George W. Krugman
Some people are sore losers, but Krugman is a sore winner on the debt ceiling. Here’s part of his post-game show:
[The organization titled] Fix the Debt didn’t just help create a climate of crisis with its fearmongering over the deficit; the fiscal scolds actively cheered GOP hostage-taking in 2011, and were still lending support to hostage tactics this time around.
Furthermore, neutrality is not an option here. If one political party attempts to defy due process and extract concessions from the other party by threatening financial and economic catastrophe, and your response is to condemn partisanship in the abstract and suggest that both sides are equally to blame, you are in effect lending cover to the hostage-takers.
In other words, Fix the Debt isn’t just ineffectual in its pursuit of a Grand Bargain, it’s an actively malign force in our politics, in effect acting as an ally of the extortionists.
Wow, a group that is concerned about the debt and criticizes both political parties is acting as an ally of the extortionists. Somebody give Krugman an award for being a champion of free speech!
A Move to Significantly Weaken the Debt Ceiling?
I got this from a pretty sensible fellow over email. I haven’t had time to confirm it myself, let me know what you folks think in the comments.
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A very little reported part of the law passed last night to end the government shutdown is described below:
The Devil Is in the Details. While the debt ceiling remains in play, going forward, the process for handling it has been changed. Instead of the Congress having to approve an increase in the debt ceiling, where withholding such approval had been used as negotiation leverage, the President now simply announces that he is waiving the debt ceiling. If Congress objects, it has to pass legislation to reject the President’s waiver. The President can veto that legislation, where a veto override would require a two-thirds majority of both the House and the Senate. Neither the passage of an override of the waiver in both Houses, nor an override of such enacted legislation, is possible in the current political environment.
I have confirmed with Senator Alexander’s office that this is in fact part of the law passed last night. They claim it is only temporary until February 7th. My guess it will become permanent before then.
The Debt Ceiling and Default
A video version of the stuff I’ve been blogging about here. Note that I recorded this before news of the deal.
And remember, my course on “Basics of Economics” starts today!
Is It Unconstitutional for the Federal Government to Default on Its Debt?
Nope. Or at least, I have as much authority in saying that, as the bloggers and pundits who claim otherwise. Here’s what the relevant section from the Fourteenth Amendment says:
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Remember, the Fourtheenth Amendment was adopted in 1868 as part of Reconstruction. Here’s the context to help understand Section 4:
Section 4 confirmed the legitimacy of all U.S. public debt appropriated by the Congress. It also confirmed that neither the United States nor any state would pay for the loss of slaves or debts that had been incurred by the Confederacy. For example, during the Civil War several British and French banks had lent large sums of money to the Confederacy to support its war against the Union.
So when the 14th Amendment says the “validity of the public debt of the United States…shall not be questioned,” it means, for example, that people in South Carolina couldn’t object and say, “Hey, why the heck should South Carolina have to pay taxes to the federal government, in order to redeem bonds that were issued in order to kill our people? That’s crazy.”
The 14th Amendment is not saying, “If for some reason the federal government defaults on its outstanding bonds, this violates the Constitution.”
I mean think about it for a second: There could be an economic calamity making it impossible for the government to pay off its bondholders, regardless of political will. So how can that possibly be an unconstitutional outcome?
Also, I find it a little suspicious that most (not all) of the people I see bringing up the 14th Amendment on the debt ceiling, just about never mention the Constitution anywhere else in their writings. And they’re not even doing it as a mere accusation of hypocrisy against the Tea Party: No, I’ve seen bloggers who have no problem with the federal government regulating microwave “standby modes” but drape themselves in the Constitution when there’s a chance that something will interfere with the Treasury’s ability to go another trillion dollars deeper in debt.
