At the very top of today's program White House Budget Director Jack Lew said that the leaders in Congress all agree that we can not default on our debts. Hence, the disagreement lies within how to do it. Compromise, as CNBC's David Faber said during the round table, would be received very positively by our creditors and the market in general. However, compromise is not where we are politically, which arrives to the sum of what Honeywell CEO David Cote said that if we can not get together to get our fiscal house in order, it's just sad. Frankly, Republicans are not on the compromise page and Senator Jim DeMint (R-SC) said as much today.
First, Senator DeMint (R-SC) is not a credible voice in economic matters given his state's economic and educational record, near or at the bottom of both categories amongst the fifty states. What he did say was that their concession was to raise the debt ceiling - simply, with no closing of tax loopholes, a Democratic demand, to go along with the spending cuts that Republicans want.
The President has received a lot of criticism for not leading but he has been the sole individual to compromise the most giving into major concessions that Democrats do not want to see. The other reason that this agreement on the debt ceiling is looking more grim is that you have Republican Presidential candidates such as Michelle Bachmann who said that the debt ceiling doesn't matter and it's a political sales jobs by the President and the Treasury Secretary. Mr. Lew in his interview today said that she is selling a misnomer, and that if the United States defaults we will not be able to pay our bills. The facts are facts he said. Mr. Lew concluded with saying that leadership needs a partner. We believe that the President has one in House Speaker John Boehner, but doesn't have one in Eric Cantor, the House Majority Leader who is speaking for the Republican Tea Party caucus in the chamber. The result is that Mr. Boehner can not get the votes within his own caucus - that's where the hold up is.
What Senator DeMint kept on about is the new Republican tact of cut, cap, and balance which is their focus now. It's catchy but completely unrealistic. This plan is to cut spending now, cap it for the next ten years, and then enact a balanced budget amendment over that period. This sounds real nice but like many of these snappily titled plans, it's simply not practical and does not take into the reality the needs of the American people.
Marc Morial, during today's panel, stated that there are $1 trillion in tax loopholes that could be closed, that's over a ten-year period. If that is indeed the case, if you cut spending, which means cutting an innumerable amount of programs that Americans rely on, Pell grants for example, without tapping into that $1 trillion hanging out there, there is no way to balance the budget without decimating the economy.
And here's another question, if Republicans are going to bring this cut, cap, and balance approach to a vote in the House, what about the Ryan budget that they voted on? In that plan, raising the debt ceiling several times to reach its goals. So which one is it? The House under Republican control seems to be voting against bills that they once passed. Whether or not you think the Democrats' plan is right or wrong, they have been the more consistent in their approach, no doubt.
For the idea of a balanced budget amendment, consider this: All the Republicans touting this idea cite the fact that the states have balanced budget amendments so why can't the federal government have one? Well, when floods occur in Missouri or a hurricane in Florida or an oil spill in the Gulf or an earthquake in California, who do they call? The federal government because the states do not have the resources (i.e. the money) to deal with the problem. Where do we go when the Federal government needs the money in an emergency? Do we pass an emergency measure.. ok, then we keep renewing because the emergency continues and then the whole point of a balanced budget amendment is lost.. and now we're breaking our own law. All that, and not to forget, it won't pass in the Senate.
Last thing on the Senators - when Mr. Gregory asked about whether there should be congressional hearings on the scandal going on with News Corp., which owns Fox News here in the U.S., Senator Durbin said yes. Senator DeMint said that we should let law enforcement do its job. Actually, both answers are wrong. Mr. Durbin by saying yes, is already implying some sort of guilt on behalf of Rupert Murdoch's network here. Mr. Murdoch is not our favorite person, but due process is in order. Mr. DeMint's answer is only partly correct that we should, in fact, let law enforcement do it's job, but by instantly deflecting the answer, it wreaks of favoritism on his part in that he's not going to say anything bad about the news organization that backs his cause and gives Republicans an unfettered platform for their opinions. It panders and is cowardly.
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Round table: Ohio Governor John Kasich (R); Chairman and CEO of Honeywell, David Cote; former mayor of New Orleans, now president of the National Urban League, Marc Morial; Chief Economist for Mesirow Financial Diane Swonk; and CNBC’s David Faber.
David Farber articulated the best point about the News Corp. scandal, which was for the first time Rupert Murdoch wasn't in front of the story. He was not able to put his spin on it in Britain, which he will try to reverse here in the United States. Mr. Kasich said that officials at Fox News here have told him that they are not touched by this scandal.
To the economic points, the panel seemed to come to the consensus that it is the 'uncertainty of demand' that has business leaders on the sideline as it were, Mr. Cote's main premise. But there isn't uncertainty of demand, we can tell you that people don't have enough money to buy more of the stuff that they already have. And why don't have that money, because business hasn't helped Americans on the back end. They haven't employed them enough to make these things for people in our countries who don't have them. They haven't created jobs here in this country, just elsewhere. We're pretty certain about this.
Mr. Kasich said that they cut out tax loopholes when he was in Congress in 1997 (Clinton years), to which Mr. Farber noted that all those loopholes are back. What he didn't clarify was that those loopholes were put back in place during the Bush years.
Where Mr. Cote is more correct is that it's scary as a business man because he looks at Congress and he doesn't know what to do because there is no consensus or compromise of any ideas that would essentially dictate how he would go about his business. Congress needs to put a plan forward, and then business will deal with it.
And one last note, something we caught in the conversation that just went by without comment. Mr. Kasich said that one of the ways to create jobs in this country is to educate our kids more specifically to the jobs that are needed. Realize that this is the rationale for educational cuts, especially in things such as art, music, and fitness, but it does not mean reinvestment in more math and science education. And teaching specifically to the job is not a good plan in the context of an overall education and the reason is that who is to say what the job of the future is. One could say that it was creativity matched with mathematical ability that created Google or Facebook.
Here's a suggestion, in grades 6 through 8, you evaluate students' aptitude and as they area about to reach high school, each student declares a focus area, but not to the exclusion of taking other subjects because they are all interconnected - sort of like college but less binding. They are high-schoolers after all. This way, it gives the student focus, perhaps a practical skill if say he/she wants to focus on more of a trade subject, welding for example because math isn't the strongest subject. Just a quick thought, but for Mr. Kasich on education, his rhetoric doesn't match his agenda.
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