Balkinization  

Sunday, October 13, 2013

Disappointing but true: Rand Paul misleads, plus observations on strategic voting

Sandy Levinson

The New York Times reports that :On CNN’s “State of the Union,” Senator Rand Paul, Republican of Kentucky, played down fears that a default on the debt this week would be the cause of a downgrade of the nation’s credit rating, as happened during a similar showdown in 2011. The downgrade, he said, was not caused by the threat of default, but by the size of the United States’ debt."  This is, for better or worse, though not altogether false, demonstrably misleading.

What exactly did Standard and Poor's say.  The answer is as follows:

  • The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.
  • More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
  • Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

  • Obviously, the size of the debt had something to do with the downgrade, so it would probably be tendentious to call Sen. Paul a bald-faced liar..  But, just as obviously, it is the pessmism about the capacity of the national government of the United States to work effectively to meet whatever challenges are involved that more substantially explains the downgrade.  Default is threatened not because the US economy is too weak to cover all of our debts (especially if taxes are raised relatively modestly for those of us in the top 1%), but because a group of Republican terrorists in the House, led, alas, by the junior senator from Texas, have determined that they would rather (threaten to) bring down the international economic order than to behave as responsibly as many Senate Republicans (excluding, of course, the junior senator from Texas) apparently wish to.  It is not, contrary to their whining, the obdurate failure of President Obama to bargain.  It is, rather, that he is not going to submit to political terrorism, and he is correct.

    Incidentally, with regard to his vote while senator against raising the debt ceiling.  I take it that all of us can recognize the difference between political posturing, which I presume he was doing, and genuine "decision making," when one realizes that more than posturing is at stake.  Anyone who voted against raising the ceiling knew to a certainty that it was going to pass.  It was a costless vote, in term of the stakes for the US.  Quite frankly, it is comparable to the posturing of House Republicans back in 1998 to impeach Bill Clinton, since they knew to a near certainty that he would never be convicted by the Senate.  If the House had truly been the decisionmaker, I wonder how many Republicans would have voted to replace Bill Clinton with Al Gore, who would therefore be allowed to run as the incumbent in 2000 (and  be eligible for re-election as well in 2004, since he wouldn't be taking over until after the the first half of the second term).  One of the realities of our political system--perhaps any political system--is that it generates all sorts of incentives for strategic voting designed to appeal to one's base, taking in the knowledge that the vote will in fact have no impact.  (This may be especially true, for example, when presidents make credible threats to veto legislation:  Why not let the President take the heat for saying no to something one's constituents want (but really shouldn't have?) 

    The rise of "war rooms" in campaigns have made such symbolic votes more-and-more important, especially in primaries, even if they often have little or nothing to do with actual governance.  Perhaps Obama would have taken us into default if he were the 51st vote (since Dick Cheney would have broken a tie), but I respectfully doubt it.  We know that almost none of the Republican senators (other than the egregious junior senator from Texas) really want to be the decisive vote to do so.  Would Rand Paul really do it, or is he, too, posturing and presenting himself as more stupid than I suspect he is with regard to the potential consequences of default.  After all, he is clearly going to run for President in 2016, and perhaps he will leave the Tea Party crazies (who I would like to think are a minority of the Tea Party itself) to the junior senator from Texas).  But maybe not?  But who will provide votes 41+ to prevent the vote:  McCain, Graham, Alexander, Portman, Collins, Kirk, even Hatch, who was just re-elected and surely doesn't plan to run for re-election in 2018. 

     

    Comments:

    Sandy:

    Read that passage again more carefully.

    Stabilize debt dynamics is finance speak for reducing our borrowing to a level which will keep us from going insolvent while the baby boomers go through the Social Security and Medicare systems.

    Point One was that the pathetic sequester about which the Democrats have been howling is far short of what is needed.

    Point Two was that the current divided government will not make the further spending cuts required.

