As I pumped gas this morning at $3.93 per gallon, I turned to a fellow customer and said, “I thought the price for gas was supposed to fall this week because the cost for a barrel of oil has dropped.”
He looked at me and said, “Yeah, it seems that when the price is raised, they can post that difference very quickly but when it drops, it takes them much longer to adjust the price on the pump.” Then he added very sarcastically, “But I bet they have a very logical reason for that.”
In my post last week, I tried to present some of the technical reasons for the price of oil’s recent rise, especially in face of the coming summer. This week I am going to focus on something that gets very little press.
The next time you drive to a gas station, only to find prices are still sky high, take notice of the rows of foreclosed houses you passed on your way to the gas station. Foreclosed homes and high gas prices may seem to be on the surface, issues that would have absolutely nothing to do with another. But high gas prices and foreclosures are actually very much interrelated. Before most of us were even aware there was an economic crisis looming on the horizon, some investment managers had already begun to bail out on failing mortgage backed securities and were looking for the next lucrative investment. What they finally set their sights on was oil futures.
An oil future is simply a contract between a buyer and seller, where the buyer agrees to purchase a certain amount of a commodity—in this case oil—at a fixed price. Oil futures offered investors an opportunity to gamble on whether a barrel of oil would increase in price in the very near future. Once locked into a contract, an oil futures buyer would receive a barrel of oil for the price dictated in the future contract, even if the market price was higher when the barrel of oil was actually delivered.
Whenever the denizens of Wall Street hear the word “bet” they flock to whatever opportunity it represents. In this case, Wall Street flocked to futures, taking the entire market to strange new places on what defines legal in the marketplace. In the last two centuries, the market bet on grain. Now, in the 21st century, it is oil. Just five years ago, despite the fact that American petroleum reserves were at an all-time high, the price of oil began to rise dramatically and it happened in spite of the fact that supply was managing to keep pace with increased demand. This created an economic phenomenon within the oil market wherein the laws of supply and demand no longer applied and in its place, an artificial market was born.
The reality of artificial markets is that they are volatile and not only are they difficult to predict they can change direction without any seemingly plausible explanation. As a result of this artificial oil market, the average price for a barrel of crude oil increased from $31.61 in July 2004 to $137.11 in July 2008. The average cost of a gallon of gas for regular unleaded gas in the United States grew from $1.93 to $4.09 over the same period.
So what happened?
As oil prices, and by extension gas prices, suddenly began to soar, the world was caught off guard. Immediately, competing theories seeking to explain the sudden increase in price emerged. One theory was that the world had finally hit a point where oil production inevitably had begun to decline since the amount of oil on our planet is after all finite. That argument was undermined to some extent however by the amount of oil left in reserve, supply still exceeded demand. Others pointed to geopolitics. Unstable nations hostile to the West such as Nigeria and Venezuela are depended on to supply much of the world’s oil. Still others argued that instability was causing volatility in the markets. Michigan Senator Carl Lewis put the kibosh on that argument when he rightfully pointed out during a May 2006 hearing on energy, “Without doubt, much of our oil comes from unstable parts of the world. But that is nothing new. It has been that way for decades.” The more Congress and market watchers looked into the unexplainable rise in oil prices, the more it looked like oil speculation was the culprit.
Everything that can be bought or sold has what 18th-century political economist Adam Smith called a “natural price.” This price is the sum total of the values of everything that came together to create the product or service. Raw materials, labor, distribution—all of these add to the natural price of a product. Any amount that the seller of a good or service can get above this natural price is profit.
What speculators do is bet on what price a commodity will reach by a future date through financial instruments commonly referred to as derivatives. Unlike an investment in an actual commodity, such as a barrel of oil, a derivative’s value is driven by whether the price of the commodity (in this case a barrel of oil) rises or declines. Speculators have no role in the sale of the commodity they are betting on because they are neither the buyer nor the seller. It is simply a side bet on whether the crap shooter makes his point or not.
By placing a bet on the price outcome of a single futures contract, a speculator would have no effect on the market as a whole. It is simply a bet. A speculator however, with the capital to purchase a sizeable number of futures derivatives at one price can actually sway the market. As energy researcher William Engdahl put it “Speculators trade on rumor, not fact.” A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes that they will be able to sell it later on at the future price. This drives prices up in reality—both future and present prices—due to the increased amount of oil currently available on the market.
Henry Ford once said that “Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services.” He should know…
Now here is where the price begins to rise: Investment firms that can influence the oil futures market are positioned to make a lot of money. Oil companies that both produce the commodity and drive prices up of their product through oil futures derivatives stand to make even more. Investigations into the unregulated oil futures exchanges turned up major financial players like Goldman Sachs and Citigroup. But it also revealed energy producers like Vitol, a Swiss company that owned 11 percent of the oil futures contracts on the New York Mercantile Exchange alone.
All of this speculation created an environment in which an estimated 60 percent of the price of the oil per barrel was added. In other words a $100 barrel of oil should in reality only cost $40. What is even more irritating is that despite having an agency created in 1974 specifically to prevent speculation from artificially inflating the price of commodities (Commodity Futures Trading Commission), by the time oil prices skyrocketed, the Bush administration had made a paper tiger out of it.
In fairness, the argument that it was speculators who drove up the price of gas and oil is one that is still hotly debated. A July 2008 report by the International Energy Agency (IEA) concluded that speculation had little to do with price increases. But a report issued by the United States Senate that following September contradicted the IEA report, pointing to correlations between the influx of money in oil futures markets and the rising cost of oil. The price of oil doubled, tripled and eventually quadrupled in step with the increase from $13 billion to $260 billion in the market from 2003 to 2008.
In response to calls for better regulation of oil futures, the U.S. Congress introduced the Consumer-First Energy Act in May 2008. The bill would have extended Commodity Futures Trading Commission oversight to foreign markets, but the act died on the Senate floor only one month later. After the bill was defeated, the argument over oil speculation changed from what caused oil prices to rise, beginning in 2006, to how long the U.S. will allow speculation on oil derivatives to continue.
Wednesday, May 18, 2011
Wednesday, May 11, 2011
Up! Up! And Away!
Despite the recent reduction in the cost of a barrel of oil, gas prices at the pump are once again on the rise. According to Atlantagas.com, local prices in that city have risen by almost thirty cents in the past month and by a dollar in the past year. While Atlanta’s gas prices are about five to ten cents cheaper than anywhere else in the United States, the rate of increase is the same as everywhere. What is even more frightening is that the U.S. Energy Information Administration (USEIA) has just released a report predicting gasoline prices could rocket past four dollars per gallon this coming summer.
To understand when we will all get some relief from high gas prices, it is first necessary to understand why they are rising so rapidly in the first place. One reason that gasoline prices are higher today is that it is almost summer. During summer months, oil refiners are legally bound to produce a different recipe referred to as a “summer blend” by the oil industry. Cheaper additives used in winter tend to evaporate and cause higher levels of pollution in warm weather so Federal and local laws require different additives in summer to protect the environment. Of course, these different additives are more expensive which then drives up the price of gas at the pump. The other factor in this scenario is that as refiners switch to this so-called summer blend, the cost of changing blends also adds to the overall price of the gas that we purchase. Federal law requires the summer blend from June 1st to September 15th but some local governments (most notably in California) have their own timeline. In order to guarantee that this summer blend is in gas stations prior to June 1st, production must commence in March or April.
