Skip to comments.TARPís Shadow: Why Tea Partiers wonít listen to the establishment, even as a debt crisis looms
Posted on 07/15/2011 10:44:38 PM PDT by neverdem
On Wednesday, House Minority Leader Nancy Pelosi sent a warning on the debt-ceiling hike. Lets get on with writing the bill, she said. I dont need to see markets drop 400 points. But Republicans may need to see markets drop 400 points. Pelosi remembers September 2008, when the House, then controlled by the Democrats, initially voted against the Troubled Asset Relief Program. Stocks plunged 778 points. Only after her caucus felt the visceral terror of an impending depression was Pelosi able to cobble together votes to counter Republican opposition.
If the House goes to the wire this time, there will be plenty to fear. A Treasury default would be worse than the financial crisis of 2008. The world economy is built on Treasury securities. Companies around the globe use them as collateral for overnight loans so that they have cash to pay workers as they wait for their own payments from other companies. Because this collateral is so safe, the lenders who make the overnight loans dont have to worry about the borrowers. The key is that Treasury bonds are supposed to be risk-free.
But nothing is risk-free. If and when the market discovers this about Treasury bonds, the consequences will be dire. Companies short of cash would shed workers. Global asset selloffs could send the slow-brewing Eurozone crisis into multiple defaults, and European governments would struggle to protect their own financial institutions from panic. The fear of default could spur companies around the world to hoard more cash in anticipation, slowing the economy down. In the past week, a parade of leading financial figures has sounded the alarmFederal Reserve chief Ben Bernanke, JPMorgan Chase honcho Jamie Dimon, Senate Minority Leader Mitch McConnell, Treasury secretary Timothy Geithner, and former Obama economic adviser Larry Summers among them.
And thats precisely the problem. Tea Party freshmen and their supporters hold this establishment in contempt. Implicitly invoking TARP, as Pelosi did when she mentioned a stock-market crash, wont scare them; it will only embolden them. It would be one thing if Tea Party adherents merely believed that a default wouldnt spell disaster; in that event, the GOP freshmen would figure out the truth soon enough. The problem is that many Tea Partiers consider TARP such a terrible idea that they would have chosen to brave a worse financial disaster instead. Today, they think that a market cataclysm would be better than another sellout vote. House veteran and GOP presidential candidate Michele Bachmann set the pace in last months GOP presidential debate: I fought behind closed doors against my own party on TARP. It was a wrong vote then. Its continued to be a wrong vote since then. As the defeat of Utah senator Bob Bennett in 2010 showed, party voters are unforgiving of Republicans who supported TARP. A debt-hike vote will follow Republican candidates in their primaries next year.
Whose fault is the trust deficit that the elites have racked up? After the initial TARP vote, the establishment spun the story, calling it not a bailout but a rescue and insisting that its purpose was to save jobs, not banks. What have Americans seen since? Financial firms whose bad decisions should have put them out of business have logged huge profits, while 7 million workers have gone missing from the economy. Such a stark disparity in outcome is absolutely the fault of establishment figuresfrom former Treasury secretary Hank Paulson through President Obama himself. No surprise that Americans digesting that experience now suspect that a debt-ceiling vote is another trick.
TARP and the debt-ceiling vote do resemble one anotherbut not in the way that the Tea Party thinks. By the time TARP came around, it was too late to do anything about a financial system spiraling out of control; the only sane way to have avoided TARP would have been to end the governments too-big-to-fail approach to the financial world long before, and that approach dates all the way back to the 1980s. The problem with TARP was not the vote for it but what government failed to do afterward: force lenders to take their losses, albeit in a less panicky manner, thus liberating the economy from the bubbles legacy. And government failed, too, to enact financial rules to ensure that it wouldnt happen again.
Were in the same situation today. Its too late now to worry about debt thats the legacy of past choices. If either party had wanted to avoid such a vote, it should have taken steps decades ago. Such steps would have included self-restraint on new entitlement programsincluding the Medicare prescription-drug benefituntil we figured out a way to control growth in the old ones. And the steps would also have included putting the rules in place to avoid a financial crisis that has sent tax revenues plummeting and safety-net costs soaring.
