Republican Economist: “It’s Not About The Debt Limit”

On ABC’s This Week with Christiane Amanpour, an “Economic Outlook” roundtable segment featured a discussion on, of course, the debt ceiling.

One of the panelists was a local gal, Sheila Bair.  Ms. Bair is from Independence, Kansas, about a rock’s throw from Joplin.  (Okay, okay. About 75 miles.)  In any case, Sheila Bair is the current—soon to be former—Chairman of the FDIC, put there by George Bush in 2006.  A couple of years ago, Forbes named her the second most powerful woman in the Solar System, or something like that.

You get the idea.  She’s a powerful chick.

She’s so powerful that she could hurl hormonal insults at a couple of the other panelists, namely the Nobel-winning and liberal Paul Krugman, my favorite economist, and the non-Nobel winning and conservative Doug Holtz-Eakin, John McCain’s favorite economist.

The boys were arguing about what to do regarding the Republican threat to blow up the economy over the debt ceiling:

AMANPOUR:  How is President Obama to respond to the call for “trillions” not “billions” of dollars in cuts?

KRUGMAN: If he gives in on this he’s setting himself up for repeated blackmail. He’s basically saying that, “I care about the economy more than the Republicans do, and therefore every time they threaten to blow it up, even though it will hurt all of us, I’m gonna give in.”  So, I think Obama’s got very, very little wiggle room, even though it’s a terrible thing.

AMANPOUR: Most of the economists are saying the Republicans are playing with fire. That hitting the debt limit, exceeding it, is not like shutting down the government;  it could cause a real cascading economic crisis.

HOLTZ-EAKIN: I don’t think there’s any great desire to hit the debt limit. The key is to recognize the limit is a symptom and that the fundamental problem is the underlying condition of the U.S. budget. What you’re seeing now are calls for, both from Speaker Boehner and from the Senate Minority Leader, Mitch McConnell, for real solutions to the real problems.  It’s not about the debt limit. It’s making sure that in the short-term we get cuts, in the medium term we have an enforceable path, and that you take care of something in the long-term. Entitlements have to be on the table.

Get that? “It’s not about the debt limit.”  It’s about cutting the size of government, the economy be damned.

Enter Sheila Bair.  She told Amanpour this:

I do think that both sides have a point. Last November I published an op-ed in The Washington Post where I said if we didn’t get these deficits under control I thought it would precipitate the next financial crisis.  I also agree with the administration, though, that it is irresponsible to even entertain an idea of a so-called “technical” default on the public debt. 

So, I think both sides have a point and I hope they come together and,  gentlemen, if you’ll excuse me,  I think there’ s maybe a little too much testosterone in this debate.  It’s too much about winning and losing and not enough “both sides are right, let’s come together and have a solution.”

Never mind the sexist statement about testosterone.*  What about the idea that “both sides are right,” when one side is clearly prepared—judging by its rhetoric—to go to the brink and beyond and risk financial disaster? 

How can “both sides are right” be anyone’s position in this debate?  Clearly, if Democrats were in charge, there would be no flirting with not raising the debt ceiling and thus no flirting with economic calamity.  The only reason there’s a possibility of defaulting on our debt—past obligations approved by Democrats and Republicans—is because Republicans are holding hostage the full faith and credit of the United States to further their ideological goals.  There’s no “both sides” to it.

Near the end of the discussion, Bair, after explaining what would be the dire consequences of defaulting on Treasury debt,  said this:

I’m sorry, but it truly frightens me. I don’t think we should be talking about it.

To which Krugman replied that he, too, was “terrified by it.”  Then he said:

But I’m also terrified by a blackmail political system.

Testosterone or not, why isn’t everyone?

________________________________

* It is inconceivable that one of the gentlemen in the segment would have said to Ms. Bair:

Now, honey, your estrogen is getting in the way of understanding what’s going on here.

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12 Comments

  1. Good post, Duane. 😆

    Like

  2. Terrance H.

     /  May 15, 2011

    To “further ideological goals,” you say. What about the insistence of the Democrats? They don’t want to touch Medicare, Medicaid, Social Security (even though Social Security isn’t adding to our national debt – currently), or any other entitlement program. Hell, they wouldn’t even defund Planned Parenthood (not that Planned Parenthood is all that responsible for our debt).

    Both sides are playing with fire to meet an ideological end. To pick on one side of the isle is disingenuous, I feel.

