Sunday, August 21, 2011

FDA Escalates War on Nutritional Supplements

If you start the day like millions of other Americans with a multi-vitamin or other supplement for nutritional support to improve your health or treat a chronic ailment or perhaps overcome a diet deficiency, be aware that Big Pharma is on the move again through its bureaucratic ally, the Food and Drug Administration.

Long a captive of the industry it is supposed to regulate, the FDA is once again targeting the vitamin and supplement industry under the guise of ‘protecting the public health and safety.’  On July 1st, the FDA issued new draft New Dietary Ingredient (NDI) guidelines that has stirred the natural health community and those who cherish freedom of health choice to action

With passage of the Food Safety Modernization Act in January, the FDA has mandated that each supplement company must ‘notify’ the agency of any New Dietary Ingredient (NDI) added to its products since 1994.  Adopting a vastly broader interpretation than Congress intended, the FDA has chosen to shift notification into a lengthy and prohibitively expensive re-approval process of nutritional supplements already approved and on the market for sale.  That notification process would require extensive documentation including peer-review articles and clinical test results for every ingredient in every product with an explanation of how each Ingredient is  ‘reasonably expected to be safe.’  Such requirement is expected to involve hundreds of thousands of products that will place a huge unwieldy burden on every nutritional supplement company as well as the Agency.  Once NDI documentation has been filed, that product is required to be withdrawn from the market within two months for a ‘reassessment’ and if not withdrawn, will be confiscated as an ‘adulterated’ product.

In an additional outrageous abuse of power, the FDA has expanded the NDI guidelines to require pre-1994 dietary supplements to go through the same extensive re-approval process. The agency, well known for its antagonism to organic foods and the self-help health movement, has refused to provide a list of those Ingredients approved by the FDA prior to 1994 and is requiring nutritional manufacturers to compile and provide the pre-1994 list which must include any changes, no matter how irrelevant such as any change to ‘milligrams per serving’.  

Critics of the proposed rule fear that FDA’s goal is to create burdensome requirements with huge fees, unreasonable administrative demands and impossible-to-meet standards that will threaten the survival of smaller, less politically connected  supplement manufacturers.  Once vulnerable, the  highly organized Big Pharma will be in a position to ‘buy out’ struggling companies, creating a monopoly in total control of alternative health products that have successfully challenged the mega-national drug cartels for its market share – all long term goals of the pharmaceutical industry.

In 1994, the Dietary Supplement Health and Education Act classified nutritional supplements as ‘food’ because of their natural, plant-based ingredients (that cannot be patented) and were exempted from the same approval process required of pharmaceutical drugs   Today, that exemption is being challenged by the proposed NDI guidelines.  Many of the herbal-based nutrients and natural minerals in supplements have been part of the human diet since the first homo habilis picked berries and have been used as folk remedies for centuries.  Unlike the deleterious side-effects of many synthetic drugs, natural vitamins are far safer than man-made chemically formulated medications and pose no threat to human life.   The nutritional supplement industry has an exemplar record for safety, especially when compared with the FDA-regulated drugs such as thalidomide, Avandia, Risperdal or prozac. 

In what is probably not a coincidence of timing, Sen. Dick Durbin (D-Ill) has simultaneously introduced the Dietary Supplement Labeling Act of 2011 (S. 1310) which would require the FDA to compile a list of nutritional ingredients that could lead to adverse effects or could be deemed risky.  In addition, Durbin’s bill would limit vitamin doses based on a non-specific set of arbitrary standards.  Once an ingredient is on the list, there is no clear process to challenge the ‘unsafe’ determination, even if new evidence comes to light.

Neither the Durbin bill nor the proposed NDI guidelines accomplish anything new in safeguarding public health and safety as current laws such as DSHEA, the Nutrition Labeling and Education Act, Good Mgmt Practices standards, and the Fair Packaging and Labeling Act have all ensured the purity and quality of nutritional products.

If adopted, the Dietary Supplement Labeling Act and NDI guidance will threaten Big Pharma’s natural health competitors and create opportunities for the FDA to more easily deny the public unfettered access to  new supplement innovations as it would decrease or totally eliminate current supplements on the market as well as dramatically increase prices.

Known for armed raids on food coops and the offices of alternative health practitioners, the FDA has never made a secret of its antagonism to an alternative health movement as it has corporatized science in the name of fraudulent clinical studies. Like many Federal departments and agencies with a revolving door that swings both ways, the FDA is rife with corruption because of its cozy relationship with drug companies whose livelihood depends on the agency’s approval process.  The relationship between the FDA and Big Pharma is a worst-case yet too common example of the influence of corporate money on public policy.

With a history of putting profit before the patient, the pharmaceutical industry, the Godzilla of American business,  has a reprehensible record of fraud, false documentation on clinical tests, kickbacks and payola to doctors, improper promotional practices, illegal off-label marketing (unapproved uses) that have cost them a mere $5 billion in fines – an insignificant amount for an industry that has been known to profit $180 billion from just 12 blockbuster drugs in one year.

According to the Center for Responsive Politics, pharmaceutical companies will ‘fare better now that Obama’s initial plan to institute a public health insurance plan did not become part of the health care reform legislation signed into law in 2010”.   FDA bureaucrats get away with their own interpretation of legislation to suit their corporate suitors because the majority of Congress are in the same Big Pharma  pocket.   With an industry-wide contribution of $3 billion in the 2012 election cycle, the pharmaceuticals have, to date, donated $1.5 million to Republicans and $12.2 million to Democrats for the upcoming election.