Both parties should stop pretending that the debt-ceiling vote is an opportunity for big fixes or a test of principle. It isnt, just as TARP wasnt. Even if party leaders can convince enough public-spirited members of their caucuses to vote on modest, long-term budget reforms in return for a debt-ceiling hike, these concessions are likely to be window dressing. Long-term fixes to programs like Medicare wont happen overnight. Theyll come after years of open-minded experimentation. Likewise, cleaning revenue-sucking holes out of the tax code will take months, not a few late nights. With the debt ceiling, as with TARP, what really matters is what happens after the vote.
Nicole Gelinas, a City Journal contributing editor and the Searle Freedom Trust Fellow at the Manhattan Institute, is a Chartered Financial Analyst and the author of After the Fall: Saving Capitalism from Wall Streetand Washington.
The Democrats propose to tear down the Washington Monument. The Republicans counter with a plan to do it in three stages. They settle on a “bipartisan” plan to do it in two stages. That’s the Washington, DC way in the age of the two-legged Republican/Democrat socialist beast.
For who? Those of us living in the bombed out aftermath are already eating squirrel for supper a couple of times a week. They gonna kill the squirrels?
The nation and the financial system needs a tonic to clean out the dreck.
Then, we can begin, again, older, wiser, and poorer. You know, the way humans learn things, for a short time.
Well, no matter how you slice and dice it or twist and turn it, the real problem remains the same. Big, bloated, expensive, overbearing government. And the solution is simple. Repeal ObamaCare. Shutter the EPA. Call off the ridiculous war on coal, oil, gas and energy. Scrap the so-called green energy boondoggle. Cut government salaries, pensions, benefits, unions, etc. Cut the strangling regulations and bureaucracy. Cut the red tape. End the war against capitalism. Cut the size and scope of government. Drastically cut the spending. Cut the taxes. Get the government off our backs and out of our way. Set our people free to produce and let the free economy soar!!
TARP was a bad idea from top to bottom. I think history shows that.
If companies are going to fail, let them fail and let their competitors fill the vacuum.
These people a completely un-serious!
Obama will have to CHOOSE to not service the debt, at which point Republicans can criticize his priorities. Why would he ruin our credit and our country and still spend money on modern art for the rich? Why would he keep Obamacare and ruin the country’s credit? There is no downside to the Republicans holding firm on the debt ceiling. What is the point of having a debt ceiling if it keeps getting raised everytime? Is it a real cap or just a lie to the American people?
We can either take action now and control our own trajectory, or wait 10 years and let the markets do it for us. The problem with kicking the can down the road, is that eventually you run out of road.
Yes, it is TIME to DownSize DC! Close entire departments, beginning with the U.S. Dept. of Education (re-education) and their SWAT team.
I don’t think they will ever listen. Listening to the people isn’t even in the top 5 for the GOP, much less the socialists.
He might choose not to service the debt on purpose.
The Cloward-Piven/Soros strategy: Maximum Chaos
It’s definitely a real possibility
I think it is time the banks bailed out the government.
I don't think it's going to take 10 years.
[ Its definitely a real possibility ]
So true.. He is trying to dismantle the whole American system.. piece by piece.
Call it sedition or sabotage or treason..
There are elements of all three..
The FBI sleeps.. and is totally AWOL... even complicit..
Another thread was pointing out how, when the Dims (with George Mitchell leading, and Dick Darman providing the essential Benedict Arnold RiNOweasel stab in the back) b.s.'d Bush 41 into breaking what was just about the only ironclad political promise he'd ever made: "No New Taxes!", that the "solution" turned out to be ALL TAXES and NO SPENDING CUTS, and the budget was right back in the soup two years later.
Rush Limbaugh was pointing out the other day that every time we turn around, Obama or somebody on their side makes a Freudian slip and says, well, we'd rather have some new programs! The Dims will spend every tax dime the Pubbies give them, and 25% more, just like they always do. Their bad faith is like a stinking black cloud. Nobody can miss it.
Certainly not this woman -- and listen to her tone! Contemptuous, peremptory, abusive: Just sign the damn bill! Nobody cares about your "principles" or "solving the problem" -- that train left the station in 1994!
