Government Shutdown

The Debt Limit, Hostage-Taking, and Ideological Stockholm Syndrome

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While the budget showdown is happening, it's worth keeping our eyes on the bigger issue that's just a couple of weeks away: hitting the debt limit or ceiling, which is the total amount of money the federal government is allowed to borrow at any given time. For a good primer on the topic (and the last big showdown in 2011) go here.

The temptation among those who want to raise the debt limit with no obligations to curb spending is to conflate hitting the limit with defaulting on our debt.

Here's an MSNBC report on Treasury Secretary Jack Lew's take:

The government already hit its borrowing limit in May, but the Treasury Department has been able to use what it calls "extraordinary measures" to increase its borrowing capacity temporarily. Such measures, however, will be exhausted by mid-October, Treasury Secretary Jack Lew said, when the government will run out of money to make its legally obligated payments.

At that point, the government would have only $30 billion in cash on hand, while its daily expenditures "can be as high as $60 billion," Lew wrote in a letter to House Speaker John Boehner. In other words, the government wouldn't have enough money to pay its bills and would risk default every day thereafter.

You see variations of this formula everywhere: If we hit the debt limit, we won't be able to pay some of our bills or all our bills, or whatever, and we'll be in default, which would be catastrophic.

There's every reason to believe that defaulting on debt payments would likely cause significant disruptions in the U.S. and possibly the world economy. But hitting the debt limit is in no way the same thing as defaulting on the national debt. That's because federal debt payments come to about 6 percent of total federal expenditures—and about 10 percent of federal revenues. As long as the Treasury Department keeps making interest payments on the debt, which is likely no matter what happens, there's no default.

At the same time, federal spending would need to be cut by about 32 percent, according to the Bipartisan Policy Center. That would reduce GDP by definition, since GDP counts virtually all government spending (though not all business spending) as increasing economic activity.

If the last time is any indication, there might be interest-rate spikes—especially if the ceiling gets raised without a "credible" deal to actually reduce debt over time (recall that ratings agencies downgraded the U.S. government's credit rating after the deal that eventuated in the sequester was brokered in August 2011).

Which is the president's position. He continues to reiterate that he will allow no conditions to be placed on any debt-limit increase. It's also the position of media observers who liken the debt-ceiling talks to a "hostage-taking situation." As The Atlantic's Matthew O'Brien sums it up:

Remember, the Republicans aren't threatening economic calamity, because they want to rein in spending. They're threatening economic calamity, because they want to stop poor and sick Americans from getting health insurance. That is, they want to stop Obamacare. But that obviously isn't happening as long as someone named Obama is living in the White House. The Republicans had their chance to make sure someone named Obama wasn't living in the White House in 2012, and they did not succeed. Throwing a temper tantrum won't change that, even if that temper tantrum involves holding the world economy hostage.

As I noted last week, it's true—and awful—that the GOP is not talking about cutting future spending in exchange for an increase in the debt limit. Which means the Party of Lincoln's position is the same as the president's and that of Senate Democrats: They all are willing to increase borrowing as long as they get to do so however they want. Given that "credible" plans to reduce the national debt aren't on even the table, it's no surprise that markets are already getting skittish; there's every reason to believe things will end badly even or especially if there's an increase that doesn't tackle drivers of debt. Which means that in fact all players in the debt-limit situation are taking hostages. And media observers who pick sides among them are simply suffering from ideological Stockholm Syndrome when they claim only one party is taking prisoners.

It's well past time to orient the debt-ceiling debate toward the amount of government spending in the short term and the long term. Of course politicians will use whatever they can to win whatever concessions they want. But that doesn't mean the public, not to mention the media, should simply let them bullshit their way past the graveyard. Especially since it's the taxpayers who will be paying for the funeral.

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96 responses to “The Debt Limit, Hostage-Taking, and Ideological Stockholm Syndrome

  1. The temptation among those who want to raise the debt limit with no obligations to curb spending is to conflate hitting the limit with defaulting on our debt.

