Stock Market Plunges

At USA Today, "Crisis of confidence leads to fears of bear market," and New York Times, "Stocks Plunge in Worst Day in Two Years." Also, at Wall Street Journal, "Downgrade Ignites a Global Selloff: Dow's Plunge Worst Since '08":

The downgrade of the U.S.'s credit rating sparked a global selloff on Monday, pushing the Dow Jones Industrial Average to its sharpest one-day decline since the financial crisis in 2008.



In scenes reminiscent of three years ago, selling accelerated as the day went on, and investors were forced to sell to meet margin calls from lenders demanding more collateral. The Dow ended the day down 634.76 points, or 5.5%, at 10809.85, its lowest close since last October. Trading volume of stocks listed on the New York Stock Exchange hit the fourth-highest level in history.



It was the Dow's biggest percentage drop since December 2008 and its sixth-largest point decline ever. Other major stock indexes also fell heavily. Traders also dumped corporate bonds and industrial commodities.



Investors fled to the traditional refuges: gold, currencies of safe-seeming countries such as Switzerland, and, ironically, the very securities that Standard & Poor's downgraded on Friday, U.S. Treasury bonds. For most investors, Treasurys seemed a lot safer than stocks.



Tuesday morning in Asia, Tokyo shares opened lower, falling 3.4% in the first minutes of trading.



The Financial Stability Oversight Council, a group of U.S. regulators led by Treasury Secretary Timothy Geithner, held an emergency conference call Monday afternoon to discuss the financial-market volatility, a person familiar with the call said.



"There's probably as much uncertainty as we've seen since 2008," said Eric Pellicciaro of asset manager BlackRock's Fundamental Fixed Income division, which has $612.5 billion in assets under management. "There's a general feeling that policy options are few and far between. There's a feeling that fiscal austerity is coming at the worst possible time."

Interesting how Treasury securities remained a safe haven. That can't go on forever.



I'll have more on this tonight.

Ross Douthat, Political Scientist

Douthat draws on political science research at New York Times, "Waiting For a Landslide." And for a second I thought he'd blow it, because "realignment theory," which he discusses, hasn't accurately explained, much less predicted, partisan trends for decades. But Douthat adds this, which is just right:

In reality, the next election may be no more transformative than 2008 turned out to be. The next Republican president may find himself as hemmed in and frustrated as President Obama has become. Meanwhile, America will still have a credit rating to fix, and a deficit to close.

More at that link at top, and Douthat had a great piece a few days ago on the debt deal, "The Liberals’ Dilemma." Note especially:

... American liberalism risks becoming a victim of its own longstanding strategy’s success. Because yesterday’s liberals insisted on making universal programs the costly core of the modern welfare state, on the famous theory that “programs for the poor become poor programs,” today’s liberals find themselves defending those universal (and therefore universally-popular) programs at the expense of every other kind of government spending — including, yes, programs for the poor. It’s a classic example of putting liberal political interests ahead of liberal policy priorities. In the short term, the insistence on ring-fencing Medicare and Social Security has left Democrats defending a system that often just ends up redistributing money from the younger middle class to the older middle class while accepting caps on programs that might do more (both directly and indirectly) to help downscale Americans get ahead. In the long term, by postponing any reckoning with the cost of entitlements, it’s making it more likely that the inevitable crunch will hit the poorest recipients of Medicare and Social Security harder than it should.

Read that whole thing. Basically, progressives will never cut entitlements because gargantuan socialist welfare states form the core of socialist existentialism.



Douthat's coming of his own as a New York Times columnist, by the way. He had cold feet or something after leaving The Atlantic, but he's been more consistent in posting some excellent commentary of late.

'Nothing From Nothing'

Perfect Democrat theme song. You don't gets to be hangin' with those mofos unless you be chippin' in some snaps (cash). And Billy Preston's 'fro is da kine!

I'm not tryin' to be your hero
'Cause that zero is too cold for me, Brrr
I'm not tryin' to be your highness
'Cause that minus is too low to see, yeah

Nothin' from nothin' leaves nothin'
And I'm not stuffin'
Believe you me
Don't you remember I told ya
I'm a soldier in the war on poverty, yeah
Yes, I am

The Alinksy-Obama Minions

I love this title, from Pat Austin, "The Alinksy-Obama Minions Would Have You Believe In the 'Tea Party Downgrade'.



