney again and again is talking about the failure of the President to produce jobs, and he doesn’t have to tell us how he would have done it. He just has to point out to that failure. And when the President again and again talks about how, I mean, I went through and looked since 2009 how many times he has said, “Jobs priority number one,” “The sustained focus of this administration,” “The relentless focus of this administration,” “We’re pivoting to jobs.” Nobody believes it any more.

For all of this focus, Obama has yet to put forward his own plan to promote massive job growth, or any kind of private-sector growth at all. If that sounds familiar, it should; Obama failed to put forward any specific plan to deal with deficit reduction and the debt ceiling, and the only specific demand he made — tax hikes — would have stunted job growth. In fact, he’s still talking about tax hikes, which is a highly strange way to claim that job creation is one’s “singular focus.”

As long as Obama’s actual “singular” focus remains on expanding regulation and raising taxes, things won’t get better until he leaves office … hopefully in 2013.

Bachmann: President created twice as many donors as jobs in the second quarter

posted at 11:30 am on August 5, 2011 by Tina Korbe
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This morning’s predictably dejecting jobs report provided the GOP presidential candidates with an apt opportunity to cast the president in an unflattering light — and to contrast his approach with what their own would be.

Memorably, former Massachusetts Gov. Mitt Romney framed his statement in a way that leaves voters displeased with the economy little choice but to vote Obama out of office.

“When you see what this president has done to the economy in just three years, you know why America doesn’t want to find out what he can do in eight,” former Massachusetts Gov. Mitt Romney said.

Importantly, Romney is not the only person who has said Obama should be a one-term president if the economy doesn’t turn around by the end of his first term. Who was it who also said that again? Oh, yes, Obama himself.

Michele Bachmann noted a fact that’s telling about Obama’s priorities and forwarded her own solutions, as well.

“The President created twice as many donors for his campaign as he created jobs in the second quarter,” she said in a statement. “This week the President announced that he would again pivot to focus his attention on jobs. We can only hope he will pivot away from his failed economic policies that have killed growth and put millions of Americans out of work. What the markets want and what the country needs is a fundamental restructuring in the way Washington spends taxpayers dollars that reins in unprecedented spending, gets our debt under control and encourages pro-growth economic policies.”

Former Minnesota Gov. Tim Pawlenty called out the president’s lack of plan to good effect.

“Today’s dismal jobs report is a far cry from the hope and change that President Obama promised on the campaign trail,” Pawlenty said. “Since the president took office, unemployment has risen 17%, the federal debt has increased 37% and gas prices have doubled.  In the last week, the stock market suffered its worst day in years, economic growth was revised down and consumer confidence dropped.  Despite these clear and abundant signs that our economy is floundering, President Obama has still failed to deliver a concrete plan to create jobs and promote growth.”

Pawlenty also emphasized that he is the only candidate so far to have put forward a concrete plan for job creation and economic growth.

Like Bachmann, former Utah Gov. Jon Huntsman observed a priority of the president’s that has distracted from jobs growth.

“When President Obama should have been focused on creating jobs, he focused on a government-mandated health care system that the American people didn’t ask for and can’t afford,” Huntsman said. “What we can’t afford now is to waste any more time. … This country will never realize its true economic potential until we enact tax cuts, implement regulatory reform and move toward energy independence.”

The websites of former Pennsylvania Sen. Rick Santorum, Rep. Ron Paul (R-Tex.), Herman Cain, former Speaker of the House Newt Gingrich and Rep. Thaddeus McCotter (R-Mich.) didn’t feature ready reactions to the jobs report (at least at the time I was writing).

How about a government shutdown to make those Tea Partiers fear Obama?

posted at 10:45 am on August 5, 2011 by Ed Morrissey
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If you want an example of how out of touch media commentators can be with American politics, look no farther than the Washington Post’s Jonathan Capehart.  Barack Obama’s cave on tax hikes in the debt deal clearly annoyed Capehart, who criticized the President for his lack of “aggressiveness” that resulted in a deal that doesn’t reflect “the will of the people” — at least as Capehart sees it.  Calling the Tea Party-backed Congressmen “carjackers,” Capehart called on Obama to be “Keyser Söze.”  But that’s not the only place where Capehart’s perspective departs from reality:

    If you’ve seen the brilliant movie “The Usual Suspects,” you know who this diabolical character is and what he did to gain mythical status. Suffice it to say that Söze so out-crazied the crazies that he became a person not to be messed with — a symbol of fear and grudging respect.

