Month: October 2013

What if the hostage is already dying?

by digby

Felix Salmon gives us the bad news: “the default has already begun:”

The global faith in US institutions has already been undermined. The mechanism by which catastrophe would arise has already been set into motion. And as a result, economic growth in both the US and the rest of the world will be lower than it should be. Unemployment will be higher. Social unrest will be more destructive. These things aren’t as bad now as they would be if we actually got to a point of payment default. …

While debt default is undoubtedly the worst of all possible worlds, then, the bonkers level of Washington dysfunction on display right now is nearly as bad. Every day that goes past is a day where trust and faith in the US government is evaporating — and once it has evaporated, it will never return. The Republicans in the House have already managed to inflict significant, lasting damage to the US and the global economy — even if they were to pass a completely clean bill tomorrow morning, which they won’t. The default has already started, and is already causing real harm. The only question is how much worse it’s going to get.

Krugman also surveys the carnage:

Macroeconomic Advisers has a new report out about the effects of bad fiscal policy since 2010 — that is, since the GOP takeover of the House. The way it’s written, however, might confuse some people. They say that combined effects of uncertainty in the bond market and cuts in discretionary spending have subtracted 1% from GDP growth. That’s not 1% off GDP — it’s the annualized rate of growth, so that we’re talking about almost 3% of GDP at this point; cumulatively, the losses come to around $700 billion of wasted economic potential. This is in the same ballpark as my own estimates.

And they also estimate that the current unemployment rate is 1.4 points higher than it would have been without those policies (a number consistent with almost 3% lower GDP); so, we’d have unemployment below 6% if not for these people.

Andrew Sullivan is (appropriately, I think) upset about this:

…I come back to the analogy of a cold civil war. The reluctance of the South to pay the debts of the nation which led to the 14th Amendment’s guarantee of the national debt. It seems to me that if the House GOP really does intend to destroy the American and global economy, to throw millions out of work, to make our debt problem far worse in a new depression … just to make a point about Obamacare, then at some point, Obama, like Lincoln, must preserve the republic.

But no president should ever want to take that position – because it represents the collapse of the American polity. But we are in collapse. If the House pushes the country into default this week, there is no workable American polity left. The most basic forms of collective responsibility will have been forsaken for almost pathological ideological purism and cultural revolt.

Waddya gonna do?

Update: There’s lots of loose talk about various ways the president might “preserve the republic” Get a load of this one.

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Oh who cares about infectious disease outbreaks?

by digby

This is what they consider non-essential:

When Republicans were talking about reopening the government piece by piece, certain very visible or emotionally charged programs rose to the top. Especially emotional was a discussion about reopening the national parks and memorials. Many conservatives, who came out in full force this last weekend, felt the metal barricades were dishonoring to the dead. Similarly, the week before, there were cries to refund the National Institutes of Health to ensure children cancer patients were put on experimental treatments.

What was left out of the discussions was the Centers for Disease Control and Prevention.

“To me the CDC and infectious disease monitoring is to the military is what a hostile enemy threat is,” Gregory Poland, an infectious disease expert at the Mayo Clinic, explains. “We don’t furlough our military and say ‘well we won’t just have any national security until the congress gets its act together.’ But why aren’t we willing to save something that could cost just as many lives?”
[…]
We’re talking in dramatic terms. Is any of this overstated?

GP: Let me take you back to February 2009. Out of nowhere, a few unusual respiratory illnesses in a rural part of Mexico, and then a few of those cases in Texas, and then a bunch of those cases in the Northeast states. Within a couple of weeks, CDC investigates, sequences the viruses and pushes the button. Nation, we’ve got a novel pandemic virus. What would happen if that happened now? There would be delayed recognition, thousands more would get ill, would die. we would be flying blind. It would be delayed development of a vaccine to cover it, we wouldn’t know what antivirals to use.

