Krugman: Let Them Default-"I'm terrified by a blackmail political system"

[kpete]

May 15, 2011 03:00 PM
Krugman: Let Them Default
By Susie Madrak

Much pearl-clutching after the statement on This Week by Paul Krugman that the U.S. should allow the government to default on the debt limit rather than allow Republicans to hold New Deal social programs hostage. Former Deputy Treasury Secretary Roger Altman is quick to say he "respects" Krugman but disagrees. I'll just bet you do, Roger!

And a "terrified" FDIC chairwoman Sheila Bair responds by urgently listing the potential effect on the bond market and institutional investors, of course completely missing the point: Would it be the Democrats' fault -- or that of the Republicans who are trying to impose their extremist and anti-democratic beliefs on the majority?

"I'm terrified by a blackmail political system," Krugman responds.

He's exactly right. It's like paying protection to your local thugs to keep your windows from being broken. It's not your fault for not paying, it's their fault for threatening you.

MORE:
http://crooksandliars.com/susie-madrak/krugman-let-them-default

[xchrom]

1. It just gets worse as we let it go on. Nt

[roguevalley]

52. I agree with the first three posts. Can't stay and read more but if

it takes the pugs making us look like a banana republic to get them finished bring it no. :(

[aquart]

2. Do not negotiate with terrorists.

[libodem]

8. Good Answer

[HowHasItComeToThis]

44. THE REPUBS ARE BULLIES..... ALL OF THEM

THE LAST HONEST REPUB WAS TEDDY ROOSEVELT

[kentuck]

3. I interpret the 14th Amendment that they cannot do that legally.

"14th amendment, Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void."

"Shall not be questioned"?

[truedelphi]

22. You use the word "they" and I am not being snarky

Which side is the "they" you refer to? (Cold meds making the world a bit fuzzy.)

[rgbecker]

31. Good read of the constitution. Someone should take this to the SCOTUS.

Why is there even a vote necessary to raise the National Debt?

[Myrina]

36. Yeah and we know how that'll turn out...

:spank:

[originalpckelly]

32. How do you mean this?

The debt ceiling doesn't have to be raised, it can simply be ignored and we will accumulate no more debt. This doesn't mean old debt will be disregarded, just that new debt will not be allowed. The interest on the old debt, and any repayments necessary, would obviously have to come from incoming tax revenues.

If you mean this to suggest that we must repay the SS trust funds, that too is true. This however, doesn't mean that benefits would not be reduced, because the IOU is to the trust fund, not to actual individual people. You can bet your bottom dollar there is a section in the law about SS giving it an out on this.

[Moonwalk]

41. This isn't about allowing "new debt"--it's about paying for new debt that we've already accumulated-

Most people think as you do, that raising the debt ceiling means we're saying we won't allow any more debts to be taken on. But from what I understand--and this is why it's so scary if it's not raised--what it means is that we are raising the ceiling to include the debts we've already incurred this year. If we don't raise it, then we're saying we can't pay those debts we've incurred, and so we're going to default on them. And if we default on them, then everyone starts to wonder if we'll default on others.

The debt ceiling isn't raised so that we can take on new debt. It's raised because we HAVE to include the debts we allowed this year. Past tense. The debt is already there. Raising the ceiling says that we accept it and will try to pay it, that we're not out of money and maybe can't pay for anything we still owe money on.

[sulphurdunn]

35. It has been many years

since our elected representatives paid much mind to the Constitution.

[ProdigalJunkMail]

47. you forgot the part "authorized by law".

debt has to be authorized by the passage of a bill through Congress. without a law being passed, no (more) debt can be taken. the above amendment says that once that law is passed authorizing the debt, that debt is valid and must be repaid. however, not raising the debt ceiling will not cause us to not pay the debt...it will require that other services are cut or taxes be raised to continue to fund the gov't.

sP

[socialist_n_TN]

4. I think we ought to call their bluff.............

Because, honestly, that's all it is. A bluff. Their owners on Wall Street won't LET them go through with it.

[iamtechus]

5. If you know that you're right, don't give an inch

Just keep letting the potential victims know who's screwing them.

