David Frum to GOP: Stop Flirting with Debt Disaster

David Frum is one of the increasingly rare species of rational conservative. As a one time member of the GOP - an activist even - I am continually amazed at the ever increasing insanity and hypocrisy of today's GOP. As I've noted before, to be a member of the GOP base one must be either clinically insane, horrifically ignorant, or have had a lobotomy. And at the leadership level, demagoguery seems to be all that folks like Boehner and Virginia embarrassment, Eric Cantor , seem to know. In a column on his blog, Frum Forum, Frum takes the GOP to task and warns them of the potential self-destruction the party is courting with its deficit reduction games. Given the quickly tarnishing shine of the GOP in Wisconsin, Ohio and other states, Frum's warnings seem well placed. Here are some highlights:
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Here is John Boehner speaking last week to the New York Economic Club: It’s true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.
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Wrong! Default would be the single most irresponsible thing the United States of America could possibly do. America’s debt has been paid in full and on time since 1789. To cast away that record even in a genuine financial emergency would be a terrifying action. To cast away that record to score a political point? Reckless almost beyond description.

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I always assumed that the first American political party to contemplate default as a way to achieve its political goals would be the Communist Party of the USA, not the GOP. I’m going to tell myself that it’s all just a bluff, and that Boehner is talking wild as a prelude to lowering the boom on the Tea Party. But wild talk has a way of generating its own momentum – and leading to wild results.
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[W]hat this default talk looks like is that the GOP wants a crisis, not a deal. A deal would involve real pain for real voters: Medicare reductions, farm spending reductions, military reductions, and revenue measures. A crisis creates an exciting substitute for such a deal – especially if the GOP can temporarily and delusively convince itself that it can pin the blame for the crisis on President Obama. That will not be true. The whole world will see that the crisis was avoidable, and will see who insisted on forcing it. And however high you imagine the financial and political price – it will be higher.

Is Law School a Losing Game?

