The Washington Post asked readers to describe outgoing House Speaker Nancy Pelosi in a single word. It then made a word cloud from the responses:
Jay Cost thinks Obama, like the economy, is kind of stuck:
The macro trend, I would say, has essentially been flat for the last few months — as Americans have developed fairly stable opinions of the 44th president by this point that probably are not easily dislodged. In the long term, the way the president gets his numbers up will be to convince the country that he is a good steward of the economy, a view most of his fellow citizens do not hold at the moment. This is why the tax cut deal was such a sensible compromise for President Obama to make, despite the criticism he received from his left flank.
Market failure or government failure? The BigGov party is promoting the former narrative, but the latter is more accurate in explaining how government created incentives for disaster. Mark Perry and Robert Dell lay it all out. Here is a sampling, but I urge you to read the whole thing:
1. Bank misregulation, in particular the international Basel capital rules, including a U.S. adaptation to them—the 2001 Recourse Rule—and the outsourcing of risk assessment by regulators to government-sanctioned rating agencies incentivized (not merely “allowed”) the creation and highly-leveraged systemic accumulation of the highest yielding AAA- and AA-rated securities among banks globally.
2. Continually increasing leverage—driven largely by Fannie Mae and Freddie Mac credit policies and the political obsession with taking credit for increased homeownership—into the U.S. mortgage system.
3. The enlargement of the riskier subprime and Alt-A mortgage markets by Fannie and Freddie through the abandonment of proven credit standards (e.g., dropping proof of income requirements) during the 2004-2007 period, and their combined accumulation of a $1.6 trillion portfolio of these loans to meet the affordable housing goals Congress mandated. As of mid-2008, government entities had purchased, guaranteed, or compelled the origination of 19 million of the 27 million total U.S. subprime and Alt-A mortgages outstanding.6
4. The FDIC, Federal Reserve, Treasury Department, and Congress undertook explicit or implicit creditor bailouts for large financial institutions starting in the 1980s (First Pennsylvania, Continental Illinois, the thrift industry, the Farm Credit System, etc.) and continuing to 2008 (Bear Stearns). These regulatory decisions led to an absence of creditor discipline of financial institution leverage and risk-taking (especially at Fannie and Freddie) and the “too big to fail” expectation of a government bailout.
5. The increase in FDIC deposit insurance from $40,000 to $100,000 per account in 1980 combined with the unchecked expansion of coverage up to $50 million under the Certificate of Deposit Account Registry Service beginning in 2003. These regulatory errors of commission and omission reduced the incentives of business, institutional, and high net-worth depositors to monitor and discipline excessive bank leverage and risk-taking.
6. Artificially low and sometimes negative real federal funds rates from 2001 to 2005—a result of expansionary Fed monetary policy—fueled the subprime and Alt-A mortgage boom and widened the asset-liability maturity gap for banks (see chart below).
Uncle Sam runs his books like he’s operating a hot dog stand rather than a $14 trillion economic superpower. It’s cash in (revenues), cash out (spending), forget about the future costs of Social Security and Medicare. But what if government bean counters acted like they worked for USA Inc., instead? The numbers would come out just a bit differently, accordingly to a little noticed Treasury Department report that didn’t escape the notice of my Reuters colleagues:
1. The Financial Report of the United States, which applies corporate-style accrual accounting methods to Washington, showed the government’s liabilities exceeded assets by $13.473 trillion. That compared with a $11.456 trillion gap a year earlier. Unlike the normal measurement of government intake of receipts against cash outlays, accrual accounting measures costs such as interest on the debt and federal benefits payable when they are incurred, not when funds are actually disbursed.
2. The report was instituted under former Treasury Secretary Paul O’Neill, the first Treasury secretary in the George W. Bush administration, to illustrate the mounting liabilities of government entitlement programs like Medicare, Medicaid and Social Security.
3. The government’s net operating cost, or deficit, in the report grew to $2.080 trillion for the year ended September 30 from $1.253 trillion the prior year as spending and liabilities increased for social programs. Actual and anticipated revenues were roughly unchanged.
4. The cash budget deficit narrowed in fiscal 2010 to $1.294 trillion from $1.417 trillion in 2009. But the $858 billion tax cut extension package enacted last week is expected to keep the deficit well above the $1 trillion mark for another year.
5. Among key differences between the operating deficit and the cash deficit were sharp increases in costs accrued for veterans’ compensation, government and military employee benefits and anticipated losses at mortgage finance giants Fannie Mae and Freddie Mac.
6. The report said the present value of future net expenditures for those now eligible to participate in these programs over the next 75 years declined to $43.058 trillion from $52.145 trillion a year ago — a change attributed to the enactment of health-care reform legislation aimed at boosting coverage and limiting long-term cost growth. The overall projection, including for those under 15 years of age and not yet born, is much rosier, with the 75-year projected cost falling to $30.857 trillion from last year’s projection of $43.878 trillion. The report noted, however, that there was “uncertainty about whether the projected reductions in health care cost growth will be fully achieved.”
Jonah Goldberg sizes up the possible GOP presidential contenders (presented in outline form by me):
1. By my count, 24 people benefit from nontrivial presidential buzz: Sarah Palin, Mitt Romney, Newt Gingrich, John Thune, Tim Pawlenty, Mitch Daniels, Mike Pence, Rick Santorum, Haley Barbour, Mike Huckabee, Bobby Jindal, Paul Ryan, David Petraeus, Ron Paul, Jeb Bush, John Bolton, Bob McDonnell, Jim DeMint, Chris Christie, Herman Cain, Gary Johnson, Judd Gregg, Marco Rubio and Rick Perry.
2. Rubio, Ryan and Jindal … are all wisely sitting out the presidential contest … though the GOP’s three golden boys are ripe vice-presidential picks.
3. Former Florida Gov. Jeb Bush and the governors of New Jersey, Virginia and Texas — Christie, McDonnell and Perry — probably aren’t running. … Also, there’s growing buzz that Huckabee … may not run because he’s got a big new contract with Fox News in the works.
4. DeMint … has said he’s not running but acts like he might be. … Gregg … acts likes he’s not running but hasn’t ruled it out. Pence … definitely wants to run but now may switch to the Indiana governorship.
5. Barbour … could be a front-runner (and a hilarious, adept debate opponent for Obama), but his plans remain murky.
6. In many respects, Thune is the GOP version of John Kerry: a candidate with presidential hair who seems “electable” despite not having done much.
7. That leaves us with a top tier of five front-runners: Romney, Palin, Gingrich, Pawlenty and Daniels. Romney is the organizational front-runner; Daniels is the first pick of wonks and DC eggheads; Palin probably has the most devoted following among actual voters; Gingrich will dominate the debates, and Pawlenty (vying with Daniels) is the least disliked.
I am beginning to think the field of legit contenders might actually be quite small in the end. But my dark horse entry is still Jeb Bush.