Home > Main > Why the Budget Ceiling Fight is good news to the Traders Crucible

Why the Budget Ceiling Fight is good news to the Traders Crucible

June 7, 2011

The biggest political fight of the last few months has been over the budget ceiling.   This fight is great, great news for the U.S. Public.

The obsession with the debt ceiling makes one things perfectly obvious: The U.S. cannot default unless it is forced to by politicians.  Although talking about default scares people, the politicians are starting to get it.

The policy implications of this are huge – it changes the entire debate.  For example – Grover Norquist is currently a very powerful person.  But as it becomes widely recognized that Grover Norquist believes in unicorns, he will become much less powerful.  His entire career is built on making people believe something that cannot be true.  Take away the potential for default, and the obsession with trying to make the government smaller through a U.S. default does not make sense at all. It’s like going around claiming the sky is falling or something equally preposterous. Grover Norquist will be a much less powerful person in the near future.  He has reached his apex of power, and in 5 years, his message will seem anti-U.S., because his basic framework will be recognized as factually incorrect.

Here is John Boehner saying we cannot default:

“The American people will not stand for such an increase unless it is accompanied by meaningful action by the president and Congress to cut spending and end the job-killing spending binge in Washington,” Boehner said.

“While America cannot default on its debt,” he continued, “we also cannot continue to borrow recklessly, dig ourselves deeper into this hole and mortgage the future of our children and grandchildren.”

More here and here.  John Boehner is the guy leading the fight against raising the debt ceiling.

Once this idea is accepted, the argument must – MUST – move to a debate about inflation. So, the debate is moving to a debate about inflation. And not just about inflation, but rather an explicit argument over how much inflation is acceptable for the United States.

Thats where we are today.

Here is Interfluidity:

“Robert Kuttner has a great column about the “rentier class” and the struggle between “between the claims of the past and the potential of the future”. See responses by Adam LevitinMike KonczalPaul KrugmanYves Smith and Matt Yglesias.”

Now, here is a A-list blogging lineup of people beginning to discuss reasons for higher inflation vs. lower inflation.  These are thought leaders, unlike the lowly Traders Crucible, so this discussion actually matters in the wider world.

But this is a debate we win.  The path to a win might be long and twisted, but the path only leads in one direction. As soon as people start looking at the constraints on government, at some point soon they will run across the fact that there is no Government Budget Constraint other than that of politically acceptable inflation.

So the entire debate is moving in a direction that is very, very helpful to real people, which is good news for me!

I started with one post, and have realized it’s like 4 posts.   More soon!

  1. wh10
    June 7, 2011 at 12:11 pm

    It’s a great point, something I have been wondering myself. I wonder where both sides will land on this. Would they disagree on the acceptable level of inflation, and/or would they disagree on projections of inflation caused by fiscal stimulus? Can you even make reasonable projections of inflation?

    • TC
      June 7, 2011 at 12:59 pm

      My #1 scenario is that the battle described by Robert Knutter gets resolved in a way that makes us more prosperous. bu this is a long process

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