    Like

    • Terrance,

      I disagree that the Democrats “don’t want to touch” entitlements. President Obama and many congressional Democrats have said very clearly they are willing to put everything on the table. In fact, Dick Durbin, a relatively liberal Democrat in the Senate, signed onto the Simpson-Bowles deficit reduction plan.

      Democrats, as Krugman suggested, don’t want to negotiate important decisions about entitlements at the point of a gun, that’s all. Everyone knows that Medicare has to be fixed in order to stay viable. But those discussions can’t take place in an atmosphere of “do this or else we will blow up the economy.” I don’t suppose you would much respect someone who held one of your loved ones hostage—with a gun pointed at him or her—in order to get you to commit to something in the future, no matter how legitimate the hostage-taker’s complaints were. I know I wouldn’t.

      There’s no way you can say that the Democrats are holding the raising of the debt ceiling hostage in exchange for anything. They want a clean bill and then they say they will negotiate over the 2012 budget, when Republicans can throw all the crap against the wall they want to. What’s wrong with that? That doesn’t seem to me to have anything to do with ideology.

      In any case, even though I believe the Republicans are bluffing, the Democrats will in the end give up a lot in this matter to avoid a disaster. They are the responsible party.

      Duane

      Like

      • Terrance H.

         /  May 17, 2011

        Duane,

        I appreciate that, but those are just words. I’ve seen no serious effort on behalf of Democrats to tackle this issues.

        You mention the Simpson-Bowles plan. How inept that is. It doesn’t almost nothing to address healthcare expenditures except to introduce some obscure cap to “contain growth in total federal health spending to GDP+1% after 2020 by establishing a process to regularly evaluate cost growth, and take additional steps as needed if projected savings do not materialize.” As one pundit noted, it does nothing but “punt the problem.”

        Democrats and Republicans both, in my view, are above all else interested in furthering their ideologies. The Republicans refuse to seriously negotiate the issues with the Democrats, and Democrats refuse to make any meaningful cuts or changes to programs that absolutely NEED rethinking.

        Both sides are playing with fire, in my view.. Yet, you seem to pick only one side to chastise. Why? Republicans have suggested something extreme, sure, but Democrats have suggested nothing. Idle promises, I think, Duane. Idle promises.

        You say President Obama claims everything is on the table. Good. We’ll see. Because, after all, Duane: “Don’t tell me words don’t matter.”

        Peace,

        Terrance

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        • Terrance,

          Words do matter. Just this morning I saw a clip of Nancy Pelosi putting “everything,” including, she said, Medicare, on the table. Now, I would never have in a million years thought I would hear a liberal Democrat from San Fran say that. I wouldn’t write that off as “just words,” if I were you. Those words represent a profound change in the position of the Democratic Party.

          The reason I blame Republicans is because it is they who are holding the hostage, not the Democrats. I find it amazing that you are equally blaming the guy holding the gun at the head of the hostage and the guy who is trying to get that guy to put the gun down. Man.

          We can have the fight over the budget during this summer’s 2012 budget talks. Or, better yet, throughout next year’s election. Democrats will have to make proposals to address the deficit and debt or the public will throw them out. It’s that simple. We don’t have to have this debate while Republicans are threatening to ruin our economy. And remember, it is the Republicans—not Democrats—who are threatening to ruin our economy.

          Duane

          Like

  3. ansonburlingame

     /  May 16, 2011

    To all,

    If the debt limit is not raised many claim the U.S. will default on its debt obligations. I simply do not understand why that is the case.

    We collect over $2 Trillion in taxes each year. Is that not enough to keep paying the “mortgage”?

    The issue should be framed, realistically, around what “we must give up” with no further ability to borrow money. Paying the mortgage should not be on the table for such cuts. But I can certainly think of a lot of “second cars and TVs” that might have to go.

    Is this left wing scare tactics, protecting their cherished entitlements? Can someone please explain?

    Anson

    Like

    • Actually, Anson, no, the tax revenue is not enough for one simple reason – out of control medical costs. You should understand that better than I, what with your recent experience. I had an epiphany on this yesterday subsequent to one of Duane’s posts. I think my comment there applies here. Here’s an edited version:

      Medicare, Medicaid and Social Security are the fulfillment of the nation’s collective commitment to, well, social security. We can argue about how to fund them as the demographics and the economy change, and we should, but there should be no argument about the basic commitment. People have a right to rely on them as a solid base during retirement because they have paid into them for all their lives and because they were promised.

