Playing Chicken with the Debt Ceiling?
As the new Congress convenes, one political battle to watch will be over raising the national debt ceiling, or the legal limit to U.S. borrowing. Right now, the debt ceiling is at $14.3 trillion. According to The Hill, Washington is expected to hit that figure sometime in February, which means the new Congress will have to take a vote on raising it.
That new Congress will host 85 incoming GOP freshman, nearly half of whom were backed by tea party groups, and many of whom "slammed Democrats they defeated for previous votes to increase the debt limit." The Christian Science Monitor predicted back in November that raising the debt ceiling could be a "poison" vote for those incoming GOPers--the "toughest vote for a bumper freshman class."
Just yesterday, the White House's top economic adviser, Austan Goolsbee, advised the GOP to not play chicken with the debt ceiling vote. He said that voting to not raise the debt limit would be "catastrophic" for the country. "If we hit the debt ceiling, that's essentially defaulting on our obligations...the impact on our economy would be catastrophic. That would be a worse financial and economic crisis than anything we say in 2008."
Though some of our own members here take a different view, Goolsbee said on ABC's This Week that,
This is not a game...I don't see why anybody's talking about playing chicken with the debt ceiling...If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity.
As John Boehner prepares to lead the House, austerity will apparently be one of his themes. How will that pan out with respect to raising the debt ceiling? In the past, he's taken a pragmatic position, saying, “Whether we like it or not, the federal government has obligations, and we have obligations on our part.”
Meanwhile, Sen. Jim DeMint, a leader of sorts for tea partiers on the Hill, said just today that he wants a "showdown" with the White House and Democrats over raising the debt ceiling. And those GOP newbies in the House, eager to spread their wings as bona fide spending & deficit hawks, just may be feeling the same way.
But will such a fiscally responsible--or seemingly fiscally responsible--move be worth the consequences, especially if those consequences are as dire as Goolsbee says they will be?
For further reading, and another perspective, check out this interview with former Reagan adviser Bruce Bartlett, who says that we don't even need a debt ceiling: "There's no need to have a debt ceiling and there's no evidence that the debt limit has limited spending. It serves no purpose except to give people free votes to look as if they're being fiscally responsible."
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May '10
Re: Playing Chicken with the Debt Ceiling?
I say, don't raise the debt ceiling this time, and let the government default.
- People always say that default is "unthinkable" or would be "catastrophic" or would result in the "end of the world." Isn't that the same language they used to justify the bailouts of failing firms? Default of course will be painful in the short-term, but is better long-term if it:
- forces the government to spend less
- restructures our existing debt to make it more manageable
- prevents or avoids a bigger uncontrollable default later
- What "obligations" does the federal government have that justify putting its citizens present and future in debt slavery to today's needs? Slash the discretionary and benefits spending now. It's going to have to be slashed later, and the more we postpone it, the worse the situation will be.
- It's not "insanity" to default. Huge companies and countries have defaulted and survived. The only insane thing is continuing the same course and expecting a different result. In other words, expecting the debt to get any better without drastic changes is crazy.
Edited on Jan 3, 2011 at 8:46amRe: Playing Chicken with the Debt Ceiling?
Michele Bachmann has also weighed in. From the Huffington Post:
Aren't those two actions one and the same? If so, shouldn't Bachmann, DeMint, and the rest, be crystal clear about that to the American people? There's no use evading the issue unless, of course, it isn't an issue at all.
Jun '10
Re: Playing Chicken with the Debt Ceiling?
The Republicans in the House, if they are serious about cutting spending NOW, would have tremendous leverage if they voted to raise the debt ceiling in small increments on presentation of the proposed spending to be allowed instead of an increase from 14.3T to 16T or some other round number that kicks the can down the road a couple of years. In effect saying: "Show us how much you want to borrow and for what. Take out a few billion for this, this and this and we will give you an increase of 300B, enough to cover the rest for 90 days. See you in a couple of months, sharpen your pencils" Isn't that how adults would deal with their college kid who wanted an increased credit line on his Mastercard?
Edited on Jan 3, 2011 at 11:18amJan '11
Re: Playing Chicken with the Debt Ceiling?
My understanding of economics is a little bit more than basic at best. However, I'm concerned that we are entering the "exponential phase" of debt expansion. We are all familiar with the legend of the chessboard and the grains of rice - whereby a king offered to pay doubling amounts of grains of rice for each square. Of course, by the end of the story, to fulfill the obligation the king would have to pay more rice than has ever been harvested throughout human history. We have maintained our commitments "for many squares" so far, but are we now facing an impossible set of obligations, no matter how much spending is cut, or revenue found?
