"Liberty means responsibility. That is why most men dread it." - George Bernard Shaw
Maybe the GOP isn't caving in after all. In a speech in New York last night, House Speaker John Boehner drew a line in the sand. According to published reports, Boehner admitted allowing America to default would be irresponsible and then added:
"But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process."
So, it would seem the battle is joined. Timothy Geithner has been the point man of late for the White House, explaining the catastrophe that sits around the corner if the debt ceiling isn't raised. For some reason despite $3.0 trillion in revenue, the government must tack on another $2.0 trillion in debt.
With that as the benchmark, Speaker Boehner is demanding the same amount in spending cuts. That is a bold number, and without a doubt means nothing is off the table including Medicare, Social Security, and Defense. I think no matter what, he is sticking to his guns on tax hikes. So the ball is back in the Administration's court.
On one hand, this demand would seem to play into President Obama's desires to fan the flames of envy and anger.
Just this past weekend it was suggested the reason gasoline prices have soared is because oil companies get some tax breaks even as they pay more taxes than any industry in the nation. I can hear the rhetoric now, "more tax breaks for the rich and oil companies", as this is the only thing holding you back Mr. and Mrs. America. We need responsible adults to make tough decisions and not appeal to base emotions. I fear that's not going to be the case because someone has to take the blame for crushed housing values that continue to sink, higher gasoline prices, and a still-too-slow jobs market. The Bush excuse has run its course.
Some schools of psychological theory states all emotions are based on six emotions.
One doesn't have to be a great political orator or carnival barker to evoke most of the base emotions listed above as things are awful, after all. It's just that stirring these things up isn't the correct way to right the ship. The country united in celebration over the killing of Osama bin Laden, which combined joy and positive surprise to bring ecstasy. If we could bottle those spontaneous gatherings, especially the one in front of the White House, it would provide energy that could power economic gains. I for one fear for the future of the nation, and find the notion that borrowing $125.0 billion a month to feed reckless spending disgusting.
While we wagged our finger at China over human rights issues the Administration was also busy crafting an economic plan for Egypt that will include debt forgiveness. It's not a surprise that religious violence is on the rise in Egypt as those young people that filled the streets are more than likely still jobless and angry. Over the weekend, 13 people died during rioting against Coptic Christians, and it's going to continue. It has actually been going on for a while now, but it's getting worse. America isn't going to be able to give Egypt enough money to make anyone in that nation happy. Instead, debt forgiveness could become a template for other favored nations.
I hope the narrative doesn't become that we incited revolution and like breaking a dish at Pottery Barn, we now own it. We want democracy and capitalism to win the day, but turning Egypt into a ward of the state that eventually could hold us hostage (see Afghanistan) isn't wise. Looking past sectarian violence isn't smart, either.
Timothy Geithner broke out some Mandarin yesterday, and it confirms what I've been telling people for a few years. Make sure your kids learn Mandarin so they can speak the language of their supervisors.
It was a sigh of relief, but also the second lowest volume day of the year. But putting the brakes on at a pivotal time has become a hallmark of this rally. Another hallmark is stocks moving higher even as the nation sinks deeper into self-loathing and hopelessness. The economy sucks! The message is loud and clear and even killing the most evil man on the planet can't change the circumstances of the unemployed guy trying to fill his pickup truck. In the most recent NBC- WSJ poll President Obama gets the following marks:
* Economy getting better 31% from 33% m/m
* Economy getting worse 25% from 21% y/y
* Approve of handling of economy 37% from 45% m/m
This morning the NFIB survey paints a gloomy picture of small businesses. The headline number on optimism declined 0.7 to a reading of 91.2 versus consensus estimate of 91.8. 16% plan to increase hiring, down 2% from the previous month. Nominal sales are on the rise, and recorded the best reading since December 2007, however, it was still a negative number (over the past three months, nominal sales has increased 7 points to a net -5%). Perhaps the most concerning line was "substantial number of owners increasing selling prices."
The deal of the day is Microsoft buying Skype for $8.5 billion. I've been screaming the company needs to make acquisitions, but I am not sure this is a smart fit. It's the most expensive deal in the history of the company but they are taking a money-losing entity and merging it with another money-losing entity. I mean if you have 663 million customers and can't make money that's a red flag.