Behind the scenes, as many as 20 once best selling drugs have lost their patent protection and will be sold across the counter as ‘generic’ products, some at significantly lesser cost to patients, the pharmaceutical giants are feeling the pinch as they see a takeover of the lucrative dietary supplement companies an easy source of quick profit.

For more information, contact the Alliance for Natural Health  

Tuesday, August 16, 2011

Quote of the Month

"It is common sense to take a method and try it.  If it fails, admit it frankly and try another.  But above all try something."   President Franklin D. Roosevelt, 1932

Monday, August 15, 2011

Joint Congressional Committee to Dismantle America

There is a lot more riding on the new Super Duper Debt Committee than has been acknowledged - more than just tinkering with multi-trillion dollar spending cuts.  As the Committee can be expected to increase its charge to cut an additional $1.5 trillion (on top of $1 T cuts to take effect Oct 1st at the start of the 2012 fiscal year), Sen. Kerry, on the weekend he was appointed, suggested that a $4 trillion cut previously requested by President Obama, appeared necessary.

What the President, Sen. Kerry, the Senate's top multi-bazillionaire and others on the Committee are not aware of is that the proposed cuts represent a fundamental shift in American society that will fuel a desperation and anger - one that promises to be deeply profound and more than worrisome.       

On his mid west bus tour, Obama's rebuke to public union employees to 'share the burden" is a further indication that even before Members of the new Debt Committee were announced, it was a foregone conclusion that there would be at least one potential Democratic cross-over vote and that given narrow-minded Republican obstinacy, the six Democrats on the Committee would be the first to blink.  

After more than two years of being embarrassed and out-maneuvered by a more committed minority, Senate Democrats can be expected to seek ‘bi-partisan cooperation’ as they sacrifice, amidst a great display of hand wringing,  significant portions of the Big Three social safety net programs in order to ‘save’ them for the future – something akin to ‘we had to burn the village in order to save it’ mentality.   Now that the list of Committee Members is public, it is apparent that the individual names are largely irrelevant since the Republicans would only necessarily appoint intractable right wing Grover Norquist toadies pledged to ‘no new taxes or die’ (politically speaking) and that Minority Leader Pelosi and Majority Leader Reid were always going to
appoint party loyalists including at least one ‘flipper’ – which is essentially what they did.  Democratic appointees out of what Paul Wellstone used to call the 'democratic wing of the Democratic party" were passed over. 

A product of the Budget Control Act which President Obama signed to raise the debt ceiling, the new Super Joint Select Committee to Dismantle America, oops I mean Deficit Reduction Committee consists of twelve Members including three Republicans Senators and three Republican House Members and an equivalent number from the Democrats.  The Committee has an extremely narrow window in which to approve the $1.5 trillion by Thanksgiving before a ‘trigger’ is activated.  If the trigger is pulled, then a full range of across-the-board cuts will occur with no new revenues as part of the ‘compromise’.   The Committee’s recommendation needs only a majority of one to be approved and will immediately be sent to the House and Senate for its rubber stamp with no public hearing, no amendments, no filibuster and no debate.

In any other western country, it would be a matter of outrage that the Democrats in Congress agreed to establish such an undemocratic legislative 'advisory' body in the first place but who can remember any compromise ever proposed without Democrats offering the shirt off their backs.   Were those 95 House Democrats and 46 Senate Democrats who supported the egregious debt ceiling bill aware that they were handing over their own fiduciary responsibility and that by allowing this hand-picked group to form, Congress was abdicating its Constitutional authority?  If not, they should be fired for not paying attention and if they were aware, they should still be fired for betraying the Constitution.     

With after-debt-ceiling polls showing that 82% of American public have no faith in Congress, a good question  might be What the Hell is Wrong with These People? On August 2, 2011, 94 House Progressive Democrats (including Rep. Becerra)  and a mere 7 Senate Democrats voted against the Debt Ceiling which authorized the Super Committee. This is not the first time Congress has acquiesced to the Executive Branch when, in recent weeks, Obama was allowed to wage war in Libya without legal authorization at a cost of $1 billion.   Republicans who continue to impress with an utter lack of intellectual capacity,  would like nothing better than to further weaken the country’s institutions of government to the point of extinction.   

Civil libertarians already alarmed by a steady deterioration under Obama point out the congruence of the Super Committee with the Enabling Act of 1933 which formally eliminated the Reichstag’s Constitutional role as it ceded its legislative authority to the German Chancellor.  The vote was 441 in favor while 84 Social Democrats voted NO with Otto Wels making the sole principled stand in opposition on the floor of the Reichstag.    

And yet with nary a word of informative analysis, neither the ‘lame stream’ nor its liberal media peers have flagged the Constitutional threat to representative government posed by the Committee.   

Potential No. 1 Flipper is Sen. Max Baucus, a proven corporate Democrat who presided over the Budget Committee (with authority over Medicare and Medicaid) in 2009 as Dr. Margaret Flowers and others were arrested as they protested not being allowed to testify in support of universal health care – and not one Democrat or Republican on the Committee that day protested. 

Even as Obama originally requested a $500 billion Pentagon cut, a pulled trigger would cut a mere $350 billion over ten years, hardly an injurious dent in their war-making capacity.  With multinational defense contractors like Raytheon, Boeing, General Dynamics and Lockheed Martin located  in every state represented by Members of the Committee, political pressure and scare tactics exaggerating the impacts of ‘doomsday’ cuts are building to spare the Pentagon as many Americans contemplate eating cat food.

