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Guest Post: Why The Debt Ceiling Debate Should Be Different This Time

Tyler Durden's picture




 

Submitted by FF Wiley of Cyniconomics

Why the Debt Ceiling Debate Should Be Different This Time

Same political disfunction. Same blue team indifference to soaring government debt. Same hypocrisy from those on the red team who helped set debt on its upward trajectory. Same lack of any serious effort to tackle the most important issue – the unsustainable paths of our major entitlement programs.

But there is one difference.

We mentioned it in July when we posted preliminary estimates for the Congressional Budget Office’s (CBO) 2013 Long-Term Budget Outlook. Before updating that analysis, though, I’ll repeat my obligatory warning that the CBO’s projections are pure fiction. Here’s a brief recap of the problem:

  1. The CBO publishes projections for a “baseline scenario” and an “alternative scenario.” The baseline gets all the attention, while the alternative is either relegated to the spreadsheets that accompany the reports (as in May’s 10-year projections) or buried deep inside a 100+ page document (as in September’s long-term outlook). Both scenarios are based on a fantasy world of permanent full employment and no budget surprises or recessions. I’ll call them UNICORNs, for Unemployment Never Increases, Crises (anything that throws off budget plans) become Obsolete and Recessions are Nonexistent.
  2. Not only does the baseline scenario assume economic utopia, it also requires lawmakers to behave in ways we haven’t seen since the 1950s. This is partly due to the CBO’s statutes, which require projections to conform to current laws and ignore the modifications and “fixes” that Congress habitually makes. In any case, it’s wholly unrealistic. It requires a revival of Eisenhower-like philosophies of fiscal responsibility. Whereas the alternative scenario is an ordinary UNICORN, I’ll call the baseline scenario GIGANTOR UNICORN. It only plays out if General Ike’s Ghost Arises from the Netherworld and Takes Over the Rotunda.

Here are updated projections for both UNICORNs, comparing September’s CBO report to the scenarios shown in last year’s long-term budget outlook:

debt projection 7

The dramatically different direction for GIGANTOR UNICORN is due to January’s tax law changes, which made the bulk of the 2001 and 2003 tax cuts permanent. As I wrote in July:

In the past, the baseline scenario assumed expiration of virtually all tax cuts going back to 2001, according to statutes requiring projections to follow current laws. This unrealistic assumption left the baseline projection far below the alternative scenario, in which cuts were presumed to be extended per usual practice. And the wildly different results allowed people to conclude whatever they wanted to conclude. For those who aren’t inclined to take a long-term view, it was easy to focus on the steadily improving baseline and declare no need to worry.

Unfortunately, while the CBO no longer paints a favorable picture in either scenario, it still offers an “out” for those who prefer to ignore our growing problem. The “out” is based on a long-standing forecast for a robust recovery and sharp increase in employment. With this rosy near-term outlook, the GIGANTOR UNICORN bends downward in the next four years.

What’s more, the Bureau of Economic Analysis (BEA) conveniently redefined GDP in August, lifting all past, present and future GDP estimates and lowering the entire trajectory of the CBO’s debt-to-GDP projections.

Needless to say, pundits who choose to celebrate the purely hypothetical and engineered improvement in the near-term aren’t on the level. The overall picture is a nightmare scenario of government debt spiraling upward, as you might see in a banana republic. Replacing the CBO’s UNICORNs with more realistic assumptions (see here), the outlook is even worse.

Getting back to the debt ceiling, the stark difference between the 2012 and 2013 projections puts the policy debate in a whole new context. It should rightly alter Washington’s perspective on the urgency of our fiscal challenge. It’s time for all sides to acknowledge they’ve created a giant economic threat – to younger and future generations, especially – and work to bend the long-term debt trajectory back downwards.

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Sun, 10/06/2013 - 11:48 | 4027616 World of Debt
World of Debt's picture

Yup... It's a WORLD OF DEBT and nobody wants to do a damn thing about it. That's why i made this music video (below). It's my contribution, in a humorous way, to create awareness. WORLD OF DEBT:

https://www.youtube.com/watch?v=99xsqxzJnXs

Sun, 10/06/2013 - 12:14 | 4027652 Silver Bug
Silver Bug's picture

It will be more of the same, it is QE to infinity.

