The debt ceiling crisis
You may have noticed I haven’t yet written about the fight over raising the debt ceiling. That is probably because not only do I have a tendency to shy away from anything to do with economics, but also because I believe that some sort of compromise will be reached in time to avoid a huge August default crisis, and that a lot of what’s going on now is political theater and strategic maneuvering. If the objection to compromise is that it’s just a method of kicking the can down the road and solves nothing, my answer is that sometimes—when that can is filled with explosives—it is necessary to kick it down the road temporarily and deal with the main problems later.
Ay, there’s the rub. Unfortunately, the two sides are diametrically opposed on the solution for the main problems, and the atmosphere in Washington is so toxic that real solutions seem distant and perhaps impossible unless one side or other (depending on your political leanings) controls the whole shebang. In the meantime, this country is in deep financial trouble.
It is easy to blame Washington, and much of that blame is deserved. Both sides of Congress have been acting like a bunch of children for way too long, and President Obama has only widened the already-existing divisions with his incendiary rhetoric and fake compromises.
But the American people are to blame, too, for sending so many of the players back again and again, term after term—and for wanting the impossible from them: low taxes and high entitlements. Any politician who threatens that unworkable duo is probably going to be unpopular. So how is a meaningful and lasting resolution of this crisis ever going to come about?
[NOTE: tune in here for lots of discussion of the debt ceiling negotiations.]
The “Default crisis” is completely bogus. That is just democrat agi-prop. The government has enough moeny to pay out its debts. They will not “default”.
(If the Democrats go ahead and do it anyway, it is just pure treason)
The issue is moving further toward Statism, and punishing the enemies of the Democrat Party. The issue is the Democrats do damage to the Nation that may not be repairable.
If we allow the ceiling to be raised without substantial spending AND have taxes raised we will be right back at this juncture again within a year.
It is absurd for the Democrat to give away a trillion dollars to their friends and clients as a “Stimulus”, and to pass the financially crushing Program of Obamacare and then talk abut “defaulting”. It show how mindless many Americans are to buy this baloney up front.
You should not join them/ Neo, you are inadvertently repeating their propaganda. You should not.
Hattip: if you would include a link from a reliable source with information backing up your claim, please do. I based mine on discussions and reading of more-or-less moderate sources such as Megan McArdle. She writes:
I would also take issue with this:
Both sides of Congress have been acting like a bunch of children for way too long
How is this so? Seems to me that, at least for once, the GOP has been acting responsibly. They would be acting like children to cave to the latest con of the Democrats. It is the Democrats who have been “acting like children”.
They should stand their ground. If this is indeed merely “posturing” on the GOP’s part, it is of no service to the country at all. They should call the Democrats bluff. The GOP should not raises the debt ceiling, but if they do they must hold out for cuts and no new taxes.
The only way out of this is in the end to radically cut discretionary spending, reform non-discretionary settlements, lower tax rates and radically reduce regulation and government interference in general.
None of this will ever be agreed to by the Democrats. Their entire source of wealth and power comes from controlling these things. That is why they need the debt ceiling raised. Should it not be raised, spending cut, and everything was OK, it would become glaringly obvious that all their talk of the debt ceiling is completely self-serving.
What the GOP needs to do it get out there and explain it directly to the America people, and, evidently, to you.
Hattip: I’m not talking about now with that quote, I’m talking about during the Bush administration.
And Republicans have explained it, during the 2010 campaign. They may not be very good at explaining it, but they have been doing so. Do you really think that will be enough to get the majority of people to accept new limits on entitlements? I have grave doubts about that. Sometimes I think it will take a major crisis of Grecian proportions to do so—and that even then it may not happen. As Margaret Thatcher once said, it may keep going this way until we run out of other people’s money.
neo, McArdle was an Obamanaut.
So much for her self-vaunted perspicacity.
Occam’s Beard: I know she was an Obama supporter. But that doesn’t mean she’s wrong on everything, or even on most things. I read her with some consistency, and she is fairly good—and fairly non-partisan—on economic issues, for the most part (plus, she’s no Obama fan now).
I have noticed that, when I try to get information on the economy or finance, it is fiendishly difficult to get unbiased and truly objective opinions, which is what I’m looking for. Nearly everyone seems to have a huge ax to grind. Refer me to someone better and more objective than McArdle, and I’ll give them a try.