She needs to spend the rest of her life humping baskets of sea-salt in a salt pan somewhere.
I think you're right, but remember -- the Republicans have to be made to take the blame. Obozo has to give his MSM cadres something to work with, a peg they can use to hang the blame on the conservatives -- better, the Tea Party, which you'll notice that this scribblerette is setting up in her contemptuous piece to be her fall guys.
Don't fall for it. It's a Beer TARP!
It isn't a matter of getting more solvent by going deeper in debt, it is a question of where the tunel will end. More money without spending constraints is foolish, too.
Let's see some significant cuts in the Federal budget, not just the scare tactics of going after the elderly and essential services.
What happened to all those "nonessential Federal employees" who don't have to show up when there is a snowstorm. If they are "nonessential", why are we paying them?
That'd be a good place to start.
Every few years it seems the oil patch goes through a 'bust', it has made for lean corporate heirarchies, merit based advancement, and a trimming of the nonproductive from payrols.
It's government's turn. They've been growing since the Civil War.
I see no compelling reason to raise the debt ceiling, and I’m OK if SS checks don’t get mailed and/or bonds don’t get paid.
Frankly, the apocolypse card has been over-played. Now I’m immune to it.
The whole idea of the debt ceiling was to warn the various Congress Critters and, more importantly, their staffs that they were spending too much. But, the moment that the debt ceiling was first raised, as a “temporary” fix so the government could continue to govern the whole idea went into the crapper.
Now, “We, the People” have said enough! If we have to balance our books so do you Congress!
Remember the big stink a few years back about Congress exempting itself from a lot of regulations, laws, and taxes that the rest of us had to follow? The debt ceiling issue is exactly the same thing only written much larger.
It is long past time to throw every long serving, “professional”, politician out. And when they complain out the “need” to stay in power remember what their staying in power has brought us!
Re post 9. Correct, there will not be a default on Aug 2 or Aug 3 or any other day in August. They have the money to pay the interest.
Tea Party freshmen and their supporters hold this establishment in contempt. Implicitly invoking TARP, as Pelosi did when she mentioned a stock-market crash, wont scare them; it will only embolden them.
Contempt, Hmmmm, Yes possibly I hold this establishment in contempt. Mostly though I fear them, I fear that they will continue to make decisions that apparently are aimed at destroying the America I love and turning it into a third world pest-pot.
As a youngster my father was in the Military and my mom and the rest of the kids were lucky enough to be able to accompany him on some of his tours to foreign countries. What I saw and learned from living there has given me a love and an appreciation for America that many of our ‘elites’ obviously don’t have.
That is why I fear this establishment. They are trying to destroy what I love. In turn that makes me support the TEA-Party freshmen in their attempts to stop the destruction. It’s long past time to rein in an unchecked federal Government all three branches have increased their power to the point where they are the De-facto masters and the rest of us... Well they must think we are their servants, serfs and property. At least they treat us that way.
Paulsen was wrong. Raising the debt ceiling is also wrong. Just live with the consequences.
Nazi Pelosi - a voice worth ignoring.
Troubled Asset Relief Program. Stocks plunged 778 points.
Democrats are talking about another stimulus deal,yeah thats clear thinking.Dems are stuck on stupid socialism never pays off.
Yes, but as you know, Washington is controlled by Democraps and RINOcraps. Which means that the first department they'd close is the DoD.
“If companies are going to fail, let them fail and let their competitors fill the vacuum.”
Damn straight. That is part of free market, which we don’t have. Instead, these large companies know they will be backed by Washington, and they behave as such.
Their managers are more concerned about stock holders than they are about maintaining a company with longevity, and that is what has helped kill America. Many of these companies stifle competition by promoting regulations that only they can afford to navigate, they buy up the competition and close the doors on them, and they behave like robber barons, all with the approval of Washington.
GM should have went under. A reset button if you will. Sorry, but yes there would have been job losses, but some small company would have risen up, and created a better product, at a better price, and would have learned from the mistakes of GM.
Instead, we reward bad behavior, and bad business practices, just as we reward bad lifestyle with the welfare state.
