David Stockman: "Both Parties And The White House Are Advocating A US Default"

Tyler Durden's picture

Last week David Stockman was on Tom Keene, making the usual media rounds (sometimes we marvel at his patience and endurance), as one of the few voices of fiscal prudence available to TV producers who seek to hold a balanced debate on the topic of US insolvency. Today, Reagan's budget director was again on Bloomberg TV explaining the reality of the situation to Matt Miller for the nth time (by now even a 2 year old will understand the cul-de-sac facing the US), although presenting a new spin on the situation, namely that we have gotten to a point where both parties are implicitly pushing for a US default, while though their inability to reach a political compromise, blaming each other for this inevitable outcome. "The real problem is the de facto policy of both parties is default.
When the Republicans say no tax increases, they're saying we want the
U.S. government to default. Because there isn't enough political will in
this country to solve the problem even halfway on spending cuts. When
the Democrats say you can't touch Social Security, when you have Obama
sponsoring a war budget for defense that is even bigger than Bush, then I
say the policy of the White House is default as well...That
is the question that really needs to be understood better and appraised
by the bond market. Both parties are advocating default even as they
point the finger at each other."

On the debt ceiling negotiations in Washington D.C.:

"Between now and November 2012, it is virtually certain [Congress] can't pass a large, permanent increase in the debt ceiling. We'll have periodic short-term fixes, a month, two months, and then they'll back to squabbling and this enormous political battle we're having over the major components of the budget: revenues, Social Security, Medicare and so forth. It will be back to the same old gong show.”

"I don't have any hope they'll come to a substantive agreement on the big things that need to be done because both parties have ruled off the table the essential things that are necessary.”

“We have to raise revenue, there is no doubt about that. We have to allow the Bush tax cuts to expire for everybody, not just the rich. We have to reset Social Security if we're doing to make any headway in denting this massive, $6 billion a day borrowing spree we're on… Neither [political] party is facing up to the real truth or telling the public."

On broadening the tax base through VAT taxes or taxes for Wall Street:

"At the moment it is very unlikely [that any of these taxes will be implemented], but that is simply a measure of how unrealistic the debate is down in Washington today."

"If they were realistic, they would be discussing what are the new revenue sources we can possibly tap in order to fill this gigantic $1.5 trillion hole in the budget. What are the pros and cons, what are the tradeoffs? You hear none of that discussion. They're whistling past the grave. They should be talking about new sources of revenue and possibly increasing some of the existing taxes we have in place today."

On when Washington will get to the point of discussing raising taxes:

"I think [Washington will discuss raising taxes] only when we get a major, thundering conflagration in the bond market."

"For the last 10 years, Congress has been lulled to sleep by the central banks that keep buying all the debt and therefore holding down the real cost of interest on the middle and long term debt that we are issuing every day.

"And frankly, bond fund managers who somehow think that the tooth fairy is going to arrive and fix this problem, when it's clear that is not going to happen, and that we have sovereign risk on the debt of the United States, just as clearly as the world is now discovering there are sovereign risks in the European debt issues and so forth."

On whether there will be a 9/11-style crisis in the economy:

"That kind of crisis would be a vicious sell-off in the global bond market. That could come sooner than people think, because the Fed is getting out of the market with QE2 ending.”

"For the last six months, the Fed has bought nearly 100% of this $6 billion a day that's been issued. Once they are out of the market, where is the new bid, where is the new demand going to come from? The Chinese are getting out of the market because finally they are having to deal with the rip-roaring inflation they have had. The people's printing press of China will not be buying as much U.S. debt because of its own internal problems.”

"When we get to real investors, what are some of the real investors saying today? PIMCO is short the bond, they're selling, they're not buying.

"When we get into a two-way market when real investors began to look at real risk, begin to look at the gong show in Washington and the magnitude of the gap that we are borrowing, I think we're going to get a re-rating of sovereign risk. We're going to get a huge dislocation in the global bond market, and then maybe the wake-up call will finally come."

On political problems in solving the debt problem:

"The problem is not the debt ceiling. When push comes to shove, at the 11th-hour, they will do it for a couple of weeks or months and we will have a little more borrowing headroom and will be back to the same impasse where we are now."

