In theory, supplemental appropriations—and emergency-designated funds in particular—are intended to provide necessary infusions of cash on matters so unforeseen that they couldn't have been expected to make it into this year's budget and so urgent that they cannot wait for next year's. The Budget Enforcement Act, passed in 1990 to facilitate deficit reduction, gave emergency-designated funding special exemptions from budget restraints.
On Tuesday night, January 21, President Barack Obama will deliver his seventh State of the Union address (SOTU). He will offer a laundry list of initiatives that will be familiar to anyone who watched any of his previous speeches.
If you plan on watching, here's a piece of advice from someone who gets paid to pay attention to politicians: Don't bother.
When control in Washington is divided between parties, the president generally doesn't get his wish list fulfilled. That's usually a good thing, by the way.
Last year's SOTU is illustrative (full text here). Here's a roundup what the president proposed last year and what has actually happened.
We all think we know Stalin. He was the brutal and vengeful dictator of the Soviet Union from the late 1920s until 1953, when, mercifully, he died before he could do any more damage. He was the instigator of forced industrialization and collectivization, taking his country down a dead-end path to modernity from which its heirs are still trying to recover. As the valued ally of Great Britain and the United States during World War II, he was responsible for his country's great victory over Nazism, which cost, sometimes senselessly, the lives of 27 million Soviet citizens. He was the primary author of the Cold War, instigating such crises as the Berlin Blockade and the Korean conflict. Stalin killed millions of people-party rivals, army officers, "kulaks" (supposedly rich peasants), ex-tsarist bureaucrats and nobles, nationalities, "asocials" (alleged prostitutes, petty thieves, gamblers, the chronically homeless and unemployed, etc.), and innumerable "counterrevolutionaries." He used the famine of the early 1930s to commit genocide against the Ukrainians. He deported and murdered hundreds of thousands of Soviet Poles, Germans, Koreans, Chechens-Ingush, Crimean Tatars, Kalmyks-the list goes on and on.
As they used to say in the old westerns, it was quiet out there-too quiet. So no one was really surprised when Ted Cruz announced to The Washington Post the weekend before the November election that his brief flirtation with civilized behavior was nearing its end.
For months, the Texas senator had abandoned his "the guy with dynamite strapped to his chest" persona, as one Republican political strategist describes it, to be a team player, crisscrossing the country to campaign for GOP candidates. No filibusters on the Senate floor to hold the federal budget hostage to the repeal of Obamacare; no fundraising letters on behalf of Tea Party insurgents seeking to knock off what Cruz likes to call "squishy" Republican incumbents.
Some of us, who are old enough to remember the old television police series “Dragnet,” may remember Sgt. Joe Friday saying, “Just the facts, ma’am.” But that would be completely out of place today. Facts are becoming obsolete, as recent events have demonstrated.
What matters today is how well you can concoct a story that fits people’s preconceptions and arouses their emotions.
Politicians like New York mayor Bill de Blasio, professional demagogues like Al Sharpton and innumerable irresponsible people in the media have shown that they have great talent in promoting a lynch mob atmosphere toward the police.
Like many other Americans, I have always had a desire to travel to Israel and visit firsthand the many historical sites of spiritual significance. I was recently afforded the opportunity to fulfill that desire and was not disappointed.
In addition to being greatly inspired, I spoke with numerous Israeli citizens from a variety of backgrounds. One overwhelming theme in those conversations was the feeling of abandonment by the United States government. Some of the more diplomatic individuals said they felt sidelined by a U.S. government that had more important issues to deal with. Of course, they had not forgotten the times that our military and financial aid saved them from utter defeat at the hands of their numerous local enemies.
With a simple Facebook post, former Florida Gov. Jeb Bush became the first person to express interest in the 2016 Republican presidential nomination. He’ll have plenty of company in the near future, as nearly two dozen others have unofficially expressed similar interests. To say the race is wide open is an understatement.
There will be 247 Republicans in the House in the 114th Congress — one more than was elected to the House in the 80th Congress in 1946. It’s the most Republican House since the one elected in 1928, a year when very few of today’s voters were alive.
But while the party numbers are almost precisely the same in the Houses elected this year and 68 years ago, the composition of the two parties’ caucuses is sharply different.
One reason is that the reapportionment of House seats following the seven censuses from 1950 to 2010 has shifted many seats from the Northeast, Midwest and Mississippi Valley to Texas, South Atlantic and Western states.
2014 has been a year of anniversaries. It was the 100th anniversary of the beginning of the First World War — a war which many at the time saw as madness, and predicted that it would be the harbinger of a Second World War a generation later.
2014 was also the 70th anniversary of the fateful landing at Normandy that marked the beginning of the end of World War II.
With vengeance-seeking global jihadists on the loose here and around the world, now is a good time to ask (again): Are we ready for a nefarious terrorist attack on our train and transit lines?
