Obama Administration Misleading Americans Over National Default
Cross posted from The Right Counterpoints -- GoRight.
Most of those polled see through Bernanke’s and Geithner’s hysterics. As Sen. Pat Toomey, R-Pa., told MSNBC on Wednesday, “If we were never to raise the debt limit at all, the Treasury would still take in 70% of all the money they planned to spend in the form of tax revenue,” which is “more than 10 times the revenue needed to avoid a default.“
Toomey explained that while a partial government shutdown would occur if the debt ceiling were not raised, the catastrophe of a default wouldn’t take place.
via Editorial: Americans Have Hit The Ceiling Over Debt – Investors.com
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This just goes to show the depths to which the Obama Administration will go. They are claiming that failing to raise the debt ceiling automatically means the US will Default on its debt obligations. This is just plain Bovine Excrement as Pat Toomey correctly points out.
Almost half of the American people oppose raising the debt ceiling , and rightly so. Just say NO to more debt.
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Comments :
typo
I think you meant
Obama AdministrationPat Toomey Misleading Americans Over National Default-- clearly that's a much more apt statement, given Toomey's childlike failure to grasp the nature of our government's obligations.Here, he implies that something less than 7% of current spending levels is needed to avoid a default. He's clearly referring to the minimum amount needed to make interest payments on the national debt, which amount to something just over 6% of federal government spending. However, it seems that Toomey has failed to consider that the Federal Government also has entered into a wide variety of contracts on which payments are regularly due. Failure to make those payments is-- you guessed it-- a default.
Since Toomey hasn't even considered this basic fact, it's pretty obvious he has no idea what the implications would be if the government were instantly unable to borrow.
skymutt: accept no substitutes!
I don't believe your interpretation ...
is correct.
The term default as it is being used in this context and in the wider context within the media is that which is consistent specifically with debt obligations. Other types of contracts do not fall under this category, IMHO.
Do you have any sources to back up you claims here? Both in terms of the common usage of the term "default" and its applicability to non-debt instrument contracts?
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4My interpretation is the same as yours.
...which, although default can have a wider meaning, is exactly the meaing I am using here as well. It's just that the government has a lot of debts beyond making good on treasuries. Stuff like utility payments, mentioned in the Wikipedia article-- or maybe you and Pat Toomey don't thnink the government uses any gas/water/electricity? Debt to utilities is just one example of a debt that government would default on in the event it brought in only enough to make interest payments on the debt.
Not a very well written Wikipedia article, btw...
As far as broader definition:
But I'm fine with your assumption that Toomey was only talking about debt obligations.
skymutt: accept no substitutes!
You're seriously stretching here.
No, you are not. Debt obligations are freely tradable instruments. An obligation to pay one's utility bill is not a freely tradable instrument as compared to bonds, mortgages, loans, and promissory notes. Public debt is a general definition covering all financial instruments that are freely tradeable on a public exchange or over the counter, with few if any restrictions.
While I will allow that this is technically true in an overly zealous interpretation of Toomey's use of the word "default" I believe that it completely ignores the significant context in which Toomey made his statement, or indeed that context which is generally considered part of the national debate on this issue of "default". As such I find your use of the term to be misleading which might cause a lesser man to level the charge of lying
. :)
Still, let us consider the substance of your point. Do you have any evidence to suggest that the sum of (a) the interest due on the Treasuries plus (b) the total of all the government's utlity bills actually exceeds the amount of tax revenue being taken in? If not Toomey's point still stands. I would also hope that we are not in the situation where we are forced to borrow money simply to meet the utility bills. If that's the case we are in a much worse set of circumstances than I would have thought.
Also note that while the payment of one's utility bill IS a legal obligation it is one over which the government has control without the need to default on the payments, unlike the Treasuries. For example, the government could simply have the electric, gas, and water turned off at their facilities until such time as they can afford to make their payments. This is one of the many possible remedies that private citizens also enjoy to avoid default.
Indeed, many of the government's non-Treasury related contracts no doubt contain clauses which allow the government to terminate the contract without further obligation. They are free to begin exercising those clauses at any time. So to imply that failing to raise the Debt Ceiling will inevitably mean default on these contracts is extremely misleading. The government could, in fact, exercise their right to terminate many of these contracts as a means of reducing their payment obligations.
ASIDE: If Obama fails to take these reasonable steps to avoid a default on the typed of contractual obligations that you refer to then any default caused by such failure would be on Obama's head, not Congress. The executive branch is typically the one to make these types of decisions.
Now, if one's goal in all of this is simply to protect the "full faith an credit" of the US Government then I assert that this can be accomplished without the need to raise the debt ceiling. Simply start dismantling the programs and canceling the contracts which are causing the government to exceed it's spending capacity. Indeed this would seem an important step to insure that the US Government maintains it's AAA credit rating.
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[1] I note the use of a strawman here as well: "in the event it brought in only enough to make interest payments on the debt". That is not the circumstance that Toomey was claiming. In fact it is very far removed from what Toomey was saying. Toomey's point was that the interest on the debt is less than 10% of what is being brought in.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Your arguments are so contorted...
...they would make a yoga master envious. It is from this pretzel-like position that you think you are observing me stretching, when in reality I am not.
Whoa there cowboy! Where did this out-of-left-field assertion come from? A debt obligation, by the basic modifier-and-noun construction of the sentence in your previous post, is merely an obligation relating to a debt, nothing more, nothing less. Where are you getting this "freely tradable instrument" nonsense? The goalposts are flying around the field!
So what? Toomey did not use the term "public debt, " nor have I, nor have you, and you offer no explanation why the definition of this term, which you are newly introducing to the conversation, is relevant in any way, fashion or form.
Complete hogwash. I fully acknowledged the context in which Toomey used the word "default"-- and then showed why that context was insufficient.
This is not even a point that I have contested, despite your fals assertion that this is "the substance of my point", so I really have no obligation to contemplate this. I took the much lower hanging fruit that Toomey gave me. If Toomey wanted to merely argue that the government would not need to default even if the debt ceiling was not raised, he should have left it at that and not made the absurd assertion that there would be no need to default even if revenue was less than 7% of current spending.
However, I'd suspect that Toomey's overall premise is misguided as well. The vast majority of tax revenue is taken in before April 15th, so I'd imagine that revenue is only a trickle in August. Remember that we have already hit the debt limit now, and the Treasury already will have had to use stopgap measures for several months just to keep the giovernment running til August. I would suspect, therefore, that the Treasury will be spending down the money that people have paid in taxes to this point in the year. If the government has $0 in the coffers at some point and has to rely on income from taxpayers who make estimated payments, etc. then that is not going to be an amount anywhere near to our 70% of current spending levels.
A salient point. But since the government agencies can't plan for a certain shutdown, there will not be an orderly early shutdown with money still in accounts to pay the amounts owing on utilities at the time of shutdown. And who's going to be around to pay the bills? In reality, the fact is that the government will default on utility bills-- and that is only one example of a government obligation.
Perhaps... who knows? Your use of the word "many" and not "all" reveals that you believe there may be government contracts that do not have such termination clauses.
There's no reason to believe that the U.S. need to immediately run a balanced budget in order to maintain its AAA rating. Meaningful steps to reduce deficits in an orderly fashion over a period of years would likely achieve that objective, while an immediate and draconian 30% cut in government spending would be an economic shock that could cause a severe economic downturn.
skymutt: accept no substitutes!
