By: Lauren,
on 8/11/2011
Who said academics don't know how to use social media? Corey Robin, author of The Reactionary Mind: Conservatism from Edmund Burke to Sarah Palin, has certainly proved them wrong. After reading this article by Glenn Greenwald, Robin turned to Facebook.
By: Elvin Lim,
on 7/26/2011
By Elvin Lim America is the only country in the world that that has the luxury of creating an economic crisis when there isn't one. Ours is the only democracy with a debt ceiling, with the exception of Denmark, which raises its ceiling well in advance of when it would be reached. Economists say that our "debt crisis" is an unforced error, because people are more than willing to lend us money, at pretty good rates. This is the benefit of having a really good credit score.
By: Elvin Lim,
on 7/14/2011
Tea Party Republicans are about to be force-fed a slice of humble pie. In the first test of their political acumen since sweeping into Congress last year, they showed an ignorance of the first rule of democratic politics: never say never, because a politician’s got to be a politician.
Especially on an issue, the federal debt ceiling, with stakes as high as financial Armageddon itself! All the best intentions in the world, served up on the high horse of ideological purity, are about to bring the entire Republican party to its knees before Obama on this issue.
Ronald Reagan presided over 16 debt ceiling raises, Bush saw it raised 7 times. Did Tea Party Republicans really think that they could out-Republican Reagan and Bush? There’s the crux of any bargaining game — know thine chips. There is simply no way Wall Street and the Chambers of Commerce around the nation were going to sit around and let the Tea Party faction within the Republican fold play with this financial matter of life and death. Maybe it was the residue of last year’s electoral hubris, or maybe they believed the myth that fiscal conservatism is the one thing that unites Republicans, or maybe they forgot that the president wields a veto, but Tea Partiers and their leaders in Congress should never have done a repeat of George H. W. Bush’s “Read my lips, no new taxes.” Doing this backed them into a corner, flanked by no debt ceiling increases on the one side, and no tax increases on the other. Leaving no standing room left for compromises, the Tea Party caucus is about to realize that two negatives do not together make a “yes” from the White House. In fact, the only one who gets to say “no” with no less than constitutional gravity is the President.
Obama knew this issue was his to win all along, and he has played the Republicans like a fiddle, presenting himself as a grand negotiator and eminent pragmatist; the go-getter who slyly had it implied that checks for social security may not be sent out in August, and the media played along and covered the circus. But Obama knew that he never ever had to compromise, which is why he raised the goal of achieving a $4 trillion plan to ensure both that he looked presidentially ambitious, and that he would get exactly what he wants when the deal inevitably fails. Republican leaders trotted along to the White House negotiation table, willingly playing his game in part because they had to look like they were trying, but for the most part they were clueless about the plastic value of their bargaining chips.
It is one thing to take an extreme position, but it is another to take an extreme position on a matter that could precipitate financial Armageddon. I have to believe that anyone who is willing to take that risk has a part of herself who would like to see financial collapse on Wall Street, the decimation of corporate capitalism, and a return to Jacksonian laissez faire. The President is rather smugly playing this game because he knows that he doesn’t have to lift a hand because in the end, Wall Street will rein the Tea Party in. And so mainstream Republicans have allowed themselves to lose control of the message — which worked so very well in their favor when they were still focused on jobs — by talking themselves into corner on an issue they wrongly thought was more on their side than on the President’s. Wall Street is not conservative or Republican, Tea Partiers! It’s even more powerful than the liberals, and that’s why the Dow’s not even flinching.
Worse still,
By: Elvin Lim,
on 7/12/2011
It is often said that the public debt is a burden we leave to our children and grandchildren. Even Barack Obama said the same when he was a Senator. Invoking children is a great way to make a moral argument without sounding moralistic, but it is a spurious way to make an economic argument in committing the fallacy that all borrowing is deferred charge.
The American people should know that it is not as if the $14 trillion public debt is owed to foreigners. Actually, Paul Krugman (not surprisingly, a Keynesian) thinks that the figure that matters is the debt (or federal securities) held by foreigners and institutions outside of the US, which is about $9.6 trillion. The remaining $5 trillion or so, called intra-governmental debt, is the debt the federal government owes to itself, such as in the form of debt owed to trust funds like Social Security. The cries against burdening our children and grandchildren are are illegitimate here. Borrowing by the federal government is itself a market transaction and an investment decision in which the lender forgoes the present use of her money, and purchases a security in return for interest. This interest is socially costless because it is simply a redistribution from all tax-payers to bond-holders. This is a transfer payment, not robbery.
