Thursday, July 28, 2011

Impertinent Observations (Debt Ceiling Edition)

The current jockeying by either side of the aisle up in DC over this debt ceiling business seems to bear out the old saying that politics is the art of the possible – and to a certain extent, therein lies the problem.

Rather than go down any number of potential rabbit holes – the arbitrary date set for raising the debt ceiling (just the latest of many such arbitrary deadlines), the fact that not raising the debt ceiling is not the same thing as default on the debt, the fact that even if the debt ceiling is not raised the feds would have plenty of income to meet their debt service obligations (paying off bonds and interest as they come due), the fact that the federal government has avoided the hard choices that would be imposed by a budget (by operating without one for years now), and the fact that all of the new spending approved over the last couple of years (Obamacare, unspent stimulus money, etc) is off of the table – I want to comment on the bigger picture.

I feel quite strongly that one’s policies and votes need to be grounded in a defensible political philosophy.  That is why I went to such great lengths to articulate my political philosophy when I ran for the District 1 seat on the Athens-Clarke County Commission in both 2002 and 2006.

On the other hand, political philosophy does not properly operate as an abstraction only; one of the reasons I hold Raymond Aron in such high regard, though his was much to the left of my own thinking, is his recognition that while political theory is all well and good, politics must be brought down to a concrete level if anything is to be accomplished.  That is the reason that I abandoned the Libertarian Party back in the late 1990s; far too many in the LP regarded compromise as a sell-out of principles, irrespective of the fact that success in politics is predicated on the give-and-take of competing interests.  And now I fear that conservative in the GOP, with whom I agree, may make the same mistake.

I fully believe that not raising the debt ceiling would, in the long run after much political wailing and gnashing of teeth, be a net plus for the country in that it should force the powers that be to rethink their spending policies.  Unfortunately, though, that is not going to happen.  The debt ceiling is going to be raised - the only real questions concern the particulars.

That is where compromise comes in.  While I fully agree with the philosophical position that raising the debt ceiling is not the best course of action to take, the political realities are that it is going to be raised.  Republicans on the Hill may be excused for crafting the best practical policy out of it that they can.

Thus, we are left to consider the Boehner plan.  Those on the Right may have to hold their collective nose in order to vote for it - an amalgam of $1 trillion in new debt, $1.2 trillion in budget cuts over the coming decade (I know, I know), and a promise of $1.8 trillion in deficit reduction later this year - but it is a damned site better than Harry Reid’s Senate alternative or anything likely to come out of the Obama White House.   As this WSJ editorial explains (much better than could I), the ball is in the GOP’s court; I pray that they don’t blow it and get blamed for whatever may follow as they surely would, irrespective of where the fault really lay.

Another aspect of this debt ceiling business is the absurdity associated with the credit rating assigned to US Treasury bonds.  As a measure of how government involvement creates perverse incentives, we are presented with the prospect that the credit rating of the United States government may get downgraded . . . if it refuses to incur even more debt that it cannot hope to pay off?  That, of course, is precisely the opposite of what should be happening.

Besides, as Holman Jenkins points out in this WSJ column, any downgrade of the bonds is an essentially pointless exercise.  Unlike many claims on the US Treasury (discretionary spending, Social Security, Medicare/Medicaid, etc.), the feds are legally obligated to pay off the bonds – so those are the last things to go to the chopping block.  Even that does not matter, though, because the Treasury can (and will) pay off the bonds using dollars that have been devalued by inflation.  From a certain and limited perspective, the government cannot lose (though the rest of us will not be so lucky).

To borrow a line from Glenn Beck, it makes your head feel like it is going to explode.

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