There is an up—side to the switch (not just up in price) and that is you should experience a slight increase in fuel economy during the summer. This is because there is more gasoline in the mixture and fewer total additives that in the winter blend.
The USEIA Short Term Energy and Summer Fuels Outlook (April 12, 2011) referred to above, explains two additional factors in the current escalating oil and gasoline prices. First, rising fuel prices are due to the growth in demand as the global economy finally shakes of the recession. Second, as you might suspect, the delivery of oil has been reduced by the disruption of not only Libyan oil exports but the continuing unrest throughout the Middle East.
A ride through history (use your bike) will reveal a pattern that demonstrates whenever oil prices rise sharply, an immediate manifestation of that is economic recession. These “oil shocks” have occurred at various times over the past fifty years. The Arab oil embargo of 1973 led to the first oil shock and a major recession from 1973 until 1975. Another shock occurred in 1979 with the Iranian Islamic Revolution causing the recession of 1980 to 1982. A smaller shock took place in 1990, brought on by the Iraqi invasion of Kuwait and again in 2001 after the September 11th attacks. The shock immediately prior to our current dilemma was in the summer of 2008.
These interruptions to the smooth flow of oil into the United States cause a decline in the demand for oil as the prices are catapulted into the stratosphere. There are two reasons for this: If you and I are spending too much at the pump then it stands to reason that we have less to spend on other things. Also, if the price of other commodities is rising simultaneously because the oil required to manufacture and deliver those products has risen, that cost is then added to the price of those products as well. As the resulting demand drops, companies earn less in sales and therefore reduce their work force resulting in both high unemployment and lower production.
The economy then becomes the nightmare that we are all too familiar with—it slides into a recession. Besides what we are experiencing today, the most vivid example of this phenomenon was the 2008 collapse of oil prices due to a failing economy.
The flip side of that is when the rising price of oil becomes an incentive for producers to produce more oil. Oil reserves that were not good business to tap at low prices are suddenly attractive. Other producers, such as our friends in the Middle East—OPEC—are guilty of historically ignoring production quotas or caps in order to take advantage of rising prices as well. The sudden increase in the supply of oil that is refine-ready drives the oil price down. Eventually however, supply and demand reach a point of equilibrium at a lower price.
Despite the fact that Europe is Libya’s primary customer, the crisis there has also helped to drive up international oil prices. As it becomes increasingly difficult for Libya to keep its oil producing infrastructure online, Europe is forced to look elsewhere for its oil. That continent’s thirst for oil is no less than anywhere else so the addition to the international market of another consumer who gulps oil almost as fast as it is produced only serves to drive the price higher for everyone. Since the fighting broke out in Libya, estimates place the loss of its means of producing oil at two-thirds. Prior to the fighting, Libya was the 17th largest oil producer in the world with Italy and Germany its two largest consumers. The current disruption in Libya is the eighth largest oil disruption in modern history.
As far as Middle East unrest goes. Libya is not alone. Egypt, Bahrain, Yemen and other Arab countries are all experiencing flash revolutions and while the violence has not yet reached Saudi Arabia, the largest oil producer in the world, Saudi forces have intervened militarily to support the ruling family in Bahrain. Should the unrest spread yet further in the Middle East, other oil producing nations would add to a further pressure destined to increase oil prices. And as always, we can never take our eyes of Iran’s nuclear ambitions which ultimately may be the biggest threat to the region.
Next week, more on the rising price of oil and what we pay for it at the pump.
To understand when we will all get some relief from high gas prices, it is first necessary to understand why they are rising so rapidly in the first place. One reason that gasoline prices are higher today is that it is almost summer. During summer months, oil refiners are legally bound to produce a different recipe referred to as a “summer blend” by the oil industry. Cheaper additives used in winter tend to evaporate and cause higher levels of pollution in warm weather so Federal and local laws require different additives in summer to protect the environment. Of course, these different additives are more expensive which then drives up the price of gas at the pump. The other factor in this scenario is that as refiners switch to this so-called summer blend, the cost of changing blends also adds to the overall price of the gas that we purchase. Federal law requires the summer blend from June 1st to September 15th but some local governments (most notably in California) have their own timeline. In order to guarantee that this summer blend is in gas stations prior to June 1st, production must commence in March or April.
There is an up—side to the switch (not just up in price) and that is you should experience a slight increase in fuel economy during the summer. This is because there is more gasoline in the mixture and fewer total additives that in the winter blend.
The USEIA Short Term Energy and Summer Fuels Outlook (April 12, 2011) referred to above, explains two additional factors in the current escalating oil and gasoline prices. First, rising fuel prices are due to the growth in demand as the global economy finally shakes of the recession. Second, as you might suspect, the delivery of oil has been reduced by the disruption of not only Libyan oil exports but the continuing unrest throughout the Middle East.
A ride through history (use your bike) will reveal a pattern that demonstrates whenever oil prices rise sharply, an immediate manifestation of that is economic recession. These “oil shocks” have occurred at various times over the past fifty years. The Arab oil embargo of 1973 led to the first oil shock and a major recession from 1973 until 1975. Another shock occurred in 1979 with the Iranian Islamic Revolution causing the recession of 1980 to 1982. A smaller shock took place in 1990, brought on by the Iraqi invasion of Kuwait and again in 2001 after the September 11th attacks. The shock immediately prior to our current dilemma was in the summer of 2008.
These interruptions to the smooth flow of oil into the United States cause a decline in the demand for oil as the prices are catapulted into the stratosphere. There are two reasons for this: If you and I are spending too much at the pump then it stands to reason that we have less to spend on other things. Also, if the price of other commodities is rising simultaneously because the oil required to manufacture and deliver those products has risen, that cost is then added to the price of those products as well. As the resulting demand drops, companies earn less in sales and therefore reduce their work force resulting in both high unemployment and lower production.
The economy then becomes the nightmare that we are all too familiar with—it slides into a recession. Besides what we are experiencing today, the most vivid example of this phenomenon was the 2008 collapse of oil prices due to a failing economy.
The flip side of that is when the rising price of oil becomes an incentive for producers to produce more oil. Oil reserves that were not good business to tap at low prices are suddenly attractive. Other producers, such as our friends in the Middle East—OPEC—are guilty of historically ignoring production quotas or caps in order to take advantage of rising prices as well. The sudden increase in the supply of oil that is refine-ready drives the oil price down. Eventually however, supply and demand reach a point of equilibrium at a lower price.
Despite the fact that Europe is Libya’s primary customer, the crisis there has also helped to drive up international oil prices. As it becomes increasingly difficult for Libya to keep its oil producing infrastructure online, Europe is forced to look elsewhere for its oil. That continent’s thirst for oil is no less than anywhere else so the addition to the international market of another consumer who gulps oil almost as fast as it is produced only serves to drive the price higher for everyone. Since the fighting broke out in Libya, estimates place the loss of its means of producing oil at two-thirds. Prior to the fighting, Libya was the 17th largest oil producer in the world with Italy and Germany its two largest consumers. The current disruption in Libya is the eighth largest oil disruption in modern history.