    There were no concerns about default if the debt limit is not increased because that is a hollow Democrat threat. Projected FY 2014 tax revenues are about $3 trillion and the cost to service the debt is less than $0.3 trillion.
     

    Our SALADISTA displays his economic skills (having minored in economics) once again but fails the reality breathalyzer test. Astutely the Nobel Committee has once again ignored our SALADISTA who may feel like he's on Cloud Nine in the Mile High State (of mind) with its liberal recreational use of Ganja. Our SALADISTA, libertarian that he is, may be pushing for the GOP's a-Paul-ing duo for 2016:

    PAUL R-AYN/RAND PAUL

    Dr. Rand Paul may have read the Standard and Poors downgrade with both eyes closed.
     

    Here's a link:

    http://www.nytimes.com/2011/08/06/business/us-debt-downgraded-by-sp.html?_r=0

    to the NYTimes take on the downgrade back then. There were some inaccurate numbers used by S & P. The most significant point made by S & P was the long range need to take the debt ceiling out of politics. But it must be kept in mind that S & P as a financial watchdog did not have "clean hands" relative to what led to the 2007-8 Bush/Cheney Great Recession.
     

    Shag:

    The Democrats and their media did indeed attack the messenger in condemning the original S&P downgrade.

    When that did not work, they took Sandy's tack and reinterpreted the downgrade as a criticism of the GOP refusal to raise the limit on the national credit card.

    Anyone who can read the actual report knows better.
     

    Sandy:

    Please allow me to expand on my original post.

    The CBO's latest public debt to GDP (not counting all the Social Security bonds) projections actually assume "stable debt dynamics" in that our deficit spending will drop to a long term rate of 2% of GDP. Even if that somehow occurs, our public debt to GDP ratios will rise to Spanish and Italian levels in another couple decades after all the boomers retire.

    http://www.cbo.gov/publication/44521

    The S&P downgrade in our government credit rating would have been larger if we were not the largest economy in the world and if the dollar was not the world's reserve currency. The ratings agencies do not want to start a well justified panic, tank world markets and sharply raise our artificially low cost of government borrowing.

    This is not a game.
     

    Nice formatting btw.
     

    Our SALADISTA seems to use Dr. Rand Paul's techniques of closing both eyes when he comes to parts he doesn't like.

    I trust that our SALADISTA took a course on Equity in law school, but note he ignores my reference to S & P's "unclean hands" that contributed to the 2007-8 Bush/Cheney Great Recession. In addition, S & P admittedly screwed up with certain numbers in its downgrade.

    And our SALADISTA's "This is not a game." puts him in the same category as Speaker Bo[eh]ner who has been demonstrating that the "o" is no longer silent.
     

    I think this point:

    The rise of "war rooms" in campaigns have made such symbolic votes more-and-more important, especially in primaries, even if they often have little or nothing to do with actual governance.

    is so important and profound that it's sad that the comments thread is going to be buried in the usual Bart DePalma and anti-Bart DePalam bullshit.
     

    Bart dePalma: ¨ ..another couple decades after all the boomers retire.¨ In what universe is it incumbent on the present to fix in advance minor fiscal problems that will only arise in 20 or 30 years time? What the CBO charts show is a nearly flat ratio of debt to GDP for 15 years. Their concern in the text is not justified. The uncertainty in such long-range predictions - especially about the trend in health costs - swamps the projected trend.
    Meamwhile, there is a huge problem of intergenerational inequity that is not being addressed: climate disruption. Its impacts dwarf the worst-case scenarios of fiscal imbalances. It´s curious that conservatives have no parallel concern for the welfare of future generations in this area, no? You might even wonder whether their fiscal concern is in good faith.
     

    A nice example of Sandy's point:

    http://www.theatlantic.com/politics/archive/2013/10/the-wwii-memorial-protest-a-big-fuss-about-almost-nothing/280542/

    These people are not "protesting" a substantive issue related to the government shutdown. There's all sorts of people suffering whom they don't care about. The entirety of the choice of venue for this protest was "what will allow us to score points against Obama as anti-military". It's actually close to meaningless, in the larger scheme of things, whether national memorials are open. The choice was solely a matter of political spin.