EXTRA: At The Other McCain, "Liberals Spinning S&P Credit Downgrade: BLAME IT ON THE REPUBLICANS!"

America Gets Downgraded

At Wall Street Journal, "A spend and tax policy mix always leads to economic decline":

... is there anything that S&P said on Friday that everyone else doesn't already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend.

This is not news.

In that context, the Obama Administration's attempt to discredit S&P only makes the U.S. look worse—like the Europeans who also want to blame the raters for noticing the obvious. Treasury officials and chief White House economic adviser Gene Sperling denounced S&P for relying on a Congressional Budget Office scenario that overestimated the U.S. discretionary spending baseline by $300 billion through 2015 and $2 trillion through 2021.

But even adjusting for that $2 trillion would only reduce U.S. publicly held debt to 85% or so of GDP—still dangerously high. And that assumes that recently agreed upon spending caps are sustained over a decade, something which rarely happens.

We think the larger problem with S&P, Moody's and Fitch is that they make no distinction over how a nation balances its books—whether through tax increases or spending reductions. Like the International Monetary Fund, the raters care only about balance.

This takes too little account of the need for faster economic growth, which is the only real path out of a debt crisis. Britain's government has earned rater approval for its fiscal consolidation, but its increases in VAT and income tax rates are hurting its tepid recovery. Letting the credit raters dictate tax increases is the road to an austerity trap.

The real reason for White House fury at S&P is that it realizes how symbolically damaging this downgrade is to President Obama's economic record. Democrats can rail all they want about the tea party, but Republicans have controlled the House for a mere seven months. The entire GOP emphasis in those seven months—backed by the tea party—has been on reversing the historic spending damage of Mr. Obama's first two years.

Continue reading.

IMAGE CREDIT: The Astute Bloggers.

The Debt Downgrade Blame Game

I was up in time for the Sunday news shows. I flipped back and forth for a minute between ABC and NBC and finally settled on "Meet the Press." John Kerry and John McCain were interviewed, forgettably, with the exception of McCain's comments on Afghanistan. But the roundtable discussion was a keeper. Former Federal Reserve Chairman Allan Greenspan stole the show (a bit of which can be seen here). But frankly the reason I didn't channel surf further was Rachel Maddow. Maddow is maddening. The S&P downgrade dominated the discussion, and Maddow's entire shtick was political. David Gregory asked her about economic implications and she segued into an attack on "Republican intransigence." Check it out:

Visit msnbc.com for breaking news, world news, and news about the economy

Maddow was sticking like glue to S&P's press release, which claimed that the downgrade was a comment on political gridlock in Washington. But Maddow's fascinating because she perfectly encapsulates all that's wrong with the Beltway media mindset: She blames Bush for the crisis, citing the revised GDP numbers to argue that "the hole we've been getting out of is even deeper than we thought." Well, I guess if you're in a hole you stop digging, but the Obama-Dems 2012 budget was pegged to add $7.2 trillion in new debt over the next decade, and that's after racking up $1.7 trillion after the administration's first year in office. Congressional Republicans stood up to this, and that fortitude so enraged the progressive political class that "tea party terrorists" were claimed to be the greatest threat to national security since Nazi Germany. But Maddow goes on. And bless his heart, but Alex Castellanos fails to get a smackdown rebuttal until much later in the broadcast. I reported on Janet Daley's essential piece earlier, "A Capitalist Economy Can't Support a Socialist Welfare State." The GOP talking point has to focus on the unsustainability of big-government entitlements. Republicans won the day by standing firm, and the S&P downgrade ultimately will damage Democrat reelection prospects next fall, hence Maddow's desperate efforts to spin this as not an economic issue at all, but one of tea party "intransigence."

In any case, see Karl at Patterico's Pontifications, "For Whom the Downgrade Tolls":

In sum, the S&P downgrade marks a post on the road where progressive demagogy loses its power. The downgrade marks a post on the road to extinction for 19th-20th century progressivism. That’s why the Obama administration — and true progressive ideologues — made S&P their first target, however futile the gesture.