    In the coming fights over the next budget, unemployment benefits and payroll tax cuts, I want Obama to show the Republican Party in general and the Tea Party in particular that he isn’t afraid to out-crazy the crazies. If that means vetoing bills, taking the fight to individual districts, shutting down the government, so be it.

We’ve already seen this strategy play out twice.  Here in Minnesota, Gov. Mark Dayton reneged on his pledge not to shut down the government over his demand for tax hikes, refusing to negotiate a “lights on” bill with the Republican-controlled legislature to avoid the shutdown.  How did that work out for Dayton?  He rushed back to the capital to cut a deal without tax hikes when his own allies gave him a blast of disapproval in town-hall meetings around the state, while most Minnesotans barely noticed the difference.  The shutdown only hurt Dayton’s voter base of unions and the poor.  Instead of Keyser Söze, Dayton turned into Eric von Zipper.

Next, Harry Reid tried doing the same thing with the FAA.  Unfortunately for Reid, his ploy was rather obvious; he had failed to move an authorization bill in the Senate and hoped that the prospect of putting thousands of government bureaucrats out of work would embarrass conservatives.  After the media started grilling Reid on why he hadn’t done anything to move a Senate version of the bill, as well as realizing that putting bureaucrats out of work wasn’t exactly causing Tea Party activists to weep into their pillows at night, and especially after it became obvious that the system ran pretty well without them, Reid ended up quickly surrendering.  Instead of Keyser Söze, Reid turned into Jeffrey Goines.

If Capehart doesn’t realize that the Tea Party activists in Congress want to shut down large portions of the federal government, what has he been doing the last two years?  A partial government shutdown would please the Tea Party to no end.  The only people it would hurt will be Obama’s own constituencies, especially since the entitlement checks would still have to go out to recipients, as those are mandated by statute and not budgeted annually by Congress.  The biggest loser in an Obama-triggered shutdown would be Obama himself.

Maybe Capehart should spend some time talking with actual Tea Party activists before coming up with grand strategies like this.

Addendum: To answer Capehart’s question, Söze got the advantage over his competitors by murdering his own family, murdering all of his competitors afterward, and then disappearing.  I’m not sure what relation that has to American governance — or to carjackers, for that matter, since The Usual Suspects didn’t have any of either.  This analogy leaves a lot to be desired, including taste and the “civility” that Democrats spent the last six months demanding not just of Republican politicians but also conservative commentators.

Carney: Yeah, taxpayers will fund the Obama Midwest Jobs Tour

posted at 11:30 am on August 4, 2011 by Ed Morrissey
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As I mentioned in the OOTD today, Barack Obama promised a new focus on jobs for about the 15th time in less than three years, shortly after the conclusion of the debt-ceiling deal. As part of that new focus, Obama plans a bus tour — an unusual mode of travel for an American President, but SOP for a presidential candidate working the crowds to bolster support. But when White House reporters quizzed press secretary Jay Carney about whether Obama or taxpayers would foot the bill for this whirlwind tour, Carney responded that “the air of cynicism is quite thick,” as CNS News reports:

    CNSNews.com asked Carney, “Is that a campaign event or a presidential event?

    Carney answered, “Negative. That is an official event.”

    CNSNews.com followed, “So it is being funded by taxpayers in battleground states?”

    Carney responded, “He’s the president of the United States.”

    Another reporter followed up about whether there was a political nature to the trip.

    “The air of cynicism is quite thick,” Carney shot back. “The idea that the president of the United States should not venture forth into the country is ridiculous.”

    The reporter said, “I didn’t say that.”

    Carney said, “No, but you implied it in your question. It is absolutely important for the president – whoever that person is, in the past or in the future – to get out and hear from people in different communities.”

Something’s getting thick, but it’s not the air of cynicism.  Presidents do make appearances throughout the country during their terms; it’s one of the perks of the office, and one reason why incumbent Presidents are so hard to beat in an election.  However, they don’t usually travel by bus.  They normally use Air Force One, which has a standard security profile as well as the capacity to allow a President to perform his job while away from the White House.  In order to accomplish this three-day bus tour of the Midwest, the taxpayers will have to foot the bill for re-inventing the wheel as well as the rest of the costs.