Smoke and fire plagued two of the nation’s major metro rail stations this week, raising justified questions about safety and preparedness. On Monday, one person died and 84 fell ill after heavy smoke filled the L’Enfant Plaza Metro in Washington, D.C. Officials believe an “electrical arcing event” caused the lethal Beltway incident. A probe into the cause of the arcing — as well as an investigation into evacuation delays that trapped hundreds of passengers — is underway.
President Barack Obama’s absence from the great gathering in Paris of national leaders from other countries, to show their solidarity with France in its opposition to Islamic terrorists, was another sign of the Obama administration’s continuing irresolution in the face of terror.
Even the recent courageous message of Egypt’s president, Abdel-Fattah el-Sisi, calling on his fellow Muslims around the world to “revolutionize” the interpretation of Islam, to make it more compatible with peaceful relations with other peoples, put no steel in the spine of Barack Obama.
Western media are declaring the million-man march in Paris, where world leaders paraded down Boulevard Voltaire in solidarity with France, a victory over terrorism.
Isn’t it pretty to think so.
Unfortunately, the massacre at Charlie Hebdo, its military-style execution, the escape of the assassins, and their blazing end in a shootout Friday was a triumph of terrorism not seen since 9/11.
Charlie Cook, a veteran inside-the-beltway political analyst, recently wrote of a focus group discussing the 2016 presidential election. He observed that the conversation among 12 Colorado voters “would be jarring to anyone who assumed that the nominations of Bush and Clinton are inevitable.” Cook added that, “When half a dozen voters in a conversation say they would back a law that would ban any Bush or Clinton from running, it makes you sit up and take notice.”
I am guessing you don’t know one of the major things President Obama was doing while snubbing France and world leaders who convened in Paris to express solidarity in the civilized world’s war against radical Islamic terrorism.
I assure you it was something close to his heart — as opposed to fighting Islamic jihad. It was something that will thrill the anti-business, anti-energy extreme environmentalists but will not warm the hearts of American businesses and energy producers, and it is not good news for America’s currently overhyped economy.
Friday, January 16, 2015
Why Does Venezuela Think Russia Is Its Friend?
In October, the Venezuelan government set a budget which increased public spending by 35%, nearly all of it on social programs. From the independent website Venezuelan Analysis:
The plan, totaling 741.7 billion bolivars (about $117.7 billion at the official exchange rate of 6.3), represents a 35 percent overall increase from the 2014 budget. Proportionally, 34 percent more funds will be invested in social programs in 2015 than this year.
The programs which will see the most growth will be the Amor Mayor mission, which provides elderly pensions, the Barrio Adentro mission, which provides free healthcare and clinics in poor areas, and the Sucre Mission, which funnels money into the country’s Bolivarian community colleges.
Oil, Sanctions And Russian Politics
Three weeks ago, I forecast that the Russian ruble would continue to fall as long as the oil price was falling – provided that politicians did not interfere. The Central Bank of Russia (CBR) had effectively floated the currency earlier than planned, though with the caveat that it would intervene to defend domestic financial stability. At the time of my post, there were already signs that the ruble and the oil price were beginning to move in lockstep.
As the chart below shows, it is now very evident that the ruble is tracking the oil price. The CBR’s attempts to support the currency explain the shallower curve from July to October. But now both the oil price and the ruble are falling off a cliff:
This is extremely painful for the Russian economy. Although the falling ruble offsets the damage to a net oil exporter that falling oil prices inflicts, Russia suffers badly from Dutch disease because of the dominance of its energy industry, which means that other sectors are relatively undeveloped and many items – including essential foodstuffs – are imported. Inflation is now rising fast and the CBR may be forced to raise interest rates again soon, inflicting further damage on an already fragile economy.
How OPEC Destroyed The Russian Ruble
The Central Bank of Russia (CBR) was doing everything right. Responding to recent oil price falls, it floated the ruble and allowed it to fall in line with the oil price, intervening only to smooth out sharp price fluctuations. It hiked interest rates to counter domestic inflation despite the weakness of the Russian economy, due (in part) to Western sanctions. It resisted political calls to intervene to defend the currency, even when it was accused of being an “enemy of the country”. It sought, and obtained, political backing at the highest levels for its actions.
OPEC Losing Its Grip? No, The Saudis Are Partying Like It's 1981
Falling oil prices have provided the equivalent of a $1 billion-a-day tax cut to U.S. consumers. That’s the good news.
The bad news is despite all the crowing about OPEC losing its ability to control oil prices, quite the opposite might be happening. The Organization of the Petroleum Exporting Counties, and particularly Saudi Arabia, are partying like it’s 1981, with Republicans in control of Congress and alternatives to oil in retreat. That means lower oil prices, possibly for years, but also lower non-OPEC energy production and eventually another recession-inducing price spike like the one that helped take down the global economy in 2008.
I get large parts of this contrarian scenario from Martin E. Cobern, a longtime oil-industry executive who has a Ph.D in physics from Yale and helped develop some of the key technology behind horizontal drilling as head of research at Teleco Oilfield Services and later APS Technology.