Thomas Sowell
Well, neo, here for starters. The money quote: “Next year, about 7 percent of all projected federal government expenditures will go to interest on our debt.” But you should Google around for this stuff yourself; there s plenty on the web and much discussion in the blogsphere.
But seriously, The Atlantic? David Brooks, the house, faux-conservative of the MSM? You are joking, right?
You will get noting but democrat lies out of ether of those “institution”. One can bet that this little bit of propaganda was actually coordinated with Brooks latest hissy fit. The is the latest (and predictable_ assualt on the GOP: The people are irrational, will not listen to common sense and are politicizing this. It is all just rank projection by the Democrats. I would think that by now, Neo, you would have caught on t this game.
This Atlantic article is just a stew of irrational leftist cliches and rhetoric. The notion of Brooks advising the GOP? Really now. Maybe the GOP should ask for advice form the Obama’s or the Clinton’s.
Beyond that, do you really expect us to take seriously a “pundit” whose “qualifications” are thus:
While working at Ground Zero, she started Live from the WTC, a blog focused on economics, business, and cooking. She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism. For the past four years she has worked in various capacities for The Economist, where she wrote about economics and oversaw the founding of Free Exchange, the magazine’s economics blog. She has also maintained her own blog, Asymmetrical Information, which moved to the Atlantic Monthly, along with its owner, in August 2007.
Megan holds a bachelor’s degree in English literature from the University of Pennsylvania, and an MBA from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington DC, where she is still trying to figure out what one does with an apartment larger than 400 square feet.
It is the resume of an New York Liberal idiot. A blog called Live from the WTC about economics and cooking!
Golly, she is even sillier than Brooks. It is absurd to imagine that this nitwit has anything whatsoever to say that is informed by the least bit of intelligence, knowledge or meaningful experience.
(I have some advice for her about that apartment, set up a nice conservative library and actually learn something about “business” and “economics” before she strt spewing that nonsense.)
If conservatives are letting people like her and Brooks guide them, they might as well start taking Mao seriously as a political guide. When Brooks has his panties in a wad, ooe knows one is on the right track. His approbation should be a cause for joy and should be actively sought. It means the democrats are starting to get nervous.
Hattip: did you read my previous comment here? I’m well aware of the Atlantic’s general leanings, and I don’t credit Brooks’ point of view (nor is McArdle quoting him in agreement, as I read her). But that doesn’t mean that McArdle is generally biased. I read her somewhat regularly, and I have found her over time to be less biased and partisan than most pundits on the subject of the economy.
The point s that new limits on entitlements are inevitable. There have been discussion about it for 40 years. Every time it is tried, we get this same agi-prop fr the Democrats: Those conservative want t take away your SS because they are evil people. We need to stop letting them get away with it.
We need to start dealing with it now. We will run out of money.
We need to get growth going AND reform, and maybe we will be able to get us through the coming Boomer crunch, but it is not merely a matter of “convincing the American people”, there will be no money. period.
Ii d not agree that the GOP does no explain it. Their explanations are just obscured by the Left’s various propaganda methods.
At any rate, entitlement reform s not directly at issue here.
McArdle is generally biased
McArdle is radically biased! My goodness, read her article. Just a farrago if leftist cliches, cant and talking points. She would not be working for The Atlantic if she was not.
That rag is just an upscale version of i>The Nation.
That you think otherwise amazes.
Dave Whitten: I do read Sowell. He hasn’t written on this subject lately, however, at least not as far as I can tell. He wrote about it back in January, though, and realized it would be a very hard sell.
I agree, as I tried to indicate in the above post. The problem with politics is that it is politics, and politicians must try to appeal to voters if they are going to accomplish anything lasting. Sowell emphasizes the importance of articulating the Republican position in a way that voters can hear, understand, and respond positively to. But I wonder whether that’s possible—not only because many Republicans aren’t very good at that, but also because human nature makes it a difficult task.
I know she was an Obama supporter. But that doesn’t mean she’s wrong on everything.
Well, it most certainly means that she is wrong on anything that matters, and very wrong at that. There can be few greater marks of stupidity and ignorance than to vote for any Democrat, let alone Obama. I will grant that she might be a real hotshot around her local organic produce dept.
