Debt ceiling again/still

It sure is exciting watching the political drama unfold in DC.  It would be a lot more enjoyable if it weren’t such a pathetic display of ignorance and incompetence, and more entertaining if it weren’t being played for real money, jobs, and moral standing.  When I was a kid, I could always get to sleep in bad times, or endure scary situations, by reflecting that the grownups were in charge and wouldn’t let things get really dangerous.  Right.

Most of the discussion I’ve read and heard has the world economy turning on whether in the end, the Treasury defaults on some obligations because the debt ceiling hasn’t been raised.   I think that’s too simple:  as I write this, the US markets have decided they were right yesterday and continued sinking (though the 10y t-bill is sitting still at around 3%). However this comes out on the specific question of the debt limit, it’s been demonstrated for all to see – all – that those in charge are not grownups, and that the national institutions of governance (including the press, paper and other) in the US are broken beyond anything I can think of since 1860.  The investment/business community may be waking up to the real nature of the beast they unleashed that was just supposed to make them a little richer and then behave itself bringing coffee and votes when asked, and the dragon’s teeth it strewed through the Congress last fall.

It’s not impossible that this gets worse before it gets better; Boehner and his orcs may get their wish to unseat Obama, and they may get it with a certifiable piece of fruitcake in the White House, employment plumbing new lows, and really scary types thinking maybe Angle was right about second amendment remedies and its their time to apply some.  I do not now see how the Republicans put their lunatics back in cages after this little drama’s curtain comes down, no matter what it’s last scene is.

 

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

11 thoughts on “Debt ceiling again/still”

  1. I think the Republicans may be approaching Peak Crazy, but I don’t think the actual peak can occur without some major dislocation, and I don’t think the running through debt ceiling is going to be major enough. President Fruitcake may be required, or, more optimistically, the crushing defeat of Candidate Fruitcake.

  2. Amen Brother O’Hare…

    You know you are in trouble when the dirty D-word (dysfunctional) finally seeps up to the top and leaps out of the president’s mouth on national teevee(!). Well guess what, here it comes: self-imposed default by a bunch of goons who can’t even pay child support(!). They gave themselves the teabag hypocorism at the very start. They tried to weasel out of it later. They deserve to retain it for the history books. Which is all to say: It never was the barbarians at the gate that we had to worry about. All along it was the teabaggers inside the gates…

    They are here.
    They are in charge.
    And they will have this country default.

  3. “My other piece of advice, Copperfield,” said Mr. Micawber, “you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and — and in short you are for ever floored. As I am!”

    The teahadis are not wrong: we can’t overspend forever. There is a limit to the amount of Chinese foreign aid we can get, from people working for 40 cents an hour in factories making gloves and power tools for us while we send them Treasury bonds in exchange. And the Reeps have extraordinary leverage here: they have a big majority and they have to pass something if the debt limit is to be raised. If I were in Reep leadership, I would likely have behaved largely as they have up to now. It does look like the grownups over there are trying to get to a deal before the car goes over the cliff, I hope they do.

  4. Dave,

    But when the tea partners refuse to accept generating revenues as a partial fix to the problem, that’s just insane. And when they blame Obama for the problem, instead of acknowledging that bush policies also caused the situation, that’s also insane. I’d like just one elected GOP rep to say, yes two wars, taxes, and two unfunded mandates contributed to this mess.

    And a pony,
    KT

  5. This seems overwrought to me. Moreover it seems a very passive analysis; it gives too much agency to the Republicans, to right-wing business interests, and to the hard right, and not enough to the president and the Democrats. They’re going to do what they’re going to do. What should we be doing?

  6. What should we be doing?

    Individually?

    You might try doing what I did.
    I emailed my Congressman and Senators and told them that today I quit delivery of my newspaper, quit my cable subscription, and quit my Quest landline.
    I told them, if it is all about austerity, if that’s the solution, I will damn well do my best to help make it work.

