"But if you want austerity, the correct way to do it is to pass spending cuts in Congress, and iron out a budget deal with Biden through the normal process that we successfully used in the centuries before 2011."
And if you want to avoid these perpetual crises, then offer a reasonable budget to moderates (including this Democrat) who find the extraordinary explosion in federal spending and deficits objectionable. Medicaid should be a matter for the States; the social security eligibility age needs to be pushed out; drunken-sailor-spending like student-loan bailouts needs to be eliminated and excoriated as growth-reducing redistribution to people who made bad but free choices; negative income tax should be used for 70-80% of the population; an income taxes can go up for the top 20-30% without objection here.
What is the relevance that there are two ppl with kinda bonkers views who believe in the trillion dollar coin proposal? Adolf Hitler also liked nature and dogs. Are they bad? These individuals are neither the originators of the idea nor the most reputable proponents.
There are quite a number of expert constitutional lawyers and I believe even one of the bill authors who have opined the move is legal (some even argue it might be mandatory) and likely would be accepted by the court. Ofc they mostly recognize that being forced to take this measure would itself be harmful (legal uncertainty etc) but it's still a reason to think that the harm will be less than a default.
Not to mention that other constitutional lawyers have made convincing arguments that the executive could just ignore the debt ceiling (the constitutional duty not to default and the congressional budget themselves creating contradictory legal duties).
Both workarounds are undesirable but I don't see what either of them has to do with the crazy ideas about sending troops to the fed.
It seems to me that the majority of comments on this string take an apocalyptic view of the current national debt. It is certainly higher than it has been in the recent past, although we've been here before (after World War II). But despite the fact that I do feel uncomfortable about moving into untested waters--I'm timid by nature--I don't see any analytically solid reason to believe that the current level is seriously problematic.
I think it's wrong to speak about "burdening future generations with our debt." We assume debt in order to accomplish ends that will serve future generations, and those ends include raising GDP, which shrinks the burden of the overall debt. We bear the cost of ongoing debt service, and those continue indefinitely, but we also reap the benefits of the investments that expand GDP, and those too continue indefinitely. I understand dismay that 15% of our annual budget simply to debt service and we never pay off any of the principal (though its value continually declines through inflation), but the question of whether the principal is yielding greater ongoing value seems never to be asked, and I've never seen anyone relate their alarm about the 15% figure to a theoretically argued optimal rate--it's generally simply a "debt is scary/bad" framework, derived from household-debt perspectives.
I'm not persuaded by MMT (that could be because I don't understand it, but it's nice to align with an economist like Noah), but I think the evidence is already clear that the level of debt that it is safe for an economy the size of ours to take on is much higher than past conventional wisdom suggested. One thing I'm sure MMT gets right (and by no means only MMT--all Keynesian-derived economic theory too) is that our national debt is not analogous to household debt, and that people who transfer household debt models to their thinking about our national debt are making a mistake that would be terribly costly to turn into policy. And I don't think that alarmism about "printing vast amounts of money" is justified if the growing size of the economic base provides a basis for monetary policy.
I became politically aware in the early '60s, and jeremiads about the debt began to catch my attention in the mid-1970s, after the oil shocks set in (when the debt/GDP ratio was actually still falling, but people were really scared in a completely unfamiliar economic environment). It really picked up in the '80s when policy changed us into a low-tax nation on the basis of what I have always regarded as magical thinking, and we shifted the burden of funding a growing country from income taxes to debt (without any overt policy change, just responsiveness to a huge 1980s Japanese appetite to park money in a safe investment). This shift, championed by conservatives, set us on a course towards tripling the debt/GDP ratio over the forty years since 1981.
I have been hearing these voices of imminent doom throughout this era, generally from the conservative end of the spectrum that engineered the very shift it deplores; no political cry of wolf has persisted longer. It seems to me that MMT more or less claims that wolves don't exist, and I'm not persuaded--I think we should stay on the lookout and be perpetually nervous. But I wonder how it is that those raising alarms about the size of the debt don't reflect more on how the imminent disaster they have predicted for half a century has never come about, and how much the national economy has grown overall despite their warnings.
