• Stunned into Silenece

    Austin is on holiday (he picked a good week to drop out!) and I think Aaron and I are mostly just stunned into silence about the debt ceiling/limit issue. This blog has written lots about the need to control health spending, the need for a sustainable budget and the like. What is happening in Washington now are our nation’s ‘leaders’ are messing around in a way that may result in a self inflicted wound to our economy that is totally unnecessary. Congress is having trouble passing a bill that says we can spend the money that they already said we were going to spend.

    Some day we could have a debt crisis (when investors aren’t willing to lend us money cheaply), but what is happening now is first and foremost an invented political crisis.

    Most blogging and twitter traffic on the subject amounts to: you suck; no you suck more (repeat). We will sit that out. Wake us when it is over.

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    • In the interest of sanity, I think it’s important to note that the US is not likely to default if even we get past Aug 2nd without a deal or debt ceiling increase. Aug 2nd is a projection from the Treasury that marks approximately when we will not have enough money to pay interest and EVERYTHING ELSE. Some non-trivial amount ‘everything else’ can be postponed and this seems much more politically and economically palatable than default. The US is many months from “default.”

      • But not so far away from a downgrade of our Treasury bonds. It helps that Europe has worse problems than we do, so there is not much of an alternative, but if our rates go up and push Europe’s up, it could get kind of ugly.

        Steve

    • If a bank finds that I’m defaulting on my American Express, Mastercard, Visa, and car loan payment, how likely do you think they would be willing to give me a 2nd mortgage?

    • “Most blogging and twitter traffic on the subject amounts to: you suck; no you suck more (repeat). We will sit that out.”

      I share the temptation, but it is important to note that one side does, in fact, suck.

      The GOP decided to turn the debt ceiling, rather than the budget debate, into econarmageddon, and will not accept the compromises that have been floated by the Dems even though these compromises are substantially to the right of what even Republicans say they want.

      To say nothing of the fact that the debt problem is the consequence of Republican governance, and that all the GOP leaders who now claim to care passionately about the deficit (Ryan, Boehner, McConnell, Cantor, etc.) spent the previous decade busily exacerbating the deficit.

      It’s fine to be weary of the discussion, but it’s not fair to engage in false equivalence.

      The problem is not that “our nation’s ‘leaders’ are messing around”, it’s that House Republicans are messing around. The problem is not that “Congress is having trouble passing a bill that says we can spend the money that they already said we were going to spend”, it’s that House Republicans won’t allow Congress to pass a bill that says we can spend the money that they already said we were going to spend.

      As Paul Krugman put it, “there has been no pressure on the G.O.P. to show any kind of responsibility, or even rationality — and sure enough, it has gone off the deep end. If you’re surprised, that means that you were part of the problem.”

      • @reflectionephemeral
        I hear you and in many ways agree. However, if the Prez was going to go grand bargain, he should have done it with his budget or at least after Ryan. With enough time to sell it it could have turned out different. Selling grand bargain early could have gotten Senate as source of action and put House Rs on defensive. Easy for me to write this since I don’t have to be the Prez

        • Thanks for replying.

          Sure, were I the president, I’d have made some different tactical decisions as well.

          But the larger context here– and I’d be pleased to be corrected if anything I’m saying is mistaken– is that the GOP decided that this vote to honor existing obligations was their hill to die on. That’s bad, because the downside of a no-deal is, unlike with that of a debate on the year’s budget, truly catastrophic for a long time to come. (We think!).

          And the Democrats are offering trillions in cuts– coming out far to the right of what voters want– with the Republicans claiming that merely agreeing to discuss the issue is their only compromise.

          I don’t mean to argue that the president is perfect, just that the vast, vast balance of the blame lies with one party.

          “Selling grand bargain early could have gotten Senate as source of action and put House Rs on defensive. “

          Respectfully, where’s your view that the House R’s would ever wind up on the defensive coming from? They’re not a conventional political party. The House Rs and the noisiest portion of the R base reject the very notion of compromise— and, therefore, Republicans reject the very structure set out in our Constitution.

          As I noted above, the GOP that created the bulk of our long-term debt problem. The Tea Party didn’t exist then, because the Tea Party is the GOP base playing dress-up with old hats. They didn’t want to compromise then, either, on invading Iraq, permitting torture, permitting warrantless wiretapping, etc. Now they don’t want to compromise on paying the obligations we incurred during GOP governance.

          There are no principles at work here, simply a lack of willingness to compromise. It’s pure identity politics, all the way down. Reason, policy, and data play no role in their decisionmaking.

          • @reflectionephemeral
            you are probably right about House Rs. Looks at though they walked from Medicare to 67 which is wildest dream territory for many conservatives. The last step will be Bowles/Simpson-esque….the hard part is figuring out the first steps up to the ledge.

    • Like you, I dislike anecdotes but in this case I can’t resist. My broker set out three investment ideas for Amerian stocks. After 5 minutes, I said to him “Let’s wait a month. They could be vaued at less than half that by the middle of August.” As a foreigner with a choice, I have to believe that this skeptical approach is widespread – just what the U.S. needs as it heads into the second half of the inevitable double dip recession. You truly deserve the politicians you paid for.