RTWT.

I wouldn't separate the partisan left from the ideological left so much (Maddow is both, for example), but it's a really perceptive essay otherwise.

UPDATE: Linked at Atlas Shrugs and Yid With Lid. Thanks! Also linked at Blazing Cat Fur!

The Debt Deal and the Progressive Crack-Up

From Peter Berkowitz, at Wall Street Journal (also Google or Sankei Digital):

In the congressional elections of 2010, the electorate, led by the tea party movement and disaffected independents, rendered its judgment on the president's priorities. The people dealt him and his party a historic midterm defeat, producing large Republican gains in the Senate and a comfortable majority in the House, including 87 freshmen.

The voters' message was clear: Cut spending, compel the government to live within its means, and put Americans back to work. In short, the president and his party badly overreached in 2009 and 2010; and in 2011 the Republicans, to the extent their numbers in Congress allowed, have effectively pushed back.

But that's not how progressives have tended to see things. They have ferociously attacked congressional Republicans, particularly those closely associated with the tea party movement, with something approaching hysteria ...

The use of crude and violent language to condemn conservatives as enemies of the state, the gross manipulation of law to make the Constitution say whatever is politically expedient, and indifference to the actual arguments made by their political opponents—these are all-too-familiar progressive vices. They were exercised with abandon in the fury with which progressives responded to the complex questions raised by the Supreme Court's decision in Bush v. Gore, the detention of enemy combatants at Guantanamo Bay, and the invasion of Iraq. Tea party hatred is the successor of and stems from the same sources as Bush hatred.

Of course, a good bit of progressive vituperation can be chalked up to the ordinary passions of democratic politics, which can be high stakes and is a contact sport. But in the debt-limit crisis, the hypocrisy of progressives reached truly breathtaking proportions ...

The progressive mind is on a collision course with itself. The clash between its democratic pretensions and its authoritarian predilections has generated within its ranks seething resentment for, and rage at, conservatives. Unless progressives cultivate the enlightened virtues they publicly profess and free themselves from the dogmatic beliefs that undergird their political ambitions, we can expect even more harrowing outbursts to come.

Be sure to read it all.

We seem to have the same general dynamic every so often of late, during the Gabrielle Giffords shooting, for example, and more recently with Anders Breivik and now the debt ceiling debate. Berkowitz pretty much nails it, and of course James Taranto consistently hammers progressive idiocy and the media's hopeless partisanship. This is why I keep blogging. Progressivism is destroying this country. We need to pushback and continue the fight. 2012 is looking good too, so there's hope!

John Kerry: Media Should Not Give Time to Tea Party

The left's elitist fallback position is authoritarianism and suppression of dissent, but you knew that already.

At The Blaze, "JOHN KERRY: MEDIA HAS ‘RESPONSIBILITY’ TO ‘NOT GIVE EQUAL TIME’ TO TEA PARTY." Also at Memeorandum.

Obama's One Term Presidency

I wrote yesterday morning that things were "not looking good for Obama and the Democrats." The thought came to me in a flash as I looked over the economic news. If Barack Obama's anything, it's a good campaigner, and hence I've been reluctant to bet against his reelection. But with folks talking about a double dip recession, and with unemployment likely to remain high regardless of economic growth rates, I think the GOP's chances are looking better than ever. Barack Obama will be a one-term president, I'm confident. And apparently, so are others, or at least there's some pessimism in the MSM that I don't recall seeing. At Politico, for example, "Obama's big drags":

The politics of the debt fight were a drag for President Barack Obama, yanking his popularity to new lows. Here’s an even bigger drag: Obama emerges from the months-long fracas weaker — and facing much deeper and more durable political obstacles — than his own advisers ever imagined.

The consensus has been that for all his problems, Obama is so skilled a politician — and the eventual GOP nominee so flawed or hapless — that he’d most likely be reelected.

Don’t buy into it.

This breezy certitude fails to reckon with how weak his fundamentals are a year out from the general election. Gallup pegs his approval rating at a discouraging 42 percent, with his standing among independents falling 9 points in four weeks.

