POLITICS

THE WEEKLY WRAP

Debt Crisis: "Gridlock in Washington, DC"

August 5, 2011

5:18 pm, Central

Diane W. Collins

dcollins@marketingweb.com

ALERT: Standard & Poor's Downgrades the US to AA+

Debt Crisis: Gridlock in Washington, DC

Welcome to The Weekly Wrap. I'm Diane Collins.

Monday, August 1st found all of us watching and wondering if Speaker Boehner would face another challenge in passing S.365, legislation that would raise the debt ceiling and end the debate over "default." In bouts of parliamentary wizardry, S.365 was offered as an amendment in the form of a substitution to Harry Reid's S.627. But, it is interesting to note that S.365 (the amendment) was really Harry Reid's version of "McConnell Plus," a plan originating from a "last option" offered by Senate Minority Leader, Mitch McConnell (R-KY) on July 18th. It removed the tranche that would have forced President Obama to request another increase with corresponding cuts prior to the 2012 election. It is a convoluted game, isn't it? Who gets credit or blame, who voted for what... that's what it is all about. "So, put your right foot in, put your right foot out. Shake it all around and turn yourself about." The House passed the amendment 269 to 161 and sent it over to the Senate. Reid chose to wait until Tuesday for the Senate vote.

Tuesday, August 2nd the Senate concurred 74 to 26 with the House and adopted S.365 as an amendment in the form of a substitution to S.627. English? They passed the bill to raise the debt ceiling. (We have offered a more in depth look at the bill in our Special Edition report, Debt Crisis: Battle on the Hill with additional research links in our Further Reading section.) The President signed the bill into law that evening just hours before the [X Date] imposed by Treasury Secretary Geithner. After passing the debt ceiling bill both the House and Senate went on vacation... August recess. Problem? Well, quite a few actually...

Wednesday, August 3rd the most immediate problem to surface was Senate inaction on the FAA Re-authorization Bill. The House had passed the bill earlier with a challenge to the NLRB's redefinition of "majority" concerning the number of votes necessary to establish a union and sent it to the Senate. Reid's guys in the Senate had serious problems with the challenge. The Left, of course, favors the redefinition of the majority needed to establish a union shop as a "majority of the votes taken... not a majority of the workers." The redefining of reality seems to be a problem with the Obama team.

Senate inaction caused a number of things. It cost the federal government about $400 million in uncollected taxes but, it could have cost as much as $1 billion if the shutdown had lasted until Congress returned in September. Many airlines raised their prices on ticket fares in anticipation the government would collect the tax retroactively when the bill passed. That caused both passengers and airlines undue inconvenience. In addition as many at 74,000 FAA workers were either furloughed or working without pay.

The media smelled a story and went after Congress for "not doing its job before leaving town." House Majority Leader, Eric Cantor made it clear to everyone that "The House has done its job." They had passed the bill and sent it to the Senate. The media refocused with the Democrats in their sights... Sen. Chuck Schummer (D-NY ) and his minions struck back saying the House is, "...holding a gun to our heads," with regard to the NRLB language being reverted to its original and correct definition. Schummer continued, "That's the part of the story you're not reporting." It would be funny seeing the tables turned for once if this ridiculous dereliction of duty hadn't cause so many unnecessary financial loss and trauma.

Thursday, August 4th a short term deal was announced by Senate Majority Leader, Harry Reid (D-NV) that involved a "bipartisan compromise," allowing workers to return to their jobs and the government to collect its taxes. The short term deal lasts through mid- September when both parties will have returned to Congress and begun to "work out their differences." Sure. September is going to be another cliff hanger month in more than one way. The federal government's fiscal year ends September 30th. That means another budget fight. And, you guessed it. POTUS has no budget. Why? FY 2012 was not approved by the House and was voted down in the Senate 97 to 0 because of the ridiculous amount of additional government spending and increase to the federal debt. Looking forward, we'll be watching another series of "continuing resolutions" in an attempt to control spending and keep the government running until February 2012 when President Obama is required to offer his FY 2013 budget to Congress. Good grief.

Thursday also saw the markets react to the "debt solution," that wasn't as well as the crisis in Europe. The Dow Jones Industirals (DJI) dropped 513.52 points, a 4.33% one day loss. The VIX, a measurement of volatility in the marketplace shot up to 30% as investors literally took flight to safety. That meant they cashed in stock and even sold gold. Gold was down $40 an ounce. What did they buy? Treasuries... an instrument whose value resides in bad sub prime mortgage and car loans, but carries the "full faith and credit of the United States." A person standing outside the situation would probably say we have gone mad. (Personally, I'm looking at islands.) The flight from stocks some say is ill advised in that corporations are showing strong profits while they horde cash; and consumers have paid down a lot of their personal debt. This would indicate the selling is psychological and not based on fundamentals. The day left many dizzy and wondering what would happen Friday when the new jobs report was due.

Friday, August 5th the jobs report came out better than expected. The President took to the telepromter and reported that 154,000 jobs had been created but the real numbers showed though the private sector had created 154,000 jobs, government lost 37,000 leaving a net of 117,000 jobs for the month of July. The unemployment rate decreased by .1% to 9.1% from last months 9.2%.

The markets were poised to open higher this morning on the anticipated report. Initially, the DJI was up more than 100 points but during the day fluctuated finally ending at 11,444.60, up 0.54% over yesterday's close.

Personally, I'm ecstatic about the August recess... though I can't say I'm looking forward to September. Interim, we'll produce some stories and videos that will delve into what's coming up. Unless, of course, I get a life between now and then.

See you soon. ;>)

UPDATE: Standard and Poor's downgraded the long term debt credit rating of the United States from AAA to AA+. The US has held a AAA credit rating since 1917.

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POLITICS

THE WEEKLY WRAP

Debt Crisis: "Gridlock in Washington, DC"

Further Reading: