Why the debt ceiling debate is a sideshow

In case you’ve been living under a rock for the past few months, the US is set to “go broke” by August 2 if its politicians don’t approve an increase in the country’s debt ceiling. I have avoided writing about this topic so far, because, as with most matters concerning the US at present, it is impossible to discuss without getting embroiled in politics. But since the consequences of a default would be so catastrophic, I think the topic deserves an in depth look. Let’s try to sort through all the nonsense and answer some basic questions.

What on earth is the debt ceiling?

The modern “debt ceiling” was first introduced in 1939, when the US Congress granted Treasury the right to issue debt when needed, as long as the total debt did not exceed a certain limit. Since the US has almost constantly ran budget deficits since this time, the debt ceiling has had to be raised frequently over the years, to avoid default. Predictably, this process usually results in political fireworks.

Now, the strange thing about this process is that the debt ceiling, and the actual spending decisions of Congress, are voted on separately. This can result in the bizarre situation where the same politicians that have already voted for tax cuts and spending increases (thereby increasing the deficit), will then rail against a decision to raise the debt ceiling, which wouldn’t have been necessary if it hadn’t been for their irresponsible decisions in the first place. As James Hamilton puts it:

One of the peculiar embarrassments of the American political process is the fact that Congress votes separately on the deficit and debt, as if they were two different decisions. This bizarre arrangement allows Congress the luxury of instructing the Treasury to spend more than it takes in as revenue while at the same time voting to deny the authority to borrow the funds that would be necessary to implement the plan.

If the government is (a) required by the deficit legislation to spend, and (b) precluded by the debt legislation from borrowing, the Treasury would be forced into default. The greater the likelihood markets attach to such an event, the higher will be the interest rate the government has to pay on Treasury debt. A politician who votes for the spending and tax measures that produced the deficit but against a debt ceiling consistent with these is deliberately wasting taxpayer dollars for no purpose other than to grandstand before voters as a “fiscal conservative”. Anyone playing such a game has complete contempt for the intelligence of their constituents.

And surely nobody would play such a stupid game, would they?

Think again. The very Republicans that voted en masse for the Bush era tax cuts which are a major cause of the current deficit, are now en masse opposing an increase in the debt limit unless certain draconian conditions are met. Amazingly, the normally free spending Democrats have agreed to tie massive deficit reduction efforts to a deal to raise the debt ceiling, and have agreed to a ratio of roughly 3 to 1 of spending cuts to tax increases. However, Republicans are insisting on zero tax increases.

This intransigence is starting to lead even many conservatives to wonder if the Republican Party has completely lost the plot. As David Brooks, the conservative New York Times columnist says:

If the Republican Party were a normal party, it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred billion dollars of revenue increases.

A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. It would seize the opportunity to put the country on a sound fiscal footing. It would seize the opportunity to do these things without putting any real crimp in economic growth.

The party is not being asked to raise marginal tax rates in a way that might pervert incentives. On the contrary, Republicans are merely being asked to close loopholes and eliminate tax expenditures that are themselves distortionary.

This, as I say, is the mother of all no-brainers.

But we can have no confidence that the Republicans will seize this opportunity. That’s because the Republican Party may no longer be a normal party. Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.

The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.

The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it.

For the most part here, Brooks is right.

What happens if we reach August 2 without a deal?

The debt ceiling deadline applies to almost all Federal debt, and it effects all government obligations, which includes interest payments on the debt, social security, funding of the military, and salaries for teachers and public servants. In a similar standoff in 1996, the government narrowly avoided default by putting non-essential government employees on unpaid leave for a week, and shutting down non-essential services like national parks. We could be headed for a similar scenario. Ultimately though, the politicans will reach a deal, because the alternative would be disastrous. S&P has already reduced its outlook on US debt to negative, and threatened to downgrade the US a gazillion notches if it chooses to skip a debt payment on August 4.

And the operative word here is “chooses.”

I say this because the debt ceiling is an entirely self imposed constraint (in fact, some argue that the ceiling is even unconstitutional). Unlike the case of Greece, there is no issue per se with “financing” the US deficit. After all, the US is an independent sovereign nation that is the sole issuer of its own currency. The US can always print more dollars. So operationally speaking, there is absolutely no need to default on its debt.

This is not to say that the soaring public debt isn’t an issue. It is. As I have argued before, continued budget deficits could lead to soaring inflation and currency debasement if they are not corrected by the time the economy returns to full capacity. The US badly needs a plan to reform its dysfunctional healthcare system, which is by far the biggest cause of the long-term deficit projections. But the point here is that these are longer term issues. Debt ceiling shenanigans aside, the bond market appears to agree with this view, which is why 10-year US Treasuries yield only 3.1%, compared to 16.5% for Greek bonds of the same maturity.

Right now, when we have near double-digit unemployment and enormous slack in the economy, is not the time for drastic cuts. In fact, drastic cuts will almost certainly be counterproductive, because (as I wrote about here), one of the biggest causes of the current deficit is the collapse in revenues caused by the weak economy. Slash public spending now and you only exacerbate the cycle of debt deflation and drive the deficit even higher.

Obama hasn’t read Koo

And here is where the political charades surrounding the debt ceiling could lead us to disaster.

Because incredibly, President Obama has adopted the same talking points as his Republican friends, recently stating:

Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.

Now this is one of those common platitudes recited by politicians that sounds reasonable on the surface but actually doesn’t make sense. Obviously Obama has not read Richard Koo.

Just like the case of Japan in the 1990s and beyond, the “balance sheet recession” that the US is still clawing its way out of  is a very different animal to your run of the mill economic slowdown. In such situations, the deleveraging process in the private sector can take a very long time, and while this process is playing out, it is only the government that can pick up the slack and prevent the economy from collapsing.

This is precisely because, contrary to what Obama says, the US government is not like a household. Unlike households, the government has the power to tax, and monopoly rights to issue the currency. In a deep recession, the government can act as an employer of last resort. The US is suffering an enormous infrastructure deficit, and with huge amounts of surplus labour available and interest rates low, there is no shortage of investments that could be made right now to increase the country’s future productive capacity.

Say what you will about Australia’s NBN. But in the USA today, there is absolutely zero political appetite for investing in the future.

Perhaps Paul Krugman is right and we are dealing with President Barack “Herbet Hoover” Obama.

