Jonathan Chait

The widespread assumption in the bond market that the debt ceiling showdown will, somehow, some way, end well strikes me as a classic underestimation of risk. We quietly assume that something terrible and pointless won't happen because it's never happened before, even if the potential causes of disaster are blindingly obvious. Jonathan Allen and Jake Sherman have a good story about the craziness of the Republican caucus. How crazy are these people?

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I have returned from my beach vacation to discover that we're still using dollars as currency rather than sea shells (drat!), the most likely debt ceiling scenario involves $1.5 trillion in spending cuts, and Ezra Klein thinks this is far worse for the White House than a $4 trillion Grand Bargain: For Republicans, this plan is something close to the best of all possible worlds (sorry, but I do not consider a world in which "Cut, Cap, and Balance" passes to be a possible one): It's all spending cuts and no revenues.

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Despite months of media hype, I've expressed long-standing, deep skepticism that the Senate "Gang of Six" would ever succeed in getting a deficit agreement passed into law. The final stages of the group are just plain sad: In a last-ditch effort to make their deficit-cutting ideas relevant to the debt ceiling debate, the remnants of the Gang of Six will give a presentation on their plan to a bipartisan group of about 50 senators on Tuesday morning, according to several congressional sources. Sens.

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Bruce Bartlett on the silliness of cut, cap and balance. And CAP's telling infographic on the proposal Keith Hennessey has a strong summary of all the horses in the budget race.  Donald Marron rails against the debt limit. Bachmann and the Tea Partiers think default is a minor concern. Last but not least, Rapper Ja Rule gets convicted on tax evasion.

I'm on vacation, but this Charles Krauthammer column in my morning paper is so wildly obtuse I cannot restrain myself from blogging about it. Krauthammer argues that President Obama's claim to favor a deficit reduction deal is phony because he's offering it in closed door negotiations: All of a sudden he’s a born-again budget balancer prepared to bravely take on his own party by making deep cuts in entitlements. Really? Name one. He’s been saying forever that he’s prepared to discuss, engage, converse about entitlement cuts.

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Vacation

I'm headed to the beach with the family through Monday night. The timing is bad in the sense that, when I made these plans, I didn't realize financial and political cataclysm might occur. On the flip side, I'll be well-positioned if I return to a world using sea shell-based currency. In the meantime, Matthew Zeitlin and Alex Klein, the journalism stars of tomorrow, will be filling in.

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-- Nate Silver thinks that Moody's is underestimating the chance of US default at 0.05 percent. -- David Frum catches Mitt Romney having it both ways on the debt ceiling. -- Financial Crisis Inquiry Commission Member Peter Wallison, in a message to Douglas Holtz-Eakin: “It’s very important, I think, that what we say in our separate statements not undermine the ability of the new House GOP to modify or repeal Dodd-Frank.” -- Josh Green on the tragedy of John Boehner. -- In defense of college football blogs.

This is the big chip I've been waiting to see fall into place: "I don't want to go to [McConnell's plan] yet.  I'm not trying to evade it, but I want to cut spending, and I don't want to give up on spending cuts.  Because if I start saying 'yeah, I'll take [the McConnell deal],' then we're giving up on spending cuts.  I'm not a fan of the idea.  I understand the merits -- the pros and cons -- of the idea.  It has a fairly cool reception around here.  But I want to get as many spending cuts as I can." Sounds like he wants to hold out but is waiting for the inevitable. I wonder -- pure speculat

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Ezra Klein has a nice rundown of the Obama administration's rationale for cutting a deal to reduce the deficit as part of the debt ceiling negotiations: Here’s their thinking: You can’t spend till you cut: The deficit is sucking the oxygen out of everything else in Washington. It isn’t just powerful as an issue in and of itself, but as a response to any significant investments the administration might propose. If you believe we need to do more on jobs, or more on anything, you need finish the deficit conversation.

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One hardy perennial theme of American political commentary is "tension between the GOP's right-wing base and business elite." The story is almost always overblown. The interests of the conservative activists and the rich folks is often orthogonal (say, one wants to ban gay marriage, the other wants to cut the capital gains tax.) Sometimes there's an asymmetry of passion (activists care way more about impeaching Clinton, business elites care a lot more about a free trade deal.) But almost never do you see a straight, head-on collision between the two.

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