I am all for business, but I am for free markets, I am for the ingenuity of Americans that made this country great, not for cronyism and protectionism.
Let the market tumble 5,000 points, I don’t care. Better to swallow that pill now. Instead we keep inflating the market falsely, which only serves to put off the inevitable.
I personally don’t give a damn about insuring the success of the markets. If you buy into a bad product expecting good returns on your investment, then you should suffer those consequences.
The same with the housing market. These artificially created bubbles are going to be the end of this nation.
Is it “the blame” or “the credit”. Republicans should be willing to take the credit for stopping the runaway train.
They subvert the nation economically, morally and militarily.
They Lie, Steal and Subject. All Commies do that, because they can only gain and keep power by that.
Need anything else be said as to why we don't trust the GOP-E?
Best to take our medicine now and start the real recovery than to kick the can down the road and make the final comeuppance even worse.
We are witnessing the implosion of the welfare state. The Dems want to keep it going for a little while longer by increasing taxes and doubling down on their spending. It is like trying to hold back the tide. The entitlement programs will consume our entire budget if we don’t reform or eliminate them. And unless we unshackle the private sector, we will continue our spiral downwards marked by paroxysms of civil unrest and eventual Balkanization along class, race, and ethnic lines. We are in a battle for national survival to maintain the vision and values of our Founders.
WE don’t have 10 years. Maybe 12 mos.
Not going further into debt, despite the offer of more and more credit, should make the U.S. economy stronger and the likelihood of a default less.
Unless I woke up in Bizarro World, where everything is opposite.
If someone owed you 10,000$ - and a look at their finances showed that they continued to spend themselves further and further into debt - would a move on their part to live within their means and no longer go further into debt make you feel MORE or LESS likely to eventually get paid back?
And whatever happens, do not cut spending. We must not even talk about it.
LOL. Such tripe spewing from the hole of the idiot who FAILED to even PRESENT a budget is rich.
Right. And TARP (and the Porkulus) imposed on us trillions more in new debt and instituted a disaster of a spending binge that is drowning us today. Now we want to gulp down more of the same old snake-oil?
If the debt ceiling is raised, what will happen after the vote is... "nothing". It will be just more of the same - lots more. The plunge into complete dissolution of the American Republic will simply continue on with added momentum and less chance of recovery.
This out of control government needs radical surgery, now. We have a raging Stage 4 cancer there are no longer enough band aids and aspirin to cover it up!
How long could your family survive making $60,000 a year while spending $100,000 and putting the balance on the maxed out credit cards?
That pic is hilarious! Somebody needs to photoshop Dingy Harry into it :)
>>They gonna kill the squirrels?
“Nice tree full of squirrels you got there. It’d be a shame if it burned down...”
“Why Tea Partiers wont listen to the establishment”?
Because “establishment”, it’s the “spending stupid”. We are tired of the financial ruin the spend and tax “establisment” has created to get votes.
[He might choose not to service the debt on purpose.
The Cloward-Piven/Soros strategy: Maximum Chaos
Its definitely a real possibility]
I think this is EXACTLY what he plans to do, and Republicans know it. That is what has Republicans running scared. That is Obama’s plan, and he also plans to use the msm propaganda machine to pin it on the Republicans in 2012. Will it work? Obama doesn’t care because he has nothing to lose. He doesn’t love this country anyway.
nobama hates you, hates your family, hates Free America, hates the Constitution and hates the Bill of Rights. nobama is a hate crime foisted upon America. nobama is the Destroyer.
Everything nobama does is intentional.
God help us all.
Holding firm on the debt ceiling would not cause a default on treasuries; it would force congress to cut deeply, and that is what the establishment of both parties fear.
>> “The problem with kicking the can down the road, is that eventually you run out of road.” <<
We already have, and they are in denial.
Perhaps because he really DOES want to destroy the country and throw it into chaos, knowing he can get away with blaming the GOP and the Tea Partiers with the help of the network news and big city papers -- and with their help trigger a "popular uprising" which would demand (he imagines) what he's dreamt about all his life -- that he impose a dictatorship with him at the top. You asked. Just sayin'.