Reason.tv: 3 Reasons Why The Debt-Ceiling Debate is Full of Malarkey

All anybody in Washington can talk about these days is the debt limit or debt ceiling – the total amount of money the federal government is authorized to borrow at any given time. After a decade in which spending increased by more than 60 percent in inflation-adjusted dollars and the debt limit was raised no fewer than 10 times, the government is about to max out its $14.3 trillion credit line, leading to fears that Washington is going to default on its bonds, stop cutting Social Security checks, and destroy the economy more than it already has.

But the current debate over the debt ceiling is full of malarkey for at least three reasons.

1. August 2 is a phony deadline. Treasury Secretary Timothy Geithner has pushed back the drop-dead date when the U.S. finally reaches its limit a bunch of times already: March 31, April 15, May 31 were all cited as deadlines before August 2 was inked in as Armageddon. But this time, he means it, man, really.

2. Reaching the debt ceiling is NOT the same as defaulting on our debt – which would indeed be catastrophic.

Think about it: You can max out your credit cards but as long as you keep paying the minimum amount due each month, your creditors don’t go crazy. Interest on the debt is a small fraction of total outlays and the government has a series of tools – from using cash on hand to selling assets to scrimping on nonessential payments – to make sure interest payments are made and seniors aren’t put on an all cat-food diet.

3. Legislating-by-Panic is no way to run a country. The reason we’re in this mess is because government can’t stop spending. And the government can’t even pass a budget on a year’s notice. But we’re expecting them to come up with a good plan for the country’s borrowing in a couple of weeks? Trying to force through an expansion of the country’s credit line by promising cuts in spending down the road is exactly why we’re in this situation to begin with.

It makes far more sense to do something like sell some TARP assets -- the government is sitting on $320 billion in outstanding direct loans and equities investments -- to cover interest payments through the end of the fiscal year than to force Congress and the president to come up with a budget that cuts spending -- and borrowing -- for real, next year, not is some distant future.

For more information, check out Nick Gillespie's 5 Uncomfortable Facts About the Wonderful, Horrible Debt-Limit Debate and Mercatus Center's Jason J. Fichtner & Veronique de Rugy's The Debt Ceiling: What is at Stake.

About 2.35 minutes.

Produced by Nick Gillespie and Meredith Bragg, edited by Joshua Swain.

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  • ||

    Legislating-by-Panic is no way to run a country.

    We don't come to your job and slap the mop out of your hand, do we?

  • Ska||

    I wish someone would show up to the Capitol and slap the dick out of Chuck Schumer's mouth.

    On second thought, no, no I don't.

  • Mainer||

    I wish Chuck Schumer would be drawn and quartered and then the pieces waterboarded.

  • ||

    I just watched (and posted) the Sean Bean death scene video making the rounds, and there's a scene from a movie I haven't seen where he gets drawn and quartered.

  • ||

    Black Death...Just got put on NetFlix a few weeks ago.

    Not all that great.

  • Ray||

    Yes, but he gives all the communist heetherns the plague. Oh...spoiler alert.

  • ||

    Definitely never saw it.

  • Mr. FIFY||

    That would take too long, Mainer.

    Plus, it would be far too kind.

  • Barney The Frank||

    Hey, whose dick do you think that is?

  • NotSure||

    Using panic is the easiest trick for a politician to get his way though.

  • ||

    Lordy, but I am peeved by the complete and utter success of the "we'll default on August 2" meme.

    I have not heard a single "expert", spokesperson, or other member or contributor to the media take issue with it. And its 100% false.

  • ||

    I'm convinced that nobody in either the political or the chattering classes owns a dictionary.

  • OO||

    so moody's plus standard & poors are bluffing?

  • ||

    ...you also need a dictionary.

  • OO||

    nope - i can spell D E F A U L T just fine thx

  • Realist||

    Perhaps you should learn to capitalize the word "I" and thx is not a word.

  • Old Mexican||

    Re: OO,

    nope - i can spell D E F A U L T just fine thx


    I can spell "relief" - look:

    R-O-L-A-I-D-S

  • Realist||

    You really are old.

  • Old Mexican||

    Re: Realist,

    You really are old.


    The fact that you understood the reference tells me you're no tender morsel yourself.

  • Jason||

    They were still running those commercials in the 1980s...

  • Kristen||

    Well, my balogna has a first name!

  • OO=======D||

    As does mine.

  • Invisible Finger||

    If we were likely to default on August 2, the rating would be FFF.

  • ||

    so moody's plus standard & poors are bluffing?

    I prefer "lying."

  • Mnemone Jones||

    What would motivate them to do so? Wouldn't that send a signal that they themselves are untrustworthy enough to lay bond ratings? Seems an awful risk for little direct gain.

  • ||

    You ask this after they rated those mortgage backed securities AAA??

    Revealed now that they also fired analysts that saw the truth and complained.

  • Mnemone Jones||

    Link?

  • Red Rocks Rockin||

    Considering they're threatening to downgrade the ranking whether we raise the ceiling or not, it looks like they know that the problem is the debt itself, not whether we'll be taking out more of it.

  • Mnemone Jones||

    It's almost like, if there were a pink elephant in the room, someone would have mentioned it by now! Oh, wait, that's the opposite of your point.

    Sorry.

  • If Aug 2 came and went...||

    ...with no action, we would not notice any difference, but things would improve little by little. Birds would sing, dogs would bark, people would skip down the street....

  • Pip||

    Fuck your gay vision of America.

  • Hugh Akston||

    Budgetpocalypse: the Movie will star William Fichtner as Tim Geitner.

  • ||

    I thought you were going to write "William Shatner" and I got excited for a brief second.

    :(

  • Scruffy Nerfherder||

    This is MY... ECONOMY!

  • Sudden||

    Lenoard Nimoy in blackface as President Obama?

  • George Takei||

    Why does Shatner get all the attention? I'M GAY AND MARRIED! HelLOOOOOO...

  • Mnemone Jones||

    Oh my!

  • Mnemone Jones||

    "Congresscritters in this town used to believe in something!" [cocks sawed-off]

  • ||

    seriously though, there have got to be a billion triggers that essentially bypass the debt limit thing. Maybe medicare recipients stop getting paid, but SS and debt payment can't just stop, nor would the Obama administration, as much as they hate half of America, risk their jobs just to make a petulant point.

  • Mainer||

    I don't know. Obama is a thin skinned prig, who seems capable of plenty of petulance.

  • Realist||

    ....and flatulence.

  • Mainer||

    You're thinking of Michelle

  • Pip||

    Imagine the thunder!

  • Montani Semper Liberi||

    I don't know about that. Obama seems like a really petty mother fucker. Just look at how he reacts whenever someone in the press challenges him.

  • C'mon let's skip the niceties.||

    ...it's become acceptable to call him ObamaSlime (successor to BushPig, whom we can stop referring to every time we talk about how awful Obama turned out.)

  • ||

    I am wondering if Obama's threat against the SS checks means that he is repudiating the bullshit story about SS payroll taxes going into a "Social Security Trust Fund".

  • Mainer||

    Good one. I heard someone on the TV last night (wasn't watching that closely) talking about SS payments not being affected because there is plenty of money in the SS Trust Fund.

  • Realist||

    Ooooh yes, the dems lock box!

  • Al Gore told us so....||

    Al Gore would never play on our fears!

  • Mercurus||

    I had this thought, too. I don't think he's capable of honesty except accidentally.

    Freudian slip...maybe?

  • ||

    I say we make the budget open source, where every user has the ability to excise one budget item.

  • Brett L||

    I'd slash the HVAC in the Capitol. See if they still have time to meddle in the 3 seasonable months in DC.

  • Mainer||

    Brett you magnificent bastard.

  • ||

    I'm removing the Capitol Police.

  • Me, the Secret Service...||

  • NoVAHockey||

    somebody did a story about this -- how things would shut down in the summer. then everyone got A/C, government offices stopped using fans, and the vendors stopped selling paperweights of the Washington monument.

  • Kristen||

    We have three seasonable months?!?!? I thought it was, like, a week!

  • Scruffy Nerfherder||

    The FEC would be gone in a heartbeat if I had a chance.

  • sven||

    I'm getting really tired of the "not paying off your credit cards after maxing them out" analogy. Democrats should be describing what they want to do as "taking out additional credit to pay the monthly minimums on all our maxed out credit cards while only negligibly changing our spending habits and hoping our income will change enough so we can maybe someday stop living on the Amex."

  • Scruffy Nerfherder||

    You just hate the children.....

    and the old people.....

    and kittens....

  • sven||

    Poor people in general, really.

    And puppies!

  • ||

    They're getting subprime loans to pay off their credit cards? I thought that was bad.

  • Jeffersonian||

    When I run my plastic up, I start investing in Powerball tickets to pay them down.

  • sarcasmic||

    Using the credit card to pay off the mortgage.

  • Lisa||

    "hoping our income will change"

    Exactly. Also, individuals may not pay off credit cards after maxing them out but they don't necessarily continue to increase their spending. Remember, in governmentese spending cuts usually mean not increasing spending as much. Democrats don't just resist spending cuts, they resist any suggestion that they should not start spending even more on everything they can possibly imagine.

  • ||

    I heard Paul Ryan talking about this yesterday, and he was saying that he thinks the president is perplexed by this whole issue, apparently believing that the government should be spending much more than it does. That may've been just partisan politics, but it sure sounds like my vision of Obama.

  • They have found heaven...||

    ...in the previous domains of the Republican Pol: The Military, Law Enforcement and National Security.

  • ||

    Yes, someone at reason really should do something on #2. Everyone from the president to the major press has been mistakenly talking about default.

  • ||

    OT, I randomly decided I will be posting 100 Pixies songs, one per thread. Enjoy.

    #1 Bone Machine

  • Ska||

    It says Bone Machine, but I keep hearing Wave of Mutilation.

  • Matt Felch||

    Do the Pixies even have 100 songs?

  • SIV||

    They all suck.

  • ||

    Fuck you bitch, there is no such thing as a bad Pixie song.

  • Neu Mejican||

    Do the Pixies even have 100 songs?

    87

  • ||

    Legislating by panic may be no way to run a country but it's how Republicans have done it since the Atwater days. Strategy of tension works; it's the best detour around the rational mind and it gets people to do what you want.

  • We must support our troops!||

    They'll have no body armor in Yemen, Somalia and Pakistan if we don't raise that damn debt ceiling...

  • CoyoteBlue||

    Reason TV needs to invest in a laugh track/crowd reaction mix. A little innapprpriate laughter for ANY statement from one of the oligarchs or their buttboys or booing and hissing or better, like 'Young Frankenstien', have whinny and panic of horses whenever Chuck Shumer is mentioned or appears.

  • ||

    Glue Factory (in German)

  • Au H20||

    Marlarkey? Horsefeathers, say I!!!

  • ||

    Horsefeathers? It's Bupkis!

  • ||

    Bully that!

  • ||

    What really really pisses me off is when the President tries to say he's working to "grow" the economy.

    This morning he was harping about higher interest rates will wreck the economy, and won't somebody think of the children and their college debt burden?

    Meanwhile, he and Timmay and Bennay are busily fucking anybody crazy (or un-American) enough to try to save money without giving it a second thought.

  • ||

    He's spreading fertilizer, which does help plants to grow.

  • Sudden||

    Clearly, President Obama Comanche believes that Brawno is what is needed to grow the economy.

  • ||

    It's got electrolytes!

  • Byron||

    It's what (assembly) plants crave!

  • sarcasmic||

    Demand magically creates supply.
    This whole idea that entrepreneurs anticipate peoples' wants and take risks to supply them with goods and services is a myth.
    Demand comes first, usually in the form of legislation, and then the supply follows.
    This notion goods have to be produced before they can be consumed is preposterous!
    Just prime the pump with money and goods will appear.

  • ||

    Our economy is built on consumer spending, they say. Ergo, saving is bad, sopending is STIMULUS!

  • Red Rocks Rockin||

    What really really pisses me off is when the President tries to say he's working to "grow" the economy.

    When you ramp up debt to obscene levels, it does help the economy grow--for a time. Every president since Eisenhower's done it at various levels. Sooner or later, though, the law of exponential functions takes over and it all blows up.

  • joeyjojojrshabadoo||

    I DEMAND JACKET

  • ||

    "" Legislating-by-Panic is no way to run a country.""

    It's worked well since 9/11.

  • OO||

    worked well since iraq too

  • sarcasmic||

    Worked well since the stock market crash of 1929.

    Worked well since the South seceded.

    Worked well since the Whiskey Rebellion.

    Hell, it always worked.

  • Invisible Finger||

    Basically, legislating by panic is the only way government ever operates.

  • ||

    Not sure about that, but legislating by panic is certainly the key way that government GROWS.

  • ||

    I'm removing the Capitol Police.

    Stop paying the water and sewer bill. And electricity.

  • ||

    I'm zeroing out the Capitol page budget.

    Let's see how they last with dead hookers in the trunk.

  • ||

    I was adding that to Brett L's brilliant deletion of their A/C. It's a cumulative thing, each citizen doing his small part to cut spending.

  • ||

    We should roll over our debt onto a new credit card (with a LOW! LOW! introductory rate) and then go on a buying spree; we'll buy giant flat screen 3D teevees for a few thousand bucks, and then sell them out for the trunk of the Presidential limousine for a couple hunnert.

    That would totally work.

  • ||

    I say we give our entire debt to another country, like, say Canada, then let them control our military for the next ten years. We could put certain contractual limits on the use--like not attacking us, for instance.

  • Scruffy Nerfherder||

    I think only China could afford us at this point.

  • ||

    "out for of the trunk"

  • ||

    Legislating-by-Panic is no way to run a country.

    How else do you expect us to keep our phony baloney jobs?

  • ||

    Work, work, work, work.

  • Mainer||

    Be right with you boys.

  • ||

    Demand magically creates supply.

    Also, announcing a new Five Year Plan to double exports works like a charm.

  • Old Mexican||

    3. Legislating-by-Panic is no way to run a country.


    Why not? That is how we obtained Sarbanes-Oxley and the Patrioct Act and ObamaCare and Frank-Dodd and....

    Oooh, I see what you mean.

  • Realist||

    Good one.

  • D.D. Driver||

    When are we going to crack down on the predatory lenders that continue to push loans upon our government knowing it can't afford them?

  • Trespassers W||

    Well put, sir or madam.

  • ||

    which would indeed be catastrophic

    Would anything else fundamentally reshape Washington?

    They wrote their checks. They knew what they were getting into. I say, let it crash.

  • Jim||

    +1,000 reference

  • Old Mexican||

    In other unrelated news, gold is about to hit $1,600.00

    http://www.lewrockwell.com/blumert/burt-gold.html

  • Mainer||

    Isn't this hall of mirrors approach to the budget the natural result of a bunch of Baby Boomers running things ?
    What exactly does "austerity" mean to a bunch of pampered poodles that have never, ever done without ?

  • Jim||

    Do you have any idea how much they went through, having to put up with their parents constantly telling them WWII stories and how they don't measure up to the Greatest Generation, so great that they gave us FDR and his bastard offspring who will never die?

    They grew up tolerating Grandpa Simpson, and by god, they want their reward.

  • ||

    Default is the magic word here. It's how we are funding the country in the first place, because investors are only buying T Bills by default in the first place. If the Euro zone or Japan had their acts together, T Bill rates would be way north of where they are and financing this level of debt would be impossible. USA debt is a "safe haven" only because other soverigns are even worse.

  • ||

    "USA debt is a 'safe haven' only because other sovereigns are even worse."

    You know what they say about being chased by bears: You only have to beat the OTHER guy.

  • rather||

    Fuck the phoney debt ceiling, there is a real glass ceiling

  • Old Mexican||

    2. Reaching the debt ceiling is NOT the same as defaulting on our debt – which would indeed be catastrophic.


    Indeed, but that's not the problem: interests on the debt will be paid.

    The problem is that, right now, you NEED to borrow in order to cover the outlays of the Big Four: Social Security, Medicare, Medicaid and the Military. That's 70% of the total budget. The deficit is now 40% of the total budget. Do the math: Unless Congress and the president decide to cut something out of the Big 4, the government WILL HAVE to borrow.

    So it's not the default they're affraid of; it's cutting the giveaways.

    Another perspective:
    Baloney

    "To attract more loans, the Treasury will have to raise rates. The return of optimism will assure this result. There will be competition for funds. But this will create a nightmare for Washington. The increase of the debt, when facing 5% or higher rates, will lead to a worse deficit. The interest component of the debt will rise. This is the Keynesian productivity trap."

  • ||

    So, if they raise the debt ceiling, and it's accompanied by some token spending cut promise sometime in the next millenium...won't they just have to raise the damn thing again next year if tax receipts don;t measure up to whatever forecast they use in budgeting for FY12?

  • Old Mexican||

    Re: gaijin,

    won't they just have to raise the damn thing again next year if tax receipts don;t measure up to whatever forecast they use in budgeting for FY12?


    Please don't point out the obvious - you may end up being the target of Media Matters.

  • Sudden||

    This must be repeated a thousand times O.M. Obviously, the commentariat here understands that. And in their heart of hearts, liberals and conservatives understand it too. Fucking hell, everyone who is part of the government understands it.

    But fucking no one is willing to make the hard decision. It is absurd. And my fucking generation is committing mass suicide by not understanding this and raising all fucking hell about it.

  • Red Rocks Rockin||

    And my fucking generation is committing mass suicide by not understanding this and raising all fucking hell about it.

    To be fair, your generation has been told their whole lives that they should never have to work hard and that someone else will take up their slack. That their lives will be worthless without a college degree. That "free lunches" are a revenue-generating enterprise. If they haven't gotten it from their 60s-70s radical burnout parents, they've gotten from mass media, and they've gotten it from the schools.

    It takes a damn strong will and sense of self-awareness to fight off that kind of brainwashing onslaught from childhood-onwards. Most aren't going to be up for it.