Guess who?
I decided to pop in and lo and behold, GoRight happens to actually be right about something!
While both of you have made valid technical points, GoRight is right on the substance. The context and meaning implied by the Administration and Toomey concern the possibility of default on our publicly held Treasury debt (bonds, bills, etc.), and the likely extremely adverse consequences of default on that type of obligation, not government contracts of other types.
That said, GoRight seems to go too far (what a surprise) in downplaying how injurious it would be if we never again raised the debt limit and simply spent the amount that ongoing revenues provide for. Think about it: that would suddenly pull several percentage points of spending out of GDP. I have to think that such an abrupt cutback would bring us back in recession even just based on direct impact (the loss of that spending), let alone the loss of multiplier effects from that forgone spending.
But THAT said (on the third hand, so to speak), I would guess that the Democrats would eventually give in to Republican demands for their preferred level of spending cuts rather than continue with even more severe spending cuts necessitated by having to spend at the level of revenues. But no one knows how it would play out and with what timing, so no one knows how much economic damage would occur how soon amid that abrupt withdrawal of several points of GDP of spending coupled with all the uncertainty.
Heh
I'm sure GoRight will be pleased to have such a highly esteemed bedfellow as yourself ;-)
Yes, I know that's what he meant-- I'm not arguing that Toomey meant anything else. Toomey implies that the government can cleanly shut down operations with zero tail obligations, so long as it can meet treasury obligations. Well, that's not true, due to other kinds of defaults that Toomey has evidently not considered as to give such a glib statement as he did. Toomey is both technically wrong and wrong in substance.
This doesn't even touch the fact that the government wouldn't be bringing in revenue equal to 70% of current spending levels in August, due to the way income taxes are collected-- a fact which Toomey doesn't consider.
skymutt: accept no substitutes!
You're still mostly wrong on the substance.
You're still mostly wrong on the substance. I don't think (and certainly don't think it's fair to presume) that Toomey was implying that government could avoid failing to meet other types of obligations (money owed to suppliers, beneficiaries, staff, states/municipalities, whatever other parties). He seems to have been simply referring to what the Administration had misleadingly implied was likely or at least a very substantial risk: the possibility of defaulting on publicly held Treasury debt. No more, no less.
Re: timing of revenues, again, in terms of substance the point is still valid even though your technical point is valid: On an ongoing basis much more than enough revenue would be coming in to cover interest expense on Treasury debt (while rolling over principal).
You believe what you want
After thinking about it, I'm going to withdraw my timing of revenues point-- because of withholding, the government's tax receipts are likely fairly smooth thorughout the year.
Uh look at Greece, look at Portugal, look at Ireland, look at Spain. Do you really think any of those governments would continue covering interest expenses on their debt until the actual point where the amount of income they brought in would not cover those interest, or anything close? Of course not. A default would happen well before that point, simply because at some point, serving the people's needs at some basic level-- avoiding violent revolt becomes more important that paying debt. Just today, this:
Look at Argentina in the past-- did it ever get to the point where it shut down all government before it defaulted on its debt? Of course it didn't! You'll never ever see a country make its debt service it's absolute highest spending priority. You really think, for instance, we would stop funding the troops in the field while slavishly servicing the debt?
Therefore , Giethner has appropriately discussed what the effects of foregoing various government obligations would be if the debt ceiling were not raised, alongside other effects. Read here for Geithner's balanced statement.
He talks about the real effects of not raising the debt ceiling-- higher interest rates, higher debt load on the U.S. government due to those higher rates, and a likely double dip recession. These are very likely outcomes of a failure to raise the debt ceiling, do you not agree?
skymutt: accept no substitutes!
Instant replay.
Here is the portion of the original piece that references Toomey:
Now you say:
Firstly, where does Toomey say anything that implies the highlighted portion of your statement? I don't see any such thing in his statement.
His statement is actually saying that incoming tax revenues are more that 10 times that required to avoid default. He is also talking about the fact that there would be a partial government shutdown. So how do you know from this statement that Toomey hasn't already accounted for your meaning of the word default?
If you want to play games with the meaning of the word default then you have to show that Toomey was clearly NOT using your definition. It is clear that he had obviously done some level of analysis to determine how much revenue was required to avoid default ... what is not obvious is whether or not that analysis included the non-debt related contracts you are bringing up. How do you know that he did not account for these extra obligations as you assert?
Secondly, saying that 'existing revenues are 10 times what is needed to avoid default' is NOT the same thing as saying "the government can cleanly shut down operations with zero tail obligations, so long as it can meet treasury obligations". I do not agree that the former implies the latter. The former clearly implies that we would be operating at a spending level about 10 times that of the existing interest on the public debt, whereas the latter is assuming a spending level only 10% of that. So it's apples vs. oranges. Bait and switch.
If we assume that Toomey actually meant default to mean the interest on the public debt, then for you to have any point here at all you would have to show that the non-public debt related debt obligations you are conjecturing are sufficient to exceed the remaining 90% of incoming revenue. If they do not then Toomey's point still stands because it would still imply only a partial government shutdown.
And as I point out above the government may have options to reduce their obligations without incurring a default. This means that you only have a point if there are sufficient non-public debt related debt obligations of the type that you conjecture which cannot be avoided by means of anything short of default such that THEY total more than 90% of incoming revenue.
Do you have any evidence that a sufficient number of such obligations actually exist?
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Well then...
Why doesn't Toomey come clean with the American people regarding what a "partial government shutdown" would necessarily look like? Since he has "obviously done some level of analysis" on what would happen if the debt ceiling is not raised, he ought to know this, right?
When we are talking about an actual shutdown, the distinction between "debt obligations" and other obligatory spending is not the overriding concern. Some non-debt spending is obviously of utmost priority-- funding troops in the field, for instance, would I think take priority over making a utility payment at a ranger station in Montana. I think it's pretty obvious that you would not shut down a federal prision before stiffing a defense contractor on a contract for a future weapons system. So it's not like debt obligatons are the first priority, and you would see defaults long before the amount of debts exceeded the amount of revenue.
skymutt: accept no substitutes!
Why do you keep reverting
Why do you keep reverting back to accusing Toomey of misleading people by NOT adopting a fundamentally different definition of "default" than the one most people would think (correctly) that he is using?
He meant marketable Treasury debt. And anyone paying attention would think that's what he meant. The fact that you can apply a different, broader definition doesn't mean he was attempting to mislead people or even inadvertently misleading many people.
Sigh
For the umpteenth time, I know what Toomey meant-- a fact which is clear from my first comment in the thread. And I full well know that "anyone paying attention would think that's what he meant." The point is that he has not acknowledged government's other obligations on which it would inarguably default were revenue levels as low as he mentions-- and those defaults would have damaging effects, so I am arguing that his view of the government's obligations is too narrowly focused on treasuries. Geithner's statement, on the other hand, lists a wide range of possible effects of the government being unable to pay all of its bills-- none of which Toomey acknowledged when pooh-poohing the consequence of failure to raise the debt ceiling as a "partial government shutdown."
It's going to be cold comfort to contractors not getting paid, doctors not getting paid, utility companies not getting paid etc. that Pat Toomey narrowly funneled the debt ceiling debate into a discussion of debt service on treauries, and led people to believe that this would just be about some governent agencies shutting down and furloughing some government workers.
skymutt: accept no substitutes!