As far as Middle East unrest goes. Libya is not alone. Egypt, Bahrain, Yemen and other Arab countries are all experiencing flash revolutions and while the violence has not yet reached Saudi Arabia, the largest oil producer in the world, Saudi forces have intervened militarily to support the ruling family in Bahrain. Should the unrest spread yet further in the Middle East, other oil producing nations would add to a further pressure destined to increase oil prices. And as always, we can never take our eyes of Iran’s nuclear ambitions which ultimately may be the biggest threat to the region.
Next week, more on the rising price of oil and what we pay for it at the pump.
Thursday, May 5, 2011
This is a Good Thing!
The killing of Osama bin Laden earlier this week has certainly served to boost the credibility of the United States in the war on terror and while it is still early, it may also make it difficult for President Obama’s political rivals to portray him as soft on national security issues as the 2012 campaign gets underway.
Bin Laden, the follower of al-Queda and mastermind of the September 11th terrorist attacks in 2001 had often referred to the United States as weak and not much more than a paper tiger. Immediately after the bib-Laden planned 1983 arrack on U.S. Marines in Lebanon and of course after the al-Queda attack on the USS Cole in Yemen in 2000, bin Laden ranted in videos that he would bring the United States to its knees. Ironically, it was made easier for him to make that claim by U.S. reaction to those attacks. The USS Cole was in the process of being refueled when it was attacked and all our government did in response was to change its re-supply routes for our naval fleet.
Osama bin Laden’s death announced by President Obama this past Sunday night shows however that our government is entirely capable of responding to threats to its national security. This was not the first time this President has responded with force and apparently it will not be the last. I have the sense however, that the brazen raid into Pakistan which located, identified and then killed bin Laden might be a signal that our time in Afghanistan might just be coming to an end. The removal of bin Laden seriously weakens the rationale for the U.S. to remain in Afghanistan much longer. The reality that the war is not going all that well only serves to strengthen the argument for getting out of a treasury draining war that very few people support wholeheartedly. More importantly, with the United States economy finally beginning to show signs of life again, propping up a policy in which the leader of the country we are trying to help is constantly ridiculing us is not a reasonable investment of strained U.S. resources.
To that end, President Obama has always maintained that he would begin the troop withdrawal from Afghanistan this summer and while some Republicans have opposed that strategy, the President’s position for beginning the withdrawal on target has been strengthened by the capture and killing of Osama bin Laden.
Undoubtedly, bin Laden’s killing may incite some reprisals from al-Queda and other terrorist groups, but it is quite possible that the opposite could happen. Losing a leader of the stature of Osama bin Laden is terribly challenging to bounce back from. The symbolism of bin Laden, particularly to the more radical elements of the Muslin world was always a source of strength to them. The loss of that symbol which more than anything lent some semblance of unity to a fractured movement may be irreplaceable.
Despite the rumblings of protest from Pakistan, it is doubtful that the raid on bin Laden’s Pakistani stronghold will have any significant or negative impact on our relationship with Pakistan. While the raid was carried out on Pakistani soil without the prior knowledge or approval of the Pakistani government, most of the more secular Pakistani politicians hated bin Laden almost as much as we did.
It is also probable that the rest of the Arab world has breathed a collective sigh of relief at the news of bin Laden’s death. The recent uprisings across the whole of the Middle East have been driven for the most part by ideals that call for democracy and transparency. This is something that was totally antithetical to Osama bin Laden. If anything, our strike at bin Laden which led to his capture and ultimate death presents an opportunity for the United States to re-engineer its relationship with the entire Muslim world and to even now be in a position to lend fuller diplomatic support for democracy in the region. It is quite possible that the generals in the Pentagon have finally accomplished something that no one else has been able to—to give peace a chance.
As hard as President Obama has tried to keep this victory an apolitical one, politics will most certainly influence where we go from here.
As the President starts to bring American fighting men and women home from Afghanistan, his credibility as a commander-in-chief will be right back where it was this past Saturday. To muddy the water further, he will be putting his foreign policy credentials on the line with at best, an uncertain and withering ally.
Consequently, the President’s ability to experience a re-election will, as it almost should, rest primarily on the state of our economy at that time. It is still, “the economy stupid.”
Bin Laden, the follower of al-Queda and mastermind of the September 11th terrorist attacks in 2001 had often referred to the United States as weak and not much more than a paper tiger. Immediately after the bib-Laden planned 1983 arrack on U.S. Marines in Lebanon and of course after the al-Queda attack on the USS Cole in Yemen in 2000, bin Laden ranted in videos that he would bring the United States to its knees. Ironically, it was made easier for him to make that claim by U.S. reaction to those attacks. The USS Cole was in the process of being refueled when it was attacked and all our government did in response was to change its re-supply routes for our naval fleet.
Osama bin Laden’s death announced by President Obama this past Sunday night shows however that our government is entirely capable of responding to threats to its national security. This was not the first time this President has responded with force and apparently it will not be the last. I have the sense however, that the brazen raid into Pakistan which located, identified and then killed bin Laden might be a signal that our time in Afghanistan might just be coming to an end. The removal of bin Laden seriously weakens the rationale for the U.S. to remain in Afghanistan much longer. The reality that the war is not going all that well only serves to strengthen the argument for getting out of a treasury draining war that very few people support wholeheartedly. More importantly, with the United States economy finally beginning to show signs of life again, propping up a policy in which the leader of the country we are trying to help is constantly ridiculing us is not a reasonable investment of strained U.S. resources.
To that end, President Obama has always maintained that he would begin the troop withdrawal from Afghanistan this summer and while some Republicans have opposed that strategy, the President’s position for beginning the withdrawal on target has been strengthened by the capture and killing of Osama bin Laden.
Undoubtedly, bin Laden’s killing may incite some reprisals from al-Queda and other terrorist groups, but it is quite possible that the opposite could happen. Losing a leader of the stature of Osama bin Laden is terribly challenging to bounce back from. The symbolism of bin Laden, particularly to the more radical elements of the Muslin world was always a source of strength to them. The loss of that symbol which more than anything lent some semblance of unity to a fractured movement may be irreplaceable.
Despite the rumblings of protest from Pakistan, it is doubtful that the raid on bin Laden’s Pakistani stronghold will have any significant or negative impact on our relationship with Pakistan. While the raid was carried out on Pakistani soil without the prior knowledge or approval of the Pakistani government, most of the more secular Pakistani politicians hated bin Laden almost as much as we did.
It is also probable that the rest of the Arab world has breathed a collective sigh of relief at the news of bin Laden’s death. The recent uprisings across the whole of the Middle East have been driven for the most part by ideals that call for democracy and transparency. This is something that was totally antithetical to Osama bin Laden. If anything, our strike at bin Laden which led to his capture and ultimate death presents an opportunity for the United States to re-engineer its relationship with the entire Muslim world and to even now be in a position to lend fuller diplomatic support for democracy in the region. It is quite possible that the generals in the Pentagon have finally accomplished something that no one else has been able to—to give peace a chance.
