January 10, 2010

Ho Hum: CBO Estimate of $390 Billion Oct.-Dec. Deficit Gets Two Establishment Media Items

On Thursday, the Congressional Budget Office issued its Monthly Budget Review for December 2009. It estimates that December’s federal deficit will be $92 billion when the Treasury Department releases its Monthly Treasury Statement on Wednesday, and that the deficit for the first fiscal quarter will be “about $390 billion.” The CBO director’s related blog post is here. The establishment press has virtually ignored it.

Here is the initial result of a Google News search on “CBO deficit” (not in quotes) for articles relating to the Congressional Budget Office’s Thursday estimate of the federal government’s deficit for the first quarter of its fiscal year:

CBOdeficitSearch011010

Clicking on the “all 10 new articles” link reveals that there are really only four results, that three of them are at blogs, and that only one of the blog posts is from an establishment media site:

CBOdeficitSearch011010

Here is the opening paragraph from the CBO Director’s blog post:

The federal budget deficit was about $390 billion in the first quarter of fiscal year 2010, CBO estimates in its latest Monthly Budget Review—$56 billion more than for the same period in fiscal year 2009 despite reduced spending related to turmoil in the financial markets. Outlays were slightly lower than they were last year at this time, but revenues have fallen by about 11 percent. Later this month, CBO will issue new budget projections for 2010 and the following 10 years.

As to the detailed search results:

  • Corey Boles’s item at the Wall Street Journal appears to be the only one that might have made it into the print edition of an establishment media newspaper.
  • Jordan Fabian at the Hill should be hoping very few people see the reporter’s entry. It claims that “The CBO has reported that the legislation will reduce the federal deficit over the next decade but Republicans say that it will make the deficit rise even more.” The sentence technically would have worked if Fabian hadn’t replaced “federal” with “reported.” The problem, as CBO noted on December 23, is that “savings to the HI (hospital insurance) trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs.” In other words, Congress was “double counting” and the CBO took note of it. The effect of the legislation would be to increase the “federal” deficit, i.e., the real deficit incurred in all federal government operations).
  • Donald Marron at Wall Street Pit fairly notes that “A portion of that (17%) increase (in the deficit) is due to the timing of weekends and holidays, but even controlling for those, the deficit is up 8%.”

Finally, Peter Suderman at Reason has the best take (internal links were in original):

The CBO, which admits a high degree of uncertainty in its findings but is arguably still the best source we have for guesses about the budgetary outlook (and is most accurate when looking at what’s already occured), has been calling our country’s current fiscal path “unsustainable” since at least June. Half a year later, though, it appears that deficit’s still expanding like Violet Beauregarde when she gets to the blueberry pie section of Willy Wonka’s chewing gum.

It would appear that the establishment press believes the less said about how dire things really are, the better.

So much for journalistic responsibility. I guess the love life of Peter Orszag, President Obama’s Director the Office of Management and Budget, is more interesting.

Let’s see how much coverage Treasury’s actual results get on Wednesday, and how the press tries to spin them.

Cross-posted at NewsBusters.org.

Venezuela Slipping Into Socialist/Statist Darkness, Figuratively and Literally

HugoChavez0110Four recent stories out of Venezuela each give readers brief glimpses at how Hugo Chavez’s brand of authoritarian socialism is critically wounding what could be a resource-rich, financially prosperous country:

  1. January 9, Associated Press — “Venezuela weakens currency for 1st time in 5 years.”
  2. January 10, Bloomberg — “Chavez Says He’ll Seize Businesses That Raise Prices.”
  3. December 22, AFP — “Chavez announces new discount ‘socialist’ stores.”
  4. January 9, AP — “Venezuela faces risk of devastating power collapse.”

Collectively, however, they depict a country in the early stages of a headlong free-fall into Cuban-style financial ruin. No U.S. establishment media enterprise appears interested in making the accelerating decays in financial well-being and personal freedom in that country understandable to the average person.

AP’s headline at the first item noted seems designed to avoid attention. This isn’t a mere “weakening” of the currency; instead, it’s a bizarre bi-level devaluation of up to 50%:

President Hugo Chavez’ decision to devalue Venezuela’s currency for the first time in nearly five years aims to stretch his government’s oil earnings further and counter a recession by increasing spending.

