I do realize markets were imploding anyway, but they seemed to stabilize a bit before the speech, only to freefall after people realized he doesn't have a clue (I also don't think it helped that he was 50 minutes late). The Dow went down 200 points in a span of about 45 minutes after he started talking and after a brief bout of short covering, ended closing down over 600 points on the day!
Why was the speech so bad? Because it showed how clueless the President of the United States is in his first job with actual administrative duties. Here are some highlights:
On Friday, we learned that the United States received a downgrade by one of the credit rating agencies -- not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political system’s ability to act.
He is basically opening the speech by saying he doesn't take the worries about our debt seriously. Yes, S&P did talk about their worries about the effectiveness of our political system with two parties so far apart but they also wrote, "a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again." Clearly the debt issue is the #1 reason for us being downgraded. If our debt to GDP ratio was half what it was today, Congress could squabble all they wan't and we wouldn't be downgraded. It's the debt, stupid. I think the market would have felt better if he actually sounded serious about tackling the debt.
The markets, on the other hand, continue to believe our credit status is AAA. In fact, Warren Buffett, who knows a thing or two about good investments, said, “If there were a quadruple-A rating, I’d give the United States that.” I, and most of the world’s investors, agree.
Really, the markets believe we are AAA? On what basis? Some actual data would be good here. Please don't tell me it's because of the flight to safety into treasuries today. Anyway instead of saying something substantive to reassure the markets, he quotes one of his donors, whose company was given an negative outlook today by S&P because of the US downgrade. Not exactly a disinterested and objective party now is he?
That doesn’t mean we don’t have a problem. The fact is, we didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction. That was true last week. That was true last year. That was true the day I took office.He makes it sound like he has always been a centrist, inclusive of the GOP as he tried to find a balanced, bi-partisan solution. Remember when he told the GOP "I won" during negotiations over the failed stimulus? Remember when he told McCain "the election is over" at the Healthcare Summit? Or when he said he didn't want the GOP "to do a lot of talking"? When did he discover this need for "balance" anyway?
Last week, we reached an agreement that will make historic cuts to defense and domestic spending. But there’s not much further we can cut in either of those categories. What we need to do now is combine those spending cuts with two additional steps: tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare.I'm not sure how much he thinks he can squeeze out of "the wealthy" but as I showed here, taxes would have to go be about 100% on "the wealthy" to close the budget gap. Also, this once again shows how clueless he is. The markets are imploding and all he can talk about are tax increases? That is the kind of talk that sends markets down, which is exactly where they went while he was talking. The wealthy already pay more than their fair share of taxes anyway.
I realize that after what we just went through, there’s some skepticism that Republicans and Democrats on the so-called super committee, this joint committee that’s been set up, will be able to reach a compromise, but my hope is that Friday’s news will give us a renewed sense of urgency. I intend to present my own recommendations over the coming weeks on how we should proceed. And that committee will have this administration’s full cooperation. And I assure you, we will stay on it until we get the job done.Woohoo! He'll present his recommendations to a committee! That'll change everything because Congressional committee's are known for their bold and quick action! I also won't hold my breath with regards to his recommendations. Even when we were on the brink of disaster he still didn't want to publicize a plan. I guess it's because his last budget was so out of touch that it was voted down unanimously in the Senate 97-0!
Of course, as worrisome as the issues of debt and deficits may be, the most immediate concern of most Americans, and of concern to the marketplace as well, is the issue of jobs and the slow pace of recovery coming out of the worst recession in our lifetimes.So this is the paragraph where he says he is blowing off the downgrade. It's really amazing how tone deaf he is. Our debt is downgraded and the markets are imploding and he starts talking about "the most immediate concern" which is not debt. Investors wanted him to stand up, act like he knows what he is doing and sound convincing in cutting our deficit. This reminds me of how when people were concerned about their jobs he decided to make hiring that much more expensive through Obamacare.
Specifically, we should extend the payroll tax cut as soon as possible, so that workers have more money in their paychecks next year and businesses have more customers next year.
We should continue to make sure that if you’re one of the millions of Americans who’s out there looking for a job, you can get the unemployment insurance that your tax dollars contributed to. That will also put money in people’s pockets and more customers in stores.
First, it's pretty clear the payroll tax cut hasn't been enough to create jobs. Second, isn't this speech supposed to be about cutting the deficit, not talking about two programs which will make it worse. Third, tell me again how unemployment insurance helps create jobs again?
These aren’t Democratic proposals. These aren’t big government proposals. These are all ideas that traditionally Republicans have agreed to, have agreed to countless times in the past. There’s no reason we shouldn’t act on them now. None.So besides the debt just being downgraded by S&P with more to come? That's not a reason to constrain some of these "stimulus" packages? How about a compromise, we lower the payroll taxes (I'm all for letting people keep more of their own money) and that's it.
Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we’ve always been and always will be a AAA country.I get the feeling this line sounded better in rehearsal. Obviously, if we keep spending like we are spending we won't be anywhere near a AAA country. Also, wouldn't it have been nice to the President to actually talk about returning the United States to AAA status at S&P? But I guess that would have required a real leader, something we clearly don't have. No wonder the markets tanked.