    See: Obama, Barack

  2. There’s every reason to believe that defaulting on debt payments would likely cause significant disruptions in the U.S. and possibly the world economy.

    Holding the rate on the ten year below 3% might be a problem.

  3. The simple answer for the House Republicans is to pass a bill authorizing interest payments and nothing else. Let the President and the Senate vote for an actual default.

    The thing is, for the proggies and much of the political class government spending is the same thing as interest payments. Not giving free stuff to their supporters is no different from defaulting on a contractual obligation.

    1. Sadbeard doesn’t understand negotiations:

      Concessions, bargaining, and negotiation are very important to politics and that’s especially so in Madisonian systems with strong separation of powers. But the way that concessions, bargaining, and negotiation work are that Obama asks for something Republicans don’t favor?a universal preschool program, say?and then Republicans counter with something they favor but Obama doesn’t. Like if universal preschool is so great, Obama, why don’t we pay for it by making Obamacare less generous and reducing federal spending on K-12 education and cutting other social safety met programs for low-income people. Obama would probably say no to that, and then we’d have a standoff. Or maybe we’d have a back-and-forth of some kind. But either way, the point of the negotiation would be that Obama is asking Republicans to make a concession so if he wants to get something done he needs to make concessions in return.

      But the debt ceiling isn’t some pet Obama administration priority. There is a gap between the spending that Congress has instructed Treasury to undertake and the taxes that Congress has authorized Treasury to collect. Authority to borrow the money to fill the gap is necessary to legally dot the i-s and cross the t-s.

      Sorry to point this out Matty, but having leverage, that is, having something the President wants but cannot get, is how negotiations start.

      1. No. He is just a dishonest fuck. What he fails to mention is that the process of give and take he describes cannot happen because the Senate refuses to pass a budget. So you never have a reconciliation process where that kind of horse trading can go on. So the only way to get any kind of negotiation between the house and senate is via a stand off over a CR or the debt ceiling. If the Dems don’t like the government being held hostage to negotiations, tell Reid to pass a budget.

        Sad Beard is a deeply strange, unpleasant and dim witted man. But he knows that. He is just a lying hack.

        1. He imbues the debt ceiling as some kind of magical automatic talisman. He might as well say, “buh buh but MANDATE”!

          And no mention of Sen. Obama’s 2007 vote against raising the debt ceiling nor the logic behind it.

          1. Of course he wouldn’t apply the same standards to both sides. And not it is not a talisman. But to the extent he has a point, he only has one because Reid refuses to pass a budget. It is not ideal to have your budgeting process revolve around threats of a government shut down and raising the debt limit.

            But thanks to Reid and the Senate Democrats’ refusal to pass a budget, that is the process we are left with. For the Dems to now complain about it is a bit rich to say the least.

      2. Sadbeard doesn’t understand negotiation.

        1. Sadbeard doesn’t understand much of anything.

          1. He’s a genius at frozen burritos.

  4. They’re still broke.

  5. Stoned Soldier: Do you care if it falls?

    Stoned Soldier: What?

    Stoned Soldier: The Roman Empire?

    Stoned Soldier: [laughs] Fuck it!

  6. “ideological Stockholm Syndrome”

    See also: Welch, Suderman.

    1. Just goes to show you can be a professed adherent to reason and still fail to use your brain, eh Cyto?

      1. Yes, randian, you demonstrate that daily.

        1. Sorry, but there’s no evidence that Matt Welch is some kind of sympathizer to the Dreaded Cosmotarianism. I wish you retards would get a new spiel already.

          1. Speaking of retards who need a new spiel…

      2. Yeah, the TEAM RED butthurt in these threads has been unbelievable. People need to learn the difference between prescriptive statements and descriptive statements.

        1. Maybe you’re not familiar with the bounty of evidence against Suderman and Welch. Both of them campaigned for Obama in 2012, by which I mean that they reported facts that might dissuade people from voting for Romney.