    And that gets back to Sandy's point. Nobody's doing policy right now, because everyone's figuring out how they can "win" any showdown politically. Before the shutdown and debt crisis happened, these threads were full of people arguing who would get blamed, which is not a first-order question.
     

    This comment has been removed by the author.
     

    James:

    The thinking behind Reagan's grand compromise on Social Security was to increase SS taxes to reduce the public debt in exchange for intra-governmental bonds given to SS to redeem when the boomers retired. Treasury would then increase the public debt to redeem the intra-governmental bonds.

    The problem was that Congress spent all the extra SS tax revenues and did not reduce the public debt except for a couple years after Clinton signed off on most of the Gingrich balanced budget plan. The public debt was higher than expected when the boomers started to retire.

    Then borrowing and spending surged under Bush 43 and then doubled from there under Obama. Before even half of the boomers had retired, our public debt was approaching the danger zone and we had only redeemed a fraction of the the intra-governmental bonds.

    RIGHT NOW, without any additional borrowing and spending the combination of public debt and the intra-governmental bonds is over 100% of GDP - which is borderline insolvency and about where the US was at the end of WWII.

    On top of all that, the GOP wants to borrow 3% of GDP per year under the Ryan Budget, the Democrats 5% per year under the Obama budgets, while CBO plays pretend games assuming only 2% of GDP over the next two decades.

    And you wonder why I am concerned about this nation's and my family's future?
     

    Our SALADISTA brings tears to my eyes with his:

    "And you wonder why I am concerned about this nation's and my family's future?"

    Is it because our SALADISTA and his family are funding the moochers/takers relying upon food stamps and other safety net benefits? Or that our SALADISTA's family is being denied food stamps and other safety net benefits because of the "Obama Shutdown?"

    Notice that our SALADISTA falls back on Saint Reagan since Nixon/Agnew and Bush/Cheney are no longer heroes of conservatives and libertarians. But Reagan's claim of "Welfare Queens? proved to be falise (in addition to much of his foreign policy).
     

    Bart doesn't seem to know the difference between deficit and debt; the biggest cause the the (long term) debt problem is our absurd health care expenditures, with the obvious solution that he deems beyond the pale; Social Security expenditures are pretty much stable (look at the charts); his foreign policy prescriptions are based on ignorance and fear, always a bad mix, and are made without regard to finance. etc. etc. http://opinionator.blogs.nytimes.com/2013/10/13/inequality-is-a-choice/?smid=tw-share&_r=2
    etc.

    But I've never known what "Saladista" was supposed to mean, and Boehner's name is German. The spelling is the anglicization of Böner, which would be worse. He pronounces it Bayner. But so what? Ivan Boesky, Bernhard Goetz, pronounced "Bosky" and "Gets" Welcome to America.

    Bart is an idiot, but he's an adult and deserves to be mocked like one.

     

    D.G.:

    Our SALADISTA started referring to Pres. Obama as a "Caesarist" some months ago giving me an attempt at mocking, as you say, an adult idiot. Maybe the Caesar Salad is not part of your cuisine. But that's the explanation. If our SALADISTA surrenders his "Caesarist" references, then I'll have to make an adjustment. But as I have noted in the past, I shall not disrespect or defile the young Simpson boy sharing the same first name with our SALADISTA by using that name.

    By the Bybee [expletives deleted and no explanation offered], I studied German here in Boston for two years and was surprised at how the Speaker's name was pronounced. But that's his prerogative. Compare this with ex-Congressman Anthony Weiner who declined "Whiner" (although he, inter alia, whined a lot), though that may have been more correct or at least more appropriated.
     

    So answer me this boy genius, if "there are no concerns about default if the debt limit is not increased", then why do you and the idiots you support think it's leverage?
     

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