The other thing could happen too. The season just kind of pedals along—no new viruses no surprises, no new viruses or infectious disease threats anywhere in the world. And the shutdown resolves and we’re a little behind on next year’s vaccines. We’re somewhere in that spectrum.

Let’s be thrill seekers and take a chance, shall we? We’re only playing with people’s lives here. It’s not as if it’s something important, like the Pentagon where they found a way to bring back every employee.

And anyway, if we do have a pandemic the Republicans can just blame it on government inefficiency so that’s good.

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A Perils of Pauline escape

by digby

I think Bob Borosage’s piece this morning gets it right about the current state of play:

…The House zealots are certifiable, but they set up the age-old good cop/bad cop routine for Senate Republicans. Republicans are plummeting in the polls. Anyone with a clue – which may barely reach a majority in the Republican caucus – knows that forcing a default on U.S. debts is utterly self-destructive folly. But Republican Senate leader Mitch McConnell uses the Tea Party’s fulminations to seek more concessions from Democrats.

So before hailing the rescue, it is worth considering what a sensible outcome to this contrived crisis would be.

First, a minimum requirement would be to end the hostage-taking that uses the threat of default to extort concessions. At the least, that would require lifting the debt ceiling to a level that would cover debts that Republicans have already voted for through the end of next year – and after the midterm elections, when voters can make their views known.

Second, a sensible agreement would reopen government for the year, funded at a level somewhere between that proposed by the Republican House and the Democratic Senate. The figure would be far below what is needed to get the economy going, but would at least keep the doors open.

Third, a sensible agreement would repeal the mindless across-the-board sequester cuts, the next round of which is scheduled to kick in mid-January. These cuts were designed to be abhorrent and are. They make no distinction between the programs we need to expand – like investments in education – and those that are pure pork or waste – like subsidies to Big Oil, the most profitable companies in the history of the world. They damage the economy and cost jobs. They do nothing to address America’s real long-term deficit concern, the rising costs of health care. Instead they add to what ails us – declining deficits that are coming down too fast, faster than any time since the demobilization at the end of World War II – and are crippling the recovery.

Fourth, a sensible agreement would set up bipartisan negotiations to focus on the real challenges we face. These would include how to pay for the investments we need – in everything from rebuilding our decrepit infrastructure to providing every child with a world-class public education. That would necessarily include cutting waste like Big Oil subsidies and raising revenue, beginning by shutting down the loopholes that reward companies for shipping jobs or storing profits abroad. And then they should focus on further measures to get rising health care costs under control – beginning with ending the perversity of Americans paying higher prices for prescription drugs than any country in the world.

As reported, the proposed deal flunks all of these tests.

It would enable government to pay its bills only until February 7. That sets the date for America to be held hostage once more to the threat of blowing up the economy. That will embolden the zealots, keep markets nervous, and erode faith in the dollar. Families will pay the price in higher interest rates, slower growth and fewer jobs. And by January we will lurch back into another contrived crisis.

The deal would reopen government and fund it at current levels only until mid-January. Proponents say that would allow for negotiations for a real budget before the next sequester cuts kick in. But it means that Republicans will use the threat of the sequester to exact cuts in Medicare and Social Security benefits. It sets up the most vulnerable to pay the bill for the costs of Wall Street’s wilding.

And by setting a three-month deadline for the next invented crisis, the deal insures that negotiations will focus on short-term deficits, which are not a problem, and slight discussion of the fundamental reforms we need to make this economy work for working people. Republicans will rule tax hikes off the table. They’ll offer to trade the loathsome sequester cuts for structural changes that cut Medicare and Medicaid. And they’ll do that with the threat of another government shutdown and another default deadline in their pocket.

Democratic leaders believe that Republicans have been so chastened by their plummeting approval ratings that they won’t dare shut down the government and threaten default again. A sobered corporate lobby will likely bankroll those who vote to keep the government from defaulting. But Tea Party zealots will accuse them of betrayal. The Koch brothers and their deep-pocket allies will continue to fund Tea Party challengers. With so many districts gerrymandered, Republican incumbents are more worried about a primary challenge than the general election. Those who assume that they won’t continue to take America hostage could well be disappointed.