  • Old Mexican||

    Re: Red Rocks Rockin,

    It takes a damn strong will and sense of self-awareness to fight off that kind of brainwashing onslaught from childhood-onwards. Most aren't going to be up for it.


    And that, alas, is our epitaph.

  • Red Rocks Rockin||

    Perhaps. The Roman empire muddled through a series of civil wars, social upheaval, religious revolution, and foreign invasion/migration over a period of several centuries.

    I have a feeling this country in its current form probably won't survive the next breakdown, though. Several decades of ethnic tribalism and social grievance mongering will likely prevent any large-scale cohesion from taking place--it's far more probable that regions will be taken over by strongmen along racial lines, and whomever can control and produce what resources remain.

  • George Washington Brown||

    True most won't be up for it. But that's what happens when you neuter a society with daytime TV and X-box. Better to learn good shooting, hunting and foraging skills.

  • Invisible Finger||

    The problem is that, right now, you NEED to borrow in order to cover the outlays of the Big Four:

    Why not just tell the "entitled" to borrow on that collateral of government promises to pay?

  • Neu Mejican||

    OM's comment is much wiser and more informed than Nick and Meridith's post.

    Now, what one takes away from the information will depend a lot upon your perspective.

    So it's not the default they're affraid of; it's cutting the giveaways.

    Actually, based on the plans announced, they are more afraid of defaulting on the loan, since the plan is to continuing servicing debt, while cutting spending by 40%.

    Not cutting those checks, or not servicing the debt both have somewhat predictable consequences on the economy. Neither are good. If you want to take 40% out of the Federal budget, it is probably better to do it in a stepwise fashion.

  • SIV||

    Mrs. Suderman says: "We have to raise taxes to raise the debt ceiling or Obama wins!" but then she also said: "We have to pass TARP or real people on Wall Street might lose their jobs!"

    Is there anyone worth reading at The Atlantic

  • SIV||

  • creech||

    Qickest way out of Libya and Afghanistan is to slap a 2% surtax on everyone's 2011 income effective 12/31/11 if the wars aren't over by then. I'm not sure all those who voted not to defund Libya would be willing to raise taxes for wars they claim are "the right wars."

  • ||

    On the whole repellent threat to SocSec:

    The phony notes held by SocSec (the "trust fund") are counted against the debt ceiling. So even if the debt ceiling wasn't raised, SocSec could just redeem as many of those notes as needed to make payments.

    Even if Treasury had to issue new debt to redeem the notes, it would be a wash as far as the debt ceiling is concerned.

  • Mnemone Jones||

    Er, if they actually are payable, then they aren't terribly "phony", now, are they?

  • ||

    If you don't know anything about the social security trust fund you might think that.

  • Mnemone Jones||

    Or, alternatively, if it is claimed by a certificate that it is payable, and it turns out it actually is payable (and at the amount and rate claimed by the certificate), then perhaps it is incredibly stupid to call it "phony".

  • ||

    The current debt-ceiling negotiations between US President Barack Obama and the Republican Congressional leadership have made it apparent that Obama is ideologically committed to increasing government spending and taxes in the face of a weak economy. If Obama is reelected next year, the dire implications of four more years of his economic policies for the US and global economies cannot be overstated.

  • ||

    Don't kid yourself. A republican in office will do the same. Frankly there's almost no difference between Obama and most of the popular Republicans who want his job. Romney? PLEASE

  • Dan||

    The US us done! We get to experience collapse! Better than nothing. No way out but a bond moment. Bring it on.

  • Mercurus||

    Quite frankly I'm up for a good financial/general societal collapse...this peace & prosperity thing is boring.

    We'll get to see and maybe experience Somalian style mayhem! I may even get to use my shotgun!

  • Dan||

    is...

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    Thanks to the u.s.a. You dont center economy around no taxing when troubled but you invest in your business to pay bills.And not go in debt paying bills. Is us post service competitve against UPS and FED EX? The gov chose the postal services! The gov has stubborn congressmen bent on one ways to help control gov and citizen!!!! Also libertarian(i hate abortion,new genetics) should not mean uncaring. Taking a bath naked is everyday, sex is every week thing, pain with marijuana(eaten) is a every day happening. Come on not abortion!! Righteous tribe liberal party not miltant secret cult democ party, stalinist or libertarian!!!!!! Lazy piggish should not be a political party.Vote or protest against corrupt press and fed poltician choices. Well thanks. rev 12 9jvz, col 3 11 jvz, rom 3 23 jvz, rom 12 2jv not self centerd

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