          1. I don’t have anything to add but nodding to SBR and Jordan’s points here. Team Red has just been bitching about OMG FACTS.

            1. You don’t understand what ‘facts’ are.

        2. Yes, it’s the people whose arguments are that 1) the GOP should never do anything to risk its senate election chances and 2)anyone who derides the weak reasoning of SuderWelch is TEAM RED-which is apparently most of HandR.

          Projection: not just for liberals!

          1. Actually, when Suderman went on his mini-rant, you’ll remember even I thought his prescriptive statements were flawed. The problem is you think factual reporting that is detrimental to your preferred outcomes = outright bias against your side, which is completely fucking absurd.

            , it’s the people whose arguments are that 1) the GOP should never do anything to risk its senate election chances and 2)anyone who derides the weak reasoning of SuderWelch is TEAM RED-which is apparently most of HandR.

            So on the one hand you think Suderman and Welch are trying to help the GOP in the long run, but at the same time are bashing the GOP?

            Pick one.

            1. The problem is you think factual reporting that is detrimental to your preferred outcomes = outright bias against your side, which is completely fucking absurd.

              You don’t understand what ‘factual’ means. Making dire predictions based on the same kind of polling numbers that should make gun control a winner (90% support background checks!) is not ‘factual reporting’. It’ weak analysis.

              So on the one hand you think Suderman and Welch are trying to help the GOP in the long run, but at the same time are bashing the GOP?

              WTF? Where did you pull this from? Maybe you should learn to read before you call people out as ‘completely fucking absurd’. I don’t remember you being a snotty dipshit but my memory isn’t great.

              1. Up until the thread I mentioned, Suderman was doing straight forward reporting. And you bitched about it anyway, because it was detrimental to your “side”.

                Making dire predictions based on the same kind of polling numbers that should make gun control a winner (90% support background checks!) is not ‘factual reporting’. It’ weak analysis.

                This is really important, so I’ll bold it for you: you never offered any other evidence. All you did was whine from the jump. you never refuted Suderman’s facts with facts of your own; instead, you tried working the ref and whining about “bias”.

                1. Which threads were this? I’m not going back I have better things to do. Even so, I expect better of Reason than obsessing over poll numbers that probably don’t matter?

                  You’re really butthurt over this and I find that most amusing.

  7. This whole terrorist/hostage theme is the type of shit I expect for low-information voters. The progfucks at Think Progress are going apeshit as usual: http://thinkprogress.org/econo…..n-default/

    Read some of the comments. Lots of ALL CAPS along with sweatpants around the ankles.

    1. Kevin Dawna Hurst ? Top Commenter ? St. Clair College
      WE THE PEOPLE WANT TO FILE CHARGES OF HATE CRIMES AGAINST THE REPUBLICANS FOR THERE CONSTANT ATTACKS ON THE POLICIES OF THE PRESIDENT WE THE PEOPLE VOTED INTO OFFICE WE WOULD ALSO LIKE TO FILE FURTHER CHARGES OF USING TERRORIST TACTICS TO OVERTHROW PRESIDENTIAL DECISIONS MADE BY OUR COMMANDER AND CHIEF , THEY HAVE JUST FALLEN SHORT OF TREASON AND MUTINY WE THE PEOPLE DEMAND THAT THE REPUBLICANS RESTORE OUR GOVERNMENT AND TURN THEM SELVES IN TO THE AUTHORITIES FOR PROSECUTION.

      “I DON’T KNOW WHAT WE’RE YELLING ABOUT! LOUD NOISES!!!”

      1. TERRORIST TACTICS

        Oooh. I want to hear this.

      2. It is funny how the most retarded stuff on those sorts of websites are always by a “top commenter” or “super user”. It is almost like those titles are meant to be ironic or something.

