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Thoughts on brinkmanship with the US national debt?
Putting aside specific criticisms of the GOP as it exists today, what do you think of using the debt ceiling as a tool to reel in spending and put the US on a sustainable path with its national debt? People make it out to seem backwards and manipulative, but this whole situation seems like we're driving a hundred miles an hour toward a cliff and the person saying we should slam the breaks is getting flack because it'll damage the car.
The correct time to debate how much money the US government should be spending, and whether or not it should issue less debt, is when the budget is passed. Once that budget is passed, having another vote for whether or not to allow the US issue enough debt to make that budget is just stupid. There's no other point than this brinksmanship exercise, which has significant effects on the economic stability of the entire world.
So even putting aside opinions on fiscal policy, the debt ceiling is the wrong place to force debates over spending.
Hasn't Congress not passed a budget in the "standard" way in like, 20 years? I don't disagree with what you're saying but the process is broken in so many fundamental ways.
Of course actually defaulting would be disastrous and should be off the table, but debt ceiling concessions would apply to future budgets not the already passed budget
I mean, that's not really the issue. In fact, it really shows how stupid it is. Congress is going to have to pass a new budget quite literally later this year. Just move all the shenanigans there. A budget won't pass without house approval - McCarthy will have his budget negotiations.
Meanwhile, the US government already committed, and issued debt for the current budget. The debt ceiling should automatically move up when the budget passes - there is no reason to have it be a separate process. It only adds destabilizing factors, as it turns out people don't like to loan money to entities that can randomly decide to not pay them due to partisan politics.
It's better to simply NOT issue that debt, and not commit that money, than to do it, and then debate over whether or not to renege on that commitment. And you do that by bringing the deficit talks to the bill that creates the new budget.
Ultimately it's a question of if it's right to tie the debt ceiling to spending. According to this AP-NORC poll, around two thirds of Americans think it should be. Though only about twenty percent are following it closely, so I suppose to an extent it should be taken with a grain of salt.
I wouldn't consider it pointless for the debt ceiling to be a separate process. Say the current debt is 20T, the current ceiling is 20.5T, and Congress is debating the budget with a Republican controlled House and Democrat controlled Senate. In theory, Republicans could dig their heels in to pass a budget with less than a 500B deficit, but they ultimately need the budget passed by the Senate and creating a government shutdown to avoid going over the ceiling would be too politically and fiscally costly. Having a debt ceiling that is not automatically raised and that is respected, since it's understood that there can be a crisis otherwise, would shift budget negotiations in favor of a deficit below 500B.
Also, I don't think a debt ceiling concession would be necessarily purely for Republican political interests. If a 1 percent spending growth cap is passed and the GOP is truly committed to not reducing military spending to make it happen later this year, then the GOP is going to get destroyed in the next election cycle and spending priorities will be forced to change across the political spectrum.
Having the budget process and debt ceiling linked isn’t necessarily the same as having the debt ceiling automatically raise. It could just as easily be framed as “you can’t pass a budget if it doesn’t also include an explicitly agreed raise to the debt ceiling to accommodate it”.
The only thing that passing a budget without a debt ceiling raise does is brings the possibility of default onto the table. Unless there’s a third scenario I’m missing, I can’t see the rationale for going through a charade where one outcome is raising the debt ceiling, and the other is just not paying the bills that were already spent after being agreed a few months ago. What good could come of doing the latter?
Apparently 10% of the entire national debt came from just Trump’s tax cuts on the rich, not to mention gestures broadly at everything else, and the last election was still a close run thing. They still took the senate back at the midterms. I think expecting that level of reaction to actual fiscal policy is optimistic, to say the least.
The problem there is that there are no immediate political consequences without a constrained budget. Tax cuts benefit everyone in the short term.
Good news! The National Debt, for all intents and purposes, does not matter. It's almost all political theater.
This is not a new take.
Not just random pundits either.
The GOP has been freaking out about the debt since forever, but for some reason only worries about it when a D is in the white house. Wonder why....
Aside from the debt ceiling, I am not convinced that the national debt does not matter.
A normal cycle of borrowing during hard times and paying it back when the economy is booming is what should be aimed for. Of course the republicans shirked responsibility while trump was increaisng the debt in a good economy and only complain now during a recession. But this is should not be to say that the debt should not be issue, or that borrowing should be allowed to continue unchecked.
I would also note this is a very easy problem to solve.
RAISE TAXES ON THE RICH.
When you're comparing say 80% to 60% debt-to-GDP, then yes the higher debt doesn't matter too much as long as you can outpace the debt through growth. But our debt to gdp is 130% and we are not at all on a sustainable debt path. We are not a developing or middle income country, so it's pretty unreasonable to expect that we can outpace the debt through growth alone. (Let alone considering whether we as a society actually want to exercise all fiscal and monetary tools to force endless growth when we might want to take the path of many European countries of mild, sustainable growth). Whatever cannot be achieved through growth would otherwise be achieved by letting inflation run rampant to make paying the debt easier, which runs the risk of increasing the cost of borrowing, undermining the dollar's status as the world's reserve currency, and would obviously favor asset holders over savers (i.e. asset management companies, financial class, landlords over ordinary wage earners).
