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Paul Krugman on the Debt Limit

post #1 of 46
Thread Starter 
Column from Thursday. Discuss. I'd imagine that he is disliked by many CE posters, but I think his points in red are very valid. We saw this kind of "extortion" with the Planned Parenthood/budget circus in April. That said, I'm for moderate spending cuts AND moderate tax increases. And raise the retirement age. We have to pay for Afghanistan, Iraq, OASDI, and Medicare Part D. But in the mean time, reaching the debt ceiling would be disastrous.
Quote:
To the Limit By PAUL KRUGMAN In about a month, if nothing is done, the federal government will hit its legal debt limit. There will be dire consequences if this limit isn’t raised. At best, we’ll suffer an economic slowdown; at worst we’ll plunge back into the depths of the 2008-9 financial crisis. So is a failure to raise the debt ceiling unthinkable? Not at all. Many commentators remain complacent about the debt ceiling; the very gravity of the consequences if the ceiling isn’t raised, they say, ensures that in the end politicians will do what must be done. But this complacency misses two important facts about the situation: the extremism of the modern G.O.P., and the urgent need for President Obama to draw a line in the sand against further extortion. Let’s talk about how we got here. The federal debt limit is a strange quirk of U.S. budget law: since debt is the consequence of decisions about taxing and spending, and Congress already makes those taxing and spending decisions, why require an additional vote on debt? And traditionally the debt limit has been treated as a minor detail. During the administration of former President George W. Bush — who added more than $4 trillion to the national debt — Congress, with little fanfare, voted to raise the debt ceiling no less than seven times. So the use of the debt ceiling to extort political concessions is something new in American politics. And it seems to have come as a complete surprise to Mr. Obama. Last December, after Mr. Obama agreed to extend the Bush tax cuts — a move that many people, myself included, viewed as in effect a concession to Republican blackmail — Marc Ambinder of The Atlantic asked why the deal hadn’t included a rise in the debt limit, so as to forestall another hostage situation (my words, not Mr. Ambinder’s). The president’s response seemed clueless even then. He asserted that “nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse,” and that he was sure that John Boehner, as speaker of the House, would accept his “responsibilities to govern.” Well, we’ve seen how that worked out. Now, Mr. Obama was right about the dangers of failing to raise the debt limit. In fact, he understated the case, by focusing only on financial confidence. Not that the confidence issue is trivial. Failure to raise the debt limit — which would, among other things, disrupt payments on existing debt — could convince investors that the United States is no longer a serious, responsible country, with nasty consequences. Furthermore, nobody knows what a U.S. default would do to the world financial system, which is built on the presumption that U.S. government debt is the ultimate safe asset. But confidence isn’t the only thing at stake. Failure to raise the debt limit would also force the U.S. government to make drastic, immediate spending cuts, on a scale that would dwarf the austerity currently being imposed on Greece. And don’t believe the nonsense about the benefits of spending cuts that has taken over much of our public discourse: slashing spending at a time when the economy is deeply depressed would destroy hundreds of thousands and quite possibly millions of jobs. So failure to reach a debt deal would have very bad consequences. But here’s the thing: Mr. Obama must be prepared to face those consequences if he wants his presidency to survive. Bear in mind that G.O.P. leaders don’t actually care about the level of debt. Instead, they’re using the threat of a debt crisis to impose an ideological agenda. If you had any doubt about that, last week’s tantrum should have convinced you. Democrats engaged in debt negotiations argued that since we’re supposedly in dire fiscal straits, we should talk about limiting tax breaks for corporate jets and hedge-fund managers as well as slashing aid to the poor and unlucky. And Republicans, in response, walked out of the talks. So what’s really going on is extortion pure and simple. As Mike Konczal of the Roosevelt Institute puts it, the G.O.P. has, in effect, come around with baseball bats and declared, “Nice economy you have here. A real shame if something happened to it.” And the reason Republicans are doing this is because they must believe that it will work: Mr. Obama caved in over tax cuts, and they expect him to cave again. They believe that they have the upper hand, because the public will blame the president for the economic crisis they’re threatening to create. In fact, it’s hard to avoid the suspicion that G.O.P. leaders actually want the economy to perform badly. Republicans believe, in short, that they’ve got Mr. Obama’s number, that he may still live in the White House but that for practical purposes his presidency is already over. It’s time — indeed, long past time — for him to prove them wrong.
post #2 of 46
A technicality, but since "All bills for raising Revenue shall originate in the House of Representatives," isn't it Obama & the senate Democrats who are holding the country hostage by refusing to proceed?
post #3 of 46
I thought no one on the left took Krugman seriously? I thought he was just someone to get conservatves pissed off. At least that is the argument usually made on here.
post #4 of 46
The first step to understanding what is happening is to stop thinking it's just the Repubs being driven by ideology and to stop with the Dem = white hat, Repub = black hat scenarios. It's all bullshit and both sides are doing it at warp speed. As an example, Obama talked about "raising taxes on millionaires and billionaires." This is bullshit as the last proposals I am aware of impacted folks down to 200k/year.