If there is any expectation that the Committee (Sens. Portman (Oh), Toomey (Pa)  and Kyl (Ariz) and House Republicans Reps. Hensarling (Tx), Upton (Mich) and Camp ( Mich) will be join by Sens. Kerry (Mass), Baucus (Mont) Murray (Wash) and House Democrats Reps. Clyburn (SC), Van Hollen (Md) and Bcerra.(Calif).will act independently in the best interests of the American people, think again.   According to the Center for Responsive Politics, each member of the Committee receives a majority of campaign funds from Business Political Action Committees such as:  Reps. Clyburn 75%, Van Hollen 56% and Becerra 72% with Sens. Murray 58%, Baucus, 84%, and Kerry at 72% with labor unions running a distant second.   On the Republican side, Reps. Hensarling PAC donors were 100% business, Upton 95%, and Camp 96% with Sens. Kyl at 87%, Portman 83% and Toomey 75%.

As the American economy hangs in the balance, consider the influence of the Financial, Insurance and Real Estate (FIRE) Sector which reaps bazillions in interest payments on loans to States and sovereign governments around the globe and has given the most campaign contributions to a majority of Committee Members:  Clyburn $1.6 M, Van Hollen $1.2 M, Becerra $1.3 M with Sens. Murray $3.1 M, Baucus $5.3 M and Kerry $21 M.   Republican Reps. pulled in from FIRE :  Hensarling $3.5 M, Camp $2.3 M and Upton $1 M with Sens. Kyl $4.3 M, Toomey $3 M and Portman with $4 M.     

As the Committee can be expected to favor funding Obama's multi-international wars in Iraq, Afghanistan and Libya over preserving programs that directly benefit the American people, there is no public figure on the horizon to articulate a massive revenue generating alternative such as taxing Wall Street profits.  The final Committee recommendations, severe and heartless, can be expected to generate a profound sense of national loss, that a once scruffy nation, brave and proud, is now bereft of its republican roots. Once an experiment in participatory democracy, always more perfect in its promise than practice, is now distorted by increased violence and anarchy in the streets, imposition of urban curfews and an erosion of democratic institutions that has taken more than 200 years to build. 


Sunday, August 14, 2011

S&P and the Blame Game - An Update

For those political/news junkies (yours truly included) who have puzzled over how such a smart Presidential campaign, so viscerally in touch with the American people could, now in office, be so lacking in strategic planning and completely inept, missing what seems to many, the obvious.   Of course, we know that running for office is significantly different than actually enacting public policy and nowhere is that more evident than with Obama's health care 'reform'.

Immediately upon the Standard and Poor's downgrade, the President, Treasury Secretary and their liberal media allies complained bitterly about the decision given S&P's own ineptitude - a valid point of contention..  Despite making a good case that the rating agencies bear a huge burden for the 2008 meltdown, it might behoove the Federal government to acknowledge that financial institutions are required by law to use 'ratings' (which are mostly 'best educated guesses') prior to making future investment commitments.   As the Securities and Exchange Commission announces it will scrutinize the S&P's 'miscalculation", the arrangement becomes problematic when an agency dependent on the Federal government bites the hand that feeds - or vice versa.  

However, given S&P's indictment of the Republicans in Congress ("We have changed our assumption ...because the majority of Republicans in Congress continue to resist any measure that would raise revenues..") putting the responsibility for the downgrade squarely on their shoulders, why wouldn't the President reiterate that hard-line Republicans have caused the downgrade?  This isn't about being petty or vindictive.  It is about being willing to roll up his sleeves and play the 'hard ball' necessary to save the Big Three social safety net programs and to arrive at a Fair Deal for the American middle class.  Who is the bigger enemy here - Standard and Poor's or the Republicans?  Shouldn't the Republicans be held accountable for their behavior during the debt ceiling debate?  As the President's approval rating drops below 40%, why wouldn't he want to score points on those same Republicans who have committed to bring him down and take the Federal government with them?

As Republicans pummel the President for causing the downgrade, it is long past time for him to swap the basketball for a pair of boxing gloves and climb into the ring.  If Obama is to convince the American public he deserves to be reelected, it is time to put the 'bipartisan compromise' attitude aside and step up his A Game..     

Wednesday, August 10, 2011

The Blame Game

In the face of repudiation of their trickle down economic ideology, it would seem implausible that persistent Republican voices have either not read or have little understanding of the real message from Standard and Poor’s downgrade of long-term U.S. credit rating to AA+.  (see full text

If they were open to being so informed, Republicans would see that the S&P’s prime concern with the Debt Ceiling Agreement (aka the Budget Control Act) was that a “majority of Republicans in Congress continue to resist any measure that would raise revenues”.   Reading through the document, Republican intransigence is obvious as a root cause for the downgrade as House Speaker John “I got 98% of what I wanted. I’m happy” Boehner bragged as he delivered for his corporate constituents.  Even predictions of an imminent double-dip has not inhibited Majority Leader Eric Cantor from advising his pack of Alpha males to resist any compromise on increased revenues.   In the face of market volatility and deepening economic jitters, what it will take remains an unfathomable mystery for neo-Republicans to shake off their self-deception and accept the real world.  Instead, the country is burdened with a Republican party that espouses an irrational opposition to common sense and in their lust to destroy any government benefits by, of and for the People, unwittingly reveal a pathological contempt for democracy and its egalitarian principles. 

While G.W. Bush's budgetary games created a financial profligacy to rival Ancient Rome in its final days, Republicans have dared to blame Democrats for 'out of control' spending.  As market chaos reigns, Republican hyperbole remains strangely silent, as they hunker down, no doubt formulating a response that will demand final destruction of the country’s favorite Big Three social safety net programs.     

