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As of this morning, international investors stood ready to lend money to the US government for 10 years at a rate of 2.94%. They would lead for 2 years at a rate of 0.41%.
And we’re supposed to believe that it’s markets that are forcing this borrowing crisis?
i think maybe its time for an americathon
http://www.youtube.com/watch?v=yFyVs_766S4
Correct. We have a long-term debt problem, not a debt crisis. We might have a solvency crisis, if the Republican Party manages to force it. (It was, of course, a catastrophic, emotional error for the Republican Party to take the unprecedented, crisis-risking step of linking the current vote to honor our existing financial obligations to decisions on how to structure the budget in the future.)
Please let us post charts again! In the absence of that ability, I’ll link to myself: http://www.poisonyourmind.com/2011/04/in-the-strife-of-truth-with-falsehood/
There’s a pile of data there showing that we have a long-term debt problem, mostly caused by the US-only astronomical and skyrocketing cost of health care.
You’re quite right that the market doesn’t believe we have a debt crisis. I doubt that even Republicans really think that we do either. They just like barking really loud at the president, and the debt they piled up is their favorite reason at the moment.
(And yes, the GOP, not the Obama administration, piled up the debt: http://www.theatlantic.com/politics/archive/2011/07/five-reasons-the-house-gop-is-to-blame/242673/ )
Your blog is excellent. I commend you.
Thanks, Sinan!
I’ve enjoyed your contributions around here, so I appreciate it. In fact, I’d appreciate it even if I hadn’t!
It’s crazy to me that you have to go out of your way to compile all that sort of stuff (well, or now the whole world can at least start with that post of mine, but you get the idea). I mean, these are the issues that we’re ostensibly debating right now. But you never see basic data about our current context on, say, CNN, much less Fox. It’s all, “oh no, GOP’s popularity falls while Obama’s rises! What does it mean?!?” Not much, honestly, when it comes to elections a year and a half away, and it has nothing at all to do with policies we’re debating right now.
David,
As I was watching the utter collapse of Boehner’s bill last night, I started wondering whether this isn’t about the debt-ceiling but rather an all-out Republican civil war? It might not matter *what* the actual bill is, it’s just that the hard-line members of the Republican House smell blood in the water (Boehner’s blood) and are taking an opportunity to try to wrest control away from him in favor of someone more…. palatable for them (Cantor?).
There’s zero reason ideologically for them to oppose Boehner’s bill. As you’ve stated with the HCR bill, if the Republicans had stayed at the table, they could have gotten a far better deal than they ended up getting. It’s going to be the same with this. Sure, Boehner’s bill would have been voted down in the Senate, but it would have left the Republicans with a far stronger position for negotiating the final agreement. In rejecting it, Boehner really has no choice but to go to the Democrats with a small cadre of moderate Republicans to get something passed, and you can bet your last nickle that it’ll be a better deal for the Democrats than for Republicans.
That leaves the ONLY reason for the House GOP to do this is that it’s a purely political struggle; they want Cantor or another hard-liner in the Speaker’s seat, and they’re willing to lose on the debt-ceiling debate in order for that to happen. As Boehner’s suggested, if this fails it amounts to a vote of “no confidence”, and it might just be the outcome that the Tea Partiers want… They’re voting no not because of any specifics in the bill, but rather because of a perceived weakness in the (moderate to them) leadership.
Thoughts?
There’s zero reason ideologically to support the bill. The Republicans had passed Cut, Cap and Balance that raised the debt limit — ending worries about “default”– with some substantial reform measures. That would have been an excellent basis for going forward, and even though Sen. Reid said it would never get out of the Senate, that’s just purty talk not to mean nothing –the House cannot be compelled to vote anything else into law.
Instead Speaker Boehner decided to go into a closet and come out with his own plan, that will cut only $22 billion (up from $1 billion – and that’s key, any serious opponent of spending could name more than $1 billion in cuts for 2012 with serious effort; it shows he does not give a damn). There was no need for it, and suddenly its the top urgent priority, and all who doubt need to get their ass in line for Boehner’s sake. And yes I limit it to the 2012 cuts; there is NO WAY the Congress and the President, whoever runs it, will limit itself to the Boehner Plan.
Instead of pushing an ideological point of view — the US budget was becoming a Ponzi scheme – with a practical solution based on reduced consumption, an end to the splurge of spending and attempts to forge national consensus around a lasting solution, the Republicans have run screaming for the sewer.
