Against Raising the Debt Ceiling: What are they thinking?

Now that the crisis regarding chemical weapons has been resolved in Syria, for the moment at least, let’s turn our attention to what many see as a potential crisis here at home, a failure of Congress to agree to raise the debt ceiling.

English: Chart of the United States' debt ceil...

English: Chart of the United States’ debt ceiling from 1981 to 2010 in $ trillion. Click chart to enlarge.  (Photo credit: Wikipedia)

We have witnessed these struggles before and eventually the debt ceiling was raised in each case, but in 2011 the dysfunction prompted a lowering of our credit rating and a tumble in the stock market before an agreement was reached.

This year a Republican minority of Tea Party hardliners appear willing to take the issue to the limit. Ted Cruz and a few others in the Senate and more in the House appear to think either Obama will blink or they are willing to chance whatever disruptions in the world economy that a failure to raise the debt ceiling might prompt.

The conventional wisdom is that by hook or by crook the debt ceiling will be raised “Because they have no real choice if they want to avoid a U.S. default. A default would hurt the economy and markets, and most lawmakers know this. That’s why they regularly raise the debt ceiling before it comes to that.”(CNN Money)

However, judging from a  a recent Wall Street Journal-NBC News poll, 44% of Americans are against raising the debt ceiling.   That statistic startled me and was enough to drive Washington Post columnist Jonathan Capehart  “nuts.”  his argument being that the 44% should have responded “I don’t know – because then they’d be telling the truth.”

What Capehart doesn’t acknowledge is that most of these people are sure they do know.  What disturbs me is that the Tea Party types seem to be voicing the anger and frustration of many Americans who are looking for a simple answer to our complex problems.  That simple answer is to cut government spending.

The simplicity of that “solution” makes it very powerful.  Positive plans tend to be complex which give rise to disagreements (Obamacare being a maximum example) which undermines action.  But lots of people can coalesce around “just say no” and if that poll can be believed, that is what is happening now.

If one argues that the debt ceiling being raised simply allows the federal government to pay bills it has already accrued, that it isn’t raising government spending, T. P. types might counter:   Yes, but how are we ever going to get spending under control unless we can turn around the trend and here is where we are going to dig in to do it.

And if told:  “Any default on the nation’s debts could be calamitous for the U.S. economy.  A default would rock Wall Street and hurt businesses and families by fueling a sharp increase in interest rates.”(Reuters).  They simply don’t seem to believe it.   Or, at least they believe that Obama would not let that happen.  It is like a game of chicken for them.   And their idea of guts is to not blink first.

If one points out that since 1940, Congress has effectively approved 79 increases to the debt ceiling, the reaction would be, well, that’s been the problem all a long.   If they hadn’t done that we wouldn’t be facing our current problems.

That the federal government has always functioned with a deficit from its inception, but our economy has continued to expand despite periodic set backs suggesting our key problem now is an economy that is barely growing and not the debt we have at the moment…  well, this starts sounding too egg heady for most Tea Party types, and wasn’t it the eggheads in government and Wall Street, the supposedly really smart people, who got us into this Great Recession to begin with?

So, you can see the line of thinking here.   And, according to that one poll, it seems to be gaining momentum. (*1)  It all reminds me of something H. L. Mencken once wrote, which I’ll paraphrase as:   For every complex problem there is a simple solution.  And it’s wrong.

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(*1) There are other polls which seem to contradict this one, which is not surprising since polls use different wordings or different questions altogtether.  As Huff Post describes one:   “Despite the lack of support for increasing the debt limit, a CNN/ORC poll released earlier this week found that 62 percent of Americans said failing to do so would cause a “crisis” or “major problems.”

So, if 62% of Americans see failing to raise the debt ceiling would produce major problems or worse, how many of the 44% who don’t want to raise the ceiling accept major problems as the cost of bringing the government to heel?  Your guess is as good as mine.

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Krugman vs. Stockman this Sunday on This Week

While I was going to wait until Tuesday to do my next post, I wanted to alert everyone  that Paul Krugman, NY Times columnist and Nobel Prize winner in economics, and David Stockman, a budget director for the Reagan administration (who quit because he took federal deficits more seriously than Reagan did), are slated to be on This Week with George Stephanopoulos this Sunday (9:oo a.m. on ABC in San Diego;  check your local listings.)

English: Paul Krugman at the 2010 Brooklyn Boo...