Oct '10
Re: Playing Chicken with the Debt Ceiling?
What is the risk/benefit analysis in relation to not raising the debt ceiling, both in the economic sense and the political sense? There needs to be some serious public debate over this issue. I for one am opposed to raising the debt limit in principal but am in accord with most here who have raised concerns with the risk of default and the devaluation of the already devalued dollar. This is truley a scylla and charybdis scenario!
Oct '10
Re: Playing Chicken with the Debt Ceiling?
CHICKEN??? Isn't that a game in which TWO parties test each others resolve by going at a disastrous outcome if one or the other doesn't give in? The Congressional tradition is that those seeking caution and mature action always show themselves to be chicken. Fear of the electoral backlash has made it so. Hopefully, the Tea Party has shifted the taxpayer fear factor sufficiently that the chickens will at last come to roost on the side of responsible leadership.
DON'T GIVE IN... IT ONLY ENCOURAGES THE B.....DS.
Aug '10
Re: Playing Chicken with the Debt Ceiling?
The interesting portion will be watching the gyrations of the Republicans as they slip into the democrat uniform (miniskirt,fishnet stockings and tube top) long enough to screw the people and then back into the Brooks Bros threads in time for the photo op.
Nov '10
Re: Playing Chicken with the Debt Ceiling?
Bruce Bartlett is exactly right. The "Debt Ceiling" is a meaningless smokescreen that has no affect on government spending one way or the other. That means Austan Goolsbee is either a certified idiot or lying through his teeth (or both). And Goolsbee's reference to the "full faith" of the United States is a sick joke. The Federal Government has completely broken faith with the American public.
The problem is, every single aspect of the Federal Government has now entered the "exponential phase." Spending, taxation, regulation and, especially, pension obligations are completely out of control. The government now exists only to grow and feed itself.
And Obamacare is the capstone in the arch of triumph of the progressive agenda. The machinery of tyranny is now in place and fully functioning. We are all well and truly on the Road to Serfdom. Nothing will stop it except outright Revolution.
I am taking the extreme position on this because I sincerely believe things are that bad. Even if the House and Senate were completely dominated by hardcore Tea Partiers, they would be unable to do anything meaningful.
Edited on Jan 3, 2011 at 12:18pmMay '10
Re: Playing Chicken with the Debt Ceiling?
I kind of like Pilgrim's idea- but with a debt ceiling limit assessment and appropriation-specific increase required with each Bill that involves spending, as a means of enforcing pay-go. I'd like to see them fight about the costs and forced to take it seriously.
Some of that can be mitigated by juggling accounts, but not all.
Jan '11
Re: Playing Chicken with the Debt Ceiling?
Lady Kurobawa, things are that bad, but never that bad. A friend of mine explained the imminent housing collapse to me in 2007, he saw it coming. I asked him how it would end - should we all get gold and guns and live in caves? His response was interesting and prescient - ie that those who caused the problem will always do well, and will happily trot off to start the next party, but meanwhile, you'll be cold in your cave with your gold and guns. Wise words! Cheers.
May '10
Re: Playing Chicken with the Debt Ceiling?
Contrary to Bruce Bartlett's assertion, I would say the debt ceiling does have an effect, though perhaps only a small one. It brings the debt into the public consciousness on a semi-regular basis. Even for that I'd be willing to keep it.
As I said before, however, it's insane to continue to do the same thing and expect any different result. The insane thing is to continue to live beyond your means, especially with some kind of wacky theory that you can gain any kind of healthy growth in the economy by doing so.
As for exponential, interest on debt is always exponential. The thing about an exponential curve, though, is you don't notice the growth at first-- it's so small. By the time you notice it and feel the pain, it's already snowballing and has quite a bit of momentum. Now, to reverse the deficit, you have to not only live within your means, you have to live well below your means just to cover the interest payment and avoid adding any principal.
Anyone think that is ever going to happen without some kind of catastrophic crisis or politically impossibly drastic action?
May '10
Re: Playing Chicken with the Debt Ceiling?
Excerpts from an excellent article from Newsweek by Jacques Attali, entitled "The West and the Tyranny of Public Debt":
Who knew Newsweek could carry an article like that?
Edited on Jan 3, 2011 at 2:39pmNov '10
Re: Playing Chicken with the Debt Ceiling?
What is the point of even having a debt ceiling if you can just raise it whenever you want without penalty?