Government Spending

The Do-Nothing Scenario, Or: What a Debt Crisis Looks Like

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The Republican budget plan put forth by Rep. Paul Ryan is far from perfect. But it offers a vision of a more limited federal government—and an alternative to the nation's "daunting," "unsustainable" fiscal course. It's a serious attempt, in other words, to stave off debt-driven disaster. Naturally, Democrats have made it clear that they don't like Ryan's proposal. What they haven't made clear, however, is what they would do to address the debt problem. That may prove politically savvy in the short term. But regardless of how public opinion about Ryan's proposal shakes out now, I'm fairly confident in saying that most people—perhaps even most of Ryan's Democratic opponents!—would prefer it to the budgepocalyptic, do-nothing alternative: actively flirting with a debt crisis.

The debt ASPLODE!

As a refresher, here's the sort of thing the boring, cautious budget-minders at the Congressional Budget Office are saying about federal debt levels: "Over the past few years, U.S. government debt held by the public has grown rapidly—to the point that, compared with the total output of the economy, it is now higher than it has ever been except during the period around World War II." So it's not just high, it's unusually high. What does that mean? Do nothing, and, the whole system makes like one of those freaky heads from Scanners and explodes: In the absence of significant reforms, CBO says, "growing budget deficits will cause debt to rise to unsupportable levels." Emphasis on the word "unsupportable." That means we can't do it any longer.

Running historic debt levels also mucks up our national credit score, which pulls us closer to a debt crisis. Here are those buzzkill budget wonks at the CBO again: "A growing level of federal debt would also increase the probability of a sudden fiscal crisis." Bad news, right?

But how bad? What does an all-of-a-sudden debt crisis really look like? Economist Arnold Kling, a member of the Mercatus Center's Financial Markets Working Group, tells me that "what it probably looks like is a relatively sudden, sharp jump in yields on U.S. government debt. This probably would start at the long end (10-year Treasuries) and work its way back to the short end, so that even 3-month Treasury bills would see yields rise."

The run-up in interest rates would be fast—Kling guesses it would be just "a matter of weeks"—meaning there would be essentially no time to prepare. Watching interest rates won't serve as a warning system. When the crisis came, the only possible response would be massive, immediate cuts or similarly drastic tax hikes. According to Kling, "the government would have to quickly find a way to raise tax revenues or cut spending by as much as 20 percent" from a single year's budget. Think about that in the context of Washington's current bitter budget battle, in which the two parties are fighting over, at most, a total of $61 billion in cuts—or just two percent of the total budget.

Few in Congress will want to slash spending or raise taxes at that level, so they'll consider other options, such as "printing lots of money, [or] partial default on the debt." And the damage could spread beyond Washington. "There is a good chance that the federal government would have to reduce payments to state governments," Kling says, "which in turn could lead to fiscal crises at the state level as well."

Last year, Kling speculated that without major policy reforms there's a reasonably high probability that the U.S. would face a debt crisis sometime in the next two decades. He's not alone in worrying. Moody's raised a yellow flag when it said last March that the U.S. was moving towards losing its solid-gold credit rating. And while the CBO would not speculate about when or if a debt crisis might happen, it has nonetheless made its basic position on the matter very clear: building up more debt means increasing the likelihood that the nation's simmering fiscal troubles will eventually blow up in all of our faces. Refusing to offer a plan is a choice to allow that to happen.

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  1. Well done with the Scanners gif, Suder-Man. This blog needs more Cronenberg references.

    1. That is teh awsum. I must get it to work on my FB for the benfit of my many friends who need to see this, but are not Reasonoids.

    2. Seconded.

    3. Looked like Henry Waxman to me. I sat and watched it 20-30 times.

      1. +1 sharp eye

      2. That’s what I thought, too, except even in the milliseconds the face is visible, the nostrils are obviously too small and not deformed enough.

      3. Looks more like JFK than Waxman. Ohhhh, you meant before? Never mind.

        1. Too soon!

      4. Me too on Waxman. I love the way he keeps pounding his fist on the table after his head explodes.

    4. And it included alt-text!

      1. with a HomestarRunner reference!

        1. Caption: “DOWN and to the left….DOWN and to the left…”

      1. Thanks, i actually was wondering how it was done. I appreciate the info.

        1. I was but the latex thing put me off.

      2. Cronenberg = too cheap for CGI. Why not do it stop motion animation, you cheap bastard?

        Also, I’ve never actually seen Scanners, but can I assume someone has sex with or around that guy after his head explodes?

        1. Uh, there was no CGI when Scanners was filmed, Gene Shalit.

          You do understand how low his budgets were, right?

          1. …and shotgun blasts to fake heads from behind for realistic assploding effects spells one thing – OSCAR for special effects!

            /Horatio Sainz

          2. You do understand how low his budgets were, right?

            YOU JUST PROVED MY POINT ABOUT HOW CHEAP HE WAS.

            Tron was made during the same time period, and it was all CGI. Hollywood had to hustle and come up with a real, flesh-and-blood Jeff Bridges after studios started asking to cast him in other films.

            1. I did? Make sense, Gene. You do understand you have to raise money for a movie, right? Cronenberg’s mostly came from the Canadian Film Commission*, and they didn’t give him much. I don’t think “cheap” means what you think it does.

              * This and the New Zealand Film Commission giving money to Peter Jackson are pretty much the only times one of these commissions have funded something good.

              1. I don’t think I care for your repeated insinuations that I “do” know things.

                But I do know this, smart guy: If I throw for my daughter a shoestring budget wedding and use the excuse that it’s because the government wedding commission didn’t give me very much money, her mother’s still going to get to call me a cheap fuck.

                1. Uh, what, Gene? If you don’t have the money for more than a shoestring budget, how the fuck are you cheap if that’s what you use? Are you supposed to go into debt? Is your wife an unbelievable bitch?

                  Also, if you pulled off a really interesting and gory wedding for that shoestring budget, don’t you deserve praise?!? You live in a world of strange priorities and values, Mr. Shalit, and I never want to meet your wife.

                  1. Wife? I don’t believe in marriage, Mr. Trump. Which would make paying for that wedding all the more painful.

                    In any event, my princess’ blood-splattered bridal train would always be compared unfavorably to her cousin riding down the aisle on that light cycle.

                2. I’m gonna pass on that one but boy are you ever a great straight man.

                  1. That was for Fist 4:09. What a pain this format is.

                    1. It’s always the format’s fault, isn’t it, Ice?

                    2. I guess you’re the straight man now.

        2. I’m pretty sure SugarFree does.

          Or at least some character that SugarFree dreamt up has sex with the corpse.

        3. As to hungry, I’m eating Fig Newtons. Well, not exactly Fig Newtons, but Daddy Ray’s artificially flavored low fat fig bars, “MADE/REAL FRUIT/WITH”. And Daddy Ray’s picture with his head surrounded by red looks like he tried to explode, but could manage only to leak blood – http://www.daddyrays.com/index.html .

          Anyway, what could be more realistic for an exploding head than…an exploding head, huh? Don’t we know courtesy of Zapruder that that’s how exploding heads are supposed to look on film? CGI is just another way of saying “artist’s conception”, and what would the artist do but model it on the great example we have? At least Jack Kennedy did us one good favor, huh? Ask not what chicks your country should send to you, ask what parts of you should blow up for our enjoyment.

        4. “Also, I’ve never actually seen Scanners, but can I assume someone has sex with or around that guy after his head explodes?”

          Some people didn’t like Scanners because it had a plot, and that was kinda at the height of the slasher film era. Imagine you got to see a slasher film, and it’s got a plot?

          Anyway. Take away Scanners, The Bionic Man vs. The Sasquatch, the Fembots and a few others, and you’ve got no X-Files, no Truthers, and Kirstie Alley doesn’t think she can cure psychological problems with a tuning fork.

          …and who would want to live in a world like that?

          http://www.youtube.com/watch?v…..re=related

          1. Fembots. John Houseman actually used that term.

            Hey, wasn’t (SPOILER ALERT!) Big Foot a robot, as well? Man, that truly was the golden age of television.

            1. It’s bizarre how the ’70s worked out. The explosion in drug use was just a part of it too. Pop culture went haywire. Cult activity went mainstream. And television was full of hot chicks and wigged out conspiracy theories.

              The president made it so my dad could only buy gas for our car on even numbered days ’cause our license plate ended in an even number! It sounds crazy now, but compared to everything else that was happening at the time…

              I’m glad I was just a kid then. It did make for some great television!

      3. shooting it from behind with a 12-gauge shotgun.

        So did they have to hire a new camera operator after the first take?

        1. Why do you need a camera operator AT the camera? Are the Canadian unions so strict that the camera operator must actually be behind the camera and not a hundred feet away?

        2. Never mind that, what about the guy who had to duck his head and balance that thing on his shoulders while Wm. Tell blew it off?

        3. They filmed the cameraman for Cronenberg’s next film. He used every part of the buffalo.

        4. Yes, because obviously Canucks are too stupid for squibs.

  2. Thats what my head feels like every time i read one of Holy Cow’s posts

    1. Or one of Tony’s, et al….

  3. Does Kos or Hufflepuff have exploding head gifs? I think not.

    1. If Suder-Man starts including the melting bums from Street Trash, no one will be able to equal us.

  4. Ok, I had to cover the video with a post-it to get through the post. Mesmerizing…

  5. Am I the only one here kind of hoping for a massive implosion? I mean, staving off insolvency for a few more years just gets people to keep buying into the “gov’t is fine as long as we elect teh right people” bullshit mindset. I’d rather see the whole thing blown to hell, and see what we can build from the ashes.

    1. There are at least two of us. My friends think I’m insane. I think they’re stupid. We’ll call it a draw.

      1. I’m hoping the whole thing shuts down for months and nobody outside the beltway really notices.

        If it weren’t for all the moaning and wailing from my liberal friends, I’d want it to stay like that. But, fuck, they can be annoying.

        1. If a congressional aide screams
          And the Capitol is empty
          Does it make a sound?

          1. I hope not!

            1. You should’ve wrtten that as a haiku. : /

    2. While I don’t want to see this happen, I do think it is the only thing that will make the Capitol Hill Clown Car buckle down and fix the problem. I just wonder if it might be too late at that point to actually do any fixing. Who knows what kind of government we’ll end up with in that kind of turmoil?

      Plus, of equal concern to me, will be our relative position of weakness geopolitically at that time. That kind of crisis will dramatically limit our options in the event of a true crisis that needs our unique capabilities – and said crisis could be used by our adversaries/competitors around the world to advance their own agendas at our expense.

      In any case, I am quite confident that Congress will do nothing and draw the inevitable closer to the horizon. Once it gets their chaos will reign and it won’t be pretty.

      1. Geopolitical weakness is a feature, not a bug. The only crises that would necessitate a US response would be a foreign military invasion or an asteroid on collision course. And the US would still have ample equipment and personnel to deal with either.

        1. Perhaps. But, the EU just forced the Irish government to enact a property tax. Who’s to say our creditors won’t force on us a 75% reduction in spending that will benefit them beyond gettng their money back?

      2. I have jokingly told people that I want to see Trump win, because he has proven his incompetence so often, he’ll be the one to bring down the state.

        1. It’s funny because he’s true. He might be the only guy on earth who can actually lose money running a casino.

    3. The more I think of it the more I’m in that camp too. If they keep inflating the dollar interest rates will HAVE to go up on treasuries or no one will buy them. But then they’ll have to keep inflating to pay off the higher interest rates. The upside is that eventually no one will be willing to loan them any more money. Fuck ’em. Maybe I’ll just move to Fiji.

    4. Me three. I don’t know if this makes me overly pessimistic, a misanthrope, or what. At this point I would prefer Lord Humungus and some kind of Mad Max world.

      1. What the hell’s wrong with being a misanthrope? My wife is FOREVER calling me a sociopath merely waiting to begin his spree killings… When she does, I chuckle to myself and say, indeed.

    5. That reminds me, time to order more ammo.

      1. lol – or get into reloading if you’re not already!

    6. I can certainly see the advantages.

    7. Well gentlemen, I’m glad for the support. I think a lot of people are actually really close to being anarcho-capitalists, and just don’t realize it.

      And in case Tony stops by, anarchy / panarchy is NOT the same thing as unfettered chaos. It simply means voluntary communities. I guess you could set up a community based on absolute chaos if you really wanted to. Hell, I might even visit there on my vacations. But I don’t think it’d be very stable. A community based entirely on prostitution, on the other hand…

      1. SOMALIAROADZZZDEADCHILDRENINTHESTREETSOLDPEOPLEEATINGCATFOODCANNIBALISMBEASTIALITY….NO HIGH SPEED RAIL!!!11!!1111!

      2. Tony is a sockpuppet. “His” comments mean Jack and shit, and Jack left town.

        I suggest ignoring it.

      3. Huh, so maybe the US could become like ancient Greece, with city-states? Interesting, very interesting….or more like WOP-land with its great trading cities? Hmmm – I sense an evolutionary jump in governance about to occur…

      4. Oh, and “A community based entirely on prostitution” is what we have in DC and sundry other state capitols, right?

      5. What is a democratic government but a voluntary community on a large scale?

        1. Yeah, like how does that go – two foxes and a hen, what, fucking like rabbits, no that’s not it, let me try again…

        2. It became compulsory somewhere around 1861.

        3. Uhm… an involuntary community on a large scale?

        4. Because, Tony, it isn’t voluntary. If I don’t give your gov’t money for a cowboy poetry festival, they will attack me with guns. “Voluntary” means that just because a majority of your friends decide something is cool, they still don’t get to “force” (the opposite of “voluntary”) me to go along.

          1. So the only legitimate voluntary societies are ones that require unanimous votes for every society-wide decision? And every child born is excluded until he explicitly joins or leaves?

            Or might societies large enough enact automatic citizenship rules that can be opted out of, and majoritarian standards for decision-making and governing?

            You’re just being a whiny brat. It is voluntary–it’s just the kind of voluntary that works on a large scale.

            1. If it’s voluntary, can I opt out??

              As mentioned above, it seems that question was settled 1861-1865.

              1. Yes you can. You can renounce your citizenship. What you don’t get to do is sponge off the society and not pay your pay.

                1. You cannot charge for benefits conferred without consent. You cannot charge for benefits conferred without consent. Benefits conferred without consent – you may not charge for them.

                  1. But you’ve given your consent. You remain a citizen. Your initiation as a citizen was conferred without your consent, but that’s because you were a drooling automaton at the time and your parents acted on your behalf. Since reaching adulthood you’ve been perfectly free to renounce the benefits and leave.

                    1. Funny how progressives only make this argument when it pertains to “benefits” that they support.

                    2. To renounce the benefits I would also have to renounce my property. Don’t you ever get tired of making the same bullshit argument? This is the part where you claim that since my property is in the ‘territory’ of the government, they have a right to administer to it. And then I say prove that my property is the government’s property. And then you say there’s no definition of property outside what the government says. And then I say, what not even your own body? And then you say Yeah, it sucks, but what’s the alternative? And then I say I’m telling you the alternative: the government not treating people inside an arbitrary territory like chattel. And then you say, yeah right, paying taxes and slavery are totally the same thing, you libertarian extremist eejit. And then I say, no they’re not the same thing but they’re wrong for the same reasons. And then you claim that morality is all about maximising human welfare. And then I say, why? And then you say because it makes sense. And I say things that make sense can be supported by argument, and that values are subjective, and that since people have free will they can decide what the good is for themselves, and although conceptions of the good are subjective, application of these conceptions are objective: since I have absolute authority over my life and you have absolute authority over yours, and then, I don’t know, you say libertarianism is bizarre or something.