        1. They should be changed to “special commenter”, “very special commenter”, and “most special commenter”.

          1. I keep waiting to get a hat tip as a “very special commenter”

            1. At HnR, we’re all very special.

        2. The department secretary was on vacation and he had to type this himself.

      3. Ah, that explains one lefty Facebook friend (that I keep around purely for entertainment value) comparing Republicans to suicide bombers.

        No, seriously.

        1. I got this link from just the sort of Facebook friend. Think Progress is the World Net Daily of left-wing cranks.

          1. I thought Addicting Info filled that role.

            1. I think both of them qualify. But then, what is Salon?

      4. Haha, his middle name is ‘Dawna’.

        1. It’s almost like his parents knew he disappoint them some day so they gave him a ridiculus middle name as pre-punishment.

      5. I’M TYPING EVERYTHING IN CAPS FROM NOW ON. THE REPUBLICANS ARE LETTING DOWN AMERICA, JUST LIKE THE CLEVELAND BROWNS.

      6. THERE CONSTANT ATTACKS ON THE POLICIES OF THE PRESIDENT WE THE PEOPLE VOTED INTO OFFICE

        Wow, they genuinely don’t believe Republicans were elected to their offices by ‘WE THE PEOPLE’.

        WE WOULD ALSO LIKE TO FILE FURTHER CHARGES OF USING TERRORIST TACTICS TO OVERTHROW PRESIDENTIAL DECISIONS MADE BY OUR COMMANDER AND CHIEF

        When did ‘WE’ become a Monarchy?

        1. That is the problem. The left are now operating on the assumption that Republicans should have no say whatsoever in government. This is why the system is not functioning like it should.

          1. The Republicans have gave up their right to have a say in the direction of our government when they were hijacked by the most extremist elements of the party that have no interest in brokering any kind of reasonable compromise. Their constituents reward them for taking the most extreme positions, and they themselves have no incentive to work out a deal. All they have to do is make a lot of noise and scream out unworkable positions that their constituents approve of, and they’ll get re-elected no matter what happens.

            So said a progressive I spoke to. He said he was familiar with the concept of projection, but was unsure why I brought it up.

          2. I’m afraid that this misunderstanding comes from the terms “Democrat” and “Democracy.’ Somehow (perhaps from party indocrinizationization,” there is a gross misunderstanding that the party of the president gets to rule the entire government because of a simple majority mandate. This is untrue, of course, but seems well supported by the comments from those subscribing to this line of thinking. Education is the only way to counter this nonsense, but is difficult to accomplish with the inherent human tendency to rationalize rather than to reason.

        2. I know, right? And the nit-picker in me has to point out he is not OUR commander AND chief. He’s the commander-in-chief of the military.

    2. Republicans are a disease that left untreated will kill America. A moral country would have the courage to cure that disease.

      Oh my.

      I suppose it’s a happy historical accident that the progs aren’t the ones advocating for private firearms ownership. If they had 300 million guns they’d be pretty fucking scary.

      1. THE REPUBLICAN DISEASE MUST BE CURED. EXTERMINATED. WE MUST FIND A FINAL SOLUTION TO THE REPUBLICAN QUESTION.

        1. You know who else… ah, nevermind.

          1. THE JEWS BANKERS POSE A THREAT TO OUR NATIONAL SELF-DETERMINATION. THE JEWS BANKERS ARE GREEDY AND WANT TO TAKE ALL THE MONEY FOR THEMSELVES. JEWS BANKERS ONLY THINK ABOUT THEMSELVES AND NOT THE BEST INTERESTS OF THEIR COUNTRY. WE MUST ELIMINATE THEM TO SAVE OUR COUNTRY.

      2. “You’re a disease. I’m the cure.”

        -Cobra

      3. Republicans are a disease that left untreated will kill America. A moral country would have the courage to cure that disease.

        You know who else called compared a despised minority to a disease that needed to be expunged?

        1. Agent Smith?

        2. Jonas Salk?

        3. Margaret Sanger?

    3. My favorite: Marjorie Nye from the legal team of Fantasy and Land – “Is there a way to hold Republicans in contempt of “We, the People”?

