Where Is The Stock Market Rally?

Today is the eighth straight day the market is down. No rally yesterday after the vote in the House. No rally today after the vote in the Senate.

Does the Market know something Washington doesn't?

Maybe they see this as a victory for the Tea Party but a loss for America. I do.

This deal, with its reduction in government spending, will be a drag on the economy. The consequences:

1. More jobs lost;
2. Reduction in the Gross Domestic Product (GDP);
3. More deterioration in the nation's roads, highways, bridges, railroads, harbors and other infrastructure (the quality of our infrastructure now ranks 23rd in the world);
4. Reduction in basic research;
5. Reduction in education;
6. Reduced ability to compete with the rest of the world;
7. More wealth diverted to the wealthy and powerful;
8. More blame to the blameless,
9. Reductions in Medicare and Social Security.

The Tea Party has now killed their half of the dog.

Cutting government expenditures in an economic downturn really worked out for Herbert Hoover in 1929, didn't it? Just remember - it was the Tea party this time.

Debt Limit Explanation

I have tried to explain what is going on, but today economist Jared Bernstein has a more clear explanation:

"While waiting to go on Larry Kudlow’s show last night, I heard Sen Mitch McConnell say:

“What we have done, Larry, also is set a new template. In the future, any president, this one or another one, when they request us to raise the debt ceiling it will not be clean anymore. This is just the first step. This, we anticipate, will take us into 2013. Whoever the new president is, is probably going to be asking us to raise the debt ceiling again. Then we will go through the process again and see what we can continue to achieve in connection with these debt ceiling requests of presidents to get our financial house in order.”

This morning, on Squawk on the Street (CNBC) I debated former Sen Judd Gregg who wholeheartedly endorsed this process, calling it the best way to impose budget discipline.

Predictable, I guess, but let’s think about this for a sec. These politicians are essentially saying the following:

“We in Congress cannot be counted upon to come up with budgets that pay for the spending we authorize. Therefore, we will have to borrow to make up the difference. But if that borrowing hits the cap, we will not raise the cap to cover the appropriations on which we already signed off, unless we get the spending cuts we want.”

To understand how nonsensical Sens McConnell’s and Gregg’s position is, you have to appreciate that Congress knows when they pass their budget whether it will breach the debt ceiling or not, just like you know when you order your lunch whether you’ll be able to pay for it. They’re saying, I’m going to keep ordering lunches I can’t pay for and when the cashier hands me the check, I’ll hand it right back and tell her it’s her problem.

The budget process is when you square the ledger. Or not—there will be budgets, especially in recession, that add to the deficit and breach the ceiling. In such cases, Congress must borrow to make up the difference, and sometimes that will mean raising the ceiling, as we’ve done without incident since 1917.

But Sens McConnell and Gregg would rather pass budgets they knowingly refuse to pay for, and then threaten default. You can call that budget discipline if you want. But I’m telling you, this is not the way of great nations.

On the plus side, while I was waiting to go on Lawrence O’Donnell’s show, I heard Barney Frank, who, while even more disheveled than usual, made a whole ton of sense on the debt ceiling debate (he was a ‘no’ vote in the House)."

Job Losses

Oriental Town Charter - Proposed Amendment

A couple of interesting items on tomorrow night's agenda for the meeting of the Oriental Town Board of Commissioners:

1. Under "new business" - Approve subdivision of property at 204 High Street. This is a continuation of a longstanding controversy in that neighborhood. There has been high public interest in the issue in the past.

2. Set public hearing for proposed amendment to Article VI of the GMO. I'm sure it's just a typo, because required notice of a public hearing has not been made - but the proposed amendment in the commissioners' briefing package says "adopted this 2nd day of August, 2011."

3. Similarly, the resolution of intent to adopt a charter amendment changing terms of office for mayor and council members from two to four years calls for a public hearing August 2, 2011. This is obviously in error.

For the information of citizens, NCGS 160A-102 sets out the procedure to be followed:

"The resolution of intent shall describe the proposed charter amendments briefly but completely and with reference to the pertinent provisions of G.S. 160A‑101, but it need not contain the precise text of the charter amendments necessary to implement the proposed changes. At the same time that a resolution of intent is adopted, the council shall also call a public hearing on the proposed charter amendments, the date of the hearing to be not more than 45 days after adoption of the resolution. A notice of the hearing shall be published at least once not less than 10 days prior to the date fixed for the public hearing, and shall contain a summary of the proposed amendments. Following the public hearing, but not earlier than the next regular meeting of the council and not later than 60 days from the date of the hearing, the council may adopt an ordinance amending the charter to implement the amendments proposed in the resolution of intent.