 

http://jimrickards.blogspot.ca/

Sun, 10/06/2013 - 12:50 | 4027702 SafelyGraze
SafelyGraze's picture

due to budget pressures, my office is shutting down all interstate highways beginning immediately

and airports.

railroads too.

hugs,
anthony 

ps - just remembered .. shipping!

Sun, 10/06/2013 - 13:25 | 4027800 Boris Alatovkrap
Boris Alatovkrap's picture

Recommend go long on manufacturer of concrete barrier.

Sun, 10/06/2013 - 13:10 | 4027765 aint no fortuna...
aint no fortunate son's picture

"...bend the long-term debt trajectory back downwards."

Bwahahahahahahahahaaaaaaa!

THat's right up there with "I promise not to come in your mouth!"

Sun, 10/06/2013 - 11:48 | 4027617 22winmag
22winmag's picture

Boo... scared you!

Sun, 10/06/2013 - 11:46 | 4027618 ThePhysicist
ThePhysicist's picture

The Blue Team also believes the UNICORN craps candy.

Sun, 10/06/2013 - 13:02 | 4027742 U4 eee aaa
U4 eee aaa's picture

Just tell them it does. We will keep it to ourselves that that really isn't organic chocolate

Sun, 10/06/2013 - 13:05 | 4027749 moneybots
moneybots's picture

"The Blue Team also believes the UNICORN craps candy."

 

so does the red team.  "Deficits don't matter."

Sun, 10/06/2013 - 13:23 | 4027797 ISEEIT
ISEEIT's picture

The 'blue' team has the ball.

FUCK YOU.

Sun, 10/06/2013 - 15:47 | 4028140 prains
prains's picture

and the red team has yours...

CHECK YOU.

Sun, 10/06/2013 - 13:46 | 4027863 McMolotov
McMolotov's picture

Blue Team, Red Team...

At the heart of it, there is only the Purple Team — a collection of old men and women who pretend to care about the American people when all they really care about is growing the government and their own power.

Their "disagreements" are a show meant to keep all of us distracted from the fact that just like Barney, they're all a bunch of retarded purple dinosaurs who need to be put down.

Sun, 10/06/2013 - 11:48 | 4027621 EmmittFitzhume
EmmittFitzhume's picture

The next person that says brinksmanship is getting pistol whipped!

Sun, 10/06/2013 - 11:53 | 4027629 LetThemEatRand
LetThemEatRand's picture

"Brinksmanship" -- Ben Bernanke.  

Sun, 10/06/2013 - 11:54 | 4027632 EmmittFitzhume
EmmittFitzhume's picture

Double pistol whip!

Sun, 10/06/2013 - 12:12 | 4027653 Kirk2NCC1701
Kirk2NCC1701's picture

Whip it! Whip it good!

Sun, 10/06/2013 - 11:53 | 4027628 LetThemEatRand
LetThemEatRand's picture

They don't care because the whole model is designed to enrich them while destroying the country.  They are buying real assets with their printed fiat so when it all goes to hell they will literally lord over the rest of us.  All according to plan.

Sun, 10/06/2013 - 12:14 | 4027655 Ignatius
Ignatius's picture

Let me know when we get to the 'hang the bankers' part of the plan.

Sun, 10/06/2013 - 11:52 | 4027631 Robert of Ottawa
Robert of Ottawa's picture

The debt ceiling debate will only change AFTER disaster, not before, because for a politician, it will always be in the future and can therefore be kickedd down the road.

Sun, 10/06/2013 - 11:55 | 4027634 lolmao500
lolmao500's picture

Lulz. Debt to GDP is already at 100%+.

Sun, 10/06/2013 - 13:26 | 4027802 Lednbrass
Lednbrass's picture

You mention something that has pissed me off for years and I have never gotten a solid answer to.

Beginning in January 2000 when Dubya took over the Treasury reports began separating out Intragovernmental Debt as though this is somehow different debt we don't need to worry about- I mean hey, its only money that the government owes itself, right?  What is ignored across all media (and I haven't seen it spelled out here either, though I may have missed something) is that this is appreciably no different from any other debt. 