The whole discussion of
The whole discussion of "default" -- Administration warnings, etc. -- has been known to refer to default on publicly held Treasury debt, not on contracts with suppliers, etc. That's what has been the Administration's misleading scare tactic, and that's what Toomey was addressing.
You come along with arguably -- not necessarily, but arguably -- a technically valid definition of "default", but a definition almost no one has in mind as this issue is discussed, debated, warned about, etc., and you claimed/implied that Toomey is misleading people about the risk of "default" by failing to acknowledge those other obligations.
That's not the same as simply saying, in effect, "Ya know, there are other adverse consequences that Toomey isn't telling people about", referring to money owed to contractors, etc., that just happen to have in common with what everyone is talking about (default on Treasury debt) the fact that they involve money the government owes other parties, a commonality that has no relevance or bearing on what Toomey (and everyone else) has been referring to, which was an entirely different animal with entirely different probability and entirely different consequences.
It seems that you were, at least initially, trying to make it sound like money owed to contractors, etc., is somehow closely related to the default Toomey and everyone else has been talking about, but you haven't made any argument as to why it's any more relevant an adverse consequence as, say, less spending on Program X or Y, or the economic consequences of such a sudden contraction of GDP, or any other adverse consequence. I could think of an argument as to why there could be a bit more relevance, but if you've made one, what is it (beyond the simple fact that they both involve government not paying money it owes some party)?
At this point it seems that you are indeed settling on just making the very weak, diluted point that there are other adverse consequences that Toomey didn't mention, and that, even though he was addressing one particular alleged consequence to refute grossly misleading scare tactics some are using on this important issue, you think he should have said "Oh and by the way, there would probably be some different adverse consequences A, B, and C, that have nothing to do with the point I'm making, nor with the scare tactics I'm responding to."
So I guess all you're saying at this point is that when a politician publicly corrects the public on a prevalent, misleading scare tactic that is impeding rational discussion of an issue and causing irrational analysis of the options, that politician is obligated to (in the same speech or Op-Ed or whatever) list all the pros and cons of the option he favors.
Bottom line: You started with a bold accusation dependent on a non-substantive semantic connection, then backed off to only the very weak and questionable point described in my preceding paragraph.
By "everybody", do you mean "not everybody"?
Not true, as far as the administration's warnings. Read Tim Geithner's warning, which I linked to below. He clearly distinguishes between the concept of a government default-- a broadly defined failure of government to meet its obligations-- and a default on treasuries.
For example as I excerpted below:
Clearly, he's using "default" to refer to the government's monetary obligations.
So when you say:
You are simply spewing inaccuracies. "Everyone" wasn't jiust talking about default in terms of default on treasuries, unless you exclude Tim Geithner, the Administration's point man on this issue from your definition of "everyone".
Read Geithner's statement for a full discussion of adverse consequences beyond a broadly defined default beyond the removal of X amount of spending, but they can be summed up in this paragraph:
This, I believe, is a correct analysis by Geithner. Suppose I am a lender considering you for a refinance of your home. I learn from your credit report that while you have continued to make payments on your current mortgage, you have have recently failed to make your car payments. This of course, will affect the terms on which I will lend you money for a refinance mortgage, even though you have not missed a mortgage payment, becasue, the fact that you have failed to pay some of your debts would cause me to believe that that the risk of you failing to pay back my loan would be increased.
skymutt: accept no substitutes!
Look
If your point is simply that "no government would ever make paying the interest on their debt their top spending priority" then I can certainly agree with you on that point. But I don't think that Toomey's statement even comes close to touching on that point, much less contradicting it or misleading people about it.
Toomey is merely making the (valid in my opinion) point that the Obama Administration is posturing like defaulting on the public debt and thereby killing our AAA credit rating and thus incurring higher interest rates is the very first thing that will happen.
Toomey is basically calling their bluff by exposing the reality that interest payments comprise a mere 10% or less of incoming revenues. It is therefore absurd to think that the government would intentionally shoot itself in the foot by defaulting first thing out of the gate. You would have to believe that the Obama Administration considers the protection of our credit rating to be the absolute lowest spending priority. Do you honestly believe that the Obama Admininstration truly believes that? I agree it is not likely the highest priority, but the lowest? Hogwash.
Bottom line: The Obama Administration is using misleading scare tactics when they imply that they have no options outside of default on the public debt.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Hmm... where are these scare tactics?
I don't see where you or BR have actually cited an example of these supposed instances of posturing or scare tactics. And meanwhile I have cited Geithner statements, discussing the consequences of the U.S. government not meeting other kinds of obligations as well as treasuries and clearly indicating his position that higher interest rates would be a likelihood even if the broader government default did not extend to treasuries, simply because investors would lose confidence that the U.S. would always pay its bills.
Do I think Treasuries would be the first think the U.S would default on? Of course not. But at some point it would not be in our control, if investors were to lose confidence and refuse to buy treasuries, preventing us from rolling over existing debt. Therefore I think Geithner is correct to bring up the possibility.
So, you are okay with a double dip recession and higher interest rates, so long as we do not default on treasuries? If you want higher interest rates, higher future deficits, and a double dip recession, hope for Toomey and his ilk to force a "government shutdown." When we lose our jobs and can't get a loan for under 10%, you and I can take a break from selling apples at Broad and High and you can say "I told you so, we didn't default on Treasuries!"
skymutt: accept no substitutes!
Here's your scare tactics right here ...
Let's review.
In January Geithner was focusing on "catastrophic economic consequences that would last for decades" if the debt ceiling was not raised by the end of March.
In January Geithner was talking about how the failure to raise the limit would "trigger a default" on our "financial obligations". Exactly what I was talking about. He also indicated a number of scary sounding consequences which would have to be taken "if the debt limit is reached before it is raised". As far as I know the Military and the Federal Civil Service Workers are still being paid, as are the unemployed, and the old people are most likely still having their medical bills paid. Note that we are not well past the end of March.
And more recently we have your own quote from Geithner, but allow me to change the highlighting a bit:
Note how he leads with a threat to fail to pay service members. There's no way that would be the first thing they would default on as we already know since we have hit the debt ceiling and they are still being paid. That spells scare tactics to me. Making false and misleading statement about your intentions by highlighting the worst possible case and implying that it would be one of the first courses of action is scare tactics, IMHO.
Now I know you like to point point out that Geithner is pointing out a whole host of dire consequences, all of which are scare tactics because none of them will be the first place they tighten their belts, but he is clearly talking about default on the national debt here and it's impact on financial markets.
I don't question the validity of the analysis should such a default come to pass, I just question whether that will be the first thing Geithner does. In fact we already know that it will not be since he has already announced other options he will implement. So when he was highlighting this point so prominently and making it sound like a forgone conclusion he was, basically, misleading the American public.
It is not clear to me that Geithner does not have sufficient means at his disposal to avoid a default on the national debt without a debt limit increase. If this is truly the case then we are essentially in a situation where we are actually borrowing money just to pay interest on existing debt. That's the same thing as taking out a cash advance on one credit card to pay the interest on a second one. I'm sorry, but continuing to operate in that fashion is fiscally irresponsible and it has to stop.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Yes, let's review.
I agree that "catastrophic economic consequences that would last for decades" is over the top rhetoric, and could qualify as a scare tactic from your perspective. (From my perspective it is merely garden variety political pressure being applied-- I don't recall any run on canned goods on January 6th).