The council may, but shall not be required to unless a referendum petition is received pursuant to G.S. 160A‑103, make any ordinance adopted pursuant to this section effective only if approved by a vote of the people, and may by resolution adopted at the same time call a special election for the purpose of submitting the ordinance to a vote. The date fixed for the special election shall be not more than 90 days after adoption of the ordinance.

Within 10 days after an ordinance is adopted under this section, the council shall publish a notice stating that an ordinance amending the charter has been adopted and summarizing its contents and effect. If the ordinance is made effective subject to a vote of the people, the council shall publish a notice of the election in accordance with G.S. 163‑287, and need not publish a separate notice of adoption of the ordinance."

NCGS 160A-103 Stipulates: "An ordinance adopted under G.S. 160A‑102 that is not made effective upon approval by a vote of the people shall be subject to a referendum petition. Upon receipt of a referendum petition bearing the signatures and residence addresses of a number of qualified voters of the city equal to at least 10 percent of the whole number of voters who are registered to vote in city elections according to the most recent figures certified by the State Board of Elections or 5,000, whichever is less, the council shall submit an ordinance adopted under G.S. 160A‑102 to a vote of the people."

Debt Limit Update

We hear there is an agreement.

The country's future has been held hostage, and we paid a substantial ransom.

The price will be economic contraction. Jobs will be lost.

I suppose disaster is better than catastrophe.

New Poll Questions

At least, these are questions I wish pollsters would ask:

Q: Do you support reduced government expenditures even if it means you lose your job?

Q: Do you support reduced government expenditures even if it means reduced unemployment compensation when you lose your job?

Q: Do you support reduced government expenditures even if it means reduction in Medicaid when you lose your job?

Q: Do you support reduced government expenditures even if it means reduced Social Security benefits?

Q: Do you support reduced government expenditures even if it means reduced Medicare?

For business owners:

Q: Do you support reduced government expenditures even if it means fewer customers buy your products or services?

Pudd'nhead Wilson, Chapter 1 by Mark Twain (Excerpt)

Mr. David Wilson, a young fellow of Scotch parentage had finished a post-college course in an Eastern law school a couple of years before. A homely, freckled, sandy-haired young fellow, with an intelligent blue eye that had frankness and comradeship in it and a covert twinkle of a pleasant sort, Wilson had just made the acquaintance of a group of citizens. An invisible dog began to yelp and snarl and howl and make himself very comprehensively disagreeable, whereupon young Wilson said, much as one who is thinking aloud:

"I wish I owned half of that dog."

"Why?" somebody asked.

"Because I would kill my half."

The group searched his face with curiosity, with anxiety even, but found no light there, no expression that they could read. They fell away from him as from something uncanny, and went into privacy to discuss him. One said:

"'Pears to be a fool."

"'Pears?" said another. "Is, I reckon you better say."

"Said he wished he owned half of the dog, the idiot," said a third. "What did he reckon would become of the other half if he killed his half? Do you reckon he thought it would live?"

"Why, he must have thought it, unless he IS the downrightest fool in the world; because if he hadn't thought it, he would have wanted to own the whole dog, knowing that if he killed his half and the other half died, he would be responsible for that half just the same as if he had killed that half instead of his own. Don't it look that way to you, gents?"

"Yes, it does. If he owned one half of the general dog, it would be so; if he owned one end of the dog and another person owned the other end, it would be so, just the same; particularly in the first case, because if you kill one half of a general dog, there ain't any man that can tell whose half it was; but if he owned one end of the dog, maybe he could kill his end of it and -- "

"No, he couldn't either; he couldn't and not be responsible if the other end died, which it would. In my opinion that man ain't in his right mind."

"In my opinion he hain't got any mind."

No. 3 said: "Well, he's a lummox, anyway."

That's what he is;" said No. 4. "He's a labrick -- just a Simon-pure labrick, if there was one."

"Yes, sir, he's a dam fool. That's the way I put him up," said No. 5. "Anybody can think different that wants to, but those are my sentiments."

"I'm with you, gentlemen," said No. 6. "Perfect jackass -- yes, and it ain't going too far to say he is a pudd'nhead. If he ain't a pudd'nhead, I ain't no judge, that's all."

-

Discussion Question - Was David "Pudd'nhead" Wilson an early member of the Tea Party?

Or was the dog?

Early Sunday Morning?

So, are we going to have a constitutional crisis?

No, Thomas Friedman, a third party won't help.

A modest proposal: can the debt limit. It serves no useful function.