                    3. *sigh* Everyone else already covered this, but I’ll say it again: no, I cannot renounce my citizenship, because I would be forced to take citizenship in some other nation. Most of which are just as bad, if not worse, and require lengthy periods of time living there, so I reasonably could not expect to be able to retain my current property.

                      The children are whatever their parents are, until they come of age. But that only means something if the parents have the ability to “opt out”. Which I don’t have. Also, as I have been over with you previously, we are not talking about unanimous votes for everything, unless that is stipulated by the community in which you choose to reside. I imagine most of them would set up some sort of majoritarian rule, but 1) the closer to the local level that is, the more representative of me and my immediate community those votes will be, and so the less odious it will be to adhere to the outcomes, and 2) some communities may reject majoritarianism all together in favor of a strictly contractually-based society. That’s the beauty of anarchy; communities can all pick different ways to organize themselves, and you can go to the one that most suits your ideas, or which display the best results. Your permanent hard-one for the idea that all crimes are completely justified just because there’s a vote is such a sack of shit that’s we’ve explained to you over and over again, I don’t know why you even still make the assertion.

    8. Same here. I took a major financial haircut and it’s tempting to want to just get the pain over with quickly, rather than prolonging the agony as Obama seems intent on doing. If we have a major debt crisis I think that would drive home the point to more people that we simply can’t go on spending like we have.

      1. And I think we as a country and as a people would survive OK and emerge smarter and stronger.

  6. Few in Congress will want to slash spending or raise taxes at that level, so they’ll consider other options, such as

    invading another country and stealing all it’s wealth.

    Left that one out.

    1. Has the U.S. ever invaded a country and benefited financially from it? That’s a serious question. The first Gulf War might be a candidate, but I can’t think of any others.

  7. Oh, and cue Tony and Shrike telling us all is well.

    1. Move along sir, nothing to see here, just a head and a defecit exploding, nothing that can’t be fixed by borrowing a little more money.

  8. I think most folks who aren’t getting a government check simply won’t notice the shutdown.

    1. There will be some minor inconveniences like some national parks and monuments will be closed.

    2. Which is probably something like 50% of the population, probably more when you consider that a lot of private employers subsist on government funding and couldn’t pay their employees with out it. If SS, Medicare, Medicaid, unemployment, government employee paychecks, government contractor checks, grant recipient checks, etc. all stopped, that would be a big f’n deal for nearly everyone.

  9. And to think that all we have to do to stave such a circumstance off is to allow old people to die a natural death at a reasonable age.

    Seriously, we shouldn’t be taxing the shit out of cigarettes and liquor, we should be providing them free of charge.

    Also, I propose adding AARP to the list of terrorist organizations.

    1. If I weren’t already subscribed to your newsletter, I’d ask to subscribe to your newsletter.

    2. Sign me up. I never wanted to make it past 55 anyway.

      1. 70-72 is my limit. quality of life generally goes to shit (so to speak) much past that point.

    3. Don’t worry, every leftist I’ve ever known believes that the old starved to death in the streets from the dawn of time until the advent of SS, so once that goes belly-up, you’ll get your wish, you mad, brilliant, beautiful man.

      1. They only say that Jim, although some might have piled the cognitive dissonance on so thickly that they now believe as much. The truth is that most of them really believe that, were it not for SS/Medicare, a septugenariain mother who screams in pain every 20 seconds would move back in with them.

        And they say we hate old people…

        1. a septugenariain mother who screams in pain every 20 seconds would move back in with them.

          That’s why god invented pillows, to smother the screams. And the air.

