It's unsustainable, stupid.

  H/T Zero Hedge 

This graphic compares U.S. debt and deficit with the dysfunctional Eurozone economies.  Interestingly, only Greece is worse than we are vis-a-vis the dual metrics on the chart.  We tie with Ireland. Other than that, we are worse than all of industrial Europe.  If our politicians across the political spectrum agree that our fiscal debt situation is unsustainable and potentially catastrophic, and they do, should this not be a critical issue in the presidential campaign?

In the 1992 presidential campaign, Jame Carville's motivational meme "It's the economy, stupid." perfectly encapsulated the key issue of the election.   The beauty of the exhortation was that it focused the Clinton campaign staff on the one issue that could and would make a difference in the electoral outcome. He correctly identified the single most important issue on the minds of the electorate and it also exposed the single greatest weakness of the George HW Bush administration. The Bush campaign seemingly never understood what the election was really about. They touted foreign policy triumphs and their consequent lack of focus on the domestic economy reinforced the perception that President Bush was out of touch with American voters.

In every election since, campaign strategists, analysts, pundits and bloggers have attempted to reprise Carville's insight with a similar construct for the election at hand. Your loyal blogger is no exception.  In 2006 and 2008 the Dividist was convinced the election was about one thing:  "It's the war, stupid."   True enough in 2006. Not so much in 2008.  In 2008 "It's George Bush, stupid." was enough to win the election for Barack Obama. Even though GWB was not running, it was sufficient to tar McCain with that brush. The public sentiment was to punish GWB and the Party he rode in on.  2010 was a different story.  In 2010 - "It's the spending, stupid." carried the day.

Which brings us to 2012.  After winning a battle, generals are reluctant to abandon the very tactics that prevailed in a victorious campaign.  Despite the setback in 2010,  Axelrod and the Obama campaign strategists continue to fight that 2008 war in 2012. It's a mistake. Things have changed. Today there is a far greater awareness and focus on our profligate and unsustainable deficit spending.

Submitted for your consideration, the 2012 Carville election snowclone:

Carnival of Divided Government LV Quînque et Quînquâgintâ Special Paul Ryan's Express Edition

 "Romney unites Republicans and Democrats." - Jon Stewart

Welcome to the 55th edition of the Carnival of Divided Government - the Special "Paul Ryan's  Express" Edition. This was intended to be the special "Dog Days of Summer" Edition, but the presumptive Republican nominee for President chose this week to make an early announcement of his selection for Vice President.   Apropos to our dividist theme,  conservatives and liberals embraced the selection of Congressman Paul Ryan for diametrically opposed rationales. Jon Stewart and the Daily Show nail it:

The Daily Show with Jon Stewart
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Carnival of Divided Government LV

As explained in earlier editions, we have adopted Latin ordinal numeration to impart a patina of gravitas reflecting the historical importance of the series. In this the Carnival of Divided Government LV (Quînque et Quînquâgintâ), as in all of the CODGOV editions, we select volunteers and draftees from the blogosphere and main stream media writing on the single topic of government divided between the major parties (leaving it to the reader to sort out volunteers from draftees).

Consistent with this topic, the primary criteria for acceptance in the carnival is to explicitly use the words and/or concept of "divided government" in submitted posts. A criteria that, to our endless befuddlement, is ignored by many of the bloggers submitting posts, which sadly results in The Dividist reluctantly ignoring their fine submissions. Among the on-topic posts, essays and articles we choose our favorites for commentary and consideration. The Dividist hopes you enjoy these selections. A reminder - Extremism in defense of Divided Government is no Vice-President:

+++

Michael Moran blogging at Slate takes note of  the Vice Presidential hopeful wrapping himself in the Reagan legacy and shares his thoughts in "Reagan's Mantle, Ryan's Hope":

"Set aside the question of whether the 1981/2013 comparison is valid or not (the case is dubious at best) and let’s look at what Reagan actually did when he took office.... Faced with a difficult economy and divided government, Reagan chose to mix tax cuts with stimulus spending and, yes, tax increases, too. Bruce Bartlett, an economic advisor to Reagan and a Treasury official under George H. W. Bush, professes amazement at the twisting of the historical record by those too young to remember the factual Reagan...

Bartlett reminds us, “The cumulative legislated tax increase during his administration came to $132.7 billion as of 1988 [$367 billion today]. This compared to a gross tax cut of $275.1 billion. Thus Reagan took back about half the 1981 tax cut with subsequent tax increases... Imagine that! The alleged God of Tax Cuts actually raised taxes when he thought progress, political, economic or otherwise, required him to do so.”

