The Fed Shutdown Poll and Megathread

[Berkut]

I think he simply doesn't know what a president does.  He spent all his time trying to get elected president, without spending time figuring out why he wanted to be president. 

Yep, that is exactly how it feels.

You just don't get the feeling that he wanted to be President because he had any kind of vision of an America that he wanted, or some kind of task he felt he needed to accomplish, or really anything other than "Well, I *can* be President, therefore I will do my best to become President". It is a goal, rather than a means to attain a goal.

Now he has the job, and it is too late to figure out what to do once elected.

Pretty much. What is really sad is that the alternatives are going to be so very, very bad.

[DGuller]

If that is the case, then the response is to come out and say "Hey, the sky is blue" and then make fun of the dipshits who say otherwise.

That's not Obama's style.  Obama's style is to say that people who believe that the sky is brown have a point, and their view should be respected.  He's not the kind of leader who leads by leading.

Anyway, beyond this point, there are two other points why Obama might not feel like weighing in.  First of all, austerity during recession is self-defeating.  The damage you do to the economy will cancel out the budget savings you get from austerity.  Second of all, the whole debate is completely, utterly intellectually dishonest in nature.  All the budget cuts being discussed are just long-time Republican targets which are attacked under the cover of budget deficits;  in the long run, entitlements and defense have to go down or taxes have to go up, everything else is peanuts. 

Everyone who says we can cut the deficit to any significant degree without doing one of the two things is uninformed, stupid, or a liar.  If Obama weighs in with a proposal, he's just lending credibility to a cynical political game that shouldn't have any.

[Caliga]

I think he simply doesn't know what a president does.  He spent all his time trying to get elected president, without spending time figuring out why he wanted to be president.  Now he has the job, and it is too late to figure out what to do once elected.

[MadImmortalMan]

First of all, austerity during recession is self-defeating.  The damage you do to the economy will cancel out the budget savings you get from austerity.

Doesn't matter anymore. There's no more wiggle room. Bush spent it all during the boom and now we can't do what would otherwise be a good idea to get out of the recession. We don't want to go up against the wall like the PIIGS.

Second of all, the whole debate is completely, utterly intellectually dishonest in nature.  All the budget cuts being discussed are just long-time Republican targets which are attacked under the cover of budget deficits;  in the long run, entitlements and defense have to go down or taxes have to go up, everything else is peanuts. 

Everyone who says we can cut the deficit to any significant degree without doing one of the two things is uninformed, stupid, or a liar.  If Obama weighs in with a proposal, he's just lending credibility to a cynical political game that shouldn't have any.

All true.

[KRonn]

One cut I've seen put out by Ryan and others is to roll back Federal budgets, which saw about a 25% increase since Obama took over. And with the stimulus adding to it, supposedly those budget increases were a lot more. At the least, we should be able to address that, roll back some of those very heavy increases.

The entitlements need to be addressed, something that every politician thinking responsibly about budget debts knows. Social Security, Medicare, others. And Defense spending needs to be addressed as well. But to tackle those requires leadership, and to take some lumps. If our parties and the President can actually work more together, making some fiscally responsible changes should be a lot easier, less damaging to the programs and the politicians.

We've been getting plenty of warnings from our Federal Treasury and Fiscal types, so that should also give cover to do what's needed. We also have the panel commissioned by Pres Obama on how to address the budget issues. That panel came up with plenty of ideas to look into as well, while also providing a bi-partisan cover.

But it does appear that the Repubs, and some Dems, will go it alone, absent many Dems and the Obama admin. They'll take heat for it though.

[MadImmortalMan]

Also, from the title, I thought Seedy had lost his mind and gone Paultard on us. "The Fed" makes me think Federal Reserve. 

[Admiral Yi]

That's not Obama's style.  Obama's style is to say that people who believe that the sky is brown have a point, and their view should be respected.  He's not the kind of leader who leads by leading.

Anyway, beyond this point, there are two other points why Obama might not feel like weighing in.  First of all, austerity during recession is self-defeating.  The damage you do to the economy will cancel out the budget savings you get from austerity.  Second of all, the whole debate is completely, utterly intellectually dishonest in nature.  All the budget cuts being discussed are just long-time Republican targets which are attacked under the cover of budget deficits;  in the long run, entitlements and defense have to go down or taxes have to go up, everything else is peanuts. 

Everyone who says we can cut the deficit to any significant degree without doing one of the two things is uninformed, stupid, or a liar.  If Obama weighs in with a proposal, he's just lending credibility to a cynical political game that shouldn't have any.

Austerity during recession (which we're officially out of) is self-defeating unless we're approaching the point where our debt burden makes lending to the US unattractive to lenders.  Austerity was not self-defeating for the PIIGs, the UK, Iceland, etc., etc.

We've been getting a free ride on interest because of the Fed, China, and Japan.  Once those turn off our debt servicing costs will become significantly higher.