I would be perfectly willing to shift back from a low-tax country to a mainstream-high-tax country and reduce the rate of debt growth, so long as the primary tax is a steeply graduated income tax. (Although that turn would require care too, since it involves shifts in incentive structure with plenty of potential unintended negative consequences.) But the reason for the shift should, in my view, rest on models of consequent economic growth, not on a gut aversion to national debt that is not backed up by an empirical rationale.
How can you say it's "pointless" - don't the GOP have a point that, well, ever spirally deficits and debts are bad? And that last time they tried the old fashioned way to reduce spending it was vetoed by the President?
If you're in Congress and you genuinely believe that vast levels of money printing are a problem, that now is the time to start reducing deficits (not even debts, just deficits), then what option do you think they should be taking? Do you think Biden would actually ever agree to big spending cuts?
You cover the subject well at the top two inches of soil, but you miss completely the deep rooted reality.
Obama agreed to a plan called "sequestration" in which future spending would pay for itself. Of course, he didn't adhere to it and the Republicans were justifiably left with the cruel realization that the Dems have no idea of how to manage spending and no intention of doing anything like that. Ever.
The lack of trust on fiscal matters by the Reps of the Dems is deeply rooted in the reality of failed sequestration, massive lobbyist-written, unread spending bills, failure of budget regular order, continuing resolutions, and omnibus bills. It is a fair and well-earned skepticism nigh onto cynical enmity.
The Dems own this conduct and the Reps are doing their elected job to forestall fiscal suicide by whatever means available and necessary.
If the Dems were following the required budget discipline and displayed even a tiny nod toward fiscal responsibility, the Republicans would justifiably be chided, but that is not so, so let's drop the charade.
Further, the Dems in control of Congress have not delivered a budget and appropriations bills - something that is mandated by law and which is called "regular order" ever.
You are crying foul on a system that is already hopelessly broken and suggesting there is moral high ground beneath the cloven hoofs of these poseurs we call Dems.
How do we return to some sense of fiscal order? I am talking Republican Dwight D Eisenhower's 8 balanced budgets and zero deficit type of fiscal order.
We will all collectively have to get in the trenches and engage in hand-to-hand combat as we did once upon a time when we banned pork - earmarks. This, too, is completely out of control proving the Congress cannot be trusted.
I view the Republicans' attempt to use the debt ceiling as a fiscal tool like a family intervening to stop a hopeless addict from doing further damage to himself. It is a desperate act born of the failed earlier acts. The Congress and the Dems need an intervention and a few months in rehab.
The notion that the US is going to actually default is sheer nonsense and is an example of fearmongering used as a pathetic, simplistic lie to trick the masses. You should be ashamed of yourself in the same way that the 51 intel community liars should be for authoring a letter that was blatantly false.
Regardless of what happens, the US is going to pay its bills. Why pretend otherwise?
I applaud the Republicans for renting a pair of balls, but I have no illusions that this will not devolve into petty politics and the White House will lie in much the same way Obama did with sequestration.
We need people in government who can manage finances IAW the law.
I'm weary of everybody using the debt ceiling issue to point the finger at somebody else. Here's who got us in to this mess.
1) American People
2) Democrats
3) Republicans
We, ALL OF US, routinely spend money we don't have and pass the bill on to our kids and grandkids. We've been doing this for decades. It's not "those people over there", it's all of us. No matter what party is in power, they do deficit spending. If you vote for Republicans, you're voting for deficit spending. If you vote for Democrats, you're voting for deficit spending. If you don't vote, you're agreeing to deficit spending.
I've been a liberal hippy Democrat since the sixties and look like I just came from an orgy at Woodstock. I'm not a MAGA man and won't vote for any of them ever.
But I'm fed up with my fellow Democrats pretending it's the Tea Party and Magaheads that caused this problem. Doing that makes us look just as dishonest as the Magaheads. The world's faith in our finances is already headed for the crapper no matter what the Magaheads do. If the Magaheads were to vanish that would still be the case, because the entire country wants to be irresponsible with our nation's financial reputation.
The federal budget is completely out of control and it's going to get much worse soon. And it's us, all of us, that made that happen. Until we start owning up to what we're doing to our kids, we're screwed.
As soon as the Magaheads get the power they will deficit spend too, just like Trump did. They are not our saviors. But I'll give them credit for making noise, and forcing us to think about this.
