Morning Monkeys,
We've just concluded the "fiscal cliff" and now it's time for a new and exciting "crisis"! Hooray! How I love all this contrived nonsense. Will we default? Will the government shut down? Will the coming crisis be determined not by congressional vote but by a cage fight between Obama & Boehner? (Answers: No, Maybe, Hopefully).
Needless to say, in an effort to not get sucked into the kabuki theater that the US congress has become, I thought I'd lay out my predictions for the resulting deal, then immediately stop paying attention:
- No Default on Oustanding Debt: This is an obvious one. In order for us to default on our debt, the Treasury would have to purposely default. Why? Because our tax revenue is well in excess of what it costs to service our outstanding debt. The risk of default on outstanding treasuries is exactly 0 and anyone who says otherwise is wrong.
- Possible "Government Shutdown": Minor issue with some employees FERS contributions not being made. Since FERS consists of only federal debt, and no other assets, this development is meaningless for the same reason that I can't buy a Ferrari by borrowing against a portfolio of "mikesswimn" bonds.
- The "Sequester" is "Resolved": The sequestration and the resulting across the board spending cuts will be resolved magically. Republicans will show they're not total pushovers by enacting other "cuts" that really, are complete bullshit.
- Spending "Cuts" are Enacted: The resulting deal, which will happen exactly 2 days after the debt ceiling is reached, will consist of, let's say, $5 trillion in "spending cuts" and $500 billion in new revenue, along with $2 trillion in new stimulus spending over 10 years. The kicker for those of us who have been paying attention is that 60% of the spending cuts will be cuts that have long since been scheduled (you'll hear "war savings", "superstorm sandy savings/spending", or something along those lines) and the rest of the "cuts" will be merely replaced by the new approved "stimulus". Result: More taxes.... that's it.
- Moody's Downgrades USA: We'll end on another obvious one with Moody's downgrading the US after the "resolution" of the debt ceiling "crisis". Additional fun prediction, Moody's will write, unambiguously and very specifically, in their report that the reason for their downgrade was because of the lack of a credible plan to reduce the budget deficit. Yet, somehow, every talking head on TV will blame it on "brinkmanship" or, if you're watching MSNBC, the Republicans or the NRA or something equally stupid. Less likely, but still a plausible prediction, it will be found that the reason for this vast misunderstanding of the resulting downgrade is due to every cable tv pundit being functionally illiterate.
So fellow monkeys, what are your predictions? How do you think this charade will end up playing out? Does anyone out there think that something meaningful will happen? Also, how do you trade the coming downgrade from Moody's? Same situation with S&P's downgrade where it'll be met with significant drops in rates?
Over the past several months I've come to the conclusion that the vast majority of Americans are either a) stupid, or b) don't care. The fact that they continue to vote for partisans on both sides shows that Americans no longer care about working together, instead are for working for their own interests. Realistically, we will never solve our debt problem until the rest of the world forces us to do so. Until then, it's all for show.
BTW, love your tag for this post.
Thanks! I shoot for realism in the tags since I shoehorn in pictures that apply only via copius captioning :).
1.) Prioritizing payments is essentially impossible, see here: http://www.businessinsider.com/tony-fratto-on-treasury-prioritization-i…
2.) If the gov't is going to be shut down, it should occur outside of the debt ceiling debate. Do it during a traditional budget debate as it was done in 1994
3.) Let's not make a false equivalence, this bullshit is being driven by the far right. There is far more variety amongst the Democrats than there is in the House GOP who see compromise as a dirty word because they all live in extremely gerrymandered districts
I don't disagree with you, but let's be serious here, we haven't had a budget in years, nevermind a debate. This is not a serious option given the circumstances.
Don't be naive. If you truly think that one party is the problem, and the other is simply trying their darndest to fix things, you're either not paying attention or you're kidding yourself. Don't fall into the trap of political tribalism as it merely exacerbates the whole "us vs. them" thinking, thus contributing to the notion that "compromise is a dirty word" you so quickly blame on "the house GOP".
Spending cuts will be had and the ceiling will increase. Obama got his politically motivated increases and Republicans will get their entitlement cuts.
And if no cuts are given I think the Republicans will simply stand firm. Unlike the President, national polls really don't matter to House Republicans. These guys can't go back to their constituents without cuts.
only clicked on this thread to view the enlarged version of the picture
Everyone should be jealous of you from here on out, haha.
http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=…
Raise the debt ceiling and then deal with the issues in a budget debate. I don't care if a budget hasn't been passed in years, shut down the gov't until one IS passed.
And come on, don't call me a tribalist. I like people from both parties, but let's not act like the House GOP is being reasonable. I know there are some on the left that won't give an inch on entitlements, but Obama is not one of them (see the Grain Bargain negotiations of 2011.)
Regardless, using the debt ceiling to hold thigns hostage is insane. And even if you could prioritize payments, which despite your assertions is not nearly so simple, it would send SHOCKWAVES through the global economy. If you want to cut spending, do so in a budget, not after you've already run up the bill. Picking and choosing what you'll pay for (after the fact) is not how it works.
Good idea. I agree completely.
I'm sorry if what I said came across wrong, but I didn't intend to call you a tribalist. Merely that the whole "they're bad, we're good" (or any variation) mentality risks falling into the trap that is political tribalism.
Holding the debt ceiling hostage, insane or not, is apparently an effective method for bringing attention to federal spending. Granted, it's efficacy stops there, as federal spending hasn't been cut in nominal dollars ever (as far as I can tell). Also, I'm not convinced that not raising the debt ceiling would cause shockwaves through the global economy if payments were prioritized via some method. For instance, if the Treasury managed the delay by making FERS contributions and contract payments via registered warrants, why would that send shockwaves through the global economy? Additionally, why didn't California's utilization of the same tool send (albeit, smaller) shockwaves through their own - nevermind global - economy? That being said, I agree, picking and choosing what you pay for after the fact is not how any responsible entity (government, business, household, etc.) should behave.
You think that suddenly all of the politicians in DC would come to this epiphany that spending needs to be cut if there wasn't some drastic consequence to not do so? While you may thing that holding the debt ceiling is insane, there seems to be no other motivating factor to enact cuts now under this current administration. Considering that for the last four years we have essentially been running on a quasi continuing resolution, thinking that sanity will come back to politics right now is asinine.
Our politicians blew their chance to face the debt when they could have allowed all the Bush and Obama tax cuts to expire. They didn't. So now it's either spending cuts, or Americans taking it up the ass 10-15 years from now. Acting responsible went out with the Bush administration and has never come back. If President Obama were willing to come forward and voluntarily suggest spending cuts (and I mean solid solutions, not "savings on future imaginary war spending" BS), I may be more inclined to agree with you. But it won't happen. Why? Because there is no incentive to. Is holding the economy hostage a dick move by the GOP? Hell yeah. But what sane alternative is there right now that would start making a meaningful impact on our debt. I can't see any.
Holding out hope that the GOP will convince Democrats to cut spending when they are just as entrenched in their ideology will get us nowhere, and we will continue to pile on debt. Drastic measures now are far more palatable than no choice to how we reduce our debt in the future.
House GOP allowed tax rates to increase. They compromised. Time for Obama to cut entitlements.
And if SS payments stop it is Obama's choice. Just like whenever a school budget fails to get passes they cut the sports programs 1st. Anything to hurt the voting public the most.
It'll get raised at the last minute after much shrieking and wailing like it always does. None of those guys up for reelection is going to go home without the opportunity to preen themselves over how great they did.
I suspect you're right, but hey, you have to take an aggressive position every once in a while!
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