I agree that the Republican proposals are gimicky low-hanging fruit.  But the rational response to that fact is not to say that the deficit doesn't matter.

[DGuller]

Doesn't matter anymore. There's no more wiggle room. Bush spent it all during the boom and now we can't do what would otherwise be a good idea to get out of the recession. We don't want to go up against the wall like the PIIGS.

You're making an assumption here, that there is no more wiggle room.  If that were true, interest rates wouldn't be rock bottom like they have been lately.  Investors would be pricing in default risk or inflation risk when lending money to the US government. 

Comparison with PIIGS is a scare tactic, it's not based on sound economics.  Eventually we'll pay the piper if we keep up this insanity, since deficits will persist to a lesser degree even after the recovery, but we're not close to the breaking point yet.  Deficits have to be tackled, but they have to be tackled with a sound economy.

[Berkut]

While DG is correct that if we want to really address the budget deficit we need to address the big ticket items, that doesn't really explain why the Dems want to keep spending more and more and more and more.

You present kind of an interesting argument. The TBs are all "ZOMG the Feds spend too much money! We should cut spending!" in response to the both parties vastly *increasing* spending, and the response is "Well yeah, but cuts don't mean anything if you don't cut the big costs!". Sounds like you are arguing that we should go ahead and keep on spending MORE since unless we cut stuff that politically cannot be cut, we might as well just keep on spending even more and more?

Sure, the cuts being proposed are not substantial, but it is surely better than not *increasing* spending, if the goal is to reign in the deficit in some fashion or another. Or to reign in an out of control federal government.

Of course, the Dems are not really being honest - the objection you have is not that the cuts don't cut enough to matter, since the Dems don't want to cut anything, and instead want to increase federal spending.

[MadImmortalMan]

Doesn't matter anymore. There's no more wiggle room. Bush spent it all during the boom and now we can't do what would otherwise be a good idea to get out of the recession. We don't want to go up against the wall like the PIIGS.

You're making an assumption here, that there is no more wiggle room.  If that were true, interest rates wouldn't be rock bottom like they have been lately.  Investors would be pricing in default risk or inflation risk when lending money to the US government. 

Comparison with PIIGS is a scare tactic, it's not based on sound economics.  Eventually we'll pay the piper if we keep up this insanity, since deficits will persist to a lesser degree even after the recovery, but we're not close to the breaking point yet.  Deficits have to be tackled, but they have to be tackled with a sound economy.

Interest rates are low because Obi-Wan Bernanke keeps them low. Eventually, that's going to change. If we have to go into inflation-busting mode, the annual deficit is going to skyrocket.

[DGuller]

Austerity during recession (which we're officially out of) is self-defeating unless we're approaching the point where our debt burden makes lending to the US unattractive to lenders. 

Well, obviously.  You can't keep up the deficits no matter what if no one will lend us money.  Any evidence that lending to US is becoming unattractive, though?

Austerity was not self-defeating for the PIIGs, the UK, Iceland, etc., etc.

That's debatable on a number of levels.  We don't know yet what will happen in UK, but we know that their GDP growth turned negative after the austerity plan.  As for Iceland, didn't they devalue rather radically after the huge bust they had?

I agree that the Republican proposals are gimicky low-hanging fruit.  But the rational response to that fact is not to say that the deficit doesn't matter.

It's not a matter of whether they matter, it's a matter of priorities.  Deficits aren't going to go away, and they can't go on forever.  The question is whether it's prudent to attack them now, while the recovery is still tottering.

[DGuller]

Interest rates are low because Obi-Wan Bernanke keeps them low. Eventually, that's going to change. If we have to go into inflation-busting mode, the annual deficit is going to skyrocket.

Bernanke now has only limited influence at best over the long-term interest rates, which slightly more than he usually does (due to QE2).  The market largely determines the long-term interest rates.

[garbon]

The question is whether it's prudent to attack them now, while the recovery is still tottering.

Who's going to want to attack them when things are good?

[DGuller]

The question is whether it's prudent to attack them now, while the recovery is still tottering.

Who's going to want to attack them when things are good?

The deficits are still going to be way too large to ignore, even after recovery.  Want to or not, that battle will have to be fought eventually.

[Admiral Yi]

Well, obviously.  You can't keep up the deficits no matter what if no one will lend us money.  Any evidence that lending to US is becoming unattractive, though?

PIMCO liquidated 100% of their Treasury holdings.  If I'm not mistaken 70% of new issues are being bought by the Fed.  Some PIMCO manager said based on debt/GDP ratio the US really should have a AA rating.  And at current rates we're tacking on another 10% of GDP to the debt each year.

PIIG spreads over German bonds were tiny before the crisis hit.  You seem to be operating under the false premise that the yield curve gradually slopes up.  It doesn't.  It's flat until a certain point, when it gets very steep.

Plus the noise Moody's was making about a downgrade back when the deficit commission ( ) was operating.