It's unfortunate that Republicans support such unsavory politicians and so often operate in bad faith, since at the end of the day you need fiscial conservatism to keep things from falling apart and the Democrats have no long term solution.
I think weeding your garden is a necessary part of taking care of it. I never hear Democrats talk about what they can optimize in the budget. They don’t even need to call it “cuts”. More like “We analyzed the system and think department X is bloated, so we will give them 2/3 the previous budget and install a manager that knows how to work with that”. A “cut” sounds to me like you’re killing a critical program. But I’m sure many programs are over-budgeted or a complete farce.
I’d love to see a week long roast of lazy administrators who sit on their ass handing out jobs to their friends. Maybe there are a lot of those, maybe only a few. But we could shake things down and determine where there is waste. At the same time we know money is needed in green energy, universal health care, etc. So spending there should go up.
I hear people make this claim that there are bloated programs that could be cut down, but I have started to suspect that this is just a conservative talking point that has wormed it's way into people's minds. For all the people who claim it, the only examples I ever get are anecdotes that don't actually name specific groups or people - it's always "a government office" or "a government worker".
The fact of the matter is that there are already offices that are responsible overseeing accountability within government programs. And when it comes to slashing budgets, I have been hearing that there are some programs that have budgets so lean that they can't effectively accomplish their missions; one of them was famously the IRS, which didn't have enough resources to audit rich people, which meant a further loss in tax revenue for the government.
I also wanted to say that you never hear Democrats talking about balancing the budget because it's quite literally the most boring and commonplace story you could ever talk about; it's simply not newsworthy.
Now there is a lot more about what kinds of programs we want to continue and which we want to retire, and there's a lot to debate around those things. But I think almost every discussion about government debt has an elephant that everyone seems desperate to ignore; we need to fund the government. You don't need to be an accountant to know that if you can't cut your budget you will need to find a way to increase your income. People keep blaming the politicians in office right now but really we need to blame all the politicians who are responsible for the past half decade of tax cuts.
If you look at what the US government is spending on education, healthcare, and the military compared to other OECD countries and then look at the outcomes compared to those countries, I’d say there’s pretty concrete evidence of significant waste.
I still sort of agree with you: I think the “conservative talking point” part is this common image of government waste looking like huge offices filled with overpaid bureaucrats achieving nothing of value, whereas I said further down that my theory on actual waste is that most of it is going to private contractor profits. But it’s waste nonetheless, and that is a genuine problem that needs to be fixed in order to make good use of the revenue that exists now, and of any hypothetical future tax increases.
I said what I did because I’ve worked in large institutions before and there most definitely was bloating. Not a crazy amount but there’s a reason the tech companies all have been doing layoffs. I imagine the same issues apply to the massive institution of the federal government.
And there’s the stories of $100,000 budget-preserving bolts billed by military contractors. The military may be where most of the bloat exists.
Did you work in a federal office before? Because from everything I've heard from government workers things are run much different in government offices than they do in private businesses, and that government offices tend to be much more strictly run in general.
I just want to reiterate that my point was that we need more actual reporting on these issues to see if they're real and that anonymous unverifiable anecdotes aren't helpful.
No, just local government.
Local governments also are easiest to affect change in.
I've worked for the Navy as a civvy before, and despite a large level of waste, a lot of that is due to bad incentives (use it or lose it).
The feds (and a lot of states) also have fairly rigid salary structures that are at or below private industry rates for comparable positions. Job stability is one of the biggest upsides in return.
Organization is one of the biggest problems. Legacy is a problem, however there is something to be said for an old mainframe (heavily isolated) that has a 800 day uptime while the rest of the industry has adopted "fail fast."
While that works in certain contexts, there is definitely more room for 'ancient but rock solid' that has been ignored in recent times.
Might as well toss a John Oliver segment into that list
Personally? I think the treasury should mint a trillion dollar coin and be done with it. The debt ceiling is an artificial limit that is not based in anything constitutional and I am sick and tired of this debate cropping up every few years. Dumb problems warrant dumb solutions.
Long as we get a movie about a rag tag group that has to steal the coin, I'm cool.
Premium bonds are a less gimmicky version of this. They are just like regular bonds but the principal is less and the interest is more. It's against the spirit of the debt limit law, but not the letter.
How does this make the debt worse? The idea behind the trillion dollar coin is that the treasury does not have to issue new debt.
