Debt Tops $14 Trillion, Zandi Says We're Not Screwed

The aptly named website outsidethebeltway.com reminds us that the national debt topped $14 trillion (14,000,000,000,000) on New Years Eve.

There was a nice little New Year’s Eve present from the Department Of The Treasury that you might not have heard of:

A visit to Treasury Direct January 4^th reveals that the debt is only $14,014,049,043,294, so we somehow lowered the debt about $11,000,000,000 between the New Year and then. That's definitely progress, but let's face it, eleven billion dollars is chump change. As Tim Iacono reminds, there is some other Good News—

We’ve now added $4 trillion in a little over two years, the last trillion taking about seven months to accumulate. The move from $10 trillion to $11 trillion during the peak of the financial crisis in late-2008 and early-2009 took only about four months, so, by that measure, things are improving.

I expect really good things to follow from this significant decrease in the growth rate of the debt

Up on Capitol Hill, the endless remake of Planet Of The Apes continues. Republicans are threatening to "play chicken" with raising the debt ceiling.

On Sunday, President Obama’s top economic adviser, Council of Economic Advisers chair Austan Goolsbee, cautioned members of Congress not to “play chicken” by voting against raising the $14.3 trillion debt ceiling – despite the fact that as a senator in 2006, President Obama voted that way.

“I don't see why anybody's talking about playing chicken with the debt ceiling,” Goolsbee told me on ABC News’ This Week.  “If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity.”

Goolsbee said a failure to raise the debt ceiling would cause “a worse financial economic crisis than anything we saw in 2008…This is not a game. The debt ceiling is not something to toy with.”

Four year ago, however, then-Sen. Barack Obama, D-Ill., voted the exact way President Obama is now cautioning senators not to do.

Oh, my! — this would be the first default in history caused by insanity! Pardon me, I guess I've been wrong. Historically speaking, I thought all sovereign debt defaults were caused by insanity. For example, the insanity of running a military Empire you can't afford.

Speaking of insanity, Michelle Bachmann, who was vehemently opposed to extending unemployment benefits, seemed to argue that a sovereign default was a desirable outcome—

Rep  Michelle Bachmann, R-Minn., appearing with the Democrats, asked people to sign an online petition to urge their representatives not to increase the debt limit.

"It's not good for anyone to shut the government down," she said. "That's why I think it's important for the Democrats who are so willing to spend money to now be a part of trying to figure out how we can be responsible."

Rep.-elect Mike Kelly, R-Pa., a car dealer elected to the House in November, spoke against the idea of the government spending money it doesn't have.

"Raising the debt ceiling, to me, is absolutely irresponsible," Kelly said.

Where will those spending cuts come from? No one can say.

Meanwhile, Moodys' chief  economist Mark Zandi, a mouthpiece for the Democrats, argued that the United States isn't screwed—

Specifically, Zandi says we need to reduce our deficit as a percentage of GDP from the current 9% to a sustainable 3%.

Tax revenue growth from the recovering economy will shrink the deficit to 5% of GDP, Zandi says, and prudent tax increases and cost cuts should take it the rest of the way.  As long as we make those adjustments within the next few years, Zandi says, we'll work our way back to a sustainable position in 5-7 years.

Imagine that! Just a few paragraphs ago, we were talking about insanity, sovereign debt defaults, catastrophic financial crises, and shutting down the government. But if we're all good little boys and girls, and we can all make nice together in the political sandbox, we might be able to work our way back to a sustainable position in five to seven years. Of course, taxes will need to be raised, and the mortgage-interest deduction will need to be eliminated. In only five to seven years, only rich people will be able to buy a house, or buy gasoline for that matter.

I don't know about you, but Zandi's calm, reasoned views certainly do make me feel better. But in the end, I guess it really boils down to what or who you mean when you say "screwed."

 

Comments

[BJ]

I love all the political posturing going on. Last month, they passed the latest round of stimulus, I mean tax cuts. Now they are wanting us to believe they don't really intend to spend the money, I mean not not collect the money, by pretending to block the increase in the debt ceiling. At this point, anyone who believes anything that comes out of the mouths in Washington should be sold multiple bridges in the middle of the Atacama Desert. Let Bernie out of jail, he can handle the details.

Lets face it, last month Washington voted to go another Trillion dollars in debt (remember they are always optimistic with revenue projections and conservative with expense projections (1,000 more troops on their way to Afghanistan)), this month they are like, No we didn't, or They did it, or They forced us too. Yes, this is the change we voted for.

Got to love democracy, where the voter always votes for the better liar. Yes, you too can have it all, just vote for me. Want more out of the Ponzi scheme we call government, social security, medicare, medicaid, or health care than you put into them, simply vote for me. Don't want to accept any more personal debt, no problem, vote for me, I'll print you some money for us all. Want to feel safe and secure as we turn other countries into war zones, no problem, I'll print trillions of dollars and pay for the flags that will cover the caskets of those brave souls to die in the name of freedom and democracy. Yes, vote for me.

At this point democrat = republican, two sides of the same coin. The bigger problem, the same power controllers in these two parties are fully in control of all new political parties promising real change, or should I say, more of the old.