Super Committee, Will It Succeed?

The Super Committee has been given the task of designing a bill to achieve $1.5 trillion or more in deficit reductions over the next 10 years.  They must submit a report by Thanksgiving. If they can reach agreement there will be an up or down vote in both chambers by Dec. 23, 2011. There will be no amendments, debate, hearings and best of all no filibuster.

The Super Committee can scrutinize the whole budget but The Hoss wonders if they will consider reducing the salaries, Medicare or pension benefits for Senators and Congressmen, or will they stick to the main big ticket items such as defense spending, Social Security, Medicare and Medicaid. What about increasing tax revenues, either by increasing taxes or eliminating tax loop holes?

Given that all six of the Republicans have indicated that tax increases are not on the table it is not clear whether or not one or two may be persuaded to increases revenues by eliminating or reducing home mortgage deduction, the deduction for employers who offer health care to their workers, or the retirement deduction. If so, a deal may be possible, as there should not be a problem in the Super committee members agreeing on cuts to Defense, Medicare and Medicaid.  Remember a simple majority is all that is needed to be able to bring a report which will be voted on.

If the Super Committee fails to agree or if Congress rejects its recommendations, then  across-the-board cuts of $1.2 trillion, equally divided between defense and domestic programs would be implemented.. However, certain entitlement programs such as Social Security, Medicaid, veterans benefits, and other “essential” programs would be exempt. Something The Hoss believes the Republicans will find unacceptable. Therefore, The Hoss predicts a plan will be presented and passed.

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Super Committee Members

Image via WikipediaThe race has begun with a full field of 12 . Six Republicans and six Democrats (A.KA. the Super Committee) must cross the finish line by November 3rd 2011. Their task is to produce a plan to cut one-and-a-half trillion dollars from the deficit in 10 years.

The Super committee is and split equally among members of the House and Senate.
The nominees are:

Sen. Max Baucus (Montana): The chairman of the Senate Finance Committee: Democrat.

Sen. John Kerry (Massachusetts): You know the climate change guy. Democrat.

Sen. Patty Murray (Washington): Appropriations Committee; she also chairs the Democratic Senatorial Campaign Committee. Democrat.

Rep. Xavier Becerra (California): Member Ways and Means Committee: Democrat.

Rep. James Clyburn (South Carolina): assistant leader to House Minority Leader Nancy Pelosi. Democrat

Rep. Chris Van Hollen, Jr. (Maryland): On the Budget Committee Democrat.

Sen. Jon Kyl (Arizona): Chair of the National Republican Senatorial Committee: Republican Whip.

Sen. Rob. Portman (Ohio): A freshman, member of the Budget Committee. Republican

Sen. Pat Toomey (Pennsylvania): A freshman. Member of the Senate Budget Committee. Republican

Rep. Dave Camp (Michigan): Chairman of the Ways and Means Committee, Republican

Rep. Jeb Hensarling (Texas): Chair of the House Republican Conference and vice chair of the House Financial Services Committee. Republican

Rep. Fred Upton (Michigan): Chair of the House's Energy and Commerce Committee. Republican.

There you have the Super Committee. Do they have an impossible mission? Should we call in Tom Cruise to accept this mission? The Hoss, in his next post will point out where these Super Committee members stand with regards to areas to be cut and their position on tax or revenue increases.

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U.S. loses AAA credit rating

U.S. loses AAA credit rating. Standard & Poor’s was severely critical of the American political process in its press release announcing the lowering the US credit rating to AA+. Further, Standard and Poor’s put the U.S. on notice that the long term rating could be lowered to AA within two years if spending reductions are less than the agreed to amount, or new financial pressures result in higher general government debt.

Standard and Poor’s but the blame squarely on the dysfunctional American political system.
Here is part of their announcement:

“We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related Fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week
falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade. Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policy making uncertainty, consistent with our criteria…”

They also said, “The political brinksmanship of recent months highlights what we see as America's governance and policy making becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in
the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program
that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures…”

In other words its time for the Democrats and Republicans to act like adults and not children and produce a workable solution to the American debt problem. Here is the complete Standard and Poor's report.

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Investors Flee to Cash

Image by Getty Images via @daylifeAnd there off, no not the thoroughbreds, but the investors running down the track looking for financial security in cash and away from stocks. North American stock markets had one of their worst days in recent history. Even gold was not immune from this stampede away from equities and into cash.  

Volumes were high, for example the NYSE hit 7.5 billion shares, not quite double this year’s average volume of 4.12 billion, so this sell off could not be attributed to low volume. Rather the very real fear of a global financial crisis sparked this panic sell by investors.

It almost seemed as if worried investors were sitting on the back of a bucking bronco and the only way they could see of staying on the horse was to liquidate as quickly as possible. Some banks are actually considering charging customers for holding their cash.


The next few days will be very interesting in deed. Will buyers step in to pick up undervalued stocks? Will Friday’s job numbers spark a buying spree or will they create further turmoil?

Stay tuned and lets see where the finish line is and which investors steer the right course.

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The Debt Ceiling Deal

Image via WikipediaThe American political system was put to the test during the recent debt ceiling crisis. This crisis exposed to the entire world the willingness of some American Republicans (Tea Party) to bring the world to the brink of financial disaster by defaulting on government bonds and other government commitments in order to avoid eliminating the Bush tax cuts or any form of increased taxation for the rich which would have provided a balanced approach to deficit-reduction.

The Deal,in summary form , over the next decade increases the debt ceiling by $900 billion along with spending cuts of $917 billion for a net $17 million. $1.5 trillion in further deficit reductions must be approved by Congress before December 23rd. These reductions are to come from a 12-member congressional committee, equally composed of Republicans and Democrats. However, there will be a similar-sized increase in the debt ceiling. If the committee fails to reach agreement or its proposal is rejected, $1.2 trillion in spending cuts will be triggered.

Let’s look at the reality, the likelihood of the committee of 12 Republicans and Democrats coming up with a deal that will be supported by both parties is almost nonexistent. The Republicans will remain adamant against any tax increases and the Democrats will protect their social programs such as Medicare and Medicaid. All that has really happened is a possible two year delay before the debt ceiling war is renewed. The American political system remains as partisan and dysfunctional as before this crisis began
.
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