Lawrence O'Donnell Has Not Quite The Last Word on Raising the Debt Ceiling

MSNBC Olbermanniac replacement host Lawarence O'Donnell has a formidable presence and knowledge base (he worked as a Senate staffer for Sen. Daniel Patrick Moynihan (D-N.Y.) and was a producer of The West Wing, a teevee show prized for being more realistic than reality (or so I've been told)).

All of which has got to help O'Donnell sound like he's knows what he is talking about when he is flat-out wrong.

Which he is when he claims, as he did last night, that the government has never actually reached the debt limit. In a conversation with former Clinton admin economist Alice Rivlin, O'Donnell said this (rush transcript courtesy of MSNBC, emphasis mine):

...what would happen if we failed to raise the debt ceiling on the day it approaches, where at the stroke of midnight we crack through it at the treasury. and it's not an easy thing, because we've never done it.

Our story thus far: The debt ceiling or limit dates back to the World War I era and represents the amount of money the federal government can borrow to operate without having to go back to Congress to specifically authorize an increase in the credit line. Total federal debt is the sum of all deficits and unpaid borrowing going back to the fat years...of George Washington. Including intra-governmental transfers (such as all those IOUs in the Social Security "trust fund") and debt held by outside investors (including your pension fund, the Chinese, et al) totals around $14 trillion, or basically the size of the economy itself (not a good thing). When the tab hits $14.3 trillion, Uncle Sam's credit line will go dark unless the government specifically authorizes an extension, which has happened oh about 10 times since 2000.

Because he speaks with the authoritative disdain of a prep-school and Hah-vad grad, O'Donnell always sounds convincing. However he, and many other commentators and pols are simply wrong that a) the federal government has always raised the debt ceiling before it's been reached and b) the consequences of failure have been terrible or, to echo Obama adviser Austan Goolsbee, "catastrophic." Treasury Secretary Tim Geithner has said that a debt limit FAIL would be the "first default in history caused by fiscal insanity," but failing to raise the limit is not the same as defaulting on anything. As the Government Accountability Office has flatly said (page 10), "Treasury has never been unable to pay interest or principal on debt held by the public because of the debt limit."

As Reason columnist and Mercatus Center economist Veronique de Rugy has written, the debt limit was reached in the 1980s, in the 1990s, and in 2002 without being rolled over immediately. In 1995-96, in fact, the limit was in force for six months, all without a "catastrophic" result that anyone can remember. The increasers say that failure to raise would send the wrong signal to the "markets." Mebbe. But so does a continuing inability to address levels of spending as a percentage of GDP not seen since World War II and debt at 100-percent-plus of total GDP. The SNAFU argument for boosting the limit doesn't cut it anymore.

O'Donnell is right that the Republicans are hypocrites when they now oppose lifting the limit while being in favor of jacking it during the Bush years. He doesn't often mention that Barack Obama has switched sides on the issue, too. Back in 2006, Sen. Obama voted against increasing the limit, calling the need to do so "a failure of leadership."

Hitting the debt limit means that the government would have to funnel some of the expected $2.2 trillion in revenue this fiscal year to cover the $200-$300 billion in anticipated interest costs. The debt limit is there precisely to force the government to stop every once in a while and account for why it's borrowing so much money. Rather than, I don't know, living within its means mostly, carrying some long-term debt at favorable rates and going on the street once in a while during cash-flow crises and then getting rid of the debt in flush times (doesn't anyone in this place have a mortgage, an equity line, and a second-cousin once removed named Nunzio? I can't be the only one).

I never thought I'd have a kind word to say about congressional Republicans, but good for them for pushing for some fiscal reckoning before rubber-stamping more rubber checks. I know they'll be singing a different tune when President Trump is running the show (and here's hoping the Singing Senators are gone for good), but we live in the fierce immediacy of now. And right now, the government's gotta get its balance sheet in order. And tomorrow too.

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  • ||

    Back in the 90's O'Donnell was an interesting presence on the McLaughlin Group. It's quite sad that he's turned into another shouty, cable news idiot.

  • ||

    They don't call him Crazy Larry for nothing

  • rather ||

  • ||

    You're very blogwhorey today, rectal. Are you entering your manic phase? And by manic, I mean extra crispy fried stupid, of course.

  • fish||

    I just clicked the link to her blog. Epi....she wants you.

  • rather Retarded||

    I just made poopy everbody! And posted it on my blog!

    Yay me!

  • ||

    Like Hand Banana?

    I won't be clicking to her blog. Ever.

  • rather||

    Good idea

  • ||

    Episiarch, tonight, YOU!

  • ||

    Are you kidding me?

    Episiarch, I guess you should be proud of your notoriety. Seriously, Rather, does he bother you that much? That wasn't even a blog post. It was more of a 13-year-old's diary entry about someone "stealing" someone else's girl/boy friend.

  • rather||

    Who do you think "rather retarded" is?
    Come on! The hanging, decapitation, and shit in his face is all the joy-joy feelings I will ever need

  • Gilbert Martin||

    "Total federal debt is the sum of all deficits and unpaid borrowing going back to the fat years...of George Washington."

    It doesn't go quite that far back.

    Andrew Jackson paid off the national debt.

    He was the only president who ever did.