You can bet you last dollar that she has no technical understanding at all of how our debts are actually paid or what the real issues are. Someone told her what to say and she said it. Easy-peesey.
That is how the NYC/DC media works.
Hattip: We disagree on McArdle’s article. Perhaps you are confusing her writing with her quotes from Brooks? I simply don’t see that “farrago of eftist cliches, cant and talking points” in the commentary she has written there.
And if you can’t make a distinction between the Atlantic and the Nation, I think you lack a fine discriminatory sense. Yes, they are both on the left, but the Atlantic is far less radical, and from time to time features writers who are even close to the middle.
“low taxes and high entitlements”
It might be worth noting that these aren’t always asked for by the same people.
There is at root little difference between The Nation and The Atlantic; there is only a difference in pitch of language to accomodate different audiences, the latter being more upscale and who smugly imagine that they are more “intellectual” and less doctrinaire. They are in reality wrong about this. To get to this bunch just requires more packaging and indirection. In the end both rags are both propagandist for the Democrats and collectivist state.
They do not feature people who “are close to the middle”, whatever that means, or at least they do not in an honest manner. They feature people who appear to be somewhat reasonable but who in the end are just ideological propagandists. It is a complete con. The resort to Brooks clearly underlines this sort of propaganda tactic.
I think it iis you that lack a “fine discriminant sense”, and I find the comment laughable. You confuse “refinement” with gullibility, which is just what the editors of The Atlantic intend. Next I epect that you will grouse abut me not being “nuanced”.
As for cliches:
If the GOP doesn’t cut a deal sometime pretty soon, we’re either going to default on our debt (hello, financial crisis, unemployment spike, substantial and immediate drop in GDP, followed by an angry mob of voters descending on their polling places with pitchforks), or we’re going to cut a bunch of programs that beneficiaries are very attached to. (Hello, angry mob of seniors descending on their representatives with machetes.) There is no deal that they can cut which does not include raising more revenue; the Democrats aren’t going to be the only people offering compromise, and I don’t blame them.
All talking points, all lies, all based on false premises and the conclusions do not logical follow.
The DNC could have written it, and it is my guess that fact they did.
It does not represent even what the GOP is talking about. (Oh and the “people” did speak and speak loudly last election).
The electorate is not crying out for “compromise”, they are crying out for us to get debt under control by cutting spending and by not raising taxes.
That is just what propaganda like this is aimed at. If the GOP does not do this, then there will be “angry people descending on DC”. If they hold out, people will praise them.
Neo, you are being taken in by the Dem’s propaganda hustles.
Hattip: And you are living in a conservative dreamworld bubble. People are “crying out” for two contradictory and perhaps mutually exclusive things.
Neo:
Out of what fevered swamp has Hattip crawled?
Alas, politics is the art of the possible and the tool wielded is compromise…give a little, take a little. Both conservative and left-liberal turn one off by their “My Way or The highway” attitude.
McArdle is always interesting to read – most of the time. People – left or right – seem to be Looking For Jesus – someone to run their lives in utter righteousness for them.
Brilliant Thinkers they ain’t: just another species of Eric Hoffer’s The True Believer.
Such seems to be Mr. Hattip…
No Neo, so far as the immediate concern the nation wants the debt taken down with no new taxes and with spending cuts, and none of this is contradictory. It shocks me that you are not aware of this.
You think this because you have allowed the democrats to control the narrative for you. You are the one that lives in a bubble: it is called New England. You should get out more. Then you might stop taking rags like The Atlantic seriously.
Outside of Democrats, there is no constituency at all that wants spending to grow or stay neutral, taxes to grow and the the debt not controlled, and everyone else but the Democrats knows that when taxes go up spending never goes down. No one believes that raising taxes will lower the debt.
It is absurd to hold otherwise. Did you miss the last election? Do you realize what you are saying? You are woefully misinformed. Conservative bubble indeed.
Certainly, the GOP constituency is not saying, raise taxes right now n the middle of a “recession”. If the GOP caves on this it will be suicide for them; this is the game that people like Brooks and McArdle are playing. It is the new (and coordinated) democrat meme. Look at WaPo over the holidays. The Exact same talking point. You do not understand how this works?
You know, I have made about a dozen points and you have dodged most of them (all but one really). Instead you engage in personal assaults that are rather risible in their predictability. (e.g., “fine discriminant sense” and “conservative bubble”). Do you realize that you sound just like a liberal being confronted with facts here. I guess you have not moved as far from your Democrat roots as you think you have.