Despite well-deserved criticism of S&P’s failure to do their job prior to the 2008 meltdown, the downgrade has affirmed the inadequacy of the bi-partisan Debt Ceiling Agreement and has taught the American public the necessity of increasing revenues and that a jobs program will spur growth.  

In a tacit rebuke to Republicans apparently immune from tweaks of conscience, the S&P’s analysis asserts that “American governance and policymaking is less stable, less effective and less predictable” with “near term progress…less likely than previously assumed and will remain a contentious and fitful process.”   Although making no policy recommendations on the ‘mix of spending and revenue measures’ necessary to put the US on the path to fiscal sanity, S&P predicts that with no new revenue generation and even with $2.1 trillion in cuts, the US debt burden will continue to grow.  In other words, S&P’s reduced credit rating did not contemplate added revenues that might be derived from increased tax generation or bringing the $240 billion spent on US military excursions around the world home to Detroit or the south Bronx.    

Standard and Poor’s further stated that they changed their projected scenario assuming that the Bush 2001 and 2003 tax cuts scheduled to expire in 2012 will remain in place” citing that a higher debt trajectory could lead to a second lowered rating unless initiatives such as the “lapsing of the 2001 and 2003 tax cuts for high earners lead to fiscal consolidation measures likely to slow the deterioration of the government's debt dynamics.”   In order words, if nothing is done to raise revenues, the downgrade to AA+ may be only the first if the Obama Administration and the Republicans continue to screw with the economy.      

It was three full days after the downgrade before the White House, silent with the President at Camp David over the weekend, spoke out as the American public and the markets waited, desperate for assurance that Someone was in charge.  What Americans needed to hear was a strong and focused President with a little spunk and a lot of vision announcing that an Executive Order establishing an Infrastructure Bank was about to be signed or that an emergency massive public works jobs bill would be rushed through Congress – daring the Republicans to obfuscate in this time of an unprecedented national crisis - and reminding us of the deleterious effect of budget cuts that will not create jobs or stimulate the economy wouldn’t have hurt either. 

Instead, as the market dropped 645 points on Monday, no reassurance was forthcoming and the President inexplicably offered no new initiatives.  Still touting his now discredited ‘balanced’ approach, the President urged extension of unemployment insurance and payroll tax deductions, both small potatoes in the present context, as if either will make a significant contribution to stimulate the economy.  The problem, of course, is that it is not clear whether the President agrees or not with the same ‘voo-doo’ economic principles that the S&P report tacitly rejected.

The President, in resuscitating a speech he has given a dozen times before, conveyed no sense of  urgency, accepted no personal responsibility for his role in the ill-conceived Agreement and provided no indication that he would imminently transform into a ‘crisis’ leader. Lacking any realistic assessment that he understood the immediate crisis or that he had a comprehensive action plan, Obama, still wearing the mantle of a candidate on the stump, exhorted that ‘This is the United States of America and it will always be a triple A country” assuming that his words would rally the markets – they did not.  

The reality that the President’s admiration for Ronald Reagan has always surpassed his admiration for FDR who restarted a depressed economy in 1937 after a precipitous stock market drop, should have been prophetic.  As the President and Treasury Secretary focus blame on the tea party and Standard and Poor’s, both are amnesiac to the fact that the President yielded too much, too soon to Republicans, just as many Congressional Democrats, complicit, enfeebled and perfidious during the 3 month debt ceiling discussion, share responsibility for what has occurred.  What was once a stark fundamental different view of government is more muddled today than ever and the reality is that neither political party has shown an ability to govern.   

As the consequence of a risky DCA without revenues, the American public deserves to know which, if any, of the President’s economic advisors endorsed the final Agreement.?  Did any of them make the case to the President that massive budget cuts without revenues would come back and bite Obama in the ass?  Perhaps it was Austen Goolsbee of the President’s Council of Economic Advisors who appeared on Jon Stewart’s program immediately after the Agreement was reached as all had a jolly good time or perhaps it was Treasury Secretary Tim Geithner, last of the President’s original economic team, who never looks like he’s having a good time.  Geithner’s assertion that the American economy is “strong” is indicative of a complete disconnect between the Administration and life outside-the-beltway for average Americans.  In a masterful stroke of timing, Geithner, who earlier indicated  he would step down after the debt ceiling and was urged by Obama to remain, no doubt in recognition for the terrific job he has done on the recovery, has announced he will stay at Treasury.  Phew, that’s a relief.

Immediately following the President’s solitary signing of the Budget Control Act without the usual celebratory bi-partisan crowd, much of the liberal media presented Obama as being ‘held hostage’ by the Republicans as if the Agreement was against his will while, in reality, the President favored a much higher package of cuts at $4 trillion.   It follows that many Congressional Democrats oblivious to the crisis, who would otherwise be having a snit fit if a Republican were in the White House, were also ‘forced’ to abdicate their fiduciary responsibility as they voted for what will ultimately be judged as a travesty of representative government.
Assuming that being ’held hostage’ (in a political context) means without shackles and a cage, what does that say about the ability of ‘hostages” to do their job, as being too inexperienced or lacking a political maturity to exercise the necessary leadership skills.

