T Nation

No Debt Ceiling?

“Republicans scoffed when President Obama demanded the power to raise the debt ceiling unilaterally in his first formal “fiscal cliff” offer to the GOP. And at first, I thought he was just staking out an extreme position for negotiating purposes. But Obama said again in the days that followed that he wasn’t kidding: He wants the debt ceiling lifted unconditionally.”

Is this man insane ?

[quote]MaximusB wrote:

Is this man insane ?[/quote]

Crazy like a fox. I honestly believe he is trying to destroy the country via the Cloward and Piven strategy.

Do you know what the debt ceiling is? And what it does? Do you think that raising the debt ceiling adds to the national debt?

The nonsense we were subjected to in 2011 should be avoided at all costs.

A lot of people think the debt ceiling should be done away with altogether. I agree.

[quote]smh23 wrote:
Do you know what the debt ceiling is? And what it does? Do you think that raising the debt ceiling adds to the national debt?

The nonsense we were subjected to in 2011 should be avoided at all costs.

A lot of people think the debt ceiling should be done away with altogether. I agree.[/quote]

The debt sealing was put in place as a stop gap for federal spending after the FED charter was amendeded to allow for the monetization of treasuries.
The argument against that amendment to the FED authorization was that spending fueled by FED policy would have no ceiling and that any artificial ceiling would be ignored or eliminated in the future.

You’re absolutely right if you’re arguing that the debt ceiling is just a superficial and mostly political construct. However, if you’re trying to argue that the federal government will EVER have any restraint in spending as long as the FED is there to monetize the debt, YOU are part of the problem.

[quote]smh23 wrote:
Do you know what the debt ceiling is?

[/quote]

It places a limit on the amount of money the federal government can use to repay debt already incurred.

Indirectly, yes. It provides a disincentive for the president to increase the debt in the next budget and also a disincentive for Congress to approve excessive budgetary spending.

[quote]TooHuman wrote:

[quote]smh23 wrote:
Do you know what the debt ceiling is? And what it does? Do you think that raising the debt ceiling adds to the national debt?

The nonsense we were subjected to in 2011 should be avoided at all costs.

A lot of people think the debt ceiling should be done away with altogether. I agree.[/quote]

The debt sealing was put in place as a stop gap for federal spending after the FED charter was amendeded to allow for the monetization of treasuries.
The argument against that amendment to the FED authorization was that spending fueled by FED policy would have no ceiling and that any artificial ceiling would be ignored or eliminated in the future.

You’re absolutely right if you’re arguing that the debt ceiling is just a superficial and mostly political construct. However, if you’re trying to argue that the federal government will EVER have any restraint in spending as long as the FED is there to monetize the debt, YOU are part of the problem.[/quote]

I’m arguing that debts incurred are debts that need to be paid. If you want to have a political fight, have it at the budget vote.

The debt ceiling is not a stop-gap because it’s too late in the game. It does not affect debt held by the public. It isn’t what almost everyone in this country thinks it is. It needs to be done away with.

The debt ceiling crisis cost us money. That kind of nonsense needs to be eradicated.

[quote]SexMachine wrote:

[quote]smh23 wrote:
Do you know what the debt ceiling is?

[/quote]

It places a limit on the amount of money the federal government can use to repay debt already incurred.

Indirectly, yes. It provides a disincentive for the president to increase the debt in the next budget and also a disincentive for Congress to approve excessive budgetary spending.
[/quote]

You’re both wrong, the process of accruing the debt and the process of servicing(repaying) it are the same process in practice. The treasury issues bonds(and other treasury debt instruments), the FED acts as the largest buyer to create a floor for the treasury market, repeat. The debt instruments are never retired in practice, they are rolled over(in differential increments) into shorter term debt until the bubble bursts.

Further, the disincentive is only a theoretical(intended) effect overcome in practice by political posturing on the surface inevitably leading to it’s further elevation(raising the ceiling).

[quote]TooHuman wrote:

Further, the disincentive is only a theoretical(intended) effect overcome in practice by political posturing on the surface inevitably leading to it’s further elevation(raising the ceiling).
[/quote]

How does setting a ceiling lead to its elevation?

[quote]SexMachine wrote:

[quote]TooHuman wrote:

Further, the disincentive is only a theoretical(intended) effect overcome in practice by political posturing on the surface inevitably leading to it’s further elevation(raising the ceiling).
[/quote]

How does setting a ceiling lead to its elevation?[/quote]

By supplanting the market forces(higher interest rates) that create a real disincentive to spend more than you can produce first.

In other words the debt ceiling was put in place in order pre-empt or “solve” the problem of FED fueled debt expansion a problem initiated by the federal government that authorized the FED to displace market based interest rates in the first place.

