So Obvious, Even The New York Times Notices

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Hattip to Ed Morrissey at Hot Air.  The New York Times reports that Wall Street is alarmed at the matterhorn of debt the Obama administration is piling up.   The Times notes that 10 year Treasury Notes briefly rose to a yield of 3.17% last week, and the federal deficit is currently running at one-seventh of gross domestic product.  There is no mystery here.  Investors are looking at this debt and beginning to understand two simple facts:  it is never going to be repaid and it is doubtful if long-term politically the US can continue to pay the interest on this debt if it dominates an ever-growing portion of tax receipts.  I have discussed the issue of national debt a few times on this blog, here , here, here, here and  here.  We are pursuing lunatic economic policies and we are heading for economic catastrophe. 

Update: The People’s Republic of China,  i.e. Communist China, sharply curtailed  their US bond purchases in January and February before resuming purchases in March.  I never thought I would live to see the day when “Red” China would be rightfully concerned with the stability of the US economy and the wisdom of purchasing US debt instruments.

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20 Responses to So Obvious, Even The New York Times Notices

  1. The 10-year rate hits 3.17 percent and the sky is falling? Have you ever looked at a long series on this indicatator?

    Here’s a hint:

    9/12/08: 3.75
    8/1/07 (just before the crisis): 4.76
    1/29/04: 4.22
    8/3/00: 5.95
    8/8/97: 6.38
    4/18/94: 7.14
    5/18/90: 8.75

    Seriously, you can argue all you like about the perils of mounting deficits, but there is no financing problem. Quite the opposite.

    And another point. You are supposed to build up cushions in good times to draw down in bad times. Sowing and reaping and all that. The Clintonites did that fairly well, but the Bushies squandered it. Where were you during 2000-08 when you voice against fiscal profligacy was most needed?

  2. Anthony says:

    Time to liquidate the empire. “Everything”, as they say “must go!”

  3. Phillip says:

    I seem to think the Clintonites did well with the prompting of a Republican Congress.

  4. John Henry says:

    Where were you during 2000-08 when you voice against fiscal profligacy was most needed?

    This type of lame et tu quoque seems to be pretty popular right now. Notice:

    1) For all MM knows, Don opposed the Bush-era deficits and spending increases, so the charge of hypocrisy doesn’t really work.

    2) Even someone who wasn’t a vocal opponent of the Bush-era deficits could still oppose the Obama deficits, which, as the chart above suggests, are several orders of magnitude larger and raise more serious concerns.

    3) Domestic spending, unlike international spending (which was the largest driver of spending growth in the Bush-era), tends to be a one-way ratchet. A deficit expansion based on funding domestic programs, which don’t go away, is obviously going to be harder to reduce than a deficit to fund international military operations.

  5. Emanuel Alfranseder says:

    I tend to agree that the price for financing will go up and it is not wise to amount such huge debt. However, it seems still unlikely that the US as a country is ever going to default. And there is always an easy way out: print money and cause inflation. That’s what already started and we will most likely see more of it. Deflation might be looming right now, but in the long inflation is what you get from such policies.

  6. paul zummo says:

    The Clintonites did nothing except reap the rewards of a stock bubble ignited by the tech boom.

    This type of lame et tu quoque seems to be pretty popular right now.

    We all have our crutches in life. At least he didn’t mention Calvinism.

  7. Yeah, Paul, you know as much economics as I do eighteenth century American political philosophy, right?

  8. paul zummo says:

    Yeah, Paul, you know as much economics as I do eighteenth century American political philosophy, right?

    Well, considering I actually know something about economics . . .

  9. John Henry:

    (1) As I said, you are supposed to shore up in good times, and loosen the belt in bad times. But of course, the Bushies inherited a big deficit and squandered it with tax cuts for the rich on on miltary and securrity spending. Not very prudent.

    (2) Yes, the projected Obama deficits raise concerns, and inflation is a possible concern down the road, but we are seeing zero evidence of it right now. The conventional wisdom is that a crisis of this magnitude requires both fiscal and monetary loosening on this magnitude — see the G-20, G-7 world leaders etc.

    (3) that’s a weird distinction between “domestic” and “international” spending. the bush spending spree was based mainly on military and so-called homeland security. A better example of big government, intrusive government, aggressive, government I cannot imagine. But somehow that’s fine, while spending far smaller amounts on health care is a disaster.

  10. S.B. says:

    But of course, the Bushies inherited a big deficit and squandered it with tax cuts for the rich on on miltary and securrity spending.

    Several things about that sentence seem wrong.

  11. John Henry says:

    MM:

    But of course, the Bushies inherited a big deficit and squandered it….Not very prudent.

    1) I assume you meant a surplus. No one suggested otherwise (although deficit spending in 2001 and 2002 certainly didn’t seem unreasonable), but it’s hardly relevant to the question at issue. Namely, whether the Obama deficits will be a problem.

    The conventional wisdom is that a crisis of this magnitude requires both fiscal and monetary loosening on this magnitude — see the G-20, G-7 world leaders etc.

    2) My point was to contest your accusation that it is inconsistent to oppose deficits on the scale the U.S. will be facing after this year, and have less reservations about the Bush-era deficits. Perhaps these type of deficits are the best course of action now (out of a bad set of options), but they still are far more worrisome than the Bush-era deficits. After all, if you aren’t concerned about the Obama deficits, it hardly makes sense to suggest the Bush deficits were wildly irresponsible (particularly given that the same conventional wisdom you are relying on to say spending is necessary didn’t see the current financial crisis coming). As I recall, 2001-2003 and 2006-2008 weren’t exactly banner economic years.