On the other hand, no self-respecting hostage with inner grit or a wealth of personal resources that enabled a whirlwind rise from a lowly community organizer to the most important gig on the planet in little more than a decade would allow oneself to be easy prey to the dictates of a morally inferior bunch of hooligans.  Such a climb up that celebrated ladder is due to more than just extraordinary luck and some healthy chutzpah – it  takes a rare combination of iron will, a single-minded ambition bordering on the fanatic and a phenomenal self-confidence that instinctively knows how to accomplish goals.  

Unfortunately, those qualities have failed to materialize into a 21st Century ‘crisis leader’ necessary to shepard this once-great country and its people through the woods.    

Saturday, August 6, 2011

Full Standard and Poor Statement Downgrading US Credit

Standard & Poor’s Report on Downgrading US Credit Rating to AA+

Saturday, 06 August 2011 02:44 GMT    By  John Kicklighter, Currency Strategist
Full Statement on US Downgrade from Standard & Poor’s: “We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating…”
United States of America Long-Term Rating
Lowered To 'AA+' On Political Risks And
Rising Debt Burden; Outlook Negative
  • We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.
  • We have also removed both the short- and long-term ratings from Credit Watch negative.
  • The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.
  • More broadly, the downgrade reflects our view that the effectiveness, stability and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
  • Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon.
  • The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.
Rating Action
On Aug. 5, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA'.The outlook on the long-term rating is negative. At the same time, Standard & Poor's affirmed its 'A-1+' short-term rating on the U.S. In addition, Standard & Poor's removed both ratings from Credit Watch, where they were placed on July14, 2011, with negative implications.  The transfer and convertibility (T&C) assessment of the U.S.our assessment of the likelihood of official interference in the ability of U.S.-based public- and private-sector issuers to secure foreign exchange for debt service--remains 'AAA'.

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.
Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria (see "Sovereign Government Rating Methodology and Assumptions," June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S.federal government's other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.
We have taken the ratings off CreditWatch because the Aug. 2 passage of the Budget Control Act Amendment of 2011 has removed any perceived immediate threat of payment default posed by delays to raising the government's debt ceiling. In addition, we believe that the act provides sufficient clarity to allow us to evaluate the likely course of U.S. fiscal policy for the next few years.

The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.  Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements,the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.

Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a 'AAA' rating and with 'AAA' rated sovereign peers (see Sovereign Government Rating Methodology and Assumptions,"June 30, 2011, especially Paragraphs 36-41). In our view, the difficulty in framing a consensus on fiscal policy weakens the government's ability to manage public finances and diverts attention from the debate over how to achieve more balanced and dynamic economic growth in an era of fiscal stringency and private-sector deleveraging (ibid). A new political consensus might (or might not) emerge after the 2012 elections, but we believe that by then, the government debt burden will likely be higher, the needed medium-term fiscal adjustment potentially greater, and the inflection point on the U.S.population's demographics and other age-related spending drivers closer at hand (see "Global Aging 2011: In The U.S., Going Gray Will Likely Cost Even More Green, Now," June 21, 2011).
Standard & Poor's takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.'s finances on a sustainable footing.  The act calls for as much as $2.4 trillion of reductions in expenditure growth over the 10 years through 2021. These cuts will be implemented in two steps: the $917 billion agreed to initially, followed by an additional $1.5 trillion that the newly formed Congressional Joint Select Committee on Deficit Reduction is supposed to recommend by November 2011. The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.
The act further provides that if Congress does not enact the committee's recommendations, cuts of $1.2 trillion will be implemented over the same time period. The reductions would mainly affect outlays for civilian discretionary spending, defense, and Medicare. We understand that this fall-back mechanism is designed to encourage Congress to embrace a more balanced mix of expenditure savings, as the committee might recommend.
We note that in a letter to Congress on Aug. 1, 2011, the Congressional Budget Office (CBO) estimated total budgetary savings under the act to be at least $2.1 trillion over the next 10 years relative to its baseline assumptions. In updating our own fiscal projections, with certain modifications outlined below, we have relied on the CBO's latest "AlternateFiscal Scenario" of June 2011, updated to include the assumptions contained in its Aug. 1 letter to Congress. In general, the CBO's "AlternateFiscal Scenario" assumes a continuation of recent Congressional actionoverriding existing law.
We view the act's measures as a step toward fiscal consolidation. However, this is within the framework of a legislative mechanism that leaves open the details of what is finally agreed to until the end of 2011, and Congress and the Administration could modify any agreement in the future. Even assuming that at least $2.1 trillion of the spending reductions the act envisages are implemented, we maintain our view that the U.S. net general government debt burden (all levels of government combined, excluding liquid financial assets) will likely continue to grow. Under our revised base case fiscal scenario--which we consider to be consistent with a 'AA+' long-term rating and a negative outlook--we now project that net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of sovereign indebtedness is high in relation to those of peer credits and, as noted, would continue to rise under the act's revised policy settings.
Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macro economic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade. Our revised upside scenario--which, other things being equal, we view as consistent with the outlook on the 'AA+' long-term rating being revised to stable--retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating. In this scenario, we project that the net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.
Our revised downside scenario--which, other things being equal, we view as being consistent with a possible further downgrade to a 'AA' long-term rating--features less-favorable macroeconomic assumptions, as outlined below and also assumes that the second round of spending cuts (at least $1.2 trillion) that the act calls for does not occur. This scenario also assumes somewhat higher nominal interest rates for U.S. Treasuries. We still believe that the role of the U.S. dollar as the key reserve currency confers a government funding advantage, one that could change only slowly over time, and that Fed policy might lean toward continued loose monetary policy at a time of fiscal tightening. Nonetheless, it is possible that interest rates could rise if investors re-price relative risks. As a result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in 10-year bond yields relative to the base and upside cases from 2013 onwards. In this scenario, we project the net public debt burden would rise from 74% of GDP in 2011 to 90% in 2015 and to 101% by 2021.
Our revised scenarios also take into account the significant negative revisions to historical GDP data that the Bureau of Economic Analysis announced on July 29. From our perspective, the effect of these revisions underscores two related points when evaluating the likely debt trajectory of the U.S. government. First, the revisions show that the recent recession was deeper than previously assumed, so the GDP this year is lower than previously thought in both nominal and real terms. Consequently, the debt burden is slightly higher. Second, the revised data highlight the sub-par path of the current economic recovery when compared with rebounds following previous post-war recessions. We believe the sluggish pace of the current economic recovery could be consistent with the experiences of countries that have had financial crises in which the slow process of debt deleveraging in the private sector leads to a persistent drag on demand. As a result, our downside case scenario assumes relatively modest real trend GDP growth of 2.5% and inflation of near 1.5% annually going forward.
When comparing the U.S. to sovereigns with 'AAA' long-term ratings that we view as relevant peers--Canada, France, Germany, and the U.K.--we also observe, based on our base case scenarios for each, that the trajectory of the U.S.'s net public debt is diverging from the others. Including the U.S., we estimate that these five sovereigns will have net general government debt to GDP ratios this year ranging from 34% (Canada) to 80% (the U.K.), with the U.S. debt burden at 74%. By 2015, we project that their net public debt to GDP ratios will range between 30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at 79%. However, in contrast with the U.S., we project that the net public debt burdens of these other sovereigns will begin to decline, either before or by 2015.
Standard & Poor's transfer T&C assessment of the U.S. remains 'AAA'. OurT&C assessment reflects our view of the likelihood of the sovereign restricting other public and private issuers' access to foreign exchange needed to meet debt service. Although in our view the credit standing of the U.S. government has deteriorated modestly, we see little indication that official interference of this kind is entering onto the policy agenda of either Congress or the Administration. Consequently, we continue to view this risk as being highly remote.
The outlook on the long-term rating is negative. As our downside alternate fiscal scenario illustrates, a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again. On the other hand,as our upside scenario highlights, if the recommendations of the Congressional Joint Select Committee on Deficit Reduction--independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners--lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government's debt dynamics, the long-term rating could stabilize at 'AA+'.On Monday, we will issue separate releases concerning affected ratings in the funds, government-related entities, financial institutions, insurance, public finance, and structured finance sectors.
Related Criteria And Research
  • United States of America 'AAA/A-1+' Ratings Placed On CreditWatchNegative On Rising Risk Of Policy Stalemate, July 14, 2011
  • U.S. Weekly Financial Notes: Soft Patch Or Quicksand?, Aug. 5, 2011
  • Sovereign Government Rating Methodology And Assumptions, June 30, 2011
  • 2011 Midyear Credit Outlook: Unresolved Economic And Regulatory IssuesLoom Large, June 22, 2011
  • Global Aging 2011: In The U.S., Going Gray Will Likely Cost Even MoreGreen, Now, June 21, 2011
  • United States of America 'AAA/A-1+' Rating Affirmed; Outlook Revised ToNegative, April 18, 2011
  • Fiscal Challenges Weighing On The 'AAA' Sovereign Credit Rating On TheGovernment Of The United States, April 18, 2011
  • A Closer Look At The Revision Of The Outlook On The U.S. Government Rating, April 18, 2011
  • Banking Industry Country Risk Assessments, March 8, 2011
  • Behind The Political Brinkmanship Of Raising The U.S. Debt Ceiling, Jan.18, 2011
  • U.S. Government Cost To Resolve And Relaunch Fannie Mae And Freddie MacCould Approach $700 Billion, Nov. 4, 2010
  • Global Aging 2010: In The U.S., Going Gray Will Cost A Lot More Green,Oct. 25, 2010,
  • Après Le Déluge, The U.S. Dollar Remains The Key International Currency,"March 10, 2010
  • Banking Industry Country Risk Assessment: United States of America, Feb.1, 2010
Ratings List
Rating Lowered To From
United States of America (Unsolicited Ratings)
Federal Reserve System (Unsolicited Ratings)
Federal Reserve Bank of New York (Unsolicited Ratings)
Sovereign Credit RatingAA+/Negative/A-1+ AAA/Watch Neg/A-1+
This unsolicited rating(s) was initiated by Standard & Poor's. It may be based solely on publicly available information and may or may not involve the participation of the issuer. Standard & Poor's has used information from sources believed to be reliable based on standards established in our Credit Ratings Information and Data Policy but does not guarantee the accuracy, adequacy, or completeness of any information used.
Complete ratings information is available to subscribers of RatingsDirect onthe Global Credit Portal at All ratings affectedby this rating action can be found on Standard & Poor's public Web site athttp://www.standardandpoors.

Thursday, August 4, 2011

Recommended Reading

"A Harvest of Heat"

 "Powerful corporations like Archer Daniels Midland, Cargill, Dean Foods, Dow AgroSciences, Monsanto and Tyson share a major - though largely overlooked - role in fueling climate change. These giant multinationals have seized control over much of the planet's food resources...According to varying estimates, oil-dependent farming, livestock operations, destruction of carbon-storing fields and forests to accommodate farming, the use of chemical fertilizers and the combustion of fuel to process and distribute food all add up to between one-fifth and one-half of the human-caused pollution that is driving climate change."

