This First "Fiscal Fitness" Of 2009

Here's my "Fiscal Fitness" column from today's Roll Call.


Welcome to 2009, the Year of the New Budget Debate
January 6, 2009

Little that has happened on the federal budget up to now — and I mean over the past few decades rather than just the past few months — has prepared anyone for the politically life-changing debate that will take place in 2009.

Anyone who tries to apply the old politics, use past slogans or insist on the still-loosely followed Congressional budget process to understand, support or oppose what is about to happen is very likely to find not just that these previously tried-and-true positions and rationales no longer work, but that their personal credibility on fiscal issues has been seriously damaged.

Panetta At CIA Adds Another Budget Expert To The Obama Cabinet

Leon Panetta, former House Budget Committee chairman, former OMB director, former White House chief of staff, and former California congressman has been nominated by President-elect Obama to be the next director of the CIA.

I've known Leon for more than two decades.  If you're looking for someone from outside the agency who is an honest broker, a great inside player, and as good at dealing with Congress as there is, Leon absolutely is the right person for the job.

But Leon will add one more thing to the Obama administration: yet another very strong budget expert inside the cabinet room.  While his primary responsibility will obviously be the CIA, we shouldn't discount the additional expertise he'll bring when he sets up shop again in D.C., or in this case Langley, VA.

Your Sunday Required Reading

The best thing I've read in a newspaper in the New Year is this op-ed by Michael Lewis and David Einhorn.  It is as good an exposition of the misaligned incentives in the financial markets and their regulation that you will find.  It continues here, with an equally good description of the government's expensive but ineffective attempts to rescue key players in the financial system.  Here's an excerpt:

THERE are other things the Treasury might do when a major financial firm assumed to be “too big to fail” comes knocking, asking for free money. Here’s one: Let it fail.

Chicken Out Is Destroying The English Language

In case you don't have one in your neighborhood, Chicken Our Rotisserie is an upscale fast food restaurant that specializes in (surprise!) chicken.  It is also a company with advertising slogans that almost certainly will provide fodder for the next edition of Eats, Shoots & Leaves.

Chicken Out's big slogan -- "Eat Good" -- is the modern day equivalent of the "Us Tareyton smokers would rather fight than switch" slogan from the 1960s and 1970s, that is, something that sent English teachers into spasms.

But the Chicken Out slogan I noticed over the weekend -- "Home of the healthier chicken" -- is the one that belongs on an SNL skit.

Exactly what is a healthier chicken?  Does it workout more, get more rest, drink more water, drink less alcohol, do yoga to manage stress, get fewer colds?

Is Anyone Not Asking For A Bailout?

Does this mean that the fast food place around the corner from GM headquarters is eligible for assistance?  After all, a hungry executive can't be that productive, can he/she?

Treasury Drafts Broad Rules on More Auto Industry Aid

By Rebecca Christie
Dec. 31 (Bloomberg) -- The U.S. Treasury drafted broad guidelines for aid to the auto industry that would let officials provide funds to any company they deem important to making or financing cars.
With today’s announcement, the Treasury is giving itself room to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC.

D.C., Maryland, and Virgina Want Gross, Not Net Inaugural Costs Reimbursed

The Washington Post reported this morning that the District of Columbia, the Commonwealth of Virginia, and the State of Maryland all want the federal government to reimburse them for the costs they expect to incur in connection with the inauguration.  So far, they are estimating that will be around $75 million.

By federal budget standards, $75 million is a rounding error.  In comparison to the billions of dollars that in recent months spent in recent months bailing out almost anything that moves, it's even less than a rounding error.  In other words, the total amount isn't the issue.

The issue is that D.C., Maryland, and Virginia are asking for the federal government to pay for the gross costs and, therefore, to provide them with more than what they will likely actually incur.

Happy 2009!

Before Andrew, Pete, or I start telling you something different, Happy New Year!

Thanks for visiting us on Capital Gains and Games in 2008.  Here's hoping that 2009 brings you peace, good health, much happiness, and as much prosperity as you and the economy can handle.

Could Vanity Fair Story Be An "Outlier"?

Ok, I've just finished reading the Vanity Fair article, "Farewell to All That: An Oral History of the Bush White House," that seems to be all over the blogosphere these days (For example, among many many others look here, here, here, and here).

The Tragic Story of AIG Financial Products

I have been enjoying the first two parts of The Washington Post's series on AIG's role in the financial crisis.  Of all the places where taxpayer money has been wasted in this series of bailouts, the most galling to me is the $150+ billion (so far) to compensate uninsured creditors of AIG.  So it is nice to have some reporting from The Post about how we got here.  Reading the early sections of Part I of the series (covering the Financial Products division through 1998), we find this:

But it took more than technology to realize their vision. It took a culture of skepticism. The firm set up a committee to examine all transactions at the end of each workday, searching for flaws in logic, pricing and hedges. "Everyone kind of understood what the nature of the game was. . . . This was not a company that involved speculating," said Tom Savage, a mathematician from Drexel who joined the firm in 1988. "So it was everybody's job to criticize and double-check other people's opinions about what was appropriate business and what wasn't."

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