What is missed in the intergenerational-robbery fallacy is that deficits actually help present working cohorts to invest in the increased supply of assets, generated by the debt. Far from being a burden to their children, the present working cohort are, if they are not also building tangible assets made possible by the money raised, at the very least saving for their retirement and doing their part to ensure that future generations are not called on to fund their retirement (either personally, or by public programs). We don’t even have to get into Keynesian arguments about how debt possibly increases aggregate demand and jobs to show that government borrowing in such instances does the exact opposite of burdening future generations. This is what makes government borrowing a potent instrument of fiscal (read “stimulus”) policy, and it is the real reason why deficit hawks are against it.
Debt sounds like a bad word only because we are falsely analogizing from the personal, or the household, to the public sphere. But what is prudent for the individual or the household is not necessarily prudent for the market. (That’s why the economy needs us all to go out and buy even if we don’t feel we should.) Yet the false analogizing isn’t too surprising if we recall that one strand of ideology in this country has always started off from the perspective if the individual, and the other, the collectivity. We can argue till the cows come home on the latter, but the idea that the public debt is always and entirely a burden to future generations is simply and certifiably fallacious. We are the children and grandchildren of people living during WWII, during which time the public debt as a percentage of GDP was even higher than what it is now, but I don’t think anyone will argue that we’re now paying off their debt.
OK wait, maybe some will.
Elvin Lim is Associate Professor of Government at Wesleyan Un
0 Comments on If the public debt robs our children, we robbed the WWII generation as of 7/12/2011 5:56:00 AMAdd a Comment
By: Elvin Lim,
on 4/12/2011
The strategic gamesmanship leading up to the budget compromise that was reached late last week suggests a blueprint for the budget battles to come. But while many observers believe that Washington is bracing for even more epic battles to come, when Congress considers the budget for the rest of the fiscal year and legislation to raise the debt ceiling, my guess is that there will be more sabre-rattling than a serious effort to avoid raising the debt ceiling. Here are three reasons why.
First, even Democrats agree that cuts are necessary, and even Republicans know that deep cuts are difficult. There will be collusion to fight, but not necessarily to disagree. Certainly, Republicans and Tea Partiers still enjoying the honeymoon from last November’s elections have successfuly set the frame of “spending cuts” such that Democrats have been forced to fight the battle on Republican turf. But everyone already accepts that the federal government has to rein in its spending. Now, Republicans will have to take their pick between fiscal restraint and their social agenda. So far they have been consistent in prioritizing the former, for when push came to shove, even Senator Tom Coburn dropped his insistence on the Planned Parenthood rider. For Democrats, the question is not whether they can beat Republicans at their own game and propose a bigger budget slash than Republicans want, but whether they can reset the political agenda, postpone the issue, or talk about something else. Both sides however, will be sure to start off each new debate with maximal bluster and deliberately over-reach, so as to win the maximal concession from the other side and to achieve a final resting point closest to one’s original pre-bluster preference.
Second, last week revealed that neither side wants to risk the political fallout of a government shut-down. Conventional wisdom holds that Bill Clinton was the net political winner when Republicans forced a government shutdown in 1995 and 1996. Last week, even Tea Partiers revealed their interest in seeing government work, not shut down. The budget talks were the first real test of the Tea Party in government, the first test of Speaker Boehner’s ability to unite a diverse group of freshmen and veteran Republican congressmen, and the first test of President Obama’s ability to reconcile Democrats and Republicans after his announcement to seek a second presidential term. Because nobody wants to risk appearing obstructionist, the irony of divided party control in Washington – which was the case the last time a president managed to balance the budget – is that it may well prove to be more constructive than gridlocked in the short-term. The long run, of course, is a different matter. Nobody in Washington thinks about that.
Third, while Democrats are hailing the $38 billion cut in spending they acceded to as the biggest real spending cut in history, the fact is this amount represents 12 percent of the amount (about $300 billion) we would have to cut from the budget so that Congress would not have to raise the public debt ceiling of $14.294 trillion, which The Treasury Department expects we will hit in about a month. Not even Congressman Paul Ryan or Senator Marco Rubio have proposed plans aggressive enough to save us $300 billion in one month. When politicians make the most noise, then we know that they are interested more in the semblance of trying than confident in the possibility of a solution.
If the last ten years, in which we have raised the debt ceiling ten times, is any guide, it is very likely that we are going to have to raise the debt ceiling, if not the US government would not be able to raise money to fund its operati
