Mimsy Were the Borogoves

Editorials: Where I rant to the wall about politics. And sometimes the wall rants back.

Defaulting on our debt is an executive choice

Jerry Stratton, July 8, 2011

Federal revenue vs. spending: Spending is out of control, even as revenue has been steadily rising.; taxes; spending

This needs to be trumpeted more:

“If we had to live under a debt ceiling budget for a couple days or a couple weeks, it wouldn’t be the end of the world, if you plan on it.”

That’s because $2.6 trillion would still flow into the Federal Treasury next fiscal year, Johnson explained.

“That is more than enough to make all debt payments. It covers 100 percent of Social Security—and still leaves about $1.6 trillion to cover about $2.6 trillion worth of spending. If this administration misses one payment to a Social Security recipient, if they miss one payment to a soldier, if they miss one debt payment, that is a choice they are making. It doesn’t have to be this way if they plan for it.”

“I’ve been on the unsecured creditor side of a customer going bankrupt,” he said. “If you come to me as an unsecured creditor in a bankruptcy situation where the customer is going through a reorganization and you say, ‘Secured creditors are getting dollar for dollar—that’s interest on the debt, that’s Social Security. The rest of you guys, until we get this figured out, will basically get 60 cents on the dollar. Once we go through the reorganization, once we get this figured out, you’ll probably get 98 cents on the dollar.’ I’d be going, ‘That’s a sweet deal.’ I’d do that in an instant.”

If there’s a default, it is the fault of whoever chooses not to pay those debts. That is the White House; if we default on our debts, it is President Obama’s default, because there is no need for a default. When the president threatens default, he’s making a personal threat—one fully under his control. Ace sums up Obama’s catch-22:

Obama says that not reaching a deal will panic the markets.

It will.

But why will it?

Because Obama and his cronies are putting out the word every single day that no deal means a default.

And who, meanwhile, is attempting to reassure markets that a failure to broker a deal does not mean a default?

The Republicans.

So yes, the market will panic, because they’re listening to the man who is deliberately attempting to panic them and possibly collapse the world economy… as a negotiating strategy.

There’s gamesmanship and then there’s insanity.

In last nights press conference, Obama tried to deflect blame to the Democrats in Congress: the Republicans have a plan he said, and I have a framework; the Democrats? Nothing.

But while it’s interesting that he’s throwing congressional Democrats to the wolves, his framework isn’t much better than nothing. It’s little more than “stop spending tomorrow”. But when you ask him which tomorrow, it turns out to be after his hypothetical second term is over. He won’t be in the White House for more than six years; his framework works on savings from 10 to 12 years down the line.

I like this from t-bird in the comments:

Counteroffer: we will raise the debt ceiling in twelve years if you cut spending now.

Only the Republicans have a plan. When Democrats start hitting the Republican plan, whether you agree with the criticism or not, your first question should be, what is your plan?

If they want to say “doing nothing”, well, that’s a plan, and it can be compared to the Republican plan. It won’t compare well. Borrowing money in order to pay for borrowed money is, again, insanity. Waiting until Social Security fails is insanity. Waiting until our debt payments exceed our gross domestic product is insanity.

Take a look at that graph. This is not a revenue problem. Revenues have been increasing. But spending has been increasing at a ridiculous rate, especially since 2007. It’s spending that needs to be cut if we want to avoid a default at some point down the line. Now is better than later, because now we have the option of not defaulting on our debts.

August 8, 2011: The media machine is calling me an asshole

The media’s use of violent rhetoric against tea partiers1 stands in sharp contrast to their shocked! outrage at the use of map imagery in political ads several months ago.2

However, I’m very late to the bandwagon for making fun of the MFM for that failing.  William Jacobson, Jonah Goldberg, Stephen Green, and the lonely conservative among many others have done a great job of it.

I want to focus on the crazy, mixed-up nature of their attack. As has become all-too common, the media is recognizing a fault in leftist rhetoric—in this case President Obama’s—and trying desperately to pin that fault on conservatives, especially the fiscally-conservative tea partiers.

Throughout the debt ceiling debate our President threatened to destroy the United States economy. He threatened to needlessly default on our interest payments.3 He threatened to needlessly stop social security payments to the elderly. It was all needless—the tax revenue is there to make our interest payments and even to continue social security checks.4

Debt ceiling debate, not crisis. It was never a crisis. The only sense in which it was a crisis was that our Democratic President threatened to destroy our economy. Destroy it now and in the future, because if we default on our interest payments, anyone willing to “buy our debt” is going to do so only at much higher interest rates to reflect the higher risk of default.

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July 26, 2011: Raising the debt limit is a major concession

The media meme that Republicans aren’t willing to make any concessions is bullshit. Their base doesn’t want to raise the debt limit, and Republicans are willing to concede that the debt limit be raised.

Their base is reasonable in not wanting to raise the debt limit. Imagine that you’re pulling in $5,000 a month1. But you’re $200,000 in debt and paying $1,000 a month in interest payments. You’re not even paying the debt down, you’re just paying the interest as it accrues.

You run out of credit, and increase your own personal debt limit to $250,0002. When you get to that new debt limit, your monthly interest payments will have increased to $1,250 every month. That’s $250 less a month to go for all of the stuff you can’t afford anyway. And it means you’re going into debt $250 faster every month—with nothing to show for it but even higher interest payments tomorrow.

Your friends and family members who tell you you need to stop increasing your debt and start decreasing your spending are being reasonable—far more reasonable than this hypothetical you who just keeps on spending more and more on interest, spiraling deeper and deeper into debt. So when tea partiers ask their representatives to hold the line at raising the debt limit, they’re not just reasonable, they’re right. The more money we spend on interest payments, the less revenue we have to spend on other things—and so we end up going into debt faster and faster. At some point the mathematics of the situation will force us to stop, but when that happens we’re fucked. Tea partiers are right that we need to stop before math forces us into insolvency, which makes all of the Republican plans that include raising the debt limit huge compromises.

I chose those numbers to be easy to understand, but the real numbers are even worse. Our annual revenue is about 2.15 trillion; our spending is 3.77 trillion; our debt is 14.3 trillion; and our interest on the debt is 414 billion.

If this were an individual making the very nice salary of $100,000 a year, they’d be spending $175,000 a year, and $20,000 of that would be just interest on the debt. And they’d be $665,000 in debt.

Just looking at those numbers, this individual is obviously heading for a major financial collapse that they won’t be able to recover from. How do you pay a debt that is more than six times your salary? But the numbers are even worse than they look: the interest payments are much lower than they’ve been historically; interest rates are very low today due to the recession. If interest rates were more like what they were in 2006, this person’s interest payments would increase from $20,000 to $30,000 a year—dropping their effective salary by over ten percent. Go back to the interest rates on January of 2001 and interest payments increase to more than $40,000 a year.

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  1. <- Gay marriage, white slavery
  2. 20/12 Hindsight ->