Thank you for a relatively sane tank as opposed to all the media generating fear over the Debt--even the NYT today had a piece which assumed, without a thought, the current Debt was a problem. The Debt is as close to a non-problem as there can be--it’s a historical accounting. Deficits can be a problem, they can drive inflation or squeeze private investment, but no one is talking about that. Everyone intuitively, and wrongly, equates
Sovereign Debt with private debt. They should ask themselves how much debt they could manage if they could set interest rates and print money?
The only sane part of the argument is about increasing interest expense (which, like other government spending, can drive inflation) which affects the deficit--but the ignore the other half of the equation which is that high interest usually accompanies high inflation--which reduces the overall Debt burden. No one is talking about how inflation wiped out $3T of Debt in real dollar last year. i.e. Debt + Budget in real dollars ran a surplus.
Every time I start feeling I’m in crazy land surrounded by a deluded mass of people, I remind myself that accounting isn’t the real economy and, whatever we can do, we can afford.
This must be a slow blogging day. Contra Noah, there have been showdowns over the debt ceiling since at least the 1980s. What's new is treating these showdowns as a looming apocalypse. Back in 1985, James Baker pointed out that the federal government had adequate cashflow to meet all bond payments, and could prioritize other payments to make the most essential payments on time. Bill Clinton, in his showdown, used the "Washington Monument Strategy" to turn the public against congressional Republicans.
Brinksmanship over the debt ceiling is not tantamount to default, and offers little more than an opportunity for grandstanding by Congressmen and Senators. Usually pointless grandstanding.
So why didn't the Democrats just eliminate the debt ceiling (or raise it by a factor of 10 or 100 or 1000) during the first 2 years of the Biden admin, when they had full control of Congress? Who was "holding them hostage" then?
Why do you say "people" are playing weird political games with the U.S. fiscal system when you mean "House Republicans?" Not Democrats. Not Senate GOP.
Just sick and tired of ‘business’ leaking their frustration about Republicans but continuing to give them money
If they think this is a danger and the danger is only coming from one place then turn off the taps FFS
"But if you want austerity, the correct way to do it is to pass spending cuts in Congress, and iron out a budget deal with Biden through the normal process that we successfully used in the centuries before 2011."
And if you want to avoid these perpetual crises, then offer a reasonable budget to moderates (including this Democrat) who find the extraordinary explosion in federal spending and deficits objectionable. Medicaid should be a matter for the States; the social security eligibility age needs to be pushed out; drunken-sailor-spending like student-loan bailouts needs to be eliminated and excoriated as growth-reducing redistribution to people who made bad but free choices; negative income tax should be used for 70-80% of the population; an income taxes can go up for the top 20-30% without objection here.
Premium coupon Treasuries, as Matt Levine suggested, are a much tidier escape hatch than the platinum coin.
It's still an amazingly dumb crisis.
Noah,
A typo I think.
In the para that starts with "But the worst result of 2011" mentions the worst fight "since 2023". I think you mean "since 2011".
If it helps, l also hate people like me who point out typos ...
There's a lefty who's actually named Tankus?
Happy Year of the Rabbit to Noah.
What is the relevance that there are two ppl with kinda bonkers views who believe in the trillion dollar coin proposal? Adolf Hitler also liked nature and dogs. Are they bad? These individuals are neither the originators of the idea nor the most reputable proponents.
There are quite a number of expert constitutional lawyers and I believe even one of the bill authors who have opined the move is legal (some even argue it might be mandatory) and likely would be accepted by the court. Ofc they mostly recognize that being forced to take this measure would itself be harmful (legal uncertainty etc) but it's still a reason to think that the harm will be less than a default.
Not to mention that other constitutional lawyers have made convincing arguments that the executive could just ignore the debt ceiling (the constitutional duty not to default and the congressional budget themselves creating contradictory legal duties).
Both workarounds are undesirable but I don't see what either of them has to do with the crazy ideas about sending troops to the fed.
It seems to me that the majority of comments on this string take an apocalyptic view of the current national debt. It is certainly higher than it has been in the recent past, although we've been here before (after World War II). But despite the fact that I do feel uncomfortable about moving into untested waters--I'm timid by nature--I don't see any analytically solid reason to believe that the current level is seriously problematic.