The devaluation of the bolivar lessens a wide gap with the black-market exchange rate for dollars and will unavoidably push inflation – already the highest in Latin America at 25 percent – to even higher levels.

Opposition leaders on Saturday called the devaluation a blow to Venezuelans that will make them pay through inflation while letting the government instantly convert its oil earnings into more cash domestically to boost spending ahead of congressional elections.

…. With the devaluation, Chavez also set a new two-tiered exchange rate in an attempt to hold down prices of priority imports like food to counter inflation.

The currency’s official exchange rate had been held steady by the government at 2.15 bolivars to the dollar since the last devaluation in March 2005. Chavez said the bolivar will now have two government-set rates: 2.6 to the dollar for transactions deemed priorities by the government, and 4.3 to the dollar for other transactions.

The wire service’s Jorge Rueda never specified the percentages of devaluation (about 20% and exactly 50%, respectively, for “priority” and “other” transactions).

Chavez’s threats identified in the Bloomberg item, to the extent they are successful, are destined to keep businesses from fully replenishing their stocks of goods for sale:

Venezuelan President Hugo Chavez said that businesses have no reason to raise prices following the devaluation of the bolivar and that the government will seize any entity that boosts its prices.

Chavez said he’ll create an anti-speculation committee to monitor prices after private businesses said that prices would double and consumers rushed to buy household appliances and televisions. The government is the only authority able to dictate price increases, he said.

“The bourgeois are already talking about how all prices are going to double and they’re closing their businesses to raise prices,” Chavez said in comments on state television during his weekly “Alo Presidente” program. “People, don’t let them rob you, denounce it, and I’m capable of taking over that business.”

If jawboning and intimidation are fully effective, most retail businesses will only have half-empty shelves and rising overhead costs — circumstances likely to put many of them out of business.

Now there’s a coincidence (/sarcasm). The December 22 AFP item reveals that the Chavez is going with a so-called “public option,” if you will, for everyday goods and services:

President Hugo Chavez on Tuesday announced a new chain of government-run, cut-rate retail stores that will sell everything from food to cars to clothing from places such as China, Argentina and Bolivia.

“We’re creating Comerso, meaning Socialist Corporation of Markets,” Chavez said at the opening of a “socialist” fast-food location for traditional Venezuelan arepas (cornbread).

“They’ll see what’s good. We’ll show them what a real market is all about, not those speculative, money-grubbing markets, but a market for the people,” said Chavez in his drive to change Venezuela from a market-based economy to a socialist one.

…. We’re going to defeat speculation. Private individuals in sales can still sell, but they’ll have to compete with us and with a people who is now fully aware,” Chavez said.

…. The socialist retail outlets will serve the public alongside the Mercal supermarket chain, which sells subsidized food in Venezuela’s working-class neighborhoods.

So it would appear that Chavez is setting up his state-run enterprises just in time to fill in the devaluation-caused breach. How convenient.

One also expects that Comerso will have all kinds of built-in advantages over Mercal and other competitors, like exemptions from taxes, more lax regulation, the ability to get government subsidies for losses incurred. These and other advantages, by the way, are also reasons why the so-called “public option” for health insurance included in many versions of statist health care being considered by the U.S. Congress is nothing but a ruse to eventually and inevitably put private insurers out of business.

Meanwhile, the AP’s Fabiola Sanchez, in describing the “devastating power collapse” in the final listed item above, wants to create the impression that it’s happening because of the whims of Mother Nature. But the reporter at least gives voice to the more likely culprits in later paragraphs:

Chavez has blamed the electricity predicament on the El Nino weather phenomenon in the Pacific Ocean, along with global warming. But critics blame the government, saying investments in infrastructure haven’t kept up in spite of Venezuela’s bountiful oil earnings.

(Economics professor Victor) Poleo said investments have been hobbled by a lack of planning, waste and corruption, and that based on his research only about 25 percent to 30 percent of the funds approved for infrastructure upgrades have reached their intended uses.

The government’s electricity minister, Angel Rodriguez, was not available to respond to the accusations.

Earlier paragraphs from Sanchez indicate that the government is already imposing power rationing, including limiting the hours of operation of …. shopping malls. Imagine that. Will Comerso have to abide by such restrictions? Will it also get the “priority” purchasing rate while its competitors are stuck with the “other” rate?

