Saturday, July 23, 2011

Karl Denninger, “Obama Throws Temper Tantrum on TV”

“Obama Throws Temper Tantrum on TV”
by Karl Denninger

“Well, it appears if you are watching the TV about now, that Boehner walked out of the debt ceiling talks after President Obama apparently sprung a $400 billion tax increase "surprise" on the discussions at the last minute. The problem is that we were told the numbers were somewhere around 2:1 or even higher on tax cuts .vs. tax increases.  History, however, says that the tax increases come immediately and the spending reductions never.  With the "surprise" it was close to 1.3:1 - essentially, trying to get rid of the spending reductions by increasing taxes instead.

But let's be straight on this: Even if that deal was negotiated, it still wouldn't matter as it amounts to less than $300 billion in change to the deficit annually and is thus less than ONE FIFTH of the size it must be to close the gap. $3 trillion over 10 years also won't prevent a downgrade, if you believe S&P.  Of course if you don't believe their threat is real then none of this matters.

I, incidentally, believe it's real but not because S&P will downgrade - if they don't the market will, and that's just as bad at the end of the day if not worse. Next week is going to be very interesting, and the "interesting" is likely to start Sunday night when the futures reopen for trading.  I don't expect a big drop at the open absent something ugly out of Europe over the weekend, but clearly the pressure will ratchet up all week, since next week is pretty much "do it or don't" time. While many will say that "don't" is not an option, it most-certainly is.  Doing nothing would force an immediate 40% spending reduction.  This would, in turn, result in a roughly 12-15% GDP contraction (and maybe as much as 17-18%.)

But despite what people are trying to BS you with in this regard, the fact remains that we're in this reality right now, whether the government is covering it up or not - and they are. We must resolve this problem, and we're not going to be able to do it without "eating our peas."  This means real entitlement reform, it means real tax reform, it means real trade reform (no, not more "free rapes" for nations with per-capita GDP 1/5th of ours), it means real medical system reform (not Obamacare) and it means real energy policy reform.

In short it means cutting the crap and stopping with the lies.  It means standing up at the pulpit and telling the American people that our legislators have spent thirty years jacking them off and lying through their teeth, and this serpent-like behavior must and will end right now.

What we have been promised government can't do.  We therefore have to face the facts.  Time has run out to screw around and we either do the right thing or we're going to have choices made for us, instead of doing what we should - having an open and up-front discussion and debate with the American people on exactly what services government is to provide and funding each and every one of those services with current tax revenue, dollar for dollar.

Everyone says that "well you can't do all that at once!"  But the "all at once" has come about because of the intentional and outrageous acts of our so-called "elected officials."  Willful malfeasance - that is, creating your own emergencies - does not make for an excuse.  It just means you're an ass and then to play the histrionic card on top of it turns "ass" into "jackass."

It's time to shut up and act in a responsible fashion.  If Washington can't or won't, then our choices will be made for us by the market - whether we like it or not.”

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