Originally posted by SleepyguyYes, let’s not have a full debate on the merits and demerits of a BBA, let alone the details of a specific proposal on one. Why, I don’t even think there’s been an informed debate on the economic ramifications on here… 😉
Yes Reid will probably table Boehner's bill even though his own bill has no better chance. So the Dems are economic suicide bombers as well, yes? Whatever Reid sends their way, I hope the house just attaches a BBA and sends it back.
I personally think the notion of a BBA is faulty on macroeconomic grounds, but—gee—I’d like to do more than a quick-and-dirty google research before taking a firm position.
http://www.usatoday.com/money/economy/2011-07-27-rating-agencies-us-debt_n.htm
Excerpts:
The agencies came under heavy fire during the credit crisis, since they gave high ratings to mortgage bonds that eventually crumbled.
They've become big players in the budget debate, warning that the U.S. could suffer a downgrade if the debt ceiling isn't lifted from its current level of $14.3 trillion in a timely fashion. If the ceiling isn't raised, the U.S. eventually will run out of cash and could default on its debt — most likely by missing an interest payment — an event that could trigger chaos in stock and bond markets.
S&P has been the most aggressive rating agency. On July 14, S&P wrote that it would view the government's "inability to timely agree and credibly implement medium-term fiscal consolidation policy as inconsistent with a 'AAA' sovereign rating, given the expected government debt trajectory."
The bar S&P has set is high. In its July note, it said it will stand down if Congress and the Obama administration agree to a package that trims the deficit by $4 trillion over the next decade. President Obama and Republican House Speaker John Boehner recently came close to agreeing on a so-called Grand Bargain that would trim the deficit by $4 trillion, but squabbles among members of both parties squashed the deal.
. . .
The other two major ratings agencies, Moody's Investors Service and Fitch Ratings, have stayed away from making budget-policy demands. Moody's has indicated that it doesn't plan to cut the U.S.' rating unless the government defaults on interest payments. Fitch has said that if the debt ceiling isn't raised and "timely and full" payments of the government's obligations aren't secure, it will place the U.S. on "rating watch negative," indicating a downgrade is possible.
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So, S&P might downgrade, based on deficit reduction (of the kind that Obama and Boehner almost had); Moody’s, based on interest payment default; and Fitch based on the security of “timely and full” payments of the government’s obligations. Also, the article indicates that I might have been a bit too sanguine about the actual and rippling impact of a formal credit downgrade.
Originally posted by vistesdTranslated: "Let's pretend everything is ok, and if we pretend enough, then it will be ok."
Agreed. But I’m not sure that the rating agencies would even be threatening a downgrade absent a combination of the current shenanigans, and their desire to redeem themselves for their utter failure with regard to the multi-tranched CDOs by “getting tough”, as they have in Europe (and, frankly, I don’t know why they should be trusted to get it right this ti ...[text shortened]... , probably a compromise based on something like the Reid bill. But I also share your pessimism.
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Originally posted by vistesdI agree that the power given to these rating agencies is absurd, but unfortunately, that's the reality of it. People have been selling of money markets at a very high rate all week, which means that some big time speculators may make a killing here if a deal is reached - the ones who can afford to gamble.
Agreed. But I’m not sure that the rating agencies would even be threatening a downgrade absent a combination of the current shenanigans, and their desire to redeem themselves for their utter failure with regard to the multi-tranched CDOs by “getting tough”, as they have in Europe (and, frankly, I don’t know why they should be trusted to get it right this ti ...[text shortened]... , probably a compromise based on something like the Reid bill. But I also share your pessimism.
In the meantime, the Senate killed Boehner's bill.
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=hsc&group=123001-124000&file=123100-123149.5
Now what?
Originally posted by WajomaYes.
Translated: "Let's pretend everything is ok, and if we pretend enough, then it will be ok."
Borrowing 40% of everything you spend = responsible leadership.
Trying to stop doing that = self imposed economic terrorism.
Or something.
If we'd like a debate on the merits of a balanced budget amendment we could have one if Harry Reid would quit tabling the bills.