I think it's wrong to speak about "burdening future generations with our debt." We assume debt in order to accomplish ends that will serve future generations, and those ends include raising GDP, which shrinks the burden of the overall debt. We bear the cost of ongoing debt service, and those continue indefinitely, but we also reap the benefits of the investments that expand GDP, and those too continue indefinitely. I understand dismay that 15% of our annual budget simply to debt service and we never pay off any of the principal (though its value continually declines through inflation), but the question of whether the principal is yielding greater ongoing value seems never to be asked, and I've never seen anyone relate their alarm about the 15% figure to a theoretically argued optimal rate--it's generally simply a "debt is scary/bad" framework, derived from household-debt perspectives.
I'm not persuaded by MMT (that could be because I don't understand it, but it's nice to align with an economist like Noah), but I think the evidence is already clear that the level of debt that it is safe for an economy the size of ours to take on is much higher than past conventional wisdom suggested. One thing I'm sure MMT gets right (and by no means only MMT--all Keynesian-derived economic theory too) is that our national debt is not analogous to household debt, and that people who transfer household debt models to their thinking about our national debt are making a mistake that would be terribly costly to turn into policy. And I don't think that alarmism about "printing vast amounts of money" is justified if the growing size of the economic base provides a basis for monetary policy.
I became politically aware in the early '60s, and jeremiads about the debt began to catch my attention in the mid-1970s, after the oil shocks set in (when the debt/GDP ratio was actually still falling, but people were really scared in a completely unfamiliar economic environment). It really picked up in the '80s when policy changed us into a low-tax nation on the basis of what I have always regarded as magical thinking, and we shifted the burden of funding a growing country from income taxes to debt (without any overt policy change, just responsiveness to a huge 1980s Japanese appetite to park money in a safe investment). This shift, championed by conservatives, set us on a course towards tripling the debt/GDP ratio over the forty years since 1981.
I have been hearing these voices of imminent doom throughout this era, generally from the conservative end of the spectrum that engineered the very shift it deplores; no political cry of wolf has persisted longer. It seems to me that MMT more or less claims that wolves don't exist, and I'm not persuaded--I think we should stay on the lookout and be perpetually nervous. But I wonder how it is that those raising alarms about the size of the debt don't reflect more on how the imminent disaster they have predicted for half a century has never come about, and how much the national economy has grown overall despite their warnings.
I would be perfectly willing to shift back from a low-tax country to a mainstream-high-tax country and reduce the rate of debt growth, so long as the primary tax is a steeply graduated income tax. (Although that turn would require care too, since it involves shifts in incentive structure with plenty of potential unintended negative consequences.) But the reason for the shift should, in my view, rest on models of consequent economic growth, not on a gut aversion to national debt that is not backed up by an empirical rationale.
How can you say it's "pointless" - don't the GOP have a point that, well, ever spirally deficits and debts are bad? And that last time they tried the old fashioned way to reduce spending it was vetoed by the President?
If you're in Congress and you genuinely believe that vast levels of money printing are a problem, that now is the time to start reducing deficits (not even debts, just deficits), then what option do you think they should be taking? Do you think Biden would actually ever agree to big spending cuts?
You cover the subject well at the top two inches of soil, but you miss completely the deep rooted reality.
Obama agreed to a plan called "sequestration" in which future spending would pay for itself. Of course, he didn't adhere to it and the Republicans were justifiably left with the cruel realization that the Dems have no idea of how to manage spending and no intention of doing anything like that. Ever.
The lack of trust on fiscal matters by the Reps of the Dems is deeply rooted in the reality of failed sequestration, massive lobbyist-written, unread spending bills, failure of budget regular order, continuing resolutions, and omnibus bills. It is a fair and well-earned skepticism nigh onto cynical enmity.
The Dems own this conduct and the Reps are doing their elected job to forestall fiscal suicide by whatever means available and necessary.
If the Dems were following the required budget discipline and displayed even a tiny nod toward fiscal responsibility, the Republicans would justifiably be chided, but that is not so, so let's drop the charade.
Further, the Dems in control of Congress have not delivered a budget and appropriations bills - something that is mandated by law and which is called "regular order" ever.
You are crying foul on a system that is already hopelessly broken and suggesting there is moral high ground beneath the cloven hoofs of these poseurs we call Dems.
How do we return to some sense of fiscal order? I am talking Republican Dwight D Eisenhower's 8 balanced budgets and zero deficit type of fiscal order.
We will all collectively have to get in the trenches and engage in hand-to-hand combat as we did once upon a time when we banned pork - earmarks. This, too, is completely out of control proving the Congress cannot be trusted.
