Friday, July 8, 2011

The Debt Deal

Things are happening, apparently, as I'm sure you all have heard.

I'm cautiously optimistic. I'm very glad they sound like they're adding entitlement reform to this. That is essential for any long-term solution. If they would actually grab the "third rail of politics" it would be very impressive. Medicare is a lot more problematic in this respect than Social Security, although the Social Security reforms sound fine as far as I can tell.

One lingering concern of mine is what this will do to the deficit in the next year or two. Hopefully this is a long-term, entitlement/revenue reform package.

If all else fails, we could always try this:


  1. The debt ceiling deadline is very artificial. The federal government could easily get around it for up to a year after the current deadline.

  2. The Treasury's phone number is 202-622-2000. I'm sure they'd be interested in exactly what you mean.

    If you're not comfortable with that, feel free to elaborate in the comment section and I'd be happy to give them a call for you.

  3. Well, we have enough revenue to take care of SSI and other things; then you delay payments to military contractors, etc. That doesn't mean there won't be repercussions, but there is a lot of "2012 like" rhetoric associated with August 2nd that is pretty clearly silly. There are lots and lots of smart people saying the same thing I am economics professors, etc. Indeed, there was a guy (someone with a PhD) on Planet Money (hardly a libertarian radio show) over the weekend making a similar argument. So the Treasury doesn't have to turn to little old me for ideas on this subject. David Stockman has also been making a similar argument.

  4. Wait, so you're saying we would have to cut spending and divert all money to obligations like social security and interest payments on the debt?

    Well obviously.

    Sorry - I misunderstood you. That doesn't sound anything like "getting around it for a year".

  5. Just cut spending by 40% -what could be easier than that?

  6. argosyjones -
    Raising the debt ceiling and selling bonds in a period of high demand for government bonds would be many orders of magnitude easier than cutting spending by 40%.

  7. Assuming you're even talking about the debt ceiling...

    ...The post was more on the long-term debt reduction package that they're talking about, but Gary got us off onto a debt ceiling discussion (understandably - since the agreement seems to be tied to that potentially).

  8. argosyjones,

    Technically it isn't terribly difficult to do. Maybe we could start by stopping the unconstitutional war in Libya.


    My point is that the world isn't going to come to an end if they don't do this by August 2nd. Yeah, the bond markets will probably be a bit upset, but it isn't the apocalypse.

  9. re: "My point is that the world isn't going to come to an end if they don't do this by August 2nd."

    Well I wouldn't imagine it would come to an end.

    The world won't come to an end if I don't show up to work or if I fail to stay faithful to my wife... presumably whether or not the world comes to an end shouldn't be a primary motivating factor in decision making.

    Indeed, so few things COULD cause the world to come to an end that it seems safest not to even worry about that.

  10. argosyjones,

    Oh, and privatizing the TSA would be a good place to start:

    (Remember, though, libertarians don't understand how power really works.)

  11. Daniel Kuehn,

    The point is that there is a lot of politically convenient hysteria coming out of the Treasury, the WH, the Congress, etc. on the issue of the debt ceiling "deadline."

  12. Gary -
    Hysteria is in the eye of the beholder. The most hysterical person I'm regularly in contact with in person or over the internet is easily you, for example.

    It is unnecessarily disruptive not to raise the debt ceiling. Will we default immediately? That's not clear to me. But if we don't we're going to work around it by doing other problematic things.

    And the reason for the frustration is in considering the question of WHY we're facing this. Do people not want to buy our debt? Is our debt and deficits to high by the consensus position of economists? Are creditors demanding high interest payments? Have we tapped out tax revenue streams to bring it into line down the road after we've emerged from the crisis?

    No. No to all of those things, Gary. This is a completely artificial problem and while I wouldn't call what I've seen "hysterical", of course they're concerned. This hurts us, it does not help us - and there's no good reason for it to hurt us. This is a make-believe crisis.

  13. Daniel,

    The person I am most in contact on a daily basis with who I find to be suffering from the greatest level of hysteria is you.

    As for why we should do it, well, that is simple. At some point you've got to draw a line in the sand and so no more spending. So yeah, over the short term it may be painful, but to echo the words of Washington's farewell address - strenuous efforts need to be made to reduce debt unless you're in the middle of a war.

  14. I was joking. It's not easy to cut 40% of any budget.

    By the way, we have a process for regulating spending, revenues and debt for the federal government. The debt ceiling is redundant.

    What would be gained by privatizing the TSA?

  15. argosyjones,

    The TSA thing was largely a joke. What would we gain? Probably some real world security.

    As for cutting spending, it is easy if you try.

  16. Daniel, what do you think about this?

    Debt ceiling limit will apply to X bonds.

    However, Y bonds can be issued without worrying about debt ceiling.

    Don't raise debt ceiling.

    Just issue Y bonds

    How about that?! ;)


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