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Originally posted by SleepyguyThere's nothing to debate on such an amendment. It's a half-brained idea which has been rejected by everyone who has even taken a survey macro-economics class.
Yes.
Borrowing 40% of everything you spend = responsible leadership.
Trying to stop doing that = self imposed economic terrorism.
Or something.
If we'd like a debate on the merits of a balanced budget amendment we could have one if Harry Reid would quit tabling the bills.
Back to the original thread topic...
Of course the fact that Reid has repeatedly said that the House bill didn't stand a chance in the Senate (ultimately being voted down by a few Republicans, too), for better or for worse, should have been enough in itself to convince him to stop wasting time on a pointless measure. At the same time, knowing that the final bill will have to be bipartisan, it defies logic that Boehner would move the measure much further to the right to earn a few more GOP votes rather than move the bill to the left and earn dozens of Democratic votes, even at the expense of a few votes from his own party. Reid was right: it wasn't anything more than a "wet kiss" to the far right.
Originally posted by wittywonkawhere is Reids plan ?
Back to the original thread topic...
Of course the fact that Reid has repeatedly said that the House bill didn't stand a chance in the Senate (ultimately being voted down by a few Republicans, too), for better or for worse, should have been enough in itself to convince him to stop wasting time on a pointless measure. At the same time, knowing that the ...[text shortened]... his own party. Reid was right: it wasn't anything more than a "wet kiss" to the far right.
Originally posted by KunsooUnfortunately, I think the debate is necessary because the proposal crops up every several years, and because it can take various forms. Is the budget to be balanced every year, or over a period that allows for business cycle fluctuation? Are surpluses allowed, and if they occur then what? Is any deficit allowed to accrue under any circumstances—are their exceptions for national emergencies, say?—and what happens then? Etc., etc. It seems disingenuous at best to insist on agreement to some undefined BBA now in order to prevent default, and we’ll debate the details later—and what happens when there is gridlock over the details? Oh, yes: we’ll be facing the debt ceiling again in a few months.
There's nothing to debate on such an amendment. It's a half-brained idea which has been rejected by everyone who has even taken a survey macro-economics class.
To those who just assume the benign impact of a BBA, what do you think are the implications of having a BBA in place under circumstances of rising demand-side inflation? Inflations of other causes? Severe deflation?
With that said, this essay by an American Enterprise Institute resident scholar is pretty good—and the AEI is not known as a liberal (or Keynesian) think tank.
http://www.aei.org/article/103883
EDIT: Here’s one by Bruce Bartlett, who had deep conservative credentials until he started to criticize George W., and realized that Keynes was not always wrong. It also outlines key provisions of a BBA proposal currently sitting in the House—
http://www.thefiscaltimes.com/Columns/2010/08/27/Balanced-Budget-Amendment-a-Bad-Approach.aspx#page1
Interesting that one of the things that Bartlett mentions is the possibility that a BBA could result in--a tax increase...unless, of course that is prohibited from the get-go. Which is apparently why most Republiclans rejected a version in the 1980s.
Originally posted by vistesdThe merits of a BBA have already been shown by the fact that virtually all the States have one and thus have had to engage in pro-cyclical policies in this time of slack aggregate demand. The result has been a loss of over half a million jobs thus worsening the already fragile economy.
Yes, let’s not have a full debate on the merits and demerits of a BBA, let alone the details of a specific proposal on one. Why, I don’t even think there’s been an informed debate on the economic ramifications on here… 😉
I personally think the notion of a BBA is faulty on macroeconomic grounds, but—gee—I’d like to do more than a quick-and-dirty google research before taking a firm position.
Originally posted by no1marauderI agree. But that is an argument in the debate. Here is another set, in addition to the ones I cited above:
The merits of a BBA have already been shown by the fact that virtually all the States have one and thus have had to engage in pro-cyclical policies in this time of slack aggregate demand. The result has been a loss of over half a million jobs thus worsening the already fragile economy.
http://choosingdemocracy.blogspot.com/2011/07/moderate-economists-oppose-balanced.html