Debt Ceiling Chicken

bandit0013 wrote:
Parallax Abstraction wrote:
bandit0013 wrote:

Warren Buffett: "I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for re-election."

Buffett '12

The man's a genius.

You'd probably have to put in a special provision for a higher deficit if war is actually formally declared, but even so yeah, genius.

Sounds good, feels good, but is bollocks. They would just cut whatever costs the most/is least popular without any consideration of the program's worth. Cutting expenses in a hurry because your job is on the line will NOT yield the best results.

Terms of office are set in the Constitution, and no mere law can override that. It would take a Constitutional amendment.

I don't think that having long term congresspeople is always a negative. There is something to be said for having a representative who has had their district for a long time, and has built themselves a network.

NathanialG wrote:

I don't think that having long term congresspeople is always a negative. There is something to be said for having a representative who has had their district for a long time, and has built themselves a network.

These days that usually means a network of donors and people they are beholden to.

DSGamer wrote:
NathanialG wrote:

I don't think that having long term congresspeople is always a negative. There is something to be said for having a representative who has had their district for a long time, and has built themselves a network.

These days that usually means a network of donors and people they are beholden to.

Which goes to the heart of the problem: money. A member of the House of Representatives needs to raise around $10,000 each and every week they're in office just to have enough money for their re-election campaign. A Senator has to do about the same.

Personally, I'd rather see taxpayer funded elections with no outside money allowed then the current system.

OG_slinger wrote:
DSGamer wrote:
NathanialG wrote:

I don't think that having long term congresspeople is always a negative. There is something to be said for having a representative who has had their district for a long time, and has built themselves a network.

These days that usually means a network of donors and people they are beholden to.

Which goes to the heart of the problem: money. A member of the House of Representatives needs to raise around $10,000 each and every week they're in office just to have enough money for their re-election campaign. A Senator has to do about the same.

Personally, I'd rather see taxpayer funded elections with no outside money allowed then the current system.

Agreed, taxpayer funded elections and a very very very strict no gifts/favors rule.

Term limits are great, because public service is so simple anyone can do the best things for the country with no experience. Heck, we should just limit *all* elected positions to, say, people with less than four years elective positions at any level, just to be sure we don't run the risk of them getting corrupt. After all, it's better to have incompetent government than put up with the fact that all politicians become corrupt after a few years in office.

(Do I need the sarcasm alert here? There's a reason the Founders didn't go for term limits, even though they existed in the Articles of Confederation.)

The founders didn't have the kind of regulatory and government capture issues that we have right now. I will not, for the second straight election, vote. I don't see the point in it. The money has won. If someone wants to put forth an initiative to clean up the system or if I think of one that will pass the "corporations are people" trap, then I will gladly put as much money and time as is necessary into reforming our system. Until then I don't see the point in voting for either half of the same party. "Debt Ceiling Chicken" is one of the best examples we've seen yet that there aren't really two parties. There are a bunch of politicians grouped into two giant PACs with interests on either side to slightly tilt them one way or the other.

Robear is correct. Term limits would just give more power to the PACs. How about lobbyist reform?

DSGamer wrote:

The founders didn't have the kind of regulatory and government capture issues that we have right now. I will not, for the second straight election, vote. I don't see the point in it. The money has won. If someone wants to put forth an initiative to clean up the system or if I think of one that will pass the "corporations are people" trap, then I will gladly put as much money and time as is necessary into reforming our system. Until then I don't see the point in voting for either half of the same party. "Debt Ceiling Chicken" is one of the best examples we've seen yet that there aren't really two parties. There are a bunch of politicians grouped into two giant PACs with interests on either side to slightly tilt them one way or the other.

So vote for a 3rd party instead of not voting at all.

dejanzie wrote:
bandit0013 wrote:
Parallax Abstraction wrote:
bandit0013 wrote:

Warren Buffett: "I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for re-election."

Buffett '12

The man's a genius.

You'd probably have to put in a special provision for a higher deficit if war is actually formally declared, but even so yeah, genius.

Sounds good, feels good, but is bollocks. They would just cut whatever costs the most/is least popular without any consideration of the program's worth. Cutting expenses in a hurry because your job is on the line will NOT yield the best results.

It's a smart assed quip about making politicians responsible for their actions, it's not supposed to be an actual plan of action.

LeapingGnome wrote:

So vote for a 3rd party instead of not voting at all.

When there's a 3rd party candidate I will. I don't literally mean I didn't fill out my ballot in 2010. Sorry for being so strident that I was really unclear. I did fill out a ballot when it was all said and done. I voted on measures and bonds, etc. Direct referendums. And then I went down the line and either wrote in someone or voted 3rd party in every election between an R and a D.

bandit0013 wrote:

Warren Buffett: "I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for re-election."