Sanchez also identifies a clear overdependence on one power source, namely the Guri hydroelectric dam, which supplies 73% of the country’s electricity. Fine, but Chavez has had every bit of 10 years to do something about that, and is sitting on a veritable ocean of fossil-fuel resources that could have been called into play if the related electricity-generating capacity had been built.

Put these four stories together and you see a country that is not at all far from being in a situation of forced misery with the state as sole provider of many if not most of the basic necessities of life. One wonders if it isn’t already too late to keep Venezuela from becoming Cuba writ large. If America wakes up one morning to find that this is indeed the case, an establishment media elite that has been all too sympathetic to Chavez from the get-go and has failed to paint an accurate picture of what has been happening to economic and human rights in that country for years will deserve a large share for that “surprise.”

Cross-posted at NewsBusters.org.

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Correction: Mercal is a state-owned enterprise. Comerso’s private-sector competitors are not named in this post. The strikethrough of “Mercal and” above remedies that error.

Brit Hume Not Tolerated for Being…Intolerant?

Filed under: Activism,General — Rose @ 2:58 pm

I’ve seen the Hume segments referenced by this column and they were the utterly benign…

The Crucifixion of Brit Hume
Matt Barber
Friday, January 8, 2010

…Nothing makes the left lose its collective noodle like an open proclamation of Christian faith. You don’t see it when Muslims proselytize in government schools; the ACLU doesn’t sue when Wiccans share their witchy ways; militant “gay” activists don’t picket Buddhist temples with bullhorns while inhabitants grasp at Zen. No, there’s something about Christianity that just drives ‘em nuts. Always has. Always will.

Case in point: Recently, on two separate occasions, Fox News veteran Brit Hume both publicly pronounced his own faith in Jesus Christ and boldly suggested that Tiger Woods might find “forgiveness and redemption” for his serial philandering should he “turn to the Christian faith.”

…As reported by CNSNews.com: “Tom Shales, media critic for the Washington Post, in a Tuesday column, demanded that Hume apologize and called his Christian remarks ‘even only a few days into January, as one of the most ridiculous of the year.’”

MSNBC’s reliably raspy Keith Olbermann accused Hume of attempting “to threaten Tiger Woods into converting to Christianity” and demanded that his Fox News ratings superior “keep religious advocacy out of public life” (back in the closet, Brit old boy).

Olblubberman then compared Hume to a terrorist, suggesting that “the worst example” of this kind of “proselytizing” are “jihadists.” Finally, he betrayed the left’s typical anti-Christian bigotry, suggesting that Jesus may have been a homosexual and wondering aloud: “WWJDIHS: What would Jesus do if he’s straight?”

…While the mainstream media’s rage was clumsily managed (or masked), unbridled hate boiled over in the left-wing blogosphere. On the sexual anarchist site, “JoeMyGod,” poster “QScribe” suggested that Brit Hume’s deceased son had been “gay” and viciously accused Hume of being responsible for the young man’s suicide: “Brit Hume still hasn’t ‘repented’ for trashing his gay son and driving him to suicide. When I want moral guidance from a pig like that, I’ll be sure to ask. Until then, he really ought to STFU.” (Hume has publicly shared that his son’s heartbreaking suicide played a large role in his acceptance of Christ.)

The next commenter went so far as to cruelly imply that Hume had sexually molested his own child and further mocked the tragic suicide, writing: “Dead victims don’t tell on their molesters.”

Commenting on the Huffington Post, “Kandaher” bypassed Hume altogether and aimed his vitriol directly at his Creator: “anyone (sic) watched ‘The passion of Christ’? I thoruhgly (sic) enjoyed it. Nothing like watching this bloke getting beaten up! He deserved what he got and more!”

Really? Hold up a mirror dude, and if you have a reflection, there’s the perfect picture of intolerance and hate. I wonder how “tolerant” they think Muslims are, who hold a swords to the necks of men, women and children and say “Submit to Allah or die.” Is that “tolerant” or is that “just their culture?”

Barber wraps up the Townhall column nicely…you can have a read here.

Further Proof That Affirmative Action Doesn’t Work…

Filed under: Activism,Economy,Health Care,Taxes & Government — Rose @ 1:07 pm

You’re put into a position for which you are woefully inadequate in order to meet some race-based quota (racism) and give cover to your modern-day “masters” on the Democrat Party plantation.

