Tag: David Dayen

Cross posted from The Stars Hollow Gazette

There are a few fools in the House and Senate who don’t understand the consequences of the US defaulting on its debt payments. Flirting with default is not an option to solve a budget impasse. It’s a recipe for global financial disaster.

The right’s antics could cause a Depression: The terrifying default aftermath

by David Dayen, Salon

Normally with a financial crisis, there’s at least agreement on the need for a response. Not with these lunatics

The biggest threat from the twin calamities of the government shutdown and the debt limit breach is not actually the real-world effect; it’s what happens the next day, and the day after that. In other words, the most frightening thing about default, which is much more problematic than the shutdown, is what happens afterward. [..]

And all of these outcomes pale in comparison to what would happen if the government defaulted on any of its debts. Put the misguided statements of debt limit denialist Republicans aside. Based on current cash on hand at the Treasury Department, roughly 32 percent of the funds owed (pdf) between Oct. 18 and Nov. 15 would have to go unpaid. That’s a massive reduction in federal spending, and would cause a significant hit to Gross Domestic Product. Prioritization of payments, which may be unconstitutional, would certainly be a logistical nightmare, forcing Treasury to rewire its payment system (pdf) and pick and choose between up to 100 million monthly invoices.

If one of the missed payments is to a holder of U.S. debt, then you have a default event that could cause credit markets to freeze, the U.S. dollar to plummet, and financial institutions to struggle to secure short-term lending on which they rely. With the dollar and the U.S. Treasury bond serving as a benchmark for world markets, Businessweek says that the resulting global apocalypse would dwarf the implosion of Lehman Brothers that precipitated the 2008 financial crisis. And it would injure the perceived stability of U.S. debt maybe forever, raising our borrowing rates as investors decide a country that threatens to default for no good reason isn’t worth putting their money into. [..]

Armed with the knowledge that Congress won’t meaningfully help recover the economy, the White House needs to think very hard about forsaking the various options they could use to try and avert a debt default. It’s not just that the alternative is a disaster; it’s a prolonged disaster.

IMF piles pressure on US to reconcile differences and prevent debt default

by Larry Elliot and Jill Treanor, The Guardian

Shares and oil prices rise in hope of six-week extension as OECD warns US deadlock threatens world economy

The International Monetary Fund and the Organisation for Economic Cooperation and Development both issued sharply worded warnings to Republicans and Democrats amid signs that America’s Asian creditors were becoming alarmed at the potential consequences of the impasse. [..]

Speculation about a deal emerged after Jack Lew, the US Treasury secretary said there would be chaos if the US defaulted – a message rammed home by the IMF’s Christine Lagarde and the OECD’s secretary general Angel Gurría.

Lagarde, the IMF’s managing director, said there would be very dangerous consequences for the US economy and very dangerous consequences outside the US economy if the default was not prevented.

She distanced herself from the infighting in Washington, noting: “The IMF does not make recommendations about how, politically, this can be resolved. We don’t take a political view. We just look at the economic consequences.

“When it affects the largest economy in the world, we are bound not only to look at the immediate domestic consequences but at what happens elsewhere, so that we can have a dialogue with our members to help them prepare. I hope we will be able to look back in a few weeks and say what a waste of time that was. But we have to look at the risks no matter how unlikely they are to materialise.”

On Wednesday, Massachusetts Senator Elizabeth Warren addressed the Senate warning that “this is no time to act out dangerous fantasies.”

“We’re in this position for one reason, and one reason only: because Congress told the government to spend more money than we have – and Congress told the Treasury to run up our debt to pay for it – but now Congress is threatening to run out on the bill,” Senator Warren said.  “…The idea that we can somehow renege on our debts without paying a huge price is a fantasy-and a very dangerous one.” [..]

“This fight is about financial responsibility. Financially responsible people don’t charge thousands on their credit cards and then tear up the bill when it arrives. Financially responsible nations don’t either….If we default on our debt, we could bring on a worldwide recession-a recession that would pummel hard-working middle class people, people who lost homes and jobs and retirement savings and who are barely getting back on their feet,” said Warren.

Talks between White House and Republicans fail to end US shutdown

by Dan Roberts, The Guardian

Hopes that a deal might be in sight disappear as Barack Obama and House speaker John Boehner fail to see eye to eye

Discussions between Barack Obama and House speaker John Boehner broke up after 90 minutes with little apparent progress, although there was a marked change in tone on both sides that suggests a deal could still be close. [..]

But the Republicans refused to lift a separate threat to spending authorisation, which has led to a partial shutdown of the government since 1 October.

Obama had insisted on at least a temporary reprieve from both threats before he would agree to negotiate over Republican demands to repeal his healthcare reforms and cut spending.

On Thursday night, it appeared the president had chosen to stand his ground and may have initially refused to accept the partial climbdown from Boehner.

The game continues and no one is hitting the brake.

