Entries Tagged as 'debt'

And the Super Winners Are…

November 22nd, 2011 at 12:00 pm 42 Comments

“Winners and Losers” headlines abounded after the Joint Select Committee on Deficit Reduction (JSC) whimpered to an end.

One of the most interesting analyses was in The Hill, malady written by Bob Cusak, although we disagree with some of his picks.

Here is our analysis. “and, the winner is…the Democrats!”

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Will the Super Committee Act Out of Fear?

October 7th, 2011 at 5:30 pm 6 Comments

“Messiness” has been a prime characteristic of legislation since the days of Solon. So, cheap the mess surrounding the operations of the Joint Select Committee on Deficit Reduction and Congress’ “work” on a jobs bill shouldn’t surprise anyone. What does always seem to surprise observers almost every single time is when the messiness turns into legislation.

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Is Daniels’ Jobs Warning A Self-Fulfilling Prophecy?

September 20th, 2011 at 12:55 pm 6 Comments

I’ve been reading through Gov. Mitch Daniels’ new book to see if he has anything to say about the current jobs crisis that America is in. The early results are a little disappointing. The first third of the book is focused on long term debt, the middle is focused on his time as governor, and the final section deals with his proposals to reform the tax code.

There are worthwhile thoughts in this book, it’s just unclear how immediately relevant those thoughts are. Yet there was a section that did touch on jobs, and that was Daniels’ discussion about Unemployment Insurance (UI).

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Huntsman Goes All in For Ryan

September 1st, 2011 at 12:50 am 15 Comments

While watching Jon Huntsman give his remarks on his jobs plan, I paid attention to how his speech described the existential threat of US debt.

Huntsman made clear he supports a Balanced Budget Amendment because “our debt is immoral and should be unconstitutional.” During a question-and-answer session, he added that the debt had to be controlled or it was going to “metastasize and kill this country.”

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How to Profit From the Debt Apocalypse

David Frum July 28th, 2011 at 12:51 am 18 Comments

Those inclined to speculate can buy credit default swaps on US debt. Warning: the price has already reached a record high, illness reports the FT.

How to Protect Your Finances in a Default

David Frum July 26th, 2011 at 8:19 am 45 Comments

Six months ago I thought a federal default unthinkable. Default now seems all too sadly possible. How can individuals protect themselves from the economic consequences of a worst-case scenario?

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Boehner Shows Leadership in Debt Negotiations

July 11th, 2011 at 10:57 am 120 Comments

Let’s have some genuine applause for John  Boehner’s leadership: his acknowledgement that a smaller debt deal makes sense does seem to allow a path to avoid default and, ampoule simultaneously, click lets the Republican Party make the best of the politically disastrous decision to play with the debt limit.

The decision to bring up the debt issue in the first place was a no-win situation for the GOP. Under the initial plan, Republicans could either get real debt reduction by coming up with a plan that the administration and Senate Democrats want—modest spending cuts and big tax increases—or force default on the debt and thereby cause an even more serious recession. A modest plan that puts aside the “trillions” in cuts that Boehner once promised allows for a “plan C”: a package of spending cuts that can get Democratic votes and a Presidential signature in return for a short-term debt limit increase. Even better, from a rank-and-file point of view, such a plan could let many members stake out a position to the right of their own leadership and get away with it.

The real losers for real leadership may be Boehner and the rest of his leadership team. He’ll have to bring to the floor a package that, most likely, will pass only because Democrats will support it. The Democrats who support it will get kudos from the business community and, given the way such things work in Washington, whatever they want from the White House. (Want a regulation to benefit a big local employer? The President showing up at your next fundraiser? Some tax breaks for your friends? Senate consideration of a pet proposal? Step right up.)  Republicans will have many fewer favors to offer but will still have to twist arms. For every Republican “no” vote that pads his or her majority in a right-leaning “safe” seat and fends off a Tea Party challenge, another member in a less-safe Republican district will be stuck casting a “no right way” vote. Meanwhile, Democrats will get the credit for being the ones who favor a big-time deficit reduction package without actually having to vast a vote in favor of the painful choices it will involve. It seems quite possible that Boehner will face a semi-serious challenge to his leadership at some point: it probably won’t succeed but it could well lead him to decide to cut his career short.

Is this “Plan C” better for the GOP than any alternative currently on the table? Quite possibly.  Does Speaker Boehner prove his leadership bona fides by bringing it up? Yup. Is it a real political winner? Not at all. But, once the debt ceiling debate began, no Republican alternative ever was.

Infrastructure Money Should Buy Us Things Worth Having

David Frum June 14th, 2011 at 7:06 pm 52 Comments

Larry Summers this weekend argued in favor of another round of stimulus, including:

  • Extension and expansion of the payroll tax cut
  • More aid to states and cities
  • $100 billion of additional infrastructure spending.

I say “aye” to number one and number two, but enter a caveat to number three.

What we’ve seen from the prior round of infrastructure spending is that the U.S. government as today organized does not find it easy to spend infrastructure money intelligently. Future generations will look back in amazement at the 2009 stimulus and wonder: what exactly did America buy with all that money? Where is the FDR Drive, where are the Grand Canyon steps, where are all of the equivalents of the amazing things built and done in the 1930s?

And what exactly would $100 billion more buy for us?

