US POLITICS SPRING 2011: Let's just call off this country.

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I'd be happy not to have Brooks, George Will and Charles Krauthammer on Sunday talk shows, even if they substituted crazier right-wingers for them

So what's the O/U we default? And should I buy some "ProShares Trust Ultrashort 20+ Year Treasury ETF"

http://blogs.wsj.com/washwire/2010/06/18/eric-cantors-investment/

(nb link is likely a non-story as Cantnor's spokesperson has said that his other larger holdings would suffer if we default)

(regardless, is there a more hateable Rep in the 112th Congress than Cantnor? What an absolute anus)

(regardless, is there a more hateable Rep in the 112th Congress than Cantnor? What an absolute anus)

too many poll options

a look at public opinion:

http://today.yougov.com/news/2011/07/08/77-agree-defaulting-debt-would-be-serious-economy-/

http://cdn.yougov.com/cumulus_uploads/inlineimage/2011-07-08/dbtceilch4_q36.png

http://cdn.yougov.com/cumulus_uploads/inlineimage/2011-07-08/repchoice_pid_q26.png

YOU (gov)

goole (and those charts) OTM

inflexibility has its rewards: you don't have to flex, ever

flexibility has a downside: you wind up flexing, especially when attempting to deal with the inflexible

most painful part is that this applies to intellectual flexibility at leasgt as much as to any other sort

The results for that debt ceiling poll for all respondents is depressing. Clearly people have no fucking idea what default is.

so glad obama caved on extending the bush tax cuts without GOP concessions to raise the resulting voodoo economics debt ceiling. go barry

love you Nancy, never change

that's pretty awesome. hope it's not just talk

krugman says our economics conversation upthread is fatalistic -

http://krugman.blogs.nytimes.com/2011/07/09/the-fatalist-temptation

I think Krugman is right; that was my point yesterday re. wanting new elites.

i really have no easy answer as to why this kind of rotten thinking has sunk in so deeply among economics professors and policymakers.

In a political role reversal Friday, House Speaker John Boehner (R-OH) warned that Congress risks severely harming the economy and exacerbating the unemployment crisis if it fails to raise the national debt ceiling in the next four weeks.

"While some think we can go past August 2nd, I frankly think it puts us in an awful lot of jeopardy, and puts our economy in jeopardy, risking even more jobs," Boehner told reporters at his weekly Capitol briefing.

http://tpmdc.talkingpointsmemo.com/2011/07/boehner-failing-to-raise-the-debt-limit-puts-economy-in-great-jeopardy.php?ref=fpb

Fuck jobs. Jobs<<<<<THE CONSTITUTION!!!!!!!!!

Did the founding fathers have jobs? No!

I have only a very doddery grasp of the larger effects of raising the debt limit / not raising the debt limit. as far as i can tell, financial meltdown is imminent one way if you're a fiscal conservative, and the other way if you're not. not trying to be glib here, just to point out that it's actually pretty hard to figure out what's going on w/o a background or good understanding in finance/economics

what i mean is, can somebody please explain this in short, neutral sentences?

If we don't scrape the popcorn off the debt ceiling, we die.

maybe you've already heard this, remy -- think of the debt limit like your credit card limit. right now ours is $14.3 trillion

we're approaching the point (aug. 2) where we'll max out. federal law requires that congress vote for any increase in the limit

no one knows for sure exactly what will happen. no one trustworthy though thinks it's worth the risk of even considering what might happen. even ronald reagan said in 1983

"The full consequences of a default -- or even the serious prospect of default -- by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar."

it's really about whether the United States will honor its debts, not whether we can pay them. we're not at the point where we just can't (e.g., we can still comfortably raise taxes, sell national assets, make budget cuts, just print money, etc.). this is one of the main reasons why the whole argument emphasizing budget cuts is really bogus (besides the argument that it would be deflationary at a time when the economy still needs to be stimulated) -- if we had just let the Bush tax cuts for high-earners expire plus close certain egregious loopholes, much of the budget deficit would decrease.

i'm with you so far. but given that the debt limit has already been raised, like, 70 times, what's the harm in raising it a little more for the time being and concurrently trying to get spending under control. as a separate issue? is the current limit (14.3) some sort of watershed amount?

to add to what reggie said: it's like Citibank offering to raise the limit on your credit card, and you responding "well, go ahead ... i'm not gonna pay for anything that i charge beyond $X dollars! see you in Bankruptcy Court!!"

there's nothing "watershed" about the current amount ... as you pointed out, the debt ceiling has been raised by the Congress a zillion times already. and there's nothing wrong about getting spending under control, as a general principle (devil's in the details, of course).

i'm with you so far. but given that the debt limit has already been raised, like, 70 times, what's the harm in raising it a little more for the time being and concurrently trying to get spending under control. as a separate issue?

here's the point where neutral sentences become impossible and the explanation has to be that republicans see the debt ceiling vote as a great opportunity to take hostages to get what they want.

so it's really a giant game of chicken

it's much less like a game of chicken and much more like pointing a gun at someone's head

"spending" does not even really need to be "gotten under control"

sorry, i am not so good at the neutral sentences

so it's really a giant game of chicken

yup ... to enact cuts to programs that the Teabags wouldn't otherwise get. it's kind of Monicagate all over again.

of course, Clinton actually had some balls throughout Monicagate (no pun intended) ... Obama's already flinched here.

doesn't a game of chicken involve two players that have an interest in pushing each other to the brink? if the republicans wouldn't have demanded huge spending cuts in exchange for an increase in the debt ceiling that must be done, there's no way that all of this would be happening.

yeah its not a game of chicken--if the republicans dont get what they want, nothing bad will happen

i mean, i suppose that some people think there's value in taking this all the way to august 2nd because it will make republicans look bad, but that assumes that the american public has any clue what is going on with this whole issue, which is far from a safe assumption

got it so far.