- "A Harvest of Heat: Agribusiness & Climate Change, How Six Food Industry Giants Are Warming in the Planet" by Gar Smith for Agribusiness Action Initiatives North America

Wednesday, August 3, 2011

URGENT - Suggested Progressive List of Super Debt Committee Members

Suggested Progressive Appointees to the about-to-be-created Joint Committee on Economic Disaster.


      Norm Dicks is ranking members; voted FOR the Debt package
      Sam Farr – voted AGAINST Debt package     YES

Ways and Means
     Sander Levin – rank member; voted FOR package;  NO
     John Lewis – oversight subcomittee, voted AGAINST – will he stand up to Obama?

    Chris van Hollen    NO

Health Employement Labor and Pensions
     Rob Andrews         NO

Financial Services
     Barney Frank – Voted AGAINST after stating that morning he would support Debt package;
     Michael Capuano – Oversight subcommittee ranking member, Voted AGAINST ; a solid progressive   YES

Energy & Commerce
     Henry Waxman – voted AGAINST debt package; a great progressive  YES

Oversight and Govt reform
    Dennis Kucinich, rank member of Regulatory Affairs, Stimulus Oversight and Govt Spending subcommittee;  Voted AGAINST         YES    YES   YES            


     Leahy    - both voted FOR Debt package’ neither will stand up to Obama

    Tom Harkin – voted AGAINST- knew him in the House many years ago, a great progressive;    
               does he still have the fight?       YES
     Barbara Mikulski – voted FOR the package
     Frank Lautenberg – Voted AGAINST; also member of Financial Services Committee
     Dick Durbin – voted FOR debt package and Simpson Bowles; gone over to the Dark Side  
    Chuck Schumer     NO

Banking Housing and Urban Affairs   
            Robert Menendez; voted AGAINST debt package, 2012 re-election; will he fight?
            Jeff Merkley – Voted AGAINST; best new Senator     YES

            Kent Conrad    NO
           Bernie Sanders    YES YES YES YES
           Jeff Merkley     YES

            Baucus      NO
            Menendez      YES
Joint Economic Committee

            Maurice Hinchey, a great progressive; knew him years ago in NY State Legislature,
                   missed vote    YES
            Other members Cummings, Maloney, Loretta Sanchez may not stand up to Obama

            Bob  Casey   Chair     NO
            Bernie  Sanders    YES

We Can Do This

Monday, August 1, 2011

Super Debt Congressional Committee with Dictatorial Powers

We can only imagine the luminous spirits of FDR and LBJ, revered fathers of Social Security and Medicare/Medicaid, rolling in horror as a disastrously tepid White House and Democratic Party surrendered those historic hard-won victories to a more disciplined, better organized right wing Republican party with barely a whimper.   

In 1937, believing an end of the Great Depression at hand and succumbing to Republican pressure to balance the budget, an overly optimistic Roosevelt approved cuts to the CCC and other New Deal programs.  As Dow Jones responded with a 48% drop, Roosevelt, a more politically savvy President than the current White House occupant, reversed himself and renewed deficit spending.      

After initially calling for a ‘clean’ debt ceiling vote in April, Obama walked away from increased tax revenues last December by continuing Bush tax cuts for the country’s wealthiest 2%.  Buying into what was once called ‘voodoo economics,’ it would not be accurate to suggest that the President was hoodwinked by Republicans.  He is a smart man and one must assume knows exactly the cynical game he has played to cover his own political derriere at the expense of the country’s middle class.  So after numerous proposed debt ceiling plans, each version more eroded than the previous until the final agreement brought an impressive Big Win for the Tea Party – and, when all the dust settles, a disastrous defeat for the Democrats.  

The final plan based on Majority Leader Reid’s proposal will raise the debt ceiling up to $2.4 Trillion with $1 Trillion of undefined, sure-to-be-objectionable cuts to discretionary spending over the next ten years and another $1.5 Trillion to be determined by a new Super-Duper Congressional Committee by year’s end. 

In his announcement Sunday evening, Obama said the Agreement would see the ‘lowest level of domestic spending since Eisenhower” as if that were something to be proud of.  In 1960, the US population was 179 million as compared to 310 million in 2010.   While voicing support, Rep. Barney Frank endorsed the agreement with the excuse that funds for the wars in Iraq and Afghanistan will be cut, a good bet  might that there will ultimately be little appreciable change in either conflict.     

While there is no doubt that the debt ceiling needs to be raised, there is no consensus that Obama’s proposed spending cuts will stimulate the economy or create jobs. As countless economists have pointed out, spending cuts at this time with a 1.3% GDP are exactly the opposite of what the government should be doing during a depressed economy which begs the question which of the President’s economic advisors signed-off on this agreement?  In any case, the coming economic disaster will deservedly have Obama and Democratic fingerprints all over it.

If there is still a need to find domestic cuts, the President might consider the estimated $600 billion cost to maintain 2.3 million prisoners each year at a cost of $63 a day per person and another $9 billion maintaining the half million prisoners awaiting trial who cannot afford bail.  Each year, Medicare costs taxpayers $452 billion and Medicaid $252 billion.      

Even as the President rejected a Fourteenth Amendment remedy, Obama’s repeated calls for  ‘compromise’ which led many citizens to believe those checks would continue and a ‘balanced’ approach that would ‘share the sacrifice’ with the country’s wealthiest and American corporations, the reality is that the President is more willing to give whatever it takes (including the Democratic party’s historic birthright) to win re-election.  The American public was led to believe that ‘compromise’ would be good for the public interest but in recent days ‘compromise’ devolved into no increased taxes on the country’s richest 2% (once a steadfast Presidential promise) or corporate subsidies (another broken promise) while the President’s  Numero Uno priority was pushing the next debt ceiling debate until after the 2012 Presidential election.    