By erecting a purely legal limit politicians can still claim to be concerned about repaying or limiting the debt without actually acting on it and bursting the debt bubble.

Likewise the president can claim to be responsible in making sure “we always repay our creditors” because(in a truly Orwellian fashion) the legal terminology for servicing our debt(by further expanding the existing debt) can be represented as “repaying” it.

[quote]TooHuman wrote:

By supplanting the market forces(higher interest rates) that create a real disincentive to spend more than you can produce first.

[/quote]

This article from American Thinker suggests the ceiling has little impact on real economic conditions:

‘Despite the fact that a debt ceiling increase only provides temporary, superficial respite, many of those who favor such a move give too much weight to the impact of the debt ceiling…it is unlikely that an arbitrary debt limit would dramatically affect real economic conditions.’

Read more: http://www.americanthinker.com/2011/07/debt_ceilings_impact_is_overrated.html#ixzz2EdmOrqWQ

[quote]SexMachine wrote:

[quote]TooHuman wrote:

By supplanting the market forces(higher interest rates) that create a real disincentive to spend more than you can produce first.

[/quote]

This article from American Thinker suggests the ceiling has little impact on real economic conditions:

‘Despite the fact that a debt ceiling increase only provides temporary, superficial respite, many of those who favor such a move give too much weight to the impact of the debt ceiling…it is unlikely that an arbitrary debt limit would dramatically affect real economic conditions.’

Read more: http://www.americanthinker.com/2011/07/debt_ceilings_impact_is_overrated.html#ixzz2EdmOrqWQ
[/quote]

I’m sorry that you’ve found an article from “American Thinker” to think for you. Particularly an article with such absurd contradictions.

“Politicians must take meaningful steps to bring about economic recovery. Economic growth occurs best when people are left to their own devices,…”

Read more: http://www.americanthinker.com/2011/07/debt_ceilings_impact_is_overrated.html#ixzz2EdrMq1Sb

Unfortunately, if you need an article to support your position on a fiscal statute without recognizing and addressing the preceding and underlying monetary actions this conversation won’t go far.

I’m gonna bow out of this thread, but I will say before I go that I suggest looking into American monetary behavior(FED action), before and since the establishment of the Federal Debt limit.

[quote]TooHuman wrote:

I’m sorry that you’ve found an article from “American Thinker” to think for you.

Particularly an article with such absurd contradictions.

“Politicians must take meaningful steps to bring about economic recovery. Economic growth occurs best when people are left to their own devices,…”
[/quote]

That’s not a contradiction. The ‘meaningful steps’ politicians must take are steps that lead to people being ‘left to their own devices’ - i.e. tax cuts, less regulations etc. That quote is also unrelated to the subject we were discussing.

The discussion wasn’t about addressing the ‘preceding and underlying monetary actions.’ It was about whether the ceiling is a disincentive to the creation of further debt.

But doesn’t the idea of not having a debt ceiling show the man’s ideas about how he plans on managing debt (or not) ?

What a shocker. As Reagan said, “Congress consistently brings the government to the edge of default before facing its responsibility.” He slammed the “this brinksmanship” because “it threatens the holders of government bonds and those who rely on Social Security and veterans benefits,” adding that it threatened to raise interest rates and explode the deficit.

Ronald Reagan raised it 18 times.

Republican George W Bush raised it 7 times including once where ONLY Senate Republicans voted for it in 2006 when (guess who!) Barack Obama opposed it.

Now, formerly against it Barack Obama is for it. Now formerly FOR IT Republicans are against it. Again, what a shocker. I’m finding it hard to believe that Republicans are opposed to spending while Democrats are in power and that Democrats are opposed to spending while Republicans are in power. And people still think significant differences amongst the parties exist? Lol.

Obama’s not insane, he’s just doing what everyone before him already did. If someone has a problem with it now, but wouldn’t if Mitt Romney was elected then it shouldn’t be too hard to figure out why we keep kicking this can down the road. Let the next guy worry about it said all the guys before, so the current guy of course is saying the same thing.

Be prepared to be arguing about this again in 2017! And 2019, and so on. Headline from the paper in 1952: “How Big a National Debt Can We Stand? Many are sure we are already bankrupt.”

:slight_smile: We didn’t start the fire…

[quote]MaximusB wrote:
But doesn’t the idea of not having a debt ceiling show the man’s ideas about how he plans on managing debt (or not) ?[/quote]

The most fundamental debt management strategy–actually, the only real debt management strategy–is to make payments. The debt ceiling allows or disallows the making of payments on obligations already incurred.

I agree with Sexmachine re: there needs to be a serious disincentive to reckless borrowing. But this is not the appropriate form of that disincentive.

The debt ceiling also implicates the Full Faith and Credit clause. I’m with smh on this one. But I’d support a balanced-budget amendment.