So folly continues. America is held hostage. A last-minute, peril-of-Pauline escape is in sight. Much damage has already been done, but the unimaginable may be avoided. But only for three months, when the next hostage crisis is scheduled to begin. No wonder Americans despair. read on…

I am reliably informed that we needn’t worry about any of this because the Republicans have been vanquished. Also too, the Democrats will never waiver on their requirements for a little bit of phony “revenue” in exchange for cutting the so-called entitlements, no matter what, and the Republicans will never waiver on their refusal to accept some phony revenue in exchange for cutting the so-called entitlements, so we have absolutely nothing to fear from another round of budget negotiations. Also too: the Republicans have been vanquished.

If the house winds up passing something in the 11th hour, which is the likely end of this round, it will be a good thing because hitting the debt limit is a very bad thing. And it’s certainly possible that the Republicans will feel such heat from public opinion that they will change their destructive ways and we’ll have a normal budget process going forward. But it would be wise for Democrats not to oversell this like they usually do. Until they get the government funded and the debt limit lifted for an appropriate amount of time and finalize these budget numbers at a level that makes sense, they have not won anything except a temporary cease fire.

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Village wiseman

by digby

I guess Cokie Roberts wasn’t available for an interview today so here’s Leon Panetta with a searing insight you’ve never heard before:

Former Defense Secretary Leon Panetta on Monday blamed the current fiscal crisis on both the White House and Republican leaders, lamenting the lack of trust between the two parties.

Panetta said that President should not walk away from negotiations.

“You can’t, just because you’ve engaged in some set of negotiations and they haven’t gone anywhere, for one reason or another there’s been a breakdown, [that] is no reason to walk away from the table,” Panetta said at a Wall Street Journal breakfast. “In this town, you’ve got to stay with it and stay at it.”

Panetta said that everyone is to blame, and that the two sides needed to operate with a sense of trust.

“When you are operating by crisis, I think there’s enough blame to go around,” he said. “Everybody has to engage, and engage – as I said – on the basis of trust. This town has gotten a lot meaner in the last few years.”

Panetta also placed blame on certain factors that have contributed to polarization in Congress like redistricting, constant fundraising and a lack of personal relationships between politicians.

There, now you understand the problem. The two sides haven’t “engaged” enough and there isn’t enough “trust.”

According to this theory the reactionary freakshow on the right that’s intent on destroying the US Government is doing all this for attention. And everybody else shares the blame for their scorched earth strategy because they didn’t give it to them.

That clears that up.
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Call a ransom a ransom. It’s not a negotiation

by David Atkins

I know that with the Senate seemingly on its way to some sort of muddled “compromise” this topic is going to already seem passe, but I feel compelled to make an extra note on the “ransom” versus “negotiation” issue in the press this past week. Yesterday I wrote about how there would be no need to come up with creative metaphors for Republican hostage-taking behavior if the press would simply call it out for what it is. Of particular interest was this amusing yet baffling incident from the White House press avail:

But it was “ransom” — a word Obama has used repeatedly to describe Republican negotiating tactics — that struck the last press corps nerve. The usual briefing room decorum, such as it is, broke down entirely when Carney said finally that Obama would sign a debt-ceiling extension but not if it meant “paying a ransom” to Republicans.

“The president will not pay ransom for … ” Carney began.

“You see it as a ransom, but it’s a metaphor that doesn’t serve our purposes … ” NPR correspondent Ari Shapiro shouted back with broad support from other confused reporters.

“You guys are just too literal then, right? Carney said.

“We just want to accurately report,” Shapiro began before Carney interjected. “We’re trying to be accurate in our description of what’s going on.”

It turns out that Ari Shapiro elaborated on the incident in a way that only raises more questions:

On negotiations, Carney was a bit mushier.