"The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts.
When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well."

"That is the question that really needs to be understood better and appraised by the bond market. Both parties are advocating default even as they point the finger at each other."

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Ahmeexnal's picture


Questionmark's picture

Another crisis is imminent and unavoidable at this point. I just wish I knew how long it would take take or what will be the trigger. I keep expecting things to unravel anyday now, but for whatever reason, everything just keeps chugging along.

Calmyourself's picture

It will keep chugging for years as they slowly painfully grind us down. The Dollar is the reserve currency of the world all are irrevocably yoked to it and prying them off it will be tough. Only coordinated action can stop this reliance and we (US Gov) will do anything to block that coordinated effort. The show will be slow to develop.

Concentrated power has always been the enemy of liberty.'s picture

Some things may move slowly, but some things will move very fast.  The markets usually sell off faster than they went up.

I think it's naive to think that it will all just come slowly like sleep and you can wake up whenever the nightmare gets too bad...

Expect panic, followed by delusion and rationalizing, then more panic.  If you meant slow to develop like that then sure, I agree.

topcallingtroll's picture

things always move extremely slowly forever.  Longer than anyone can imagine.


But when things break.  They break quickly.


Who lived through the Cold War that ever thought that the soviet union would end so dramatically and quickly?

mick_richfield's picture

Everything works that way. 

Ice melting on a pond works that way.  You keep walking on it as the days get warmer -- the voices of mindless normalcy bias keep telling you that nothing will ever change -- and then one day, you just fall through.

Long slow linear changes often terminate in sudden discontinuities.


JW n FL's picture

the US is not going to default on debt held offshore the provisions are in place to keep offshore paid.


now that we have cleared that up..


the only thing(s) that are going to change are the quality of life for the poor / middle people without a Billion dollar lobby.. again.. for the worse.. some more!


the Country is being crashed on purpose and NO! ONE! is paying any attention.. everyone is to busy pretending that what they say or think matters, it doesnt!


the Country is on the path to civil un-rest.. and no one here has put us on that path and the sheer force needed to keep the Country on that path is immense! mean while the sheep keep on eating grass and baaaaaahing at each other.. all the while slowly being herded off the fucking cliff! I guess the slow motion car accident type herding being done is why no one is noticing?


at some point the safety nets will have been all cut away and there will be an angry crowd.. but that is what the Army is training for, to maintain order over the starving Country men / women and children of the United States of America!


Fuck those scumbags! the weak can die off! shoulda dug a ditch! every man for themself!


Austerity will thin the herd! and! we will have that pesky population problem licked!


Thank God everyone is on board for starving Americans and using the Army to beat back the starving hoards on U.S. Soil! Fuck the Constitution! the Founding Fathers never would have fed a bunch of scumbags! they would have let them starve!

mkkby's picture

Listen folks.  All this deficit talk is just more of the same red vs. blue fight that's been going on for decades.  Everyone in DC knows very well gov spending is a direct addition to GDP.  They all want the other party to have to start austerity, because it means a depression... and getting trounced at the next election.

Nobody in power will EVER voluntarily cut spending.  Every administration since Reagan/Stockman has been manipulationg the spending portion to juice GDP on "their watch".  Of course that means the borrowing has to grow every year because the real economy is being outsourced at warp speed.

None of them care about mom, apple pie or the flag.  It's all about "vote for me".

zhandax's picture

the US is not going to default on debt held offshore

No, it is worse than that.  Who is the biggest creditor to the US now?  Social Security beneficiaries.  Remember that happy days bunch of criminals who "drove the budget to surplus"?  To accomplish this that same gang of thieves created a special class of government securities to 'fund' the fictitious Social Security Trust Fund.  Those are credit obligations of the US (as opposed to plain ol dollars which are credit obligations of the federal reserve) and puts the SSb's in the same class as China and the other central banks.  So the easiest way to default is to stiff Social Security.   The idiots forced to take this tack will get voted out, but they can assuredly take a bullet for the team and buy another year or two for their fellow criminals which in the current DC kick the can playbook, is a win.