We are ordered to accept the “reality”: Republicans have no obligation to prefer good legislation over bad legislation; they cannot justify reform to the public; abandoning reform for bad legislation will give them better “talking points”; it is the fault of Republican constituents that there is no political pressure for a “reasonable” alternative; nothing matters but winning the next election; the smart ploy is for Republicans to vote for the Democrat plan so that the Democrats “own” the consequences; the Republicans are not responsible for what they “have to” vote for. Normally I’d expect this from people like rbottoms as a condemnation of the GOP; but it is now the GOP’s own justification for its policy.
If I accept this “political reality” then what is the purpose of the GOP? An alternate career track for career politicians?
Many of you think Keynesian economics is tried and true and necessary and the debt problem was simply solved by perpetual deficits, borrowing and taxes. Many of us who thought that was crazy, thought we had a Republican majority to challenge those policies. If the point of the debt limit debate is to assert the right of the Republican apparat to mandate their own big spending, tax raising, Keynesian solutions over Democrat policies, I have no interest in who wins. I also question whether such Republicans are fit to be in office at all.
You do not understand Keynes.
I am astounded when I hear people keep harping that every single deficit in any circumstance is a Keynsian policy. Keynes never said to run a deficit continuously. He never even said to run it when you were in a recession. He only said that when monetary policy has run it’s course and you are entering a period of massive contraction of demand and there is no other way to create demand, fiscal policy is the wisest, quickest and safest route to create more demand. Then, he advised that when you get out of the hole and start charging again, you take the surplus revenue and pay down the debt you incurred during the recession or depression. He did not say to keep spending without taxing when times are good. He did not say that all deficits are good. He did not say “the extra revenue we got this year will not go to pay down our long term debt obligations and pay off our debt, it is going to the people because it’s their money not ours”. This is what Bush said in 2000 and 2003 when he gave away the farm with rebates, tax cuts and so on when he could have paid down our debt entirely by keeping marginal rates intact until the money owed for services demanded by the nation had been paid off. The far right has so warped the debate that they no longer understand the very economic theory they hate. I bet even Hayek would agree that you should pay off your debts first.
wait, so let me get this straight, the ACA was “forced” down America’s throat with 60 votes int the Senate, an majority in the House and the President but this Republican fantasy bill of cut, cap, and balance that is passed by only one house MUST become law of the land or we will default. This is batshit insane. Cut, cap, and balance is a nightmare. How dare you use a hostage type situation to force down America’s throat which does not have support of the American people.
I have nothing against a balanced budget amendment per se, but the one the Republicans are pushing is antithetical to everything anyone to the right of John Birch believes in.
Who the hell says the economy can not be more than 20% or that tax hikes would require a 2/3rd majority. It is shameful and disgraceful.
“How dare you use a hostage type situation to force down America’s throat which does not have support of the American people.”
Easy. Same way you dare to promote generals and appoint judges and approve treaties with 51 Senators and a President.
“I have nothing against a balanced budget amendment per se, but the one the Republicans are pushing is antithetical to everything anyone to the right of John Birch believes in.
Who the hell says the economy can not be more than 20% or that tax hikes would require a 2/3rd majority. It is shameful and disgraceful.”
Then we can expect a rout in 2012. Until that time, you’re stuck with the elected government.
BTW what is at issue is raising the debt limit, not avoiding default.
How is a majority vote for Senate confirmation remotely a hostage situation?
And: for the last time, there was (is) no way to avoid default during this budget cycle without raising the debt limit. This is about paying for what we have already bought.
It’s down to 2.87% at 10:15am.
Is there anyone who believes this is market driven, rather than a Republican manufactured political crisis?
Not me!
This is, unfortunately, yet another demonstration of a poor understanding of the interaction between markets and politics.
The fact that the markets aren’t freaking out yet is simply a reflection in their faith that a deal will be reached. In other words, they don’t actually think the GOP is as bat-shit crazy as they appear to be.
Ironically, this lack of reaction is helping the GOP act even crazier. It’s a negative feedback loop that can be broken suddenly and dramatically. Once the worm turns, it will turn very fast indeed.
You know, if you jump out of a 50-story window, you’ll be just as healthy as you pass the second floor as you were when you passed the 41st. You might even wonder why people made such a big deal of the dangers of jumping out of windows — as long as you don’t look down.
http://www.talkradiosucks.com/forum/viewtopic.php?f=3&t=33
The markets don’t seem to believe that Congressional Republicans are really as crazy as they have been acting.
