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Entries Tagged as 'debt limit'

Will The GOP Listen to This Fed Hawk?

August 17th, 2011 at 7:34 pm 21 Comments

Republicans believe the economy is weak because of “uncertainty” created by the Obama administration. Yet a recent statement by a Federal Reserve President suggests that if there is any uncertainty, it should be blamed on the Republicans for forcing a standoff with the White House over the debt ceiling. This is not from the remarks of an inflation dove, but rather, one of its hawks who recently dissented from the Fed’s plan for further easing.

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The S&P Bond Rally

David Frum August 9th, 2011 at 9:18 am 42 Comments

In a column for the National Post, I explain why the current price of government bonds repudiates the S&P downgrade of American debt:

If I were Standard & Poor’s, I’d be damn embarrassed. On Friday, the famous bond-rating services took the momentous step of downgrading the sovereign debt of the United States of America, a country that has paid interest on its loans punctually since 1789. All weekend, the world awaited market reaction. On Monday, the markets did react: with an explosive rally in US Treasury bills.

Now that’s a repudiation.

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Bachmann’s Shameless Response to the Downgrade

August 6th, 2011 at 7:04 pm 305 Comments

Michele Bachmann seems to be competing for the heavily contested title of Most Shameless Politician. As the leader of the Tea Party Caucus in the House of Representatives, she may bear more responsibility for the unprecedented downgrade of the US credit rating than any other individual.

So what was her immediate reaction to the downgrade? She called for ”the immediate resignation of Treasury Secretary Timothy Geithner.”

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Dysfunctional Politics Have a Price

August 5th, 2011 at 10:26 pm 120 Comments

S&P has now downgraded the US government from AAA to AA+, a historic downgrade. The effects of this downgrade will no doubt echo throughout the US and global economy.

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The Debt Deal’s
Biggest Losers

David Frum August 4th, 2011 at 12:01 am 67 Comments

In my new column for The Week I discuss who has lost the most in the new debt deal:

The first and most obvious loser: National security.

The economist Herb Stein used to advocate a simple model of federal budgeting:

a) Decide how much it costs to defend the country.

b) Pay for it.

c) Then see what else you can afford.

Adam Smith phrased the same idea more elegantly, by saying that “defense is superior to opulence.” The point is that the defense of the nation is not just another line-item. It’s the first obligation of government, more important than any other form of spending, and way more important than minimizing taxes.

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Bartlett: End the Debt Ceiling

August 1st, 2011 at 11:21 am 6 Comments

One consequence of the psychodrama over the debt ceiling is that we can now discuss how to remove it. In his column Bruce Bartlett reminds us that we have known since the 1950′s that the debt ceiling doesn’t reduce spending:

While politicians and the general public believe that the debt limit is an important constraint on national indebtedness, not one iota of evidence supports this belief. Economists have been making this point repeatedly for more than 50 years. In 1959, Marshall Robinson of the Brookings Institution came to this conclusion in a book-length study of the debt limit:

On the record, the debt ceiling experiment has failed. Although at times the ceiling has clamped down on government spending, it has not prevented the long-term growth of debt. Indeed, there is some evidence that reactions to its short-run pressure may ultimately contribute to the growth of debt.

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Seven Ideas for the GOP After Debt Day

David Frum August 1st, 2011 at 10:26 am 50 Comments

In my column for CNN, I discuss seven ideas for the GOP to take up after the debt crisis has passed:

1) Unemployment is a more urgent problem than debt.

The U.S. can borrow money for 10 years at less than 3%. It can borrow money for two years at less than one-half a percent. Yes, the burden of debt is worrying. Yet lenders seem undaunted by those worries.

Meanwhile, more than 14 million Americans are out of work, more than 6 million for longer than six months. The United States has not seen so many people out of work for so long since the 1930s.

2) The deficit is a symptom of America’s economic problems, not a cause.

When the economy slumps, government revenues decline and government spending surges.

Federal revenues have collapsed since 2007, down from more than 18% of national income to a little more than 14%. To put that in perspective: That’s the equivalent of losing enough revenue to support the entire defense budget.

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Stumbling Toward Disaster

David Frum July 22nd, 2011 at 7:22 pm 140 Comments

There’s blame for all in the debt talk breakdown.

The president walked away from Simpson-Bowles, declined to present plans to reach long-term budget balance, etc. etc. etc.

But in the argy-bargy, keep this in mind: the debt problem has become a debt crisis for one reason only: because Republicans put the threat of debt default on the table.

That never needed to happen.

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Towards a Deal?

July 22nd, 2011 at 5:56 pm 13 Comments

Reading the New York Times column by David Brooks on why Republicans should vote for the “plan” that House Speaker John Boehner and President Obama reportedly have developed casts a pall of depression  over any thinking person.

Reading the New York Times column by Paul Krugman on the impending global economic collapse merely worsens confusion.

Can both be right?  Cut spending: Brooks. Increase spending: Krugman. Failure to do either could lead to “The Great Depression, cheap The Sequel.”

The juxtaposition of those columns reflects almost perfectly the confusion in Washington, buy cialis D.C.

And the weather is just right in the nation’s Capitol for productive negotiations—100 degrees in the shade, 115 heat index, code red air quality.  A perfect metaphor.

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Looking for the Exits

David Frum July 22nd, 2011 at 1:11 am 71 Comments

What House Republicans need now is an exit strategy.

They are backed into a corner where they must either push the United States into default – or else be attacked by their talk radio and Tea Party supporters as cowards and sell-outs.

Everybody who wants to avoid Fate 1 (ie, search everybody) has an interest in protecting House Republicans from Fate 2.

Good news: the situation is not hopeless. House Republicans have been pressing for a vote in the Senate on the Cap, order Cut, here and Balance plan. On Saturday they will get that vote. The vote will lose – but even if it passed the Senate, it would still fail of ratification in the states, so no harm done. Advocates of Cap, Cut, and Balance can plausibly tell their supporters they have accomplished everything that can be accomplished.

So that’s the first step to an exit.

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