The question is, why is Toomey bringing this back up now, when Geithner's and Bernanke's more recent statements have been much milder and have not contained such hyperbole? Could it be that it is actually Toomey who wants to play up these so-called scare tactics?
"Financial obligations" does in no way imply "interest payments on the debt," if that's what you are saying here. Again, Geithner was referring to a broader range of obligations than just treasuries, and he listed these in that statement.
Well, if you had gone to the original source, Geithner mentioned that the actual point of default might be reached well after that point. Here's what he said:
So, despite your claims, it is so far all basically playing out just as Geithner claimed. Geithner simply was making it known that he wanted the debt limit to be raised in plenty of time-- likely to avoid any market-rattling unceretainty that could be a drag on the economy as may happen if we approach the time of default with no agreement in place.
If you wish to view this as a scare tactic, so be it. I believe it is like Bernanke said-- we really do not know what will happen if the debt ceiling is not raised, so unless a guy like Toomey actually makes an accounting of the over $1 trillion in annualized government spending that will be cut off when default hits, in my view it is perfectly fair game for Geithner to remind people that the government has real and important obligations, that it's not just a bunch of desk jockey bureaucrats getting a few days off that we're talking about here.
I've already deiscussed this with BR and I believe you are wrong. Discussion of higher interest rates on the national debt does not imply causation by failure to make good on treasuries. Default on other government obligations would be likely to put a bit of a chill on the treasury market. Again, I fall back on the basics: you miss your car payment, and you have to pay more for your next mortgage. You seem to reject this analogy, but it is perfectly reasonable.
So, we are borrowing money at around 3 or 4% interest, and you believe that the debt is so dire an emergency that we need to stop all borrowing immediately, even if it means shutting down the government cold turkey and bringing harm to the economy? That, my red-barred friend, is fiscally irresponsible. If you were out of work and didn't have the cash to meet your debts, you'd gladly borrow more at 4% to tide you over and pay those debts till you got a job.
While I am totally with you that the sheer amount of borrowing is very concerning and must be addressed, it is also very very important for the economy to recover, and the two concerns must be balanced. An economic recovery will bring in additional revenues and help balance the budget as well.
skymutt: accept no substitutes!
Some responses.
I believe that you are flat out wrong in this example but we can agree to disagree.
No offense, Skymutt, but go back and look at the original topic. You earn a well deserved "well, duh" on this rhetorical question. :) I would modify "play up" to a more reasonable "raise awareness about", however. Otherwise this is spot on.
True. It's almost like a self-fulfilling prophecy!
Note that "This estimate is subject to change" in this context is nothing but liberal code speak highlighting the fundamental strategy being applied: state the scary scenarios like they will be unavoidable facts unless something is done by a specific date ... and then if you don't get what you want by that date simply "update the estimates" and try again. Repeat this process until it works. This is basically just an application of the "Big Lie" propaganda technique
with a few facts sprinkled in to create deniability. It appears to have worked on you. :)
Yes, I reject this analogy because you are using an example completely within the domain of financial instruments to make a point about non-financial instruments. Is it really hard to understand why I would reject it in that form since it is basically apples and oranges?
Actually, I think that if you go back a reread my position this is not an accurate summarization thereof. Both I and the Republicans are more than willing to raise the debt ceiling to avoid a cold turkey shutdown. We just want to make sure that we have identified and put in place appropriate steps to actually and substantially reduce our spending FIRST. Just like a reasonable household budget would have to do.
I am not FOR a cold turkey shutdown but I consider that alternative to be better than extending more credit in the face of out of control spending. Burrowing more without first fixing the spending problem won't solve anything. It will just make it worse.
No, that is how you force fiscal responsibility onto a system that currently has none.
Actually I don't think that I would because doing so would only be exacerbating my problem. I would be paying interest on the interest which obviously increases my effect interest rate. I think that would be much worse than the obvious alternative of simply working out some sort of deal with my existing creditors to reduce or delay my payments.
But once again your analogy is fundamentally flawed. If I were out of work my income would be effectively zero. If I don't have any revenue stream how am I ever going to go get a loan in the first place? Who lends money to people with no income, and especially at 4 percent? More importantly, the government's existing revenue stream is very far from zero so it is not at all analogous to them being out of work.
I agree with this statement, however I likely disagree with your assumptions about the fundamental relationship between more short-term borrowing and sustainable economic recovery. More borrowing won't change the underlying problem. I prefer to focus on the underlying problem first, then making a realistic estimate of how much additional credit is required to get past the point where are begin to live within out means, and then extending the credit cap by that amount and nothing more.
At this point forecasts seem to indicate never ending deficit spending. That's not sustainable, obviously, so we have to take steps to put a stop to it now.
Agreed.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4I would modify "play up" to
I think "exaggerate" is more reasonable ;-) Why is it important to "raise awareness" about a scare tactic from five and a half months ago? Is he expecting people now to suddenly find Geithner's January statements en masse and stampede each other in the canned goods aisle?
Except the original estimate hasn't really substantively changed, as I have already pointed out. Geithner original estimate of when the treasury would run out of tricks to juggle the books ranged up to May 16th + several weeks. Reasonably, August 2nd = May 16th + several weeks.
It's not apples and oranges, but if you inisist, my argument works just as well with utility bills as car payments. Fail to pay your utility bills and they will go on your credit report and you'll pay a higher interest rate on your next mortgage.
skymutt: accept no substitutes!
Heh is right.
I don't know. He's sounding somewhat more reasonable today than usual! :)
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4You need to back that up.
While there may undoubtedly be a bump in the revenue stream around April 15 each year I sincerely doubt that this accounts for the "vast majority" of the tax revenue taken in. I could be wrong but you'll have to show me some evidence. The statement is not prima facie true.
I say this based on the simple fact that I, like the vast majority of tax payers, have an employer who withholds money from every paycheck and sends it to the government. In my case this happens on a semi-monthly basis. For others it may be weekly or monthly. It is clearly NOT the case that the vast majority of tax payers are making single lump-sum payments on or around April 15.
If memory serves you are required to pay as you go and if your tax payments are less than some percentage of that ultimately owed (I think it is like 90% or something but don't quote me on that) then you incur a penalty. The vast majority of taxpayers will seek to avoid that penalty. In addition, if you know the withholding from your employer will be insufficient you are required to make quarterly estimated payements to make up the difference.
So with all due respect, I believe that the government has a fairly steady revenue stream coming in every month and if that is the case then the rest of your argument simply collapes like the house of cards it is. :)
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Indeed. See chart at
Indeed. See chart at http://www.economist.com/blogs/freeexchange/2011/01/americas_debt
I knew this to be the case. When I said skymutt's point was technically valid, I just meant that there is some significant variation in revenue flow over time, but I missed his/her earlier characterization of "the vast majority", which is obviously invalid.
Heh
What you meant to say was that you did not catch my error ;-)
skymutt: accept no substitutes!
You are correct on this and I have withdrawn the point.
I had already prepared my statement to withdraw this point before reading this. Since this was a side argument, however, the rest of my argument does not collapse :-)
skymutt: accept no substitutes!
I agree that your argument
I agree that your argument does not collapse...because something that has never been built cannot collapse :-)
Your argument had no legs to begin with. I didn't read every word, but scanning your comments, it seems you never gave any reason to think Toomey was talking about anything other than default on our marketable Treasury debt, nor any reason why Toomey's point is invalid (that there would be much more than enough ongoing revenue to avoid such default).