Max, is 'getting spending under control' really party ciphertalk for 'let's slash social services?'

Yes!

Paul Ryan fooled the Beltway commentariat with his blue eyes and serious mien; his plan is nothing less than the culmination of several decades' pent-up wrath against SS and Medicare.

well yeah

the issue right now is more about a lack of revenues, and the GOP's refusal to countenance raising taxes

there are elements of the budget that will need to be... worked on? in order to get spending on control. medicare, for example--we need to figure out a way to spend less money on it.

but thats an issue for the future. the thing that needs to be dealt with right now is that nearly 1 in 10 americans (in the labor market) dont have a job. cutting gov't spending is only going to make that worse

xp for remy

If the debt limit is not raised, the Treasury will not be able to borrow money. Some obscure arguments have been raised, based on the 14th amendment, claiming that Obama could ignore the debt limit, but for all practical purposes this will not happen.

The administration would then be faced with a crisis, because it would not have the funds to meet all of its financial obligations. Those obligations include paying federal employees, paying contractors, and paying creditors who hold Treasury notes (T-Bills and bonds). Because these immediate obligations are generally met through issuing short-term notes upon future revenues, most of them would go unpaid.

The first, most obvious and predictable consequence would be furloughs of huge swaths of federal employees and suspension of work done on federal contracts. Large areas of the government would simply stop activity. However, services considered vital to the security of the nation would continue, just because they must continue (but this would not be true forever).

The next obvious and predictable consequence would be a big drop in the value of already-issued US bonds, creating a big rise in interest rates. The bond market keys off government bond interest rates. Those rates are set in two ways:

1) The government auctions off newly issued debt and the low bids win (this activity would be suspended).

2) Then there are old gov bonds being sold by their owners before their expiration. The "face value" of all these bonds were set when they were issued and originally auctioned, but in the bond market, this value floats.

For example, I might want to sell a $100,000 bond that has ten more years to run and pays 3% interest. Except now that bond is viewed as much riskier than before the default. You, the buyer can offset that risk by paying me $80,000 for it, which means the nominal 3% on $100,000 interest the bond accrues will represent a much higher return than if you paid me the full $100,000 for it. Effectively, the interest rate has risen considerably, but I am out a shit load of money. You, the buyer, otoh, have your fingers crossed that when the bond matures, you'll get a tidy $100,000, along with all that interest.

The longer the Treasury is broke (can't pay all its obligations out of current revenue), the worse all this gets. The circulation of money will slow down, vast numbers of federal employees won't get paid, business will slow drastically and unempployment will risestill further.

In a nutshell, bad news city.

The Republicans may gamble that a very brief shutdown won't have any drastic effects, but every day of uncertanity will pile up worse and worse problems, like a snowball rolling downhill, so they can't force the issue beyond a certain point, maybe five days or so, and it is imperative they think Obama is getting the major balme, because otherwise they're slitting their own throats.

wow, thanks! i am a total economic naive, unless it concerns ed. spending. it's kind of embarrassing, and it keeps me from wading into these threads more often.

The political system in DC Cab seems so dysfunctional that even if good ideas are put into it they're just going to come out fucked up. The dysfunction belongs to deep, fundamental problem with so many factors involved, all this feels like treating the fever to cure the cancer. Cutting the deficit? Pointless. Tinkering with Medicare and SS? That should be in the footnotes of the priority list. It's important stuff, but it pales in comparison to the Real Deal(TM), I think.

Just cuz we hear people talking about issues like a mantra doesn't increase their actual value and importance... Feels like our thoughts and words are taken over by what is ultimately not productive.

it could be a constitutional crisis (hey i'm not lawrence tribe here, i'm just saying)

the 14th says the debt "shall not be questioned." which is weird language when u think abt it.

but article something-or-other says all spending of revenues must originate in congress

so conceivably, the treasury (exec) spending money not authorized by congress would be unconstitutional, even if trying to satisfy the 14th

the implication is that it is congress that's contitutionally hamstrung -- the must, under the 14th, appropriate money to cover the debts. how they do that is up to them. which is basically where we are?

in a way, the government does use debt the way that a lot of private businesses do ... e.g., businesses use bank lines of credit for payroll, make interest payments on company debts, etc. to oversimplify, this is one of the reasons why everything went to shit post-Lehman Brothers. banks and other financial institutions cut credit to businesses, who couldn't meet expenses, and the whole thing snowballed.

i guess a lot of right-wingers claim that debt is outta control, and if they just keep raising the ceiling, we will sooner or later find ourselves in a similar situation as Greece...?

The argument has a grain of truth, but that grain is magnified by at least an order of magnitude in order to play on people's fears. Managing the whole baby boom aging thing will place a burden on society, but cutting taxes relentlessly on the wealthy is a sorry-ass way to go about it. Most of the current "debt crisis" is as manufactured as the Reichstag fire.

if they just keep raising the ceiling, we will sooner or later find ourselves in a similar situation as Greece

this is true in a long-game sense, they just decided to have this discussion now at crunch time instead of when it would have been sane to do it.

like, before we are staring at default or after we raise it

Bohener pulls out

http://www.politico.com/news/stories/0711/58630.html

Pulls out of the vagina of appeasement.

this is an O win, right? "i proposed the biggest spending cut of anybody in the room, and john boehner's house said no"