Friday, August 25, 2017

Trump and his people are talking... sense on the debt ceiling

That... did not feel good to type.  Something weird, but important is happening.  And it is useful for social science!

Obligatory refresher on the debt ceiling:  Congress tells the Treasury to disburse more money than it lets the IRS collect in taxes.  The only way for the Treasury to disburse that money is for them to sell bonds, but there is also a statutory limit on the bonds that the Treasury can issue, called, "the debt ceiling."  If we hit the debt ceiling, either they can't disburse all the money they must disburse, the IRS has to collect more money than they can collect, or the Treasury must sell more bonds than they are allowed to sell.  All of those options are bad and illegal.  The most bad but least illegal, and therefore most likely outcome is that not everyone gets paid.  If that includes bond-holders, then we are really and royally fucked, because investors lose confidence in our bonds, and lots of badness ensues.

When we hit the debt ceiling, Congress has three options:  let a disaster happen, raise the debt ceiling (kick the can down the road), or eliminate the debt ceiling.

That third option is what we should do, as basically everyone with a brain and any economics training knows (no other country is dumb enough to do it this way), but we're too fucking stupid for that.  U-S-A!  U-S-A!  That leaves either disaster, or kicking the can down the road, which is what we always do.

Historically, a party's position on the debt ceiling has been tied to whether or not they are in the majority, because it's a fun little game to say "raising the debt ceiling is horrible!" when you are in the minority, and don't have to worry about the actual consequences of your votes, but Republicans forgot to switch after the 2010 election gave them control of the House, and we've had debt ceiling problems ever since.  That is, obviously, the very abbreviated version.

Now, we have unified government and an idiot in the White House.  Which way would Trump jump?  Amazingly enough, Trump is... acting like a normal president on the debt ceiling!  The Trump Administration's formal position is that the debt ceiling needs to be raised, without strings attached.  True.  He also chastised Congress for not just doing it.  He said that it would have been much easier if they had just attached it to the more popular VA bill.



Trump speaks the truth on this.  The debt ceiling has to be raised.  Period.  The Democrats aren't going to give them any concessions for an increase.  Obama did in 2011 as part of the Budget Control Act, and it was a strategic mistake.  He realized that, and never did again.  Republicans won't get any Democratic votes for a debt ceiling increase with strings attached.  Freedom Caucus members aren't going to go for anything that isn't wacko, and some of them won't vote for a debt ceiling increase, period.

Solution?  Well, either the straight-up, no-strings-attached bill with mostly Democratic votes that Ryan can't put up for a vote without getting Boehnered, or... Trump's solution.  Attach it to something like the VA bill.

Yes, Trump is kind of right on this.  He is approaching this like... a normal president.

What happened?  The debt ceiling really is, in policy terms, simple.  You vote to increase it when necessary.  Otherwise, bad shit happens, and everyone except the hardcore mouthbreathers knows it.  He's got Mnuchin and others around him telling him, "look, this doesn't happen, and you have an economic collapse."  He then has people pointing out that the president takes the blame when the economy collapses, and his position is pretty simple.

Why does failure to raise the debt ceiling potentially cause an economic collapse?  It raises interest rates on bonds if bond-holders worry about not getting paid, which subsequently raises all other interest rates because our bonds are the comparatively safest investments, so everything else is tied to them.  When bond interest rates go up, so does the rate on any other kind of loan.  When that happens, fewer loans are made, and blah, blah blah.  If you know anything about economics, you can see what happens from there.  I can do a longer post on the chain of events, and "crowding out," and all of that because I actually read a shit-load of economics, but do you think Trump can explain the mathematics of "crowding out," or how the interest rate on bonds affects other kinds of investment?  No.  Of course not.  All he does is watch Fox News and tweet all day.

But, he just had all of his advisors tell him that if the debt ceiling isn't raised, people will say that he is responsible for the worst economic disaster in history.

So, he is acting like... a normal president.

Wow.  Yeah, Trump is speaking truth, and acting like a normal president.  With proper training, this is what you can do with Abby Normal's brain...

I'd really rather have Hans Delbruck's brain in charge of our nuclear arsenal than Abby's, and the occasional performance of "Puttin' on the Ritz" just doesn't make me feel safe...  How about you?  Fuckin' Igor...

(So, in this metaphor, Mnuchin is obviously Frankenstein, and Igor would be, I guess, Comey?)

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