If there's some assertion you made for which you provided any real supporting argument, I don't see it.
Sigh
Well, there's your problem right there!
Again, slowly: I know full well what Toomey was referring to. Please re-read (or read for the first time) my first post in the thread:
skymutt: accept no substitutes!
I should be the one
I should be the one sighing.
Help me out then, instead of (in effect) asking me to play a guessing game: What is this argument that you imply you've presented and which you say has not "collapsed"?
Is your point only that, even though Toomey's point clearly had nothing to do with the government paying what is owed to contractors, suppliers, etc., and even though it was clear that Toomey was responding to others who were referring to debt that has nothing to do with what is owed to contractors, suppliers, etc., you think it would have been helpful in some way if he had mentioned such obligations?
Is that all your saying? If so, that seems a long way from your apparent initial assertion, and I would think the tone would be quite different as well, since all you're saying is that he could have added some other information related to a fundamentally different set of potential adverse effects than the one he was talking about and responding to.
If not, what IS your point?
You should be reading before posting...
...not sighing.
Responding to what others? He's certainly not responding in a meaningful way to Tim Geithner-- Geithner has clearly referred to the whole spectrum of government obligations, and uses the term "default" in a more broad and meaninful sense to refer to government's failure to meet its whole array of obligations, not just treasury debt service:
Geithner is meaninfully explaining the overall consequences of not raising the debt ceiling, and talking about default in the broader sense that I am asking for. Geithner talks about consequences in terms of higher mortgage rates, higher future debt service costs for the U.S., higher borrowing costs for businesses and so forth-- all likely outcomes of a failure to raise the debt ceiling. It's not scare tactics or some wild armageddon scenario that he is peddling. Toomey, meanwhile, is narrowly focused on treasury defaults, which not only is not responsive to Tim Geithner, but also misses the broader picture and misleads the public.
Hope that clears things up for you, but I have no illusions.
skymutt: accept no substitutes!
If such a broad definition of
If such a broad definition of "default" were typical in the rhetoric of the Administration and others to whom Toomey was responding, you'd have a point. But I don't think that's the case. Out of all the occasions I've seen warnings of default in the media from the Administration and others, overwhelmingly the implication seems to be a reference to default on the publicly held debt, with related consequences re: harm to confidence in our Treasury debt and thus impact on future Treasury interest rates, etc.
Just because you can pick out one (or some) examples of cases in which an Administration official states a broader definition, that doesn't mean that that's been the definition (stated or strongly implied) that has been used generally.
you don't think, huh?
1) Toomey was responding to the Administration, not to the media. How the media uses the term "default" is not relevant-- and besides, I have already stipulated that most people would know what Toomey meant because of context. None of this changes the fact that the Administration is talking about defaults other than treasury defaults-- nor does it change the fact that in his "response," Toomey ignored those other types of default.
2) "Default" in the broader sense would also likely "harm confidence in our Treasury debt and thus impact on future Treasury interest rates," as Geithner and I have explained. So just because you see a guy like Geithner talking about harmed confidence or higher interest rates, it does not mean that they are talking about a consequence that would only happen if there were an actual treasury default.
3) Your guesses about what is "typical" and what is not in Administration rhetoric is just evidence-free assertion on your part. Before, you said that "everyone" used "default" to mean "default on treasuries" as a matter of course. Now, when shown that this is not true of the most important administration figure, you are claiming that you "don't think" that is typical, while providing no evidence to the contrary.
skymutt: accept no substitutes!
1. I referred to the explicit
1. I referred to the explicit or at least strongly implied definition that I've seen "in the media", not "by the media".
2. That's the argument I alluded to earlier as an argument one could make re: the connection, but even allowing for that argument (A) it's not at all clear that the argument is valid -- that delays (let alone "defaults") in paying contractors, etc. would spook markets re: Treasury debt and cause interest rates on Treasuries to increase, and (B) it is still my perception that Administration figures and others on the Democratic/liberal side have intentionally given people the false impression that they were speaking of default on Treasury debt (meaning publicly held Treasury bonds, etc.).
2 & 3. You're correct that I haven't substantiated my claim re: what has been "typical" from the Administration. I don't intend to spend the time to try to amass so much such information to prove what has been typical, but in my view one would have to have been living under a rock to have gotten a different impression of their typical messaging than the one I've described. You have provided just one data point to the contrary, so you haven't proven anything either re: what has been typical.
it's not at all clear that
A delay is a default, when it comes to not making payments when they are due. I would not suggest that you "delay" your mortgage payment with the idea that it is not a default, for instance. A payment that is not made when it is due is a default, and unless there is some state law that prevents it, a bank has the right to begin a foreclosure action if a payment is one day late.
And as far as whether it is is clear whether this will spook markets, you can say that we do not know, but as I have already pointed out, in the real world, if you don't pay some debt obligations, lenders tend to demand a higher rate of return. This makes it reasonable to believe that it is likely that a failure of the government to pay its obligations would cause a rise in future borrowing costs.
...Or listening to folks outside the Administration like Pat Toomey rather than folks like Tim Geithner? Go Right's original article singled out Bernanke and Geithner as being responsible for their "hysterics"-- but when I read Geithner's statements, they seem perfectly level-headed and sensible to me. Perhaps that wild man Bernanke has been off the reservation? I'll have to check into that later. I suspect strongly that I will be able to add a 2nd data point.
skymutt: accept no substitutes!
Re: the semantics of
Re: the semantics of "default" vis a vis delays of payment, obviously that's not central to what we're discussing, but I'll just say that I don't think delays of any kind of payment due constitutes "default". You're saying that if you provide consulting services to me and I miss the due date for payment, I've defaulted? Or even if I'm a week or two past the due date for my credit card payment -- that's "default"?
I wouldn't presume such a relationship in the case of U.S. Treasuries and delays in payments to government contractors, etc. I can't rule it out, but I sure wouldn't presume it just because there's such a relationship in at least some cases for private sector borrowers.
I'd be interested in what you dig up re: quotes, but I assume you're not more willing than I am to spend enough time to collect enough data points to possibly be convincing of what is typical. For what it's worth, I certainly don't concentrate my news & opinion media consumption on partisan or ideologically-slanted media or individuals of either side.
Bernanke
Okay here's Ben Bernanke when asked about the debt ceiling in his latest appearance before Congress--
Okay, so let's break this down:
I assume he's referring to the government having to shut down some or all operations here... this I think is more or less well understood by all sided with different perceptions only in scope, so I do not think this in controversial
This is a new one on me and I'm not sure what these legal problems would be, but if anyone would know this, it would be Ben Bernanke. If the debt ceiling is not raised, Bernanke is gonna be the one scrambling to put out fires, so I have no doubt that he is actually seriously considering the consequences here, while Toomey can lay low and hide behind 230+ other Republicans in Congress if he wishes.
So right away he's talking about defaults other than on treasuries-- consistent with Geithner, and consistent with what I am talking about.
Again, the idea that there is a risk of higher interst rates even if there is no default on treasuries should not be overly controversial-- this is a risk that you acknowledge is at present in some degree; I think it is a very stong risk, Bernanke seems to think it is certain, but the bottom line is that the risk is there, we all agree on that.