Last year, this wouldn’t have been as big an issue.  That’s because Obama hadn’t officially launched his re-election campaign.  The campaign raised $49 million for itself in the first quarter and another $38 million for the DNC.  Getting in a bus on a jobs tour sounds a lot like preparing the ground for later fundraisers more than a job-related duty.  This is the reason that most incumbents wait for as long as possible to launch re-election campaigns, but Obama and his team wanted to make a run at a billion-dollar haul for this election … and this from the candidate who sang hosannas about public funding of presidential campaigns, too.

Rick Perry: I support constitutional amendments to ban gay marriage and abortion

posted at 5:25 pm on August 3, 2011 by Allahpundit

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Two caveats to his otherwise strict support for the Tenth Amendment, both of which happen to serve the agenda of social conservatives whose votes he’s depending on. He backed away from his “states’ rights” defense of legalizing gay marriage last week; here’s the inevitable climbdown on abortion too, which he described as a states’ rights issue a few days ago. Follow that last link and re-read the post to see why it was predictable. I’m surprised he didn’t anticipate the tension his Tenther rhetoric on these issues would cause with his base, which he could have defused by mentioning his support for the amendments straightaway. There’s nothing necessarily inconsistent in that position: You can be a strong federalist and still condone federal solutions for exceptionally grave evils like slavery which the states, for various reasons, can’t be trusted to police as diligently as they should. That’s the core of the pro-life argument for an anti-abortion amendment — it’s a matter, literally, of life and death. What’s Perry’s argument, though, for why gay marriage qualifies as an “exceptionally grave evil” warranting a nationwide ban? Is smoking, say, an evil sufficiently grave to require a constitutional amendment outlawing it? (Don’t answer that, liberals.) He’s not in a legal trap here but he is in a philosophical one. And a political one, of course, as the press will use this to throw him off his economic message. Specify, please, which behaviors are so pernicious that we can’t risk letting parochial state legislatures deal with them.

Incidentally, as with Fred Thompson four years ago, the media’s “Perry as GOP savior?” hype is already being replaced by the “Perry as overhyped flop?” counter-narrative. Here’s Politico’s new piece wondering whether a tea-party-flavored Bush soundalike can get traction with the current conservative base. (One state Republican chairman compares Perry to “Will Ferrell doing a George W. Bush imitation.”) And here’s CNN noting that Perry’s upcoming prayer event, which can accommodate 71,000 people, has had just 8,000 registrants thus far. I doubt Perry cares — the real audience for that event is in Iowa, not Texas — but they’ll build that counter-narrative with any available brick. Exit question via Democratic pollster PPP: Does the GOP need Romney to win?

Tea Party won the first skirmish of a long, long fight

posted at 2:05 pm on August 3, 2011 by Ed Morrissey
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Did anyone win in the recently concluded deal that reduced the upward trajectory of federal spending?  In my column for The Week, I argue that Barack Obama certainly was the big loser, having blown an opportunity that he himself cultivated for months to demonstrate leadership.  While the deal doesn’t feel like a win to Tea Party activists at the moment, I argue that they won an important opening skirmish:

    Reid gave up on tax hikes, not because he got tired of talking about them, but because there isn’t any appetite for tax hikes on Capitol Hill — thanks to the power and influence of the Tea Party. The cuts mandated in this compromise might be paltry, especially at first, but they represent a step in the right direction. For the first time in perhaps decades, Congress will approach budget shortfalls by looking at where spending can actually be reduced rather than where revenue can be raised.

    That is a remarkable paradigm shift, and one worthy of celebration after a decade of exploding deficits from Congresses controlled by both parties. Without the Tea Party, that paradigm shift would never have occurred. Indeed, without the Tea Party and their victorious candidates, the debt-ceiling increase would have been a routine vote noted only by a few bloggers and the back pages of most newspapers.

    Understandably, most Tea Party activists see this as business as usual and not the kind of transformative, instant change they envisioned. But just as Rome wasn’t built in a day, it will take much more than one vote or one budget to build the kind of limited, fiscally responsible America that these activists desire. The expansion of the federal government has gone on for decades, and it will take many battles and victories, small and large, to reverse it. This is a long journey, and the Tea Party helped push the nation into taking a step in the right direction.

There are two dangers in incremental victories, which are closely related to one another.  The first is that they tend to discourage activists who want big, unmistakable, validating victories.  However, those will only come with big, unmistakable majorities in Congress and a different President in the White House.  Given the relative weight of the Tea Party caucus on Capitol Hill in this Congressional session makes the win here even more remarkable. It’s very important to remember that our political system is heavily weighted against radical change in the short term, and that lasting change takes patience and long-term planning.