I have been a licensed attorney for over 33 years and I can speak from experience that law is a brutal profession over all that to be "successful" - at least in a big firm setting - typically means abandoning one's family to a large extent in order to put in horrifically long hours in exchange for making partner and, if one is lucky and enough of a suck up (I'm not good at the latter attribute), hopefully making some decent money. Or at least that's how it used to be before the current economic meltdown which has left thousands of attorneys suddenly unemployed and new law school graduates unable to find jobs. Yes, being an attorney can allow one to work to right wrongs and aid the less fortunate, but that's not where the money is and funding for such public interest work is far from what it should be. As a result, I have always told my children that I'd never pay a penny for them to go to law school. In the case of my youngest daughter who is my office manager and paralegal, she's seen the ugliness of the profession and would never make the mistake of going to law school. The New York Times looks at the bleak landscape for many new law school graduates. Here are highlights:
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IF there is ever a class in how to remain calm while trapped beneath $250,000 in loans, Michael Wallerstein ought to teach it.
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Mr. Wallerstein, who can’t afford to pay down interest and thus watches the outstanding loan balance grow, is in roughly the same financial hell as people who bought more home than they could afford during the real estate boom. But creditors can’t foreclose on him because he didn’t spend the money on a house. He spent it on a law degree. And from every angle, this now looks like a catastrophic investment.
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Mr. Wallerstein and a generation of J.D.’s face the grimmest job market in decades. Since 2008, some 15,000 attorney and legal-staff jobs at large firms have vanished, according to a Northwestern Law study. Associates have been laid off, partners nudged out the door and recruitment programs have been scaled back or eliminated.
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And with corporations scrutinizing their legal expenses as never before, more entry-level legal work is now outsourced to contract temporary employees, both in the United States and in countries like India. It’s common to hear lawyers fret about the sort of tectonic shift that crushed the domestic steel industry decades ago.
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“Enron-type accounting standards have become the norm,” says William Henderson of Indiana University, one of many exasperated law professors who are asking the American Bar Association to overhaul the way law schools assess themselves. “Every time I look at this data, I feel dirty.” . . . . A law grad, for instance, counts as “employed after nine months” even if he or she has a job that doesn’t require a law degree. Waiting tables at Applebee’s? You’re employed. Stocking aisles at Home Depot? You’re working, too.
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Number-fudging games are endemic, professors and deans say, because the fortunes of law schools rise and fall on rankings, with reputations and huge sums of money hanging in the balance. You may think of law schools as training grounds for new lawyers, but that is just part of it. They are also cash cows. Tuition at even mediocre law schools can cost up to $43,000 a year.
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“If you’re a law school and you add 25 kids to your class, that’s a million dollars, and you don’t even have to hire another teacher,” says Allen Tanenbaum, a lawyer in Atlanta . . .
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[T]he glut of diplomas, the dearth of jobs and those candy-coated employment statistics have now yielded a crop of furious young lawyers who say they mortgaged their future under false pretenses.
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But so far, the warnings have been unheeded. Job openings for lawyers have plunged, but law schools are not dialing back enrollment. About 43,000 J.D.’s were handed out in 2009, 11 percent more than a decade earlier, and the number of law schools keeps rising — nine new ones in the last 10 years, and five more seeking approval to open in the future.
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Apparently, there is no shortage of 22-year-olds who think that law school is the perfect place to wait out a lousy economy and the gasoline that fuels this system — federally backed student loans — is still widely available. But the legal market has always been obsessed with academic credentials, and today, few students except those with strong grade-point averages at top national and regional schools can expect a come-hither from a deep-pocketed firm. Nearly everyone else is in for a struggle.
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“I think the student loans that kids leave law school with are more scandalous than payday loans,” says Andrew Morriss, a law professor at the University of Alabama. “And because it’s so easy to get a student loan, law school tuition has grossly outpaced the rate of inflation for the last 20 years. It’s now astonishingly high.”
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Today, countless J.D.’s are paying their bills with jobs that have nothing do with the law, and they are losing ground on their debt every day. Stories are legion of young lawyers enlisting in the Army or folding pants at Lululemon. Or baby-sitting, like Carly Rosenberg, of the Brooklyn Law School class of 2009.
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You get the drift of the article which is scathing in its treatment of law schools which "cook the numbers" to project a cheery job market forecast that bears no resemblance to reality. Add to this picture the fact that if one is openly gay, you will be largely unemployable in many red states unless you go the root of starting your own firm - something far less easy than most contemplate. Especially, in a down economy.

Defaults on Insured Mortgages Rise 35% to Record

As the headline of this Bloomberg.com story (http://www.bloomberg.com/apps/news?pid=20601103&sid=api7SbPeUP3Q&refer=us) indicates, things are NOT good in the residential mortgage world, which will further add to the financial distress arising from the real estate market crash. Not that Mike Huckabee (or the Chimperator) would know since he seems increasingly out of touch with issues that he ought to know about. I guess he is too busy condemning gays and has not had a chance to notice. Here are some story highlights:

Defaults on privately insured U.S. mortgages rose 35 percent in November to a record, an industry report today showed, adding to evidence the U.S. housing slump is deepening. The number of insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006, according to data from members of the Washington- based Mortgage Insurance Companies of America. The missed payments, often a prelude to foreclosure, represented a 2.9 percent increase from October.

Continued deterioration is likely to spur higher claims. And higher claims activity may result in some companies needing to raise money.'' Home prices fell 6.1 percent in 20 U.S. metropolitan areas in October, according to S&P/Case-Shiller. Mortgage insurance compensates lenders for losses on bad loans as falling home prices make it harder for borrowers to refinance.

Bond insurers including MBIA Inc. and Ambac Financial Group Inc. are struggling to maintain credit ratings needed to guarantee debt after losses on mortgage-backed bonds they covered. Fitch has given MBIA and Ambac less than six weeks to each raise $1 billion or face loss of their AAA ratings. MBIA on Dec. 10 said it will get $1 billion from private- equity firm Warburg Pincus LLC to bolster its capital and Ambac took out reinsurance on $29 billion of securities it guarantees.