We are at the point where the senators will be willing to push on the party hard enough to sacrifice a few congressmen to retain power.

jekyll island's picture

Do you ever wonder why the Soviet Union went quietly in the night without a fight?  When did a regime ever give up power without being forced by open rebellion or a coup and shooting several thousands of their citizens?  Look at all the countries of MENA, add Panama, Argentina, Nicaraugua, etc.   Small time dictators will bring down the country to remain in power, yet a superpower like USSR dries up and goes away because they are broke?   

swmnguy's picture

Maybe the Soviet Union fell apart peacefully unlike your other examples because, unlike your other examples, the regime wasn't challenged by opposition.  Things just got bad enough that one day, nobody showed up.  That's more the way I see things going for the US, too.  No "Freedom Movement" or anything like that.  Just...nobody putting any money in the bank, or going to overly abstract jobs, or paying ruinous bills for things that can't be repossessed (like health care or education).

ISEEIT's picture

The 'Soviet Union' was only ever nothing more than an experiment in Leftist political perversion. In true Leftist style, they did not dissolve. Leftist politics does in fact represent evil. Satans little project if you will.

That is just true. Like it or not.

It is true.

It's the lies. That is what gives it away.

Deceit is the calling card.

Ahmeexnal's picture

The "Soviet Union" was a hoax. The "bolshevik" revolution was planned, directed and financed by the Vatican.

Nothing is what it seems.

Even the "Cuban" revolution is a hoax. Batista started acting up and would not take any more orders from the US. One of the orders was to demonetize silver coinage in the island.

When the Castro brothers seized power in a revolution planned, directed and finaced by the CIA, one of their first actions was...to demonetize silver coinage in Cuba.

As an added bonus, the MIC got themselves a boogeyman a few miles from Miami to scare the shit outta the sheeple.


falak pema's picture

you make me laugh, much as I feel that the church was the medieval bogey man of Europe, you are pushing it there...they created Lenin...

wow! Now that is "God's will be done", lol!

"Saint Peter don't you call me I'm working on my bolshevik revolution!..."

Keri at Bankster Report's picture

The USSR worked perfectly: the banks funded the so-called worker's revolution in 1917, the funded both sides of WWI, and then cleaned up by funding the then-US ally USSR during WWII, only then to clean up once again in funding the military industrial complex that came about because of the so-called Cold War; once the MIC was entrenched in US foriegn policy, the evil Communist Soviets were no longer needed as boogieman, and they had their funding cut, only to be resurrected as oligarchist "capitalists" with a (surprise!) massive amount of commodities.  Communism is good today anyway, right?  Why else would the People's Republic of China be the freedom-loving USA's prime trading partner?  It turns out that all you need to make communism good is "free" trade!  

There's only a little bit of sarcasm and cynicism in all that above, unfortunately.  Also remember that the Reagan administration and CIA were counterfieting the ruble on a massive scale to try to fulment monetary instability and consumer price inflation that they believed would get the people to rebel.  And remember fax machines.  And remember, as evidenced by the so-called "missile gap" that wasn't, the information given us by the US government about the USSR was at least as inaccurate as the information given us directly by the USSR itself.  Things are rarely as we are told: and by the way, "we" killed bin Laden and dumped his body in the ocean, and NO, you can't see any pictures.

"Whose panties are these?"


Dugald's picture


    Due to the lack of interest tomorrow has been cancelled!
Dejean Splicer's picture

Bullshit. Think Japan x100. The US debt-to-GDP will be over 1000% before the house of cards spontaneously combusts.

Many a fortune will be made in the mean time.

Go out and get your nut! And don't forget to convert it to gold.

The Profit Prophet's picture

I agree it could take years.....or, it could happen next week.  The advice I provide to friends who are smart enough to be concerned is to get prepared now, but don't lose sight of the reality of the inevitable collapse as time passes and propaganda plays on every media stream. Central Banks may be able to keep the global economic turd afloat with printed fiat for a few years, but this insanity will only work until it can't. There are forces at work that could potentially trigger a collapse tomorrow...but I wouldn't bet any of my gold on it. Aside from Japan collapsing into the sea and wiping out the US west coast with the resulting tsunami, the Maniacal Money Men may be able to print themselves out of most foreseeable jams. When the entire world financial regime is in on the fiat joke, who is stupid enough to pull the plug that starts the irreversible swirl around the drain?