If you were to say anything in his statement was a scare tactic, this would be it, but I do not see how you can claim that Bernanke is wrong in claiming that this is a risk. And of course Bernanke terns this the worst outcome, not a certain outcome.
Bottom line: Bernanke talks about default on obligations other than treasuries, and explains his view of the risks in a reasonable and measured way. He mentions the same default risks I am talking about and uses the word default to describe them. Meanwhile, there's no hyperbole or scare tactics here: no mention of mass starvation, revolution, or angry mobs with pitchforks and torches.
skymutt: accept no substitutes!
Re: "legal problems
Re: "legal problems associated with making sure the debt is paid", what I think Bernanke is referring to is that it is not extremely clear what the seniority of obligations is or what discretion the Treasury has in deciding whom to pay and whom not to pay. I think that's why Toomey wanted to pass legislation to make it clear that paying interest on the public debt comes first.
Bernanke refers to "the risk of default or even the default on non-debt obligations." So ONE of the risks he's warning about is default on publicly held Treasury debt. But Toomey's point is that there is no such risk on the basis of insufficient revenue and thus no such risk as long as whatever necessary actions are taken to allow for such prioritization, and I think it's a safe assumption that such actions would occur rather than allow default on publicly held Treasury debt. Thus Toomey is right to respond to scare-mongering re: that risk.
The fact that Bernanke ALSO says that "default" on other obligations are a risk with adverse consequences is some support for your argument that it would have been ideal for Toomey to mention that type of "default", but it's still far from establishing that Toomey was misleading or had some ethical obligation to mention those other risks when he was addressing the biggest, scariest implication that others were making (misleadingly) re: the risk of default on publicly held Treasury debt.
Just want to say that,
Skymutt -- I just want to say that, although I still disagree, I think you've argued well. Good to see.
Well, thanks
You have taken my barbs and jabs well :-)
skymutt: accept no substitutes!
Default
By definition, a default is simply a failure to meet an obligation. Your obligation is to pay your mortgage payment in full by the due date. Failure to do so = default.
Technically, yes. Now if you are just a week or two late, you're probably not going to get sent to collections or be sued in either case, but it is still by definition a default-- you have not adhered to the terms of the contract.
Here is a rundown of the terms of the credit card reform act signed by Obama in 2009.
You will note that under the federal law, 1.) a late charge can still be assessed if they don't get their payment by the due date, and 2.) they can still jack up your intererest rate if you miss your due date.
Obviously, there are degrees here. It's not a very serious default if you pay before there are serious consequences. On a mortgage, that might take 30 days or so, and for my consulting services, it might be 90 days before I sue, or I might just decide your debt is not worth pursuing and write it off.
Sometimes in statistics for defaults, the number of people in default will be measured by actions taken-- reports to credit agencies, notices of default, etc.-- but these are technically responses to default, not markers that indicate the beginning of default, even though they are often looked at that way.
skymutt: accept no substitutes!
ok, and thanks for that meaty
ok, and thanks for that meaty response. But a lot of those technical/legal variations (e.g., how late on a type of debt before legally "in default" of that obligation) and related responses relate to how people THINK of the term "default", and thus they are not mere technicalities, but rather are relevant to what we're talking about, which is the impression the public is given when the term is used.
That said, IF it even takes a couple of months to be in default of just about any contractual debt obligation, then the timing doesn't matter for our purposes -- I'd accept that as a type of default (regardless of what impression most people are given by whatever the Administration and Democrats have been saying about the debt limit). I'm still unclear though on whether or not that "IF" is the case. I don't know if "default" would be a legal term applied to a long overdue obligation to pay for services provided.
Well, Skymutt, you got that part right.
But you would never know that from listening to Geithner. :) The sky will begin falling on day one after the debt limit is reached ... or so he would have people believe.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4False.
Above, I've referred you to Geithner's January 6th statement-- the one you cherry picked as so scary-- and he still says that Treasury can shuffle the books for several weeks after the limit is hit.
That's what you get for relying on the MSM to spoon feed you stuff, rather than going to original sources.
skymutt: accept no substitutes!
As much as it pains me, BR ...
I agree with you on the substance here. Skymutt is correct on the technicalities [1] but short on the real world substance. In the real world people can and do pay bills late, even credit card bills, without huge ramifications to their credit ratings.
I have paid my credit cards late in the past, mostly because I just didn't get around to them in time, and the credit card company dutifully tacked on an interest charge along with a late fee and they were perfectly happy as long as I paid them both. I generally pay the off in full every month. The same is true of utility payments.
And what I am pointing out here is what applies to the average Joe Schmoe on the street. I also agreew ith you that investors are going to be even more accomodating to the US Government.
And to hear Skymutt talk here you would think that the US Government was never late in paying any of its contractors. Ever. I sincerely doubt that. In fact I am certain that there are contractors who had to go to court to be paid somewhere along the lines. None of that has affected the US Government credit rating.
-------------------------------------------------------------
[1] Mostly. For example, I don't know how common this is but my house loan specifically states that my payment is due on the first of the month but that I am not in default unless it remains unpaid after the 20th.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Default = failure to meet the obligation
The contract, in the context of the law, spells out the obligation. If the lender gives you extra time, or the law says you have extra time, then you get extra time.
Many if not most government obligations would not have an equivalent grace period. A soldier does not expect the government to have a 20 day grace period in which to deliver his paycheck, for instance.
Well, when we are selling pencils at Broad and High, I will be happy to explain the difference between a contract dispute with an individual contractor and a situation where the government fails to meet 30% or more of its obligations-- but I think unfortunately the difference will be all too obvious by then :-(
skymutt: accept no substitutes!
And nothing ...
you have presented alters the validity of Toomey's point either in the narrow definition of "default" as it applies to the interest on the public debt, or in the broader definition that encompassed other types of default. You have failed to demonstrate that the government will be unable to live within its existing revenue stream simply by taking other legal actions to reduce their obligations. And Toomey's point that the interest is less than 10% of the existing revenue stream gives Geithner and the Obama Administration a lot of room to play with.
While Toomey was specifically addressing the interest on the national debt, which is the only type of default that anyone other than Geithner seems to be discussing, his point still remains valid even in the broader sense as far as we know. And even if that were not the case it is not at all clear that the US Government defaulting on a few utility bills is going to automatically trigger a global economic collapse as the Obama Administration would have everyone believe.
Correction, as you have claimed. "Explained" suggests that you have proven your point which you have not. I also note that in your example you were forced to use an example which dealt only with debt obligations of a financial nature (i.e. loan payments).
A more applicable analogy to illustrate the broader interpretation of "default" would be that I manage to make all of my loan and credit card payments but I am maybe 30 days late on paying a utility bill or paying the guy that fixed my gutter last week. Neither of these will affect your credit rating or result in any immediate effects on your ability to borrow. Let them become chronic and you may have problems.
The bottom line is that when you find that you expenses exceed your available income the prudent response is to reduce your expenses moving forward to the point where you can keep your head above water and ultimately pay that utility bill and the gutter guy (even if you are a bit late). Without implementing the necessary spending cuts to put us back within our means raising the debt limit is a meaningless gesture. We will quickly exhaust the additional credit and be right back here again, only the hole will be even bigger.
Moral: When you find yourself in a financial hole, stop digging.
Geithner and Obama both want us to keep digging for now even though they are "willing to talk about stopping ... eventually ... someday." Stopping now is the most prudent course of action.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Good thing you aren't in charge!