  10. So, who here has seen ‘Hobo with a Shotgun’?

    1. I saw a transient with a knife once.

    2. Filmed in Nova Scotia: fuck yeah!

      No, I haven’t seen it. It looks terrible.

  11. ‘Few in Congress will want to slash spending or raise taxes at that level, so they’ll consider other options, such as

    invading another country and stealing all it’s wealth.

    Left that one out.’

    Trump for President!

  12. Instructions on a vending machine circa 2020:

    DEPOSIT COINS AND MAKE SELECTION. THIS MACHINE ALSO ACCEPTS $1,000 AND $5,000 NOTES.

    1. Why does it not accept $2,000 notes? What kind of madness is this?

  13. It’s hard to read the blogpost with Henry Waxman’s head exploding on an endless loop.

    1. Hit the escape key or click stop on your browser and the bad man’s head will freeze mid-boom.

  14. We need to start using Global Warming rhetoric in this debt crisis thingy.

    Use phrases like “tipping point” and respond with stuff like, “it’s not the debt itself, but the rate at which the debt is increasing.”

    Then quickly use the frog-in-boiling-water analogies when someone denies that government spending/debt will cause any real problems.

  15. Emphasis on the word “unsupportable.” That means we can’t do it any longer.

    Nonsense Peter! We can simply repeal the Bush Tax Cuts to make up the shortfall!

    1. I’ve got an even better idea – you could tax the wealthy at a 200% bracket! They can certainly afford it!

      1. The money belongs to the community anyway! The fuckers just stoled it all from us! Micky Moore told me so!

  16. My only quibble with this article is that you need to put a debt crisis in terms the average American can understand. “A relatively sudden, sharp jump in yields on U.S. government debt” doesn’t really cut it. You need to describe it like “imagine if Brad and Angelina got divorced, and Tom Cruise adopted their kids, on the same day that LeBron James won the NBA title and Ben Roethlisberger won the Super Bowl”.

    1. …and they all lost a ton of money on their houses as mortgage rates skyrocketed.

    2. How about: “Imagine if Tom Cruise and Lebron James got divorced and Ben Roethlisberger adopted their kids on the same day that Brad won the NBA title and Angelina won the Super Bowl and Michelle and Barry and William and Kate got caught in a pr0n sting.”

  17. Democrats have made it clear that they don’t like Ryan’s proposal.

    As has been said before, they’re going to like it a lot less when the market stops buying Treasuries and Bonds and the US Dollar trades at par with the Zimbabwean dollar.

    1. That’s when they’ll blame currency and bond “speculators”. “Everything would be fine if we would just stop letting people do things of their own free will.”

      1. Speculators are already short and salivating. Anyone wanna bet Soros is short US treasuries?

      2. “Everything would be fine if we would just stop letting people do things of their own free will.”

        Tony? Is that you?

  18. Hey? The head-exploding thing? Make it stop. Please. I have head-explode-obia. or something like that.

    1. I’m trying to figure out how to import it for my desktop at work.

  19. “what it probably looks like is a relatively sudden, sharp jump in yields on U.S. government debt.

    I think this is a shitty answer from Kling.

    If yields spike, there has to be something investors are looking at to signal to them not to buy at a lower yield. THAT’S the thing we need to be looking at, looking at yields is one step late.

    1. Inflationary expectations.
      Liquidity needs.
      Talk of actual default.

      Who knows what the trigger will be? Kling’s just saying that it’s likely to happen all sudden-like, which I find highly credible.

      1. It will be a rush for the exits as the bubble pops. Messy. Like that ‘splodey head.

  20. “You ever see that scene in Scanners where that dude’s head exploded?”

  21. 10 years there will be a debt crisis so what your saying is there is nothing to worry about.

  22. We’ve found our 2 icons for Hit & Run for the year, if not forever: Waxman’s head exploding while he keeps pounding the table, and the gently grinning guy with the shaved head.

  23. That head exploding is really distracting. Can you guys take this down?

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