It's unsustainable, stupid.

  H/T Zero Hedge 

This graphic compares U.S. debt and deficit with the dysfunctional Eurozone economies.  Interestingly, only Greece is worse than we are vis-a-vis the dual metrics on the chart.  We tie with Ireland. Other than that, we are worse than all of industrial Europe.  If our politicians across the political spectrum agree that our fiscal debt situation is unsustainable and potentially catastrophic, and they do, should this not be a critical issue in the presidential campaign?

In the 1992 presidential campaign, Jame Carville's motivational meme "It's the economy, stupid." perfectly encapsulated the key issue of the election.   The beauty of the exhortation was that it focused the Clinton campaign staff on the one issue that could and would make a difference in the electoral outcome. He correctly identified the single most important issue on the minds of the electorate and it also exposed the single greatest weakness of the George HW Bush administration. The Bush campaign seemingly never understood what the election was really about. They touted foreign policy triumphs and their consequent lack of focus on the domestic economy reinforced the perception that President Bush was out of touch with American voters.

In every election since, campaign strategists, analysts, pundits and bloggers have attempted to reprise Carville's insight with a similar construct for the election at hand. Your loyal blogger is no exception.  In 2006 and 2008 the Dividist was convinced the election was about one thing:  "It's the war, stupid."   True enough in 2006. Not so much in 2008.  In 2008 "It's George Bush, stupid." was enough to win the election for Barack Obama. Even though GWB was not running, it was sufficient to tar McCain with that brush. The public sentiment was to punish GWB and the Party he rode in on.  2010 was a different story.  In 2010 - "It's the spending, stupid." carried the day.

Which brings us to 2012.  After winning a battle, generals are reluctant to abandon the very tactics that prevailed in a victorious campaign.  Despite the setback in 2010,  Axelrod and the Obama campaign strategists continue to fight that 2008 war in 2012. It's a mistake. Things have changed. Today there is a far greater awareness and focus on our profligate and unsustainable deficit spending.

Submitted for your consideration, the 2012 Carville election snowclone:

Carnival of Divided Government LV Quînque et Quînquâgintâ Special Paul Ryan's Express Edition

 "Romney unites Republicans and Democrats." - Jon Stewart

Welcome to the 55th edition of the Carnival of Divided Government - the Special "Paul Ryan's  Express" Edition. This was intended to be the special "Dog Days of Summer" Edition, but the presumptive Republican nominee for President chose this week to make an early announcement of his selection for Vice President.   Apropos to our dividist theme,  conservatives and liberals embraced the selection of Congressman Paul Ryan for diametrically opposed rationales. Jon Stewart and the Daily Show nail it:

The Daily Show with Jon Stewart
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Carnival of Divided Government LV

As explained in earlier editions, we have adopted Latin ordinal numeration to impart a patina of gravitas reflecting the historical importance of the series. In this the Carnival of Divided Government LV (Quînque et Quînquâgintâ), as in all of the CODGOV editions, we select volunteers and draftees from the blogosphere and main stream media writing on the single topic of government divided between the major parties (leaving it to the reader to sort out volunteers from draftees).

Consistent with this topic, the primary criteria for acceptance in the carnival is to explicitly use the words and/or concept of "divided government" in submitted posts. A criteria that, to our endless befuddlement, is ignored by many of the bloggers submitting posts, which sadly results in The Dividist reluctantly ignoring their fine submissions. Among the on-topic posts, essays and articles we choose our favorites for commentary and consideration. The Dividist hopes you enjoy these selections. A reminder - Extremism in defense of Divided Government is no Vice-President:

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Michael Moran blogging at Slate takes note of  the Vice Presidential hopeful wrapping himself in the Reagan legacy and shares his thoughts in "Reagan's Mantle, Ryan's Hope":

"Set aside the question of whether the 1981/2013 comparison is valid or not (the case is dubious at best) and let’s look at what Reagan actually did when he took office.... Faced with a difficult economy and divided government, Reagan chose to mix tax cuts with stimulus spending and, yes, tax increases, too. Bruce Bartlett, an economic advisor to Reagan and a Treasury official under George H. W. Bush, professes amazement at the twisting of the historical record by those too young to remember the factual Reagan...

Bartlett reminds us, “The cumulative legislated tax increase during his administration came to $132.7 billion as of 1988 [$367 billion today]. This compared to a gross tax cut of $275.1 billion. Thus Reagan took back about half the 1981 tax cut with subsequent tax increases... Imagine that! The alleged God of Tax Cuts actually raised taxes when he thought progress, political, economic or otherwise, required him to do so.”

 Moran despairs of either party adopting the practical pragmatic governing style that was the hallmark of the Reagan presidency. But he glosses over the very reason why pragmatism was a characteristic of that administration - to whit:  "Faced with a difficult economy and divided government...  Reagan actually worked quite deftly with a Congress in which Democrats held power in both chambers."

The appetite for practical, pragmatic, compromise will be directly proportional to the degree the government remains divided in 2013. There is no chance that the GOP will lose control of the House this cycle, so there is no possibility of the Democrats restoring One Party Democratic Rule. However, the GOP will certainly close the gap in the Senate and have a real possibility of taking control of that chamber. This raises the specter of One Party Republican Rule restored with a Romney / Ryan victory.  In that eventuality Moran's fears of an uncompromising intransigent GOP administration will be realized.

However, if any of the three other possible variations of divided government that will likely result from this election prevail, a pragmatic solutions along the lines of  the "Grand Bargain" is a virtual certainly. This is where the comparison to the Reagan administration is apt. One difference -  This time it is likely to be the Democrat Obama who will need to learn to work deftly with a Congress in which Republicans hold power.

Rise of the Algos - Knight Capital and the Inevitable Catastrophic HFT Triggered Market Meltdown In Our Future

It happened again on Wednesday.  A High Frequency Trading  (HFT) proprietary algorithm crafted by highly compensated brains-on-sticks and nurtured in the bowels of an investment bank escaped into the wild. From its carefully co-located massively parallel high speed trading computer it emerged to wreak havoc on the financial markets.  In this case, it was a happy ending. The algo turned on its master and sucked the very life blood out of the firm that deployed it.

The incident is yet another lights-flashing, klaxon-blaring warning signal that competing HFT algorithms operating with the speed, size and complexity that are commonplace today cannot be adequately regulated, tested, or managed. Their interactions with each other cannot even be understood  or predicted.

Wednesday 8-1-12: The Knight Capital Algo Clusterfrack