As hard as President Obama has tried to keep this victory an apolitical one, politics will most certainly influence where we go from here.
As the President starts to bring American fighting men and women home from Afghanistan, his credibility as a commander-in-chief will be right back where it was this past Saturday. To muddy the water further, he will be putting his foreign policy credentials on the line with at best, an uncertain and withering ally.
Consequently, the President’s ability to experience a re-election will, as it almost should, rest primarily on the state of our economy at that time. It is still, “the economy stupid.”
Thursday, April 28, 2011
Why We Must Raise the Debt Ceiling
I know that for many of you—if not most of you—this sounds absolutely incredulous.
The United States already has a staggering debt load of more than $14 trillion and to now raise the debt ceiling which would in effect allow the government to borrow even more money must sound crazy. After all, shouldn’t we be doing everything as a country to reduce the amount our country borrows each year thereby reducing overall what we owe the rest of the world? And in a twist of irony that must have Stalin and Mao laughing wherever they are, we owe most of it to the Chinese.
I sat down this past weekend and planned my budget for the next three months and as I attempted to squeeze more out of less (old man inflation is not playing), I realized that our government currently borrows an almost unbelievable $100 billion each month just to keep the doors open and the lights on.
Before we go any further, let’s try to understand just what the debt ceiling is anyway. When you acquire a credit card, it usually comes with a specific dollar limit you are allowed to spend. Go over that limit and you will either pay a massive amount of fees for doing so or you will simply have your card declined.
The United States Government also has a credit limit but it is not set by those we borrow from. It is instead, set by the U.S. Congress which has passed legislation allowing the government to borrow up to a ceiling. Currently, under the existing law, that limit is $14.3 trillion. Our ability to get credit so that we can keep borrowing money is believe it or not, not relevant in this discussion because after all, we have laws that limit the amount we can borrow as a country.
So what is the fuss all about? The Republicans who have already shoved through Congress a $38.5 billion cut during the recent budget fight are now screaming that before they will approve any legislation that is designed to raise the amount the government can borrow, they want to see even more cuts in spending. While the verbiage is a little mean-spirited, and some of what they want to cut is even more mean-spirited, they unfortunately have somewhat of a point. More importantly, most Americans are coming around to their way of thinking on the issue of American debt because after all, who doesn’t worry about debt, especially the crushing debt our government owes its creditors today.
Despite the fact that the GOP has a point on this matter, any cuts that are taken need to be done sensibly and fairly. While I agree with some of what the Republicans are saying, my level of agreement is not total. That is, we must cut the budget as much as possible, but those budget cuts should first be a tax policy that will remove the subsidies to big oil companies and raise the taxes that are barely paid by the extremely wealthy. Cutting and/or eliminating programs like Head Start, affordable housing, tax credits for discovering and producing alternative energy sources, education, cancer research and other similar initiatives is not only NOT going to put a serious dent in our deficit, it may actually end up adding to it.
This is the reality: If we are unable to borrow more money because the U.S. Congress has decided to disallow borrowing at a higher level, then one of two things could happen:
1. Default: Let’s assume that we fail to raise the debt ceiling. Simultaneously, Congress fails to reduce the amount of money we spend. When there is no money, it has to come from somewhere. Possibly the cash could come from the payments our government makes to pay off our debt. This would be similar to each of us paying the minimum on the balance due on our credit card each month or worse, determining that we are not going to make any payments. This action would amount to hundreds of billions of dollars each and every year. By not paying, and allowing our debt to default, the government would then have lots of money to pay for everything else, including paying federal employees, paying for the military to operate, holding up Medicare and Social Security, and all of the myriad services Uncle Sam provides.
Just as if you chose this option, there would be an unfortunate result. For us, as a country, the result would be very high inflation. Our creditors would rapidly come to the conclusion that if America could no longer honor its debts, then there would be an uncontrollable urge on their part to dump dollars and loans supported by the dollar onto world markets. This would of course, cause a tsunami of dollars worldwide, seriously devaluing our currency. When that happens, anything we purchased from other countries would quickly escalate in price. If you think $4.00 a gallon gas is an ordeal now, think of what $40.00 a gallon would do to your family.
This super inflation would cause our country, and probably most of the rest of the world to plunge into a depression which would make the Great American Depression of the 1930s look like a birthday party by comparison.
2. Not to worry, there is a second option, raise the taxes and cut the benefits: Exercising this option would result in our continuing to pay off our debt in order to protect our currency from being trashed on world markets. Unfortunately, without the ability to borrow more money to keep paying off old debts—and this is where it gets tricky because it sounds crazy to do that—again, the money has to come from somewhere. That somewhere would be guess who? That’s right—you and me—the taxpayer.
Once again, the resulting scenario is not a pretty one. Now, the government would have to continue to pay down its debt, but in order to keep the government running while the debt is being paid down, we would have to cut programs and services that Americans have for the most part, come to take for granted. Our government expects to borrow approximately $1.4 trillion this year alone, so that means for the remaining eight months of the this year, somewhere around $871 billion more would need to be cut from the federal budget. This of course would have an immediate devastating impact on our economy, resulting in slashing Social Security payments in half, shutting all of our national parks down, firing the vast majority of federal employees and much more. It would, unfortunately be a disaster not that much different from the first option presented above.
The only conclusion I can come to is that as crazy as it sounds, option two is the lesser of two disasters. Consequently, each of us needs to contact our respective legislators and tell them you want them to approve raising the debt ceiling.
Correction: Last week I incorrectly cited the National Organization for Women (NOW) as the organization the Republicans were attempting to eliminate funding for in the federal budget. The organization they wanted to no longer fund is actually Planned Parenthood. As most of you know, the bid to eliminate Planned Parenthood by the GOP was unsuccessful. My apologies…
The United States already has a staggering debt load of more than $14 trillion and to now raise the debt ceiling which would in effect allow the government to borrow even more money must sound crazy. After all, shouldn’t we be doing everything as a country to reduce the amount our country borrows each year thereby reducing overall what we owe the rest of the world? And in a twist of irony that must have Stalin and Mao laughing wherever they are, we owe most of it to the Chinese.
I sat down this past weekend and planned my budget for the next three months and as I attempted to squeeze more out of less (old man inflation is not playing), I realized that our government currently borrows an almost unbelievable $100 billion each month just to keep the doors open and the lights on.
Before we go any further, let’s try to understand just what the debt ceiling is anyway. When you acquire a credit card, it usually comes with a specific dollar limit you are allowed to spend. Go over that limit and you will either pay a massive amount of fees for doing so or you will simply have your card declined.
The United States Government also has a credit limit but it is not set by those we borrow from. It is instead, set by the U.S. Congress which has passed legislation allowing the government to borrow up to a ceiling. Currently, under the existing law, that limit is $14.3 trillion. Our ability to get credit so that we can keep borrowing money is believe it or not, not relevant in this discussion because after all, we have laws that limit the amount we can borrow as a country.
So what is the fuss all about? The Republicans who have already shoved through Congress a $38.5 billion cut during the recent budget fight are now screaming that before they will approve any legislation that is designed to raise the amount the government can borrow, they want to see even more cuts in spending. While the verbiage is a little mean-spirited, and some of what they want to cut is even more mean-spirited, they unfortunately have somewhat of a point. More importantly, most Americans are coming around to their way of thinking on the issue of American debt because after all, who doesn’t worry about debt, especially the crushing debt our government owes its creditors today.
