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Tuesday, October 15, 2013

Debt debt debt

Big news days are usually good for bloggers. But I hate this kind of big news day. We're basically reduced to standing outside the Sistine Chapel waiting for that puff of white smoke. Will we have a government...?

Note this:
Fitch, a global credit rating agency, warned that Congressional intransigence had put the full faith and credit of the government at risk. The firm has put the United States on a “negative ratings watch,” but it reaffirmed the country’s sterling AAA credit rating.

The news came as the Treasury Department said it had only about $35 billion in cash on hand. It expects to run out of “extraordinary measures” to keep paying all of the government’s bills on Thursday.

Fitch warned that Congress had not “raised the federal debt ceiling in a timely manner.” It said that it “continues to believe that the debt ceiling will be raised soon,” but that “political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.”

The firm did not say whether it would consider downgrading the country’s rating even if Congress struck a last-minute deal, as Standard & Poor’s did in 2011.
That ties into a point made in our previous post: If we play games of brinksmanship every few months, pretty soon we're going to be downgraded even if we continue to pay our bills, because the rest of the world is tired of dealing with our crap. Other nations want to park their money somewhere stable -- and these days, stable ain't us.

Other countries do not have to deal with this debt ceiling nonsense.That's the real problem, the problem we must solve through legislation.

The Wall Street Journal has started to get it:
Now the most Republicans will get from all of this is lower public approval, the pleasure of imposing ObamaCare on Congress and the promise of more budget negotiations with Mr. Obama before another debt limit deadline is reached early next year.

At least that's better than getting the blame for whatever happens if Treasury stops sending out Social Security checks in order to prioritize debt repayments. The politics of that are no better than defaulting on debt. Republicans can best help their cause now by supporting Speaker John Boehner and moving on to fight more intelligently another day.
I am not one who believes in belt-tightening during bad economic times. I believe in the old principle: When rough times hit, you run up debts to get the economy going again. When good times come again, when the money starts flowing again, that's when you tighten the belt and pay your debts.

That's what works. I don't understand why Republicans have always done precisely the opposite.

Still, if we must curb spending, then we should do it while crafting legislation and when appropriating funds. The debt ceiling concerns our ability to pay for debts we have already incurred. If we don't raise the ceiling, we'll still owe the money. That burden isn't going away.

Here's the good news (and I'm still enough of a party animal to consider this news good): According to the most recent polling, if the 2014 elections were held today, the Democrats would win 30 seats in the House of Representatives.  Dems need only 17 seats to take the House.
I'm sensing a bizarre lack of concern in many Democrats who have been speaking about this. Yes, they are outraged, and rightfully so, but they don't look terrified. I can tell the difference because I kind of am. Obama hasn't been heard from in days. I'm kind of thinking that Obama has told them that he's going to unleash the 14th Amendment. Or maybe the Mad Tea Party will actually fold tomorrow and let the vote happen. There are some reports to that effect but predicting the behavior of this seriously disturbed group of people isn't easy. Okay, it's impossible: I sold all my stocks today and will ride it out until Monday, or whenever the dust clears.
Some people should have their belts tightened. If there's to be more government debt, then there should be

* higher rates of income tax for those on higher incomes;

* swingeing tax rates against moneylenders;

* and, a demand which should be made very loud and very soon, but doubtless won't be: the introduction of heavy restrictions on the export of money.

The rich will rush to take their wealth out of the country. Some will even make big fortunes out of the apocalyptic repercussions of the imminent default.
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