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« Kevin McCarthy is out! | Main | To survive, the GOP must kill a part of itself »

October 08, 2015



Evidently McCarthy isn't as discombobulated as he sounds, which is a shame since we'll be deprived of eventually hearing the political equivalent of 'Jabberwocky'. John Boehner must have the waterworks running full blast.

Tom Benjamin

It's pretty clear McCarthy didn't have the votes. The "governing caucus" can't elect a speaker without the Tea Party and the Tea Party is making impossible demands. Can they possibly make a deal with the Democrats?

Should the Dems deal? I think probably so. If I was Pelosi, my first demand would be that the Republicans all go on the record so my first question is "How many votes do you need?" The pros are that the government carries on, Dems gain real power in the House and the two sides in the Republican side are exposed.

All the Presidential candidates will have to choose a side when they need both sides to win.

If the Dems refuse to deal doesn't it force a tea party speaker?

Peter G

I'm going with PM on this one. On no account should the Democrats aid the Republicans in their hour of lunacy. I wouldn't mind if the inestimable Nancy Pelosi kindly offered, tongue firmly in cheek, to assume the position of Speaker Pro Tem and show them how it is done. The Republicans are just going to have to bite the biscuit and learn how to compromise. First with each other and then maybe they'll learn how to run a government without trying to drive it into a bridge abutment every time an exit sign is visible.


Think you're being way too cavalier about the prospect of breaching the debt ceiling. Even if Obama has executive means at his disposal to avert it or limit the fallout (and he's repeatedly said he doesn't), the panic that would ensue when Congress purposefully drives the truck off the cliff will damage the financial security of millions of people. The 2011 brinksmanship threatened to push us into a double-dip recession if I remember correctly. I'd rather see Pelosi cut a deal with the sane remnant of the GOP than let that happen, personally.

While I'd love to see the cleansing forest fire the GOP needs to suffer before it will willingly reconstitute itself, I'd prefer it not be in the form of a self-inflicted economic panic. The GOP will still look pretty pathetic if they are forced to cut a deal with the Democrats, and without the needless widespread pain.


The death of each political party has been predicted for longer than I have been alive. The blasted things manage to survive and then thrive. The proof is we as a nation are over 18 trillion dollars in debt. It takes many thousands of bi-partisan votes to accomplish this feat. No party wants to be the fly that owns the fly paper.


John Boehner is probably the most important Republican now. Since he reputedly has genuine respect for the House and has done end runs around the wingnuts before, there's a good chance he'll arrange to keep things running now that he has nothing to lose.


I hope so. His parting gift to the country could be to round up all the sane GOPers he can, talk to Pelosi, and pass a bill that kicks the debt ceiling can at least a year or two down the road, if not suspending or abolishing it entirely. Damn thing is arguably unconstitutional anyway, as PM points out.

But Boehner has only really done the right thing when all other options are exhausted, so I'm not sure he will do it.

Peter G

What's the debt to GDP ratio? Oh not that bad really. No need for panic. But how exactly did the U.S. go from budget surpluses under Clinton to climbing sovereign debt? Well let's see, a bunch of ill advised tax cuts, a couple of unfounded credit card wars, an ill managed financial system that resulted in some rather impressive reparative spending. Who did all this? Hey there Georgie boy!


I think you are mixing deficit and debt. Debt to GDP ratio? Aren't they pretty close to par?

The Dark Avenger

Debt isn't a problem, not in the way you think, anyway.

someone rails against deficits with slogans like “Stop stealing from our kids.” It sounds right, if you don’t think about it: Families who run up debts make themselves poorer, so isn’t that true when we look at overall national debt?

No, it isn’t. An indebted family owes money to other people; the world economy as a whole owes money to itself. And while it’s true that countries can borrow from other countries, America has actually been borrowing less from abroad since 2008 than it did before, and Europe is a net lender to the rest of the world.

Because debt is money we owe to ourselves, it does not directly make the economy poorer (and paying it off doesn’t make us richer). True, debt can pose a threat to financial stability — but the situation is not improved if efforts to reduce debt end up pushing the economy into deflation and depression.

Which brings us to current events, for there is a direct connection between the overall failure to deleverage and the emerging political crisis in Europe.


I'm sorry, but if you use that Keynesian fool Paul Krugman, you are wasting ink. The "we owe the bulk of it to ourselves" is no relief from the fact it must be serviced like any other debt.

