James Fallows nails it

The entire “debt ceiling” brouhaha in two sentences:

1) Raising the debt ceiling does not authorize one single penny in additional public spending.

 2) For Congress to “decide whether” to raise the debt ceiling, for programs and tax rates it has already voted into law, makes exactly as much sense as it would for a family to “decide whether” to pay a credit-card bill for goods it has already bought.

Any reporter who doesn’t get those two basic facts into any story about the debt ceiling should be replaced with someone competent to do the job.

Comments

  1. Mitch Guthman says

    Ordinary, I would agree with you but the economies in Washington D.C. and NYC would be devastated by loss of so many jobs in the entertainment industry. As near as I can tell, we would be left with James Fallows as the only reporter in America covering political and economic issues.

  2. Dennis says

    Fallows is correct, of course. But I really hate the analogy, because it reinforces the dangerous idea that governmental financing and household financing are isomorphic.

    • Dan Staley says

      I agree to a point, it is a good frame for the folks who don’t want to look in to the fact that public finance is utterly different than family finance, because the TeeVee they watch is insistent on telling them it is the same.

    • says

      Assume it is isomorphic…

      Then what do families do when they get a bit of a surplus? Put it away for a rainy day, correct?
      What did Bush do with the Clinton surplus? Spent it frivolously on a sunny day.

      Seems to be you can’t have a half-baked isomorphism.
      Either the Bush tax cuts were dumb from the get go…
      Or we shouldn’t pretend to run a government like a household.

      Next up: Destroying the equally ludicrous idea that you want your government “run like a business.”

      • Betsy says

        Where sunny day = blowing up innocent Iraqi people and bridges, then rebuilding some of the bridges

          • Freeman says

            Probably a good idea to fully quote in-context with attribution — It’s even more devastating that way:

            You know, Paul, Reagan proved that deficits don’t matter. We won the mid-term elections, this is our due.

            This reveals a great deal of hypocrisy with regards to Reagan’s legacy, deficits, and mandates.

          • Ken Rhodes says

            I’m truly tired of hearing/reading politicians (and other doofuses) of one (to remain nameless) political party claiming Reagan showed that cutting taxes boosts the economy.

            Bullshit! Reagan simply proved Keynes was correct. In case there was any doubt, we learned that government spending [massively] more than it takes in boosts the economy. When Reagan’s party does it they call boosting the economy. When O’Bamas party does it, Reagan’s party calls it disastrous deficits. And of course, when Clinton manages a surplus while presiding over a booming economy, then the economic talking heads of Reagan’s party are rendered speechless, leaving it up to the arbiters of morals like Newt Gingrich to whale away at Clinton because of his zipper problem.

            I’m tired of appreciating the irony. What I’d like to appreciate next time around is if O’Bamas party (my party) could come up with this generation’s Lyndon Johnson. Heck, I’d even settle for a Teddy Roosevelt.

          • Altoid says

            Agreed, Ken Rhodes– in his own day, Reagan was the greatest Keynesian of them all. It might have worked for w bush too, except that a) he dropped so much of it over in Iraq (too many pallets of 100-dollar bills went missing) that not much of it circulated here, and b) there was that little irregularity in the financial world. Not to mention that the Medicare drug money went straight to Big Pharma. We got very little bang for all the deficit bucks that got thrown around (away?) in the early 2000s; more like a fizzle.

      • Altoid says

        And refusing to raise taxes is exactly like forbidding your spouse and kids from getting jobs, and the bush tax cut was like quitting your second job because you discovered you were making a little more than you were spending.

      • Dennis says

        The Bush tax cuts were dumb from the get-go.

        I said it then, and I’ll say it again. The Bush tax cuts were dumb from the get-go.

        Happy?

    • Nick says

      Yeah, you have to make these household financing analogies more specific. Normally you just need to specify that it’s a family of vampire counterfeiters (you know, immortal, print their own money) but here you also need to specify that the entire world economy depends on the family paying its credit card bill.

  3. Herschel says

    But Michele Bachmann says that increasing the debt limit is handing the President a blank check. Surely she wouldn’t say that if it weren’t accurate.