The second danger is that the activists will turn on each other and on their nominal allies.  If that happens, they will lose the ability to grow their standing in Congress.  Worse, they will alienate those who want to work towards the same general goals but who may differ on tactics and time lines.  That will bring incremental progress to a halt, while at the same time pushing activists into giving up altogether.  We need to avoid a “Mission Accomplished” mentality, but more importantly recognize that incremental progress is not futile.

Meanwhile, on the other end of the ledger, Barack Obama comes out as the biggest loser in this fight.  I give an explanation for that in my column, but two media reports today confirm this as a consensus position.  First, The Hill takes us inside the negotiations, where John Boehner apparently ordered the President out of negotiations at one point:

    GOP aides and lawmakers, speaking on background, portrayed Boehner as the calm negotiator who repeatedly exasperated President Obama.

    Boehner last month asked the networks to televise his response to Obama’s address to the nation, a request which infuriated the White House, Republican sources said.

    On July 23, they claim, the White House called Minority Leader Nancy Pelosi (D-Calif.), telling her not to participate on a call with Boehner, Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.). Pelosi informed Reid, who declined to participate, and the call was canceled, the Republican sources said. (A Pelosi spokesman could not be reached for comment.)

    Later that day, the four leaders met with Obama at the White House. At one point, GOP officials said, the Democratic and Republican leaders asked Obama and his aides to leave the room to let them negotiate.

Reid reneged on the agreement that was reached at that point under pressure from the White House, according to the Hill’s account based on their GOP sources.  Obama had to send Joe Biden into the final negotiations instead.  But it’s not just Republicans who are painting Obama as a bumbling negotiator, as the LA Times reports:

    Moreover, many Democrats — including some ordinarily sympathetic to the president — feel part of the problem is of Obama’s own making. …

    Given the acrimony and the high-stakes deadline, the impasse posed a severe test of Obama’s negotiating skills. On the fly he sought to improve his relationship with Boehner, inviting the speaker to play a round of golf early in the talks. But White House officials believe that personalities aren’t at the root of congressional paralysis. …

    Others are more critical, comparing Obama unfavorably with presidents who made broad use of their executive powers in times of crisis: Harry Truman, who nationalized the steel industry in 1952 in the face of a steel strike, for example, or John F. Kennedy, who denounced steel executives for price increases and threatened them with an antitrust investigation.

    “I am just sorely upset that Obama doesn’t seize the moment,” Sen. Tom Harkin (D-Iowa) said as the final deal was coming together. “That’s what great presidents do in times of crisis. They exert executive leadership. He went wobbly in the knees.”

The White House apparently hopes that the deal will eventually be popular enough for Obama to benefit, but the problem with that idea is that Obama had nothing to do with the eventual deal.  His only stated demand — higher taxes — got taken off the table more than a week before the compromise.  At the end, Obama ended up accepting a Congressional diktat rather than leading the path to a solution.  Obama ended up as little more than a spectator at his own leadership opportunity, and everyone knows it

What about us? Responsible homeowners left out in the cold

Responsible borrowers who have good credit and make their payments on time are being told that the only way they can refinance is if they start defaulting on payments.
No relief for the responsible
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No relief for the responsible

Consider it yet another cruel irony of the housing bust: While hundreds of thousands of mortgage borrowers have been able to squat in their homes without making a single mortgage payment in months or even years, many responsible homeowners who have good credit and consistently meet their monthly obligations haven't been able to refinance in order to avoid losing their homes.

Many of today's homeowners purchased their homes during a time of easy credit, when mortgage products, like interest-only loans and option adjustable-rate mortgages were issued to the marginally qualified. And many were told that -- if they made their payments faithfully -- they could easily refinance out of these products into affordable fixed-rate loans once the payments started to balloon.

But that day has never come for some borrowers -- no matter how good their payment record or credit score.

Many lenders are refusing to refinance underwater mortgages -- loans that are higher than the value of the home -- because it would mean big losses for them if the borrower defaults, said Mark Zandi, chief economist for Moody's Analytics.

According to data submitted to federal regulators and analyzed by the Wall Street Journal, nearly 27% of mortgage applicants were denied mortgages in 2010, up from 23.5% a year earlier.

The cruelest twist? Lenders typically wait until a homeowner is in default before they are willing to modify their mortgage.

For some homeowners, the clock is ticking. In 2011, $1 trillion in adjustable rate mortgages are scheduled to reset. And many are scrambling to refinance their mortgages while rates are still low -- to no avail.