His economic stats are even worse. The nation has 2.5 million fewer jobs today than the day Obama took office, a fact you’re sure to hear the Republicans repeat. Consumer confidence is scraping levels not seen since March 2009.

Where’s the bright spot? Hard to see. Obama has few, if any, domestic achievements that enjoy broad public support. No one assumes employment, growth or housing prices to pick up much, if at all — something Obama is essentially powerless to change. And the political environment and electoral map are significantly tougher than in 2008, especially in true up-for-grabs states.

It's long piece. Continue at the link.

RELATED: FWIW, see Andrew Hacker at New York Review, "The Next Election: The Surprising Reality." According to Hacker, "Although it is never openly stated, there are Americans who don’t want to be governed by a black man." (Racism, wouldn't you know?) Beyond that (as part of a book review), Hacker's main argument is about turnout: Obama's toast if he can't generate the kind of voter (and youth) enthusiasm that propelled him to victory in 2008. And if that's the case, I'm even more confident Obama's a one-termer. ("Hope & Change hasn't been all that great for young folks.)

Obama's Taxpayer-Funded Bus Tour

It's all porkulus for this administration.

At LAT, "Pivoting from debt fight, Obama plans jobs-focused bus tour."

But see CNS News, "Taxpayers Will Pay for Obama Bus Tour of Battleground States, Says White House."

Double-Dip Recession May Be Returning

Well, I've been writing about this all day, and I'm not surprised at all.

At New York Times:

Until recently, most observers believed the American economy was in a slow recovery, albeit one with very disappointing job growth. The official figures on gross domestic product showed the United States economy grew to a record size in the final three months of 2010, having erased the loss of 4.1 percent in G.D.P. from top to bottom.

Then last week the government announced its annual revision to the numbers for the last several years. New government surveys indicated Americans had spent less than previously estimated in 2009 and 2010 on a wide range of things, including food, clothing and computers. Tax returns showed Americans even cut back on gambling. The recession now appears to have been deeper — a top-to-bottom fall of 5.1 percent — and the recovery even less impressive. The economy is still smaller than it was in 2007.

In June, more American manufacturers said new orders fell than rose, according to a survey by the Institute for Supply Management. The margin was small, but the survey had shown rising orders for 24 consecutive months. Manufacturers in most European countries, including Germany and Britain, also reported weaker new orders.

PREVIOUSLY: "Commerce Department Downward Revision on GDP Growth, 2007-2010."

RELATED: From Roger Simon, "Dow Down 500: Should Obama Resign?" (via Memeorandum).

Deficit Battle Shifts to Panel

At WSJ:

WASHINGTON—The Senate approved—and President Barack Obama immediately signed—the long-awaited deal to raise the nation's debt limit Tuesday, as the battle shifted to how a special committee created by the measure will cut the deficit by $1.5 trillion.

The Senate voted 74-26 for the package, which raises the government's borrowing limit by $2.4 trillion and cuts $917 billion in federal spending. A fiery debate is likely over the next step, the bipartisan panel, and how much of its $1.5 trillion in deficit reductions will come from tax increases and how much from cuts in safety-net programs.

Meanwhile, Democrats in particular were eager to move beyond the debt-limit fight and tackle the issue of jobs, which they consider friendlier political turf. Mr. Obama signed the bill in private but used his public comments to try to shift the focus to the economy.

The president could send a stronger signal of defeat than a private bill-signing. Jimmy Carter is smiling somewhere.

'Civility': The Denouement

See James Taranto, at Wall Street Journal.

"Terrorist," "racist," "uncivil," "insane," the list goes on--in this context, these words have no real meaning. They are mere epithets. The Obama presidency has reduced the liberal left to an apoplectic rage. His Ivy League credentials, superior attitude, pseudointellectual mien and facile adherence to lefty ideology make him the perfect personification of the liberal elite. Thus far at least, he has been an utter failure both at winning public support and at managing the affairs of the nation.