Why The World Hurts Economically: Unhealthy Patients Treated By Incompetent Doctors
THE KEY TO CURING a sick patient is getting the diagnosis right. That’s also true in economics. The astonishing inability of economists and political leaders to gauge what ails most economies these days and then promulgate the right cures is sad testimony to their obstinate refusal to look at facts and to their deep emotional adherence to bogus ideas. It also reflects their intellectual laziness.
Answering Obama's Illegal Edict On Immigration
PRESIDENT OBAMA’S EDICT on immigration marks the most blatant attempt to subvert the Constitution since Franklin Roosevelt tried to pack the Supreme Court in 1937. Here’s how Republicans should respond to this constitutional crisis.
–A resolution. Pass a resolution in January affirming that the Constitution is not a mere scrap of paper, a relic meant only for public viewing in the Smithsonian, like antique airplanes; that the President of the U.S. is not a four-year monarch who rules by decree–who, if Congress doesn’t do as he commands, can unilaterally enact whatever he wishes by issuing an order.
Euro Crashes Against Swiss Franc
So this is the background: During the euro crisis huge waves of hot money swamped the Swiss franc as fear of a euro collapse made international funds dash for safety. The Swiss franc is a renowned and historic haven for hot money in times of uncertainty. The Swiss franc span upwards out of control and threatened to crush Swiss commerce. This was terrible news for Switzerland. How can you export your goods to the world when your currency is so high it is better than gold?
Sell! Sell! Why The S&P 500 Will Halve In 2016If you thought a low oil price was set to inspire a period of revived consumer spending and galvanized global growth, there is an alternative view you should know about. A report out today calls the impending end of the US business cycle, followed by a 50% drop in the S&P500 to 1,100 by March 2016 and another US recession.
The miserable soul who has predicted this grim event is Charles Robertson of Renaissance Capital, a regular fixture on this blog. He has a number of reasons for his bleak point of view.
Why The Swiss Franc Shot Up 30% In A Morning
He is referring to the extraordinary climb of 30% by the Swiss Franc, one of the world’s most important safe haven currencies, against the euro this morning. At one stage, it was up 39% against both the euro and the dollar. Movements like this simply don’t happen in big, widely held currencies like the Swiss franc. So what happened?
The answer is simple. Three years ago the Swiss central bank put in place a ceiling of Sfr1.20 per euro to stop the currency’s appreciation, which was causing problems for Swiss exporters, among other things. This morning – to general surprise – it abandoned the ceiling. It appears to have done so because of an expected sovereign bond buying programme from the European Central Bank in the next few days. That, in turn, is expected to increase demand for safe haven currencies like the Swiss Franc, and the Swiss National Bank – the central bank – seems to have decided that it just would not be able to defend its self-imposed ceiling in the circumstances.
“A central bank does not act in such a dramatic way very often,” says Stanton. “It’s a once in a blue moon event and it has taken the currency markets by surprise.”
Trading in currency brokerage firm FXCM FXCM -15.06%, which caters to retail traders, was delayed at the open after shares plummeted 88% in pre-market trading to $1.49 apiece. After dropping 15% to $12.63 Thursday, the broker said the “unprecedented volatility” in euro/franc pairs resulted in massive losses for clients, who subsequently owed FXCM about $225 million, leading to a negative equity balance that could put the company in breach of regulatory capital requirements.
Jefferies Makes Another Wall Street Rescue, Shores Up Currency Broker With $300 MillionFXCM FXCM -15.06% is getting a rescue, after the currency broker was nearly buried by Thursday’s volatile spike in the Swiss franc.
One of several brokerage firms that allow retail traders to make sizable currency bets while committing relatively minuscule amounts of capital, FXCM was caught wrong-footed when the Swiss National Bank bagged its currency floor of 1.20 Swiss francs per euro and the franc surged. The result was customers with losses that tore through their thin capital layer owed the brokerage some $225 million, putting the company’s coffers below regulatory capital requirements.
What Does The Swiss National Bank Know That No One Else Does?
People are still picking through the rubble of yesterday’s events and stories are now surfacing of numerous FX brokers/dealers having their capital wiped out. I suspect this will continue for some time to come. But I wanted to focus on the motivations behind the decision. It is rare that a large central bank unveils a complete surprise – not just in the sense that it had not communicated the move but that there was no significant market pressure or indicators for a move.
Why did the SNB decide to remove its exchange rate floor?
I’ve yet to hear a particularly good or convincing answer to this. Yes, of course the SNB’s own explanation was incredibly lacking and clearly was hiding other reasons (they suggested in vague terms that the economy no longer warranted such FX controls). And yes of course this is all to do with the ECB’s Quantitative Easing. But why now? Furthermore, what changed in the past few days – the SNB Vice Chairman Jean-Pierre Danthine said just a couple of days ago that the SNB was committed to defending the EURCHF floor.
I think there are a number of contributing factors which motivated the move: