"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." Cicero, 55 BC.
Harry Truman once said something like there is nothing new in the world except the history you don't know. I guess we haven't learned a lot in the past 2,066 years.
I liked the President's speech Tuesday night, but it wasn't focused on specifics to any great extent. The London Financial Times said it was not the speech of a President focused, as Barack Obama should be, on the country's fiscal condition. He expressed concern about it, "but no great sense of urgency."Paul Krugmanof the New York Times and Princeton University said "if there was a vision there, I missed it." Yeah but Professor, you wouldn't like the Republican response much either.
In what I thought was a uniquely flat performance, the alleged rising star of the Republican party, Paul Ryan (R. Wisconsin), stated more a battlefield position versus the President when he said "We hold to a couple of simple convictions: endless borrowing is not a strategy; spending cuts have to come first." OK, but where. The lack of specificity seems to be an oppositional plan only with vagueness as its central theme. No star was born last night. If it's any consolation, Michelle Bachmann, the Tea Party spokesperson was far worse, in my opinion. She seemed hostile and strident. I thought we were launching a new era of cordiality. I did like the mix of Republicans and Democrats sitting together, though.
Paul Ryan at age 40 might not be ready for prime time. Greg Valliere of Potomac Research Group mentioned in a recent letter that Tim Pawlenty of Minnesota is running hard for the Republican bid. Mitt Romney might be considered the leader; "conservative activists are in love with Rep. Mike Pence (R. Ind.); and Washington insiders favor Gov. Mitch Daniels (R.Ind.)." My sense is a few of these guys would have a name recognition problem.
But, as though to rub salt in the Budgetary wound, the nonpartisan Congressional Budget Office said the Federal deficit will widen to $1.5 trillion this year from an estimated $1.3 trillion last year. The CBO said this increase is created in part by the cost of extending the Bush tax cuts which has a $858 billion price tag. That does assume a static response to a tax cut which reasonable people will debate (as well as unreasonable people). The Agency painted a grim picture of the longer term says Bloomberg business news. It said "the government will run up $12 trillion in deficits over the next ten years if Congress permanently extends the tax cut package, slated to expire in 2012, and continues other longstanding policies such as preventing scheduled cuts in Medicare payments to doctors." The CBO added that the nation's debt will rise to 100% of GDP by 2021, the highest since Word War II. Actually, if you count the total amount of IOU's the government has issued, including the slight of hand of borrowing from itself (via the Social Security Fund), we are effectively at 100% now.
New home saleshad a seemingly impressive percentage jump in December rising to an eight month high of 329,000 from 280,000 in November. But as Uncle Dougie Kass, Lola Jane Farrell's honorary uncle, pointed out the impressive increase is mainly due to the expiration of a tax credit in California. Doug wrote "the West Coast (California) numbers artificially inflated the national and state housing statistics, owing to California's first-time homebuyers tax credit which expired on December 31, 2010." Capital Economics in Toronto figures that without the home buyer credit, new home sales "would have increased only marginally, to 285,000 from 280,000." So there are lies, damn lies, and statistics.
Vincent Farrell, Jr. is chief investment officer at Soleil Securities Group and a regular contributor to CNBC.