T.E.I.N. everyone! 

Mr Lennon Hendrix's picture

As 25% unemployment turns into 30%, slow to develope, yada yada, move along.

topcallingtroll's picture

I was outraged by both parties and hope the republican party goes extinct and the tea party takes over.

Greenhead's picture

TX I junked you and I live in Texas too.  Many of us were furious and felt we had been betrayed by the expenditures, wars and the deficits during W's administration.  What we saw was an acceleration of the corporate influence on gov't that went beyond anything in the past.  We saw an erosion of liberty that no one in their right mind would have condoned had the not been either scared into it or felt it was their "patriotic" duty to allow.  We saw the expansion of  big gov't and statism in a way that we knew wouldn't end well, and it hasn't.  So, quit the partisan bs and let's deal with the real issues.  It doesn't much matter which corporatist party holds the office.  It isn't about the peoples anymore.  One party plays to the left, one to the right, both to the big corporate donors.  What is moving to extinction is freedom and liberty.  High taxes and a welfare/entitlement state which snoops on your email, phone conversations, and through gps knows your whereabouts isn't much of an improvement, is it?

johnnynaps's picture

Funny, I was watching Pirates 3 thinking and trying to compare the last 45 minutes of the movie to the US's woes of today. The US can be compared to GB in the movie. Invasive, Pompous, and militaristic are 3 things that came to mind when drawing up a comparison. On the other hand, the pirates, who in todays terms can be Iran, Pakistan, Iraq, Afghanistan and Venezuela were vastly outmatched in the battle......but they overcame and won the battle! Ironically, the last words of Lord Beckett were "it was all just good business"! As what he thought was an ally turned and crushed him.

I don't see this ending well for the US! A huge ally will turn and financially cripple us (just as bad as military interaction).  Not to mention, we have 300 million over-worked, obese and debt-riddled citizens who have been sold down the river and can't possibly take any longer of a workday to pay back our debt!

Mariposa de Oro's picture

I was confused at first but then I realized you weren't talking about the Pirates movie that I was thinking of...


sgorem's picture

RE-GREENHEAD. couldn't have said it any better. thanks, you just saved me some typing.

Bay of Pigs's picture

I don't know who you are Slinger, but one thing is certain, you are a total piece of shit. 

knowless's picture

i like to pretend that he is george dubelyou, it makes it more fun to read. especially applying the accent in my reading.

trav7777's picture

are you stoned?  There is no way in hell the aggregate debt has only risen by $2T in the past 3 years when we have been running $1.5-2T deficits annually.

Your math is utter bullshit as is your central premise.

The Demofags only complained about war spending under Busch...where the fuck are they now?

bigdumbnugly's picture

not only are his numbers utter b.s., but even if they were remotely accurate he is still comparing an 8 year term to a guy that's been around only 2+ yrs. 

johnnynaps's picture

Where as I was almost suicidal when Bush was re-elected and I hate him more than anything........this guy's numbers are way off! But, the Messiah did inherit a TOTAL mess!

Mariposa de Oro's picture

I'm no Bush fan, but I'm even less of a Messiah fan.  In two years, with one year of his party controlling BOTH houses of CONgress, he has done nothing to clean up the mess.  In fact, he's even worse than Bush!

Texas Gunslinger's picture

So now you want to talk about aggregate debt, as in the $100T+ figure?

How convenient!  If you prefer that angle, perhaps you could provide some figures on US aggregate debt in 2001 versus 2008? 

At least you didn't question the radius of Obama's cranium, which is a mild improvement from the racist garbage you were spewing this past winter.  

And you might want to STFU regarding central premises: your central premise that diversity mandates are to blame for much of the decline of this country is only slightly more ridiculous than your admission you drive a Volkswagen Phantom. 

Dejean Splicer's picture

"diversity mandates are to blame for much of the decline of this country is only slightly more ridiculous"

Total retard. Why is .gov so worried about China? Because they have no dependent class. No welfare baby momma's, no negro reparation class all sitting at home 'on disability' collecting food scooters waiting for their section 8 upgrade, on the phone to the personal injury attorney setting up their case.

