In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Wednesday, September 11, 2013

Repeating myself on the "Debt Ceiling"

by Calculated Risk on 9/11/2013 09:42:00 AM

The bottom line is Congress is being silly (again), and they will raise the debt ceiling. It is just a matter of when.  It looks like the "debt ceiling" will be reached on October 18th.  Note: There is a reason Congress never threatens to default right before an election, they hope everyone will forget! 

I wrote several posts about the "debt ceiling" debates in 2011 and early 2013 (only odd years, not even years because of elections). The debate clearly scared many Americans in 2011 and negatively impacted the economy.   Congress folded earlier in early 2013.  Hopefully this time the "debt ceiling" will be raised again in advance of the deadline.

Here are some excerpts from some previous posts ...

I prefer "default ceiling" because "debt ceiling" sounds like some sort of virtuous limit, when, in reality, the vote is about whether or not to the pay the bills - and not paying the bills is reckless and irresponsible.

A key point is that all of the talk in Congress is just a bluff.  They will fold.  As Republican Senator Mitch McConnell noted in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.

I reread some of my posts from 2011, as an example Debt Ceiling Charade: The Smart Options.

Option #1: Eliminate the debt ceiling. The debt ceiling is a joke. It serves no purpose except political posturing. It is not about the deficit - it is about paying the bills, and the U.S. will pay the bills.
Option #2: Pass a "clean" bill raising the debt ceiling enough to get through the next election (so the politicians don't have to embarrass themselves again). Congress could do this at any time. That is why voters would blame the party controlling the House if the debt ceiling is not raised.
I still prefer Option #1, but one thing is clear, the Congress will fold and the debt ceiling will be raised.

In 2011, I started writing about the debt ceiling when it became clear the threat of default was impacting the economy. A couple of old posts: Debt Ceiling Charade impacting Short-Term Credit Markets and Random Thoughts.  From July 30, 2011:
"I remain confident that Congress will raise the debt ceiling; however the circus in D.C. is clearly impacting the economy. This morning I spoke to a business owner who is negotiating a new lease to expand. His lawyer told him not to sign the lease until the debt ceiling issue is resolved. I believe similar caution has gripped business owners and consumers in many places - and impacting consumer and business confidence."
It is now time to start criticizing Congress again before the economy is impacted; 2011 was ridiculous and reckless.