Thursday, June 30, 2011

Why Obozo Really, Really Needs the Debt Increase

Ticker mentions something here which is key to understanding the politics behind the debt-ceiling fight.

  • If the government does not get its debt increase it must immediately balance the budget. This is good, not bad, in the intermediate and longer term.

The problem is that this situation also exposes the truth, which nobody wants to face in Congress: Whether you raise taxes or cut spending the economic impact is the same - 12% of GDP disappears.

Whoops! If 12% of GDP disappears, Obozo will get run out of office long before 11/12. Of course, most of Congress could suffer the same fate.

So. What's the problem with THAT?


Anonymous said...

Sack the whole lot of them......
Leave no incumbent standing.....
Thieving SOBS, every last one needs to go......Especially the Pro abortion, unborn child killing
Pro-Sodomy Democrats

Anonymous said...

If the Teapottiers insist every piece of new legislation has a direct tie to the Constitution, how do they explain the debt limit ceiling?

J. Strupp said...

"Whether you raise taxes or cut spending the economic impact is the same - 12% of GDP disappears."

Which would cause another financial crisis which would put us back into global depression. According to you, Obama wants to destroy our economy. This would be the easiest way to do this yet he'd rather raise the debt ceiling rather than collapse GDP by 12%. This doesn't support your argument at all. Actually, it runs contrary to your argument.

Ironically, Republicans WOULD like to collapse GDP growth via massive cuts to spending in order to avoid increasing the debt ceiling. This would mean that Republicans support global depression and mass unemployment since double digit GDP contraction certainly means depression and 20%+ unemployment (Okun's Law).

Likewise, massive cuts to spending as a emergency measure to avoid increasing the debt ceiling would certainly destabilize sovereign debt markets which would most certainly lead to rising interest rates which would most certainly increase our debt service burden which would require more massive spending cuts which would lead to more mass unemployment and collapsing GDP.

Ironically, Republicans have been warning of a spike in interest rates for 3 years now. They would now be responsible for creating the very thing they have been warning about.

You do see why I think Republican politicans are either effing nuts or effing stupid or both? Either way, they don't understand basic econ. Apparently that's cool with you people though.

Dad29 said...

Kinda depends on what you define as "basic econ."

Keynes' "econ" doesn't work, so it's not "basic"; it's lunacy.

Austrian School--specifically, Pesch--is actual econ.

J. Strupp said...

Nothing I wrote is Keynesia. Likewise, most Austrians would pretty much agree:

When you cut spending, you shrink GDP as government spending is a component of GDP.

Employment and growth are directly correlated.

When interest rates rise, so do debt service costs.

Besides, Austrians believe in pretty much what the Republicans are trying to achieve:

Just let the whole thing fall into a pile of shit.

Other than that, they don't really have anything else to say.

J. Strupp said...

Keynesian. Missed the n key I guess.

steveegg said...

Hence, the insanity of including government consumption as part of GDP in a capitalist society is laid bare. The federal government has become the ultimate "too big to fail" entity.

Dad29 said...


Let the Gummint fall into a pile of shit.

The rest of us will do just fine.

J. Strupp said...

Unless, of course, you work for Lockheed Martin or Boeing or Northrop Grumman or General Dynamics or KBR or United Technologies or URS or CH2M Hill or GE or one of the thousands of other private enterprises which benefits greatly from the evil Gummint's money.

Everything will be just fine.

Display Name said...

Wailing about some 0.000001% of the budget program that can be injected with a whiff of moralism is far more fun than seriously attacking the war spending.