In clear subversion of democratic principles, a new uber-Special bi-partisan Congressional Committee of 12 will be formed with unprecedented dictatorial powers to identify another $1.5 trillion worth of cuts by Thanksgiving or the Big Three entitlement programs will be automatically slashed – just in time for something to be grateful for.  A legislative gimmick that will do its deed behind closed doors, this new Super Committee. in abdicating Congressional responsibility, will bypass the proper legislative process of public hearings, witnesses, testimony and debate and public accountability.  With the authority to consider ‘everything’ on the table for cuts including all Federal government departments and programs, the Super-Committee can be counted on to decimate what remains of discretionary spending and the Big Three in ways that could only occur outside of the public legislative process.  The deal would activate a 'trigger' if the Committee fails to act with automatic cuts including a $350 billion in cuts to the Pentagon over 10 years - less than Obama's earlier proposed cut of $400 Billion.  The Agreement would, however,  keep federal retirement benefits (ie Congressional pensions) off the Committee's table. With Republicans emboldened by their current success, Democrats can be expected to continue their slide into oblivion – much like the Social Democrats in Germany in 1932.   

Proposed by an enfeebled Democratic Senate and a peacock of a Democratic President, establishing the Committee will be fast-tracked through Congress with no filibuster or amendments just as its recommendations in November will be an up-or-down vote and not subject to debate – something like your average bi-partisan regressive abuse of power.  As the level of cuts to be considered by the Committee remain murky and in case you were wondering, do not expect American corporations or the financial services industry to ‘share the sacrifice.”   

Strong opponents prior to its adoption on August 14, 1935, Republicans have, for its entire 76 year existence, portrayed Social Security as a ‘cruel hoax’ while predicting insolvency since the 1970’s with repeal always the target.  In 1977, the National Commission on Social Security Reform headed by Alan Greenspan found the fund ‘solvent for the entire 75 year forecast period” as did a 1983 Study which found the system to be ‘in balance for both the short and long run showing a slight surplus.”  Those positive results were reiterated by the 1994-96 Advisory Council on Social Security.   Current estimates put the Social Security fund from which the Federal government withdraws $180 billion annually, in reality, provides meager benefits, at $2.7 trillion with enough resources to meet its long term obligations. 

As Members of Congress like Frank and Sen. Dick Durbin, both corporate-Democrats, make media appearances in support of the agreement despite what they acknowledge to be an expected ‘exacerbation’ of unemployment, there are 23 Democratic Senators up for 2012 re-election (some of whom have already announced retirement) who will expect local Democratic activists to work their buns off knocking on doors, making telephone calls and doing whatever it takes to get the party faithful out to vote.   When the American public catches on to how they were screwed by the Democrats, some of those Senators may prefer to dust off those classics they have always wanted to read and plan to spend more time with the grandkids.

After relinquishing the potent campaign issue of saving Medicare from the Ryan Plan, the President who knows instinctively how to appear as the offended party while making the ‘hard choices,’ exhibited no conscience as he thanked the American people for their support while at the same time claiming that the Agreement was not his ‘preferred’ deal.   Once those trusting Americans who heeded the Presidential request to contact Congress discover they were being asked to slit their own throats while Democrats made little pretense of  ‘shared sacrifice’ from the country’s richest or corporate America; once those conscientious citizens come down off the ceiling, an appropriate response might be “Mr/Ms. Senator, since I cannot count on your support in my time of need, you can no longer count on my support. ”

It should come as no surprise that the R’s who did an exemplary job of defining the debate while controlling only one-third of three branches of government.(thanks largely to the capitulation of the Democrats) realized virtually ALL of their demands while the Democrats received Zilch.  Most important, Tea Party Republicans took a major step toward realizing their ultimate goal of shutting down the Federal government, what FDR once called the ‘affirmative instrument of the People”.   

Any question of how the Progressive Caucus (who put little real effort into proselytizing their People’s Budget) or the Black Caucus will vote is a foregone conclusion.  With few exceptions, the liberals can be expected to line up with the President..   With the two party system in undeniable dysfunction and chaos, Republicans, so rigid in their ideology, are genetically incapable of making intelligent decisions to benefit the public will continue to push the country into the ditch.

Even with an acknowledged intellectual prowess, it is now apparent that Obama assumed office with insufficient administrative experience, a lack of real political expertise and other than hollow rhetoric, no real people skills.  If he were insightful and wise, he might be embarrassed to know that we now see no personal or professional growth in office.       

The current debate is not the first time that government officials have appealed to naive American taxpayers with woeful predictions of dire consequences if Congress does not act with haste to forestall an impending economic debacle, averting catastrophe and a default that would be devastating to the public.  The current urgent drama played out on the House and Senate floors citing an imminent ‘never has there been such a time’ disaster echoing previous alarms by an irresponsible Congress since the 1970’s to prevent bankruptcy, default, loss of jobs, consumer confidence,  economic volatility, financial insolvency, global lack of confidence and other economic disasters that required trillions of taxpayers funds.  .    

UPDATE   August 1, 2011   6:45 pm
House vote to approve Debt Ceiling increase:     S365
                                  YES                            NO
 Republicans                173                              66
Democrats                   94                                95
Total                           269                             161
Rep. Barney Frank voted NO as Members of the Black and Progressive Caucus held back until the last two minutes when passage was assured.