Sunday, July 24, 2011

The End Draws Nigh

The debt talks adjourned today. There is now just one week left to get agreement. To my untutored eye, it looks more and more like the fanatics are going to drive the car over the cliff.

Here is a post on the blog Firedoglake:
On several occasions after the Great Depression began, President Hoover admonished the public and those demanding the government provide economic relief that the nation had run out of money and that it would be irresponsible to borrow and engage in profligate spending. Over 80 years later, we are hearing virtually the same economic gibberish from President Obama.

From the President’s weekly address:
For years, the government has spent more money than it takes in. The result is a lot of debt on our nation’s credit card – debt that unless we act will weaken our economy, cause higher interest rates for families, and force us to scale back things like education and Medicare.

Now, folks in Washington like to blame one another for this problem. But the truth is, neither party is blameless. And both parties have a responsibility to do something about it. Every day, families are figuring out how stretch their paychecks – struggling to cut what they can’t afford so they can pay for what’s really important. It’s time for Washington to do the same thing. But for that to happen, it means that Democrats and Republicans have to work together. It means we need to put aside our differences to do what’s right for the country. Everyone is going to have to be willing to compromise. Otherwise, we’ll never get anything done.

That’s why we need a balanced approach to cutting the deficit. We need an approach that goes after waste in the budget and gets rid of pet projects that cost billions of dollars. We need an approach that makes some serious cuts to worthy programs – cuts I wouldn’t make under normal circumstances. And we need an approach that asks everybody to do their part.
And via Brad DeLong, here is President Hoover in 1932:
In his Budget Message for fiscal year 1933, Hoover wrote:

In framing this Budget, I have proceeded on the basis that the estimates for 1933 should ask for only the minimum amounts which are absolutely essential for the operation of the Government under existing law, after making due allowance for continuing appropriations. The appropriation estimates for 1933 reflect a drastic curtailment of the expenses of Federal activities in all directions where a consideration of the public welfare would permit it…. The welfare of the country demands that the financial integrity of the Federal Government be maintained…. [W]e are now in a period where Federal finances will not permit of the assumption of any obligations which will enlarge the expenditures to be met from the ordinary receipts of the Government…. To those individuals or groups who normally would importune the Congress to enact measures in which they are interested, I wish to say that the most patriotic duty which they can perform at this time is to themselves refrain and to discourage others from seeking any increase in the drain upon public finances…
What we now face is a President who insists we are in a debt crisis that reputable economists say is phony, a product of deficit hysteria, political cynicism, and economic ignorance.. And he insists the debt crisis requires we take economically damaging steps that will harm the public by undermining popular and beneficial programs to preserve our future. He’s told us we must do this to achieve economic prosperity and that we can’t even have a meaningful conversation about the jobless until this is done so the debt problem is not just a distraction; solving it is a prerequisite to economic recovery. Eat your peas.

Moreover, he’s effectively affirmed the precedent that it’s okay for a crazy, irresponsible, anti-government party to threaten to tank US credit, because the debt limit offers an opportunity to cut government in major ways that might not otherwise be politically possible. God bless the Tea-GOP!
I'm finally starting to agree with those who say that despite assurances by both side that there will be no default, it is starting to appear to me that there will be a default because they simply can't move foward on anything, not even the supposed "finesse move" of Mitch McConnell to simply pass a new ceiling.

Here's Brad DeLong's take on the situation:
The Treasury's lawyers should simply announce at 9 am Monday morning that (a) since the Constitution prohibits questioning the validity of the national debt, and (b) since the continuing resolution that mandates spending through September 30 was passed later in time than the restriction on borrowing, that (c) the debt ceiling is a dead letter. This is so by the oldest of the principles of black-letter law: a law inconsistent with a previous law is deemed to repeal the previous law even if it does not do so explicitly.

An administration that can find lawyers to say that Libya is not "hostilities" and that wanted to reassure markets and reduce economic uncertainty by solving the debt ceiling kabuki theatre debate would have no problem at all with finding lawyers to advance and justify this well-grounded and wise legal interpretation.

The structure of Tim Geithner's testimony to Congress defending his additional borrowing is:
  • The Constitution forbids me from even thinking about default.

  • You ordered me to spend.

  • A previous Congress told me not to borrow, but no Congress can bind its successors, and those of you who are in this Congress here now ordered me to spend.

  • I'm just doing what you told me to do--and what the Constitution directly and explicitly tells me to do.
And then we should move on to the people's business. This episode of kabuki theatre has done nobody any credit. If I had previously had any respect for or confidence in Republicans, this would have shredded it. And each day it continues it further shreds my respect for and confidence in the executive branch.
I completely agree.

What really upsets me is that the Republicans who are now have their hair on fire about deficits and debts were the very ones who 8 months ago, in December 2010, argued that trillions in tax breaks for billionaires and millionaires was absolutely essential. But if you are going to give away tax breaks, then debt can't be important. Or if debt is that critical, you shouldn't be giving away tax breaks and lowering revenues and forcing the deficit to go up. In short, the Republicans are hypocrites and liars.

From the Washington's Blog:
Here's the quote of the day on the debt negotiation farce:
Today's intrepid White House pool reporter, The Hill's Sam Youngman, on the state of the negotiations: "DC is a big bag of suck that couldn't solve a rubik's cube if it were all one color."

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