More Fiscal Follies: Dancing Near the Debt Ceiling

Continuing in the spirit of  self-preservation, the Republican controlled House allowed a vote Wednesday to suspend the debt ceiling limit until May.   Perhaps they are catching on to Louisiana Governor Bobby Jindal’s recent advice:  “We’ve got to  stop being the stupid party.”  Exactly how they are going to do that remains to be seen, but at least they are avoiding general enmity for the moment.   They are still holding the debt ceiling hostage, but are at least giving “him” food and water for a few months.

Other fiscal shinaningins will take place between now and then, but they can wait while we try to better understand the tug of war since it is likely to continue throughout this presidential term.   As much as I don’t want to study the matter, and you probably don’t want to read about it, I feel compelled to for the simple reason that our inability to develop a fiscal path forward seems likely to sink us in upcoming decades, if not right to the bottom than leave our deck stranded along the water line.

To build a context for this debate, I suggest first looking at the seven minute video below by David Wessel, economics editor of the Wall Street Journal.  His portrayal undoubtedly has critics from the left and right, but his outline of the issues has been praised by moderates on both sides.

While ostensibly focusing on the fiscal cliff, his  points are relevant to the whole deficit/debt issue in terms of providing an overall snapshot.    He states a number of facts that I find illuminating, which is what facts should be, of course, but these days they are more often manipulated to obscure like peas in a shell game.

A case in point.   During the third presidential debate, Mitt Romney made a point that we have less ships in our navy now than in 1915, as if that meant anything.   Obama’s derisive response stemmed from the fact that Romney was implying that it did (*1).   The number of ships we have is not important;  their collective fire power and relative dominance is.   In that regard, “today’s navy is bigger than the next thirteen combined.”   Now that is an illuminating fact in contrast to Romney’s misleading one.

And the light source just happens to be David Wessel’s book Red Ink:  Inside the High-Stakes Politics of the Federal Budget.  

The book, by the way, is only 162 very readable pages.   If you read it, your expertise on these matters will largely match my own.


(*1)   Part of  President Obama’s irritation with Romney’s point about the navy’s size in 1915 may have stemmed from his apparently cribbing the line from Obama’s own Defense Secretary, Leon Panetta, who in defending the Defense budget had given the same misleading statement to Congress. (Red Ink, p. 90).

A Bipartisan Love Story

Martha Stewart at the Vanity Fair party celebr...

Martha Stewart (Wikipedia)

If you didn’t happen to notice, President Obama signed The Stop Trading on Congressional Knowledge Act on April 4.  (Stock Act:  Don’t you just love a memorable acronym?).  Bipartisans were oohing and cooing that day, like love birds on their first date.

While it was way overdue and nothing to really get excited about, it is an example of how something positive can actually get done by our congress if the stars align just right.

You probably know that last November 60 Minutes did an interview with Peter Schweizer, a Stanford professor who wrote the book Throw Them All Out, a study of how Congress has profited from their insider knowledge about political decisions that would have an impact on business.

For those looking to triangulate a left/right bias, Schweizer is a fellow at the Hoover Institute at Stanford, which should give you a clue (note the  HOOVER part).   However, there is little argument from either side of the spectrum regarding the main thrust of the book:   Congress should not be allowed to do what the rest of us would be jailed for.

Well, duh!

You mean they’ve been allowed to do insider trading all this time?  What?  Makes me feel sorry for Martha Stewart all of sudden.   Not that there haven’t been efforts a foot in Congress for years to restrict this practice, but they got nowhere until the 60 Minutes piece  shined a bright light on the dark corners of those hallowed halls.  I guess with so much time spent on gridlock, it was hard to find a few hours to fix this little flaw.

After the 60 Minutes piece, both the Wall Street Journal and the Boston Globe looked into the matter and found that, overall, Congressmen and women didn’t do any better with their stock trades than the average Josephine , which the Journal saw as proof the matter was being overblown and the Globe saw as a positive, that at least Congress, in general, wasn’t turning their insider information into Swiss bank accounts.

A tempting, third interpretation might be that Congress was, in general, no more capable of employing insider information to good advantage than they are in producing legislation useful to the American people.   However, that would be like kicking a dog when he is down.   I believe there is more ability there than meets the eye, but it can’t flourish in what has become a dysfunctional institution polluted by acrimony.

But functional enough to realize that a popularity rating of about 15% with the American people might go even lower if they didn’t do something about this outrage they suddenly discovered, so they passed the Stock Act with close to unanimous support.

Both parties hailed this as a great example of bipartisanship, though, as noted:  “While members in both parties and chambers were eager to support the legislation, it was not without some controversy. Sen. Chuck Grassley (R-Iowa) was loudly critical of a decision by House Majority Leader Eric Cantor (R-Va.) to trim an amendment Grassley offered that would require political intelligence firms, which seek out information on lawmaking to sell to investors, to register as lobbyists do.”

There were complaints that the register issue would require more study, so a commission was assigned to report in a year, which may be akin to burying a body;  the chances are slim it will  come up for air.   (Note to self:  Look for a report from that commission a year from now)

But let’s not quibble.  And do note, the conflict mentioned was between  two in the same party, not the usual split.  It was a good move by congress to finally correct an injustice that had become obvious to the rest of us.   A researcher and the media shed light on the issue and there was a lot of response from the public and the right thing was finally done.  The good news is the system worked in its stumble bum sort of way.   The bad news is the biggest problems we face are much more complex, with no course of action that is as widely viewed as obvious;  hence our polarization.

An interesting aside is that, though a fellow at Stanford, Schweiser lives in Florida while commuting frequently.   Most of his research is done over the internet.   He says:  “To me, it’s troubling that a fellow at Stanford who lives in Florida had to dig this up.”

Hey, maybe it’s actually a hopeful sign.  A match to ignite a positive change might be struck anywhere.


More about Peter Schiewzer

More about the Stock Act