Just admit that I caught you being taken in here by the “default” agi-prop of the Dems and be done with it.
CHARLEY:
Charlie: Spare me the juvenile, condescending claptrap. Act like man. If you have something to say to me, then say it to me directly. Spare me your cowardice whle you are at it.
Address my points. This you have not done.
“Art of the possible”, What would that be? The GOP caving to the usual con games by the democrats that got us here in the first place.
What are you saying, that the American people want taxes raised and the deb spiral to continue?
Nonsense. Pure Stockholm Syndrome.
It is you people that are living in a dream worlds: you are taking political advice from Brooks and The Atlantic, foe Pete’s sake. You should listen to yourselves.
I have to mostly agree with hattip that it’s a democrat sham that musn’t be yielded to. And a compromise here by republicans is arguably the most destructive path in what it will signal to their base.
This country will fall into chaos and misery if we continue to demand leaders fear current public opinion as though it’s written in stone.
Gerrymandering plays a major role in the American poeple sending back the same representatives term after term. The politics of the parties has shaped the landscape as much as sentiment of the people.
Neo:
Something strange is happening with comments? mine seem to have fallen down the Memory Hole…
Hattip: I like to keep this blog substantive and relatively respectful in its arguments, and you are bordering on troll territory. Your comments here are the ones most consistent with “juvenile, condescending claptrap.”
Good Old Charlie: I found your comments in the spam folder. I liberated one of them, and it should show up now (see above). Don’t know what the problem was, but let me know if it happens again.
By Neo’s own lead-in admission (and I have not read all of the rebuttals and her counters), she is not much interested in economic issues, she ‘believes’ there will be a compromise, and she offers the comfort that even a useful idiot (Megan) can stumble across an occasional truth.
My belief, rooted in economic facts, is that Obama and the Dems are intentionally destroying the American economy, and that opposition to their demagogic kleptocracy is principled and essential, nay, critical. Are we so foolish as to look at Greece and at Wisconsin, some essential economics like the projected interest on our enormous present federal debt, learn nothing, and compromise?
The Default Crisis Neo fears is like Y2K. Ginned up, but not real, not to be feared. Indeed, welcomed. Like reining in a runaway horse.
If we weren’t students of history, some minor tax increases might not seem all that unreasonable. However, every time taxes are raised, the spending increases. The last time was at the beginning of the Clinton admin. They raised taxes and then increased spending. Only the Republican Contract With America in 1994 forced the government to actually rein in spending and create a surplus. But the democrats always say, “See, Clinton raised taxes and we went into surplus.” Thus their claim that raising taxes will help balance the budget.
I would not object to some minor tampering with tax subsidies, if we could somehow place the money derived from such in a “lock box” where Congress couldn’t get its greedy paws on it.
I just sent the following letter to my Representative and Senators:
“Dear Senator Cantwell,
I am writing once again to urge you to break ranks with your Democrat colleagues and vote to cut spending and I mean cut it not just pretend to cut it.
I know you think it would be more fair if the “fat cats” would pay more in taxes. I wouldn’t be against that except for one thing. Congress has never been able to resist spending new revenue. If new tax revenue could be segregated out and used only for deficit reduction, then new taxes might make sense. But you and I both know that isn’t the way the bookkeeping works and your fellow Senators cannot resist spending other people’s money on every cockamamie scheme that special interest groups push to the fore.
Cut spending even if it’s only 5% to start, enact a cap on spending at 18% of GDP, and pass a balanced budget amendment to be voted on by the citizens. It’s the right thing to do and the only way forward if we want to get out of this mess.
We cannot keep spending 24% of GDP while our economy generates 16% of GDP as revenue. To increase revenue, the only thing to do is to increase economic activity. Government does not create jobs, but it can discourage them with too many regulations and restrictions. Get government regulation and restrictions out of the way and see what happens. This country is functioning way below it’s potential because there is no confidence that government will keep taxes low and cut back on regulations.
Cut spending!! Just do it!”
Write your congress critters if you want spending reduced. Particularly if they are dems.
