freeman2 wrote:You must really want Obama to win in 2012.

Freeman, you're a nice guy. However, I would suggest reading something other than Krugman. I even wrote a letter to the NYT based on today's Krugman column. He knows a lot about economic theory. You know a lot about the law.

Neither one of you has his finger on the political pulse at the moment. Americans are not yearning for a national debt that we can only hyper-inflate our way out of.

As I challenged Krugman, let me challenge you: what specific cuts has the President advocated?

Btw, the GOP has already voted a budget through the House. Have the Democrats pushed one through the Senate? Does the President have one?

Hint: the answers are "no" and "well, he did, but it lost 97-0 in the Senate, failing to garner even one Democratic vote."

So, let me flip it on you: Nice try, Mr. President! If you want to keep borrowing money, you're going to have to do it legislatively. You cannot blackmail the Republicans into allowing you to borrow more. You cannot credibly blame the Republicans when you have failed to make a SINGLE public proposal. By the end of next week, the GOP will have voted on two budget cuts (the Ryan plan and what they will propose next week). Cry all you want, Mr. President, but Americans who are paying attention know that you've not lifted a finger or tried to broker a deal. You have simply expected the Republicans to give you everything you wanted.

That's not how democracies work, Mr. President.

Steve,

i won't tell anyone that you read the NY Times!

The nice thing about this debate is that we will know who is right in a few weeks. My prediction is that there will be some face-saving deal with modest cuts (as in billions not trillions)

freeman2 wrote:Steve,

i won't tell anyone that you read the NY Times!

The nice thing about this debate is that we will know who is right in a few weeks. My prediction is that there will be some face-saving deal with modest cuts (as in billions not trillions)

If so, may it be short in duration! That's the kind of deal that will just guarantee many more trillions in debt.

Don't know if you saw this--but, the GOP is just beginning to make hay in the Senate over the lack of a budget. Turns out NO appropriations bills can legally be passed without a budget.

Hmm, that funny law thing getting in the way!

800+ days without a budget passing the Democratically-controlled Senate.

I heard the President say the government doesn't need a Constitutional Amendment to get them to do their jobs.

Um, are you sure, sir?

Machiavelli wrote:Whole issue is rather silly; if a rating agency downgrade causes borrowing costs in the public markets to rise, Congress can simply require the Fed to "deploy its balance sheet" to buy treasury debt. That essentially amounts to printing money to pay the government's bills (and has accounted for a majority of treasury borrowing over the past year). One wonders why the treasury bothers with its bond auctions at all. No borrowing=no worries about debt service and no pesky debt limit.

Of course, the result is dilution and devaluation of the currency, but that seems to be what the Fed is aiming at anyway (under the fancy name "quantitative easing"), so why worry?

Treasury would still have to create the debt purchased by the Fed. You can't create more debt under the debt ceiling, therefore the Fed cannot monetize it. Ron Paul suggests (though I don't know if it is his idea) the Fed simply destroy the debt it already owns, freeing up the Treasury to make more. Off the top of my head, I can't imagine the ramifications of that but it would certainly mess with the Fed's balance sheet!

Doctor Fate wrote:

freeman2 wrote:The nice thing about this debate is that we will know who is right in a few weeks. My prediction is that there will be some face-saving deal with modest cuts (as in billions not trillions)

If so, may it be short in duration! That's the kind of deal that will just guarantee many more trillions in debt.

If a deal is not made and the US is at risk of default (and as we are discussing in the Euro thread, the perception of risk is enough for ratings agencies to declare that it exists), then you may end up with more debt anyway, or a heap of other problems that overshadow the debt.

As unpalatable as it is, there are sometimes good cases for taking a short-term step to avoid a crisis now, even if it makes long term problems more likely. Of course, it's no reason to then pretend that the long term issues can be avoided themselves.

danivon wrote:As unpalatable as it is, there are sometimes good cases for taking a short-term step to avoid a crisis now, even if it makes long term problems more likely. Of course, it's no reason to then pretend that the long term issues can be avoided themselves.

Oh, I agree--and that's a good portion of the problem. It should be obvious that our President has absolutely no interest whatsoever in debt or deficit reduction.

His "best" proposals are the equivalent of putting a single bucket of water on a forest fire.

I suppose it depends what the 'short term step' you think it is that's needed. Debt is a long term problem. Deficits are a medium term problem. Risk of default and hitting the debt limit strike me as short term problems.

After all, the US government has been in debt for a long time and has been in higher debt (as a proportion of GDP). So it's not ideal, but it's not an imminent issue.

The US government is in deficit, and it is structurally high as well as being exacerbated by the effects of recession and of the actions taken to try and deal with the banking crisis and the recession. But the main effect of deficit is to increase debt, and as long as it is reduced over time, or at least does not grow, it can be borne. It would be better fiscally if it were reduced more quickly, and ideal if it could be eliminated completely within a few years. But it's not a disaster if that doesn't happen now.

The US government is close to it's internally set debt limit and if legally bound (by it's own rules) by that limit, and once it hits that then there are various effects, none of which are likely to be anything other than bad. Either there will be default, or there will be shutdowns (all very well laying people off, but that will add to unemployment, some employees will have contracts that mean a payout on layoff, won't reduce pension liabilities, and may be contestable).

I understand the desire to ensure that any agreement to increase the limit is dependent on a concrete plan to reduce deficits. However, there is a limit to the wisdom of a brinkmanship policy on this. Both sides of the debate appear to have a problem with recognising the need for compromise. It's easy (especially for someone who's spent the best part of three years vigorously opposing Obama and all his works) to attach all the blame to one individual, but basically it appears to be slightly wider than that.

danivon wrote:I suppose it depends what the 'short term step' you think it is that's needed. Debt is a long term problem. Deficits are a medium term problem. Risk of default and hitting the debt limit strike me as short term problems.

But, adding $2.5T in debt in the next 16 months is a short, medium, and long term problem. That's just ridiculous. The "great plan" by the "great man" is to add about 15-20% to the national debt in a year and a third?

That is not a solution to any of the problems.

After all, the US government has been in debt for a long time and has been in higher debt (as a proportion of GDP). So it's not ideal, but it's not an imminent issue.

Spending as a percentage is through the roof, which is why we are getting to where we're going.

More than 800 days of Democratic control of the Senate without a budget. No significant cuts proposed publicly by the President this year, even though he's taken several swings at budgets and proclamations about them.

Instead, he's installing a new chief of a new bureaucracy, the Consumer Protection Bureau. He's increasing spending on education, green programs, blah, blah, blah.

We can't do it all. However, that hasn't stopped him from trying.

I understand the desire to ensure that any agreement to increase the limit is dependent on a concrete plan to reduce deficits. However, there is a limit to the wisdom of a brinkmanship policy on this. Both sides of the debate appear to have a problem with recognising the need for compromise. It's easy (especially for someone who's spent the best part of three years vigorously opposing Obama and all his works) to attach all the blame to one individual, but basically it appears to be slightly wider than that.

Of course it "appears" to be wider. The press is in the bag for the man.

The Democrats ran up huge bills over the last two years. It supposedly helped. However, if we had the same number looking for work as we had just two years ago, the unemployment rate would be 11%.

The Obama Administration has produced the most anemic recovery since WW2 and his response: let's keep borrowing!