“Can I ask a very straightforward question?” asked ABC’s Jonathan Karl. “Is the president willing to engage in budget negotiations with Republicans if the government is still shut down?”

Carney explained that Obama will have “conversations” but won’t pay a “ransom.”

Of course, one man’s negotiation is another man’s conversation is another man’s ransom.

Is it? Is it really? Have we reached a point of such moral cowardice that in the interest of “balance” we cannot call things as they are? The debt ceiling is a hostage, point blank. It’s not a conservative or liberal priority, but just a hostage for the GOP to ransom. Must we not call it that because the GOP would like to call it something else? Why don’t other hostage takers get the same courtesy?

More Shapiro:

At that point, the convoluted nonanswers had gotten to be too much.

Typically the White House briefing room is a reserved place, where people wait their turn to speak. It was not my turn to speak.

But I couldn’t help it.

“You see it as a ransom, but it’s a metaphor that doesn’t serve our purposes,” I protested to Carney. “We’re trying to be accurate in our description of what’s going on.”

Finally, I tried to sum up what we’d learned so far.

“You said we need to see whether they’re serious about putting the matches and gasoline aside. You’ve also said they want to keep a nuclear weapon in their back pocket. So, is keeping the nuclear weapon in the back pocket the same as putting the matches and gasoline aside? Or, even better, can we stop talking matches and gasoline and nuclear weapons and start talking about what’s actually happening?”

Carney’s response was not much clearer.

But an hour later, Senate Majority Leader Harry Reid emerged from a White House meeting with the president and was asked whether he would negotiate with Republicans over the budget if the government were still partially shut down.

“Not gonna happen,” said Reid.

Three simple words. Now that wasn’t so hard, was it?

Shapiro thinks he’s quite clever, cutting through Carney’s supposed obfuscation to get an “honest” answer. But he isn’t.

Shapiro insisted against all reason on framing the issue as a “negotiation.” He wanted to know whether the White House would “negotiate” with Republicans over the debt ceiling. Carney did exactly what he ought to do, which is deny the premise of the question. The very use of the word “negotiate” in this context is leading the witness. As well might Shapiro have asked pointed questions of Keanu Reeves about whether he would or would not “negotiate” with Dennis Hopper in Speed. The premise is ridiculous. Even if they’re talking and making deals under the table, the correct public answer to that question is “we can talk as soon as he disarms the bomb.” Because you don’t negotiate with terrorists, at least not publicly.

As much as Shapiro desperately wants the issue to be about a “negotiation”, it isn’t. He thinks he got to the “truth.” In reality, he got bad journalism that only further serves to mislead the public about the radical nature of the GOP’s gamesmanship.

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Hide the bunny

by digby

Fox News latest spokesmodel, Ed Henry, had a little tantrum:

Fox News’ Ed Henry addressed his sudden exit from a Friday White House press briefing in a Monday interview.

A visibly angry Henry walked out of the briefing after press secretary Jay Carney ignored his repeated questions.

Speaking to colleague Brian Kilmeade on Monday, Henry said that, though he looked annoyed, he had to duck out to appear on television.

“The briefing went on for about 40 minutes and I didn’t get a question, for whatever reason,” he said. “I guess Jay Carney will have to answer that. I don’t know why, I guess maybe he was upset. I wasn’t. I was running to do a live shot.”

“Does he do that a lot?” Kilmeade asked of Carney.

“That hasn’t happened before, ever,” Henry said, adding later that the “professional thing” for Carney to do would have been to call on him.

“I won’t be ignored, Jay.”

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Graph ‘o the day: Hey, big spender

by digby

So, how have the Republicans managed to persuade Americans to buy into the whole “Obama as big spender” narrative?

It might have something to do with the first year of the Obama presidency where the federal budget increased a whopping 17.9% —going from $2.98 trillion to $3.52 trillion. I’ll bet you think that this is the result of the Obama sponsored stimulus plan that is so frequently vilified by the conservatives…but you would be wrong.

