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"The sharp tongue of your zealous will is only congruent with the salt in your mouth.”
Screwing around with the debt ceiling is yet another example of how governance has been replaced by politics.
This week’s soundtrack: Deafheaven - “Vertigo”
The news over the weekend was largely focused on the Chinese surveillance balloon that was shot down over South Carolina, but that particular potential international incident should not take away from the fact that the United States, by statute, has run over the debt ceiling and not much has been done about it. The Treasury Department did some money-moving stuff – dubbed “extraordinary measures” – that will buy some time for Congress to agree to a raise of it, but that’s estimated to keep the entire enterprise afloat until the spring. June, probably, is when a default rears its head.
For context: The debt ceiling is the total amount that the U.S., by law, can borrow cumulatively by issuing bonds. It is not the national debt, nor is it really like a credit card or a car loan or any other consumer debt.
(I’ll almost certainly tackle this in a future newsletter, but my frustration with the way the federal budget is portrayed – and understood – by the news media, politicians and the public… it knows no bounds. I hate it so much, it’s so facile and fully flattens something complex into dumb bullshit. I despise it. The U.S. budget/debt is not the same as household debt.)
I’m hardly an economy-knower, but Matt Levine is the columnist to whom I look at these 300,000 ft matters and I take his word on it when he wrote “The dumbest thing in economics, the US government’s debt ceiling, is clattering into relevance again” in January. While his suggestions in that January column are not something I want to explore here, I do want to agree wholeheartedly that the debt ceiling is exceptionally stupid. No other country really has anything like the debt ceiling; not China, not the EU, not any other similarly-sized economic power. It is a fake number, an arbitrary thing. It’s great for grandstanding and not much else. The incentive structure of Speaker Kevin McCarthy, Senator Joe Manchin and the various “budget hawk” doofuses is to misrepresent the debt ceiling as something other than what it is. It’s not a real thing. It’s arbitrary and does nothing for governance, but it is very useful for politics.
Over at the ranch, we’ve covered this issue twice on the show. Our more-recent one was with reporter Eric Katz, in which we talked about the repercussions for federal agencies and federal employees. The tl;dr version is that there, in fact, isn’t a lot of precedent here. Agencies could pay public servants in IOUs or employees could get furloughed.
The House GOP is dead set on getting spending cuts from the White House, as part of a deal to raise the debt ceiling (though, as I write this, neither has released a budget. The White House is expected to release its annual budget in March). The last time this was an issue was 2011, partially culminating in some credit agencies downgrading the U.S.’ credit. With a few months until a default, it’s worth asking why no one is taking this more seriously.
I asked Eric the question that undergirds a lot of these recent conversations in my mind: What about trying to increase revenue (as in: raise taxes or enforce the tax code by funding the IRS)? He, smartly, noted that the GOP House is pretty against that notion by their recent actions regarding the agency responsible for collecting revenue.
“By increasing funding for the IRS, and this has been validated by the independent Congressional Budget Office, there's an expectation that that will help raise revenue, which will then be offset by spending when inflation Reduction Act.”
Politics being what they are, this strikes me more as a hostage situation than a negotiation, but I guess a hostage situation is a negotiation, in a way. The previous episode on which we covered this topic featured former OMB and CBO official Doug Criscitello. He is a self-described “budget guy” and I value his expertise as much as anyone on this subject, but even he seems to think the timing on this is incorrect. He noted that dicking around (my words, not his) with the U.S. credit rating would really hurt consumers and he said that “given the high inflation that we've been living through over the past year, the public doesn't need something else driving up prices”
I definitely suggest you listen to the episode, if only because Doug also went through the options from the silly (minting the $1T coin) to the somewhat more realistic (invoking the 14th Amendment’s clause about “The validity of the public debt of the United States…shall not be questioned”) to a few others.
More than anything, Doug (and Eric, in a way) noted that the timing is just awful. Usually these negotiations happen when there are actual real budget negotiations; the Congress has the power of the purse and can use it. This timing just adds more agita to an already anxious economic time.
But, again: I want to reiterate that this is not a thing that exists anywhere else. It’s a fake number. It doesn’t matter. This is not, like, a left v. right thing or a tankie v. Reason reader thing; even the capitalist class accepts that the debt ceiling should be raised. At the Federal Reserve Bank of New York’s Annual Primary Dealers Meeting last month, Assistant Secretary for Financial Markets Joshua Frost said:
As market participants have repeatedly highlighted, markets do not like uncertainty and will demand a risk premium to hold Treasury debt as compensation.
It’s maddening that we’re even having this conversation, which is a phrase I think I’m going to writing a lot in the next few years.
I already mentioned the debt ceiling show we did, but we also had some good shows about other stuff. Dr. Richard Orbé-Austin came on the show to talk about his book; Courtney Bublé and I talked about the over-classification problem; Bob Westbrooks (formerly of the PRAC) talked with me about remote work and how important it is; and Natalie Alms came on the show to talk about waste, fraud and abuse in pandemic money tracking. It was a busy week – we’re also doing prep for some projects that the show will be doing in the next few weeks – and I’m pretty happy with our shows.
Finally, be sure to check in with the GovExec Facebook or LinkedIn pages for a live post State of the Union show that I’ll be hosting. It’s likely that Lulu will bark while the mics are hot, which is always fun.
Today is the Jewish New Year for the Trees (Tu B’Shvat) and I took Lulu on a little trip to the National Arboretum (see below) to greet and enjoy the trees. She is absolutely nuts for water (she tried to jump in the Arboretum fountain last year), so I let her get very close to one of the ponds today.
A Recommendation: The National Arboretum
I’m sorta proud of myself for waiting this long to recommend one of my favorite places in D.C., but it was absolutely inevitable that I was going to mention it. I live across the street from the back end of the grounds, so I can look at the fence and the tops of the trees from my window. More than anything, I like to visit the Arboretum with Lulu and just walk around, be outdoors and get some fresh air.
It’s a real treasure. It’s acres and acres of little hiking paths through native and non-native trees and plants. Lulu gets to explore new places and smells and sounds and sights. I get to be out someplace with her and not worry about her attacking a dog. There’s a spice garden with all kinds of exotic plants, a full exhibit of different dogwoods, as well as many many other gardens and collections. A dumb little scavenger hunt-type thing is also the Stately Treasures trees, which are actual state trees sprinkled throughout the grounds. I force Lulu (with treats, of course) to pose in front of the signs when we come upon them.
More than a few D.C. people have told me that they’ve never been to the Arboretum, which shocks me. Do yourself a favor and take a stroll through it.