      The only reason we are talking about collapse of the entitlement system now is the intransigence of the GOP to discuss raising the debt ceiling without Democrats yielding spending cuts in the “trillion dollar” range, while at the same time placing the medical spending off limits until after the election.

      The medical funding IS the problem. All other spending programs pale in comparison, and the budget problem can not be fixed without fixing Medical. If the GOP had the brass to tackle THAT problem, i.e., embrace reform that would actually reduce revenues by the medical industrial complex (which is the only way to reduce costs), then I might actually approve of their brinksmanship. But their insistence on doing one without the other is outrageous. It is nonsensical to talk about giving up second cars or TV’s or even the Defense budget when they are a mere pimple compared to entitlement reform.

      Now tell me what part of this I have wrong.

      Jim

      Like

  4. ansonburlingame

     /  May 16, 2011

    Jim,

    Medicare costs somewhere around $500 Billion per year. Interest on the debt is around $300 Billion. That keeps paying the mortgage and medical costs and leaves $1.2 Trillion ($1200 Billion) for second cars, TV, defense, etc.

    So you still have not answered the basic question of why eveyone keeps talking about default on the debt if we no longer borrow any money to keep the federal government afloat.

    I KNOW how hard it would be to live within our means. But it still seems evident to me that we could do so without defaulting on debt obligations.

    So it still seems to me to be left wing scare tactics to say we will default on our debt if we do not raise the debt ceiling.

    Anson

    Like

    • Anson,

      I don’t have time right now to retrieve the information for you, but you can find a lot of right-wingers who understand the repercussions of Republican brinkmanship on this issue. Heck, just watch the Chairman of the FDIC on This Week, the subject of my post. Listen to her. And then listen to Wall Street. And the Chamber of Commerce. It’s not a left-wing scare tactic. It’s very real. And it’s very scary. It’s one of the most un-conservative things I can think of doing. It’s totally irresponsible.

      Duane

      Like

  5. Anson,

    Just because you might stop borrowing through Treasuries doesn’t mean you don’t have to keep paying interest on the outstanding $15 Trillion debt, and if the U.S. fails to meet ANY payment at any time, China and the rest of the world will present their treasuries for payment. It’s like a run on the bank – just like Jimmy Stewart’s S&L in “It’s a Wonderful Life”. That’s the default they are talking about of course.

    If Congress raises the debt ceiling, the problem is delayed. The problem could well fade when or if the economy recovers. BUT, Mr. Boehner and friends in the House have threatened to REFUSE to raise the ceiling unless the Administration and House Democrats agree to spending cuts of a Trillion dollars or more. So, where to cut?

    OK. The Wiki page for the budget is here:
    http://en.wikipedia.org/wiki/United_States_federal_budget#Mandatory_spending_and_entitlements
    (The 2010 budget is the latest one adopted.)

    Total 2010 budget: $3,456B

    Medicare & Medicaid: $793B
    Interest: $197B
    DOD: $689B
    “Other Mandatory”: $416B
    Discretionary: $660B

    “Other Mandatory” seems to include basically running all the government departments other than DOD, like NASA, EPA, NDI, CIA, Coast Guard, Treasury, BATF, INS, FBI, Agriculture, Interior, State, DHS, etc.

    The discretionary budget is broken down at this link:

    http://costofwar.com/media/uploads/security_spending_primer/discretionary_budget_m_vs_nm.pdf

    Maybe you can see where to cut, but I am having trouble with it. I would offer up the NDI and DHS, but that’s peanuts compared to what is needed. If you go to the first link on the U.S. Federal Budget and page down about 80% of the way, you will see a green chart, United States GDP and Government Spending. It shows the “iceberg” and it is clearly out of control and accelerating.

    I hope you understand that we can NOT stop borrowing through the sale of Treasuries, without cutting spending BIG TIME. Medical entitlements, the single biggest item, is 22% of the whole budget. I really don’t see how to deal with the problem without dealing with that. The green chart:

    The public has bought into two enduring but mutually-conflicting memes, lock, stock and barrel:

    A. Government spending is out of control and must be reined in.
    B. Do NOT touch my entitlements.

    Jim

    Like

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