And you end up looking like a real idiot as everyone starts to figure it out

Jim Harper over @ CATO & Liberty (“What’s a Little Promise Among Friends?”) has the “naked” truth.

Fan and Fred: Frauds by Design? (Also See Update Point)

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 8:29 am

FredAndFanLogos1209A new revelation makes their failures look more contrived than incompetent.

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Note: This column appeared at Pajamas Media and was teased and extended at BizzyBlog on Friday.

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In September of 2008 (“Think Enron Was Bad? ‘Fredron’ and ‘Fanron’ May Be Worse”), reacting to the implosions at Fannie Mae and Freddie Mac, the two “government sponsored enterprises” that had just become “government controlled enterprises,” I quoted a Wall Street Journal editorial telling readers that, “Taxpayers are now on the hook for as much as $200 billion ….”

We should be so lucky. On New Year’s Eve, a Bloomberg story headline told us that the losses will be $400 billion. The story’s first sentence actually says that “taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion” (italics mine). The only question appears to be, “By how much?” We’re already at eight Enrons (losses there were roughly $50 billion) and counting.

The government has given up even trying to guess how deep the hole is. On Christmas Eve, the Treasury Department, which had previously “limited” its financial commitment to $400 billion ($200 billion for each entity), issued a cleverly worded press release. Blandly titled “Update on Status of Support for Housing Programs,” it told us that Treasury’s financial commitment to keep the two entities afloat will “increase as necessary to accommodate any cumulative reduction in net worth over the next three years.” In other words, Fan and Fred will receive relief without limits.

Many readers will be less than pleased to know that Massachusetts Congressman Barney Frank now considers Fan and Fred to be a “public policy instrument of the government,” and that they “have become a kind of public utility.” In her story about the unlimited relief with a Pollyanna title (“New Aid for Fannie and Freddie”), Louise Story at the New York Times wrote that “the Obama administration has effectively transformed them into arms of the government, using them to help carry out its mortgage modification programs.” Great.

How have these new “arms of the government” been performing? Last week, Peter S. Goodman at the Times brought forth evidence that the modification programs have “done more harm than good.” That harm is escalating. Desperate for success stories, Treasury reacted to the fact that many of those who are trying to get relief are fudging their applications by significantly understating their income in hopes of getting undeservedly low monthly payments by issuing a mid-December directive ordering participating lenders not to penalize applicants for having done so. Associated Press columnist Rachel Beck described this move as “reward(ing) liars.” Expect more liars to apply for “rewards.”

This is all happening way too easily. It’s enough to make you wonder if designing Fan and Fred for failure while making them “too big to shrink” in the eyes of many hasn’t been the plan all along.

If the previous statement seems extreme, consider this shocking revelation carried in the Wall Street Journal last week — a tidbit that also, strangely enough, has barely gotten any notice in the rest of the establishment media:

New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

Before Pinto’s bombshell, we knew that Fan and Fred were used as instruments to “encourage” loans to undeserving borrowers. We knew that this “encouragement” was enforced through the Community Reinvestment Act (CRA), a law originally passed in the 1970s that was “progressively” given threatening teeth in ensuing years.

We have known for some time, as described in my September 2008 column, that Fan and Fred lowered the qualifying standards for conventional and subprime loans that they would buy from participating lenders roughly as follows (quoting from that column):

The credit score threshold for conventional mortgages, which had generally been 670 or more, dropped to about 630. In the real world, a score of 630 indicates that you’re having trouble with your debt load, paying your bills on time, or a little of both.

More ominously, the credit score threshold for subprime mortgages, which had generally been 630 or more, fell to about 590. A score of 590 is the credit scoring equivalent of barely having a pulse.

We know that in doing this, Fan and Fred, as well as those who underwrote or bought securities backed by these conventional and subprime mortgages, were taking a huge risk by hoping that borrowers with mediocre or poor credit histories would somehow keep up with their mortgage payments. The chart from Fair Isaac, which shows the chances of going seriously delinquent (90 days or more late) for various credit score ranges based on lenders’ experience through the mid-2000s, shows how serious that risk assumption was:

FICOdelinquencyChances2008

In lowering the conventional score threshold, Fan and Fred hoped that borrowers with scores between 630 and 670 would defy all reasonable expectations that they would fall seriously behind on their mortgages at three or more times the rate of those whose scores exceeded 670. In lowering the subprime score threshold, they dreamed that the default rates would be far below the experience-based average of about one-third. They passed these hopes and dreams on to both their stockholders and those who invested in mortgage-backed securities. These judgments have proven horribly wrong.