 Moran despairs of either party adopting the practical pragmatic governing style that was the hallmark of the Reagan presidency. But he glosses over the very reason why pragmatism was a characteristic of that administration - to whit:  "Faced with a difficult economy and divided government...  Reagan actually worked quite deftly with a Congress in which Democrats held power in both chambers."

The appetite for practical, pragmatic, compromise will be directly proportional to the degree the government remains divided in 2013. There is no chance that the GOP will lose control of the House this cycle, so there is no possibility of the Democrats restoring One Party Democratic Rule. However, the GOP will certainly close the gap in the Senate and have a real possibility of taking control of that chamber. This raises the specter of One Party Republican Rule restored with a Romney / Ryan victory.  In that eventuality Moran's fears of an uncompromising intransigent GOP administration will be realized.

However, if any of the three other possible variations of divided government that will likely result from this election prevail, a pragmatic solutions along the lines of  the "Grand Bargain" is a virtual certainly. This is where the comparison to the Reagan administration is apt. One difference -  This time it is likely to be the Democrat Obama who will need to learn to work deftly with a Congress in which Republicans hold power.

Rise of the Algos - Knight Capital and the Inevitable Catastrophic HFT Triggered Market Meltdown In Our Future

It happened again on Wednesday.  A High Frequency Trading  (HFT) proprietary algorithm crafted by highly compensated brains-on-sticks and nurtured in the bowels of an investment bank escaped into the wild. From its carefully co-located massively parallel high speed trading computer it emerged to wreak havoc on the financial markets.  In this case, it was a happy ending. The algo turned on its master and sucked the very life blood out of the firm that deployed it.

The incident is yet another lights-flashing, klaxon-blaring warning signal that competing HFT algorithms operating with the speed, size and complexity that are commonplace today cannot be adequately regulated, tested, or managed. Their interactions with each other cannot even be understood  or predicted.

Wednesday 8-1-12: The Knight Capital Algo Clusterfrack

Oboomercare & The Dumbest Generation

While I was neglecting my blogging duties last month, the Supreme Court ruled on the constitutionality of the Affordable Care Act aka ObamaCare.  Since then the debate reignited on several points:  Did the Supreme Court get it  right or wrong by ruling the individual mandate constitutional because it was really a tax?  Did Chief Justice John Roberts bravely rule on the constitutional merits of the law or did he hide behind the fig leaf of congressional taxing power? Did he show judicial activism or judicial restraint?  Is ObamaCare the biggest tax increase of all time or is it not? Will ObamaCare reduce the deficit or take the deficit to new heights?

Some of these questions answer themselves. If ObamaCare costs $1 trillion dollars to provide new benefits (and it does), and it does not really control costs (it doesn't), and it really is deficit neutral (as the CBO asserts), then simple arithmetic tells us it must also raise $1 trillion dollars of new revenue (which SCOTUS identifies as a tax to be constitutional).  And that pretty much makes it the biggest nominal tax increase in our history.

Carnival of Divided Government Quattuor et Quînquâgintâ Special Back and Blogging Edition

Cartoon ripped from XKCD

Welcome to the 54th edition of the Carnival of Divided Government - the Special "Back and Blogging!"Edition.

NOTICE: The Dividist hereby retroactively announces that the Dividist Papers Blog will be taking a six week Blogging Sabbatical effective at the conclusion of the Facebook IPO post six weeks ago. We did not know we were taking a six week hiatus at the time. It just sort of happened.

NOTICE: The Dividist has returned from our recently announced blogging sabbatical. We are back and we'll kick off with this slightly late edition of the Carnival of Divided Government. Nothing gets those blogging juices flowing like reviewing and correcting the misrepresentations, misunderstandings and general ignorance about the nature and value of a divided federal government. Somebody has got to do it. If not the Dividist, who? If not now, when?

Carnival of Divided Government LIV

As explained in earlier editions, we have adopted Latin ordinal numeration to impart a patina of gravitas reflecting the historical importance of the series. In this the Carnival of Divided Government LIV (Quattuor et Quînquâgintâ), as in all of the CODGOV editions, we select volunteers and draftees from the blogosphere and main stream media writing on the single topic of government divided between the major parties (leaving it to the reader to sort out volunteers from draftees).

Consistent with this topic, the primary criteria for acceptance in the carnival is to explicitly use the words and/or concept of "divided government" in submitted posts. A criteria that, to our endless befuddlement, is ignored by many of the bloggers submitting posts, which sadly results in The Dividist reluctantly ignoring their fine submissions. Among the on-topic posts, essays and articles we choose our favorites for commentary and consideration. We hope you enjoy these selections, and fresh from our blogging vacation, we submit for your consideration this month's selections:

Extraordinary Popular Delusions and the Madness of Facebook

The Facebook IPO priced at $38 per and the offering was increased 25% by over 100 million shares. At this price Facebook will be the largest tech IPO in history and second largest IPO of all time behind VISA. Depending on how the offering trades, it may finish the day as the largest offering of all time. At the IPO price Facebook as a company will be valued more than tech giants Cisco, Amazon, and more than all except 20 other companies listed on the S&P.