I view the Republicans' attempt to use the debt ceiling as a fiscal tool like a family intervening to stop a hopeless addict from doing further damage to himself. It is a desperate act born of the failed earlier acts. The Congress and the Dems need an intervention and a few months in rehab.
The notion that the US is going to actually default is sheer nonsense and is an example of fearmongering used as a pathetic, simplistic lie to trick the masses. You should be ashamed of yourself in the same way that the 51 intel community liars should be for authoring a letter that was blatantly false.
Regardless of what happens, the US is going to pay its bills. Why pretend otherwise?
I applaud the Republicans for renting a pair of balls, but I have no illusions that this will not devolve into petty politics and the White House will lie in much the same way Obama did with sequestration.
We need people in government who can manage finances IAW the law.
Let's get ready to ruuuuuuuuumble.
JLM
www.themusingsofthebigredcar.com
I'm weary of everybody using the debt ceiling issue to point the finger at somebody else. Here's who got us in to this mess.
1) American People
2) Democrats
3) Republicans
We, ALL OF US, routinely spend money we don't have and pass the bill on to our kids and grandkids. We've been doing this for decades. It's not "those people over there", it's all of us. No matter what party is in power, they do deficit spending. If you vote for Republicans, you're voting for deficit spending. If you vote for Democrats, you're voting for deficit spending. If you don't vote, you're agreeing to deficit spending.
I've been a liberal hippy Democrat since the sixties and look like I just came from an orgy at Woodstock. I'm not a MAGA man and won't vote for any of them ever.
But I'm fed up with my fellow Democrats pretending it's the Tea Party and Magaheads that caused this problem. Doing that makes us look just as dishonest as the Magaheads. The world's faith in our finances is already headed for the crapper no matter what the Magaheads do. If the Magaheads were to vanish that would still be the case, because the entire country wants to be irresponsible with our nation's financial reputation.
The federal budget is completely out of control and it's going to get much worse soon. And it's us, all of us, that made that happen. Until we start owning up to what we're doing to our kids, we're screwed.
As soon as the Magaheads get the power they will deficit spend too, just like Trump did. They are not our saviors. But I'll give them credit for making noise, and forcing us to think about this.
Stupid question, but couldn’t the Democrats have repealed the debt ceiling law in the last few years?
Why didn’t they? Just, other priorities? Or it would have been politically unpalatable?
Thank you for a relatively sane tank as opposed to all the media generating fear over the Debt--even the NYT today had a piece which assumed, without a thought, the current Debt was a problem. The Debt is as close to a non-problem as there can be--it’s a historical accounting. Deficits can be a problem, they can drive inflation or squeeze private investment, but no one is talking about that. Everyone intuitively, and wrongly, equates
Sovereign Debt with private debt. They should ask themselves how much debt they could manage if they could set interest rates and print money?
The only sane part of the argument is about increasing interest expense (which, like other government spending, can drive inflation) which affects the deficit--but the ignore the other half of the equation which is that high interest usually accompanies high inflation--which reduces the overall Debt burden. No one is talking about how inflation wiped out $3T of Debt in real dollar last year. i.e. Debt + Budget in real dollars ran a surplus.
Every time I start feeling I’m in crazy land surrounded by a deluded mass of people, I remind myself that accounting isn’t the real economy and, whatever we can do, we can afford.
This must be a slow blogging day. Contra Noah, there have been showdowns over the debt ceiling since at least the 1980s. What's new is treating these showdowns as a looming apocalypse. Back in 1985, James Baker pointed out that the federal government had adequate cashflow to meet all bond payments, and could prioritize other payments to make the most essential payments on time. Bill Clinton, in his showdown, used the "Washington Monument Strategy" to turn the public against congressional Republicans.
Brinksmanship over the debt ceiling is not tantamount to default, and offers little more than an opportunity for grandstanding by Congressmen and Senators. Usually pointless grandstanding.
So why didn't the Democrats just eliminate the debt ceiling (or raise it by a factor of 10 or 100 or 1000) during the first 2 years of the Biden admin, when they had full control of Congress? Who was "holding them hostage" then?
Why do you say "people" are playing weird political games with the U.S. fiscal system when you mean "House Republicans?" Not Democrats. Not Senate GOP.