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  1. The US politicians do this fighting up until the end and then vote it through. After that balance the freaking budget. Americans are going to have to get use to higher taxes plain and simple.

    • “Americans are going to have to get use to higher taxes plain and simple”

      Erhh no, they can raise the retirement age, thus diminishing those able to access social security, medicare and medicaid.

      There’s as with ours is a problem of age. The upper tail of the dependency ratio is too high because the age at which we (now) offer income support in the absence of productive output is too low.

      • Rusty Penny,

        Raising the retirement age might help but the fact is Americans are going to have to get use to much higher taxes with the deficit that is on hand now. The rich will need to pay alot more taxes and so will the corporations. They have no choice.

        • “They have no choice”

          Yes they do, they can move to lower taxing nations and therefore take the economic activity with them.

          Taxing the rich is a nice simpleton sollution…but it doesnt get away from the fact that the US, EURO and Australian welfare states are broken and need to be trimmed back massively.

          This is why the Republicans are taking a stand..because for too long no-one had the guts to take a stand.

          • “Yes they do, they can move to lower taxing nations and therefore take the economic activity with them.”

            Then those that remain have the choice of barring the output of their economic activity to U.S. customers.

            No use being active if you have no customers.

          • Stavros, the US is already the lowest taxed country in the developed world, but there is a good reason why rich Americans do not move to ultra low tax nations like, let’s say, Pakistan. They wouldn’t be rich in the first place if it wasn’t for many of the protections that the US provides – the rule of law, enforcement of property rights, a reasonably well functioning police force, and so on. Most of the lowest taxed nations in the world do not provide such an environment, and this is not entirely a coincidence.

          • Montgomery Burns


            Methodology is the one area where Austrian economists differ most significantly from other schools of economic thought. Mainstream schools such as the neoclassical economists, the Chicago school of economics, the Keynesians and New Keynesians, adopt empirical, mathematical and statistical methods, and focus on induction to construct and test theories—while Austrian economists reject this approach in favor of deduction and logically deduced inferences. According to Austrian economists, deduction is preferred, since if performed correctly, it leads to certain conclusions and inferences that must be true if the underlying assumptions are accurate.

            Never mind how the real world works, lets stick to our ideology and fantasize about our economic nirvana.

          • One of the articles on MB recently showed that a large part of the current problem is caused by the Republican Bush-era tax cuts for the rich.

            “Taking a stand” now with the debt ceiling is insanity as Brooks points out above.

          • upstream from the herd

            Very simplistic to sheet all blame back to the “welfare state” Stavros. Perhaps to move forward we all need to leave our ideological baggage behind.

            But before I do perhaps a parting shot across the bow of the right is in order with regards defence spending; Reagan’s “star wars” initiatives perhaps. Oh while I’m on Reagan perhaps his embrace of the Laffer Curve.

            Or closer to home Howard’s FHOG.

            And “welfare state” do we have NO wefare at all. Who decides, at what level does it start and cut out. Do we go back to early industrial England.


        • “Raising the retirement age might help but the fact is Americans are going to have to get use to much higher taxes with the deficit that is on hand now.”

          It can and will help greatly.

          The problem with the U.S’s balance sheet is unfunded liabilities, namely Medicare, medicaid and Social security.

          By raising the retirement age, you immediately wipe out a lot of unfunded liabilities, you widen your tax base and you keep aggregate demand higher as (discretionary) spending is higher from a worker than a welfare recipient.

          “The rich will need to pay alot more taxes and so will the corporations. They have no choice.”

          Well I do subscribe that the disparity of wealth distribution in the private sector has some bearing on the problem, but it is a differetn debate.

          • I can think of a few more desirable places to relocate for US businesses. Asia and South America come to mind.

            To think that Government revenue collection is the problem is hillarious. Its like people saying the Greece situation was caused by their poor tax system.

            Yes it was a factor, but the silly spending sprees that the Government engaged in was caused the fiscal issues over there.

            Its the same in Oz and US. Government pending is the issue…spending needs be cut. YEs it will cause a drop in ‘GDP’ and output and every other Keynsian inspired statistic, but it is the ONLY path to real prosperity

            That means you dont need to raise taxes and you wont drive businesses away.

          • Montgomery Burns

            yeah, lets not bother with pesky Keynesian inspired statistics and data.

            …and the ONLY path to improved health is through illness.

            Fair dinkum mate I think it is fair to view austrianism as some form of mental impairment or psychological disorder.

          • And, yet, Monty, many prominent Austrian economists are the ones that have picked major crises, and adjusted to them, well before they happened; whereas many other schools of thought did not, or at least have not picked them soon enough, and/or adjusted adequately (etc).

            You’ve got to give the Austrians some credit for picking numerous major trends, even if their timing is off sometimes (and it’s hard to blame them for that…)

            My 2c

      • Raising the retirement age has the unintended consequence of not creating a job vacancy for a young person getting out of college and waiting in the wings.

        • That is not emprically proven, and it logically unsound.

          A person, any person, regarldess of age, is likely to be a greater spender than someone who receives income support.

          Greater spending equates to more job opportunities.

          The ONLY downside is that there is a slower attrition rate within existing organisations, though western IR laws don’t help here.

          However if one feels their only opportunity is to be promoted within an existing organisation, they are probably lacking the sort of ambition and enterprise that we should be rewarding anyway.

          • Personally, I don’t mind higher retirement age. Just that it is always the people at the bottom of the pyramid who will suffer – people doing manual work.

          • They don’t have to do vigorous manual work forever. When their body gives way, it doesn’t take much for a 68 year old to cook fries at McDonalds for the minimum wage.

  2. Nonsense alert:

    “the Bush era tax cuts which are a major cause of the current defici”

    Yeah right.. forget about Medicare, Medicaid, Social Security, Iraq and Afghanistan…

    Its that temporary tax cut of a few basis points to high income earners.

    Spending is the problem, tax revenue is already at 23-25% of GDP, which is a historical high.. usually it hangs around 19-20% of GDP.

    • Jono — You are getting mixed up between short term and long term issues. The biggest cause of the current deficit is the Bush era tax cuts, the wars in Iraq and Afghanistan and the collapse in tax revenues caused by the recession (followed by the recent stimulus). The main cause of the projected LONGER TERM blowout in the public debt is Medicare/Medicaid. See my recent post titled Demystifying the Deficit.

