My 2 Cents Worth Regarding the Federal Default -- 6 Days and Counting -- Absolutely Nothing To Do With The Bakken

The following is all opinion. Phrases or statements sounding like fact are most likely opinion; if they sound factual, they need to be confirmed by official sources. 

Governments the size of the US government cannot "turn on a dime," so if plans are not in place for social security checks to go out on August 2nd (2011), by now, they probably won't go out.

But you know, the checks will go out. Everybody knows. That's how it goes.

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Theme song for White House aides:

Everybody Knows, Leonard Cohen

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That's how it goes.

Everybody knows the boat is leaking
Everybody knows that the captain lied
Everybody knows this broken feeling
Like their father or their dog just died.

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So, one of three things is going to happen/has happened:

1) A deal to raise the debt limit is not reached by the deadline (August 1, 2011, 23:59 hours), and the US officially defaults. But behind the scenes, the administration has already decided to invoke executive powers or14th amendment by executive order to pay all or "some" US bills. If "some" bills, the list has already been made, which will include social security checks. They are not in the "Al Gore lockbox" but social security funds will be treated as if they were. All of other bills will be paid with "IOU" warrants. The US, if it does not pay all bills, is technically in default, but social security and some other "critical" payments would be made.

2) A deal is reached to raise the debt limit at the very last minute (August 1, 2011, 23:59 hours), all bills will be paid. The deal may be "the" final deal in this go-around, or may be a short-term deal to allow more negotiations. Because "the list" has already been drawn up, and "everyone" knew that bills would be paid, payments will go out as scheduled.

3) A deal is not reached by the deadline, and US officially defaults. Unlike outcome #1 above, the list has been drawn up, but the president says "no." No bills are to be paid.

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From what I can determine based on those three possible outcomes, the buck stops at the Oval Office. The president has to sign off on any deal.

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The legacy of every president is phrased in about the same number of syllables as the president's full name:

• George Washington: Father of our country
• Abraham Lincoln: Freed the slaves; US Civil War president
• FDR: WWII, Social Security
• IKE: golf, post war-boom, Cold War
• JFK: Assassinated, Bay of Pigs
• LBJ: Vietnam war
• Richard Nixon: resigns
• 1st Bush: No new taxes, watch my lips
• Clinton: impeachment
• 2nd Bush: War on Terror, 9/11, Katrina
• Obama: US defaults, first time, banana republic; ObamaCare debacle;
  

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In the short term, if the US defaults, the mainstream media will savage the GOP, and, in fact, the GOP may lose big in public opinion and in the next election.

In the long term, when the history books are written, the legacy will be as above. Does anyone remember the Speaker of the House or the Senate Majority Leader under George Washington, during the Civil War, during the Vietnam War, under President Clinton? The names Reid, McConnell, Pelosi, and Boehner will be long forgotten by the time this president's legacy is written. Even Joe Biden's name is likely to be forgotten (in fact, we haven't heard his name in several days now).

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So, the question is this: will President Obama accept this legacy, the first president to preside over a US default? That's a tough one.

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So, where has the far right wing GOP drawn their line?

• Rise in debt ceiling must be offset by cuts in spending equal to the rise
• No new taxes (includes no "smoke and mirrors," no new definitions, no code words)

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Switching gears: from the president's vantage point -- "Never let a serious crisis goes to waste."

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Where has the president drawn the line?

• "Never let a serious crisis go to waste."

This is why the president continues to negotiate and won't accept certain congressional plans.

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 Where has the far left drawn their line.

• I don't think anyone outside the Reid-Pelosi circle knows.

Because of this, the President risks coming to a deal that his own party refuses to support. The president's ability to prevent a default could actually be scuttled by his own party, not the GOP. Of course, it will still be the GOP that gets savaged by the mainstream media because the GOP dragged its feet too long to allow the President time to arm twist his far left base.

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Two more things:

• Cuts in spending are in the out-years, after the present bunch of folks are out of office.
• New taxes take effect immediately.

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What is the far right GOP afraid of?

• Negotiations will result in new taxes, new policies, new social engineering.
• Remember: "Never let a serious crisis go to waste."

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The odds of passing a comprehensive plan decrease each day. Some say as of Sunday, July 24, 2011, it was too late to pass a comprehensive deal. [Update: somehow the deal was done -- I forget how it ended, but I know the US did not default.]

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January 15, 2012: this story ended up being a non-story. I don't recall how it ended, but I know the US did not default. It was all political theater.

July 25, 2011, 3:00 p.m.: Talking head on CNBC said that Bank of America says the real "drop dead" date is now August 10, 2011, and not August 2, 2011, as originally expected. The new date is due to higher tax receipts coming in than expected. I will stick with the "August 2" date to watch this non-event, political theater play out.

July 25, 2011, 7:00 p.m., Kudlow: President Obama agrees to no new taxes. Now, will the liberal base agree to this, or will the liberal base scuttle the plan? Right wing GOP still not happy because they haven't got the other half of the deal -- cut in spending. Boehner accused the president of moving the goal posts. The right wing GOP is starting to sound like it is moving the goal posts; they have not, but at some point compromise is required. The right wing wants to make major changes in entitlements but that's not gonna happen in a couple of days.


July 25, 2011, 9:00 p.m.: President's speech. Oh-oh. The first few minutes of the speech -- half of it related to tax increases -- on hedge funds, corporations with special exemptions (code word for "Big Oil"); and even mentioned "those earning less than $250,000 won't see any tax increase."  He is back to asking wealthy Americans to pay more taxes -- regardless of what side of the fence one is on, his speech was very clear -- he wants increased taxes. He is still sticking to the August 2, 2011, "drop dead date", even though Bank of America says the real "drop dead date" is August 10. The president also left open his option to veto any compromise bill if he doesn't like it.  It will be interesting to see the post-speech analysis. My analysis: he set the process back; closer to default; he wants increased taxes. Kudlow must be shocked.