[Celebration]

6. it is a game of chicken

On both sides...........very dangerous, IMHO.

[dkf]

7. Wouldn't the impact not be default but the Inability to fund government?

And wouldn't that be a defacto cut in expenses?

I don't understand why people who support social programs would consider this.

[DCBob]

15. Yes, if we actually do hit the debt ceiling, agencies and programs would get cut not debt payments.

The fed gov is required by law to service its debts. The rest of government will be subject to massive cuts or shutdown completely. At least that is my understanding.

[dkf]

17. Yeesh Krugman wants us walking straight into Republican hands.

Although maybe he feels the public would be so pissed they would turn on the Repubs. He could be advocating Obama style chess.

[JHB]

25. Krugman's thinking can be found here:

Krugman outlines what would happen from a failure to raise the debt ceiling, but there's only one party driving the issue, and that's the radical-controlled Republicans. Failure to raise the debt ceiling would be capital-letters Really Bad. But it would be barely-winning a battle while setting yourself up to lose a war with zealots.

From his blog on Friday:

The direct effects of hitting the ceiling would be bad enough — sharp cutbacks in spending, which would undermine essential services, not to mention derail the economy. It’s not clear to me whether there would be some wiggle room through the accumulation of arrears — say, not actually paying workers and contractors but promising to make it up when sanity returns. But it would be ugly indeed.

What might make it even worse would be indirect effects, of two kinds.

***

Second — and I don’t think this is getting enough attention — failure to raise the debt limit could act as a terrible signal about the US political system.
***

But all this depends on our having the political will and cohesion to do what’s necessary. What if it turns out that we’re a banana republic, with crazy extremists having so much blocking power that we can’t get our house in order?

And failing to raise the debt limit could be widely read as a signal that we are, in fact, a banana republic. In that case, however, what should Obama do? My answer is that despite all that, he must not let himself be blackmailed.

http://krugman.blogs.nytimes.com/2011/05/13/hitting-the-ceiling/

And today's column:

So hitting the debt ceiling would be a very bad thing. Unfortunately, it may be unavoidable.

Why? Because this is a hostage situation. If the president and his allies operate on the principle that failure to raise the debt ceiling is an unthinkable outcome, to be avoided at all cost, then they have ceded all power to those willing to bring that outcome about. In effect, they will have ripped up the Constitution and given control over America’s government to a party that only controls one house of Congress, but claims to be willing to bring down the economy unless it gets what it wants.

Now, there are good reasons to believe that the G.O.P. isn’t nearly as willing to burn the house down as it claims. Business interests have made it clear that they’re horrified at the prospect of hitting the debt ceiling. Even the virulently anti-Obama U.S. Chamber of Commerce has urged Congress to raise the ceiling “as expeditiously as possible.” And a confrontation over spending would only highlight the fact that Republicans won big last year largely by promising to protect Medicare, then promptly voted to dismantle the program.

But the president can’t call the extortionists’ bluff unless he’s willing to confront them, and accept the associated risks.

http://www.nytimes.com/2011/05/16/opinion/16krugman.html?_r=1&hp

[libodem]

9. Leave our food stamps alone

And Headstart. MF'ers

[pa28]

10. Banks, corporations and wealthy individuals fund the Republican party.

They'll never allow the economic disruption and uncertainty that would follow a default. Time to call their bluff.

[socialist_n_TN]

11. Yep. It IS a bluff. Wall Street owns them lock, stock

and barrel. And Wall St. won't LET them default.

[truedelphi]

23. That's the whole problem in one simple sentence.

Krugman can say anything he wants, and no matter how much sense he makes, so what?

The people in Congress and 1600 Pennsylvannia all know who frosts their cake.

[AlbertCat]

30. Yep. It IS a bluff.

Just like filibustering in the Senate has been for the past 2 years.

Make the Repugs do it.... they'll chicken out. Or become the villains.

[Cali_Democrat]

12. Krugman is spot on. n/t

[Change Happens]

13. We default then the WallStreeters/Casino Players get hurt, right?

They get hurt first and the most by far...Average poor people do not have money in the markets, or they have very very little of it anyway?