    • One other point. Your numbers are out of date, because tax revenues are currently running at 14.4% of GDP, which is the lowest since 1950. The postwar average is 18.5% and the more recent average since late 90s is around 20%.

  3. I’ve got to say I disagree with just about every word written in this Keynesian diatribe.

    The government can pick up the slack for the private sector ?

    Obama is frugal ?

    What planet are you living on ?
    Haven’t you seen the size of the stimulus packages and their negligible effect on unemployment ?

    Stimulus spending doesn’t work, and the government cannot create real wealth-producing economic activity. It can only distort activity and redistribute wealth. Even though it can temporarily boost GDP numbers by spending, this is not the same as dynamic economic growth.

    The entire finance, automotive and housing sectors have been zombified by Washington and their endless bailouts.

    All thats left to show is a pile of debt.

    • “I disagree with just about every word written in this Keynesian diatribe.”
      erm.. what is YOUR idea of a solution? More austerity?

    • +1

      More govt spending is bad. It is a waste of money, only to provide a temporary boost and then we’ll be back to no growth and a lot more more debt in a couple of years.

      This is no “normal” recession. There’s no miracle cure. The patient will take time to get better after the debt hangover.

      It’s the right time to start living within your means.

    • Govt. can pick up slack if it invests in the right areas. America has been very highly indebted before over it’s history, but they borrowed to invest in infrastructure and productive capacity.

      They were in nation building mode, constructing rail, ports, factories, roads, farms and all the good stuff that adds utility. It’s ok to spend if the money you invest will be paid back in spades because it is being invested in areas that will boost utility.

      What the govt. is doing now is spending to support asset prices, something that adds no utility. Or they choose to prop up the industries of old like the automotive industry where they are no longer competitive no matter how much they subsidise.

      They need to let non-competitibe industries die and continue to nurture industries where they have advantages, not give money to the rich and support asset prices in the hope they will spend their way out of this situation. That is short term constipated thinking.

      • Exactly. The Hoover dam in the 1930s, Eisenhower building the interstate highway system in the 50s, and so on. There is no shortage of examples in the past. As I have written about before, the infrastructure in this country today is crumbling. Every time I use JFK airport in New York I am astounded at the dilapidated state of some of the terminals. Not to mention the terrible road and rail access to the airport, etc. And New York is pretty good compared to a lot of US cities…

      • JC is spot on…this is Kensisan dribble.

        People like Koo are not considering the counter factual…what would have happened if the Government didnt support the zombie Japanese banks and didnt engage in stimulus after simulus.

        A far better solution is a debt reduction program, where lenders take their losses and we all move on.

        This new Koo mantra is really annoying. Its just Krugman dressed up as a new idea.

        • Agreed.

          I really don’t like how govt is touted as another entity that can do “extra things” as if it were not actually connected to and dependent on the private sector.

          Govt picking up slack, etc, is a bit of a furphy, IMHO – ultimately, they are just an arbitrary extension of citizenry, but acting economically as if they are not (ie. the separation of govt and private spending, deficits, etc…they are not, really, seperate).

          • That is why people are saying measuring GDP should not include Government spending…as it leads to this stupid cycle of Government spending money to ‘stimulate’ economic activity in the short term (this wins over the masses who think – hey the Government ‘picked up the slack’)…but then comes pay back time, and higher taxes then act as a drag on future growth.

            This is what is happening now in Australia – Government spendign created an illusion of financial strength that will fade over time

    • “I’ve got to say I disagree with just about every word written in this Keynesian diatribe.”

      Sounds like you’re entering the article with an ideological bias already.

      “The government can pick up the slack for the private sector ?”

      No, it can pick up the slack for idle labour. People are resources, countries like Swizterland and Singapore, devoid of natural resources ensure they extraploate maximum value out of their human resources.

      Currently, the USA has over 9% of its human resources laying idle, and with a phemonenally low clearance price are still not being deployed.

      The reason can’t be lack of capital, U.S corporation are on the receiving end of the highest wage share since Roosevelt, perhaps even the Gilded Age. They will not seek to boost output, thus deploying more labour, because none of the potential customers can afford to buy this excess product. It is an aggregate demand problem.

      “Obama is frugal ?
      What planet are you living on ?
      Haven’t you seen the size of the stimulus packages and their negligible effect on unemployment ?”

      The negligble effect was because it was a poorly targetted stimulus program.

      Trickle down doesn’t work, it will never work because those empowered to carry out the flow on effects will keep a margin for themselves. Incrasingly they will take greater margins (see return to capital, and current profit share vs wage shares). The hoarded capital becomes inert, reducing velocity if you subscribe to the Quantity Theory of Money, and causes fiscal drag on aggregate demand.

      This fiscal drag has been circumvented by increasing levels of private debt until now, where the debts levels have peaked.

      “Stimulus spending doesn’t work, and the government cannot create real wealth-producing economic activity. It can only distort activity and redistribute wealth.”

      Rubbish, complete an utter rubbish.

      Poorly targetted stimulus is a problem I agree, but for wealth creating stimulus, infrastrucutre can be built, this allows the private sector the leverage off it and become more productive.

      • Agree that it is an aggregate demand problem. US companies have record amounts of cash on their balance sheets. Why are they not investing it on new capacity? Why haven’t the banks started lending again?

        Because consumers are deleveraging and there is not enough demand. Not because Obama is a socialist, or because they are worried about the debt ceiling, or because their taxes are too high, or because there is too much uncertainty about regulation, etc etc. Those problems all may exist, but at the end of the day there isn’t enough aggregate demand. Which is where a (limited and well targeted) role for the govt comes in.

        • In a sense you can extrapolate that to Oz – aggregate demand is on the slow decline. The only way ordinary people could feel ‘wealthy’, real or imagined, was via increasing property values which allowed people to feel that drawing on that value was OK – the value was only going to increase. But we all know, that is not the case at present and possibly for some time. Result – close the cheque book. The insidious effect trickles through the economy and indeed, the economy declines.

          That this should coincide with a (potentially) once in a century mining boom is extraordinarily unfortunate. For a range of reasons.