The bulk of this as far as I can tell is the famous Social Security Trust Fund, which in reality is a giant pile of non marketable securities.  In order for these to be redeemed by the Treasury and used by SS to send out checks, they MUST use money from the only two revenue streams available to the Treasury- tax collection and debt sale. 

As this redemption comes out of the same till as everything else, it is ridiculous to separate the two- merely a semantics game that unfortunately many who analyze these things (including the guest poster of this article) perpetuate by blithely pretending that it does not exist, and does not have an effect on debt when it most certainly must due to the mechanics of funding the whole system.

Anyone have hard data showing me to be incorrect? Not some unsourced or vaguely sourced drivel bandied about in the media, I mean real stuff that shows a different functioning of the mechanics of actually paying what the government supposedly owes itself? The core of it as I see it is the way in which incoming SS funds are immediately spent with anything else, and any surplus betwwen the amount received under SS tax and that expenditure goes into the theoretical Trust Fund as securitites to be later repaid from the standard revenue streams.

Any defenders of Uncle Sugar got something showing me wrong, and that this debt is in reality separately repaid from some other source?

Sun, 10/06/2013 - 14:12 | 4027918 TwoHoot
TwoHoot's picture

" Anyone have hard data showing me to be incorrect?"

No.Never have, never will. You are correct.

Sun, 10/06/2013 - 14:30 | 4027953 Winston Churchill
Winston Churchill's picture

There have been plenty of ZH articles about this.

Bruce Kasting was repeatedly writing posts on it..

The SS 'trust' fund is already in shortfall on a cash flow basis with the difference being made up

from general taxation.The number is relatively small,but about to go exponential.

Sun, 10/06/2013 - 21:43 | 4029086 Lednbrass
Lednbrass's picture

I've seen Bruce's articles on SS (though not in some time) but most concerned the absurdity of their projections and I can't recall a concrete breakdown by him or a Tyler on the mechanics. I admit I'm not here as much as I once was; once you hang here for a few years it's amazing what you can new see plainly for yourself. I started reading here alot just before they changed over the website and now just look in here and there for interesting analysis you just don't get elsewhere.

In any case, the insistence on factoring out that massive number even by those supposedly criticizing debt accumulation is irritating and stupid.

Sun, 10/06/2013 - 17:11 | 4028327 GeezerGeek
GeezerGeek's picture

Bush was elected in November 2000, or was it 'selected in December 2000'? Whatever. How did he manage to take over the Treasury reporting in January 2000? Was Willie otherwise distracted, and didn't notice?

Sun, 10/06/2013 - 11:58 | 4027637 Haole
Haole's picture

ROOOOOAAAAAAAR... *phizzle* *pop* *pop*

Sun, 10/06/2013 - 12:14 | 4027639 jon dough
jon dough's picture

Gadzooks, I love Gigantor

http://m.youtube.com/watch?v=LZnV9REm-Eo

Any melómanos out there know the musicology of the theme song?

Sounds Cuban maybe, or Puerto Rican? Love the bongos and flute...

Sun, 10/06/2013 - 11:57 | 4027640 LetThemEatRand
LetThemEatRand's picture

I think of the Fed as an invading army.  Or an evil would-be dictator in the Hitler model.  They intend to take over the entire world, but they are doing it over many generations.   I used to think Alex Jones was just selling his wares with the "New World Order" meme, but I've become convinced that he's right even if his analysis is a bit off.  Hard to know if we're near the end game, but it sure feels like we're getting close.  

Sun, 10/06/2013 - 12:21 | 4027666 JFKFC
JFKFC's picture

I prefer the David Icke brand of tinfoil.

Sun, 10/06/2013 - 12:46 | 4027695 OwnSilverPlayMusic
OwnSilverPlayMusic's picture

Jones is far too emotional for his own good.  It's tough to point out everyone else's lies when you're embellishing, exagerating or flat out lying yourself.  I give the man a whole world of credit for opening many people's eyes to the horrors of eugenics, democide and just the good old 'as fereral as federal express reserve' But the football coach meets Rush Limbaugh shtick is a bit much for me.  I'd rather listen to James Corbett, just the facts, and to the point. 

Sun, 10/06/2013 - 12:59 | 4027725 LetThemEatRand
LetThemEatRand's picture

I agree -- it's hard to get past the theatrics.   But I think he's dead on in thinking that there is a concerted effort to enslave us all under a cartel of unelected multi-national corporations and bankers.