Incredibly, the Pinto paragraph above takes things one step further. It’s bad enough that Fan and Fred lowered the loan approval thresholds. Pinto’s point is that for 15 years, they doubled down by “routinely” misclassifying approved loans, effectively telling the capital markets and the public that these loans weren’t as risky as they really were. Because of this, securities backed by these mortgages carried lower interest rates than they would have if the risks had been properly disclosed. Some of the offerings should probably never have been issued, or should have been given junk-bond pricing. Further, misrepresented loans Fan and Fred kept on their books enabled the two entities to continually make false claims of financial health.

Enron’s perpetrators were aggressively prosecuted and shamed, while Fannie Mae’s and Freddie Mac’s executives, officers, and directors made and kept millions in undeserved salaries and bonuses, even during years-long periods when their books were unauditable. Up to and including Rahm Emanuel, President Obama’s chief of staff, many if not most of them are still influential and respected players within the government and the Democratic Party.

Meanwhile, the government has gained a firm and seemingly indefinite grip on goings-on in the housing and mortgage markets. We’re supposed to believe that this statist result is merely the product of extraordinary incompetence and greed with no grander design. Excuse me for being skeptical.

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UPDATE: Great point by a PJM commenter

There is an additional substantive problem with Fannie and Freddie.

They are no longer controlled by independent shareholders. They are completely controlled by the Federal government and are acting as its agents and instrumentalities. Despite the formality of a conservatorship, there is no conceivable state of affairs where they can regain their solvency or independence.

Under any system of accounting rules, where one entity is completely owned and controlled by another, the owner must show the subsidiary’s obligations on the owner’s balance sheet as the owners liabilities.

The US government has not done this with F&F. Their more than T$5 of obligations must be added to the US Governments outstanding debts of T$12. The result is a an increase in national debt of about 40% of GDP, which kicks us well over 100% of GDP.

Looking at the entities’ balance sheets, it looks like the the number involved is a bit less than “only” $2 trillion. I believe the $5 trillion might include loans securitized and dumped on the private investors; sadly, those private investors have mostly already suffered the consequences of Fan and Fred’s massive fraud, or have themselves been bailed out by the government.

But the commenter’s point stands. Treasury’s open-ended commitment to fund future capital shortfalls, along with the Barney Frank quotes in the column, clearly remove any legitimate objection there may once have been to recognizing Fan’s and Fred’s debts as obligations of the government itself.

Positivity: Benedict XVI tells youth not to fear a religious vocation

Filed under: Positivity — Tom @ 6:56 am

From the Vatican:

Dec 31, 2009 / 05:10 pm

On the last day of 2009, Pope Benedict XVI led first vespers at the Vatican’s St. Peter’s Basilica. In addition to singing the Te Deum hymn, he exhorted young people to have the courage to pursue their vocation.

The Te Deum is sung in thanksgiving to the Lord in the Catholic churches of the world on December 31 of each year. In his remarks, the Holy Father noted that this is a time to “put the various events of our lives – major and minor…under the sign of salvation and accept the call God makes to guide us toward a goal beyond time itself: eternity.”

“We are called to say with our voices, hearts and lives our ‘thanks’ to God for the gift of his son, …for family, for community, the church and the world,” he continued.

Pope Benedict gave special thanks for those who live and work within the Diocese of Rome, of which he is bishop. He praised efforts within the city to follow in the footsteps of Christ and encouraged further participation of the faithful “to be able to offer a valid contribution to the edification of the Church.”

In the message, Benedict XVI put special emphasis on the importance of reaching youth with God’s Word. “Rome needs priests that are courageous announcers of the Gospel and, at the same time, reveal the merciful face of the Father.”

The Pontiff invited young people “to not be afraid to respond to the complete gift of their own existence to the call that the Lord makes to them to pursue the way of priesthood or the consecrated life.”

Go here for the rest of the story.