          Without the boom, spending would still have declined as debt saturation point had been reached by households not experiencing strong property value increases nor strong wages increases. It was going to happen. Regardless. But it allows some interests to place blame on rising ‘inequities’ on the boom. Not the case at all. Debt.

          It coincides with a number of major global economies experiencing almost identical hangovers from the recent credit bubble. These countries have their own difficulties to conquer but China, our most valuable trading partner (at least to us) will likely undergo a decline in demand of their own. This potentially threatens the only sector that at the moment has any potential to provide significant revenue to the country.

          What all these economies are experiencing is the end of the easy credit frenzy. It buffeted the middle class in nations where in real terms wages barely kept pace with inflation. It ensured the rise of the double income household, at first a pleasure, eventually an economic necessity, simply to survive. It enriched governments and corporations and households (or so they believed), it promoted the transfer of manpower intensive industries to the cheapest provider (eg China) it meant we were all free to move into services and reap the rewards – that can only come with prosperity. But this prosperity was a chimera. Take away the credit, and the ability to service it, and its all gone. SCHPOOOOF! Like that.

          And all those jobs with it.

          Australia is still, despite the gloom merchants, in a good position. It does appear that the slippery slope beckons and this is what I guess the RBA is trying to manage.

          There is no doubt, it is time for countries like the US to act. If the US can implement employment generating worthwhile infrastructure projects and get the economy vibrant again, the debt will slowly be attended to via increased tax revenues from both individuals and corporations. I can’t see how it is of any value letting a great nation like the USA go to ruin for the sake of some spurious economic dogma.

        • RA,

          Aren’t you putting the cart before the horse?

          Perhaps I am misreading you, but I get the impression you think that there is uncertainty because of a lack of aggregate demand. But it seems more likely that there is a lack of aggregate demand because of uncertainty.

          Is there not a risk that more Govt stimulus spending (especially if against the wishes of the people) will add to that uncertainty, and thus fail to raise aggregate demand?

          • Sidelined – I’ll try to be more clear. What I was getting at is the very common Republican talking point that you will hear all day long on Fox News, and which states that businesses are not spending or hiring because of uncertainty about Obama’s policies, over-regulation, fears about tax increases, etc.

            I am saying that this is not the main issue. Businesses are not investing because there is a lack of final demand. That’s it.

            Many consumers are stuck in negative equity due to the collapse in housing prices, and they are still deleveraging. The consumer boom of the decade or so leading up to the crisis was based on an overextension of credit and it is going to take a long time to get household balance sheets back in decent shape.

          • Couldn’t quickly find my first link, but here is Elizabeth Warren and the Death of the Middle Class – can only totally recommend it to anyone wanting a deeper understanding the the forces at play. No wonder she has been opposed by certain elements in Congress. This is the fundamental truth – and it extends to all developed economies. We are all captive of credit fallout. It’s long, but you want regret it. In fact, get coffee or a drink, and sit back – be enlightened.

          • RA,

            I’m surprised that you had not seen this before, but anyway…

            In January 2009, two (Keynesian) economic advisers to the President of the United States (Christina Romer and Jared Bernstein) published a report on the American Recovery and Reinvestment Plan. The report is available here:

            On page 4 is a chart comparing how the unemployment rate would fare with/or without the stimulus plan.

            Based on their modelling they predicted that by this time, the unemployment rate ‘with the stimulus’ would be around 6.5%, but ‘without the stimulus’ would be around 8%. In reality, it is 9%. By their own standards, the plan was a monumental failure.

            Unsurprisingly, they are no longer employed as economic advisers to the President.

          • Sidelined – Actually I have seen that report before but I don’t think it proves what you think it does. The modelling was completely wrong — in other words Obama’s advisors massively underestimated the severity of the crisis. Hence the stimulus was too small to do what it was intended to do. When you net out the effect of the budget cuts by the states, the total size of the US stimulus was small compared to what most other developed countries did. (and some developing ones like China). On top of that the stimulus was terribly designed. But that’s another debate…

          • You may be right that the recession was worse than expected. But you don’t know that. Indeed, you have no way of knowing that. It could similarly be argued that the recession would have been shallower if not for the stimulus. And you can’t disprove that either.

            Thus, all we can do is judge the forecasts put before us. And what we find is that not only did the actual unemployment rate end up higher than ‘with stimulus’ it was also higher than ‘without stimulus’ (the worse case scenario).

        • Krugman!!!! Please go and read all teh rebuttals of Krugman on Mises.org

          The idea that all we need is more demand and the Government can provide this demand is pure crazy talk!

          We had unsustianable aggregate demand pre-2007 because it was built on unsustainable private debt levels. Trying to revive unsustainable demand that was driven by private debts by asking Government to spend more and more (depsite 14 trillion debt!)…

          You guys have lost the plot.

          Austrians are the only ones that have the answers

          • Montgomery Burns

            Austrians are the only ones that have the answers

            it is unfortunate that the answers are to the wrong questions.

    • That’s because the US stimulus was rubbish. Instead money should be injected into the economy as real assets (highways, airports, ports, hospitals, schools, etc).

      • Yeah – coz that tactic has worked well for China…which now has empty cities, massive debts and a credit crunch coming.

        And the BER program here delivered such great value.

        Havent you Keynesians learnt anything…Government spending has proven to nearly always be misdirected due to political influences and due to the inability of Government officials to understand what the market needs.

        • “And the BER program here delivered such great value.”

          Actually, as someone who has witnessed a number of these projects and discussed the topic with someone who has inspected many more, I would have to say – yes, it did deliver pretty good value.

          My wife’s school is already reaping the benefits in a financial way by hiring out the excellent quality hall for functions.

          I attended that very same primary school myself and what the BER has provided sure beats what I had – a rusty swing set and half-a-dozen tractor tyres half buried in the ground.

          The wild claims peddled by the MSM about the huge numbers of shonky, unsafe structures are just that – wild claims designed as attention grabbing headlines, often presented without the context necessary to gain a proper understanding. How and why the government simply let the MSM own the narrative on this issue is beyond me.

          Everyone I know has been glad to recieve what we have been given.

          • Not shonky or unsafe….just not value for money and not tailored for what the schools actually wanted/needed.

            The BER was a failure, despite the fact tha some schools got things that benefited them. Of course that was going to occur when they spent billions and billions of our money.