    But somehow that’s fine, while spending far smaller amounts on health care is a disaster.

    3) MM, again, the question under discussion is deficits. It’s simply more difficult to reduce a deficit funding domestic spending than international military spending because the latter is much easier to reduce. I didn’t say spending on guns was ‘fine’ but spending on butter was bad; just that one is easier to defund.

  12. Donald R. McClarey says:

    Tony, face it, this economic disaster is now the responsibility of Obama. As readers of this blog know I blamed Bush for the Bailout Swindle of 2008, and the candidate you voted for in regard to the Bankrupt the Nation Act of 2009, sometimes erroneously called the stimulus bill. As any reader of my comments on other blogs can attest, I have always been an opponent of irresponsible government spending. I have said in prior posts on this blog that it is a bipartisan disaster.

    Obama now has more power than any President since LBJ in 1965. He can do whatever he wants in regard to economic policy. What he has decided to do is to spend this nation into the ground with debt we can never repay. The consequences to the nation will be dire.

  13. jh says:

    More “Progressive” Catholics better take note of thos spending. What happens when the SOcial Security trust find goes broke.

  14. j. christian says:

    Where were you during 2000-08 when you voice against fiscal profligacy was most needed?

    Oh, I dunno… Trying to sort through the rubble of the World Trade Center maybe?

    MM, you can try to pretend that a Democratic president wouldn’t have responded militarily to those attacks or wouldn’t have formed a Homeland Security department, but you’d be deluding yourself. And John Henry’s point

    After all, if you aren’t concerned about the Obama deficits, it hardly makes sense to suggest the Bush deficits were wildly irresponsible (particularly given that the same conventional wisdom you are relying on to say spending is necessary didn’t see the current financial crisis coming). As I recall, 2001-2003 and 2006-2008 weren’t exactly banner economic years.

    is spot on. Why the concern ex post with Bush’s spending if Obama’s gigantic deficits are no big deal?

  15. J. Christian: I am sure that a Democratic president would have reponded militarily/ violently, but I am also convinced that he (i) would have not approved torture;(ii) would not have invaded and occupied Iraq. These are two great sins of the Bush years.

  16. Dale Price says:

    “What happens when the Social Security trust find goes broke?”

    As it will, next year.

    http://www.cbsnews.com/stories/2009/03/31/politics/washingtonpost/main4906936.shtml

    But the odds of Democrats attempting entitlement reform while they spend hundreds of billions to create new ones are too low to be meaningfully calculated.

    Granted, that’s not all their fault, not by a long shot. But the bill is coming due on their watch, and they control all the levers.

  17. Phillip says:

    Q – Why the concern ex post with Bush’s spending if Obama’s gigantic deficits are no big deal?

    A – I am sure that a Democratic president would have reponded militarily/ violently, but I am also convinced that he (i) would have not approved torture;(ii) would not have invaded and occupied Iraq.

    I guess he MM doesn’t have a non-polemical answer.

  18. Matt McDonald says:

    MM,

    (1) As I said, you are supposed to shore up in good times, and loosen the belt in bad times.

    Says who? Do you do this in your family? In my family we do store up in good times, but we sure as heck don’t spend more in bad… we SPEND LESS.

    But of course, the Bushies inherited a big deficit and squandered it with tax cuts for the rich on on miltary and securrity spending. Not very prudent.

    Tax cuts for ALL WHO PAY TAXES in proportion roughly to those who PAY THE MOST TAXES, while at the same time taking a significant number OFF OF THE TAX ROLLS altogether to be accurate. Which tax cuts I might add led to an INCREASE in revenue (or is “equality” really your concern for tax policy, regardless of revenue). Squandered on security? I’ll take the lack of a SUCCESSFUL terrorist attack on our soil despite many attempts and deep desire as a counter to SQUANDER.

    (2) Yes, the projected Obama deficits raise concerns, and inflation is a possible concern down the road, but we are seeing zero evidence of it right now. The conventional wisdom is that a crisis of this magnitude requires both fiscal and monetary loosening on this magnitude — see the G-20, G-7 world leaders etc.

    Zero evidence of it coming, or zero evidence of it NOW? Nobody is suggesting we are in an inflationary period, it’s a recession, but it WILL come and with a vengeance, nobody doubts that even your hero.

    (3) that’s a weird distinction between “domestic” and “international” spending. the bush spending spree was based mainly on military and so-called homeland security. A better example of big government, intrusive government, aggressive, government I cannot imagine. But somehow that’s fine, while spending far smaller amounts on health care is a disaster.

    I guess it’s not clear to you. International spending can be cut without causing a revolution. Domestic spending creates entitlements which are near impossible to roll back later, they create not only a present deficit but a future one as far as the eye can see.

    I am sure that a Democratic president would have reponded militarily/ violently, but I am also convinced that he (i) would have not approved torture;(ii) would not have invaded and occupied Iraq.

    Considering both of these actions were supported by most Democrat leaders I find this a rather baseless suggestion. Is there ANY record of Democrat offering restraint in such matters?

    THe reality is that the Democrats are riding opposition to actions which they approved of and would have executed more or less the same way (probably with a lot less restraint, see FDR’s internment of Japanese residents).

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