      Case motherfucking closed.

      1. A trial by the proletariat!

      2. I plead guilty to contempt of the people.

        1. EXECUTION IT IS.

  8. It’s well past time to orient the debt-ceiling debate toward the amount of government spending in the short term and the long term.

    It would be nice to hear somebody, in all this noise about the end of civilization, to ask, “Why are we borrowing all that money, again?”

    1. “It would be nice to hear somebody, in all this noise about the end of civilization, to ask, “Why are we borrowing all that money, again?””

      It’d be even nicer to get an honest answer, like ‘well, those O’phones are expensive’.

      1. If your civilization requires borrowing a trillion dollars a year, perhaps it is not very sustainable.

        1. A trillion Zimbabwe dollars? That’s pocket change.

        2. It’s only $700 billion now, so everything is fine, crisis averted!

      2. Well except that wouldn’t be an honest answer.

        An honest answer would be “So we can ensure that Grandma and Grandpa don’t have to sell their house which is worth $500,000 in order to pay for their Mediterrainian cruise or the viagra that Grandpa is taking on it.”

    2. I’d like to hear a talking head or politician acknowledge that our economy, and possibly the global economy, is now dependant on ever increasing debt to function.

      This is the implication of claiming that by not raising the ceiling, we’re risking an economic catastrophe.

      1. I am pretty sure pauli Krugnuts openly acknowledges that.

      2. Well, yeah. Government spending is part of the GDP. So if government spends less, the economy suffers. If government spends more, the economy improves. Never you mind where that money comes from or what else it could have been used for. That’s the unseen. We don’t worry about that. We just concentrate on aggregates and what is seen.

        1. GDP is not an economic measure, it’s a political one. The two metrics I care about are the labor participation rate and the median income.

          1. GDP is not an economic measure, it’s a political one.

            Keynesian theory is little more than an excuse for politicians to spend other peoples’ money in the name of stimulating aggregates. There’s nothing economic about it. It’s political.

            1. WE’RE SPENDING IT ON OURSELVES, YOU LOLBERTARIAN TRAITOROUS CAPITALIST RUNNING-DOG SABOTEUR WRECKER FAR-RIGHT CHRISTFAG.

        2. And GDP equals wealth, so we get to create debt fueled wealth!

        3. Never you mind where that money comes from or what else it could have been used for.

          Exactly. It’s not as if resources are scarce, and using them on some moronic government boondoggle means they will be unavailable for uses that actually have an economic purpose.

          1. But, but, but that “boondoggle” creates jobs and stimulate the economy with its magical multiplier!

            1. I honestly think at this point, we could get China mid-90’s growth if the US started cutting government spending and rescinded a few key regulations. Seriously, I think we could get double digit growth if these assholes would get their foot off the windpipe of the creative sector of America.

              1. Thing is, it’s not just federal. Every layer of government has its cartels and cronies that it keeps in business at the expense of economic growth for everyone else. Want to contribute to the economy? First you must buy this license, pay that fee, follow these regulations, allow this inspection, fill out these forms, oh, and request denied. Fuck you.

              2. If you were negotiating to get regulations repealed, what would be your top targets to maximize growth?

                1. ATF: The firearms industry is one of the few growth areas in American manufacturing. Demand is high. Cut the regs/laws, and let the yoohoos buy overpriced MG-42s (market them as “The DeerBlaster”).

                  DEA: Does nothing except consume money with no perceptible benefit. Has probably deprived us of some good tunes.

                  NSA: Damages our software industry, with little perceptible benefit. Could use a nice 50-75% haircut.

                  Department of Agriculture: Cut the whole damn thing.

                  1. let the yoohoos buy overpriced MG-42s (market them as “The DeerBlaster”)

                    FUCK YES

                    If we could eliminate any of those, the effect would be big and basically an unmitigated benefit. However, none of them, other that the NSA, are particularly vulnerable to cuts at the moment since they all have huge entrenched constituencies.