Despite the fact that the GOP has a point on this matter, any cuts that are taken need to be done sensibly and fairly. While I agree with some of what the Republicans are saying, my level of agreement is not total. That is, we must cut the budget as much as possible, but those budget cuts should first be a tax policy that will remove the subsidies to big oil companies and raise the taxes that are barely paid by the extremely wealthy. Cutting and/or eliminating programs like Head Start, affordable housing, tax credits for discovering and producing alternative energy sources, education, cancer research and other similar initiatives is not only NOT going to put a serious dent in our deficit, it may actually end up adding to it.
This is the reality: If we are unable to borrow more money because the U.S. Congress has decided to disallow borrowing at a higher level, then one of two things could happen:
1. Default: Let’s assume that we fail to raise the debt ceiling. Simultaneously, Congress fails to reduce the amount of money we spend. When there is no money, it has to come from somewhere. Possibly the cash could come from the payments our government makes to pay off our debt. This would be similar to each of us paying the minimum on the balance due on our credit card each month or worse, determining that we are not going to make any payments. This action would amount to hundreds of billions of dollars each and every year. By not paying, and allowing our debt to default, the government would then have lots of money to pay for everything else, including paying federal employees, paying for the military to operate, holding up Medicare and Social Security, and all of the myriad services Uncle Sam provides.
Just as if you chose this option, there would be an unfortunate result. For us, as a country, the result would be very high inflation. Our creditors would rapidly come to the conclusion that if America could no longer honor its debts, then there would be an uncontrollable urge on their part to dump dollars and loans supported by the dollar onto world markets. This would of course, cause a tsunami of dollars worldwide, seriously devaluing our currency. When that happens, anything we purchased from other countries would quickly escalate in price. If you think $4.00 a gallon gas is an ordeal now, think of what $40.00 a gallon would do to your family.
This super inflation would cause our country, and probably most of the rest of the world to plunge into a depression which would make the Great American Depression of the 1930s look like a birthday party by comparison.
2. Not to worry, there is a second option, raise the taxes and cut the benefits: Exercising this option would result in our continuing to pay off our debt in order to protect our currency from being trashed on world markets. Unfortunately, without the ability to borrow more money to keep paying off old debts—and this is where it gets tricky because it sounds crazy to do that—again, the money has to come from somewhere. That somewhere would be guess who? That’s right—you and me—the taxpayer.
Once again, the resulting scenario is not a pretty one. Now, the government would have to continue to pay down its debt, but in order to keep the government running while the debt is being paid down, we would have to cut programs and services that Americans have for the most part, come to take for granted. Our government expects to borrow approximately $1.4 trillion this year alone, so that means for the remaining eight months of the this year, somewhere around $871 billion more would need to be cut from the federal budget. This of course would have an immediate devastating impact on our economy, resulting in slashing Social Security payments in half, shutting all of our national parks down, firing the vast majority of federal employees and much more. It would, unfortunately be a disaster not that much different from the first option presented above.
The only conclusion I can come to is that as crazy as it sounds, option two is the lesser of two disasters. Consequently, each of us needs to contact our respective legislators and tell them you want them to approve raising the debt ceiling.
Correction: Last week I incorrectly cited the National Organization for Women (NOW) as the organization the Republicans were attempting to eliminate funding for in the federal budget. The organization they wanted to no longer fund is actually Planned Parenthood. As most of you know, the bid to eliminate Planned Parenthood by the GOP was unsuccessful. My apologies…
Thursday, April 21, 2011
What a mess!
As I watched television the night the government almost shut down, there was one recurring theme being pounded all over the airwaves—that the stalemate over the budget was the fault of the Democrats because they had failed to pass the budget prior to the mid-term elections when they owned the majority in both Houses of Congress AND the White House. Given the frequency with which it was raised, an examination of what actually happened is required.
Margaret Wolfe Hungerford once said, “Beauty is in the eye of the beholder” (no it was not Shakespeare) and I think she was absolutely right. Another similar truism is that history is in the mind of the beholder. Much of how we feel about a certain issue today is governed by our particular sense of the history behind that issue. So, let’s take a little stroll down memory lane together and see if our collective minds are in sync.
As most people hopefully recognize, the recent budget fight has to do with the current fiscal year. Historically, the funding that keeps the federal government operating would have been worked out months ago and the Congress would now be preparing itself for a debate focused on next year’s funding (it seems the only person in Congress focused on next year right now is Paul Ryan). But the 111th Congress failed to do its job and so it fell to the 112th Congress, which already is showing similar symptoms of legislative fatigue and is not doing a great job of accomplishing anything either.
So, most Republicans and no small amount of Independents are making the argument that Democrats are somehow to blame for the almost-shutdown of the federal government because when they were in charge prior to the 2010 mid-term elections, they failed to complete and pass a budget. Even a Democratic politician or two voiced this sentiment such as when Representative Norm Dicks (D-Wash) said that Democrats bear “some responsibility” for the budget mess because his party failed to get the job done.
ABC’s Jake Tapper and CNN’s Wolf Blitzer have been making this same point—over and over and over. Mr. Tapper said (paraphrasing here) that it was remarkable to hear Democrats slam the GOP for not passing last year’s budget when Democrats ruled the roost…
Conservatives have voiced this same sentiment, so much so that it is easy to slip into a fog and think that it is an accurate portrayal of what happened. While I believe that the Democrats failed miserably during the first two years of the Obama administration, I think people who truly believe it is all the fault of the Democrats are actually getting confused about the difference between a budget resolution and appropriations bills. The reality, as it is in most cases like this, is that there truly is enough blame for everyone.
To begin with, because the Democratic Party was suffering from an anticipated sense of doom due to the mid-term elections and their own intra-party fights, Congressional Democrats chose to avoid a fight over spending by not governing. Also, somewhere in those little brains must have been the sense that delaying any debate regarding spending would keep them from ultimately being beaten in the mid-terms. Funny how that turned out isn’t it. Obviously that strategy failed miserably.
Then, there were the events of February of this year. House Budget Committee Chairman Paul Ryan called for $32 billion in budget cuts for the rest of this fiscal year. The Democrats took this proposal seriously and also thought that because Ryan was so respected in the GOP that the number was a real one.
So, the Democrats gave in without so much as a whimper and gave the Republicans $33 billion in cuts. One would have thought at that point the GOP would raise the flag and declare victory. However that did not happen. Instead, because of strong pressure from the right wing of the Republican Party which is now bolstered by first year Tea Party legislators, both Ryan and House Speaker John Boehner went back on their word and instead demanded more cuts. The Democrats, bloodied by this whole turn of events fought back and said “No.”
The real kicker is that the Republicans didn’t just ask for more cuts, they also wanted to de-fund the National Organization of Women who receives federal monies to provide healthcare to large groups of women around the country and to basically take all authority from the Environmental Protection Agency in the name of good business legislation.