"What's breaking my heart is the people making payments every month who can't refinance their mortgages, through no fault of their own," said Senator Barbara Boxer (D-Calif.).

She has co-sponsored a bill, the "Helping Responsible Homeowners Act," for borrowers who want to refinance but are in "negative equity," owing more on their mortgages than their homes are worth.

Boxer's legislation also requires banks to offer interest rates comparable to what they're giving to borrowers who are not underwater. And it bans risk-based fees for mortgages issued by Fannie Mae or Freddie Mac that can be as much as 2% of the loan principal.

Here are four responsible homeowners who are currently trying to refinance their loans.

Awww: Obama campaign to blame debt negotiations for lower fundraising this summer

posted at 12:45 pm on August 3, 2011 by Ed Morrissey

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You know how it is when you keep putting off important tasks, like mowing the lawn, taking out the trash, and resolving budget standoffs with Congress. If you don’t handle them when you’re supposed to do so, they end up getting resolved at the most inconvenient times:

President Barack Obama’s campaign expects to raise tens of millions of dollars less this summer than it did in the spring because negotiations over the nation’s debt limit forced Obama to cancel several fundraisers.

Obama’s campaign said Wednesday it canceled or postponed 10 fundraisers involving the president, Vice President Joe Biden andWhite House chief of staff Bill Daley in the past month because of the debt talks, scrubbing events in California, New York and elsewhere.

Only weeks after the president’s campaign reported collecting a combined $86 million with the Democratic National Committee, Obama’s team is trying to lower expectations about its fundraising juggernaut while signaling to its army of volunteers and activists that they need to fill the void. Obama is coming off a bruising battle with congressional Republicans over raising the government’s debt ceiling and is expected to face a formidable challenge from Republicans in 2012 against the backdrop of a weakened economy.

“We’re going to raise significantly less in the third quarter than we did in the second quarter,” said Jim Messina, Obama’s campaign manager. “We will not be able to replace all of these events just because of his busy schedule. We always knew that he had his job and we had to do this around his schedule, and the truth is we just have to deal with canceling a month’s worth of events.”

Well, if Congress had addressed the debt ceiling and deficit reduction during 2010, Obama wouldn’t have had to spend three whole weeks in Washington negotiating with John Boehner. Democrats failed to pass a budget for FY2011 while they had large majorities in both chambers of Congress. Harry Reid refused to raise the debt ceiling in December during the lame-duck session, specifically because Reid wanted Republicans to get their hands dirty on the debt ceiling.

Obama doesn’t have any excuses, either. Almost as soon as Reid bailed on raising the debt ceiling, Obama’s team began raising the specter of default. What did Obama do to avoid the problem? In February, Obama submitted a budget request that increased the rate of deficit spending. When that flopped, Obama promised to produce a plan to reduce the deficit, using a national address in April to underscore the point. And then …. nothing. No plan, no specifics, just nothing until July, when Republicans offered plan after plan and Obama refused to accept them until utterly forced to do so.

If the President had done his job in February or even April, then none of this would have been necessary. Instead, Obama chose to lead from behind. If that caused him to miss fundraisers, it’s no one’s fault but his own. And that might be a much bigger reason for lower fundraising numbers this summer, fall, and winter

Biden to Gabby Giffords: “Welcome to the Cracked Head Club”

posted at 8:30 pm on August 2, 2011 by Allahpundit
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Via Breitbart TV. Since we’re grooving on insane left-wing double standards today, here’s the second thing this guy has said in the past 24 hours that would have become a national media scandal had his party affiliation been different. And before one of our three lefty readers wonders — no, this isn’t a Fox scoop. Other reporters heard Biden say it, including one from the Boston Globe. Which raises the question, what’s the dumbest part of this? That he’d joke about a cracked skull with Gabby Giffords, who may very well prove to be permanently disabled from having “joined the club”? Or that he found it amusing enough to share the anecdote with reporters later on? Free advice for conservatives and independents: Do not attempt this “joke.” Not only is it tone-deaf and callous, but you won’t get graded on the curve afterward. (“Oh, that Joe!”)

Giffords herself, you’ll be glad to know, is coming along well enough that Debbie Wasserman-Schultz thinks she can make it back to Congress. But reports early this morning that she’s planning to run for reelection turned out to be wrong. They’re hopeful that she’s well enough, but it’s still wait-and-see.