  4. GiT says

    Isn’t it a bit more like a family buying a used car for $6,000 on a credit card with a, say, $30,000 dollar limit, and then, before the transaction goes through, calling their bank and asking them to lower their credit limit to $5,000?

    • Brett Bellmore says

      No, it’s more like, Congress never actually decided to spend X amount of money in total. They just made a lot of individual spending choices, without reflecting on the bottom line. (Seriously, they haven’t had a real budget in years!)

      Along comes the debt ceiling, providing an occasion where they unavoidably have to think about that bottom line, about whether, while each individual purchase might seem like a good idea, the sum of them all might be a bit excessive.

      If they decide that it is, they can’t very well go back and undo the spending that’s already taken place, but it’s not too late to scale back the spending which HASN’T already happened. Cancel the HBO, decide the summer at Disneyland isn’t necessary, that sort of thing.

      There are plenty of things contributing to the debt ceiling, which can be cut without stiffing anybody, because what’s to be purchased hasn’t been taken possession of yet. They actually DO have the right to cancel purchases which have been scheduled, but not yet completed yet.

      I think that’s really why you don’t like the debt ceiling: It provides an occasion for reflection that you don’t want to have happen, for fear that, were the purchasing decisions made in light of the total, rather than individually, America might not buy as much government as you want them to.

      • MobiusKlein says

        that is a very thin rail you are standing on there.

        Congress & President bought A, B, C and D, but forgot to press the = key on the calculator?

        (and a contract to purchase X in the future is still enforceable)

      • paul says

        Bullsh*t.

        Of course you can decide that you don’t want to buy X, Y or Z in the future, and of course that would lower your credit-card bill. And families have processes (some more consensus-based than others) for making such decisions. What you can’t do — at least not if you want to be considered even an approximation of a sane, decent person — is grab the checkbook and refuse to let anyone pay this month’s credit-card bill until they agree to stop going to the doctor or saving for retirement.

      • Herschel says

        Brett: If the congress decides that some of the spending decisions embodied in duly enacted legislation were a mistake, the solution is not simply to refuse to pay the bills as they come due. Wouldn’t you agree that that course of action is irresponsible, to say the least? Let them repeal the legislation that mandates the spending they no longer favor. You seem to be suggesting that the President can do that for them, which is about as far outside the bounds of our constitutional system as I can imagine going.

        But then, it’s pretty obvious that you argue in bad faith.

      • Jamie says

        That’s the dumbest rationale I’ve seen yet.

        At the end of the month, do you pay your utility bills, or use the moment to reflect upon your water usage, and whether that lightbulb should have been on, and expect the utility company will process with you?

        I keep hearing that liberals are the hippies.

      • Richard Cownie says

        This is all nonsense. If Republicans want spending cuts, then obviously what they need to do is
        to say what spending cuts they want. They don’t want to cut defense spending; any time Dems take
        a dollar out of Medicare the Republicans demagogue it, so presumably they’re not going to propose
        substantial cuts there; and with their heavy dependence on the votes of seniors, I’m pretty sure
        they’re not going to propose immediate cuts to Social Security. So what is the demand ?? What
        is it you want to cut substantially ? And want badly enough, and urgently enough, that you’re
        threatening to blow up the economy to get it ?

      • GiT says

        “They just made a lot of individual spending choices, without reflecting on the bottom line. ”

        “Along comes the debt ceiling, providing an occasion where they unavoidably have to think about that bottom line, about whether, while each individual purchase might seem like a good idea, the sum of them all might be a bit excessive.”

        Oh please. Congress is unaware that it engages in deficit spending? And Congress has never before thought about how the sum of all appropriations is more than tax revenue? That’s rich.

      • GiT says

        “They just made a lot of individual spending choices, without reflecting on the bottom line. ”

        “Along comes the debt ceiling, providing an occasion where they unavoidably have to think about that bottom line, about whether, while each individual purchase might seem like a good idea, the sum of them all might be a bit excessive.”