Sun, 10/06/2013 - 13:03 | 4027747 OwnSilverPlayMusic
OwnSilverPlayMusic's picture

FWIW I +1'd ya.  I know a ton of people who "woke up" or whatever you want to call it thanks specifically to his barking.  It can take a lot of approaches to reach people.

Sun, 10/06/2013 - 13:46 | 4027853 adr
adr's picture

When you see coordinated events across all media and commerce to prop up new IPOs like Twitter, the truth that a hand full of people control everything is readily apparent.

It should be impossible to roll out Twitter tags for everything within a week of the filing, but it happened. It's like you can't even produce a commercial or ad without supporting Twitter. But again when you start looking into the fact that something like four ad agencies create almost all advertisements, things are easy to control.

Same as when people laughed when I said that after Obama gets elected every single TV ad would feature blacks in power positions. It happened.

You can't get thousands of independent agencies to coordinate something like that, but people still believe there is competition in business. There is only collusion today.

I remember when CIA psy ops were a conspiracy theory. You really think the CIA only meant to control foreign media? Ha, they started with the domestic media. Nothing goes on the air without being vetted by the spooks first.

Sun, 10/06/2013 - 15:50 | 4028147 stacking12321
stacking12321's picture

i doubt it - it's a far-fetched explanation, a vast conspiracy of shadowy figures and groups scheming to enslave humanity.

more likely, these groups and individuals are all acting in their own self-interests to accumulate power and wealth.

the only conspiracy i believe in is the federal reserve's scheme to extract the nation's wealth through inflation and banker bailouts.

Sun, 10/06/2013 - 13:31 | 4027814 Lednbrass
Lednbrass's picture

Regarding Hitler and his plan to take over the world- if that were the intent, can you explain why he did not build a Navy beyond a small coastal defense fleet and submarines which are of minimal value in establishing control of the oceans?

It's pretty clear that he wanted German hegemony over Europe and outright conquest of Eastern Europe and Russia, but given the German propensity for extremely detailed advance planning of even a trip to the bathroom how would a plan for world conquest not include a naval superiority fleet?

They didn't even have enough Navy to make it over the English Channel, much less establish control of the massive oceans. I don't think this was an accidental oversight.

Sun, 10/06/2013 - 13:42 | 4027841 LetThemEatRand
LetThemEatRand's picture

Presumably his plan was to take over Europe, Eastern Europe and Russia first, then the rest of the world later.    And had he developed nukes first, he probably would have succeeded without a world power navy.  But I am not an expert in WWII politics, just a casual reader so I don't pretend to have the inside scoop.

Sun, 10/06/2013 - 13:53 | 4027878 adr
adr's picture

Hitler would have been dead long before Germany could have tried to take over the world. There is a lot of evidence that Hitler was a puppet, a public face for the group pulling the strings in Germany. Like Obama today.

The assassination attempts on Hitler were the result of him going off the reservation. The German leadership wanted a European state to challenge the USA. We would have had a cold war, but with a German controlled Europe instead of a Soviet controlled.

That idea never really died, see the European Union now, essentially controlled by Germany.

Sun, 10/06/2013 - 14:31 | 4027962 NaN
NaN's picture

Hitler a puppet? Must be the chemtrails and crop circles ;^)

Sun, 10/06/2013 - 12:07 | 4027647 shermacman
shermacman's picture

The debt chart is a real statement about government info. Only the CBO is stating the our debt-to-GDP isn't at 100% yet. Pretty much everyone else has it at about 100% to 102% already. And climbing.

Sun, 10/06/2013 - 13:39 | 4027828 ISEEIT
ISEEIT's picture

The CBO huh?

So meaningful right? It is actually, but not in the way projected directly. Funny how we tend to adapt though isn't it?

All perfect in a proper sense and 'on a long enough timeline'.

Not to blow any unrequired (new word!!) smoke up Tyler's entirely full ass, but the 'guy' has had a well made point for quite sometime?

Corrupted Bureaucrats Obstruct.

Obstruct us from truth.

Truth is freedom.

Slavery is not.