Once the dust settles, I give it few trading days, everything gets back to normal levels, bond holders can yell at the GOP rightwing teabagers in Congress all they want between now and November 2012!

[ixion]

14. We default, and the long-awaited healing can begin...

It will have to happen sooner or later, and the later it happens the worse it will be.

[QED]

20. I'm sure Goldman Sachs has a scheme to make money on a shut down.

After reading Taibbi's article in this month's Rolling Stone, I wouldn't put anything past those criminals.

http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511

[The Second Stone]

16. It's a bluff and Obama and Reid had better call it and then

not compromise a bit to help them save face. It will only encourage this kind of extortion. Make them follow through on it and when they do, or do not, then hold them to their actions, inaction and big talk.

[dkf]

18. He favors a strategic default anyway. Guess if you think it's inevitable it really doesn't matter.

Oops that is default of private debt.

[defendandprotect]

19. kr

[unkachuck]

21. default?

....if the great and honorable Nobel Prize winning economist Paul Krugman, says default is okay rather than allowing Republicans to hold New Deal social programs hostage, then it's certainly fine with me....

[NewJeffCT]

24. The president almost always takes the lion's share of the blame or credit

for the economy. If we default on our debt and send the world-wide economy into a depression, then Obama will get a majority of the blame.

[think]

26. Let the Republican politicians show how truly un American they really are. nt

[trud]

27. default

I'm tired of being blackmailed. The Repigs got far too much last time, including really bad environmental damage accomplished.

And I say that as a Social Security recipient.

[ProdigalJunkMail]

28. terrified by a political blackmail system???

then he better not sleep at night because, folks, that is ALL WE HAVE here. People buying, selling and trading votes based on nothing more than fear of not being re-elected. "You better vote for my pet project or you won't get..."

people acting like this doesn't happen every damned day need to wake the fuck up!

sP

[think]

34. Can you imagine the outrage if the Dems tried this BS under Bush? nt

[Avant Guardian]

37. No this does not happen every day

The consequences of this are dire for the whole world. I agree with Krugman, call their bluff.

[ProdigalJunkMail]

45. every deal in DC is made with

blackmail, bribery and/or collusion. if it were done in the corporate world (and you got caught for it) you would go to jail. it DOES happen every day. to say it doesn't is purely delusion. this is a pretty big one; i'll give you that. it is still business as usual, just on a slightly larger scale.

sP

[Avant Guardian]

59. This is 'we're gonna kill the hostage' blackmail

...and the hostage is the whole world economy. Obama needs to draw the line in a 'Cuban missile crisis' kind of way and NOT BUDGE NO MATTER WHAT. He needs to tell them 'I wont negotiate with blackmailers'. He needs to use those terms, not some nicey nice 'don't want to hurt their feelings' terminology. He needs to say 'If you collapse the world economy attempting to blackmail your own country, the aftermath is all on you. We will NOT be blackmailed. EOM.

[Auntie Bush]

57. Raises hand. Seconde!

[bertman]

29. Kabuki theatre leading to the capitulation to every Reichwing demand. But they do try

to make it look as sincere as possible.

You have to ask yourself why the President would appoint Alan Simpson, one of the most long-standing and hardcore opponents of Social Security and "big gummint" to be the head of a commission to examine the ways to "reduce the deficit".

[AlbertCat]

33. Republicans to hold New Deal social programs hostage.

See??? Bin Laden is STILL alive! His goals are being met!

[Gin]

39. didn't we hit the debt ceiling today??? or am I mistaken?

[Tom Rinaldo]

38. Thank you, a thousand times thank you to Krugman fior this

The Republicans have the system totally gamed now. They pad all their most exteme demands by 20% at the outset and then claim they will shoot the puppy if they are not met. Finally, at the last second, they give in on the 20% that was always built in to allow Democrats some shred face saving while they completely cave. Democrats say "We saved the puppy!" Republicans say "We saved the country!", and the public comes away with the nagging suspicion that only Republicans are tough enough to rule.