        Oh please. Congress is unaware that it engages in deficit spending? And Congress has never before thought about how the sum of all appropriations is more than tax revenue? That’s rich.

        “There are plenty of things contributing to the debt ceiling, which can be cut without stiffing anybody, because what’s to be purchased hasn’t been taken possession of yet.”

        Wait wait wait, I thought it was right who was all concerned about “regulatory uncertainty” and “the rule of law.” This is some classic Hayek right here. People have rationally plotted their futures on the basis of social security and medicare, their jobs in *insert federal job here*, &etc. But, of course, expectations only matter for corporations, not individuals.

        “I think that’s really why you don’t like the debt ceiling”

        I don’t like the debt ceiling because Washington talks about overspending, deficits, and debt every single week, and “the debt ceiling” is a completely artificial occasion to repeat the same old crap that we already hear all the time.

      • A. Replier says

        There are plenty of things contributing to the debt ceiling, which can be cut without stiffing anybody..

        Really? List them. Assign some $ amount of savings as you may judge. Place these savings in the context of the current overall budget (yes, a continuing resolution is a budget-your protestations notwithstanding), the national debt, and your anticipated future output of the economy.

        If not. Then it would be fair to say you are just faking it.

        • GiT says

          On Brett’s reading, unless we’ve actually spent or transferred the money such that it’s in someone else’s position, we’re not “stiffing” anyone by not spending what we’ve said we spent. With this conception, I don’t doubt it would be very easy for Bret to make a list.

          • Ken Rhodes says

            I think Brett is saying that there are tenses of the verb “to spend;” that “spent” creates an actual bill to pay, while “will spend” still affords the opportunity to change ones mind before it becomes “spent.”

          • A. Replier says

            Disagree. It would not be easy at all. He made the assertion. He should back it up…..unless, of course, he is merely bloviating.

          • richard cownie says

            It’s easy to make a long list. But it’s hard to
            make a list that adds up to $100B a month or
            more. And it’s utterly impossible if you take
            military spending and Medicare off the table.

        • Richard Cownie says

          Great graphic here showing the breakdown of spending: http://www.sbo.gov/publication/42635

          This was for fiscal 2011, so there have already been various cuts.

          But roughly interest+defense+SS+Medicare are 14.2% of GDP, remaining spending
          (including stuff like pensions and veterans benefits which probably no-one
          wants to cut) are 9.7% of GDP. Revenue is about 15.4% of GDP.

          So Brett’s suggestion of just instantly cutting spending to match revenue
          (presumably without touching interest/defense/SS/Medicare) would require the
          rest of the budget to drop instantly from 9.7% of GDP to 1.2% of GDP.
          That means stuff like stopping pensions to veterans and former federal
          employees …

          The numbers don’t add up. Not anywhere close. Tens of millions of people
          would be horribly “stiffed”. And economic chaos would follow, as they all
          stopped buying stuff and defaulted on their mortgages.

          Get real. Before Feb 15th when the checks have to stop.

      • Richard Cownie says

        Well, Brett, we’re waiting. You need roughly $100B/month in cuts to match spending to revenue,
        starting roughly Feb 15. The suggestion that we can shuffle a few payments around here and there
        and wave our hands is nonsense: that’s what Treasury is *already* doing, and sometime shortly after
        Feb 15th those games fail to produce the needed cashflow: handpumps wouldn’t have kept the Titanic
        afloat.

        I think we can make this easier for you. We don’t need a long list, let’s just hear your top 3
        suggestions for what bills we stop paying after Feb 15th, together with the monthly saving
        resulting from each. Three categories of spending, with the monthly saving from each. And
        for extra credit an estimate of how many, and which, people will be directly affected.

      • matt w says

        The hilarious thing about this line of argument is that opposition politicians have in the past used the debt ceiling vote as an occasion of reflection. In 2006 Senator Obama and other Democratic members of Congress voted against raising the debt ceiling as a protest against the Bush Adminstration and GOP politicians’ refusal to take in enough revenue to keep up with their spending. He in particular protested the GOP’s decision that tax cuts did not need to be paid for. (Remember, the US economy was not in recession at the time, so the Bush deficits did not help the economy in the way that the Obama deficits have.)