Adding nothing, sucking, thieving, and adding nothing to GDP.

Wake up.

Texas Gunslinger's picture

Inconceivably idiotic.

Who is a bigger threat to this country, and which group has inflicted more harm:

  • the poor and down-trodden taking government subsidies... or
  • the well-educated, perfectly assimilated, mostly white, country-club-plutocratic elite who have gutted this country to the core?

Yet still, if you absolutely must blame diversity mandates for the demise of this country, tell me what color the senators were/are that crafted those "diversity" bills in an effort to buy the minority vote? 





ZapBranigan's picture

Shitslinger, you've been 'outed' over and over and over again here on ZH.  You're so fucking fake that you don't even deserve the title of "troll".  You make the likes of Hamy, Smailes, MethHead, and the rest of the fucktroll posse actually look good...a feat not easily accomplished.  Get yourself another username and try again...epic, epic fail.

knowless's picture

the tell is the obvious class play with a racial analysis.

pure chumming the waters:http://www.youtube.com/watch?feature=player_embedded&v=mlSPKxDZHt4


the rulers will distribute bread to the most likely to usurp power through violence, that is a fact. the only other alternative is disappearings.

Bay of Pigs's picture

So now swearing is okay for the religious nut from Texas?

How many different people are on this particular account?

knowless's picture

i feel that he is sincerely attempting to help others to question their vague beliefs..his statement about "what color" is what gets me, fully recognising that a political class of mostly "whites" promising minority and partisan voters an ease on their guilty conscience/free money..

it's a direct assault on racism as an ideology, pointing out the inadequacies, supporting an understanding of power that has no specific dental/skin/stature requirements.

he is definately looking for a fight, but maybe watch how he punches, there might be something to it.

superman07's picture

"Why all the outrage now? "

pay attention much? last I checked W's poll numbers sucked and these issues were in the news. The diffrence is people actually thought O was going to be change, and he is simply more of the same (in black skin since you like to bring it up so much).

BoeingSpaceliner797's picture

The greatest genuine outrage, of course, is anybody propagating the busted paradigm that a substantive difference exists between the two parties in the US.

Imminent Collapse's picture

+1 797

Not a dime's difference between the two parties.  Both bought and paid for by corporate overlords.  Total collapse is the only thing that will remedy the situation.  It will be painful, but better sooner rather than later when it will be even worse.  Fuckin A  

nmewn's picture

What most troubles you Redneck Republicant...the fact that you were a poor student or that you lost your lawsuit against the professor?

jaffi's picture

That is incorrect, Texas.  

GWB increased the debt from $5.728 trillion to $10.627 trillion.  Obama raised it from $10.627 trillion to the current $14.392.

In terms of increases as a share of total debt, that means that GWB increased the debt 85%, and Obama increased it by 35%.  

In terms of increases of total debt as a share of GDP, GWB increased debt by 5.6%, and Obama increased it by 21.9%.

In terms of total net increases of debt, GWB increased debt by $4.899 trillion, and Obama increased debt by $3.765.

While I love playing with numbers and percentages, it often does help to remember that Bush's numbers are for a term of 8 years in office, while Obama's are for a term of 2 years 4 months in office (or, roughly 29% of 8 years).  While I was extremely critical of GWB when he was president, and am certainly not a fan of Obama, the point is that debt continues its exponential climb; such is life on a debt-based monetary system.

BTW, I am not a conservative, just in case you were curious.  I am an Austro-Libertarian since February 2004, exactly two years after I had enlisted in the US Navy and experienced my first deployment (having been to war will tend to change one's political outlook). 

bmwm395's picture

Don't forget the Dems had the majority 2007

earnyermoney's picture

The Tea party was fighting the Republican establishment in the primaries. Where's the equivalent on the Democratic side of the isle. Does not exist and will not exist.


The lunacy, hypocrisy, fear mongering and faux-outrage by American "conservatives" replaced same from American "progressives" the previous 8 years. Keep braying those fascist talking points of the Center for American Progress.