    Couple million emails like that might be better than a club or bomb or a brick…

  7. Ten years ago the “conservatives” inherited a national debt of about 5 trillion, which was shrinking. They enacted the Bush tax cuts, continued them in wartime, and handed on the results to the current administration. They howl at any suggestion that their past measures be reversed even slightly in order to stem the flood of red ink.

    What can you say about them? That they are odious excrescences from the rotten bowels of a degenerate remnant of a once-respectable political philosophy? Maybe Stephen A. Douglas could so describe them, but we need William Shakespeare at times like this.

  8. Meanwhile, actual tax revenues are going out the window, not to be collected due to the FAA non-renewal debacle: $30M per day, since Monday(?) which adds up to quite a few multiples of what I pay in annual income taxes. Gone from the national treasure, $120,000,000 in four days, for no reason at all, simply because Republicans can’t get their way on weakening transportation union rules (they want to count those who don’t vote as ‘no’ votes in union elections).

    THOUSANDS of workers are needlessly furloughed from in-progress construction sites needed for airport maintenance (so they’ll get unemployment benefits and the work won’t get done) because our DYSFUNCTIONAL Congress refuses to renew FAA’s authorization over this union-busting issue.

    They could pass the debt ceiling increase in 30 minutes of work and leave all the useless and intensely irritating drama behind, as they have numerous times in the past, and they could do the FAA reauthorization in the same hour and start effortlessly collecting $30M a day, to apply to the deficit or whatever. Instead we get to watch our nation held hostage to their tantrums.

    James Surowiecki made some very good points about this that I haven’t seen elsewhere:

    “If the debt ceiling isn’t raised, we’ll face an absurd scenario in which Congress will have ordered the President to execute two laws that are flatly at odds with each other. If he obeys the debt ceiling, he cannot spend the money that Congress has told him to spend [but] if he spends the money as Congress has authorized him to he’ll end up violating the debt ceiling.”

    Surowiecki also notes that, historically:

    “[The debt ceiling] was a way for Congress to keep the President accountable. Congress used to exercise only loose control over the government budget, and the President was able to borrow money and spend money with little legislative oversight. But this hasn’t been the case since 1974; Congress now passes comprehensive budget resolutions that detail exactly how the government will tax and spend[…]”

    But the best line in his piece has to be:

    “For the U.S. to default now, when investors are happily lending it money at exceedingly reasonable rates, would be akin to shooting yourself in the head for failing to follow your diet.”

    Highly recommended, the whole piece is available:
    http://www.newyorker.com/talk/financial/2011/08/01/110801ta_talk_surowiecki#ixzz1TRdnZ7iZ

  9. I doubt if anyone cares any longer, but arguments like this one “The teahadis are not wrong: we can’t overspend forever” are disturbingly wrong. In the long-run, gross debt of the private and public sectors in the U.S. have almost *always* risen. The same would be true for private debt in any advanced economy and is doubtless true for China today. Based on data on the St. Louis Fed’s FRED website, I calculate that private sector debt in the U.S. has increased at an average annual rate of 8.2% per year between 1959 (the earliest year in the data set) and 2002 (when they series was discontinued). Over the same period, the debt of the federal government grew at a slower rate, 7.4% per year. Now, the last few years have been difficult, but the long-term trends don’t make the Federal Government look all that bad, debt-wise.

  10. “If I were in Reep leadership, I would likely have behaved largely as they have up to now.”

    I take that as a confession of a deranged desire to damage my Country, made socially acceptable by what the fashionably deranged call “grownups”. But we knew that.

  11. Kathleen, good article. I also liked this:

    “In reality, debt-ceiling votes merely perpetuate the illusion that balancing the budget is easy. That’s why politicians like the debt ceiling: it allows them to rail against borrowing more money (which voters hate) without having to vote to cut any specific programs or raise taxes (which voters also hate).”

    Abolish the ceiling.

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