        Now, this was a bad idea; some of the arguments Obama made are bad, and playing politics with the debt ceiling was a poor idea in that it opened the way to the Republicans’ current irresponsibility. But, and this is the important part, it was a purely political and symbolic vote for reflection. The Democrats did not actually attempt to prevent the debt ceiling from being raised, even though they could easily have filibustered the bill. They did not attempt to force a repeal of the Bush tax cuts as the price of raising the debt ceiling. They did not indulge in any moronic fantasies about how, instead of borrowing money, the government could just refuse to spend money that had been appropriated and passed into law, without any need to repeal the laws that mandated the spending. (Which would be what you mean by canceling purchases which have been scheduled, right? But the Republicans aren’t proposing any bill that would cut that spending so that the debt ceiling wouldn’t need to be raised.)

        They didn’t do any of this because they’re not psychopaths.

  5. Byomtov says

    They just made a lot of individual spending choices, without reflecting on the bottom line.

    Now that’s weak. You mean none of those Tea Party representatives who are so deeply concerned about the deficit can do arithmetic?

    I think that’s really why you don’t like the debt ceiling: It provides an occasion for reflection that you don’t want to have happen, for fear that, were the purchasing decisions made in light of the total, rather than individually, America might not buy as much government as you want them to.

    You’re an engineer, Brett, not a psychologist. I don’t like the debt ceiling becasue it’s both useless and dangerous, providing an opportunity for irresponsible legislators – which is to say most Republicans – to make trouble for no reason.

    • says

      That sentence of Brett’s does seem to imply that the debt-ceiling theatre is just a fun dramedy, designed to sharpen everyone’s minds on the necessity of budget restraint.
      And that after the disgruntled get done pounding the ash can lids, everything will go back to quiet normal…
      Rather than what some of us see it as: Confederate barbarians (not at the gate but at the well) threatening to poison the world’s economy if their minority demands aren’t met in total.

      Consequently I disagree with Ezra Klein and all the other anti-coiners.
      Nothing matters more than beating the Vandals every step along the main thruways.
      And I argue safely and sanely funding our American Empire is the main highway sine qua non.
      Anybody who thinks that giving the rural Republican Confederacy enough rope to hang themselves here, is really agreeing to give them enough rope to hang everyone…

      Given Obama’s recent decisions, let’s hope I am dead wrong.

      • Brett Bellmore says

        You know, some of us see it as socialist barbarians, threatening to bring everything down Right Now, if they don’t get their way about a course of spending that’s bringing everything down in the long run.

        • Skip Intro says

          Except, of course, these brave and steadfast opponents to the barbarians actually voted for almost all of that spending in the past, and are now actually arguing that paying the bills they themselves helped incur will lead to disaster.

        • says

          Interesting point Brett. And a fair one I suppose. Although the “socialism” cudgel would be more puissant if most of America’s vast wealth wasn’t held by a tiny percent of the 1%. But never mind that money-in-the-bank fact, I am sure you are correct: The James Yeagers of the world really believe that socialism is a menace (even as they compare themselves to Washington and Jefferson, — I nearly feel down in horse laughter when I heard Yeager say that with a straight face).

          But isn’t it so that for your false equivalency to be in balance we would need some urban socialists in Congress daring to hold the World’s economy hostage?
          Specifically: daring to default “AMERIKA” if taxes aren’t raised on the rich to FDR levels. Correct? That would make the equivalency true.

          Is that happening? No. But maybe it should. Maybe the Dems should counter-hostage the debt-ceiling hostage.
          I admit, that would be interesting…

          Side note to James Yeager (and other like-minded American rurals):
          The only socialists making news these days are in Mali fighting Islamofacists.
          And what exactly are you doing?
          Smoking dope, shooting trees, planning your next tattoo, watching Sons of Anarchy reruns, and trying to get the American Empire to default so you can drown it in a bathtub of gin?
          Aren’t you just world beaters!