            You would hope a few schools got a good deal

            That doesnt mean the BER wasnt a disaster.

          • MOST schools got things that benefitted them stavros.

            And a lot of Australia’s builders were glad not to go under, construction being one of the first and worst hit sectors during a recession.

      • Hopefully that will be the form of QE3 – although someone here a while back said that technically the Fed doesn’t the power to spend in that way (something like that).

    • Montgomery Burns

      That is just Keynesian diatribe from Ron Paul. We are creating debts for our grand children. We need to return to a gold standard and ban illegal immigration. Hyperinflation is just around the corner. Shut down the Federal Reserve. We have the right to bear arms. What planet are you living on. On this planet we are mortgaging our future so tax and spend socialists in Washington can turn us into Europe …

      …and so on

  4. If mouldy excess debt is the cause of the deleveraging in a balance sheet recession why not speed up the process of purging that debt from the financial system.

    Rather than keep all those bloated deleveragers afloat with rock bottom interest rates, why not let the marginal ones meet their makers. Yes the banks would feel some pain but there is always the option of the government guaranteeing depositors and setting up a new state bank if the private ones all go belly up.

    With a deficit funded social security safety net and perhaps a couple of genuinely useful make work schemes to hold things together while the assets of the deleted deleveragers get applied by new businesses.

    • I am not in favour of bailouts or propping up failing businesses. I still think Obama made a huge mistake bailing out the banks with no strings attached, and we would have been better off letting the weak ones go under (with an orderly process to transfer them into new ownership). So I’m mostly in agreement with you here. I would rather see the government target its deficit spending to things like retraining for the jobless and make-work schemes in useful areas.

        • Oops. You’re absolutely right. Apologies to Dubya there! But basically Obama continued the Bush/Paulson policies on the banking front, and as you say, they bailed out GM.

          • Montgomery Burns

            Obama continued Bush’s policies, period. Apart from his lame attempt at health care reform how is the Obama presidency different for a third Bush term?

          • Totally agree Monte, Obama’s presidency has effectively been a 3rd term for Bush.

            The supposed Democrat and Republican divide is non-existent.

          • Obama is so obsessed with the idea of “bipartisanship” that he appears to have completely forgotten what his principles are (if he ever had any to begin with, apart from getting elected).

            He is basically indistinguishable from the Republicans when it comes to talking about the deficit and the economy, and is well to the right of Cameron in the UK, for example, who still believes in a national health system.

          • Jumping jack flash

            as with our politicians they are run by lobbyists.

            They all suffer from not knowing what to do. Where there is a void of thought or direction, anyone with a thought or direction is welcomed, even if they are pushing their own agendas.

            No vision. But the banks have one. No vision. But big business and Wall Street has one. It is to milk the taxpayer, and the Government and Fed just goes along with it because they have nothing better.

  5. Montgomery Burns

    It was pretty clear prior to the 2008 elections that Obama knew zip about the economy, but he basically had nothing to beat so won easily. The guy is a tosser — admittedly one that looks good in a suit and speaks well, i.e. he looks and sounds presidential, but on substance he has no clue. Having said that he will probably be running against bigger tossers and nutjobs in 2012.

    • Yes, I am afraid that tossers and nutjobs may be the theme!
      Just saw your comment on the other thread about Ritholz. Will have to check out his post on the debt limit…

        • Chris Hedges wrote a great piece about that very thing a couple of months ago. He was actually angriest with the Democrats who still like to portray themselves a certain way (Labor here) but in fact sold out to corporations and vested interests long ago – in his view, at least the Republicans more ideologically honest!

          But both are appalling.

          • Montgomery Burns

            It is easy to have more contempt for democrats. They controlled both houses for 2 years and wet the bed.

          • Montgomery Burns

            yeah that’s circulated for awhile. Murphy does a great job of creating a straw man then tearing him down. Shame he doesn’t attempt to critique MMT instead of critiquing straw men.

            MMT is a description of how the monetary system works. Murphy apparently doesn’t like how the monetary system works, having said that he probably doesn’t know how it works, so therefore he rejects the description. But that is not surprising because austrians reject the use of empirical data and mathematics (i.e. tools that might show up flaws in their religion) don’t they or am I being unfair?


            I provided you with a link debunking Rothbard but I didn’t notice any new comments to that article.

          • Separating economics into “schools” such as the Austrians and MMT doesnt help anyone IMO. They each have valid points, and each have points of contention.

            Separation into schools of thought merely allows one to dismiss new information without properly considering it.

          • Montgomery Burns

            Pete MMT seeks to be a description of the operations of the monetary system, i.e. describing the operational mechanics.

            If there is some fault in that description of the operations then that needs to be corrected but rejecting the description because you just don’t agree with it on ideological grounds, as some do, is analogous to rejecting the description of how a car operates because you have an ideological objection to the use of cars.

            Where there is room for debate is on policy, i.e. what you do based on how the monetary system operates, but the actual operations are a given for a particular economy.

          • Monty,

            “I provided you with a link debunking Rothbard.”

            Cool! But I couldn’t find it here, maybe you posted it elsewhere?

            Anyway, can you re-post? Ta muchly!

          • “MMT is a description of how the monetary system works”

            While I posess no formal economic education, that’s how I see it. After spending a year or so “studying” – as I’ll loosely call it – nightly under Bill Mitchell when he first launched billyblog, I am of the opinion that modern monetary theory is the correct way of understandingt the actual mechanics of modern day monetary systems and the nature of “money” itself.

            Perhaps I have not investigated other schools of thought deeply enough, but I have not yet seen anything that has caused me to reconsider that veiw.

            But try explaining the basic tenants to people who are uninterested in understanding what makes things tick and you can see that most of them just struggle to accept any other veiw than that of a government budget being analogous to that of a household or business.

          • Montgomery Burns




            yep. Sticking with the car analogy, two people might debate what to do about something in a car, which fuel to use etc. but they do not debate how a car works because that is a given. Likewise, given how the monetary system works you’d expect people to debate policy based on that operational fact. But instead of debating policy based on how the system works people want to give prescriptions for a monetary system that doesn’t exist. It is alice in wonderland stuff.

          • hmmm

            Logically amd philsophically, you have to keep in mind that mathematics is less powerful / has a lesser scope that than qualitative philosophy/dialectic/logic.