Neo, for Thomas Sowell’s opinion on this issue, you can check this out:
http://www.nationalreview.com/articles/271038/politics-vs-reality-thomas-sowell
You have to admit, if any of us ran our household this way, we wouldn’t have one anymore, and we’d be in jail to boot. I can’t for the life of me understand why that isn’t enough for everyone to see we must stop this insanity.
It’s intentional. Bottom line.
Megan McArdle says:
Karl Denninger of the Market Ticker has said many, many times that it doesn’t matter what the American public “wants”. The laws of mathematics will not be denied. There must be drastic cuts to entitlements right now.
He has hammered this point time and again in countless Tickers. Here is one from today:
(Emphasis in the original.)
Denninger has also said that a refusal to raise the debt limit doesn’t automatically mean default. The federal government will still take in more than enough money to make the interest payments. It just means they’ll have to cut elsewhere and start living within their means.
On the other hand, Obama is a wild card. He has already displayed his contempt for the law. I would not put it past him to precipitate a crisis by defaulting. Remember the GM and Chrysler bondholders?
This process of putting off the inevitable on spending reminds me of the story of the young boy whose mother caught him masturbating. She said he had to quit or he would go blind. The boy asked if he could do it until he needed glasses.
Neo,
I believe Pat Toomey is point man for the Republican’s proposition that the federal government can easily cover the interest payments on its debts:
“Next year, about 7 percent of all projected federal government expenditures will go to interest on our debt. Tax revenue is projected to cover at least 70 percent of all government expenditures. So, under any circumstances, there will be plenty of money to pay our creditors.”
http://www.realclearpolitics.com/articles/2011/04/22/the_truth_about_the_debt_ceiling_and_default_109633.html
In May, the WSJ had a very good interview with Stanley Druckenmiller on the consequences of a failure to meaningfully deal with the debt. Druckenmiller, a hedge fund artiste and former Soros compatriot, discussed the 1995 debt “crisis” when the Republicans briefly resisted an increase in the debt ceiling, Russia’s easy passage through a “real” default, and the consequences of a technical default. See http://online.wsj.com/article/SB10001424052748703864204576317612323790964.html
“I have a tendency to shy away from anything to do with economics…”
You are not alone. 98% of females and 88% of males don’t want to stare into the headlight of the train coming down the track. Of course those are made up percentages, but probably not far off the mark.
Karl Denninger of the Market Ticker has said many, many times that it doesn’t matter what the American public “wants”.
Unfortunately, yes, it does matter very much. The American public votes… and there’s nothing to stop us from voting for the mathematically impossible. (Remember when the American public voted for a man who suggested that, with his election, the oceans would recede and the planet begin to heal?)
This is a stage much to be feared in democratic societies. Someone runs for office, promising to do the fantastically desirable and utterly impossible, and wins. He fails utterly, because, through no fault of his own, he too is subject to the laws of nature. The stage is now set for a political opponent to run against him, making the exact same promises, except that HE will actually do it, not just talk about it! Anyone who tries to change the status quo is pushing grandma off a cliff. Wash, rinse, repeat; people then become used to ruinous policies, and the way to get elected is then to promise to continue them.
I very much hope that the American public will see through this nonsense in 2012 and vote pragmatically. I very much fear that we will not. And then I take comfort in Lincoln’s comment about fooling all of the people all of the time.
Heck, if I had the time, money, and talent, I’d want to run for office myself, as the super-Obama — promise everything Obama does (and did), but exaggerate it just a touch, to make it clear that these promises make absolutely no sense. Maybe that would wake people up.
On another topic, Neo, let me issue a metaphor alert: please do NOT try to kick a can of explosives down the road.
respectfully,
Daniel in Brookline
You’re right, Daniel, and that illustrates why democracy is not a stable or even desirable form of government. America was created as a republic, remember. The Founders knew perfectly well that democracy would lead to ruin, and, well, here we are.
There are simply far too many ignorant and irresponsible people voting who have no business doing so.
It has taken more than a century to tear down the Founders’ brilliant edifice, brick by brick. Usually by multitudinous leetle incremental mousie bites, punctuated each generation by shark attacks (Wilson, FDR, LBJ, and now Hussein). I really and rationally doubt it can be restored to anything approaching its original design.
It has been quite a campaign; the enemy casualties have been remarkably few.
Here’s a great short video about the different forms of government:
http://www.youtube.com/watch?v=ELvhpeVJJEQ