Obama's failure is the failure of the liberal elite, and that is why their ressentiment has reached such intensity. Their ideas, such as they are, are being put to a real-world test and found severely wanting. As a result, their authority is collapsing. And if there is one thing they know deep in their bones, it is that they are entitled to that authority. They lash out, desperately and pathetically, because they have nothing to offer but fear and anger.

That's a Bill O'Reilly segment at the clip, and a good one.

RELATED: At Verum Serum, "Another Day, Another Progressive Accuses Elected Members of Congress of Domestic Terrorism."

Sarah Palin Slams Joe Biden Linking Tea Party Conservatives with Terrorists

It's "quite appalling," and that's putting it mildly:

Yet progressives have their meme at they're sticking to it. See Joe Nocera, "Tea Party's War on America" (via Memeorandum).

Mark Meckler Interview at Der Spiegel

See, "Interview with Tea Party Co-Founder Mark Meckler: 'We Have Compromised Our Way Into Disaster'":

SPIEGEL: The world is looking at Washington and sees gridlock and chaos. How much have the negotiations over the United States' debt ceiling hurt America's standing in the world?

Meckler: Saying that these debates have hurt our image is absurd. What you currently see in Washington is one of the most responsible debates ever about the size and scope of government. The world should look at what is going on in the United States as a model for what should happen in all countries.

SPIEGEL: We look at it and see a Congress held hostage by a small group of radical Tea Party members unwilling to agree to any budget compromise and risking a US default.

Meckler: What do you mean by "a small group?" Forty-one percent of voters in the last US election said they agreed with Tea Party values. And the primary values of the Tea Party are about fiscal responsibility.

SPIEGEL: But you are willing to accept a US default if your demands for massive budget cuts and no tax increases are not met. That seems rather irresponsible or even unpatriotic. Most leading economists forecast financial "Armageddon" in that case.

Meckler: Default is a false threat. We take in over $220 billion in revenues every month and our debt service is only roughly $20 billion. The only way we will default is if the President of the United States makes the irresponsible choice not to pay our debts. We Tea Party Patriots put principles first, and we have to understand what America is about. Our country was founded on an idea: liberty. But it requires fiscal responsibility for people to be free. We are becoming slaves to our own government. Every US family now owes $400,000 to $500,000 in national debt. We Tea Party Patriots fight for the future of the nation, and there can be nothing more patriotic than that.

Continue reading.

Tea Party Sees No Triumph In Compromise

At report at Wall Street Journal:

The agreement to cut deficits and raise the debt ceiling hammered together in Washington caps a remarkable two-year surge by the tea-party movement—forcing Republicans and Democrats alike to refocus on spending and, at the same time, proving the political power of the tea party.

Yet, a chorus of tea-party activists and leaders across the country denounced the agreement on Monday, saying it included little in the way of the change they actually sought.

"People are saying, 'These tea partiers, aren't they wonderful, they are changing the conversation,'" said Ellen Gilmore, a leader of the LaGrange Tea Party Patriots in Georgia. "Well, we got absolutely squat—except for the conversation."

However, the deal struck Sunday falls far short of many tea-party groups' stated goals of no increase in the debt ceiling, vastly larger budget cuts and passage of a balanced-budget amendment. The central question facing the loose-knit tea-party movement today, two years after it sprang into existence, is whether its organization and leadership can grow to match its ideological force.

Actually, the tea party is stronger than I thought it'd be after the election. Members of Congress have really taken the limited government message to heart, and that goes all the way to Speaker John Boehner. I think activists should be patting themselves on the back and mobilizing to get more grassroots representatives elected in 2012. And the GOP presidential field sure is taking the tea partiers seriously. See Los Angeles Times, "Almost all GOP presidential hopefuls oppose debt deal."

VIDEO: Gabrielle Giffords Returns to Congress

This is good.

At New York Times, "Giffords Return Marks Moment of Unity in Divided House."

Representative Gabrielle Giffords made a surprise appearance Monday evening on the floor of the House of Representatives, the first time she has returned to Washington since she was shot earlier this year in Arizona.

With two minutes remaining on the voting clock, Ms. Giffords entered the chamber through a side door. Her arrival prompted a standing ovation that lasted throughout the remainder of the vote on the compromise to raise the debt ceiling. She was among one of the last representatives to cast her ballot, voting yes on the measure as other affirmative votes put the bill over the top.