[sulphurdunn]

40. Since 2000

the Republican Party has determined that it and only it will govern. As a minority party, extortion and blackmail are the only tactics they possess to do that. They are confident of being resisted by a spineless majority, unwilling to draw any kind of line in the sand, with many its members actually willing to aid and abet Republican tactics.

[lonestarnot]

42. K & R!

[On the Road]

43. As One Commentator Pointed Out,

the whole nightmare scenario of defaulting on interest payment is a faulty premise, namely that freezing additional debt means withholding interest payments.

In a corporate environment, interest payments come first. The first payments to be withheld are payments to suppliers and if necessary salaries.

Whether you agree with those priorities or not, witholding salaries and payments to suppliers and contractors put the debt limit argument on a much different footing. All of a sudden Republicans are responsible for holding funding for the military, government paychecks, and all kinds of services that are much more popular.

If Democrats fall for the equation that a debt freeze = stopping interest payments on T-Bills, they are allowing themselves to talked into a corner.

[Moostache]

46. Damn straight....NO NEGOTIATIONS WITH TERRORISTS, PERIOD!

Here thugs, here's a bullet...now, go shoot the puppy and explain to the voters why you HAD to do it instead of raising revenue by restoring sanity and fairness to the tax codes.

I really want to watch them defend themselves - just watch that smug asshat Ryan backpeddle away from his original bluster and you get a good idea of what the entire cuacus will look like in full flight from their own actions. We sadly NEED an epic, cataclysmic event to shake this system to its very core and cause enough fracturing to collapse the whole house of cards on those who continue to suck a living out of the rest of us - namely the F.I.RE. sector. As far as I am concerned, they should have all gone down in a sweeping inferno 3 years ago and the debt limit is just the tool to use to now destroy them. They contribute NOTHING, they take ANYTHING THEY WANT and they have an arrogance and smugness to them that will make watching their death rattle actually be satisfactory.

I would rather watch the entire system burn than watch them take credit for one more thing that is actually their FAULT! Fuck 'em and their stupid "economy". If the pain is coming no matter what (and it sure as hell looks inevitable to me) then its time to just let the chips fall where they may and get on with it. Rip the band-aid off clean already and quit pulling at the edges slowly....

[pscot]

51. +1

If the Repukes break it, they own it. If they want to commit suicide the President should give them the knife and offer to hold their coat while they do it.

[AldebTX]

48. I Don't Want to See US default

But I don't want to give in to the repubug's demands. This is not the proper manner to negotiate the budget.

[Jakes Progress]

49. republicans suck. Democrats suck at message.

The republicans are at fault here, but somehow, once again, the Democrats let themselves be painted as the villain.

[jwirr]

50. If we do not confront them they are just going to continue to dismantle

government programs one by one. I agree with Krugman - draw the line. Call their bluff because the world and especially Americans have to start realizing that this Milton Friedman end game is what is destroying us not so called "socialism".

[Rex]

53. They tapped the phones and have years and years worth of criminal

evidence to blackmail anyone they want to...why would the govt be scared of the natural process...oh right, Too Big To Fail...almost forgot.

[lsewpershad]

54. Obama should

find a way to hire Krugman immediately.

[libodem]

55. I'm sick of

The Boner. And his puppeteer's the COCK BROTHERS. Leave my country alone. Pffft. It will
hurt them a lot more than it will hurt the people.

[DirkGently]

56. Make the Republicans pay the political price for holding the gun to the baby's head. Again.

[Larry Ogg]

58. Our debt based monetary system is a complete fraud

It was designed by the banksters to rob the working class of their property and enslave us with a debt that can never be repaid, it can't be fixed and should be abolished, and the people that run it dethroned, tried and thrown in jail.

But that wont happen because the slave owners have rigged the political election game, and with the fortunes made from the federal reserve ponzi scheme and its corporate spawn, they manage to hand pick most of the politicians we vote for. Of course such politicians are willfully ignorant and treat this fraud as if it's an act of nature, not much they can do beyond pointing the finger at each other while the rich get richer and the poor get poorer.