The Two Stages of Dysfunction

July 28th, 2011 at 5:15 pm

The thing I like least about the Boehner plan (that I’m hearing may pass the House later) is that it raises the debt ceiling in two stages, meaning we’re back in the middle of this debate in another few months.  (The other thing I dislike about this plan is its implications for entitlement cuts that would start soon and cut deep.  It’s one thing to put entitlements on the table; it’s quite another to hack away at them like this.)

As I noted last night, facts are on extended holiday in this debate, and it’s just a silly, I guess, to point out blatant hypocrisy.

But you’ve got to have amazingly strong facial muscles to pull off, with a straight face, the R talking point on how a) economic uncertainty is hurting the economy, yet b) we should raise the debt ceiling in not one, but in two steps.

As Goldman Sachs researchers put it in a note out today:

Debt limit uncertainty: Proposals that increase the debt limit for a longer period appear to have a better chance of leading to more positive rating outcomes, by reducing uncertainty regarding interest and principal payments. This implies that an increase in the debt limit of $2.4 trillion that occurs in two stages would, all things being equal, pose more risk to the US AAA rating than a single increase of $2.4 trillion.

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5 comments in reply to "The Two Stages of Dysfunction"

  1. Matthew says:

    Hi there,

    I certainly agree with this post, and the major hurdle would seem to be that a two step approach is now the singular goal of the Republican position. (The Senate plan having adopted a very similar position on cuts without new revenue.)

    That said, I would be quite interested in your thoughts regarding the cuts in the Senate plan given your view of the Republican plan’s “implications for entitlement cuts that would start soon and cut deep. It’s one thing to put entitlements on the table; it’s quite another to hack away at them like this.”.

    Given the details and comparisons of the plans I’ve seen, it seems that the Senate plan is, if anything, worse. Link: http://nyti.ms/oBaYkG


  2. Merrill Goozner says:

    Jared,
    Just thinking out loud here. Obama has agreed to $4 trillion in deficit reduction over the CBO basline over a dozen years. He wants a quarter of that to be in new revenue.

    If Boehner’s cuts than Reid’s cuts in the coming fiscal year (I’m led to believe by people like Ezra Klein that they are not), then why not take the six month bill as an opportunity to outline the president’s plan for the next ten years, and introduce it as his 2013 proposed budget in February? He could outline a tax reform plan that would raise even more money than $1 trillion, while lowering rates for all taxpayers (for high end taxpayers, below 39.5, but maybe more than the current 35, split the difference, etc.). Make up for it with carried interest, capping mortgage deductions for high end homes, ditto for health insurance exclusion, etc. Also could call for more military cuts, fewer domestic discretionary cuts. . . in other words, a concrete plan that would be his election year document. Then, if Boehner and the Republicans go through the same crap they did this time about raising the debt ceiling (demanding immediate cuts in the current fiscal year), Obama can say, let the voters decide. Anyway, just thinking. I really don’t care any more what “markets” think, bad as that is for my 401k. It’s now clear that no one is ever going to be able to retire again anyway.


    • Merrill Goozner says:

      I meant to say “If boehner’s cuts are not much different than Reid’s cuts” . . .


    • Jared Bernstein says:

      Maybe…interesting idea. But does POTUS really want to run on all those tax issues? I can see both sides, but it’s risky for him.

      Also, go through this same debate in a few months?? Really?? Why would you do that to me…I thought we were friends.


  3. Misaki says:

    Keep in mind, these are the same people who say that “government spending destroys jobs”.

    This is actually true in the sense that since the public dislikes inflation, government spending must eventually be made up for with higher taxes, which will lead to fewer jobs in all cases where the entity being taxed does not make $7 billion USD in profit every quarter. The money being taxed will simultaneously be used to finance a number of less efficient, redundant, poorly-allocated government jobs or be given away for free, but in the Republican mindset jobs that perform an unnecessary function are not “real” jobs, and so the statement that government spending destroys jobs is true in the sense that work is shifted to a less efficient, and ideologically undesirable configuration.

    After all, anyone upset about not being able to find a job can always just go and rob a bank for one dollar and have free housing/food/medical care. Even old ladies can manage that much.

    It shouldn’t hurt to mention once again the politically acceptable (i.e. no spending increase) alternative to old ladies going to prison.


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