English: Paul Krugman at the 2010 Brooklyn Book Festival. (Photo credit: Wikipedia)

It is a verbal prize fight in the offing as each sees our fundamental fiscal problems very differently and have exchanged written barbs resulting from Stockman’s publication of The Great Deformation:  The Corruption of Capitalism in America.

They figure to deal with the large fiscal issues that face us in contrast to the congressional pie fights over just keeping the government running.

David Stockman

David Stockman (Photo credit: New America Foundation)

There figures to be a lot of heat and perhaps some light shed through what should be an interesting verbal battle. Actually I wouldn’t mind if a punch or two is thrown, just to break the tension with some laughs.  Old men fighting is always funny.

Those interested in some background information can click the link to the Krugman blog in my Blogroll to the left and scan down his posts.   And/or  check out the article below.

Can’t wait for the opening bell!

The Big Picture of our Federal Fiscal Problems

Rubik's Cube Français : Rubik's Cube Bahasa Me...

Rubik’s Cube Français (Photo credit: Wikipedia)

Typing the above title made me laugh.  The idea of me saying anything useful about the “big picture” in the space of an itty bitty post makes no sense at all.  On the other hand, it doesn’t feel worthwhile to keep tracking a congress which struggles to just keep the government funded on an almost month by month basis.

Common sense would suggest the issues of the sequester and whether to continue funding the federal government past March 27 shouldn’t be issues at all.  Solving those are the bare minimum while the real issues, the REALLY BIG fiscal  issues are not being touched upon.  It’s as if we are busy trying to agree on shoring up some levees while a tsunami is coming at us a few miles away, or in years, 10 or so.

Doug Elmendorf is the Director of the Congressional Budget (CBO) which acts as a kind of referee examining budget proposals developed by congress and the president and “scoring” them as to their actual cost.   I have come to realize this is a sophisticated guestimate at best since there are so many variables involved, but a good faith guestimate is better than nothing, I guess.

According to Elmendorf we are headed towards very rough waters in our fiscal future.  Last year the CBO chief said that even if congress could come together on various tax hikes and spending cuts offered by both sides – A REALLY BIG IF since they barely can agree to keep the government operating for a few months – they might cut around $250 billion annually from our growing yearly deficit (not touch the overall debt, mind you, but just stanch our full speed towards the iceberg field of insolvency dead ahead).

While that would be a plus, Elmendorf  envisions the need for $750 billion annually in tax hikes and/or spending cuts by 2022 to prevent out national debt from climbing to the point of being equal to about 90% of our GDP, a level which scares most economists.   To reiterate:  Under what seems a best case scenario, we still fall  $500 billion short annually of swinging this big ship of state away from a treacherous ice flow in the 2020s. (*1)

Of course, Elmendorf’s vision would be challenged by some on the left and the right, with economist Paul Krugman the poster boy on the left and, let’s say, Congressman Paul Ryan on the right. (*2)   However, if Elmendorf is close to being right, certainly those on the right who see a solution shaped by only cutting taxes and spending are particularly delusional.

Our ship of state seems to be heading directly towards a huge iceberg in 10 years, or so.  And both parties have their hands on the wheel trying to pull it left or right, which keeps us going straight forward towards, if not disaster, to an America that is no fun to imagine.

Considering the complexity of all this reminds me of Rubik’s Cube, a puzzle I tried unsuccessfully to solve as a young man.  This seems infinitely harder to solve, and so complex it is hard to know even where to begin.  But I’m willing to put in much more time.

There is something about the impossible that has always attracted me.

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(*1)   I drew the Elmendorf material from Red Ink, a book by WSJ economics editor David Wessel.   Short (162 pages) and easy to read, it provides a good ball park sense of our fiscal Rubik’s Cube.

(*2)  In case you haven’t bumped into him, Paul Krugman is a liberal, Noble laureate economist who probably has more influence than most in his trade because in addition to knowing his stuff he’s everywhere, through his column at the New York Times, frequent political chat show appearances, several books and a blog which he updates sometimes three times a day, which can be found in my Blogroll to the upper left.   He’s sharped tongued to say the least and argues that while the debt is important, we should forget about it right now and deal with unemployment and strengthening the economy first.    A stronger economy would generate more federal income and begin to reduce our yearly deficits.  Then we could work on cutting down spending.