Anne J

From what I understand, the democrats have decided to stay out of the fight. I don't understand why one of the backbenchers that's been there a long time like Dana Rorabacher, who is my mom's rep or Darrell Issa or my rep, Ken Calvert doesn't surprise everyone and step up to the plate. But I suppose if it is your career goal in life to come to Washington to be a legislator and only a legislator then that is your right. But even the more famous names like Paul Ryan or Peter King don't want the job, either. Louie Gohmert and Steve King, have been there a long time, too but I'm sure they are just content to heckle from the cheap seats, without ever having to have any real responsibility for anything. This has got to be the most glaring proof the country has ever seen that one of the parties has zero interest in governing. Even Rorabacher admitted it himself when he said they just have to "get through the next election" and determine what their goals were. What did these seasoned vets think was going to happen after they pampered and spoiled the wing nuts? The spoiled brats are tearing the house apart, the babysitter wants to quit, and no one wants to take his place. Maybe the job should go to someone who is ready to retire.

Peter G

This is the standard way of measuring and comparing the sustainability of government sovereign debt. And the sustainability of debt levels is what determines the yield of that debt, usually in the form of government bonds. The government of the United States does not have a dire problem in this regard. The accrued debt is well within the capability of the government to pay with even the most modest economic growth projections over the life of any particular bond issue. this is not to say that it could not either be improved or reversed. The cure is simple, stop promising stupid tax cuts. Every single Republican proposal to do this adds to the projected deficits and massively so. There is no shortage of capital for investment and no reason to think tax cuts will do anything but make rich people much richer without reducing government debt at all.


I for one am not unhappy for this open race to continue until January. More time suits me. Since the Speaker can come from outside the House, I would like a true Constitutional academic like Hillsdale College President Larry Arnn. Or a governor eg Scott Walker comes to mind. Personally I like some rancor in the ranks and a good deal of friction. I get suspicious without it...too many people in on something if all goes too smooth and we the people take it in the shorts for it.

Peter G

Aside from the fact that Keynesian economics is the only system that has proven itself functional at all you have a problem in finding a functional alternative. It is true that most people, most especially Republicans, have a problem understanding that Keynesian economics has two sides. When necessary government should spend money to stimulate the economy. Both Republicans and Democrats both do that. The Democrats prefer to do this by things like infrastructure spending that employs large numbers of people and creates demand. The Republicans like to do this by giving tax cuts to rich people so they will fix all the roads and bridges that need fixing. Either way creates debt. Only one creates government revenue to balance that debt. Guess which?

The flip side of Keynesian economics is that when the economy flourishes government needs to restrain stimulus spending and use surpluses to pay down debt. The Democrats are not particularly good at this but the Republicans are worse. The Republicans assume taxes must be too high and cut them making debt repayment problematical. They've come up with some pretty laughable theories about how this can work but the debt you cite is absolute proof that it doesn't work. It not only doesn't work but in conjunction with their equally asinine policies in allowing unregulated high risk investments makes meltdowns like 2008 inevitable.


We have the capability to pay on the debt as long as interest rates are effectively zero. When interest rates begin their climb back to normal, which they will, then watch things get hot and loud in Congress. Servicing debt at higher rates will bring blood letting. Watch your availability of investment capital dwindle as rates rise. The "cure" isn't simple. Because the cause comes before a cure. Ever increasing amounts of our money in Washington's hands will cure nothing. It might cope briefly, but the fundamental driver of our debt is for now off limits.


Sorry, Keynesian Europe has the same structural problem as we do. Fiat money and over collateralized assets. Keynes became popular after the War because it was a gift to statists who like easy money to curry favor with voters.


The name Larry Arnn is familiar. He is the same Larry P. Arnn who writes on along with such luminaries as Michelle Malkin and Erick Erickson. Not to imply nuttiness merely by association, his bio includes that he is on the board of directors of The Heritage Foundation and has a lecture series devoted to Austrian School neolib Ludwig von Mises.

The Dark Avenger

Read and learn if you can.

Debt Is Good

Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter account he decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.”

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing. The British government, by the way, has been in debt for more than three centuries, an era spanning the Industrial Revolution, victory over Napoleon, and more.

But is the point simply that public debt isn’t as bad as legend has it? Or can government debt actually be a good thing?

Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.

I know that may sound crazy. After all, we’ve spent much of the past five or six years in a state of fiscal panic, with all the Very Serious People declaring that we must slash deficits and reduce debt now now now or we’ll turn into Greece, Greece I tell you.

But the power of the deficit scolds was always a triumph of ideology over evidence, and a growing number of genuinely serious people — most recently Narayana Kocherlakota, the departing president of the Minneapolis Fed — are making the case that we need more, not less, government debt.


One answer is that issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.

Beyond that, those very low interest rates are telling us something about what markets want. I’ve already mentioned that having at least some government debt outstanding helps the economy function better. How so? The answer, according to M.I.T.’s Ricardo Caballero and others, is that the debt of stable, reliable governments provides “safe assets” that help investors manage risks, make transactions easier and avoid a destructive scramble for cash.

Now, in principle the private sector can also create safe assets, such as deposits in banks that are universally perceived as sound. In the years before the 2008 financial crisis Wall Street claimed to have invented whole new classes of safe assets by slicing and dicing cash flows from subprime mortgages and other sources.