Bottom-lining the debt deal

posted at 2:00 pm on August 2, 2011 by Steve Eggleston
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There’s been a lot of numbers and rhetoric tossed about on what the debt deal (shortened to The Deal, not because I like it, but because it makes the phrase stand out) does and doesn’t do. However, I don’t believe anybody has done an exploration of the absolute effect is. It’s high time to do so.

Baselines matter

First, the base from which the reductions are to be needs to be established. While that base has been established to be a “modified” version of the March 2011 Congressional Budget Office extended-baseline scenario, a quick review of which is part of the CBO’s review of the President’s FY2012 budget proposal.

The extended-baseline scenario assumes the CBO’s estimates, based on current law and not necessarily current policy, of direct spending (which, among other things, ends the Medicare “doc fix”) and revenues (which, among other things, assumes that all of the Bush tax rates expire at the end of 2012 and the Alternate Minimum Tax is no longer “indexed” to keep middle- and lower-income Americans from being caught in that trap), and that every top-line category of discretionary spending that does not explicitly end in FY2010 is increased at the rate of inflation.

The bottom line on that is that, on $39.03 trillion in revenue and $45.77 trillion in outlays, there would be $6.74 trillion in deficit spending. However, there are a couple of “wrinkles” that were added to that in the baseline used.

Normally, that would include spending on what used to be known as (and is still called by the Republicans on the House Budget Committee) the Global War on Terror. However, every entity, from the White House to the House of Representatives to the Senate Democrat leadership, agrees that, instead of spending $1,589 billion over the next 10 years as the extended-baseline scenario calls for, $545 billion will be spent. While the CBO excluded the entirety of that at the request of Congress as it is not part of this bill, I will add the $545 billion back in, using the House budget spending by year, as there is no difference year-to-year between the President’s and the House of Representatives’ budgets.

Also, the CBO, at the request of Congress, has figured in the effects of the final FY2011 continuing resolution. That is another $122 billion reduction in spending.

Taking the full effect of those modifications into consideration, the federal government would take in $39.03 trillion in revenue, spend $44.60 trillion, and run a 10-year deficit of $5.57 trillion.

There are a couple of other “baselines” that one could choose. The President’s budget, according to the CBO, would take in $36.70 trillion in revenue, spend $46.17 trillion, and run a 10-year deficit of $9.47 trillion. That budget already includes all of the modifications above.

An “Alternate Fiscal Scenario” from the CBO, which assumes various spending and revenue options, including those outlined above, are affirmatively extended rather than allowed to expire or otherwise not happen and last outlined in percentage-of-GDP form in June, would also need to be adjusted by the above adjustments. Once that is done, it would presume $35.05 trillion in revenues, $46.81 trillion in spending, and $11.76 trillion in deficits.

Meanwhile, the House budget, which keeps all of the Bush tax rates, indexes the AMT, and does some further tax cuts, envisions $34.87 trillion of revenues, $39.96 trilion of spending, and $5.09 trillion of deficit spending. Like the President’s budget, it already includes all the modifications above.

The first 2 years – $63 billion in scorable deficit reduction versus the “adjusted” CBO baseline

Like the CBO, I cannot and will not attempt to score the effects of a potential $1.2 trillion in “trigger” cuts, $1.5 trillion in “commission” cuts, or adoption of a Balanced Budget Amendment. However, I have actually read the bill, and the discretionary spending caps are, unlike the $1.2 trillion-$1.5 trillion in “additional cuts”, actual hard numbers, not nebulous percentages or “reduction” numbers”. Therefore, actual bottom-line spending comparisons can be made against any base. As the CBO used an adjusted version of their March 2011 baseline, I added the (all-but-)agreed-to spending levels on the GWOT to do so.

Using the adjusted CBO baseline, there would be, between FY2012 and FY2013, $5.65 trillion in revenue, $7.34 trillion in spending, and $1.69 trillion in deficit spending. Adopting The Deal l would knock the spending down to $7.28 trillion and deficits down to $1.63 trillion.

By way of comparison, the President’s budget would have $5.44 trillion in revenue, $7.51 trillion in spending, and $2.07 trillion in deficits. That’s an additional $233 billion in spending and $438 billion in deficits versus The Deal.

The House budget would have $5.39 trillion in revenue, $7.09 trillion in spending, and $1.69 trilllion in deficits. While spending in the House budget would be $190 billion less than The Deal and $253 billion less than the adjusted CBO baseline, the deficit would be slightly higher than The Deal and insignifiantly less than the adjusted baseline as, instead of the Bush tax rates expiring at the end of 2012 (1/4th the way through 2013) and the AMT “indexing” not happening, both would continue as they have the past 8 years.