The first year of any incoming president term is saddled—for better or for worse—with the budget set by the president whom immediately precedes the new occupant of the White House. Indeed, not only was the 2009 budget the property of George W. Bush—and passed by the 2008 Congress—it was in effect four months before Barack Obama took the oath of office.

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Quick, grab the can and toss it over your shoulder before it goes over the cliff


by digby

Ezra reports what he’s hearing about a potential deal:

The outline of the emerging Senate deal is this: The government is funded until Jan. 15. The debt ceiling is lifted until Feb. 7. There are a handful of basically meaningless Affordable Care Act changes: Stronger income verification, which Republicans want, and a one-year delay on labor paying into state reinsurance pools, which Democrats want. Oh, and there’s a bicameral budget committee that needs to report back by Dec. 13.

He says that because a government shut down deal expires just as a new round of sequestration cuts are scheduled to take place in January, the fight will now be about lifting sequestration:

That’s what the Democrats want. It’s also what some Republicans, including Rep. Paul Ryan and Grover Norquist want. But it’s not been what the Ted Cruz wing of the Republican Party wants. The question now is how much pull they really have. 

It’s true that this shuts out the Ted Cruz wing. But is that what we are defining as a win now?  Because Ted Cruz wasn’t in congress the last time the GOP pulled this stunt, so I don’t know that simply shutting down this Obamacare demand gets the job done.  (Still, we live in hope…)  In fact, it seems to me that by pushing the negotiations right up against the next round of sequester cuts, the Republicans will potentially have yet another hostage — along with the threat of another government shutdown and another debt ceiling breach.  What am I missing?

There is a chance that public opinion will chastise the GOP enough that they will behave less like animals and more like decent human beings in this next round. (Again, we live in hope.) But with alleged progressive Dick Durbin extolling the virtues of Simpson-Bowles on TV this week-end while Paul Ryan massages the wingnuts with Randian cant, I think we should be careful before declaring victory and assuming that the end game will be that the Republicans agree to lift sequestration, raise the debt limit and keep the government open. (Not that Ezra’s saying that, mind you.  He just says it won’t be about repealing Obamacare and will be about sequestration, which may very well be true.)

Anyway, who knows if this is even possible?  But virtually everyone on TV is saying pretty much the same thing and that Boehner and McConnell are strategizing together to get something along these lines done, presumably by Boehner agreeing to drop his self-imposed Hastert Rule and allow a vote.  (One also assumes he feels he will keep his job by doing this …)

Just for kicks, let’s revisit what the GOP had on the agenda before the looney tunes decided to turn this into an Obamacare clown show this past summer:

On the next, upcoming debt-ceiling measure, Boehner promised it would “be tied to things that get us on the ten-year path to balance,” as South Carolina representative Mick Mulvaney put it at a “Conversations With Conservatives” event co-hosted by the Heritage Foundation on Wednesday.

The Ryan budget enacted by the House would balance in ten years and offers a sense of how ambitious this goal is. First, the budget assumes the repeal of much of Obamacare, which, it can safely be assumed, is something that President Obama would not sign into law. But it also includes significant entitlement reforms such as Medicare “premium support.”

And certainly, there are senior members of the Republican conference who are not anxious to tie the debt ceiling to such a bold plan. House Ways and Means chairman Dave Camp has discussed tying the debt ceiling to a path for tax reform, for example. Is GOP leadership still on board with this plan?

Michael Steel, a spokesman for Boehner, said “we have just begun the process of talking with members, and – more importantly – with the American people, about the best way to increase the debt limit consistent with the ‘Boehner Rule,’ which requires cuts or reforms greater than the increase.”

A source familiar with the deal said “the agreement was that it would include cuts or reforms that put us ‘on the path to balance’ in ten years. The bill wouldn’t necessarily have to achieve balance in ten years all by itself.”

The difference between achieving balance in ten years and putting the country on a “path to balance” in ten years seems semantic. Representative Steve Scalise, the Republican Study Committee chairman, offered more detail for the first time at the Heritage event, envisioning a kind of sliding scale by which the closer the deal gets to a ten-year balanced budget, the further into the future the debt ceiling will be extended.