            Maths (and, thus, all of its applications, including those into quantitative empiricism) is only Descriptive, not Prescriptive; and, is as such, quite limited – extensions only come from moving back into philosophy.

            So, it’s invalid to criticise the Austrians for relying, essentially, on on the philsophical dialectic, but in logical reality, it is actually a more powerful tool….

            Just thought that was worth mentioning (yes, i’m into that sort of stuff!! ;))

          • Montgomery Burns

            I could abandon mathematics and data and theorize how the planets move in the sky, as men did for centuries, but if my theorizing didn’t actually explain the movements it is worthless naval gazing.

            The starting point for most of these austrian rants is a monetary system that doesn’t exist. So they haven’t been able to deduce how the system works let alone prescribe cures to economic ills. They have spent too much time indoors with their eyes closed imagining their nirvana.

            It is a bees dick away from becoming a cult, with Keynes as their great Satan.

          • Monte, not sure if you understood but my point was that MMt should not be rejected just because its “MMT”. and similarly Austrian economics should not be rejected just because its “Austrian”.

            MMT is a description of how the monetary system works, if you assume that the economy = GDP.

            so IMO the weakness of MMT is relying on the mathematical relationship that holds for GDP having explanatory power over “the economy”, for which GDP is just one representation. Mathematics is just a tool, and an equation does not mean a relationship holds in physical reality, there needs to be a coherent explanation developed away from the mathematics which is then supported by the equation.

            Its similar to language just being a tool; just because i can arrange letters to form the word “unicorn” doesnt mean the unicorn is a real thing. Just because i can arrange an equation in a certain way doesnt mean that reality behaves in a certain way, it just tells you that there may be a driver there and to investigate it. It does not mean that “increasing X will reduce Y, because the maths says its self evident”.

            Just as a weakness for Austrian economics is an insistence on the gold standard because gold is “money”, when that isnt true. The gold standard merely makes it more difficult to devalue a currency, because its pegged to gold, but it is still based on confidence just like a fiat currency.

            Austrians not using heavy maths is not a weakness, its just a different method of investigation.

            There’s too much “my school is right and yours is wrong” going on. ALL schools are right in some ways and wrong in others. Looking at a normal distribution as an analogy, within +/- 1 std dev of “economic normality’ will have most theories operating correctly. Keynesianism works fine during normal economic times, so does Austrian theory, so do the interpretations of MMT. Its the “tail events” of an economy which show the weaknesses.

          • +1

            Well said pete. Actually really well said, come to think about it….

            I think the post-Keynesian school goes a long way trying to mind meld the various schools (although it has far to go too).

            Isn’t it amazing that after all the scientific process of the last 200 years, we still haven’t figured out what makes our economy tick?

          • The Austrians have worked out what makes the economy tick…entrepreneur…the good ones, the bad ones…they all create a market where the needs and wants of citizens are met. That is how an economy works…freely and for the benefit of consumers.
            What we have are a bunch of power hungry politicians who want us to think we can’t do anything without massive Government departments telling us how to do it.
            Of course these Government departments create all types of burdens and taxes on the freedom of others and this causes distortions and inefficiencies
            Seems pretty clear cut to me….but we have a lot of corporatism that is now occurring and this is the worst kind of free market as it damages the reputation of the free market without actually being the free market at all…it’s a rigged game where Government dishes out favours and creates class conflicts.

          • Montgomery Burns

            Prince where both you and Pete seem to be missing the point w.r.t to mathematics is that if for example you define assets as equal to liability plus equity then changing one identity impacts the other. If you devised business plans or models or theories in which A didn’t equal L+E you will encounter some problems. If you run a business do you get your accountant to do double entry book keeping or do you deduce your financial position? Similarly for national accounts you have accounting identities which describe how we keep score of what is going on. If you ignore the accounting identities and instead suppose to deduce how things work then you lack the foundations from which to make sensible judgments. Thus we see statements being made in various outlets that are so-called “solutions” for a system that doesn’t exist. BTW even from a starting point of understanding the basic accounting it doesn’t follow that a policy prescription will be correct. In other words it doesn’t follow that an MMTer knows how to optimize the economy.

            Also as Pete points out there are things in the economy that are not captured in GDP. The middle “M” in MMT is monetary. It only seeks to describe monetary flows. It doesn’t say anything about non-monetary flows. As for “It does not mean that “increasing X will reduce Y, because the maths says its self evident”.”

            I’m not sure how to describe that statement. A=L+E, by definition. external sector = government sector plus private sector by defintion. If I hold L constant and reduce E by one unit then A will reduce by one unit. If I reduce external by one unit gov + private must reduce by one unit. This mathematical fact doesn’t tell us anything about causality but it is a fact that A will decrease and suggesting that this wouldn’t necessarily happen because the math said so is …well, mind boggling.

            There is really no point in entering into a discussion with anyone not prepared to accept that but does highlight the difference between the empirical world and a belief system.

          • Getting a bit late on this thread but here’s what I’ve been banging on about Monty……….

            “U.S. Recovery Less Important Than Debt Reduction To Americans: Poll

            According to a poll published Wednesday, 59 percent of Americans want the government to make national debt reduction its top priority, even if it comes at the expense of kick-starting the economy. Only a third think the focus should be on stimulation”http://www.huffingtonpost.com/2011/07/07/debt-reduction-recovery-americans-poll_n_891748.html

            The meme that government spending is generally a waste of “taxpayers money” is so entrenched in the public’s mind that broad understanding and acceptance of simple, basic macroeconomic facts seems unlikely.

            Sad but true IMO.

          • Lefty is saddened by the fact that American taxpayers are fed up by the government throwing their money in the money hole.


            “If you love america you throw money in its hole.”

            “My father worked two jobs so he’d have money to put in the money hole.”

            “You have to throw money in a hole and set it on fire to make money.”

          • No, Lefty is saddened to see mass unemployment and all the misery and hardship that comes with it. He’s even further saddened to see the widespread misundertanding that’s driving demands for austerity.

            Including the notion that US taxpayers actually pay for the US governments spending in any real sense.

  6. ” there is absolutely zero political appetite for investing in the future.”

    They seem to have an insatiable appetite for investing in the past though.

    Debt ceiling will get raised, after some whoo-ha from and back room deals. If memory serves it has been raised over and over again since 1967, more than 20 or 30 times i believe.

