August 24, 2007
THANKS TO PETE WILSON, CALIFORNIA IS ALREADY WRITTEN OFF:
Would a Bush Bailout Save the GOP? (James Pethokoukis, 8/24/07, US News)
The last politician who took advice from the bond market was Bill Clinton. When he pushed for a tax hike back in 1993 to cut the budget deficit, it was under the assumption that bond investors would respond by bringing down interest rates. (The theory here is that deficits are inflationary. Inflation is bad for bonds.) Yet long-term interest rates surged from 6.45 percent when Clinton signed his tax-hike bill on Aug. 10, 1993, to 8.16 percent on Nov. 7, 1994, the day before the midterm congressional election where Republicans won back the House and Senate.Now PIMCO's Bill Gross, perhaps the most well-known bond fund manager in the world, is giving President Bush and the GOP some advice. He wants the government to start cutting checks to struggling homeowners, as both good policy and smart politics. [...]
2) Talk about playing on someone else's home turf. Any Bush bailout idea, if he should propose one, would inevitably start a bidding war with Democrats. Hillary Clinton, for instance, has already proposed a billion-dollar fund to boost state programs that help at-risk borrowers avoid foreclosure. I don't see why the Republicans would get more credit than the Dems.
3) We're not talking about a very big constituency here. Research firm First American CoreLogic projects 1.1 million subprime-related foreclosures, spread out over a total period of six to seven years. And it's blue state California—which Democrat John Kerry won by 11 points in 2004—where most of the trouble is, with a reported 39,013 foreclosure filings in July, the most of any state for the seventh month in a row and up 289 percent from July 2006, according to RealtyTrac.
4) Not that politicians necessarily care, but the economics of a bailout are pretty iffy.
They've also been telling us for decades that rates would come down if only we ran budget surpluses, yet both Chairman Greenspan and Bernanke have hiked rates into the teeth of falling deficits. Posted by Orrin Judd at August 24, 2007 1:19 PM
Agreed, OJ. The whole "defecits are inflationary" is nothing more than an article of faith with centrist and center-left economic types... There is just no evidence to support it... The only thing I can think is that they are like the environmentalists: they want an overall reduction in economic activity in the same way the environmentalists want a reduction in human activity (and humanity).
Posted by: Benny at August 24, 2007 3:49 PMThe supposed threat of deficits is like Saddam's WMD, made up for political ends.
Posted by: oj at August 24, 2007 5:41 PMAny discussion about foreclosures and "bailing out" anyone needs to start with a discussion about RealtyTrac's business and data-mining practices:
http://www.businessandmedia.org/articles/2007/20070824115854.aspx
Those of us who live in the state that was touted by these people as the number one foreclosure state (Colorado) figured out RealtyTrac's game.
Posted by: Brad S at August 24, 2007 5:42 PMI suppose the ends can differ for everyone who asserts it as a truism.. But let's take Rubin, Clinton's guy, he is a huge deficit hawk, what were his and Clinton's ends?
Posted by: Benny at August 24, 2007 6:25 PMTo stop the congressional party from spending money like drunk sailors. As Clinton said, he and Rubin were Eisenhower Republicans.
Posted by: oj at August 24, 2007 8:19 PMI work at a financial firm. Listening to portfolio managers (and Gross) whine about losses and clamor for bailouts when we have been warning them for years about this stuff is nausiating.
Posted by: AWW at August 24, 2007 10:46 PM