Last week's news reports about congressional (actually...congressional Republican) action on the debt ceiling did what in the journalism business is called "burying the lead," that is, the stories typically didn't start with the most important part of what happened.
To a certain extent that wasn't surprising. As most reports said, the GOP folded its debt ceiling tent and went home. Three years after Senate Minority Leader Mitch McConnell (R-KY) began to insist that Congress would never allow the government's borrowing limit to be raised again unless Republicans got something something in return, and long after House Speaker John Boehner (R-OH) said there would be no debt ceiling increase unless he got a dollar in spending cuts for every dollar of increased borrowing authority, congressional Republicans allowed the government to borrow more without getting anything from the White House and congressional Democrats.
CG&G alum Bruce Bartlett has an important column about federal spending in The Fiscal Times that does what Bruce does best: Say it straight with no BS.
What Bruce shows -- convincingly -- is that, contrary to those that say federal "spending" is the long-term problem, the real problem is spending in just one area -- interest payments on the national debt. Spending on virtually every other area of the budget is flat over the long term while interest starts to rise precipitously in 2020 and keeps rising over the next 60 years.
This isn't to say that interest payments on the national debt don't constitute federal spending because that obviously isn't true. But, as Bruce points out, the deficit for the non-interest part of the budget -- the "primary deficit" -- is only 1.7 percent of GDP over the long run and that makes it far less scary than the deficit scolds want us to believe.
Yesterday's The New York Times had a good story by Binyamin Appelbaum about how low interest rates are significantly driving down the government's borrowing costs.
Appelbaum said that, given the continuing very strong demand for U.S. debt, the Treasury is considering issuing securities with negative interest rates -- requiring buyers to pay for the privilege of safely parking their money -- and is assuming it will get lots of takers. In fact, the story shows that some investors in Treasuries are already getting a negative return and, given the alternatives, are happy to have it.
Appelbaum's piece is factually correct and interesting but misses the real story. As Jesse Eisinger of ProPublica wrote about a months or so ago in The Times and I posted about here, there are three important budget implications of this situation.
Interesting column in yesterday's The New York Times by Jesse Eisinger of ProPublica about the budget strategy the U.S. might be following if it were a private equity firm, that is, if it were run as if it were Bain Capital, Mitt Romney's former employer.
Eisinger's conclusion: Given the current incredibly low interest rates, the management of a private equity firm would be rushing to borrow more to finance its activities rather than to be repeatedly demanding that it deleverage and do less.
In other words, running the U.S. as a business as Romney says if elected he could/would/will do, would actually get him to do the opposite of what he and others running for president and Congress are insisting needs to be done: They would be increasing the deficit and borrowing more rather than reducing it and shrinking federal activities.
(originally posted on The Will and the Wallet
For thirty-five years, the Egyptian people believed the myth and lived in fear, fear of the security forces and fear of the chaos and instability that might exist without a strong ruler. They have just overcome that fear and created hope. That collective psychic shift was the key to making the change they needed to bring about.