  • ||

    Hitting the debt limit means that the government would have to funnel some of the expected $2.2 trillion in revenue this fiscal year to cover the $200-$300 billion in anticipated interest costs.

    Interest - a must.
    Social Security - legally a must.

    That leaves medical costs and defense as big ticket items.

    They will raise it.

  • ||

    You will give me more money. Or I will show you even more of my rat faced giant cranium.

  • CrackertyAssCracker||

    they can stop paying SS whenever they feel like it. Wouldn't be popular. But wouldn't be illegal either.

  • prolefeed||

    Interest - a must.
    Social Security - legally a must.

    Congress is not constitutionally obliged to be constrained by the actions of prior Congresses. Paying for either of these expenses is a political choice.

  • Rob||

    And if the Fed Gubmint refuses to pay out SS, Shreik is going to have them put in jail.

  • ||

    And right now, the government's gotta get its balance sheet in order. And tomorrow too.
    Agreed. But not raising the debt ceiling won't do a damned thing to help. From what I can see, it would only make matters worse.

  • kilroy||

    The debt ceiling will stop rising. The question is will it stop voluntarily.

  • Sudden||

    Obama may be half black, but he is clearly half white too.

    Because us pasty-assed white folk don't know any dance moves other than the old "Raise the Roof" and clearly Obama doesn't either.

  • fish||

    I thought that was Olbermann....I just thought somebody stuck a new Ken doll head on the body.

  • ||

    The markets, I believe, are relatively unconcerned about whether principal and interest payments would be made on outstanding debt, regardless of the debt limit, at least for the short to medium term. They know that an actual default on outstanding debt (not a pretend default like that financial illiterate Geithner goes on about) would be so catastrophic that it ain't gonna happen. As evidenced by the lack of a financial catastrophe when we operated up against the debt limit in the past.

    What the markets will be concerned about is a failure to put federal finances on a sustainable footing.

    Oh, I'm sure our masters will raise the debt limit.

    They could actually buy themselves quite a bit of time by just cancelling the special bonds held by SocSec - technically a default, but I don't think the markets would care. That would, of course, make absolutely zero difference to finances of the federal government, but would be accompanied by much screeching about lockboxes and trust funds, and would be an admission that there never was any such thing. So that ain't gonna happen, either.

  • Sudden||

    What the markets will be concerned about is a failure to put federal finances on a sustainable footing.

    Precisely. The markets recognize that we are not gonna have a significant problem paying the ~$200b in current debt finance. But the markets do recognize that if we continue to float another $1.5tr per annum, and interest rates inevitably rise to some degree even if small, all of a sudden, the federales are on the hook for close to a trillion in debt payments per annum, right at the time the massive fiscal clusterfuck that is SS/Medicare/Making-Old-People-Live-Forever-Because-They-ALWAYS-Vote-Programs drops a monumental additional liability on Uncle Scam's annual balance sheet.

    The markets know that will be when Helicopter Ben goes ahead and just adds a few zeros to the money supply, and that is when all mofuckin' hell breaks loose.

  • ||

    (he worked as a Senate staffer for Sen. Daniel Patrick Moynihan (D-N.Y.)

  • ||

    Fuck you, squirrels!

    (he worked as a Senate staffer for Sen. Daniel Patrick Moynihan (D-N.Y.)

    We should adopt a modified version of Suttee in this country; when a politician leaves office, he and all the members of his staff should be put to the sword and thrown on a giant funeral pyre.

    This would save us from the moronic huffing and puffing of pompous jackasses like O'Donnell (and Matthews, and that idiot Scarborough).

  • ||

    We should adopt a modified version of Suttee in this country; when a politician leaves office, he and all the members of his staff should be put to the sword and thrown on a giant funeral pyre.

    In my country we also have a tradition. We burn politicians and their staffs alive after they leave office. Build your voting booths. I will instruct my men to build a pyre next to it. You follow your tradition and then I will follow mine.

  • Brett L||

    My only concern with this is that no Congresscritter would ever retire.

  • The Donald||

    What gave congress the authority to raise the debt ceiling? Is it somewhere in the same document that gave congress the authority to declare war and that the president has to be a natural born citizen?

  • ||

    I, for one, would be quite content to see the entire Homeland Security budget redirected to debt service.

  • ||

    +1

  • 0x90||

    The likelihood of an authority's disestablishment is inversely proportional to the power it holds.

  • Realist||

    "MSNBC Olbermanniac replacement host Lawarence O'Donnell has a formidable presence and knowledge base (he worked as a Senate staffer for Sen. Daniel Patrick Moynihan (D-N.Y.) and was a producer of The West Wing, a teevee show prized for being more realistic than reality (or so I've been told)).'
    The guy is a dolt! One of the few times I saw him, he was confused about semi-automatic and automatic weapons. If he is on MSNBC he is stupid....period.

  • ||

    I'm a little curious as to how working as a producer on a teevee show gives you a knowledge base on sovereign finance. Or any public policy issue.

  • Realist||

    ....or anything!

  • Stretchy||

    The debt limit was a tangential theme of an episode of his flop tv show "Mr. Sterling" It was the episode with Portia de Rossi. This is why Larry knows so much about it.

  • Somalian Road Corporation||

    I don't know what the deal is with the West Wing, but for some reason my left-leaning friends have this very disturbing and annoying habit of citing it to make political points as if the show was reality.

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