Everyone knows Paul Ryan, who generally speaking, is the polar opposite of Paul Krugman.   He is all about reducing our annual deficits and later our debt.  He has just unveiled a 10 year plan to balance our budget which seems like a Tea Party fantasy.  For one thing, it assumes Obamacare will be abolished, which is definitely not going to happen over the next four years and quite likely never (though I do think it will be altered over time).   Krugman, though rough tongued to make an impression, seems to be arguing what he believes.   I don’t know what Ryan is up to.

“You Like Me. You Really Like Me!”: The Paul Ryan Selection

When I first heard of Paul Ryan’s selection as  Mitt Romney’s VP candidate, I didn’t know what to make of it, other than the campaign suddenly seemed more interesting.   In my previous post, I referred to Mitt as the “stealth candidate, ”  given his tendency to avoid the details of his personal history as governor, businessman and Mormon leader.

paul-ryan-grannie

paul-ryan-grannie (Photo credit: Majordomo2012)

The Democrat dogs have stuck their teeth into the evasions, such as why he refuses to show more of his income taxes.  Every day we do not talk about the sludge-like economy is a good day for Democrats.   Well, to change the focus, how about a startling pick for VP ?   Especially if that pick reminds us that our problems go much deeper than Romney’s tax returns.

That seems part of the reason the  “artful dodger” picked someone like Paul Ryan, despite his having a specific history, often not in keeping with his public image as fiscal hawk, that is already being focused upon and flayed by the Democrats.   In picking Paul Ryan as his running mate, Romney moved the focus away from him to our overall financial problems.  Also, as columnist George Will wrote, he was “talking conservative.”   This was his way to prove to his conservative critics that he is indeed one of them.   Sure, he’s  been saying for months that he is a conservative, but his etch-a-sketch ways  hadn’t convinced them.

However, now that the warm, bonding moment has past, it will be interesting to see if Romney’s habit of not wanting to go into specifics  fits with his running mate’s coming equipped with all sorts of details for both reporters and the Democrats to dwell on.  Such as the what-will-happen-to-medicare question and what kind of fiscal conservative is Ryan if his plan takes us to around 2030 to balance the budget.   Sure, the Democrats are open to counter attacks, such as there is no foreseeable time they balance the budget, but there might be if the Republicans would bend on their no new taxes pledges.

Other than solidifying his base, taking the attention off such things as his refusal to show more tax returns and attracting more money for his campaign (but don’t they have plenty as is?),  I don’t see what good the Ryan pick will do for Romney.   They want us to  believe that in picking Ryan , Romney is not afraid to make the bold choices required in our time, but as I’ve indicated the Ryan image of fiscal hawk will not likely hold up after being gone over with numerous fine tooth combs in the days ahead.

What will hold up is the image of his destroying Medicare as we know it – shoving granny down the stairs – even though for fairness sake it should be noted that at least Ryan has a plan to save something akin to Medicare.  It is unclear to me how the Democrats will try to save it, so granny remains in jeopardy in either case.  But the Democrats  seem likely to win this battle of images.  MY CONFESSION:  I CHOSE THE PHOTO, WHICH IS TOTALLY UNFAIR, BECAUSE I GOT A KICK OUT OF IT.

Also, leaving all doubts about Ryan aside for a moment,  I doubt that the cautious Mitt can continue to reap benefits from his choice.   Romney doesn’t want to deal with specifics, so I bet Ryan becomes more like Romney than vice versa, another artful dodger.   And if Ryan stays too much like Ryan, i.e. a darling of the right, well, that can’t be good for Mitt, either.   The star shouldn’t be upstaged by his supporting cast, and doesn’t it feel like he already is?

Here’s my thinking, at base Mitt Romney picked Paul Ryan because like most of us he wants to be liked and he has been running for months while mostly being just tolerated, as the candidate who wouldn’t go away and had the money and organization to just stay and stay and stay.  If his  strategy of being the Un-Obama had been really working of late, he would not have picked Ryan.   But that not being the case, why not  go bold?  Even button down types like Romney sport a wild hair.

Those old enough to remember Sally Field receiving an Oscar for Places of the Heart in 1985, probably recall that in her acceptance speech she screamed out:  “You like me.  You really like me!”

Well, Mitt, you’ve had your warm, fuzzy moment.  Now I will be curious to see if in November enough citizens overall will show they like you, they really like you.