From wikipedia:
My understanding is that special collectors coins are governed by different laws as normal money but remain legal tender. There therefore exists a loophole whereby a trillion dollar coin could minted under laws intended to allow for collectable coins, thereby printing money to pay off the debt while bypassing all otherwise necessary oversight and approval.
Don’t the GOP approve ludicrous allotments to the military? Less spending sounds good, as long as we’re cutting the right things.
I think it's extremely dangerous and misplaced that these debates are coming now, not around budgets and measures that increase spending.
However, the debt ceiling debacles are a necessary evil that follow from the outdated rules of governance from parliaments both on the federal and lower levels throughout the US.
Deficit spending has to come to an end, or be much, much more tightly managed. It's not sustainable. The issue is that he money is being thrown away on causes there's no room to prioritize.
In a democracy, you can't leave your population to die on the streets. This simple truth in combination with demographic outlook means that spending has to be seriously reigned in and repurposed toward taking care of the elderly as that group grows.
Cutting spending won't be enough. It's a mathematical truth that taxes have to rise. Substantially. As folks are used to getting more than they should through deficit spending, that becomes harder and harder to get through. We have to be weaned at some point or other.
It looks like that process isn't going to happen politically unless it is to avoid a massive disaster. Lawmakers won't remove their tools for exerting influence voluntarily. Especially not as dysfunctional and hamstrung they are in the arenas where they should be politicking.
Genuine question, as I haven’t looked at the numbers on this specific question myself: does “folks” necessarily mean the majority of voters, or would it be sufficient for the couple of million people who have a third of the money to cover it?
Political will to make them do so is a much tougher question, of course, but intuitively it doesn’t seem to me like the majority of Americans are ending up with “more than they should”.
I personally have what might be a strange view on taxing the ultra wealthy. We should tax them (perhaps heavily)--not for the revenue but to protect democracy and the balance of power in private life. I think a major concern among good-faith conservatives is treating the wealthy like a public piggy bank. Ultimately we should plan as if the option of wealth redistribution is not available to us.
Of course, there are also all the common sense things about enforcing the tax code and closing loopholes that favor the rich.
My working assumption here is that much of that government spending is going to the wealthy and ultra-wealthy: defence contractors, healthcare companies, the broad for-profit ecosystem around education, industrialised agriculture, etc.
The people who are used to being subsidised by deficit spending are primarily the owners of the companies who contract for that spending, much less so the general population.
Exactly this! Right now, the wealthiest individuals aren't paying even the same percentage of their much higher wealth and income as those in the middle, let alone the higher marginal amount they're already supposed to be paying. Simultaneously, they are benefitting the most from government deficit spending, as large amounts of that spending go to private contractors, and as with almost all companies the primary beneficiaries of that revenue are the owners.
I would say that there's a lot of bloat in government spending and that bloat disproportionately favors the rich. The tricky part is that the bloated nature of the healthcare, insurance, defense industry means that there are many jobs that would be at risk if spending were seriously scrutinized or if reforms were made.
There's also the issue of just plain corporate socialism, say in the case of airlines where we would've saved a lot of money by directly subsidizing salaries versus writing a check directly to companies themselves.
Jobs that should not exist are not jobs, they are handouts with extra steps. I don't care if every employee at every health insurance company is instantly unemployed. They can find a real job.
You have me at a fork in the road because...
I don't love the framing on this because support systems are necessary, but also....
I couldn't agree more.
I should be clear, I agree support systems are important and neccessary. Handouts is a phrase bandied about by the same types that value job creators over workers, so I try to make them squirm a bit..
To ride that tan()... I see an ideal system along the lines of be a public health program, a basic income (the closest you can reasonably get to an 'opt out'), and a jobs garuntee (if you want work, you will get it). I think that has the best possible outcome for damn near everyone with little administrative bloat from means testing garbage.
I hear ya, I was being a little tongue in cheek too ;). I think we have near identical political views.
Reading through the replies, I might be more cynical than everyone else here. Like everyone else, I'm frustrated that the GOP is trying to force these concessions despite holding only the barest majority in one chamber of Congress.
But I also think some of those Republicans -- I'm thinking of the Freedom Caucus in particular -- don't actually care whether the US defaults. As pure political theater, it's a heads-I-win, tails-you-lose situation: if they receive the concessions, they can boast about it to their base; if they fail to reach an agreement and the US defaults, they'll just blame Biden for causing a recession. Meanwhile billions of people around the world will have to deal with the fallout, but I guess that's what happens when you elect millionaire demagogues who are basically totally isolated from economic harm.
I had also hoped the government would just invoke the 14th Amendment (section 4: "The validity of the public debt of the United States [...] shall not be questioned"). The text seems fairly unambiguous -- which should appeal to a certain segment of conservative Supreme Court justices -- but the actual interpretation appears to be more nuanced, and I doubt this Supreme Court is going to bend over backwards to give Biden a political win, especially on a matter conservatives hold so dear to their heart (spending).