A permanent increase to the debt ceiling?

Why not? Until last year, raising the debt ceiling has been a routine procedural thing that no one thought twice about - it just authorizes us to spend the money that's already been approved by Congress. Then last year it got used as a hostage and did some very real damage to the economy for no really good reason. If Congress wants to demand reduced spending, then just do it when creating a budget. There's no reason to repeat the nonsense that happened in 2011.

I don't think a permanent debt ceiling increase will happen, but the politization of it was ridiculous.

 

The whole "debt ceiling" itself is a horrifically outdated and pointless concept, and of dubious legal provenance itself. It's a procedural gimmick that is now exploited as a political hostage taking opportunity.

More appropriately - why don't you explain why it should exist at all.

So I guess in a way I agree that a "permanent increase" in the debt ceiling should be off the table - because the concept itself should be trashed where it belongs.

 

Congress should not be able to saddle the tax payer with debt without voting for it.

 

They did vote for it when they authorized the spending in the first place.

 

They did vote for it when they passed the appropriations bills.

 

Damn you.

 

authorized the spending, not the extended credit line

 

Yes they did; every appropriations bill has accompanying CBO documentation indicating exactly what it would cost and its overall impact on the budget.

 

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It is nothing more than a gimmick and honestly does not change anything. I do not think you will see substantive cuts and tax increases to solve the debt until the economy begins to improve, and once the economy improves you get idiots like GW and RR that believe the debt does not matter.

 

appropriations authorizing spending, not borrowing

 

If that's the way you want to play it, there are all sorts of things that aren't explicitly spelled out. Appropriations don't authorize that you should not be chained to a pole in a public square and clubbed over the head with your deliberately obtuse logic - ergo, does that mean that you can't not be chained to a pole and so bludgeoned? unclear....

The only real case for the debt ceiling in the reality-based community is if you don't want the government to operate logically or efficiently, and to follow deliberately inefficient processes and frustrate its purpose. You've made it pretty clear from your past posts that you view that as optimal - that's nice, but not very relevant to real world arguments that grown-ups have, rather Ron Paul BBS wet dreams.

 

Article I vests borrowing power solely with Congress.

Any borrowing must be approved by Congress.

I agree, though, having to vote on stuff makes it much more inefficient for Congress to saddle us with debt.

Totally unreasonable position I know, insanity, not reality-based, blah blah etc.

 

I think part of this starts from an assumption that we're facing some sort of imminent debt crisis - but that's all artificially made up. Yes, it sucks that we're deficit spending so much. But compared to the 1980's, we're paying less in interest as a % of our economy - so the debt *burden* is actually lower. Here's a fairly good article on the topic:

http://www.forbes.com/sites/pascale...l-not-go-into-a-debt-crisis-not-now-not-ever/


No, The United States Will Not Go Into A Debt Crisis, Not Now, Not Ever


If there’s one article of faith in Washington (and elsewhere), it’s the idea that the United States might get into a debt crisis if it doesn’t get its fiscal house in order.

This is not true.

The reason why it’s not true is because we live in a fiat currency system, where the United States government can create an infinite number of dollars at no cost to meet its obligations. A Treasury bill is a promise that the government will give you US dollars–something that the United States government can produce infinitely and at no cost.

That’s the reason why interest rates on United States debt have only gone down even as the debt has ballooned. That’s the reason why Great Britain has very low rates on its debt despite having very high debt-to-GDP. That’s the reason why Japan has an astounding debt-to-GDP ratio and still enjoys some of the lowest rates ever. Investors have bet for so long that there would be a run on Japanese debt and have ended up so ruined that in financial circles that trade is called “the Widowmaker”. (Here’s a more detailed analysis by my former colleague Joe Weisenthal at Business Insider.)

Well, what about Argentina? Argentina had to default on its debt because it had pegged its currency to the US dollar. It wasn’t sovereign with regard to its currency since it had to maintain its currency’s peg. It wasn’t Argentina’s debt that caused it to default, it was its currency peg.

What about Greece? Same thing. Greece hasn’t used its own currency for ten years. Of course it’s going bankrupt.
Mvc-017x

Does it seem that strange that governments can’t run out of money?

You don’t have to take my word for it. How about Alan Greenspan? He said (PDF): ”[A] government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit.”

But waaaaaaait, you shout, what about inflation? If the government prints money like crazy, won’t that create inflation?

Well, in theory, yes. But probably not. Why is that? Because the US has an even bigger advantage than just being sovereign in its own currency (hi Greece), it also holds the reserve currency. The US dollar is the main currency that is used in most international transactions, it is held by all of the world’s central banks, and so forth.

Why is this important? Well, another way to define inflation is to say that the supply of a currency gets out of whack with its demand: too much currency chasing too few people who want to hold it, and so its value drops. Well, when you have the reserve currency, the demand for your currency is always going to be extremely strong. There’s always going to be tons of people, all around the world, who want to use US dollars, because their transactions are conducted in US dollars. (And it’s highly unlikely that this will change soon–being the reserve currency has a network effect, meaning everyone uses the dollar as the reserve currency because everyone else uses it, creating a self-reinforcing cycle that’s extremely hard to break.)
Series 1928 or 1934 $10,000 bill, Reverse

(Photo credit: Wikipedia)

In other words, while in theory printing tons of money could create inflation, in practice demand for the dollar is so high–and for structural reasons that have very little to do with how the US economy is doing at a particular point in time–that it’s hard to imagine a circumstance under which the US government would have to print so much that it would cause significant inflation.

And even if it did–well, for all the bad memories we have about it, the Stagflation of the 1970s was many things, but it was not Greece. Life in the 1970s was still relatively okay, despite the stagflation. That is to say, even in the extremely unlikely event that the government had to print so much money to get out of its debt that it caused moderate inflation, it still would not be a debt crisis of the kind that Greece and Spain are under right now. (Hyperinflation, meanwhile, is even less of a danger, since in recorded history it only happens in cases of not just reckless money printing, but also extremely serious exogenous shocks such as war, regime change, etc.)

After all it’s already common knowledge among economists, Fed officials, and an increasing number of sophisticated investors.

Maybe so, but it’s still not common knowledge among politicians and among the general public. A lot of people still think that the US is under some risk of one day becoming like Greece, and it’s distorting our public debate.

It’s especially distorting it on the Right, where hysteria about deficits, and debt, and becoming like Greece has reached a fever pitch. Paul Ryan, especially, has framed his entire message on entitlement-cutting on the flawed premise that the US needs to cut its entitlement or it will suffer a debt crisis. This message, in turn, has infected broad swathes of the conservative movement (including very smart people in it), a movement that I consider myself a member of and want to see in strong intellectual health. But very few liberals–certainly no Democratic elected officials that I’m aware of, certainly not the President and the Vice President–are disputing the premise that the US is in any danger of a debt crisis.

In future posts, I will try to look at what the conservative movement can do to move past the idea of the debt crisis, and what it means.

 

It's different by different measures. It caused major stock market volatility and panics during the Summer of 2011. It lowered the US credit rating. It froze a lot of business decision making and there was a downturn in hiring around that period (unclear if it was related).

http://www.huffingtonpost.com/2012/...axpayers_n_2204553.html?icid=hp_front_top_art

According to this, direct costs simply from higher borrowing interest during the debt was $19 billion to the taxpayers.

In addition, the "solution" to the debt ceiling debate last year was to create the sequestration process this year which, again, is creating uncertainty and delaying business decisions, etc.

 

Where are people going to put their money? The euro? The Yen? The yuan? It is what it is.