 

 

Sun, 10/06/2013 - 12:12 | 4027654 Anonymous peon
Anonymous peon's picture

 "It’s time for all sides to acknowledge they’ve created a giant economic threat – to younger and future generations, especially – and work to bend the long-term debt trajectory back downwards."

The hole is already too deep, the country is bankrupt. He is talking about trying to prevent something that has already happened.

Sun, 10/06/2013 - 15:18 | 4028066 grekko
grekko's picture

Yes, it is a little hard to defuse a bomb that has already gone off.

Sun, 10/06/2013 - 12:17 | 4027661 lolmao500
lolmao500's picture

Muuuuuuuuuurica! Fuck yeah!

http://washingtonexaminer.com/feds-evict-elderly-couple-from-their-home-...

National Park Service officials cited the government shutdown as the reason for ordering an elderly Nevada couple out of their home, which sits on federal land.

"Unfortunately overnight stays are not permitted until a budget is passed and the park can reopen," an NPS spokesman explained to KTNV.

Ralph and Joyce Spencer, aged 80 and 77, respectively, own their home, but the government owns the land on which it sits.

"I had to be sure and get his walker and his scooter that he has to go in," Joyce Spencer told the local news outlet. "We're not hurt in any way except it might cost me if I have to go buy more pants."

Similarly, the NPS forced privately-operated inns on the Blue Ridge Parkway to close during the shut down.

Sun, 10/06/2013 - 13:46 | 4027855 Oracle 911
Oracle 911's picture

Hang the congress, senate and their masters.

 

Because what happened to the couple is not just a sheer stupidity, but a planned action. I think America is on the verge of implosion and disintegration: http://investmentwatchblog.com/why-texas-will-survive-the-soon-collapse-...

-but the charade will continue for several years more, not because the skills of rulers, but because the EU and Japan will implode sooner.

Sun, 10/06/2013 - 12:17 | 4027664 JR
JR's picture

In the current D.C. standoff, the banks are playing their cards to oppose the people.

Always at the crest of a wave, Sarah Palin hits the men of finance. Breitbart News has the story:

“In an exclusive interview with Breitbart News, former Alaska governor Sarah Palin blasted the Republican establishment's contempt for and destructive behavior toward the Tea Party during the current budget showdown with the Obama administration.

“Palin told Breitbart News that these establishment financiers cannot relate to the average American worker and are throwing a "fit" because Wall Street knows they are in a whole new ballgame where their influence is diminishing.”

Says Palin:

“So I say call these guys out and expose the fact that they no longer control any conservative movement because they’re not the voice of the people. See, some of these Wall Street guys basically want to use the GOP for three things: They want low taxes for themselves; they want lots of cheap foreign labor (aka blanket amnesty); and they want to be safe (though most won’t send their own kids to fight our wars, they don’t want anyone blowing up buildings in Manhattan; so they’re all for sending our sons and daughters to whatever foreign hell hole beckons to make sure the bad guys stay off our soil).

http://www.breitbart.com/Big-Government/2013/10/05/Exclusive-Palin-Rips-Establishment-Financiers-For-Not-Knowing-What-Precinct-Captain-Is

Sun, 10/06/2013 - 13:44 | 4027849 ISEEIT
ISEEIT's picture

It's no accident.

Opposition is always treated this way.

ALWAYS.

Sun, 10/06/2013 - 12:22 | 4027667 apberusdisvet
apberusdisvet's picture

Relax everyone; the unsustainable debt (entitlement) problems will be solved by mass genocide.  2.5 billion hollow core bullets together with the arms training and militarization of the sociopathic TSA says it all.

sarc/

Sun, 10/06/2013 - 12:26 | 4027674 Harry Dong
Harry Dong's picture

I don't believe your /sarc tag

Sun, 10/06/2013 - 12:22 | 4027668 shovelhead
shovelhead's picture

"urgency of our fiscal challenge"

Relax, take a smoke break. Read a magazine.

No sense in rushing to the Operating Room to save a crash victim if all you have is a pair of pliers and a roll of duct tape wielded by a guy who took the short bus to school.

Gotta keep things in perspective.

Sun, 10/06/2013 - 12:23 | 4027671 involuntarilybirthed
involuntarilybirthed's picture

This debt ceiling will be different because it is a different number.  The End.

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