        • liberal says

          Except that doesn’t comport with the dictionary definition of “socialist,” which is government ownership or true control of the means of production.

          • Brett Bellmore says

            Except that it does, in that latter version, given the metastasizing regulatory state. Don’t we have a socialized health insurance sector now that government is dictating the contents and price of health insurance policies, even going so far as to mandate what has to be included in them at no cost?

        • Mitch Guthman says

          Well, let’s see if what you think about this thought experiment. I’ve come to understand that when conservatives talk about holding the “ceiling hostage” it’s pointless to respond about the necessity of paying one’s bills and so forth. Really, it’s all about leverage and power. What you want today is budget cuts in social services and for the Democrats to fall on their swords and take the political blame for cutting popular programs. Tomorrow, who knows?

          So let me suggest a small thought experiment about what it might be like if us “socialist barbarians” played by your rules: Let’s say that the result of the 2016 general election is that the GOP wins the White House, the Democrats keep the Senate and newly elected Speaker Alan Grayson’s program of doubling the minimum wage, a massive middle class tax cut, Medicare for all and the revocation of all of Fox’s broadcast licenses is stalled in the Senate due to a Republican filibuster and a threatened presidential veto.

          Would it be acceptable in your view for Speaker Grayson to take the “debt ceiling” hostage to force Republicans to lift the filibuster and have their president sign it into law?

  6. Daniel says

    But families DO decide whether or not to pay a credit-card bill for goods it has already bought. They decide to pay the minimum cost rather than the whole bill, or they pay their bills late, or they just don’t pay and wait for creditors to call. That’s what people do when they’re in economic trouble. It might be irresponsible, and it might not be a good strategy in the long run, but there really are choices.

    • Byomtov says

      Indeed it might not be good strategy. One possible consequence is a credit downgrade, which will make borrowing more expensive in the future.

    • A. Replier says

      Daniel,

      That’s what a private actor may do. However, a government that issues its own fiat currency is financially unconstrained and such actions as you set forth would be stupid, destructive, ignorant, and totally unnecessary. The constraints we’re discussing in the current context are all political, not economic.

      • Brett Bellmore says

        No, a government that issues it’s own fiat currency merely has more rope with which to hang itself. The idea that issuers of fiat currency can’t get into trouble ignores the historically demonstrated fact that, eventually, it doesn’t matter if you can issue fiat currency, if people refuse to use it.

        • Mitch Guthman says

          I suppose that’s true in an abstract sense. Could you explain how what you say relates to the United States in the current economic situation? As Lewis Carroll and Cranky point out, right now the Federal government can borrow money for practically nothing and that cost continues to fall; the demand for US debt and currency has increased year on year since 2007 and there is nothing on the horizon to suggest that the world’s appetite for our debt and currency will diminish in foreseeable future.

          Flight capital that can get here continues to do so—the US remains the financial destination of choice for most kleptocrats, drug barons and bankers. The inflation rate is either stable or increasing only slightly. People want to come here and we are the top market for foreign businesses, entertainers and investors. The only factors increasing the cost of borrowing for the US government is the antics of the Republicans holding the debt ceiling hostage. Things aren’t great here but they’re better than in Europe (because we didn’t do as much austerity in the middle of a depression) and we really don’t seem to be becoming Zimbabwe.

          I can’t help noticing that over the time I been reading your comments here and elsewhere you talk as though the US is in imminent danger of becoming Zimbabwe but you never really bother to relate your right-wing nostrums to the economic environment as it actually exists. Neither does the fact that the United States never actually becomes Zimbabwe seem to modify your thinking in any way. Are you so deeply invested in this way of thinking that no hint of reality can ever penetrate it?

        • bobbyp says

          Not true. If the government insists that only the currency can be used to pay taxes, then there will be an ongoing demand for it. Do you mail crates of chickens to Washington, D.C., to pay the IRS?

        • MobiusKlein says

          eventually? What are your comps for the US currency situation? There are quite number of existing fiat currencies that have not collapsed or transitioned to ‘people refuse to use it’ mode.

          You really are asserting as fact an unproven statement.