See also, "House Passes Bill on Debt Ceiling." (At Memeorandum.)

A Tea Party Triumph

This is why the New York Times editors are so pissed off.

At Wall Street Journal:

If a good political compromise is one that has something for everyone to hate, then last night's bipartisan debt-ceiling deal is a triumph. The bargain is nonetheless better than what seemed achievable in recent days, especially given the revolt of some GOP conservatives that gave the White House and Democrats more political leverage.

***

The big picture is that the deal is a victory for the cause of smaller government, arguably the biggest since welfare reform in 1996. Most bipartisan budget deals trade tax increases that are immediate for spending cuts that turn out to be fictional. This one includes no immediate tax increases, despite President Obama's demand as recently as last Monday. The immediate spending cuts are real, if smaller than we'd prefer, and the longer-term cuts could be real if Republicans hold Congress and continue to enforce the deal's spending caps.

I've been really thinking about that this last few days. So much of current political dealmaking in the end depends on who wins in November 2012 and beyond. Republicans positioned themselves well for the upcoming campaign, and with 1.3 percent GDP growth and unemployment sticky at 9.2 percent, there's lots of reason for the Times to be even more pissed. It's another case of projection, of course. Progressives are mad. So they lash out, despite their own home-grown failures. Keep an eye out this week for more heated rhetoric from the left. Republicans might stock up on some choice quotes to run later in political ads. Democrats are really sore at losing this round, all the more so since their strategy of do-nothing obstructionism turned out to be a disaster. And we've got a presidential election as on the ballot as well. Boy, things are shaping up very well for the reviled teabaggers conservatives.

New York Times Slurs Republicans as 'Hostage-Taking Extremists'

It's no mystery where the Times' editorial board gets such language. The progressive blogosphere has long been awash in beyond-the-pale attacks on principled conservatives. And the tone has taken a desperate turn of late. Government spending is out of control and leftist elites called for more of the same as an ostensible solution. The White House never offered an original plan and Senate Democrats played obstruction until the last moment. As I noted previously, elections have consequences. The GOP deserves credit for sticking to the political currents that brought them majority power last year in the House of Representatives. There's still a long way to go on the road to reform, and progressives are suffocating at the prospects of more good government rationalization. And reading this is like hearing the tormented screams of the demon being impaled. It's excruciating when your expansionist agenda is decisively crushed. But with luck it's just a start:

There is little to like about the tentative agreement between Congressional leaders and the White House except that it happened at all. The deal would avert a catastrophic government default, immediately and probably through the end of 2012. The rest of it is a nearly complete capitulation to the hostage-taking demands of Republican extremists. It will hurt programs for the middle class and poor, and hinder an economic recovery.

It is not yet set in stone, and there may still be time to make it better. But in the end, most Democrats will have no choice but to swallow their fury, accept the deal and, we hope, fight harder the next time.

VIDEO: President Obama Announces Debt Agreement

Here's the clip, as promised:

And at Wall Street Journal, "Leaders Agree on Debt Deal":

After weeks of partisan wrangling, President Barack Obama and congressional leaders reached a deal Sunday night to raise the government's debt ceiling while cutting spending by about $2.4 trillion, avoiding a government default but setting the stage for months more of stormy debates over how Washington taxes and spends.

The Senate and House are expected to vote on the deal Monday, so the agreement still needs the support of many House Republicans, who have proven a restless, independent group in recent days. But if it passes the House and Senate, it culminates an extraordinary display of political and economic brinksmanship, coming just days before the government could have been unable to fully pay its bills.

The deal would raise the debt ceiling by $2.4 trillion in two stages, and provide initially for $917 billion in spending cuts over 10 years. A special committee of lawmakers would be charged with finding another $1.5 trillion in deficit reduction, which could come through a tax overhaul and changes to safety-net programs.

If the committee doesn't find at least $1.2 trillion in savings, or Congress doesn't adopt its proposals, a pre-set array of spending cuts would kick in, including cuts in military spending and Medicare payments to health-care providers.

Also, "White House Issues Fact Sheet on Debt Deal."