Buffett '12

Why is 3% the magic number? Why not 2% or 0% or 5%. Why not go into surplus.

There is no magic number, except keeping inflation low and employment high.

Warren Buffet has also said this.

The United States is not going to have a debt crisis as long as we keep issuing our debts in our own currency. The only thing we have to worry about is the printing press and inflation.”

Holy crap that sounds like me.

There is no magic number, except keeping inflation low and employment high.

The magic number is zero. If you go past zero to try to keep employment high, the economy gets dependent on that deficit spending, and you can't stop. Eventually, the system gets so warped that it self-destructs.

Keynesian counter-cyclical spending only works if the government is saving during the good years, and maybe it doesn't work at all, over the long term. Recessions and even depressions are important; they're a critical component to making capitalism work. You have to have the bad to get the good; the old ways of doing things have to go away to allow new ones to form.

DanB wrote:
dejanzie wrote:
bandit0013 wrote:
Parallax Abstraction wrote:
bandit0013 wrote:

Warren Buffett: "I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for re-election."

Buffett '12

The man's a genius.

You'd probably have to put in a special provision for a higher deficit if war is actually formally declared, but even so yeah, genius.

Sounds good, feels good, but is bollocks. They would just cut whatever costs the most/is least popular without any consideration of the program's worth. Cutting expenses in a hurry because your job is on the line will NOT yield the best results.

It's a smart assed quip about making politicians responsible for their actions, it's not supposed to be an actual plan of action.

Just because it was smart assed doesn't mean the idea doesn't have merit. Partisan voting, gerrymandering, etc have made it so many representatives have little chance of being voted out. It's also prohibitively expensive to run for office and the rules and regulations are structured to make it difficult for any party to gain ground. There always examples like Charlie Rangle, William Jefferson, etc who are sleezebags but never lose elections. We need to find better ways of holding politicians accountable because the voters aren't doing their job. Even the founding father's believed in this as they certainly didn't just let anyone vote, not just on racial grounds either. Sensationalist partisan media combined with voter ignorance and the lack of accountability that brings is going to kill this country.

I'd love to do away with the winner takes all voting and go to a system where the house is proportioned by voting % so that other parties had a shot at seats on the national stage and people wouldn't feel like they were "wasting their votes". When the founders set things up they clearly didn't envision having 300+ million citizens and a land mass the size that america has become.

goman wrote:

Malor, post your thoughts on their websites. I know they will be happy to engage you.

If you do, please link it and I'll make some popcorn.

Malor wrote:
There is no magic number, except keeping inflation low and employment high.

The magic number is zero. If you go past zero to try to keep employment high, the economy gets dependent on that deficit spending, and you can't stop. Eventually, the system gets so warped that it self-destructs.

Keynesian counter-cyclical spending only works if the government is saving during the good years, and maybe it doesn't work at all, over the long term. Recessions and even depressions are important; they're a critical component to making capitalism work. You have to have the bad to get the good; the old ways of doing things have to go away to allow new ones to form.

You are basically saying unemployment is more preferable than inflation.

In reality, deficit spending does not cause inflation so I don't know how your 0% can be the magic number.

The magic numbers are low inflation and high employment. Get those two correct and the deficit/surplus number will be what it will be.

Depressions and recessions are a way to rebalance but of course there is a cost to them. Unemployment being one of the biggest.

If you want 0% or 3% to be the magic number you will get depressions by that virtue. In other words, it is a self professing prophecy.

Inflation is caused by inefficiencies in the economy. Not just the public sector finances. Private sector debt also causes inflation. In fact it is the major force.

In reality, deficit spending does not cause inflation so I don't know how your 0% can be the magic number.

It does if you print money to do it.

When deficit spending is funded by borrowing, as opposed to money printing, all it's doing is kicking the can down the road. You're pulling forward demand from later years. In exchange for more growth today, you're accepting less growth in the future, because you'll have to suck wealth out of the economy to repay your creditors, when you could be using it to grow with instead.

If you're not using your deficit spending in ways that will repay the loans, it's a net negative. Do enough of it, for long enough, and you have to start printing money to pay off your creditors, and that's when the inflation gets going.

It also screws the hell out your supply and demand mechanisms; the economy grows to support the demand from the government. When that demand is inherently temporary, as most deficit spending is, that means that part of the economy will usually need to die. If you didn't invest in wealth-producing activities, there may be no place for those workers to go.

Inflation is caused by inefficiencies in the economy.

The root cause of inflation is supply and demand, when too much money is being made available, for whatever reason. That is it. That is what causes inflation. There's a lot of additional complexity that can hide or exacerbate its effects, many confounding variables that can disguise this fundamental truth for a while, but over time, the truth will out.

