We have good news and bad news today: The White House has a secret plan to deal with a fiscal crisis.
The plan’s existence is revealed in a book called The Escape Artists: How Obama’s Team Fumbled the Recovery.
“In May 2009,” writes journalist Noam Scheiber, “the president asked [White House budget director Peter Orszag] to draft a secret memo laying out the government’s options in the event of a fiscal crisis, in which a runaway deficit sent interest rates spiraling upward.
“No other member of the Obama economic team was even aware of the assignment.”
We pause here to tease out Mr. Scheiber’s narrative in which “a runaway deficit sent interest rates spiraling upward”:
Of course, these rates are still ridiculously low by historical standards. But Mr. Scheiber’s crisis is creeping up from behind.
What’s in the Orszag memo? We don’t know. We’ll explain why in a moment. But we do know neither the White House nor Congress has a plan to wrestle with the rising national debt.
So “instead of developing a long-term plan to avoid the worst-case scenario,” writes James Pethokoukis of the American Enterprise Institute, “it has chosen to plan for the worst-case scenario…
“Maybe the crisis plan is the long-term plan,” Mr. Pethokoukis speculates, “Maybe it’s something like this: a) do nothing; b) keep implementing the Obama health care and environmental agenda; c) wait for markets to finally freak out over rising U.S. debt; d) break the glass and grab the 2009 Orszag plan.”
The glass covering the Orszag memo might well get cracked, mostly by accident, on Jan. 2, 2013.
Under the law passed last minute in August 2011 raising the debt ceiling, something called “sequestration” is supposed to kick in shortly after the new year. “Sequestration” is wonk-speak for automatic spending cuts totaling $1.2 trillion over 10 years.
The cuts will come entirely out of “discretionary” spending. Meaning Social Security and Medicare would be left alone.
Congress and the White House can avoid sequestration if they reach agreement sometime this year on spending cuts and/or tax increases totaling that same $1.2 trillion. The odds of an agreement happening this year? Well, we’ll leave that conjecture up to you.
Addison Wigginfor The Daily Reckoning
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
Now we get to find out if the US Houses of Congress have successfully implemented artificial intelligence, in the form of “automatic” spending cuts. If so, can we send stop paying all of them and send them home?
What happened to intelligent design? Actually using human brains to make appropriate spending cuts instead of lopping off an equal percentage of everything like demented farm equipment?
I’m suddenly reminded of an old Charles Schultz cartoon showing Charlie Brown’s little sister Sally holding a limp roll of fur in her arms as Charlie looks on and says “They’ve done it. They’ve finally invented the boneless cat.”
We’ve finally invented the brainless government.
The ‘plan’ is (and always has been) deprecate, devalue and default.
Plan: nationalize the entire economy!
Now that we know from the examples of the
European nations who have cut back on spending, that to do just this diminishes the economic vitality of the country. That there must be conjoint actions to stimulate these nations’ economies, e.g., rebuild deteriorating infrastructure. This takes new money, therefore tax increases.
When you've got a room full of 200 oil insiders scratching their heads at current high prices, something's gotta give.
For most investors, it’s weird to think of stocks as their go-to investing option.
The petropoly has bills to pay and setting the price of oil was a simple way to balance their budgets.
Investors don’t seem to care that what's propping up their investments is what will ultimately destroy them: government monetary policy.
For the next decade the energy revolution will be likely confined to the US, displaying the robustness of American entrepreneurship.
Why the Sage of Baltimore’s commentary persists through America’s changing times.
After attending Platt’s oil conference in London I want to relay two important themes you need to know.