Monday, February 12, 2018

Whiplash






"Hang on to something solid for the next few months. The stock market last week might have been the canary in the coal mine. We are in for a wild, yet necessary, ride."  


Whiplash. This term came to me yesterday. It explains quite a bit of what is happening in Washington. In previous posts, I have talked about how most administrations are the "ying" to the previous administrations "yang". Every previous administration tries to "bend the curve" from the prior administration(s). That is - until Donald Trump came around.

Trump is not "bending the curve" from the Obama, Bush or Clinton administrations. He is going to get some stuff done - and he is going to get some big stuff done in a big hurry. Is he going to change what Obama has done? Not only change it, but destroy most of it. He is a true iconoclast. The changes are going to come so fast, some of us might get "whiplash". But these are changes which MUST BE made.

First example. The Freedom Caucus in the House is having a fit right now over the size of the two year deal. Understandable - it is a budget busting number. BUT (and this is very important), the 2011 sequester, which was the worst idea in the history of man, left our military looking almost third world rather than like a super power. This current budget really needed to be "juiced" to get enough money to the military to get some things fixed. To get our readiness up to snuff. And (this is huge), to help ensure this budget was at least a little bit bipartisan, some Democrat "pet rock" programs also had to be over funded. Whiplash.

Next example. DACA. This issue has been going on now for just about forever. Again, to try and make this fix at least somewhat bi-partisan, President Trump offered to legalize 1.8 million dreamers. Wait! There are only 800,000 dreamers at last count! That is right. But the President wanted to lay out a number the Democrats could not turn down. In return, the President will get an end to chain migration, visa lottery and $25B to start funding the wall. No matter how carefully this is crafted, it will still look like amnesty to some. Whiplash.

Next example. Infrastructure. Today, the President is going unveil his long awaited infrastructure proposal. It is going to be massive - about $1.5T. Why so big? Because jack spit has been done in fixing and updating our infrastructure for decades. We need it. We are long overdue. The "shovel ready" boondoggle stimulus package that Obama visited upon our country, was not "shovel ready" at all. We did however, find out how fast a shrimp can go on a treadmill. Will this $1.5T add to our national debt? Absolutely. Whiplash. 

The bottom line is this folks. We elected an outsider - a businessman to be our President for a reason. We wanted to get some needed and critical items done. And with very little help from establishment Republicans, Democrats and the so called media, he is doing just that. He and his economic team are betting on hitting an inside straight. Betting that the economy will heat up just enough, to give a constant 3.5 or 4 percent GDP. That type of growth in the economy will mitigate some of the growth in the national debt. 

Are there dangers in all this whiplash? Sure, it the inside straight does not materialize and we get inflation due to an overheated economy, interest rates are going up. And if they go up, the cost of carrying a $22T national debt goes up. If that goes up too much, the economy tanks.

Hang on to something solid for the next few months. The stock market last week might have been the canary in the coal mine. We are in for a wild, yet necessary, ride.  

9 comments:

  1. Jim Jordan, Freedom Caucus stalwart said, "The American people ... could care less about their traditions of the Senate. They do care about their pocketbook. And what we’ve done is we’ve actually taken money from them to grow the size of government by almost 13 percent."
    When Republicans control the federal government, and particularly the White House, spend money like a drunken sailor and run up the US debt as far and as fast as possible. This produces three results – it stimulates the economy thus making people think that the GOP can produce a good economy, it raises the debt dramatically, and it makes people think that Republicans are the “tax-cut Santa Claus.”

    Increased Military Spending?
    End the senseless incursions in the Middle East!
    Leave billions of dollars in equipment there for them to use to kill each other and get our butts home.
    But in reality, the best management tool is to put the Pentagon on a tighter budget, so it is forced to make some tough choices.
    No one, hawk or dove, should sit still for the waste of tens of billions of tax dollars.
    Waste doesn't defend us.
    On the contrary, spending too much on the Pentagon just subsidizes bad choices.
    It's time for Congress, the president and the presidential candidates of both parties to speak out about Pentagon waste, and put forward concrete plans for reining it in. 1.2 trillion for an F-35's lifespan. Unmanned naval tankers? Close bases! Stop building shallow water Littoral ships! Destroyers built in Bath Shipworks in Maine that nobody wants! Coast Guard Security Center in Mississippi that the Coast Guard doesn't want! I could go on for 24 hours listing pork that congress has decided we need but the military doesn't.
    Otherwise, our era may have the dubious distinction of being the golden age of Pentagon waste.

