Do investors really not get it regarding US paying it’s debt?
A question has been nagging me. First, does the rest of the world not get that the republicans are playing a game with the US’ bank account? Does anyone really believe that the US won’t pay as in the renter just skipped out the back door? Or maybe I should say; as in the capital venture company just loaded up the latest purchase with debt, pocketed that money and filed bankruptcy?
Really, the US won’t pay it’s bills? Oh no, the nation is going Detroit?
It’s a game folks. Don’t play it. If you don’t play it then the republicans have no threat because the financial world is not really threatened.
Well, the regular citizenry thinks we are “revenue” constrained at the Federal level. So do most Republicans, and Democrat clowns in congress. Even many economists think we are. The debt limit is an old relic of the gold standard, and now is only a self inflicted political limitation, and technically should be done away with. Obama could easily bypass it with Platinum coin seniorage, but he is too chicken to do that.
Imagine if the citizenry realized that the national debt is our savings representing our non-governmental wealth…..the citenzenry cannot accumulate wealth without it, unless they want to accumulate personal debts, which there is a limit on for most folks.
Here are all the options Obama has, and there are several that do not require any grand austerity bargain. One interesting option is issuing Consuls – read the link for more:
http://neweconomicperspectives.org/2013/09/stop-kabuki-great-betrayal.html#more-6436
I agree with you Matt but, my issue is the “threat”. Under the current circumstances, the US is not a risk regarding paying it’s bills. The debt ceiling thingy is nothing but an empty hand bluff in reality. The only thing that makes the bluff work is if the financial world goes along with it or actually believes that the US is currently at a contingent point in it’s life such that the US will not pay it’s bills.
If the financial world wants this to stop so as not to have the financial world to have hiccups regularly then the financial world needs to stop going along with the bluff.
Which begs the question: Why is the financial world going along with the bluff?
Most Americans, I’m sure, believe that the US needs to run just like they run their household. Bills need to be paid, or there’s going to be trouble, I doubt it goes much farther than that.
Where’s the evidence that our leadership understands any of this, either? Remember when Obama said that Washington would have to tighten its belt because households were doing it, too? ”
Daniel – the financial world is every bit as misinformed, and I see this first hand every day. They really believe the Federal government is equal to a household.
“Why is the financial world going along with the bluff?”
While not entirely disagreeing with Matt’s point about the financial world believing their own bullshit let me put forth an other answer (or two).
The 1% have a long standing agenda that might best be explained as “We oppose Social Democracy”. And if you had to ask for a one word answer to “Why?” you would be safe in answering “Taxes”. And if you let them add three more “marginal rates/progressive taxation”. Now tactically the major problem of Social Democracy for the 1% is that the programs it supports are by and large popular and serve a large base and so on a straight policy level are likely to be approved by simple small-d democratic majorities. So the pushback has to be something different than “well we rich people don’t like paying taxes” which requires some other mechanism which can ‘explain’ why ‘you can’t have nice things’. And a handy answer is that debt and debt service are or inevitably will crowd out everything else. Combine that crowding out argument with some economic mumbo-jumbo why progressive taxation is somehow a net loser on debt reduction/uncrowding and you have the perfect excuse to play off the three major categories of Federal spending: military and police powers, domestic discretionary, and (largely) retirement security.
And the reason the latter is the main target is that by and large the two major components of it are not in any real sense needed by the 1%. Although it is the rare one of them that doesn’t actually TAKE his Social Security and at least ACCEPT Medicare Part A as a backup, in point of fact they don’t need it. And while Social Security ‘crisis’ is overblown, there is a gap between scheduled benefits and payable benefits projected in the next twenty to thirty years, a gap that the 1% fears will be backfilled by – wait for it – progressive taxation/increases in top rates.
A very great deal of the economic and social history of the 1% past and present can be summed up in the term “tax avoidance”. Scaring as much of the 99% about debt and debt service as possible to get them to not vote to increase spending on non 1% related policy goals and/or to cut spending on programs benefiting the 99% (e.g. Social Security) is just another tool in the tax avoidance tool box.
Because it seems that many people, especially financially successful people are primarily motivated by maximizing their own economic self-interests. Something Uncle Miltie fully believed and proselytized but never seemed to work out the implications. As in “let’s screw the 99% to maximize our (the 1%’s) own interest”.
Scaremongering over debt is an excellent tool to battle back small d democracy, particularly in explicitly Social Democratic forms. Which in turn is a risk to marginal rates. Pretty simple really.
We should stop talking about “the national debt.” There is no such thing as “the” national debt. There are only individual debts, and there is zero doubt that they will each be paid off no later than when they come due. Always have, always will. There simply is no crisis. We now know that the 90% “cliff” (Reinhart and Rogoff) was nonsense, so there is not even a long-term concern if we can have any decent period of a healthy economy again.