  7. Why the debt ceiling debate is a sideshow. Because: ETA

    QE3=3rd QTR.2011.

    That or economic collapse. Benny and the ink jets.

    • Ha! Actually I don’t know enough about the NBN to have a strong opinion, but on principle we should be able to agree that we’d rather see the govt spend money on things like broadband infrastructure, rail links to airports, public transport, etc, rather than bailing out banks and failed auto companies, subsidising ethanol production, or giving tax breaks to big oil companies.

      • No – you underestimate the distorionary effect of the Government intervening in the private sector. When building this infrastrucuture, they usually require all kinds of regulations and costs to be imposed on the more efficient private sector.

        The NBN is a clear case of this

    • Build a railword, it’ll be there in 100 years. Build the NBN – it may well be outmoded before completion.

        • Yes, build Oakajee, open up the mid-West. Infrastructure needs around the Kimberley with various gas projects likely. Good grief, I’m still not put off the idea of a pipeline from the Kimberley to Perth, or at least a major irrigation project.

          • We should have a second city up north, and anyone who is working in those regions fly-in fly out should live there. That would stop this insanity, where people are charged $1,500 a week in rent so they can sleep in a sea container. How is that adding any utility to our economy?? A second large city of 150,000 – 250,000 would have it’s own self-sustained economy in areas other than mining, though obviously it would be underpinned the LNG and iron ore abundance in the north.

    • Alex Heyworth

      Well, that comment was somewhat tongue in cheek! I agree with you that the US badly needs to spend up big on infrastructure. For a start, there is heaps of infrastructure that was built in the depression era that is now crumbling and in need of replacement. Airports in many places are stretched beyond capacity. Freeway and rail transport systems have not kept up with population growth.

  8. The debt ceiling will be raised at some point. It is open to question whether this happens before or after 2 August, and whether or not it entails a default by the US on any of its debts.

    Regardless of this, what is almost beyond doubt is there will be cuts in Federal spending. Since it is axiomatic that a cut in spending is a cut in spending, regardless of the identity of the spender, it follows that demand in the economy will be lower than it otherwise would be.

    Depending on the magnitude and timing of the cuts, they may provoke a new cycle of contraction, which will just generate more job losses and more declines in Government revenue.

    The result would be different if the private sector consumption and investment were expanding and if the economy were approaching full employment. But this is clearly not the current situation.

    There is only one path out of the current malaise, and that is to restore economic growth.

    Cuts in spending will sap demand, and tax increases may also sap both private consumption and investment (which are also already badly recessed).

    It follows that the single policy choice available is the one that all sides of US politics have decided to reject: increase public borrowing and spend freely on public services and infrastructure projects.

    The one thing that will certainly work has been ruled out by the dysfunctional imperatives of US politics.

    Hopefully the cuts will not be too deep and will not happen too abruptly and more lasting harm will not be done to the fortunes of US households, but I wouldn’t bet on it.

    • upstream from the herd


      been there before Japan circa the 90’s.

      All complex problems have a simple answer……………which is always wrong.


  9. Alex Heyworth

    It seems to me that most of the US’s problems can be sheeted home to their dysfunctional political system. All politicians now rely on so many favors to get elected that they are in an impossible situation as soon as they get into office. So much of government discretionary spending is allocated to unnecessary pork projects that there is none left for the things that really count. Distorting tax breaks have to be made to pay off special interest groups.

    Public funding of election campaigns (and low or no private funding allowed) would result in far better policy outcomes.

    • Agree with this 100%, but of course we can’t have public funding of elections because it would put us on the road to communism, and the next thing you know they would even be taking our guns away…

      • upstream from the herd

        Aren’t we all on the road to Communism now or should that be the road our resources travel on their way to the steel mills of China, that great bastion of capitalism.


          • upstream from the herd

            like……………..ur……….rule of law, representative government, human rights, floating currency, free movement of capital, open press

            Nice one R2D2…………free is a strong word to be bandying about when discussing China


          • Laughing. I was working and didn’t read your comment correctly. Yes, China has a few issues. Part of the transition and development of any nation I would suggest.


    • Montgomery Burns

      The 2 year election cycle is a killer for good policy.

      Also the supreme court last year (or was it the year before?) ruled that corporations have the right to donate based on freedom of speech provisions in the constitution (someone correct me if that is inexact or misleading). So political donations will continue to be a source of crony policy.

      So you can forget about public funding replacing private funding.

      • No the problem is the lower House’s involvement in policy.

        There was a reason the Senate had unelected Senators from the States – to keep the lower house “mob” in check.

        Having said that, the Senate seats were basically for sale up until they went democratic (and then became for sale via the ballot box…)

  10. Unless I am mistaken (and I would be happy to admit if I am) the Republicans were elected on the basis that (a) they would not raise taxes and (b) they would reduce govt spending.

    If so, then they are simply honouring their election committments.

  11. > Perhaps Paul Krugman is right and we are dealing with President Barack “Herbet Hoover” Obama.

    Didn’t Hoover actually spend a lot of money with stimulus during the Great Depression? I remember reading that he actually boasted about how much he had spent during that period in a speech. If so, funny to see Bernanke basing his current attempts to counter deflation based on the Great Depression that the world is exposed to on a fallacy!

    • Hoover ran a budget surplus for 1929-1930, the year when the stock market crash occurred. It turned out to be a complete disaster,

      • I was discussing what prolonged the Great Depression, not ncessarily what caused it because this fallacy is what Bernanke is using to supposedly get the US (and the world indirectly) out of its current state.

        Found some relevant quotes from when I looked this up a few weeks ago:

        Hoover was sworn in as the 31st president of the United States on March 4, 1929. By the time his term ended four years later, federal outlays had climbed more than 50 percent in dollar terms; they had almost doubled when measured in purchasing power; and they had tripled as a fraction of national income. “If stimulus is the solution to high unemployment,” remarks Santa Clara University economist and law professor David Friedman, “the Great Depression should have ended almost before it began.”

        “FDR is remembered today, of course, for the vast expansions of the New Deal. But as the Democratic standard-bearer in 1932, he lacerated Hoover as a big-spending Republican.

        “For three long years,” Roosevelt said in accepting his party’s nomination, “I have been going up and down this country preaching that government . . . costs too much. I shall not stop that preaching.”