(For the opposite view, go and read more in the Wikipedia article in that section, you’ll see some people–like Bruce Bartlett–being cited as authorities for why it may be unconstitutional to interfere with the issuing of Treasury debt. And there’s also the 1935 Supreme Court case of Perry vs. U.S. that, according to the Wikipedia article, says the Congress doesn’t have the authority to cancel a federal bond. But I think Bartlett is just plain wrong, in light of my arguments above, and I don’t see how the 1935 Supreme Court case is doing what the Wikipedia writer claims. But anyway, you don’t need Congress to declare an existing federal Treasury bond void in order for my position on the debt ceiling to go through.)
Danny Sanchez Interviews Me, Part 5/5
Here’s the fifth and final installment of my marathon interview with Danny Sanchez of Mises Academy. Remember, my online class starts this Thursday (tomorrow).
Potpourri
==> The observant von Pepe sends this CFR critique of Krugman.
==> If I do say so myself, I think I had a nice example in this post to illustrate a problem with the EPA’s cost/benefit procedures. (It involves changing the oil on 18-wheelers, for those who saw my inquiry on Facebook.)
==> Amanda Billyrock thinks I outrank Tom Woods.
==> The policeman is your…oh never mind.
==> Mark Spitznagel in IBD talking about the Herbert Hoover myth.
==> Noah Smith has a good post trying to show that there’s nothing veird about Fama and Shiller winning the “Nobel.” (Also, just in case anyone is foolish enough to get his or her views solely from Free Advice, let me be clear that three people won: Lars Hansen was the other guy.)
==> For more reactions to the award, Mark Thoma has a great compilation.
Danny Sanchez Interviews Me, Part 4/5 (Robinson Crusoe)
Here’s the fourth installment of my marathon interview with Danny Sanchez of Mises Academy. Remember, my online class starts this Thursday. I was looking through the textbook to arrange the courses, and man there’s some good stuff in this class! I’m pumped to teach it.
Potpourri
==> In Noah Smith’s absence, he has a claque of lesser men (and women) blogging at his site. This guy, Peter Dorman, not only failed to acknowledge The Great Debt Debate of 2012 in his initial post, but he dismissed Nick Rowe’s futile attempts to educate him in the comments. (Oh, notice Gene Callahan et al.: This guy was certainly not taking the line that “yes the present generation can impoverish our grandkids in the OLG way using debt, but that has nothing to do with the debt per se.” Nope, he was shaking his head at the stupidity of anybody who thought there was any sense in which people alive today could live at the expense of people not yet born.)
==> On the other hand–and to Noah’s credit–Josiah Neeley is a modern day Jeremiah, preaching Niall Ferguson to the children of Keynes. Really, Neeley couldn’t have tried to defuse the situation any better than he did; he was funny and even self-deprecating, admitting he had been wrong on the euro just as Krugman had been. You can see what his humility and candor got him in the comments.
==> Peter Klein draws our attention to Bruce Bartlett’s even-handed discussion of those advocating a Treasury default. After reading this, I’m so glad I never posted my idea for a compromise in which the federal government only honors 3/5 of its bonds.
==> This fun Netflix customer service experience (sic) happened to my friend. He posted it on Facebook, ha ha that’s great Norman, and then next thing you know it’s on HuffPo.
==> This stuff about the Renewable Fuel Standard is even more absurd than you might expect from the feds:
The American Fuel & Petrochemical Manufacturers (AFPM) and the American Petroleum Institute (API) have filed lawsuits with the D.C. Circuit Court challenging EPA’s unrealistic 2013 cellulosic biofuel requirement under the Renewable Fuel Standard (RFS)—requirements that were released nine months late.
This year’s cellulosic mandate requires refiners to blend 6 million gallons into the nation’s fuel supply, but cellulosic ethanol remains essentially nonexistent. The actual amount of cellulosic ethanol available to refiners so far this year is closer to 142,000 gallons, far from the EPA’s 6 million gallon mandate. Despite the disparity between the mandate and reality, refiners are forced to pay fines for not meeting the requirements.
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