Getting serious

For weeks the word was that Wall Street was not panicking about Washington's inability to raise the debt ceiling because it was understood that, in the end, some kind of deal would be reached. After all, the thinking went, the leadership of both parties knows how potentially serious and far-reaching the consequences would be of default. In the past few days, however, markets around the world have started to drop and there is now a real feeling that "these guys could screw this thing up." We are, indeed, in interesting times.

One article that most still cling to is that the US will not default -- in other words, miss payments on the debt to creditors. Because of what would certainly be the cataclysmic results of the world's safest asset suddenly unable to pay its obligations, the widely held view is that even if no agreement is reached the Treasury would first pay the $90 billion due to bondholders. After that, the government would need to prioritize, as incoming tax dollars only cover 40% of outlays. More than half of government would not be funded: Social Security or homeland security or troop salaries or Medicare, etc. Some essential programs would be on hold.

This assumes that, absent a Congressional vote, President Obama doesn't invoke the 14th Amendment to the Constitution, which some Democrats are publicly pushing him to do. Obama, a Constitutional law professor, has said that his Administration's lawyers have reviewed the 14th Amendment -- part of which reads, "The validity of the public debt of the United States ... shall not be questioned." -- and concluded that it is not "a winning argument." Using such a tactic spuriously, some say, could lead to impeachment.

What has many analysts concerned is that even if an agreement is reached and the debt ceiling is raised this entire dramatic and drawn-out episode has already done its damage. Though the mounting total of US government debt -- currently $14.3 trillion -- has always been in plain sight, investing in that debt through US Treasury bonds was still considered the safest bet in the financial world. Now, the spotlight is on and some may start to second guess the wisdom of such an investment, for even if obligations are met this time the idea that there could come a time when this is not so is beginning to creep into worldwide financial markets. And the idea that the Tea Party segment of the political spectrum is actually playing chicken with America's financial affairs and that this most unstable and irresponsible movement may grow in power and is even looking to take the White House -- well, such a possibility could, right now, cause investors to panic and ratings agencies to lower the AAA rating of American debt.

Coupled with the current flat recovery from the Great Recession, it seems that we are forging new economic ground. The Tea Party and its lackeys in Congress think they know what they're doing, but we have seen how their conception of reality is not fact-based. We can only hope that saner heads step in and quickly fix this mess.

Library gets go-ahead

The city has announced that it will go ahead with the construction of East Boston's new library branch despite a failure to receive state funding this year. Though it appeared for a bit that the project would have to wait an extra year, Mayor Menino said, "Under no condition are we going to stop on this project," according to Boston.com.

The library, which will be located at one end of Bremen Street Park, will be nearly 15,000 square feet. Construction is scheduled to begin next spring and the library could be open by the fall of 2013.

Photo courtesy of Boston.com.

DC snub could be Bay State gain

President Obama today announced his nomination to head-up the new Consumer Financial Protection Bureau -- and it isn't, unfortunately, the woman who had the original idea for the agency and has been overseeing its set-up. Elizabeth Warren, a Harvard law professor, is smart and tough, with unquestionable integrity, and you would think that these qualities would make her a no-brainer for the top spot in the CFPB, which is supposed to provide information to consumers and to keep an eye on banks, credit-card companies and other financial institutions -- all with the goal of protecting all of us from lies, schemes and predatory practices.

The Republican Party, of course, has a problem with any tactic that prevents their friends, and themselves, from getting richer. GOP senators made clear that Warren would not pass confirmation, so the president nominated an underling, Richard Cordray (whose nomination, it appears, will also be held up). While, again, I wish that Obama would fight back against the morons in Congress, there may be a bright side to this for those of us who live in Massachusetts. Warren's name has been tossed around as a possible Democratic challenger to Senator Scott Brown in the 2012 election. Warren said today that, with her work in DC done, she is returning to Massachusetts "to do more thinking" about a possible Senate run.

Warren would be an excellent candidate, and she would immediately have my support. I'm hoping she throws her hat in the ring.

Good time for a good cause

I had a nice time last night at the DeVeau Family and Friends Summer Beach Party at the Orient Heights Yacht Club. The annual event raised more than $20,000 for the Jimmy Fund. Ed DeVeau is a former Savio student of mine and there were a number of other former Savio students on hand, including guitar hero Joe Maraio, who played a set for the crowd.

Car accident

I came across the scene of a two-car accident moments ago at the corner of Bennington and Moore streets in East Boston. No one appeared to be hurt badly, though I saw a young woman with a scratched face. One car had smashed into a pole outside Carlo's Market while the other was splayed across the median strip. I took the photos above.

In Congress, July 4, 1776

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed…”