Debt Ceilings and Financial Basements

Last night, as I watched Obama and Boehner address the nation about their inability to reach a compromise about the debt ceiling, Steve wandered into the room and calmly stated that he plans on cashing out of the stock market on Wednesday. My husband, who is always a glass half empty sort of guy, is ready to retire to a family compound in Montana with a carload of beans and guns. I think they're going to have to come up with some sort of compromise in the next eight days, but they are going to wait for the clock to run out until the last minute. 

The New York Times' chart comparing spending during the Bush and Obama administration was flying around on Twitter last night. It's a nice one. 


A stand-off between Republicans and Democrats is nothing new, but what's interesting/disturbing about this fight is the influence of the Tea Party on the Republican Party. I think lots of us have been waiting for the emptiness of the Tea Party Republicans to become obvious and for politics to return to normal. It hasn't happened yet. 

It's forcing even optimists like myself to consider the outcome of doomsday events. It is beans and gun time? 

Reactions from the RSS feed: 

John Quiggan, Crooked Timber "One thing the Tea Party has shown is that, in the current dire state of the US, there are few penalties for abandoning moderation. What the US needs at this point is someone willing to advocate a return to the economic institutions that made America great – 90 per cent top marginal tax rates, strong trade unions, weak banks and imprisonment for malefactors of great wealth."

Andrew Ross Sorkin, Deal Book "While the sky indeed may fall if the sides cannot compromise, the fact that the market has been calm has served only to deepen the resistance to a deal. People who perhaps should be worried don’t seem to be, and worse, appear to have stopped listening to the warnings."

Megan McArdle "These guys are out of ammunition.  They don't even have any good arguments left to fire at each other.  Which I think means we're hosed."

Dan Drezner "After last night's stunningly useless set of speeches, I'd put the odds of the U.S. not raising the debt ceiling by August 2nd at 1 in 2."

Nate Silver "To get something that is mutually agreeable to at least some members of Republican Study Committee and the Congressional Progressive Caucus is going to be extremely difficult."

15 thoughts on “Debt Ceilings and Financial Basements

  1. I’d have more sympathy for Tea Party critics if it wasn’t for the fact that the Bush tax cuts had to be deliberately extended by a vote of Congress and signed by the president just a few months ago.

  2. “Steve wandered into the room and calmly stated that he plans on cashing out of the stock market on Wednesday.”
    Don’t do it. Anyway, I don’t think you’d enjoy Montana.
    That said, beans are an excellent idea. I suspect that canned are better for lengthy storage.
    “I think lots of us have been waiting for the emptiness of the Tea Party Republicans to become obvious and for politics to return to normal.”
    Normal is what got us where we are today. Normal stinks.

  3. I had another look at that chart. I must say, estimating that “health reform and entitlement changes” will cost only $152 billion from 2009-2017 is quite the flight of fancy. In general, comparing the stuff that actually happened (under Bush) to the cost of stuff that mostly hasn’t happened yet (Obama 2009-2017) is a pretty good trick. It would make a lot more sense to compare the first 2.5 years of Bush’s presidency to the first 2.5 years of Obama’s presidency. The NYT chart is speculation masquerading as rigor.

  4. Amy, if you did do that, and only included the first 2.5 years of Bush with the first 2.5 years of Obama, you’d still have Bush to blame for the single biggest negative in overall federal spending: the massive revenue reduction represented by his tax cuts, which he pushed forward and never questioned, even as he embarked upon a couple of expensive wars (with attendant increases in military spending across the board) and a expensive Medicare give-away, all before 2004.

  5. RAF,
    That’s totally defensible as a discussion. The NYT chart, though, is disingenuous partisan garbage.
    Would taking out a year’s worth of living expenses be enough to make Steve feel better? I couldn’t argue with that as long as it wasn’t from actual retirement accounts with the penalties and taxes associated with that. Just taking it out of retirement (which a lot of people have done over the past few years) could generate a 40% hit.

  6. Hmm, the bulk of the participants in the market don’t share Steve’s, or Megan McArdle’s, concern. Treasury bonds are actually higher as of this morning, while equities are basically flat.
    Maybe tomorrow everyone will sell. But if that’s true, Steve should sell today.

  7. It may be disingenuous and partisan, Amy, but it’s not garbage; it’s making a point that really ought to be kept front and center as the country looms into default. Namely, that we in this situation for many reasons, but two reasons stand above all others: first, expensive wars that are not being paid for, and second, an inability to pay for them because the means to pay for them (taxes) were taken away.
    More of my thoughts here.

  8. Steve is indeed rejiggering 401K right now. He said that everyone else on his office did it a month ago. Now he does work at a very cautious firm, but I think if your stock broker is taking his money out of the market, it’s slightly worrying.

  9. Every time I’ve tried to rebalance my 401k, I’ve gotten too confused and nervous to actually do anything. I think we’ve got 7 different accounts with who knows how many different funds so I’m calling that a diversified strategy. I’m hoping half-assery in my 401k works as well as my half-assery in real estate investing has worked so far.

  10. I’m with Russell. Don’t start a war without a plan to pay for it. Republicans/moron “independents” thought they would get a nice war that would make everyone feel safe from bin Laden without paying a dime. What arrogance. The right thing to do would have been to raise taxes or keep taxes the same to pay for the War in Iraq. Republicans who gave a fuck about the deficit would have done that. But no, what they really want is the dismantling of this country.
    I called Scott Brown and Jim McGovern today. Call your Republican senators and your representative, be s/he Repub, Dem, or Ind. I told Scott Brown that I’m well-off (gave him a #) and I wanted taxes to be raised, just for good measure.

  11. So, invest like a girl.
    If that means, “don’t fiddle with it”, then my whole financial strategy has always been girlish. My retirement plans (TIAA-CREF) are simply something I’ve never thought worth the cost of thinking too much about. My family may suffer for that someday, but oh well.

  12. It may be disingenuous and partisan, Amy, but it’s not garbage;
    I’m perfectly happy to move the “Bush tax cuts” over and call them the “Obama-renewed tax cuts” and move the two wars over and call them the “Obama-continued wars” if that would make the right-wing partisans happy, and give Obama a much bigger bar in the bar-graph for the partisans to point to and laugh.
    But that’s not the point. The point is that the in a situation where the Republicans claim that they want a “balanced budget” and “lower deficits” but they are unwilling to consider cuts to the two biggest items on the chart.
    The position only makes sense, if you assume that the Republicans true bottom line is “We want to gut Medicare and protect tax cuts, but we want Democrats to share in the blame for it.”

  13. I would like to decree, right now, that no one will ever hold office again that’s currently holding it. If it gets the politicking to give ground to actual debate on points, then my cynical point of view that this is electioneering is then proved correct.
    If not, then my even more cynical fear that the individuals aren’t what matters, and it’s political parties fighting for survival, then f alla Washintgon, I wanna move to a parliamentary country. Maybe one with potential radiation poisoning and economic woes. Because I’ll feel safer.

  14. The Bush administration ran up record setting deficit after record setting deficit and now any conservatives that dare to want some assurances that we are actually going to do something about our rampant debt problem are labeled as “al-Qaeda terrorists”. Of course the Obama administration is essentially doing the exact same thing. The current Treasury Secretary, Timothy Geithner, has been running around frothing at the mouth and declaring that we are going to experience financial armageddon if the debt ceiling is not raised. This whole episode is yet another example that shows what a fraud the false left/right political paradigm in this country really is.

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