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Monday, May 16, 2011
Debt ceiling politics
We are getting closer to the debt ceiling. So what? A lot of noise signifying nothing or a real contraction in GDP? Here is a good summary of some of the impacts. As it gets closer to the end of the quarter, I keep thinking about competency in economic theory or the lack thereof. Samuel Clemens wrote: "It is not what we don't know that hurts, it is what we do know that just isn't true." A lot of people in Washington know a lot of things that just aren't true.
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Great article. To me it seems that at some point the U.S will have to take some form of austerity measures to riel in the debt problem. Perhaps the S&P was correct when they lowered the U.S outlook based on debt ceiling concerns.
ReplyDeletehttp://www.treasury.gov/connect/blog/Pages/Geithner-Implements-Additional-Extraordinary-Measures-to-Allow-Continued-Funding-of-Government-Obligations.aspx
ReplyDeleteU.S hits debt limit
I want to learn more about macro theory (I can't believe I wrote that), as we have been discussing in class, we do not know which theory best represents our current situtation until it has already passed.
ReplyDeleteThis quote makes sense to me "This The decline in federal purchases of private sector goods and services would reduce aggregate demand, and this could slow or even reverse the recovery." But is it only applicable in a Keyensian world?
Very interesting article, but alarming at the same time. I too would like to learn more macro theory. It seems that the best option here is to reach an agreement that increases the debt ceiling (even though this will lower the US credit rating). Out of all of the outcomes, this appears to be the one that will lead to the least amount of devastating consequences (at least according to what I just learned from this article).
ReplyDeleteI agree with Chris that we are going to have to face austerity measures at some point. We will need to re-evaluate some things we take for granted and show some strength in unity and resolve. I am not sure these are realistic expectations especially when our country is so politically polarized and easy to distract. It is easier to keep pushing the problem along and I fear that because of how our political system is set up that is what will happen. Anyone who dares to raise taxes or cut deeply into certain programs will be shouted out of office by about half the country while a quarter of us defend then and another quarter do nothing.
ReplyDeleteInteresting article, I agree that it goes to show that we need to face austerity measures at some point. But when is that point and who is going to take the lead on that initiative? I think short-term reality is that we're going to have to extend our debt ceiling yet again...but will this be the last time that happens? If we don't start taking action soon, I think this 'problem' is going to turn into a catastrophe.
ReplyDeleteI agree with Laura about discussing Macro theory more in class. I feel a little lost when we start talking about the debt ceiling and strategies for the future. I'd like to have a little more background before I can form an opinion that I feel comfortable supporting.
ReplyDeleteI also agree that stricter and smarter spending needs to take place. This problem cannot keep being pushed down the tracks.
ReplyDeleteGreat article.
The most interesting part about the debate regarding the debt ceiling is the back and forth banter between economists and lawmakers. Some argue that the debt ceiling is not a necessary budget tool. By itself, it does nothing to keep the country from running into the red. Congress controls the annual surplus or deficit by determining the country's levels of taxation and spending. Annual deficits contribute to the overall national debt, which the Treasury Department finances by issuing bonds. The ceiling acts as a check on that overall debt and when Treasury needs to issue debt above the ceiling, Congress raises the ceiling.
ReplyDelete