It sounds like you really believe we should just stop borrowing now... trying that would be the pinnacle of foolishness and would quickly put us all into the poorhouse!
Again, we are borrowning at 3% or 4% interest rates-- stopping now is NOT the most prudent course of action. Continued managed borrowing is the most prudent action so as not to shock the economy. We need to get the deficit under control-- it is not necessary nor possible to eliminate the deficit immediately without SEVERE consequences.
Moral: When you find yourself in a financial hole, you likely didn't get into it in one day and you aren't going to get out of it in one day. If someone is trying to sell you a quick fix, they are likely misleading you.
skymutt: accept no substitutes!
Heh. True dat.
The only trouble is, Skymutt, in this case the "quick fix" in question is ... raising the debt limit. :)
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4No, not moving the goalposts.
I had assumed that the term "debt obligations" in a financial sense was generally understood to refer to freely marketable financial instruments like loans, mortgages, bonds, etc. I never intended it to mean anything outside of those.
If I was incorrect and my use of the term was confusing, then I apologize. Now that I have clarified my meaning do we still have a disagreement?
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Obviously...
...with my new understanding of what you meant, we have disagreement where I previously saw agreement. I still have no idea on what basis you made your assumption, but since I have been wrong about the tax withholding thing today, I guess I have to be humble and let it pass :-(
skymutt: accept no substitutes!
Independent observers.
Lest people believe that I am the only one who believes that the Obama Administration is utilizing scare tactics, here is a report on the topic writen by an independent, ostensibly non-partisan source:
The tactics here are clear: Highlight the worst case scenario and portray it as if it will occur on some date certain to try and scare people into taking on more debt. Then if that date doesn't work issue a new one.
But at some point we have to reach a limit on the amount of debt we take on independent of the consequences. We cannot simply keep adding to the debt. We will eventually have to pay the piper.
Since the Obama Administration has failed miserably in terms of initiating corrective actions and/or proposing fiscal solutions to reduce the need to borrow just to make interest payments I argue we should shut off the flow of credit. This is no different than taking an overdrawn credit card out of the hands of an irresponible teenager.
Sure, it is a blunt instrument. It will have consequences. But those consequences likely pale in comparison to damage which will be done by allowing the status quo to continue.
I believe that the Republicans have hit upon the most responsible reaction to the current requests to raise the debt ceiling: take substantive steps to get the house in order before taking on more obligations. This is what any responsible financial advisor would recommend to any individual who finds themselves awash in debt that they cannot afford to pay. The first step is to stop running up your current debt level and start living within your means. Find ways to cut back so that you can meet your obligations including the payment of your interest obligations within the framework of your existing levels of revenue.
Unless and until we see significant steps to make real cuts in spending (not merely reductions in the growth of spending, a typical liberal way to lie about making cuts) I am in favor of forcing the Treasury Department to become creative in how they manage their money. They have already found a number of
"extraordinary measures"meaningful attempts to avoid default without running up more debt. I have no doubt that they have other options also available to them to do so. Let them start using them.I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Again-- thank goodnees you are not in charge!
You seem to actually want to see the Republican threat carried out to the bitter end!
Consequences = GoRight and skymutt pushing shopping carts around Columbus scouring the landscape for recyclables in order to survive probably, so thanks in advance*! When the alternative is borrowing a few trillion more at low interest rates to facilitate a smooth landing when you already have 14 trillion in debt, I strongly question if the blunt instrument is the prudent course.
*I'm actually not really worried about this situation. We have not touched on this, but I believe that the Republicans are bluffing here. At most, they are using this bargaining chip to achieve some concessions that will fall far short of eliminating the deficit. They will raise the debt limit in the end. John Boehner has been signalling this.
What if you had someone willing to lend you long term money at 4%? Is your financial advisor going to tell you to turn that down, if it can help tide you over until your income improves?
skymutt: accept no substitutes!
Depends on the circumstances.
No, I want to see some meaningful steps towards fiscal responsibility.
Depends on the circusmtances. If I am telling my financial advisor that I refuse to stop spending more than I earn do you believe that it would be prudent for that advisor to recommend taking on more debt at that point? Or would it be more prudent to get me to agree to reduce my spending first?
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4If I am telling my financial
The Administration has not refused to spend more than they earn, but rather it is a simple reality that we must do so for the time being. Even under the Republican House plan, the government is estimated to spend more than it earns for many years to come.
If the borrowing heads off a damaging financial event such as a default, then you should just go ahead and borrow the money.
It might also be prudent to get you to agree to get a 2nd job. Reducing speding is only half the picture when we are talking about curing deficits; raising revenue is the other. Of the two parties, only the Republicans have insisted that the revenue half of the picture be completely banned from the discussion. If the Republicans want an agreement to reduce the deficit, why don't they drop their condition that tax hikes for the rich be left off the table, for instance?
skymutt: accept no substitutes!
Sure they have.
I think you have a typo there, but assuming you actually meant "the administration has not refused to spend [less] than they earn ..." I say yes they have.
They have flat out said that they don't need to deal with the spending problem before we raise the debt limit. They have flat out said that the two issues should be decoupled ... which in effect is saying that they refuse to deal with the spending problem before we raise the debt ceiling.
That was exactly the scenario I laid out in my example.
Even Obama has agreed that now, in the middle of an economic downturn, is NOT the time to be raising taxes. That's why he caved and agreed to extend the Bush tax cuts. He knows that raising taxes will do as much to stall any economic recovery as anything. And as you yourself point out an improving economy will be a significant part of fixing the deficit problem.
The problem isn't that taxes are too low, the problem is that spending is too high.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4FYI
FYI http://www.washingtonpost.com/business/toomey-says-us-wont-default-regar...
I won't have time to comment for at least the next few days, but thought I'd share this. Based on the Bloomberg reporter's opening question, it seems that reporter is under the impression that Geithner is saying/implying we'll default on publicly held Treasury debt in August if the debt ceiling isn't raised.
Thanks.
An excellent interview by Toomey. He completely lays out the reality of what a partial government shutdown would entail and highlights that none of it would entail a default which would impact the bond markets. He also highlights that Geithner is attempting to blur the distinction between a default on the public debt and a default on other types of obligations. He basically calmly lays things out in a way that completely nails Geithner and the Obama Administration to the wall, IMHO.
It's like they are reading our blog! :)
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4You left out the good parts
I notice you failed to mention the part where Toomey characterized the effects of not raising the debt ceiling as "laying off the folks who cut the grass on The Mall." Obviously, this is very misleading to the American Public-- it minimizes the effect of over $1 trillion in immediate and sudden annualized cuts. It seems like someone who is accusing his political adversaries of not leveling with the American people would, you know, level with the American People.
Notably, when the interviewer suggested the possibility that Social Security payments and military payments would not be made, Toomey was silent. If all those payments can be made, Toomey had a golden opportunity to make that clear, but no... he had to trot out his one-liner about government workers mowing grass. Again, not leveling with the American People.
GoRight, why won't Pat Toomey level with the American People?
skymutt: accept no substitutes!
Toomey IS leveling with the American people.
I didn't leave that out. It was never my intent to provide a complete transcript of the entire interview. That's why we have a link.
In the interview Toomey correctly characterizes what a partial government shutdown would be like: it would be disruptive, it would be not optimal, some federal employees would be laid off, some procurements would be delayed. But it would NOT be a catastrophe as Geithner is claiming.