There is no shortage of advice on how to assess the value of Facebook's stock. You can easily find analysis outlining the bull case, the bear case, and everything in between. The financial news networks have turned all their programing over to 7x24 Facebook coverage. Many spent $5.00 to download an anonymous author's analysis in e-book form - The Pitch. This blog will not try to assess the merits of the company value versus the IPO value versus the value of as it trades in a speculative frenzy. However, we will suggest that the best book for analyzing the Facebook offering is available for a free download for your Kindle, or on the web.

Charles Mackay's Memoirs of Extraordinary Popular Delusions and the Madness of Crowds was first published in 1841 and summarized three economic bubbles:

Carnival of Divided Government LIII Três et Quînquâgintâ Special May Day Edition

Welcome to the 53rd edition of the Carnival of Divided Government - Special "MAY DAY GENERAL STRIKE!!!!" Edition. It is the First of May - International Worker's Day - May Day - and the official start of the Occupy [FILL IN THE BLANK]! protest season.

Today the Occupiers kick off the season by calling for a national General Strike. Their inspiring motto: "No Work. No School. No Banking. No Shopping. No Housework." is emblazoned across dramatic posters calling for May Day protest actions. Vera HC Chan has identified what may be their most important and lasting cultural contribution: "Whatever the outcome of May Day, one thing has clearly emerged -- the return of propaganda art."

Wait. What? No House Work? Yeah. The poster actually says "No House Work." Is this really how the "99%" are going to stick it to the man? No house work? Some of the posters substitute "No Chores". No joke. It's like an Onion story.

Here in EssEff, the Occupiers were very excited about closing the Golden Gate Bridge. Until they decided not to close the Golden Gate Bridge. Then, apparently experiencing some Midwest Protest Envy, they decided to embark on a "Wisconsin-Style Occupation of San Francisco City Hall". And just like in Wisconsin, about 300 protesters marched into City Hall carrying sleeping bags, made some noise, then left. I guess that is sort of like what happened in Wisconsin. Well, if all else fails, they always have breaking windows and vandalizing small businesses in minority neighborhoods to fall back on.

The Dividist is disappointed that "No Blogging!" was not included in the general strike directives. He now has no excuse for failing to get this latest Carnival of Divided Government posted as scheduled.

Dividist Doubles Down on Divided Government for Six Year Blogiversary

The Dividist let several auspicious dates float by without comment over the last week, including Earth Day, 4-20 Day and Tax Day.  The latter is responsible for us missing the former. One date that we cannot let slip by is the six year blogiversary of The Dividist Papers (aka Divided We Stand United We Fall).  We celebrate by reflecting on the journey as we paraphrase previous posts, plagiarize ourselves, and update some familiar themes and favorite topics.

Six years ago today, the Dividist started this blog by asking the question "Is this blog for you?" As no one else was reading the blog at the time, the Dividist answered his own query saying "Probably not."

William A. Niskanen - The Godfather of Divided Government Voting Strategy

Bill. Niskanen, long-time member and chairman emeritus of the Cato Institute passed away last October. This tribute video was presented  at a Cato Institute memorial service last week.

The Doctrine of False Non-Equivalence - or - Why the left whining about "False Equivalence" is equivalent to the right whining about "Liberal Media Bias"

It's all in the framing
image from [F]oxymoron

The President’s comments at the Associated Press luncheon on Tuesday received a great deal of media attention. Much of the punditocracy was focused on the President’s preemptive strike at the Supreme Court and apparent attempt to direct judicial decisions from the oval office. The political grandstanding by the President precipitated a grandstand volley between the judiciary and the DOJ, as well as predictable partisan posturing from both the right and left.

Frankly I am at a loss to understand what Obama hopes to gain from this kind of rhetoric. Sure it will fire up his base, but it also fires up the GOP base to a degree that the presumed Republican nominee could never hope to achieve. I also don’t see how it helps Obama with centrists and independents. When both a former mentor and student think he got it wrong, it is no surprise that his press secretary was on the defensive.

The President also tried to make hay with the oft-repeated point that the individual mandate was supported by Republicans before they were against it. Avik Roy and Ilya Somin point out the converse is also true, with many Democrats (including candidate Obama) opposing the individual mandate before they supported it.

We once again see partisan hackery, hypocrisy, and cynical opportunism from partisans and politicos on both the right and left. Nothing new there.

But is it true equivalent hypocrisy? Or is it false equivalence?