    Infrastucture?
    Ok that’s confusing. Somehow we’re only going to spend 200 billion and that will generate 1.3 trillion from states and private investment?
    I don’t think I’ve ever seen a bill like this before.
    I guess we’ll have to wait for Congress to hash this out, but something tells me we’re going to end up being on the hook for far more than 200 billion. Or, nothing will be built/repaired.

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  2. 45 sent Congress a sweeping plan Monday to rebuild the nation's depleted roads and bridges — then immediately raised doubts about how committed he was to delivering on that campaign promise.

    "If you want it badly, you're going to get it," 45 told state and local officials during a meeting at the White House. "And if you don't want it, that's OK with me too."

    Pelosi finally gets one right!
    "After a full year of empty boasts, the president has finally unveiled a puny infrastructure scam that fully fails to meet the need in America's communities," said House Democratic leader Nancy Pelosi of California.

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  3. “Major Savings and Reforms.”

    Those are all the cuts the 45 administration is proposing, and they’re going nowhere.

    45 again wants to take a meat cleaver to the Environmental Protection Agency, chopping its budget by one-third. He’s asking Congress to scrap entirely community-development block grants and heating assistance for low-income housing. And he wants to eliminate funding for the Corporation for Public Broadcasting, the national endowments for the Arts and the Humanities, and a slew of other independent agencies.
    The proposals prompted an outcry from Democrats, advocacy groups, and activists. But there wasn’t much cause for alarm: Congress ignored most of them last year, and lawmakers are even more likely to ignore them again this year.
    For good measure, 45 is proposing hundreds of billions in new cuts to Medicare, a program he vowed as a candidate to leave alone and which he generally laid off a year ago. But those reductions, too, aren’t going to happen.

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  4. So, on one hand complained loudly (and rightly) about the deficit, and then on the other hand decry any attempt to cut spending and reduce the deficit. Please, what are you telling your representatives in Washington that might lessen their obvious confusion?

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    Replies
    1. Don't give the military more money to waste. Define our security needs better and focus funds on same. Stop ridiculous adventures in Mid-East. We don't need to be everywhere all the time. Let our perceived power be the weapon of choice. Return the draft OR mandatory service.
      No deferments! Everyone can do some worthy task. Make American Great Again by making every American have some skin in the game.

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  5. Don't give the military less money and expect them to prioritize any better than they do now. If in fact the Navy is down, to lower than the number of ships we need, and the Air Force lacks parts to keep their planes in the air, that needs to be funded. If you can point out some real waste that does not affect readiness, let us attack that specifically.

    If you are really worried about government deficits, you should be worried about the more than 80% of the budget which is NOT going to the essential function of national defense.

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  6. Biggest increase (percentage wise) will be the interest payments on the debt due to the unfunded corporate welfare program and the increased military spending.
    And your phraseology (essential funding of national defense) speaks for itself. Fund appropriately for defense, not offense.
    The best offense IS a good defense. It worked during the nuclear years, it will work now.
    Come home, stay home and let the action come to us, and we will have the resources and will to deal with it.
    No more body bags from the Mid-East. End it now.

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  7. Perfectly acceptable opinion, if you are consistent about it. But I am afraid you presume a rational enemy. Do you really believe that if North Korea or Iran has a nuclear ICBM capability that they will NOT use it? If they fire one at the US, are we allowed to retaliate "over there"? How about if they fire at London, or Japan, our staunch allies, do we have any obligation? Or the age old question: "would you rather fight them here or over there?"

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  8. Biggest percent increase may be interest, true, but because of the huge national debt created by NON-defense spending over the last 8 years, coupled with a small increase in the interest rate. And it is still "entitlements" that are out of control and growing worse.

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