        Stop that preaching he didn’t. He accused Hoover of presiding over “the greatest spending administration in peacetime in all our history . . . an administration that has piled bureau on bureau, commission on commission.” He slammed the Republican’s record of “reckless and extravagant” spending, and of thinking “that we ought to center control of everything in Washington as rapidly as possible.” He mocked those who thought “a huge expenditure of public funds” was the best way to grow the economy of succumbing “to the illusions of economic magic.” His running mate, Texas Congressman John Nance Garner, even warned that Hoover was “leading the country down the path of socialism.
        …[concluding line below]
        Herbert Hoover can be fairly faulted for many things, but rolling back the federal budget isn’t one of them.”

        • The idea that Hoover was some kind of big spending Keynesian is revisionist nonsense.

          He ran a budget surplus in fiscal 1930. Then from 1930 to 1933 the economy collapsed and tax revenues fell by 50%. This was the main cause of the blowout in the deficit.

          • And how did Hoover respond to the economic collapse and drop in tax revenues? He increased government expenditure by 39% over the same period. As a share of GDP, outlays grew from 3.4% in 1930 to 8.0% in 1933.

        • There is a lot of confusion over what exactly happened during the Great Depression, and there are a lot of commentators from both side who are ‘rewriting history’ to support their own point of view.

          The initial response to the Great Depression is best summed up by the words of Andrew Mellon, the Treasury Secretary of the time :

          “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

          The interest rate at the Federal Reserve was kept high, and liquidity was removed from the banking system. It was a disaster. Deflation set in, and after one year, the economy has gotten so bad that Hoover stopped listening to Mellon. Taxes were cut and government spending increased, the deficit be damned. Thing didn’t get better though, and what really destroyed Hoover was the ‘Bonus Army’


          FDR was elected on a platform of reducing government debt, then end up outspending Hoover by almost 2:1. FDR spent the money on ‘direct programs’ which hires ordinary people, whereas Hoover used the money for ‘bailout funds’ (similar to TARP) for banks. That’s really where their difference lies.

          • When you think about rewriting history..the Government has the incentive to pretend it was the one that saved the people from the perils of the Great Depression. The Government is one that controls the schools and education system, so they can brainwash the next geenration to believe Big Brother is good and there to help.

            I can see exactly what occured in 2008. Big Business bad – Government good…Government saves the day…


            The improvements over the past 100 years have nearly ALWAYS come from the private sector. The sooner we get rid of big Government, the better we will be.

          • Montgomery Burns

            It is one massive conspiracy. Whenever so-called data doesn’t agree with my ideology I am convinced that it is because the government had falsified it. They are evil yet we entrust our safety to them. The government cannot do anything right and they work against us. How can they protect us? We should force them to disband the military immediately so we can protect ourselves by way of private militias. This will also cut back the debts that our grand children are being forced to pay because a large part of the debts to the banking cartel conspiracy are to finance the military.

          • Montgomery Burns…

            Do you think that it is convenient for Government that Keynes put forward the solution that enabled the Government “to do something” to cuntrer the depression.

            Surely it is not a nutter or conspriacy link to question the economic sense of such an approach…cant you see it is a political solution – not an economic one.

            Why dont you take me up on the specific and clearly explained points I am making. Rather than stalking me with belittling payouts of the Austrian school of economics…the fastest growing school of economics in the world.

            Explain to me how the Austrians have it so wrong…

  12. Talking about it as an aggregate demand problem tends to miss the point that the reason there is a lack of demand is that some people want to reduce their debts and the rest have no compelling need to consume.

    Rather than fight this it would better to face it front on. Let those who can reduce their debts do so and let the rest go broke. Once the market place starts producing stuff that those without debts want they will buy.

    The govt has a role keeping food on the plates and undertaking worthwhile make work schemes but just filling a demand hole is a mistake.

    • Trouble is, economies are built on demand. The credit bubble provided the means. Those with no debt cannot fill the void.

      • 3d1k,

        When a consumer goes to buy most types of goods the maker of those goods must have in the past speculated in the past about future demand i.e you don’t turn up at a shop and have the goods you want made instantly.

        If the maker of a good makes more goods then consumers want to buy then the only option is to REDUCE the PRICE until there is sufficient DEMAND for that good.

        Its easy to observe just look at the computer you are now using, as the cost of computers has dropped it has created more DEMAND, how many computers are now in the average house compared to 10, 20 years ago ?

        • Computers – design increased exponentially, prices…well, opposite – manufacturing costs streamlined, competition increased – you know it. Like the old transistor radio, I would suggest, or the B+W television.

          The credit bubble part is – if you don’t have the finance, you can’t buy.


          • “Oh, and the logical extension of your argument is bankruptcy.”

            NO a maker of a good reduces their price UNTIL demand catch’s up with supply, and of course works in the opposite direction as well prices can be bid up until supply meets demand.

          • Selling for loss is what most businesses have to do from time to time, because trying to anticipate future demand 100% correctly is hard.

            Now if you stuff it up totally bankruptcy follows unless you have friends in the government !

          • “We’re on the same page!”

            Thats good because I’m off to snooze land.

            Good Night

    • +10000 Pfh007.

      The govt’s role is to protect the weak and the vulnerable. Keep them fed, clothed and housed. That’s it.

      The government should not be indirectly bailing out speculators by filling a “bubble demand” hole.

      Let the speculators go bankrupt – maybe then they’ll teach their kids about the dangers of excessive debt.

      • Well read? Seriously, I do the Machiavellian thing, and get my ‘advice’ from a variety of sources! Keepin’ it real.

  13. How about an investigatory commission alongside the debt cutting commission to make inquiries into how the debt became so large in the first place – to cause the kinds of contentious conflict that was exhibited in Congress these past two weeks?

    What is not readily apparent is the need to assign liability within Congress for the situational dilemma, probably caused by relational irresponsible politics.

    In fact, Congress might view the problem for democracy as one that totally ignores the three dimensional design of Congress that makes decisions based upon transactional, situational/cirumstancial as well as relational politics which political scholarship has long avoided.

    Without such an inquiry, is there no end to repetition when Congress neglects its own fundamental obligations under their Constitutional oath – the same as, John Boehner points out, the one Presidents take?