WI No Debt Ceiling Debacle

[John Fredrick Parker]

It's been about a year now since the US came w/in hours of defaulting on it's debt, and the credit rating took a hit as a result. Suppose that in 2010, Congress had gotten around to passing a budget and subsequently raising the ceiling -- so that the crisis of OTL doesn't happen in 2011?

First, does the economy fare better, and if so, how much better? How would the political dialogue of 2011 to present be affected? And what other butterflies might there be?

[The Kiat]

It seems like you're going to have the same problem in the long run. As for if no debacle... I don't know why it would have much of an impact. I suppose with no immintent concern over default might make speculators less jumpy.

[John Fredrick Parker]

Well if nothing else, it cost the Federal Government -- $1.3 billion according to the GAO...

[Plumber]

Apparently it dramatically slowed the recovery by about six months to a year or so.

[John Fredrick Parker]

Originally Posted by Plumber

Apparently it dramatically slowed the recovery by about six months to a year or so.

I can see that -- looking at this job creation chart, it struck me the weakest month for job creation (once job creation became standard again) was the month after this near catastrophe. Would anyone think it a stretch if a TL presented this, and shows the months of August to January as each seeing at least 200,000 jobs created?

[Hyperbolus]

The political capital that could have passed a 2010 budget was spent on the Affordable Care Act. The contrast with Clinton's 1993 budget (but no heath care reform) is instructive.

[John Fredrick Parker]

Originally Posted by Hyperbolus

The political capital that could have passed a 2010 budget was spent on the Affordable Care Act. The contrast with Clinton's 1993 budget (but no heath care reform) is instructive.

Normally, passing a budget doesn't, in itself, take too much political capital -- that really only comes in to play if it's used to push things like spending cuts and/or raising taxes, something that didn't really feature prominently in the Administration's proposed budget for 2011...

[Hyperbolus]

The 1993 budget combined spending cuts and tax hikes, and in the event it passed by a single vote in both houses. A budget 'costing' little politically (continued Bush tax cuts, say) would not have been worth passing.
ok, I'm stricken with parliament envy

[John Fredrick Parker]

Originally Posted by Hyperbolus

A budget 'costing' little politically (continued Bush tax cuts, say) would not have been worth passing.

That's more or less what Obama wanted (sans those making over $250,000 a year); whether it would be "worth passing" depends on your standard. For the purposes of this thread, that's just letting Congress know to where they need to raise the debt ceiling by year's end so they don't have to in 2011.

[Linsanity]

Originally Posted by John Fredrick Parker

Normally, passing a budget doesn't, in itself, take too much political capital -- that really only comes in to play if it's used to push things like spending cuts and/or raising taxes, something that didn't really feature prominently in the Administration's proposed budget for 2011...

But we have a new normal today. For the lack of the debt ceiling crisis, probably have the Obama administration focus on the economy before ACA, a more successful stimulus, and the lack of the tea party. Basically, as long as the tea party doesn't rise, you wont have this crisis, because while Senators and Congressmen moan and grumble, raisin the debt ceiling is "normally" a routine thing.

[John Fredrick Parker]

That's certainly a point for the Debt Ceiling being inevitable post Tea-Party eventually, maybe even as soon as 2012,* but right I'm only looking at avoiding it for 2011 -- one step at a time...

*though if the GoP pulled off this crap in an election year, that would be another layer of... well, it'd make it even harder for their party come November

[FDW]

I don't think that it's really possible to avoid this event…

[Derek Jackson]

WI the law assumed that any gap between authorised taxation and authroised expeinditure was simply authorised debt

[Tellos]

The republicans would throw a fit over that, i suspect if you stopped this it'd show up in another battle someplace else. The republicans painted themselves into a corner with the "make him a one term president" line.

[Simreeve]

How far could you actually raise that Debt Ceiling without it affecting the USA's international credit rating?

[John Fredrick Parker]

Originally Posted by Simreeve

How far could you actually raise that Debt Ceiling without it affecting the USA's international credit rating?

Really, the ceiling itself could be set at infinity and it wouldn't hurt America's credit rating, probably even helping it (now actual level of debt, on the other hand...)

[StevoJH]

So, what happens to the US once the banks refuse to lend money? Considering that given the current state of US Debt and the way its increasing, its quite obvious that without significant changes in Taxation and Spending Policy that long term, the US CANNOT service that debt.

[FDW]

Originally Posted by StevoJH

So, what happens to the US once the banks refuse to lend money? Considering that given the current state of US Debt and the way its increasing, its quite obvious that without significant changes in Taxation and Spending Policy that long term, the US CANNOT service that debt.

To be honest, because of various technicalities (Like the US's unlimited ability to mint Platinum, and others), things don't work that way.

[John Fredrick Parker]

Originally Posted by FDW

To be honest, because of various technicalities (Like the US's unlimited ability to mint Platinum, and others), things don't work that way.

Plus if China tried to cut credit, US purchasing power would suffer, badly enough Chinese exports would plummet to the point their economy collapses (and with it, their political order).

[FDW]

Originally Posted by John Fredrick Parker

Plus if China tried to cut credit, US purchasing power would suffer, badly enough Chinese exports would plummet to the point their economy collapses (and with it, their political order).

And not just China for that matter, Saudi Arabia, Japan, Canada and a number of countries that rely upon us would suffer horribly. However, I don't quite think this will come to pass, given the Americans (though not the American government) have been pulling back from the brink in regards to debt.