Debt can cause inflation, but it's temporary, because debt is eventually liquidated. It causes an inflationary impulse during issuance, and a deflationary one during repayment.

This is precisely what happened in the housing bubble, in fact. Huge amounts of debt were issued, driving house prices into the stratosphere. This didn't show up as inflation because of the way the government cooks the books. (see: "Owner's equivalent rent", a fancy way to ignore house price inflation.)

Now that that debt is being liquidated, house prices are going down, and the government is desperately trying to prevent that, causing even more damage than the original bubble caused in so doing.

Malor - We just have different paradigms of thinking of government debt and deficits.

Here is an overview of the different paradigms.

There are three general paradigms concerning government deficits and the national debt:

Deficit Hawk, Deficit Dove, and Functional Finance.

First, let’s keep in mind some basic definitions.
The government budget is the relation between government spending, G, and tax revenues, T, in one year.
If G = T then this is a balanced budget.
If G > T, there is a budget deficit.
If G < T, there is a budget surplus.

The National Debt is the accumulation of all past deficits (and surpluses).

Deficit Hawks take the view that budget deficits and the national debt are almost always
and everywhere negative. The deficit hawk argument usually includes some combination
of the following five points:
1. Deficits cause inflation – Because most Hawks accept the basic neoclassical theory,
they view the economy as tending to full employment. Since budget deficits increase
aggregate demand, they will tend to set off inflationary pressures in a full
employment—or near full employment—economy.
2. Deficits cause high interest rates – Accepting the neoclassical view of savings and
investment and interest rate determination, Hawks view government spending that is
financed by borrowing (i.e., deficits), to be coming out of a fixed ‘pool’ of savings.
Government is thus competing with the private sector for savings, bidding up interest
rates.
3. Deficits ‘crowd out’ private spending – Related to the previous point, if
government and the private sector are competing for a fixed pool of savings to
finance their spending, government spending financed by borrowing decreases the
resources leftover for financing private expenditure. Thus any increase in deficit
spending “crowds out” (is exactly offset by) decreases in private spending.
4. The national debt is a burden on future generations. They have to pay the debt.
5. Government deficits and debt are generally immoral. Hawks often make an
analogy between government deficits and debt and household or business debt.

2 Deficit doves take the view that deficits can be okay under certain circumstances—it
depends on the economic context. But Doves also devote a lot of attention to issues of
defining and measuring deficits and the debt, often arguing that they are not as big as
they might appear.
1. Are deficits being measured in constant or current dollars? Doves argue that it is
wrong to compare deficits between years in current dollars, because the value of the
dollar has changed. One way of correcting for this is to look at deficit/GDP ratios
(and debt/GDP ratios). These ratios are also important for Doves, because they argue
that a larger GDP means we can afford a bigger deficit or debt.
2. The Federal Government doesn’t keep a capital account. So when there is a large
capital expenditure it looks like a lot has been paid out in this period and the budget
doesn’t reflect the services that will last for years.
3. The Government owns assets. The Government may have a debt, but it also owns
asset land, buildings, stocks, gold, water sewage treatment plants, hospitals, schools,
etc.
4. State and Local Budgets often not considered. Often the Federal budget is
discussed, even though historically Federal deficits have been offset by surpluses at
the State and local levels.
5. Government agencies own government debt. It is argued that in this case, we
really do “owe it to ourselves.”
6. We should examine the “full employment deficit” Doves argue that much of the
deficit is due to unemployment. When there is unemployment, income is lower, so
tax revenues are lower, and government spending on various assistance for the
unemployed is higher.
7. Balance budget over the business cycle, rather than in one year. Doves argue that
one year is an arbitrary amount of time. Instead, it makes more sense to run deficits
during recessions and surpluses during booms, so that the budget is balanced over the
cycle and debt is not growing.
8. Debt is not a burden on future because we are also creating assets for the future.
Doves also argue that the debt will be paid to those in the future as well.
9. Doves argue that if deficits and high interest rates are correlated, the causality
goes the opposite way—from high interest rates to big deficits. When interest
rates are high, interest payments are high, pushing deficits higher.
10. To the extent the analogy with households and firms is applicable, Doves think it
support their view. Well-managed, responsible debt is not a bad thing for
households and firms—same with government.