Cross posted from The Stars Hollow Gazette

David Dayen, aka d-day, proprietor of FDL’s News Desk, has decided to take his keyboard and depart the blogosphere after eight years. There is no way to fill the gap he will leave. Damn, David, who is going to explain the next financial debacle or Washington’s latest manufactured crisis with your clarity?

A few days before his last post at the News Desk, David talked with Sam Seder on Majority Report to give us an insight to his reason for leaving blogging.

The privilege has been all ours, David. Thanks and best wishes.  

Cross posted from The Stars Hollow Gazette

Whether you voted for Barack Obama or not, the reality is he is on the same path he was on for the last four years and that is to sell out the majority of Americans to reach a “bargain” with Republicans, who lost the election, on the mythical “fiscal cliff” and the  unconstitutional “debt ceiling.” Part of that sell out is raising the eligibility age for Medicare recipients to 67. This little nugget has started a “great debate” and a bit of an internet dispute about whether or not this is a good, or even workable, idea.

In his article at AMERICAblog our friend Gaius Publius, who is just reporting it, quotes Paul Krugman’s reaction on his NY Times blog to Ezra Klein’s commentary in The Washington Post on Jonathan Chait’s article in The New Yorker, who thinks that raising the eligibility age by two years is an OK idea. What the Herr Doktor said:

Ezra Klein says that the shape of a fiscal cliff deal is clear: only a 37 percent rate on top incomes, and a rise in the Medicare eligibility age. [..]

First, raising the Medicare age is terrible policy. It would be terrible policy even if the Affordable Care Act were going to be there in full force for 65 and 66 year olds, because it would cost the public $2 for every dollar in federal funds saved. And in case you haven’t noticed, Republican governors are still fighting the ACA tooth and nail; if they block the Medicaid expansion, as some will, lower-income seniors will just be pitched into the abyss.

Second, why on earth would Obama be selling Medicare away to raise top tax rates when he gets a big rate rise on January 1 just by doing nothing? And no, vague promises about closing loopholes won’t do it: a rate rise is the real deal, no questions, and should not be traded away for who knows what. [..]

All that effort to reelect Obama, and the first thing he does is give away two years of Medicare? How’s that going to play in future attempts to get out the vote?

If anyone in the White House is seriously thinking along these lines, please stop it right now.

Meanwhile, Chait’s article, Go Ahead, Raise the Medicare Retirement Age, prompted David Dayen’s response at FDL and the Wanker of the Day Award from Atrios.

Dayen’s critique prompted some poutrage from Chait and Ed Kilgore at Washington Monthly, who was more concerned about “tone” than the consequences of raising Medicare’s eligibiliy age.

Which resulted in Dayens’ response to Chait, the ill informed Ezra Klein comment agreeing with Chait that the Affordable Care Act would “blunt the pain,” and a hat tip to Kilgore’s pique about “tone.”

Meanwhile, Karoli at Crooks & Liars gets it in her response to Klein’s interview with Peter Orzag, former director of the Obama Administration’s Office of Management and Budget, currently Vice Chairman of Global Banking at Citigroup:

Listen Up, White House! Take Medicare Eligibility Age Off The Table NOW.:

Raising the Medicare eligibility age is terrible, awful, horrible policy that plays right into the Republicans’ goal of killing Medicare altogether. Obamacare does not change that fact in substantive ways. Here’s why, in bullets:

• Adverse selection – Obamacare or no Obamacare, raising the eligibility age means people enter the Medicare system with a higher likelihood of health problems. Even if they have health insurance before they’re eligible for Medicare, facts are facts: The older one gets, the more likely health problems become.

• Administrative costs – Medicare’s administrative costs consistently come out to about 7 percent. Obamacare allows for administrative costs of 15 percent. Extending coverage via Obamacare means higher, not lower, costs to the government and the middle class. Subsidies will cost more for that older group as well as for the younger group, since insurers will set a higher baseline on young people in order to pad reserves for older people because of the 3:1 ratio requirement on rates between youngest and oldest.

• Workforce phase-outs of older employees – This is the dirty little elephant in the middle of the room that no one talks about. Because of the high demand for jobs right now, older employees are being shoved phased out earlier. Beginning at around age 50 to 55, jobs become scarce for older workers, leaving them with a 10-15 year gap before they become eligible for Social Security and Medicare. That means they’re living on their savings, home equity, or odd jobs just to scratch their way to the social safety net. Moving that football means leaving them on the hook for 2 extra years, not only for living expenses, but also covering their health insurance, whether or not subsidized.

[..]I’ve been told by some pragmatic liberals who I usually agree with that I’m being unreasonable on this point. I beg to differ. It is not reasonable for Peter Orszag to say we’ve gotten a concession from Republicans because privatizing Social Security is off the table entirely. That’s a little like saying we’re really lucky that they’re holding the gun to our hearts instead of our heads. The impact of conceding any ground on Medicare eligibility is immeasurably negative for Democrats.

HELLO, Barack, raising the eligibility age for Medicare is a really bad idea.