“A Potpourri of Platitudes, Pandering and Profligacy,” Introduction
by Brian Maher
"Trump’s speech Monday night sure set the river ablaze... Tax cuts, deregulation, infrastructure spending, defense spending- American Greatness on a dozen fronts- and something for everyone! But hard schooling has conditioned us to meet good news with mild alarm. Matching H.L. Mencken’s definition of a cynic, when we smell flowers... we start looking around for a coffin.
Today’s the first of March, two weeks from March 15... the ides of March… Beware the ides of March, the soothsayer Spurinna allegedly warned Caesar about his approaching doom. He didn’t.
David Stockman doesn’t claim to be a soothsayer. But he’s a crackerjack analyst with 40 years of government and market experience. And David too says to beware the ides of March: “What people are missing is this date: March 15, 2017. Why March 15? That’s the day that this debt ceiling holiday that Obama and House Speaker Boehner put together right before the last election in October 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop.
The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion-a-month rate. By summer, they will be out of cash. Then what? Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obamacare repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for."
Here David draws a dark sketch. And March 15 is just two weeks away. Does the debt ceiling raise the curtain on “one giant fiscal bloodbath,” as David fears? We don’t know. And David says the crisis won’t necessarily strike March 15. He says it’ll probably start “slowly at first” followed by “accelerating intensity” as the Treasury runs short on cash.
We’ll see. But there may be other reasons to beware the ides of March… The Fed’s Open Market Committee concludes its two day meeting March 15. Do they raise rates? Last week, the fed funds futures indicated just a 20% chance of a hike. But after Trump’s stemwinder, today they’re flashing a 69% chance. But Bloomberg says the timing of the next rate hike is a “balancing act.” Raise too soon and it could strangle growth in its crib. Raise too late and it could give inflation too much running room. And some signs indicate inflation is percolating amid all the growth talk. That’s why Dallas Fed head Robert Kaplan argues, “We want to guard against a situation where we get behind the curve.”
Just so. But maybe the economy’s weaker than they think. Despite the low official unemployment rate and mounting inflation, the economy grew only a skinny 1.6% for all of 2016- its lowest rate since 2011. MarketWatch says the number of distressed U.S. retailers is at the highest level since the Great Recession of 2009–09. Forbes told us yesterday that the U.S. economy is “weaker than you think.”
Is this an economy in need of a rate hike? Some other potential market movers clustered around the ides of March:
• The European Central Bank (ECB) meets March 9. U.S. employment data for February comes out March 10.The Netherlands holds the first European election of the year on March 15, the ides.
• The G-20 gaggle of finance ministers and central bankers meets March 17–18.
• The G-20 gaggle of finance ministers and central bankers meets March 17–18.
Who knows if any surprises lay in store? Maybe the ECB surprises. Maybe a populist, anti-EU party wins in the Netherlands, throwing more doubt on the EU’s future. Maybe something big comes out of the G-20. Or maybe nothing at all. But add something else to a looming debt ceiling crisis and a potentially botched rate hike, and bewaring the ides of March might be sage advice.
Below, David Stockman shows you why he thinks you should beware the ides of March, based on Trump’s speech last night. Read on."
“A Potpourri of Platitudes, Pandering and Profligacy”
By David Stockman
"I could just call the Donald's maiden Congressional address a potpourri of platitudes and pandering- and then move along. But I can't get over the profligacy part. Trump promised more Big Government practically everywhere- the Pentagon, infrastructure, border control, education, veterans, crime, child care, medical tax credits- with nary a word on how to pay for it.
Actually, our wanna-be swamp drainer did not even acknowledge that the fetid waters of the Imperial City were lapping up to his waist as he spoke. That is, there was not a single mention of runaway spending or even a vague directional nod to programs that would have to be cut back or eliminated.
For the record, in his inaugural address to Congress on February 18, 1981, Ronald Reagan mentioned dozens of them under far less desperate circumstances than today. And he did so because he knew that unless the public is told about the tough choices that need to be made, the Congress will never be mobilized to vote them through. Even then, what the Gipper was terrified by was a ballooning national debt that was small beans compared to the present: "Can we, who man the ship of state, deny it is somewhat out of control? Our national debt is approaching $1 trillion."
By contrast, within weeks the Donald will become ensnared in a giant $20 trillion debt trap. The latter- plus the $10 trillion more built-into current law over the next decade- will knock the stuffings out of his promises to make America Great again by causing it to go broke even faster than before. It will also monkey-hammer the hideously inflated stock market bubble that is now going full-frontal on Trump's undeliverable promises of "big, big" corporate cuts and a "massive tax reduction for the middle class."
Surely the Donald will soon rue the day that he boasted about the $3 trillion stock market gain during the first 40 days of his watch. I won't, however. The survival of capitalist prosperity and constitutional liberty in America depend upon an end to the current mutant regime of Bubble Finance that has buried the nation in debt and monetary fraud.
By delivering 65 minutes of airballs and content free bloviation, in fact, the Donald actually helped usher in that needed day of reckoning. That's because, unlike the Gipper, he has not given an iota of substance about how he intends to tame the nation's out of control fiscal machinery. In fact, what he has said to date consists essentially of self-contradictions, budgetary gibberish and extreme naiveté.
For example, he took another bow for saving $600 million on the new F35 fighter plane, when in fact he got conned by a standard beltway military contractor scam. That is, this plane is a $400 billion monstrosity that will provide thousands of stealth fighters that we don't need because the only place they can be used- the Middle East- has already been reduced to rubble.
By contrast, Russia and China are already fully deterred by Washington's massive nuclear arsenal. So these $100 million per copy aircraft are useless on those fronts. The idea that you could fight a conventional war with China without destroying the global economy or with Russia without it going nuclear real fast, is just the kind of strangeglovian fantasy that keeps the military industrial complex alive.
Even then, the F-35 is essentially still in the launch phase of a multi-decade procurement. This front-end phase is called LRIP (Low-Rate Initial Production) because many performance specifications and testing standards have yet to be meet. So compared to the ultimate total of 2,500 of these planes the Pentagon intends to purchase, the Donald is talking about 90 test planes under LRIP-10, which are coming in 6.7% per unit cheaper than the 45 planes purchased under LRIP-9, which in turn, came in 3.5% cheaper on a unit basis than the handful of prototypes procured under LRIP-8.
In a word, nobody saved anything! This is just the standard economics of the ramp-up curve for massive weapons programs like the F35. But in selling the Donald a batch of phony savings, the swamp critters from Lockheed and the Pentagon reinforced Trump's wrong-headed belief that he can negotiate his way to fiscal balance by making better deals with government vendors and agencies.
In truth, Trump's "great negotiator" theory is far more groundless than the Gipper's stubborn conviction that the budget could be shrunk by eliminating fraud, waste and abuse. To the contrary, there is virtually none in the $1 trillion social security program and what passes for it in the $1.1 trillion outlays for Medicare and Medicaid is the inherent disputes over pricing of services and necessity for services that is inherent when the government becomes the payor for billions of discrete medical bills submitted in behalf of nearly 100 million separate beneficiaries.
Uncle Sam is now hemorrhaging cash at a rate of $5 billion per day, yet Trump and his team remain obstinately unaware that they are heading for a hard stop debt ceiling crisis after March 15. But beginning on that date- slowly at first and with accelerating intensity- the Imperial City will suddenly become transfixed by the fact that the Treasury is running out of cash and there is no conceivable path to a Congressional majority to raise the nation's $20 trillion debt ceiling on a timely basis.”