3 The Functional Finance view says both Hawks and the Doves are wrong.
1. In a Modern Money system, the purpose of taxation is to create a demand for—
and give a value to—unbacked currency.
2. The Federal Government is the monopoly issuer of the currency. The
government doesn’t need the public’s money; the government needs the public to
need its money to give it value.
3. The purpose of bond sales is not to finance spending, but to drain excess reserves
created by deficit spending. This is necessary to maintain positive short term
interest rates.
4. In the functional finance view, the relation of G and T doesn’t matter – all that
matters are the effects of any policy.
5. “Printing money” can have no effect on the economy independently of the six
different fiscal operations (taxing, spending, giving, taking, lending, and
borrowing). To consider the effects of printing money and these six would be to
double count.
6. The sound money, sound finance view of the Hawks treats the modern money
system as if it were a gold standard.
7. Doves are wrong because by saying that the deficit is not really as big as it seems,
or that we can balance the budget over the cycle, they are giving in to the Hawk
view that it matters whether we deficit spend, how big the deficit or debt is, and
whether we balance or not!
8. The deficit is just accounting information – it tells us how much the public wants
to ‘net save’. In a closed economy, (G – T) = (S – I), that is, the public deficit equals
the private surplus.
9. The national debt is just accounting info. It is the record of government’s draining
of excess reserves to maintain short term interest rates. It might be better called the
“IRMA” (interest rate maintenance account) than the national debt.
10. The national debt is not a burden on the future, because there can be no
financial burden on a money monopolist.

http://cas.umkc.edu/econ/economics/f... - The PDF here has better formatting.

Most Austrians and Chicago School Republicans are Deficit Hawks. See Ron Paul for example.
Most Democrats are Deficit Doves. See Paul Krugman for example.

I am obviously a Functional Finance person. I think the evidence points here. Not only in accounting principles that i have stated previously but also in logic and empiricism.

Macro econ both scares and interests me.

Senate Minority Leader Mitch McConnell has solved the debt ceiling crisis. By running away from it.

NPR wrote:

Under McConnell's plan, a "resolution of disapproval" to boost the debt-limit by $2.5 trillion would be introduced in both chambers with a majority of lawmakers voting for the resolution. In other words, they would have the chance to vote against any increase.

Obama would then veto the resolution, a veto Congress would be unable to override with the required two-thirds majority in both the House and Senate. That would allow the U.S. to legally go beyond its $14.3 trillion debt ceiling and avoid a widely feared, first-ever general default by the U.S. government on its obligations.

So... they're going to raise the debt ceiling by voting NO on it, forcing Obama to veto their NO vote, thereby making Obama responsible for raising the debt ceiling. This is some pre-school sh*t goin on right here.

It is Congress' central duty to control the money of the United States. Obama should sign it.

With respect, once Congress passes a bill, it's the President's prerogative to choose whether to sign it or send it back. There's no class of bill that the President should "just sign".

Robear wrote:

With respect, once Congress passes a bill, it's the President's prerogative to choose whether to sign it or send it back. There's no class of bill that the President should "just sign".

Some of us prefer the executive whiggish, SIRRAH.

That is some messed up logic there... just because Obama vetoes a bill to not increase the limit does not mean the limit is increased.

Wow. It's the Congressional equivalent of "I'M NOT TOUCHING YOU ON OPPOSITE DAY!"

Robear wrote:

With respect, once Congress passes a bill, it's the President's prerogative to choose whether to sign it or send it back. There's no class of bill that the President should "just sign".

I think what Malor is saying is that Obama should toss the hot potato right back into Congress' lap by accepting their refusal to raise the debt ceiling rather than vetoing and raising the debt ceiling himself (which I'm still not sure how that is accomplished, but hey, I'm not Senate Minority Leader). I'm inclined to agree. If Congress is going to pull this infantile nonsense, they should be called on it.

Yeah, but if there's one thing we know about Obama by now, it's that he has no spine. I expect him to veto like a good little boy.

Seth wrote:
Malor wrote:

Yeah, but if there's one thing we know about Obama by now, it's that he has no spine. I expect him to veto like a good little boy.

I think this is how the Democrats might view him, but after the rest of the BS he's pulled (I'm thinking specifically about his failure to end the tax breaks on the wealthiest Americans), I don't think he's spinless; I think this is exactly what he wants. Just because he ran under the Democratic ticket doesn't make him a Democrat.

Well it's the neo-liberal capitalist choice. Both the republican and democratic parties are economically neo-liberal capitalist parties. Just because he ran under the Democratic ticket doesn't make him anti-capitalist.

Malor wrote:

Yeah, but if there's one thing we know about Obama by now, it's that he has no spine. I expect him to veto like a good little boy.

I think this is how the Democrats might view him, but after the rest of the BS he's pulled (I'm thinking specifically about his failure to end the tax breaks on the wealthiest Americans), I don't think he's spineless; I think this is exactly what he wants. Just because he ran under the Democratic ticket doesn't make him a Democrat.