The strict Keynesian answer is: it should not matter. Demand is demand. As Keynes himself said in one of his more cynical moments, it would suffice if the government put bank notes in bottles and buried them in coal mines, anything to encourage private investors to put people to work.

Few of us are as strictly Keynesian as that. As we amass debt in hope of accelerating growth, we’d like some assurance that the debt is buying things worth having.

The chokepoint here is the breakdown in the congressional system of governance. Back in the 1930s, Americans believed more in expertise than they do today. The executive branch chose the projects and assigned priorities. After a little log-rolling, the legislature enacted them. Today, the legislature is much more empowered. Within the legislature, power is more diffused. And so the money is divided into hundreds of little pieces that may or may not make sense as a whole: fragments of a high-speed rail line through rural California or windfalls of educational money for states like South Dakota and Wyoming that do not face big funding gaps.

The phrase “infrastructure bank” is catching on. But the key point to the idea is not only to increase the amount spent, but to enhance the effectiveness of the spending by depoliticizing it. Senators Chris Dodd and Chuck Hagel introduced legislation to create such a bank back in 2007.

John Kerry and Kay Baily Hutchison have tried again this year.

Fareed Zakaria endorsed the idea in a noteworthy column last week.

I’ve even noodled the concept myself.

There are a lot ways to imagine how the thing would work, and I’d be keen to hear Larry Summers’ version. Otherwise, Zachary Karabell’s caution will prove depressingly accurate: until Americans feel more confidence that infrastructure money will be spent well, it won’t be spent at all.


Did Geithner Really Kill The Recovery?

June 9th, 2011 at 10:03 am 46 Comments

Zachary Goldfarb’s reporting in the Washington Post has revealed an important piece of information about why the economy is slowing down. Forget about Republicans in Congress and their gold-bug nonsense, case blame Timothy Geithner for pushing austerity from day one:

The economic team went round and round. Geithner would hold his views close, rx but occasionally he would get frustrated. Once, as Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.

Wrong, Romer snapped back. Stimulus is an “antibiotic” for a sick economy, she told Geithner. “It’s not giving a child a lollipop.”

But is Geithner the source of all our current woes? Or would any Treasury Secretary make a similar argument?

It’s one thing if high unemployment can be pinned on Republicans treating Atlas Shrugged as gospel but it is another when the prime driver of the austerity caucus is from the White House itself. It’s unsurprising, then, that most of the criticism of Geithner is emerging from liberal sources.

John Judis at The New Republic writes that Geithner “is also behind the Obama administration’s unseemly obsession with reducing the debt and deficits — even if that should throw a few people out of work, prolong the Great Recession well into this decade, and pitch American politics to the right.” Paul Krugman describes the reporting on Geithner’s role as “deeply depressing” and Atrios simply notes: “We Are Doomed. Geithner is awful.”

But when FrumForum called up noted conservative economist Bruce Bartlett for his take, he suggested that blaming Geithner ignores the fact he is simply doing what any other Treasury Secretary would have done, and that his critics should really be concerned about the institution of the Treasury, not the person:

The Treasury Secretary really has one job, and one job only, which is raising the money to pay the government’s bills, either through taxation or through borrowing.

… There has never been a Treasury Secretary in the history of this country that wouldn’t have his life made a lot easier by having as little as possible to have to borrow or raise in terms of taxation. It’s an institutional attitude.

As for why it’s hard to get a person into Geithner’s job who might be more willing for the U.S. government to take on larger bills in the short term to help with an economic recovery, Bartlett explained the powerful financial interests which would oppose such a policy:

If they ever tried to appoint somebody, say a Robert Reich or another outspoken liberal, the constituency of the Treasury, which is essentially Wall Street, would have a cow it. It would be extraordinarily embarrassing to the President. You can’t even get appointed to the Federal Reserve if you have a Nobel Prize in economics.

The situation is not entirely without options (Bartlett suggested that had the President focused on the weak economy instead of healthcare reform, he could have used the bully pulpit to keep Washington seized of the jobs situation) but short of Obama appointing a liberal or progressive economist during a recess appointment, it seems that whoever would have been Treasury Secretary would have had a strong voice in pushing against stimulative measures.

This ultimately suggests that while a lot of criticism has been directed at conservatives in the Congress, more attention also needs to be given to the institutions within the executive branch and the incentives they face.

Does Pawlenty Have a Jobs Plan?

June 6th, 2011 at 2:11 pm 10 Comments

On Tuesday, health Tim Pawlenty will deliver his big economic policy speech in Chicago, discount promising a “specific plan for boosting the economy and creating jobs.” Despite unemployment currently being at 9.1%, it’s unlikely his speech will include actual policies for immediate job growth. So far Pawlenty’s messaging has focused on long-term debt concerns.

This preference is clear in his new YouTube video where Pawlenty opens up with his face right next to the National Debt Clock:

Pawlenty’s message: It’s going to be painful to bring down the debt but at least I’ll be honest with you about it. He promises to phase out ethanol subsidies, reform entitlements, reduce public employee benefits, and adds that there will be no more bailouts.

While these are laudable goals, they don’t speak to the problems of a weak economy right now; they all are about long term spending imbalances. The video doesn’t even acknowledge the unemployment rate or weak economic climate.

It will only be disappointing if Pawlenty’s speech tomorrow has nothing to say about the current economic pain. It will be worse if discredited fringe ideas are included in his speech as well, such as his ill-advised attack on “fiat money”.