But all of that supposedly brilliant financial engineering turned out to be a con job: When the housing bubble burst, all that AAA-rated paper turned into sludge. So investors scurried back into the haven provided by the debt of the United States and a few other major economies. In the process they drove interest rates on that debt way down.

And those low interest rates, Mr. Kocherlakota declares, are a problem. When interest rates on government debt are very low even when the economy is strong, there’s not much room to cut them when the economy is weak, making it much harder to fight recessions. There may also be consequences for financial stability: Very low returns on safe assets may push investors into too much risk-taking — or for that matter encourage another round of destructive Wall Street hocus-pocus.

What can be done? Simply raising interest rates, as some financial types keep demanding (with an eye on their own bottom lines), would undermine our still-fragile recovery. What we need are policies that would permit higher rates in good times without causing a slump. And one such policy, Mr. Kocherlakota argues, would be targeting a higher level of debt.

In other words, the great debt panic that warped the U.S. political scene from 2010 to 2012, and still dominates economic discussion in Britain and the eurozone, was even more wrongheaded than those of us in the anti-austerity camp realized.


Google Hillsdale College. Pull up their site and read a while. BTW, I'm partial to some Austrian School. I attended college for a while in far southeastern Austria forty some years ago. Their style of education and methods are different and rigorous and worth it as I looked back. Proper liberal inquiry. Not today's "selective sensitivity" too many American colleges have given in to. Again, check out Hillsdale for your own edification.


Debt can be good if used to good purpose and then the debt obligations paid down and then paid off. Rand Paul is funny just by showing up. When running up more debt becomes a replacement for proper public policy---read fixing our budget busting entitlements--then it is not good debt even if we are able to manage for a while. But that which cannot continue will not and the consequences can be dire.

I myself have used a great deal of debt as I spent about 30 years as a real estate investor. Leverage can help or it can kill you. I learned to use debt properly and paid off the holders of my loans. Poorly used debt will kill someone like me, or a company or eventually a government. Today I'm retired and own a great deal of real estate--debt free. I know risk and the hunt for decent returns. And no, I'm out of this stock market.

Just let interest rates rise and we will see a whole new landscape. About a hundred fifty basis points will do it. Theories will go out the window then.

The Dark Avenger

Which explains why Great Britain crashed after accumulating the debt from the Napoleonc Wars:

Antonio Fatas, commenting on recent work on deleveraging or the lack thereof, emphasizes one of my favorite points: no, debt does not mean that we’re stealing from future generations. Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means, because as Fatas puts it, one person’s debt is another person’s asset; or as I equivalently put it, debt is money we owe to ourselves — an obviously true statement that, I have discovered, has the power to induce blinding rage in many people.

Think about the history shown in the chart above. Britain did not emerge impoverished from the Napoleonic Wars; the government ended up with a lot of debt, but the counterpart of this debt was that the British propertied classes owned a lot of consols.

And all a real estate investor has to do to prosper is buy cheap and sell dear. Governmental economics are a bit more complicated than that.


I read about the history of Hillsdale and found it was founded by a sect of Baptists and has a long history of anti-goverment sentiment. It's also not been without controversy and scandal, especially under the leadership of George Roche III. No doubt it has been something of a heavyweight in conservative academia. I also read the piece in Imprimis by former U.S. Attorney General Michael B. Mukasey. Though well written it is common conservative boilerplate.


True about real estate, but I have never been in government. I had to pay back and pay off. As I said, there is useful-good-debt. And there is bad debt--an easy way out of responsibility for bad and even lack of sound public policy for the future. Imagine the hard work Congress in the future will do when they have to confront the inevitable. Retirements will come fast and soon.


That "common conservative boilerplate" is our original foundation. It will be our way back from the edge or we will be no more.

The Dark Avenger

Your ignorance on the difference between personal debt and governmental debt is summarized in your statement. The next thing I'll know, you'll be afraid that the Federal government will go bankrupt.

The Dark Avenger

Like getting rid of women's right to vote, bringing back debtors prison, pushing back gay marriage and civil rights........

You have a lot in your plate, but unfortunately for you, it is all doomed to failure.


No ignorance on the difference between the types of debt. I do know the difference between good debt and bad debt as I explained above several times above. Maybe you need to work on comprehension. No the Fed won't go broke. A conclusion you assigned for no reason.

The Dark Avenger

It's like this, see--You owe the bank a thousand dollars that you can't payoff, you have a problem

You owe the bank 10 million dollars, and you can't pay it off, they have a problem.

And, as Krugman noted above, the stimulative value of governmental debt when it's run up for infrastructure repair and maintenance, especially now with interest rate so low, is very useful, compared, to say, running it up to give tax cuts to those who George Bush called, The have and have mores.

Anyway, as Krugman has also noted, Hayenkism is a cult, not a school of intellectual thought, which you have proven conclusively on this thread.

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