Former Bush speechwriter Michael Gerson put it this way: “The less-than-serious faction of the Republican Party is intent on squeezing more savings out of the 2011 budget or pursuing a government shutdown as an end in itself. Some of this bloc is composed of House freshmen, who share the unrealistic expectations of the Tea Party base — the undoing of modern government by one-half of one branch of that government. Others are more senior members of the Republican caucus — representatives such as Mike Pence and Michele Bachmann — who seek to raise their profiles by establishing themselves as rebel leaders.”
In the end, the Democrats made all kinds of concessions and the Republicans, despite their grandstanding and huffing and puffing got a pretty sweet deal. Even the White House has jumped on the concession bandwagon endorsing spending cuts in excess of what House GOP members even requested back in February.
For those of you who like watching car wrecks on the side of the road, good news—the 2012 budget battle and the war over raising the United States debt ceiling are right around the corner.
Margaret Wolfe Hungerford once said, “Beauty is in the eye of the beholder” (no it was not Shakespeare) and I think she was absolutely right. Another similar truism is that history is in the mind of the beholder. Much of how we feel about a certain issue today is governed by our particular sense of the history behind that issue. So, let’s take a little stroll down memory lane together and see if our collective minds are in sync.
As most people hopefully recognize, the recent budget fight has to do with the current fiscal year. Historically, the funding that keeps the federal government operating would have been worked out months ago and the Congress would now be preparing itself for a debate focused on next year’s funding (it seems the only person in Congress focused on next year right now is Paul Ryan). But the 111th Congress failed to do its job and so it fell to the 112th Congress, which already is showing similar symptoms of legislative fatigue and is not doing a great job of accomplishing anything either.
So, most Republicans and no small amount of Independents are making the argument that Democrats are somehow to blame for the almost-shutdown of the federal government because when they were in charge prior to the 2010 mid-term elections, they failed to complete and pass a budget. Even a Democratic politician or two voiced this sentiment such as when Representative Norm Dicks (D-Wash) said that Democrats bear “some responsibility” for the budget mess because his party failed to get the job done.
ABC’s Jake Tapper and CNN’s Wolf Blitzer have been making this same point—over and over and over. Mr. Tapper said (paraphrasing here) that it was remarkable to hear Democrats slam the GOP for not passing last year’s budget when Democrats ruled the roost…
Conservatives have voiced this same sentiment, so much so that it is easy to slip into a fog and think that it is an accurate portrayal of what happened. While I believe that the Democrats failed miserably during the first two years of the Obama administration, I think people who truly believe it is all the fault of the Democrats are actually getting confused about the difference between a budget resolution and appropriations bills. The reality, as it is in most cases like this, is that there truly is enough blame for everyone.
To begin with, because the Democratic Party was suffering from an anticipated sense of doom due to the mid-term elections and their own intra-party fights, Congressional Democrats chose to avoid a fight over spending by not governing. Also, somewhere in those little brains must have been the sense that delaying any debate regarding spending would keep them from ultimately being beaten in the mid-terms. Funny how that turned out isn’t it. Obviously that strategy failed miserably.
Then, there were the events of February of this year. House Budget Committee Chairman Paul Ryan called for $32 billion in budget cuts for the rest of this fiscal year. The Democrats took this proposal seriously and also thought that because Ryan was so respected in the GOP that the number was a real one.
So, the Democrats gave in without so much as a whimper and gave the Republicans $33 billion in cuts. One would have thought at that point the GOP would raise the flag and declare victory. However that did not happen. Instead, because of strong pressure from the right wing of the Republican Party which is now bolstered by first year Tea Party legislators, both Ryan and House Speaker John Boehner went back on their word and instead demanded more cuts. The Democrats, bloodied by this whole turn of events fought back and said “No.”
The real kicker is that the Republicans didn’t just ask for more cuts, they also wanted to de-fund the National Organization of Women who receives federal monies to provide healthcare to large groups of women around the country and to basically take all authority from the Environmental Protection Agency in the name of good business legislation.
Former Bush speechwriter Michael Gerson put it this way: “The less-than-serious faction of the Republican Party is intent on squeezing more savings out of the 2011 budget or pursuing a government shutdown as an end in itself. Some of this bloc is composed of House freshmen, who share the unrealistic expectations of the Tea Party base — the undoing of modern government by one-half of one branch of that government. Others are more senior members of the Republican caucus — representatives such as Mike Pence and Michele Bachmann — who seek to raise their profiles by establishing themselves as rebel leaders.”
In the end, the Democrats made all kinds of concessions and the Republicans, despite their grandstanding and huffing and puffing got a pretty sweet deal. Even the White House has jumped on the concession bandwagon endorsing spending cuts in excess of what House GOP members even requested back in February.
For those of you who like watching car wrecks on the side of the road, good news—the 2012 budget battle and the war over raising the United States debt ceiling are right around the corner.
Thursday, April 14, 2011
Winning is not all it's cracked up to be...
Each week, I read the news voraciously, not only seeking enlightenment but also looking for the topic that will drive that week’s post to Birth of a Notion. I try hard to keep the topic relevant, topical and timely but sometimes I feel as if everyone is addressing the same topic in their blog, article or column so I set out to seek something different.
This news of this past week was dominated by the so-called budget compromise that ensued from the bloody budget battle that took place primarily between the United States Congress and the White House although there were sporadic but murderous fire fights that took place within both the Republican and Democratic Parties. With the Democrats it was between the liberal and moderate wings of the Party and with Republicans it was between the old line conservatives and the new upstart Tea Party freshman legislators.
I did not think I could add anything to that discussion so I looked around for something else and as important as the budget battle was, I wanted something that was possibly more important. And I think I found it. The year 2010 was a year for taking the United States census and among the many types of impact a count of our nation’s population creates, there is one that seems to get lost in the fog of data, policy and law—the redistricting of the United States Congress. The drawing of electoral districts is among the least transparent processes in democratic governance. All too often, redistricting authorities maintain their power by obstructing public participation. The resulting districts embody the goals of politicians to the detriment of the representational interests of communities and the public at large.
After the tidal wave of Republican victories in last year’s mid-term elections, it appeared that the GOP was poised to make redistricting history. In theory at least, Republicans seemed armed to the teeth to engage in the decennial activity of redistricting which this time around has ignited almost unprecedented public interest, to say nothing of the possible litigation waiting in the wings.
Now that the GOP has major control over the majority of state legislatures that historically are tasked with redistricting new legislative boundaries, they will have an opportunity to influence how more than 200 congressional districts around the country will be drawn.
But wait a minute! The Democrats despite their horrific defeat at the mid-term election polls are not exactly without some power of their own. Because the Republicans control so many seats in the U.S. House of Representatives, they now have to turn their attentions on to solidly-held Democratic Districts in order to expand their power and influence. That said, the 2010 census shows a demographic paradigm shift, particularly in the growth of the Hispanic population, and this time the demographic shifts tend to favor Democrats and could even cause the Republicans to retreat somewhat in their fervor to control everything.
