All UR Debt Ceilingz Are Belong To Us

There's a great interview with investor Stanley Druckenmiller in the weekend edition of the Wall Street Journal. And by "great", of course I mean he agrees with me.

I haven't read a whole lot of people who resist the "ZOMFG we have to raise the debt ceiling now or we're all gonna die!!!" message coming out of the administration, but the mere fact that it's the drumbeat of the left should give you pause. It sure does for this guy:

Mr. Druckenmiller is puzzled that so many financial commentators see the possible failure to raise the debt ceiling as more serious than the possibility that the government will accumulate too much debt. "I'm just flabbergasted that we're getting all this commentary about catastrophic consequences, including from the chairman of the Federal Reserve, about this situation but none of these guys bothered to write letters or whatever about the real situation which is we're piling up trillions of dollars of debt."

Bingo!

The House GOP needs to go to the mattresses on this and force the donks to make real structural changes that reduce the deficit and debt in exchange for any temporary increase in the debt ceiling.

Here's what I'd hold out for if I was Boehner:

• Taking total government outlays for FY 2012 back to pre-spendulus levels
• Making any temporary debt limit increase ratchet down automatically based on CBO projections
• Eliminating a sacrosanct government department (Ed, Energy, Ag - pick one) just to show we're serious

It's the weekend, so I didn't grab the excellent DOOM! SluShop to headline this post, but you'll recognize the theme. Holding the spendthrifts' feet to the fire with the debt ceiling ... which is why the damned thing was created in the first place ... is really our last, best chance to stave off disaster. We've been kicking the can down the road for decades; we've reached the end of that road.

Changing the things that are killing us long-term - Social Security, Medicare and, coming soon to a theater near you, Obamacare - requires winning the White House, 61 solid votes in the Senate and holding a majority in the House. There's probably nobody reading this that remembers a time when conservatives had all these, if we ever have. (Note: any dipshit that trots out "8 Years Of Bush-Cheney" is required to immediately submit an application to clerk for Miguel Estrada on the U.S. Court of Appeals.)

But as Rahm Emanuel so kindly pointed out, you should never let a crisis go to waste. In this case, bumping up against the debt ceiling is creating precisely the kind of crisis it was intended to, and we hold all the cards for once. If I'm gonna be called a hostage-taker anyway, the debt limit makes a mighty good hostage.

So back to the Andy Plan™ ... does anyone think we had too little federal government in 2007? No? Then why the hell can't we just take spending back to those levels tomorrow? I'll even grant an increase for inflation, since teh Bernank tells me there isn't any.

And I'm more than willing to increase the debt ceiling with a ratchet down to CBO debt projections since they've been rigged to be optimistic.

Monty recommended the following short clip to explain the difference in government and business forecasting standards:

And to the last point of the plan, we need to reverse the one-way ratchet of perpetually increasing government spending. Nothing could show we were more serious about doing that than eliminating a Department of Education that has no students, a Department of Energy that produces no power or a Department of Agriculture that doesn't even own a damned tractor.

The bond market understands this. U.S. treasuries set the standard for the "risk-free" interest rate. I'm betting even a 50 basis point risk premium on treasuries would draw hordes of investors. But hey, I'm a moron, what do I know? Oh, wait:

Mr. Druckenmiller says that markets know the difference between a default in which a country will not repay its debts and a technical default, in which investors may have to wait a short period for a particular interest payment. Under the second scenario, he doubts that investors such as the Chinese government would sell their Treasury debt and take losses on the way out—"because I'll guarantee you people like me will buy it immediately."

Emphasis added for the "Duh!" factor.

Come on House GOP, man up. This is why we elected you.

posted by Andy at 10:48 AM

| Access Comments