                    We libertarians need to be vigilant for any low hanging fruit that
                    1) can actually be cut with a decent mobilization effort, and
                    2) will yield visible short-term benefits, especially economic benefits.

                2. Anything that requires people to ask permission and take orders before engaging in voluntary exchange with other people.

                  Anything that tells people what they may or may not do with their own property.

                  Enforce contracts and property law, but otherwise get the government out of the economy.

                  1. Well, yeah. But concretely, what are we targeting?

                    That’s a little like me asking what we should cut from the budget and getting, “THINGS THAT SPEND MONEY THAT WE DON’T NEED.”

                    1. Zoning? Occupational licensing? Permitting?

                      Here’s a little story that might piss you off a bit. Last year my father wanted to put an addition onto his house. Well, it turns out that the greenhouse out back that had been there for thirty years, before he even bought the house, had been built without permission. That’s right. No one got a permit. Well, the petty tyrant in charge of giving out permits for the addition made my father tear down the greenhouse as a condition of being allowed permission to build on his home.

                      After he tore it down, the guy attached more conditions. Dragged the whole thing out for most of a year.

                      That’s just a the county level.

                      So I can’t get into specifics because it’s so pervasive and rampant.

                    2. They didn’t make him get a permit to build it before tearing it down and then make him get a permit to tear it down?

                    3. Yeah, specific permits are potentially very good targets at the local level. I wish occupational licensing were more vulnerable, especially since my state requires licenses for every damn thing, but those usually have a lot of support from their industries.

                      We need a good laundry list for the federal level.

                3. If you were negotiating to get regulations repealed, what would be your top targets to maximize growth?

                  I can’t really give a good specific answer to that. I based my response on articles such as this one that states our economy would be over 3 times as large had we kept to the same level of federal regulation as in 1949.

                  Were I in a situation to actually do something about it, I’d probably look for the regs with the greatest deadweight loss that would be politically feasible to remove.

                  Off the top of my head, getting rid of the Jones Act and revising car manufacturers fleet MPG requirements would be two big ones.

                  1. I suppose if it begins with Department or ends in Act, there’s a good chance we could do without it.

                  2. All of this and not a single mention of eliminating OSHA, EPA, EEOC and DOE. You people sicken me.

                    1. I was going to mention the EPA specifically, but I’m not sure how feasible it is to get rid of them.

  9. As long as we can make political hay out of [insert D.C. event here], it’s all good.

  10. Since most people don’t know the difference between debt and deficit, money and wealth, seen and unseen, I imagine it’s easy to convince them that this means, well, whatever you want it to mean.

  11. Now I can’t get this song out of my head:
    http://www.youtube.com/watch?v=gTQCU2ndzzw
    The judge said five to ten, but I say double that again
    I’m not working for the shutdown
    No man born with a living soul
    Can be working for the shutdown
    Kick over the wall ’cause governments to fall
    How can you refuse it?
    Let fury have the hour, anger can be power
    D’you know that you can use it?

    The voices in your head are calling
    Stop wasting your time, there’s nothing coming
    Only a fool would think someone could save you
    The men at the factory are old and cunning
    You don’t owe nothing, so boy get running
    It’s the best years of your life they want to steal

    You grow up and you calm down
    You’re working for the shutdown
    You start wearing the blue and brown
    You’re working for the shutdown
    So you got someone to boss around
    It makes you feel big now
    You drift until you brutalize
    You made your first kill now

  12. WE THE PEOPLE DEMAND THAT THE REPUBLICANS RESTORE OUR GOVERNMENT AND TURN THEM SELVES IN TO THE AUTHORITIES FOR PROSECUTION.

    My only quibble with this is, will the DEMOCRATS be surrendering, also?

  13. There’s no such thing as manditory government spending. Just discretionary spending they decided to not vote on in the future.

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