“If you look at the budget, it’s a ten-year budget – if the president did everything in that budget, you could make the argument that would be a ten-year increase in the debt ceiling,” Scalise, who was in the room when the deal was struck with Boehner, said. ”If the president doesn’t do all of those things, as you work your way down, the amount of time that the debt ceiling is increased should be corresponding to the size and seriousness of the reforms that are ultimately are agreed to that get us to that ten-year balance,” he explained.

One wouldn’t think they’d be this bold after the drop in popularity but then, they came up with this arrogant plan after losing an election. But if anything’s changed from that strategy, you can probably see it in Ryan’s more recent Grand Vision.

We have an opportunity here to pay down the national debt and jump-start the economy, if we start talking, and talking specifics, now. To break the deadlock, both sides should agree to common-sense reforms of the country’s entitlement programs and tax code…

If Mr. Obama decides to talk, he’ll find that we actually agree on some things. For example, most of us agree that gradual, structural reforms are better than sudden, arbitrary cuts. For my Democratic colleagues, the discretionary spending levels in the Budget Control Act are a major concern. And the truth is, there’s a better way to cut spending. We could provide relief from the discretionary spending levels in the Budget Control Act in exchange for structural reforms to entitlement programs.

Stay tuned…

Update: Brit Hume says that this proposed deal means that “nobody’s caved and nobody’s won.” I dunno.  That may be true when you’re talking about the two parties’ political establishments. But the Cruz wing has taken a hit.  Whether it lessens their clout over time remains to be seen, but within the GOP they may be feared but they are also universally loathed. I’m not sure they care, though.

Update II: Robert Kuttner pens a “Dear GOP Colleague” letter.

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Losing whites: the biggest polling problem for the GOP

by David Atkins

Joshua Holland has perhaps the most cogent take on the potential long-term electoral consequences of the shutdown for the GOP:

A civil war among Republicans is also a civil war among white people, since there is little else in the party these days. This clarifies just how close to the brink the GOP may be. A civil war among white people will surely hurt the party right where it cannot afford any slippage: among white voters.

It is only the very large majorities the GOP has been running lately among white voters that are keeping the party competitive. Indeed, majorities that not only remain large but increase are at the heart of what passes for GOP electoral strategy these days. Start cutting those majorities and the strategy goes up in smoke, replaced by immediate and serious electoral danger.

Consider that Congressional Republicans got 60 percent of the white vote in the 2010 election, compared to just 37 percent for the Democrats. What if, as we move into 2014, the war among white people breaks out in earnest, with the Tea Party on one side, business and establishment Republicans on the other and white working class voters already suspicious about the party’s Paul Ryan-inspired drive to cut Medicare and Social Security watching from the sidelines?

All this would make it prohibitively hard for the party to replicate its 60 percent showing among white voters in 2014. Say white support subsides to, say, 55 percent, with Democrats edging up to 42 percent. Assuming that the minority share of voters rises by a couple of points relative to 2010 and support for Democrats clocks in close to 80 percent, we are then in take-back-House territory, a popular vote margin of 6 points or so.

Impossible you say? Hark back to 2006 where Democrats only lost the white vote by 4 points, 47-51. Democrats don’t need to do that well in 2014. In fact, they don’t have to come particularly close. All they have to do is compress the GOP’s 2010 margin so it is still strong but not overwhelming.

Loss of white support would certainly put the GOP’s hold on the House in danger. But it would make them positively uncompetitive in Presidential elections. A “mere” 13 point margin among white voters would translate into a crushing 10 point defeat in the 2016 Presidential popular vote.

It’s true that come November 2014, the vast majority of the “civil war” will have been tamped down, and that few of these intramural combatants will ever cast a vote for a Democrat.