Toomey is correct that the first things to be cut in a partial government shutdown would be things like delaying certain procurements and laying off non-essential federal employees (i.e. like the folks who cut the grass on The Mall). This is a perfectly sane and rational exposition of what is likely to actually occur.
If you listen to what the reporter is actually saying he is NOT even asking Toomey about the possibility of Social Security and military payments being part of the mix. He is actually asserting it on his own. And the reporter does not pause to get a response he continues on uninterrupted to ask Toomey a question about what the alternative is because the Treasury Secretary is making the point that cuts to Social Security and the military would be a type of default.
That's when Toomey very directly responds to the reporter's question by highlighting how Geithner is trying to blur the distinction between default on the debt and other types of non payments. Toomey then reiterates and expands on just what a partial government shutdown would entail; things like laying off the federal grass cutters and delaying procurements. That is a perfectly valid response to the question, "what is the alternative to cutting payments to Social Security and military personnel which are the things that Geithner is claiming would happen?"
So I think Toomey has done a very good job of leveling with the American people. He is saying that given a choice we can choose to do things like laying off the grass cutters and delaying procurements as an alternative to cutting Social Security payments and not paying the military. And I agree with him.
Toomey also points out that Geithner is the guy who would be making the priority calls. So the question is, do you believe that Geithner will be cutting Social Security payments and paychecks for the military BEFORE he lays off the grass cutters or delays procurements? What would you do when confronted with that choice?
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Plainly false.
After the reporter made that statement about disruption to payments to the military and social security payments, Toomey went right back to harping about Geithner talking about default on Treasury debt. Nowhere did he say that "given a choice we can choose to do things like laying off the grass cutters and delaying procurements as an alternative to cutting Social Security payments and not paying the military," as you claim. What he said instead was that we can choose to do things like laying off the grass cutters before defaulting on debt service.
In fact, quite the opposite of making a distinction between military payments, etc. and government grass cutters, his statement explicitly grouped them toghether! The only distinction he drew was between debt service on treasuries and "every other conceivable payments that the government mgiht engage in," a category that would include both government grass cutters and military payments
I've transcribed that part of the Q and A:
Let's break down Toomey's answer just to remove all doubt.
Toomey makes a clear distinction between "debt payments"-- referring to Treasury debt service-- and "every other conceivable payment that the government mgiht engage in"-- procurement payments, payments to grass cutters, payments to service members, payments to social security recipients, and so on. Toomey makes no distinction between stuff like military payments and mall grass cutters, however. The opposite actually occurs: he lumps grass cutters and military personnel together.
Reinforcing that he was clearly talking about Treasury debt service vs. all other types of government payments. Here, he clearly uses payments to the grass cutters on the Mall as the representative of "all other conceivable payments that the government might engage in"-- including payments to service members and social security payments. Despite your claim, again no distinction was made between payments to Mall grass cutters and military payments.
Here, Toomey claims that Geithner has the discretion over what payments to make-- but again, only in the context that Geithner can decide to make Treasury debt service payments. Again, he makes no distinction whatsoever between mall grass cutters and military payments. Listening to Toomey, there's no indication that he even considers military payments more important than paying the Mall grass cutters.
That being said, I think it's pretty much a no-brainer that you would lay off the grass cutters before you would cut paychecks to the military. But that's not the real question. The real question is: do you have to do both to make up for a $1 trillion+ annualized shortfall? Toomey did not say, even when being given an opportunity to clarify the matter on a silver platter. He therefore fell far short of leveling with the American People.
skymutt: accept no substitutes!
You're stretching this beyond all credibility.
Um. No. I think you better go look up the meaning of explicitly
. Toomey never even mentioned Social Security or Military Payments so he didn't "explicitly group" anything together. That's what you and Geithner are trying to do.
This is the reporter making his own bald assertion. He is, in effect, sort of putting words into Toomey's mouth with that statement when he says "what you just laid out there". Toomey never said any such thing about "Social Security payments, even payments to military personnel" as the recording clearly demonstrates.
Note that this is not a question but it does establish the context for the question which the reporter is about to ask.
OK, so where are we? The reporter setup the context for the question as being "The Treasury Secretary suggests [that disruption of Social Security payments, even payments to military personnel] would be a default --" and then asks Tommey "what's the alternative here?"
There are actually multiple aspects to the question given the context established by the reporter: (1) what is the alternative to the Treasury Secretary's definition and use of the word "default", and (2) what is the alternative to the "disruption of Social Security payments, even payments to military personnel".
Toomey quite reasonably responds with:
which is directly addressing (1) above on how one might alternatively interpret the use of the word default within the context of "debt payments".
Toomey then continues with:
which is directly addressing (2) above. He explicitly points out the obvious: everyone understands the difference between making a debt payment and laying off non-essential personnel like the grass cutters (as an example). His reference to laying off the grass cutters is obviously intended to be an example of one alternative to "disrupting Social Security payments, even payments to military personnel". Thus this reference is clearly drawing a distinction between what the Treasury Secretary is talking about and "the alternative". The exact opposite of what you claim.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Diversion into minutiae and handwaving on your part
By all means, let's look at the definition of explicit--
Nowhere in the definition does it say that one has to mention things by name to be explicit.
Now lets see if Toomey's statement explicitly groups payments to grass cutters and military personnel, according to that black letter definition:
Toomey proposes two categories here, which encompass all government payments: Treasury debt service payments, and other government payments. Since neither military payments or grass cutting payments are treasury debt service payments, they clearly fall into the "other government payments" category. There is no vagueness or ambiguity here, and any implication is so obvious as to make it impossible to come to any other conclusion. I argue that the definition of explicit is at least plausibly met, and really in any case is not so far off the mark as to be worthy of a diversion. If you insist on clinging to this thin thread however, I will simply withdraw the word explicitly and leave the phrase as "his statement
explicitlygrouped them toghether" -- a true statement, which, since you decided to nitpick the word "explicitly" instead of delving into substance, I can only assume you are not contesting .So what? Once the reporter puts the assertion out there, if it is false and/or misleading, Toomey should have countered it. Otherwise, it appears that Toomey is agreeing to the truthfulness of the words purportedly being put in his mouth-- and I agree that the reporter is essentially putting words in his mouth.
Handwaving on your part. Using words like "obviously" and "clearly" does not make this false and unsupported claim on your part either obvious, clear, or true. Why should I believe that he is talking about alternatives between grass cutting payments and military payments when 1.) he groped them together, and 2.) the whole answer has been about a purported alternative between grass cutting payments and treasury defaults?
Now let me venture my best guess as to why Toomey evaded the question. Toomey could have made such a clear distinction, but I think he knows that would have been risky, because he's winging it here and really hasn't done the math to figure out specifically what can be paid and what cannot. What if it then turned out that there wasn't enough revenue coming in to make some more important payments like payments to military personnel? Toomey would have egg on his face and some serious explaining to do. So, he evaded the gist of the question, and carved himself some wiggle room in case stuff like military payments can't all be made. In doing so, he abjectly failed to level with the American People.
skymutt: accept no substitutes!
False premise.
Toomey directly answered the question. Directly answering the question is not evasion.
Good. So we are agreed that Toomey did not say what they reporter implied he said.
I disagree and I believe any reasonable observer would as well.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4