July 25, 2011, 11:59 p.m.: Bloomberg -- Wells Fargo Bank says "drop dead date at least a month later than August 2, 2011."

July 26, 2011, 3:01 a.m: Read this story very closely, and then tell me that you don't think the GOP would push Obama to default. You start to get the feeling that some of those young representatives are "mad as hell, and aren't going to take it any more." These young representatives are the same age as Senator Obama when he voted against raising the debt ceiling during President Bush's administration. What goes around, comes around.

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July 26, 2011, 8:30 a.m..: Talking heads on CNBC all agree August 2, 2011, was a contrived date; means nothing.

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July 27, 2011, 3:00 p.m.: It looks more and more like option #1. No deal will be reached; behind the scenes, the Treasury has already prioritized "must-pay bills"; August 2nd will come and go with a speech by President Obama saying he has taken decisive action, directing the Treasury to pay US bills in full. Of course, there is enough cash to do that anyway, and the US still won't have to raise the debt ceiling until September 2, or later. Many will interpret the president to have taken decisive action, when in fact, it will be just one more speech. Meanwhile, the concerned citizenry fall into one of two groups: continued angst and/or debt ceiling fatigue.

July 27, 2011, 6:00 p.m.: The Treasury Department's credibility is at risk. Here is the CNBC lede:

The U.S. Treasury Department reiterated Wednesday that unless the U.S. debt ceiling is raised, the U.S. runs out of borrowing authority Aug. 2, and that higher tax receipts will not give it more time.

The headline: Treasury "Insists" August 2 Debt-Ceiling Deadline Is Real.

Two comments. First, the headline writer used the word "insists" to suggest that not all accept the Treasury Department's statement.

Second, the press, and folks in general, are getting better and better at parsing statements and scrutinizing anything the Federal government says. In this case, there is a different between "the US runs out of borrowing authority" and "the US won't be able to pay its bills after August 2."

Several sources have said there is more than enough cash on hand to carry the US government through August 10, probably through September 2, and possibly longer.

If the August 2nd date comes and goes without a bill to raise the debt authority, and the US does not default, the Treasury Department will be another casualty of this contrived, political debacle. Reminder: then-Senator Obama voted against raising the debt ceiling the one time he was offered the opportunity.

July 28, 2011: The House scheduled for tonight was "pulled" by Boehner when he did not have the necessary votes. Thus: another lost day. August 2: 5 days. Fortunately July has 31 days. If this were February, it would be "all over."

July 30, 2011: CNBC notes that the White House and SecTreasury are playing us for fools, hoping the market would crash, and legislators would rush to pass almost any bill that Obama ghost-wrote for Senator Reid. Maybe the market will crash, but so far it hasn't and if August 2nd comes and goes without a whimper, and no debt limit ceiling bill, the country will have called the White House bluff.

July 30, 2011: It should be concerning to Americans that while this political theater is being played out, the White House risks dropping the ball on a number of other issues. Today in the internet headlines, but not being reported in the mainstream media: 1) Egyptian Islamists rally in show of strength; 2) gunmen attack Egyptian pipeline carrying natural gas to Israel; and, 3) Turkish military chiefs (DOD, Army, Air Force, and Navy equivalent) resign en masse over arguments with the civilian government leadership.  The Mideast has been way too quiet too long; Hillary Clinton is on her world tour, away from Washington for a very long time. It is unsettling. It is even more unsettling to read that The New York Times refers to the Muslim Brotherhood as relatively moderate.

The Brits know, but I doubt many Americans know that violence has increased in Iraq over the past year due to resurgence of Shi-ite militias.  And our drawdown continues.

July 31, 2011: there is an increasing number of stories reporting that the president is losing his liberal base. I believe that is the #1 reason that the debt ceiling talks are so difficult (Boehner's relationship with the Tea Party members of his own party is a very, very close second). More and more it looks like Obama is caught between Iraq and a hard place. If Obama is unable to get a deal done (and remember, in America, the buck stops in the Oval office) he will be remembered as the first president to preside over a US government default, regardless of how bad that really is, or how short it really lasts. If he has to concede to the point that he completely and irrevocably loses his liberal base, he will go down the McGovern road -- losing every state in the union but Massachusetts. In this case, Obama might even lose Massachusetts in a general election.

August 1, 2011, 9:00 a.m.: if the deal is scuttled, the vote was "personal." I don't know if the far right in the House has/have enough votes to scuttle the deal, but they certainly will if the House democrats fail to support the deal that the President has endorsed. If the House democrats fail to support the deal, the deal is scuttled, and President Obama will go into August 2 without additional borrowing authority. Although most agree that is a contrived date, the fact that his own democrats are willing to scuttle the deal and let Obama go down in history as the first president to preside over a US default will mean just one thing: their votes were personal. They no longer like, want, or trust Obama to lead them in the next election. Peggy Noonan called it right: In America, no one likes a loser.

August 1, 2011, 12:15 p.m.: the market is telling us one of two things. The market either a) doesn't like the deal; or, b) doesn't think this particular deal will be passed by the House of Representatives. Even the Senate looks iffy. But right now I'm not sure Boehner (the House) has the votes.

August 2, 2011: well, the market told us it doesn't like the deal, but more important the market agrees with Cypress Semiconductor CEO, TJ Rodgers, who clearly stated the White House has mismanaged this economy similar to what we saw during the Carter administration. TJ Rodgers was interviewed on a business show at 3:15 p.m. CDT, this date, when he said that. The market sees a double dip recession. Oh, well.