          • Byomtov says

            But Zimbabwe, Weimar!!!

            Besides, there’s ultimately really no such thing as a “non-fiat” currency. Are gold standards – which by the way can also produce disaster – divinely ordained?

  7. Tony P. says

    I will not insult Brett by assuming that he actually believes everything he has written in this specific thread.

    –TP

    • Brett Bellmore says

      You really don’t like admitting people actually disagree with you, do you?

      I think we can dismiss the notion that Obama’s response to this situation is going to be constrained by his feeling an obligation not to violate federal laws. He has just notified the House he doesn’t intend to submit a budget by the statutory deadline. (He’s only met it once.) This isn’t any less of a violation of law than refusing to spend money he doesn’t have.

      So can we stop pretending that not spending the money he doesn’t have is off the table, because it’s illegal? That’s not even a consideration in this administration.

      • Byomtov says

        (He’s only met it once.)

        Oh come on. He’s been a week late a couple of times. Grounds for impeachment, no doubt.

        • Brett Bellmore says

          Oh, come on, he knew when the deadline was, how far in advance? It’s not a last minute thing. And he’s missed it four out of five times, (The one time he got it in on time it was rejected 99-0.) you have to go back to the 1920′s to find a President who was this bad at it.

          It’s not unheard of for a President to miss the deadline on their very first budget. Obama isn’t even TRYING to make the deadline.

          Then you’ve got his violation of the war powers act in Libya.

          This is not a President who’s obsessive about obeying laws. If he doesn’t chose to meet the debt ceiling crisis by not spending the money, he might have reasons, but “because it would violate the law” won’t be one of them.

          • Byomtov says

            From commenter “Kerry” at Volokh:

            Barack Obama has submitted the following budgets:
            FY 2010 – May 7, 2009 (in transition years, incoming Presidents have typically submitted late. See Reagan, Clinton, W. Bush. H.W. Bush doesn’t really count, because he didn’t submit a budget or revise Reagan’s outgoing submission.)
            FY 2011 – On time.
            FY 2012 – Due on February 7, submitted February 14, 2011
            FY 2013 – Due on February 6, submitted February 13, 2012
            FY 2014 – Has notified Congress that it will be late prior to the deadline and we don’t know how late it will be.

            Obama did miss the deadline on three of four prior occasions. But just saying that (followed by “congressional budgeting process…has also broken down”) when the facts are as
            above, suggests, to me, an effort to create a false impression with a technically true statement. Basically, it strikes me as dishonest.

            But he was
            late and that’s terrible, right? Well, how many times did Reagan meet
            the Congressionally-mandated deadline for his mid-session budget review? Once in eight
            years. When he was late, it was anywhere from 10 days to 46 days
            late. (Consider also that the great scofflaw (sarcasm) Reagan missed the
            deadline for his initial budget proposal by 45 days in 1988 (not a transition year), and H.W. Bush
            missed the deadline by 21 days one year out of three tries.) My point being, all the hand wringing about the timing is, as
            Ricardo117 points out, just political theater.

            That’s a pretty good response, IMO.

            Take ten points off Obama’s grade and move on.

          • Brett Bellmore says

            No, I’m saying it’s a bit late in the game to pretend violating the law fills this administration with such horror that not spending every cent appropriated is impossible because it’s illegal.

          • bobbyp says

            And Reagan sold arms to terrorists. We should have stood him up against a wall and shot him. Both Bushies, too. So there you have it. End of discussion. This internets stuff is pretty easy.

        • Cranky Observer says

          There’s absolutely nothing in the Constitution about a “budget”, and this obsession the hard Radical Right has about throwing “there hasn’t been a budget passed for x years” into conversation actually stonkers me. I can usually figure out what the nefarious purpose behind most of the Radicals’ toss-outs, but this one doesn’t even make sense. We have spending bills, we have revenue bills, we have a gap between them that requires borrowing. The holy totem of a “budget” is meaningless – the more so since the Bush/Cheney Administration chose to call all of its war expenses ‘supplementals’ instead of what they were (spending).

          Cranky