In a sense, the Republican Party and their new Tea Party allies have themselves to blame. They have increased their majority in the House so much—particularly in swing districts—they now have the most to lose in states that are faced with eliminating congressional seats in order to be in compliance with the new districting requirements of the 2010 census. Louisiana is a prime example. Here, the state will lose a seat and the six Republicans who make up Louisiana’s delegation (there is also a lone Democrat) will begin to kill each other off as each congress person is engaged in the mad scramble to save their seat from extinction due to the new census.
In addition to Louisiana, Republicans also control the redistricting process in Ohio, Pennsylvania, Florida and Texas. Ohio loses two seats, Pennsylvania loses one, while Florida gains two seats and Texas will gain four new seats. In each of these states however, a mirror image of the fight in the U.S. Congress between the GOP Old Guard and the new Tea Party adherents will erupt at the state level as a fight for survival engulfs the old-line conservatives and their not-always-friendly allies, the take-no-prisoner Tea Party legislators.
One exception by the way to all this bloodletting is California where there, the ever innovative people of that state have put the task of redistricting squarely in the hands of an independent commission.
If however, you think that the new flock of tax and budget cutting Republicans will force incumbents to slink off into the darkness, think again. Legislators will do everything they can to draw districts that will help them hold onto their seat. Incumbents are developing new strategies to retain their seats such as instituting legal challenges to the entire redistricting process or as has been reported recently in the New York Times, hired consultants and lobbyists to help them keep their seats.
As always with matters like these, the courts will play an important role in determining final outcomes. Some Republicans have already promised to go to the U.S. District Court for the District of Columbia instead of the normal route, which has been appealing to the United States Justice Department. Republicans are avoiding this step because they feel there will be no one in Justice who has any empathy for their situation particularly since most of the appointments there come from the Obama administration. Keeping that dog from hunting however, is that historically, lower courts tend to defer to the Justice Department. Also, going to court—any court, involves expense, delays and of course there is always the chance you can lose.
Republicans however do have plenty of reasons to be happy. Due to the twin victories of a Supreme Court ruling which opened the floodgates of corporate political donations and the Federal Election Commission approving the collection of soft money for a National Democratic Redistricting Trust, the GOP now sits in the cat bird seat and with their control of the majority of state legislatures around the country, this could be an ugly fight.
Some political experts have already made the claim that political mud-slinging will be far worse this year than even last year, given what is at stake for the next ten years. Andrew Beveridge, a sociology professor at Queens College in New York City was quoted as saying, “What you are going to see is a game of musical chairs. I think it will be a big fight and it will be both state and national.”
This news of this past week was dominated by the so-called budget compromise that ensued from the bloody budget battle that took place primarily between the United States Congress and the White House although there were sporadic but murderous fire fights that took place within both the Republican and Democratic Parties. With the Democrats it was between the liberal and moderate wings of the Party and with Republicans it was between the old line conservatives and the new upstart Tea Party freshman legislators.
I did not think I could add anything to that discussion so I looked around for something else and as important as the budget battle was, I wanted something that was possibly more important. And I think I found it. The year 2010 was a year for taking the United States census and among the many types of impact a count of our nation’s population creates, there is one that seems to get lost in the fog of data, policy and law—the redistricting of the United States Congress. The drawing of electoral districts is among the least transparent processes in democratic governance. All too often, redistricting authorities maintain their power by obstructing public participation. The resulting districts embody the goals of politicians to the detriment of the representational interests of communities and the public at large.
After the tidal wave of Republican victories in last year’s mid-term elections, it appeared that the GOP was poised to make redistricting history. In theory at least, Republicans seemed armed to the teeth to engage in the decennial activity of redistricting which this time around has ignited almost unprecedented public interest, to say nothing of the possible litigation waiting in the wings.
Now that the GOP has major control over the majority of state legislatures that historically are tasked with redistricting new legislative boundaries, they will have an opportunity to influence how more than 200 congressional districts around the country will be drawn.
But wait a minute! The Democrats despite their horrific defeat at the mid-term election polls are not exactly without some power of their own. Because the Republicans control so many seats in the U.S. House of Representatives, they now have to turn their attentions on to solidly-held Democratic Districts in order to expand their power and influence. That said, the 2010 census shows a demographic paradigm shift, particularly in the growth of the Hispanic population, and this time the demographic shifts tend to favor Democrats and could even cause the Republicans to retreat somewhat in their fervor to control everything.
In a sense, the Republican Party and their new Tea Party allies have themselves to blame. They have increased their majority in the House so much—particularly in swing districts—they now have the most to lose in states that are faced with eliminating congressional seats in order to be in compliance with the new districting requirements of the 2010 census. Louisiana is a prime example. Here, the state will lose a seat and the six Republicans who make up Louisiana’s delegation (there is also a lone Democrat) will begin to kill each other off as each congress person is engaged in the mad scramble to save their seat from extinction due to the new census.
In addition to Louisiana, Republicans also control the redistricting process in Ohio, Pennsylvania, Florida and Texas. Ohio loses two seats, Pennsylvania loses one, while Florida gains two seats and Texas will gain four new seats. In each of these states however, a mirror image of the fight in the U.S. Congress between the GOP Old Guard and the new Tea Party adherents will erupt at the state level as a fight for survival engulfs the old-line conservatives and their not-always-friendly allies, the take-no-prisoner Tea Party legislators.
One exception by the way to all this bloodletting is California where there, the ever innovative people of that state have put the task of redistricting squarely in the hands of an independent commission.
If however, you think that the new flock of tax and budget cutting Republicans will force incumbents to slink off into the darkness, think again. Legislators will do everything they can to draw districts that will help them hold onto their seat. Incumbents are developing new strategies to retain their seats such as instituting legal challenges to the entire redistricting process or as has been reported recently in the New York Times, hired consultants and lobbyists to help them keep their seats.
As always with matters like these, the courts will play an important role in determining final outcomes. Some Republicans have already promised to go to the U.S. District Court for the District of Columbia instead of the normal route, which has been appealing to the United States Justice Department. Republicans are avoiding this step because they feel there will be no one in Justice who has any empathy for their situation particularly since most of the appointments there come from the Obama administration. Keeping that dog from hunting however, is that historically, lower courts tend to defer to the Justice Department. Also, going to court—any court, involves expense, delays and of course there is always the chance you can lose.
Republicans however do have plenty of reasons to be happy. Due to the twin victories of a Supreme Court ruling which opened the floodgates of corporate political donations and the Federal Election Commission approving the collection of soft money for a National Democratic Redistricting Trust, the GOP now sits in the cat bird seat and with their control of the majority of state legislatures around the country, this could be an ugly fight.
Some political experts have already made the claim that political mud-slinging will be far worse this year than even last year, given what is at stake for the next ten years. Andrew Beveridge, a sociology professor at Queens College in New York City was quoted as saying, “What you are going to see is a game of musical chairs. I think it will be a big fight and it will be both state and national.”
Thursday, April 7, 2011
Tea Anyone--Round Three
Love them or hate them—the tea party movement is a dominant force in American politics. This is especially true within the ranks of the Grand Old Party as Republican leadership in the House is now struggling with their new tea party freshman representatives.
Despite their hateful rhetoric, the tea partiers managed to completely dominate the 2010 GOP legislative and gubernatorial primaries and then went on to win almost every contested Republican primary race. Particularly hurt in the 2010 season of political upheaval were the long-time conservative senators and governors defeated in GOP conventions and primaries, because, as far as the tea party was concerned, the GOP of days gone by were just that—to liberal, too accommodating, too willing to compromise and most importantly, guilty of taxation gone wild.