Be afraid. Be very afraid.
I can’t tell if the debt is in the rear view mirror or out the windshield. They need to put both hands on the steering wheel and stop the thumb sucking for power and pleasure.
http://blogdredd.blogspot.com/2011/07/thumb-sucking-for-power-and-pleasure-2.html
This outstanding article by Fareed Zakaria explains better than any why we are already damaged, and no it’s not because we ran too large of deficits, it’s because we are acting like DEADBEATS!:
http://globalpublicsquare.blogs.cnn.com/2011/07/28/the-damage-is-already-done/
Right.
Lower-Class Deadbeats. There is no such thing. I can produce eyewitnesses and people would still denounce anything I said as racist or classist. So it’s a waste of time even to discuss it.
Middle-Class Deadbeats. I have a right to see my house increase in value without doing a lick of work. I have the right to retire in luxury but don’t you dare raise my Social Security taxes. I have the right to see my salary go up even if I don’t improve my skills or work output. I have the right to be served by an army of technically proficient people without paying for schools to educate them. I have the right to life-saving drugs but don’t let Big Pharma charge for them. I have the right to borrow money and not pay it back if it becomes painful.
Upper-Class Deadbeats: I have the right to Interstate highways to transport my goods to market, and a defense establishment to protect my interests, but don’t actually tax me for them. I need consumers to buy my goods but don’t expect me to pay them salaries to make those goods affordable. Don’t expect me to assume responsibility when my business decisions hurt others.
Bottom line – the whole society is infected with an attitude of entitlement. We’re a nation of spoiled brats.
From Warren Mosler: http://moslereconomics.com/2011/07/29/the-elders-of-jonestown-contemplating-the-kool-aid-mix/
“The actual problem with the US economy is the federal deficit is way too small given current credit and global demand.
That should be a good thing.
Congress should be arguing over whether we need tax cuts and/or spending increases.
But instead they all have the misguided idea that we are at immediate risk of some kind of unknown financial crisis that would cause us to suddenly be unable to fund ourselves, much like Greece, and be faced with the choice of default or hyperinflation.
It’s all inapplicable nonsense. There is no such thing as the issuer of a currency running out of money, or being dependent on foreigners or anyone else for finance. And inflation from over spending comes from trying to buy more than there is for sale, which is hardly the case right now. But the President and members of Congress believe what they believe, however misguided, as do the majority of the voters, and are acting accordingly as they attempt to pass measures to make the federal deficit smaller.
And doing nothing makes the federal deficit smaller still, making the economy that much worse, as doing nothing means the debt ceiling is not raised and the Treasury goes cold turkey to balance.
So the actual best case for the US economy is that they get a bill to the President that he signs, and the deficit reduction and economic harm will at least be less than the catastrophic deficit reduction from doing nothing.
But for too many in power, the best case is doing nothing.
It’s all like drilling holes in the bottom of a sinking ship to let the water out.
The more you drill, the worse it gets.
Unfortunately, it’s now drill, baby, drill!”
“But instead they all have the misguided idea that we are at immediate risk of some kind of unknown financial crisis that would cause us to suddenly be unable to fund ourselves, much like Greece, and be faced with the choice of default or hyperinflation.”
I don’t know that’s ever been the theory. The thinking is, if we have to borrow money to keep the government funded, we are not ultimately in control of the price of our borrowing. Since the debt is so big that a return to Clinton-era interest rates would cost us several hundred billion a year, then the problem won’t be any more manageable in the future, as our debt is growing by over $1 trillion a year. Better now than later.
“There is no such thing as the issuer of a currency running out of money, or being dependent on foreigners or anyone else for finance.”
How does he explain Weimar Germany?
“if we have to borrow money to keep the government funded, we are not ultimately in control of the price of our borrowing”
This is bang-head-against-desk stupid.
“Better now than later.”
Have you been paying attention to anything that’s happened since the housing bubble burst and the economy melted-down? You couldn’t pick a worse time to reduce government spending.
Chris has admitted he is a reactionary, not a conservative. Refreshing way to interpret life perhaps, but you are not about to get anywhere by using logic and facts with him.
>>“if we have to borrow money to keep the government funded, we are not ultimately in control of the price of our borrowing”
This is bang-head-against-desk stupid.<<
What's the worry about losing our AAA rating then?