I'm pretty convinced neither party gives a damn about the state of the US and its populace but merely are pandering to their base and hoping to get re-elected.
post #5 of 46
Quote:
Originally Posted by Piobaire View Post
The first step to understanding what is happening is to stop thinking it's just the Repubs being driven by ideology and to stop with the Dem = white hat, Repub = black hat scenarios. It's all bullshit and both sides are doing it at warp speed. As an example, Obama talked about "raising taxes on millionaires and billionaires." This is bullshit as the last proposals I am aware of impacted folks down to 200k/year. I'm pretty convinced neither party gives a damn about the state of the US and its populace but merely are pandering to their base and hoping to get re-elected.
I guess you don't realize that some who makes 200k is a quarter of a millionaire.
post #6 of 46
Quote:
Originally Posted by Piobaire View Post
I'm pretty convinced neither party gives a damn about the state of the US and its populace but merely are pandering to their base and hoping to get re-elected.

been saying this for a while
post #7 of 46
Quote:
Originally Posted by Bhowie View Post
I guess you don't realize that some who makes 200k is a fifth of a millionaire.

FTFY.

On topic, the way each side frames the issues is making me want to puke.
post #8 of 46
Quote:
Originally Posted by Piobaire View Post
FTFY. On topic, the way each side frames the issues is making me want to puke.
lol. Damn I'm dumb. That is some Edina level fail.
post #9 of 46
Quote:
Originally Posted by Bhowie View Post
lol. Damn I'm dumb. That is some Edina level fail.

And for some reason I thought you were a mathmagician or something?
post #10 of 46
I thought the definition of "millionaire" was based on net worth and not annual income.
post #11 of 46
Quote:
Originally Posted by Parker View Post
I thought the definition of "millionaire" was based on net worth and not annual income.

Apparently not to the current POTUS.
post #12 of 46
The argument that the US is somehow going to become non-creditworthy and countries will quit lending to it or start charging it usury rates is ridiculous and one of the main reasons why curtailing spending has never been a big issue. As long as people are willing to lend to the US they can continue to spend like drunk sailors on shore leave. The bigger problem, in my opinion, is that such fiscal recklessness becomes a sort of sword of Damocles because with this type of debt the minute the rest of the world decides the US isn't creditworthy, even if it appears to be a remote possibility, they're in deep trouble.
post #13 of 46
Thread Starter 
Quote:
Originally Posted by Lord-Barrington View Post
The argument that the US is somehow going to become non-creditworthy and countries will quit lending to it or start charging it usury rates is ridiculous and one of the main reasons why curtailing spending has never been a big issue.
post #14 of 46
Listening to Krugman on economic matters these days is like asking Manton to judge a spelling bee. No offense, Manton.
post #15 of 46
Thread Starter 
Quote:
Originally Posted by Artisan Fan View Post
Listening to Krugman on economic matters these days is like asking Manton to judge a spelling bee.
He doesn't say much that is controversial in the article. Do you agree with the premise that it would be dangerous to let the US credit rating go sour? And give the man some credit. He has authored multiple textbooks and won the Clark medal and the Nobel Prize... what have you done with your life?
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