But it doesn’t take that many to engineer a big shift. Although it isn’t reflected in the Congress, there are moderate Republican voters out there. They do exist. You meet many of them when you get involved in local politics: they’re older Eisenhower Republicans, socially liberal ones, folks who want to tax the rich but are uncomfortable with abortion, or the locally centered “federal government doesn’t bother me much, but local regulations need to be loosened on small business” ones. There aren’t that many left, but let’s say they make up at least 1/12th to 1/10th of the Republican coalition. That’s probably understating the percentage, but let’s say it’s only that many.

More importantly, they tend to be concentrated in areas that aren’t ruby red–states like Michigan, Wisconsin, Pennsylvania, and Colorado. States and districts where gerrymandering has given the GOP an undue edge. In districts hyperleveraged by gerrymandering, small shifts can have big impacts.

Remember that given demographic changes, the Republicans are doomed in national races and eventually even in the House if they can’t expand their coalition. That’s not liberal wishful thinking: that was the whole point of the post-election “rebrand” campaign. The disaster won’t befall them immediately, but if they allow the Latino and Asian vote to go the way of the African-American vote and if six in ten Millennials continue to vote Democratic, they’re basically finished in about 10-15 years. They certainly can’t afford to lose key parts of their existing white base. Not now, and not later.

If Republicans do lose that moderate 1/10th or so, that really could spell disaster even as soon as 2014.

Loco Yoho

by digby

So Ted Yoho tried to explain what he meant when he said that default would “stabilize the markets”:

What the Washington Post said, and what got picked up is, ‘Ted Yoho thinks default is good for the government and for the economy.’ And that’s just an outright falsity or lying. Because what I said was, not raising the debt ceiling does not automatically trigger a default.

And if we address our problems, and we say, ‘Brett, I owe you money — you know I owe you money, and I’m going to pay you. I’m going to pay you with interest. But we just need a little breathing room here to reorganize our debt.’ I don’t know if you’ve ever been in business with people who have owed you money…

And if you had someone that owed you money, and if they were to call you up and tell you that — instead of just trying to hunt them down, you’re not going to feel better about that?

He certainly has a sophisticated understanding about how the financial system works, doesn’t he?

I’ll let Josh Barro unpack this little bit on nonsense for you. He points out that Yoho is essentially saying the US Government should declare Chapter 13 bankruptcy. Or:

It is also possible to engage in a voluntary restructuring outside of bankruptcy. When a debtor calls up a creditor and asks for a reorganization, that might make the creditor “feel better” — relative to a scenario where the debtor hides from the creditor and makes no payment at all. It does not make the creditor feel better compared to a scenario where the debtor pays as agreed.

When a borrower comes to you asking for a restructuring on the grounds that he needs “breathing room,” that is a sign of financial distress that warrants a high interest rate to compensate the lender for risk. If the U.S. is going to keep its world’s-lowest borrowing costs, it can’t be going to creditors saying it can’t afford to pay as agreed.

Well, they could try. But it won’t work out very well for the home team. Or the rest of the world either.

Barro offers a key insight:

I understand why Republicans are frustrated. They were sure that President Obama’s deficit spending would cause a debt crisis. Creditors would flee Treasuries out of fear that the U.S. will be unable to pay its debts. Or at least they would demand higher bond yields out of fear of inflation. But the bond markets have not cooperated; interest rates are very low and investors think the U.S. is a great credit.

So Republicans have been forced to invent a debt crisis, either in their own minds, or in the real world by pushing the government into a default created by political circumstances instead of economic ones. They are sure that we can’t afford to go on spending this way, and they will make sure that’s the case, even if they have to break the financial system to do it.

I only wish that it was only Republicans who were convinced that deficits were leading us to ruin and it never materialized. Unfortunately, a whole lot of Very Serious People of both parties have been relentlessly flogging that poor sick debt horse for so long that the addled Tea Partiers got confused and decided that we need to stop raising the debt ceiling so we can “stabilize” the economy. These VSPs are almost as much to blame for this absurdity as the Republicans.

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