We have a set amount of we are looking to borrow as a necessity. If nobody choses to lend it to us at the interest rates we desire, then we have to raise the rates until we can borrow the required amount.
If the borrower must get a loan, it is the lenders who control the rates.
"Have you been paying attention to anything that’s happened since the housing bubble burst and the economy melted-down? You couldn’t pick a worse time to reduce government spending."
Yes, the next recession would be a worse time. If it came in 2021 we'd probably owe $25 trillion not $15 trillion. And we'll be on the hook to bail out Wall Street and Detroit, if needed. And what are the odds it'll be needed?
“the next recession would be a worse time.”
You really think your talking-points-as-data economic theory would get us to 2021, eh?
Do you have any explanation for how exactly we control the cost of borrowing money at interest?
I did not know the existence of the United States economy until 2021 depended on having the right political economy. We must be in very bad trouble then.
“This is bang-head-against-desk stupid.”
Sweatyb, meet Chris Balsz. Chris, Sweatyb.
King of the straw tautology!
“How does he explain Weimar Germany?”
It is explained in great detail but the short version is that after the war reparations were demanded in the foreign currencies making the local currency worthless; hence the famous wheelbarrow full of money to by a loaf of bread.
I thought it was for a turnip?
Could be.
Depends on the size of the wheelbarrow
At which point foriegn intervention -loans and debt forgiveness- was required to keep that industrialized nation going financially, right?
No Germany defaulted since they could not make the reparations. The indebted countries retaliated and took over the industrial mining and manufacturing of Ruhr.
If you guys want to know what happened, read “Lords of Finance”. It is all there for your enjoyment.
I think the timeline is getting a little confused. Hyperinflation seems to have come after the Ruhr occupation.
there’s a full blown civil war for control of the Republican Party and, in civil war, words change their ordinary meaning … what is declared a “debt crisis” now signifies something far different and more ominous to the “Tea Party” members, I suspect
In describing the civil war at Corcyra, Thucydides, noting that “Words had to change their ordinary meaning” (Thucydides 3. 82.4) … “Reckless audacity came to be considered the courage of a loyal ally; prudent hesitation, specious cowardice” (Thucydides 3.82.4), concluded that “human nature, always rebelling against the law and now its master, gladly showed itself ungoverned in passion, above respect for justice, and the enemy of all superiority” (Thucydides 3.84.2).
That’s akin to what I see happening with the GOP … pass the popcorn
Yes they are willing to buy the bonds, but you have to have the money to buy the bonds. How many can they roll over before they need new ones?
The Tea Party is examining Sovereign Debt. issues with a 3rd graders eye. National Debt is NOT like Personal Family Finances, more like business. It doesn’t matter how bad it gets you don’t want to destroy your future by cutting marketing or R&D or selling off all your good product lines to raise Cash. Families who run out of money face NOTHING but bad decisions, like Junior doesn’t go to College, and instead gets a job at the Mill, that has negative ramifications FOREVER!
“How is a majority vote for Senate confirmation remotely a hostage situation?”
In the same way a majority vote for a debt limit increase is a “hostage situation”–there’s a constitutional bottleneck where action takes place, if the result is to occur.
“And: for the last time, there was (is) no way to avoid default during this budget cycle without raising the debt limit. This is about paying for what we have already bought.”
Stopping payment on contracts is not a default on debts. The monthly income is enough to make regular interest payments.
So you’re admitting that if we don’t raise the debt ceiling, we will be unable to pay for the contracts we have already signed?
And you honestly believe that the markets (to say nothing of our creditors, or the other parties to those contracts) will just go “oh well” and business will continue as usual?
No, but I find that acceptable and nothing like the GLOBAL ECONOMIC MELTDOWN that MUST occur if we “default”.
You find it acceptable for us to refuse to pay for services we’ve already contracted? How would you react if one of your firm’s clients refused to pay? Would you find that “acceptable?”
Those contractors have a pretty good case for fraud against the government, since it apparently didn’t have funding approval when it made those contracts.
Raising the debt limit is not approval for additional spending — it’s authorizing payment for products and services already bought. Chris, I think you might be confusing the debt limit with the appropriations process.
So, lenders want to lend us money; but we CANT borrow any more money, see, because the congress cant get a bill through to let us raise the debt ceiling, see, so we CANT borrow any money right now. If we could borrow money, people are more than willing to lend it to us, but right now. . . . . . we can’t borrow any more money.