But not every tea party candidate who roared to victory in their primary, ultimately won in their respective general elections. Two of the more notable general election defeats were losers Christine O’Donnell in Delaware and Sharron Angle in Nevada.
Remaining cognizant of the power of the tea party movement, how will their newly won influence impact the 2012 race to the White House? No Republican candidate is going to be the GOP nominee for the presidency unless he or she is embraced by the Tea Party. So, based on that realization, the process of elimination is not that difficult.
Mitt Romney while extremely conservative has adopted the strategy in the early goings on for the 2010 nomination to distance himself as far as he can from the Tea Party. What’s more, his authorship and support for the Massachusetts healthcare bill Romneycare (Come on, what’s fair is fair) is just too much for the tea partiers to stomach.
Mississippi Governor Haley Barbour spent too many years in DC as a beltway lobbyist and also as head of the Republican National Committee which means he fed at the trough for much too long. In the immortal words of Bob Dylan, “The only thing I did wrong was I stayed in Mississippi a day too long.” Haley, you stayed in DC years too long.
Jon Huntsman, former Obama ambassador to China and also known as the “liberal” Republican in Iowa has as much chance of being nominated without Tea Party support as I do.
Newt Gingrich, the man of a thousand positions—just as long as it is juxtaposed to President Obama’s has been married too many times, cheated on his many wives too many times, is constantly tripping over his own forked tongue and has no credibility with the Tea Party, the coffee party and the soft drink party.
Newest possible candidate for the nomination Donald Trump could not win an election to be dog catcher. He may have some in his corner because they support the stupid things he says about China, but tea partiers are simply not moved. Also, once the Tea Party discovers that in the past Mr. Trump has bankrolled several Democratic candidacies, he will be doomed.
And please forget the also-rans like Rudy Giuliani and Rick Santorum who attempted to use the Libyan crisis as a political hook they could hang their hat on.
That said, who can the Tea Party embrace?
Well, it seems that Minnesota Congresswoman Michelle Bachmann is getting all the attention right now. Sarah Palin was the darling of the tea partiers but Ms. Bachman has replaced her, mostly by acting like Sarah Palin multiplied by ten.
Tim Pawlenty, the consummate politician is attempting to be everything to everyone. The downside of that is when you choose to say yes to everyone, you end up being of no value to anyone. He is walking the very tricky tightrope of trying to appease both the Republican establishment while simultaneously wooing the Tea Party. Ain’t going to happen.
Ron Paul is a true libertarian which makes it difficult for the Tea Party to fully embrace him. Like most libertarian politicians however, he does have a small but devoted and almost fanatical base but it is not enough of one to get him the nomination.
Finally, Huckabee despite his initial strong start in the 2008 race fizzled rapidly after Iowa and New Hampshire and ultimately his campaign simply crashed and burned. Today, he might be considered the front runner, but if that is all they got—the Republicans got problems.
Ultimately, the new upstart Tea Party will heavily influence the selection of the 2010 GOP nominee but that is absolutely no guarantee that he or she will win the general election for the presidency. Michelle Bachmann could end up being the next Christine O’Donnell if for no other reason that her witch credentials are more easily proven. In any event, Congresswoman Bachmann will never attract enough independent voters to win the White House.
I don’t know about you, but I can hardly wait for this thing to start…
Despite their hateful rhetoric, the tea partiers managed to completely dominate the 2010 GOP legislative and gubernatorial primaries and then went on to win almost every contested Republican primary race. Particularly hurt in the 2010 season of political upheaval were the long-time conservative senators and governors defeated in GOP conventions and primaries, because, as far as the tea party was concerned, the GOP of days gone by were just that—to liberal, too accommodating, too willing to compromise and most importantly, guilty of taxation gone wild.
But not every tea party candidate who roared to victory in their primary, ultimately won in their respective general elections. Two of the more notable general election defeats were losers Christine O’Donnell in Delaware and Sharron Angle in Nevada.
Remaining cognizant of the power of the tea party movement, how will their newly won influence impact the 2012 race to the White House? No Republican candidate is going to be the GOP nominee for the presidency unless he or she is embraced by the Tea Party. So, based on that realization, the process of elimination is not that difficult.
Mitt Romney while extremely conservative has adopted the strategy in the early goings on for the 2010 nomination to distance himself as far as he can from the Tea Party. What’s more, his authorship and support for the Massachusetts healthcare bill Romneycare (Come on, what’s fair is fair) is just too much for the tea partiers to stomach.
Mississippi Governor Haley Barbour spent too many years in DC as a beltway lobbyist and also as head of the Republican National Committee which means he fed at the trough for much too long. In the immortal words of Bob Dylan, “The only thing I did wrong was I stayed in Mississippi a day too long.” Haley, you stayed in DC years too long.
Jon Huntsman, former Obama ambassador to China and also known as the “liberal” Republican in Iowa has as much chance of being nominated without Tea Party support as I do.
Newt Gingrich, the man of a thousand positions—just as long as it is juxtaposed to President Obama’s has been married too many times, cheated on his many wives too many times, is constantly tripping over his own forked tongue and has no credibility with the Tea Party, the coffee party and the soft drink party.
Newest possible candidate for the nomination Donald Trump could not win an election to be dog catcher. He may have some in his corner because they support the stupid things he says about China, but tea partiers are simply not moved. Also, once the Tea Party discovers that in the past Mr. Trump has bankrolled several Democratic candidacies, he will be doomed.
And please forget the also-rans like Rudy Giuliani and Rick Santorum who attempted to use the Libyan crisis as a political hook they could hang their hat on.
That said, who can the Tea Party embrace?
Well, it seems that Minnesota Congresswoman Michelle Bachmann is getting all the attention right now. Sarah Palin was the darling of the tea partiers but Ms. Bachman has replaced her, mostly by acting like Sarah Palin multiplied by ten.
Tim Pawlenty, the consummate politician is attempting to be everything to everyone. The downside of that is when you choose to say yes to everyone, you end up being of no value to anyone. He is walking the very tricky tightrope of trying to appease both the Republican establishment while simultaneously wooing the Tea Party. Ain’t going to happen.
Ron Paul is a true libertarian which makes it difficult for the Tea Party to fully embrace him. Like most libertarian politicians however, he does have a small but devoted and almost fanatical base but it is not enough of one to get him the nomination.
Finally, Huckabee despite his initial strong start in the 2008 race fizzled rapidly after Iowa and New Hampshire and ultimately his campaign simply crashed and burned. Today, he might be considered the front runner, but if that is all they got—the Republicans got problems.
Ultimately, the new upstart Tea Party will heavily influence the selection of the 2010 GOP nominee but that is absolutely no guarantee that he or she will win the general election for the presidency. Michelle Bachmann could end up being the next Christine O’Donnell if for no other reason that her witch credentials are more easily proven. In any event, Congresswoman Bachmann will never attract enough independent voters to win the White House.
I don’t know about you, but I can hardly wait for this thing to start…
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