The “out” years – $855 billion in “scorable” deficit reduction – if The Deal holds

I will preface this that there is a significant amount of debt service savings from the reductions in spending on the GWOT that were scored in the two budgets that were not scored separately in even the CBO analysis of the Senate proposals. Judging by the CBO scoring of the Senate proposal versus the House proposals and The Deal, that is roughly $220 billion in reduced spending over the 10 years not reflected in either the adjusted CBO baseline or The Deal.

Also, the bulk of the $1.2 trillion-$1.5 trillion in additional deficit reduction, or any adoption of a Balanced Budget Amendment, will happen in this time frame. As noted above, that cannot be properly scored as yet.

With that said, the adjusted CBO baseline anticipates $33.39 trillion in revenues, $37.26 trillion in spending, and $3.87 trillion in deficits between FY2014 and FY2021. The Deal changes the spending to $36.41 trillion and the 8-year deficit to $3.02 trillion.

The President’s budget is a veritable blowout of spending, especially deficit spending. On $31.26 trillion of revenue, there would be $38.67 trillion of spending and $7.40 trillion of deficits.

While the House budget would continue to spend less at $29.48 trillion, its reduced expectation of revenue of $32.87 trillion would result in $3.39 trillion in deficits.

What about tax hikes?

While The Deal does not explicitly address taxes, I’ve got bad news for everybody (or at least everybody who thinks a non-WWII record level of revenues as a percentage of GDP in 2021 is a bad idea) on that front. Any attempt to either extend any part of the Bush tax rates beyond 2012 or keep “indexing” the AMT will be scored as a deficit increase. The back-of-the-envelope numbers on the various proposals are that the “scored” increase would be about $2.5 trillion for the Obama “hold those under $200K/$250K harmless” plan, $3.5 trillion for full extension of the Bush tax rates, and $4.2 trillion to continue the entirety of the current tax structure.

What about S&P and Moody’s?

Again, baselines matter. Unfortunately, neither S&P nor Moody’s appear to have mentioned from which baseline they wanted the “$4 trillion in deficit reduction”. It has been said that Cut, Cap and Balance, even before adoption of the Balanced Budget Amendment, would have met that. However, I have not seen any CBO score on that.

Moreover, up until the Congressional leadership decided to start talking to each other instead of with President Obama, it was widely assumed the $4 trillion that was being talked about was against the President’s budget and its $9.47 trillion 10-year deficit spending. The House budget, and the Cut, Cap and Balance bill that, after higher spending in FY2012 compared to that, used percentage-of-GDP spending levels based on that budget, would easily have cleared that hurdle.

Going against the President’s budget, The Deal, with $4.65 trillion in 10-year deficit spending, also would very easily clear that hurdle, even before the “trigger”/commission/BBA. Moody’s has already said they would maintain a negative outlook on the US soverign debt, while S&P is making noises that they will downgrade the debt. I have to wonder what more those credit rating agencies want.

Revisions/extensions - I really need to proofread these opii. Corrected a typo. I hope there isn’t more.

This post was promoted from GreenRoom to HotAir.com.
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Obama in Pennsylvania virtual tie with … Rick Santorum?

posted at 1:22 pm on August 2, 2011 by Ed Morrissey
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Bad news comes out of the must-carry state of Pennsylvania today for Barack Obama and his re-election hopes.  Not only has Obama fallen far below water in his approval rating in the latest Quinnipiac poll, he has now dropped into a tie against a potential Republican nominee.  No, this isn’t a generic Republican, either:

    The protracted slugfest over raising the national debt limit leaves President Barack Obama with a 54 – 43 percent disapproval among Pennsylvania voters, but he scores better than Republicans or Democrats in Congress, according to a Quinnipiac University poll released today. …

    Pennsylvania voters say 52 – 42 percent that Obama does not deserve to be reelected. Matching the president against possible Republican challengers shows:

        Former Massachusetts Gov. Mitt Romney with 44 percent to Obama’s 42 percent;
        Former Pennsylvania Sen. Rick Santorum with 43 percent to Obama’s 45 percent;
        Obama leads Minnesota U.S. Rep. Michele Bachmann 47 – 39 percent;
        Obama tops Texas Gov. Rick Perry 45 – 39 percent.

