Free Markets, Free People


Quote of the Day–debt limit edition

Alan Greenspan to David Gregory on “Meet the Press” (via Politico):

"I have a more fundamental question. Why do we have a debt limit in the first place? We appropriate funds, we have tax law, and anyone reasonably adept at arithmetic can calculate what the debt change is going to be. … [T]here is a major problem in cutting spending. … [I]t is inconceivable to me that we’ve put ourselves in this position. Why we are continuously going back to the well to continuously up the debt limit when we already predetermined what that limit has to be, and so, consequently, they’re trying to abrogate what the Congress did?"

It is a pretty fundamental question.  What is the purpose of a debt limit – note the word, “limit” – if it only serves as a temporary point at which, when reached (again) Congress reconvenes and raises it almost automatically?   It makes no sense.  But then we’re talking about Congress and politicians here.

Greenspan’s point is dead on target.  What is its purpose if not to limit spending to that amount or less?  And what real purpose does it serve if it is continually raised?

The answer to the first is “political not policy” and the answer to the second, unfortunately, is “none.”

~McQ

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10 Responses to Quote of the Day–debt limit edition

  • Congress’ solution to Greenspan’s criticism would be to erase the limit and not to make it more meaningful.  At least it generates a few headlines and serves as a public reminder. 

  • It USED to be something of a barrier.  A LIMIT kind of limit.  But there was a time when state senators stayed in their states and voted, too.  Some things really have changed.

  • http://www.cnbc.com/id/42643384
    Standard and Poors gets it…
    “Standard & Poor’s on Monday downgraded the outlook for the United States to negative, saying it believes there’s a risk U.S. policymakers may not reach agreement on how to address the country’s long-term fiscal pressures.
    “Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable,” the agency said in a statement.
    That isn’t even about the “debt ceiling”…but the long-term. It means our bonds are more risky and less valuable.

  • “For the first time since the Great Depression, households are receiving more income from the government than they are paying the government in taxes. The combination of more cash from various programs, called transfer payments, and lower taxes has been a double-barreled boost to consumers’ buying power, while also blowing a hole in the deficit. The 1930s offer a cautionary tale: The only other time government income support exceeded taxes paid was from 1931 to 1936. That trend reversed in 1936, after a recovery was underway, and the economy fell back into a second leg of recession during 1937 and 1938.”


    Predictable. Predicted. And deadly to our nation and its people.

  • I’m waiting for the day when it is announced that the Fed will supply any funds the government needs.

    • It already does.  It gives money to banks at 0% so they can buy treasuries that earn 2-3%.

  • DJIA12,131.09-210.74-1.71% Nasdaq2,714.02-50.63-1.83% S&P 5001,298.71-20.97-1.59%
    Which way goes investor confidence…???  And it has little enough to do with the debt ceiling, and much to do with the long-term prospects of our nation.

    • “Yes we can” – yes we can take the car that went into the ditch under Bush, and pile enough mud on it to bury it….yes we can.

      Mmmmm mmmm mmmmm  Barack Hussein Obama.

  • [I]t is inconceivable to me that we’ve put ourselves in this position. Why we are continuously going back to the well to continuously up the debt limit..?

  • Damn…

    [I]t is inconceivable to me that we’ve put ourselves in this position. Why we are continuously going back to the well to continuously up the debt limit..?

    I did a double-take when I read this.  Alan Greenspan, of all people, wondering “HOW DID WE GET INTO THIS MESS???” Why, it’s almost as if he wasn’t in DC running the Fed for nearly twenty f*cking years.

    I do not hold Greenspan solely or even primarily responsible for our current mess; the biggest culprits are the politicians who spent-spent-SPENT and We the People who elected them to do it.  However, his statement smacks of Bart Simpson: “Wasn’t-there-didn’t-do-it-you-can’t-prove-anything!”

    McQWhat is the purpose of a debt limit – note the word, “limit” – if it only serves as a temporary point at which, when reached (again) Congress reconvenes and raises it almost automatically?  


    It’s the same as any other limit: a warning that, if you go beyond that point, there is a possibility / probability of bad consequences.  The problem is that the rest of the world has viewed the US as “too big to fail” and hence not a risky investment no matter how boneheaded we are and how much money we borrow.  This is starting to change, but the unpleasant consequences have never materialized, so the limit has become meaningless (US taxpayers certainly don’t punish their members of Congress for spending too much… er… investing in America and protecting our most vulnerable citizens, that is.

    It’s the same sort of thing as the speed limit: yeah, the OFFICIAL limit may be 65, but nobody gets in trouble if they go 70, and the cops don’t really get too upset if you keep it under 75, but the odds are decent that you won’t even encounter a speed cop, so 80 is reasonable.  Even if you DO get caught, the cop will likely “write it down” to avoid having to do the paperwork of taking you to jail, so 85 or even 90 is possible if you’re in a big hurry, and maybe even —-

    WHAM!!!

    Sh*t!  Why didn’t somebody tell me not to drive so fast???

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