The internals of the poll look even worse for Obama.  The overall deserves-re-election number is 42/52, a very bad number in Democrat-heavy Pennsylvania, where Democrats account for half of all registered voters.  Independents split almost exactly the same at 42/51, and the only region in which Obama has a majority for re-election is Philadelphia.  Even among union households, which should be Obama’s bread and butter, he only gets a narrow 48/45 split, roughly a virtual tie.

The head-to-head numbers are simply embarrassing for a Democratic President in Pennsylvania, especially against a former Keystone State Senator who got blown out in his last statewide election.  There is another reason to worry, too, in that series.  Obama doesn’t get to 50% against any Republican in head-to-head matchups, usually a big red flag for incumbents.  The best he does is 47% against Michele Bachmann.

If Obama is doing this badly in Pennsylvania, it strongly suggests a big opening in the Rust Belt for Republicans next year.  Democrats in Michigan have a similar registration advantage, but not in Ohio, Indiana, or even Wisconsin, which have similar demographics as Pennsylvania and all of which Obama carried in 2008.  Obama has a big, big problem in this region, and losing Pennsylvania might just be the beginning of his woes.

Open thread: Senate to vote on House-passed debt deal at noon Update: Senate passes debt deal, 74-26 Update: President ends this saga, signs debt deal

posted at 11:20 am on August 2, 2011 by Tina Korbe

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After a dramatic night in the House of Representatives last night, the disappointment of a debt deal that passed the House heads to the Senate, where it faces seemingly fewer obstacles than it faced in the House.

But that doesn’t mean passage will be “easy.” Senate Majority Leader Harry Reid has said no amendments will be allowed and the plan requires a supermajority of 60 votes to pass. One notable “no” vote will come from Senate Budget Committee ranking member Sen. Jeff Sessions (R-Ala.). The senator who has been sounding the warning bell about an eleventh hour deal for months — and who has kept the count as to how many days the Senate has gone without passing a budget resolution (825!) — explains why he can’t support the deal:

“We’re getting pretty far away from the traditions of this body when you don’t publicly debate a budget, you create a committee of limited numbers of people to produce legislation that can’t be amended,” Sessions says in the video. “For those reasons, I feel like as a Senator and the ranking member on the Budget Committee who’s wrestled with this for some time, I would not be able to support the legislation. Though, I truly believe it is a step forward, and I respect my colleagues who’ve worked hard to try to bring it forward.”

Sen. Mike Lee (R-Utah), whose name has become almost synonymous with the push for a balanced budget amendment, is still a “no” vote, as is Sen. Ron Johnson (R-Wis.), while Senate Minority Leader Mitch McConnell (R-Ky.) and Sen. John McCain (R-Ariz.) remain “yes” votes, of course.

Senate Democrat opposition to the deal doesn’t rival Democrat opposition in the House, where Rep. Emanuel Cleaver created news by calling the deal a “sugar-coated satan sandwich” and House Minority Leader Nancy Pelosi implied it also features “satan fries on the side.” But I’ll keep an eye out for any likely “no” votes from the left side of the aisle.

Again, though, the bill is broadly expected to pass. Bill Hemmer just said the guidance Fox News has received suggests the Senate will give it at least 70 votes — so it won’t even be close. After that, attention will turn to the 12-member special commission.

Meanwhile, rumors of a downgrade despite the deal continue to circulate.

Update I: Reid is on the Senate floor right now, saying, “We were on the brink of disaster, but, one day before the deadline, we were able to avert that disaster. … There’s principally one winner through all of this: the American people. … The result of this Tea Party direction of this Congress has been very disconcerting. It stopped us from arriving at a conclusion much sooner. …”

Update II: Bill Hemmer just tweeted and AP reports that 60 senators have already voted “yes” for the deal, which means it passes. But the roll call continues. Guy Benson tweets that four Democrats have voted “no” so far: Sen. Frank Lautenberg (N.J.), Sen. Robert Menendez (N.J.), Sen. Tom Harkin (Iowa) and Sen. Bernie Sanders (VT).

Update III: The deal has passed, 74 to 26. Three more Dem “no” votes: Sen. Kirsten Gillibrand (NY), Sen. Jeff Merkley (Ore.) and Sen. Ben Nelson (Neb.). Now awaiting the president’s speech from the Rose Garden …

Update IV: In his Rose Garden speech, the president issued veiled instructions to the deficit-reduction joint committee created by the debt deal — instructions that amounted to, “Raise taxes.” For more, see my upcoming post in just a bit.

Update V: The president just signed the debt deal. Aaaannnddd … it’s over. For now.