Category Archives: Money

Jonathan Alter on Boehner’s Misleading Speech

Here’s a nice summary of all the many falsehoods and inaccuracies in Speaker Boehner’s televised address, from Jonathan Alter via Bloomberg. However, at this point I’m most disappointed in President Obama. He appears to be willing to cut off his own arm to appease the GOP, in exchange for… what, exactly? Nothing that I can identify.

The facts are quite simple. We already spent this money. We need to fulfill our obligations. We have to raise the debt limit accordingly. This has nothing to do with whether we should continue future spending at the same rates, or whether we should try to reduce our national debt overall. Of course we should try to curtail government spending, and of course we should adjust both spending and revenues to reduce our deficits. We can sort these matters out at any time; there is no reason it has to be now, under the gun of the approaching deadline, in a way that risks default and a reduction in our credit rating. We will only end up having to pay even more than we currently owe if that happens. I don’t understand why any of this is a mystery. I don’t understand why “conservatives” are so completely out of touch with the fiscally conservative, prudent position on this matter. Pay what you owe, already, and then roll up your sleeves and figure out how to stop continually spending beyond your means.

 

Debt Ceiling Madness

An article yesterday in the New York Times describes the preparations that banks, mutual funds, and others are taking in case the current debt ceiling impasse cannot be broken. It seems clear that even if a solution is reached, the gridlock in Washington is damaging confidence in the U.S. as a financial safe haven. If we have to have another debate like this every time the treasury needs to spend more money, how can investors trust that we won’t someday fail to resolve it?

The more I read about the debate, the more it seems that people are making a mistake I’ve mentioned here before: that raising the “debt ceiling” or “debt limit” is the same thing as agreeing to increase the national debt. We already DID increase the national debt, though, when we agreed to these financial obligations. Maybe we shouldn’t have spent so much money, but now that’s water under the bridge. The only question is, having run up the credit cards, are we going to pay them off or not? And we cannot afford to say no. If I say no to my creditors, I end up paying more in interest or penalties, and this is roughly what will happen to the nation as a whole if we even flirt with default!

Should we stop spending so much, though? Absolutely! I agree with the critics of our out-of-control debt who argue that we cannot sustain this course. We need to make difficult, belt-tightening decisions, and doubtless lawmakers will disagree about where to make cuts. But the debt ceiling is a separate issue. Playing political games with the deadline will hurt ALL of us, including those of us who want a more austere budget. I’m starting to become a little amazed that so many people don’t get this. I had assumed that a deal would be reached because it’s so obvious why it’s needed, but now I’m wondering if Congress might truly be short-sighted enough to hurt our economy with this fight.

I wonder if some Republicans think they can blame Obama for any resulting economic crisis, so they think default is politically valuable and therefore worth risking. Is it possible that they actually believe this? Talk about cutting off your own nose to spite your face…

Going Cash-Only

I’ve often run across articles about the wisdom of cutting up one’s credit cards, using only cash, avoiding all debt, and so on. Usually in response I roll my eyes, think fondly of my 2% cash back arrangement and the low rate on my home loan, and move along cheerfully. However, Brett Arends provides a few compelling reasons to be cash-only (or at least, to rely much more on cash) in his recent SmartMoney article. First, cash offers a certain degree of privacy compared to credit cards, where your every purchase is tracked and the information used in future marketing efforts. Second, credit card use enriches certain companies or their employees at the expense of others, and perhaps it’s more important to do business that keeps local employees at work, in your credit union or bank, than to further line the pockets of AmEx or other companies that are outsourcing labor and taking money from local businesses.

Of course, I’ll still continue using credit cards, since I function on the same budget and purchasing plan whether I use cash or credit, and I like the cashback bonuses. However, there are still some good reasons worth considering, to rely on cash more often.

Raising the Debt Ceiling

I’m concerned that those in Congress who oppose raising the debt ceiling are pulling a political stunt with support from constituents who may not understand the difference between raising the debt limit and raising the national debt in general. A useful outline of the issues at stake can be found at the U.S. Treasury’s website, which counteracts several prevalent myths about this subject. It’s a little stunning that some of the same folks who oppose further debt-raising spending, on the grounds that it defies basic standards of fiscal responsibility, would then wish for the U.S. to default on it’s already-existing obligations. If that isn’t fiscal irresponsibility, I don’t know what is. However, these sentiments seem to be part of the now-entrenched change in Conservative politics, according to which facts may be glibly disregarded and prudence abandoned. My die-hard Republican granddad, who taught me the basics of fiscal conservativism at his knee, would be aghast.

Bubble Bursting in Lincoln?

The Street (via Yahoo Real Estate) recently took a look at five places where they speculated that an economic bubble might burst, affecting the otherwise relatively stable real estate and employment markets. First on the list was Lincoln, Nebraska, which they said might be vulnerable, “if higher education costs ever find a ceiling.” The problem with their analysis is that costs at the University of Nebraska have not risen at the same pace as counterparts elsewhere, and are still a good bargain. This is especially true for in-state students, the biggest share of the University’s recruiting pool. So, even if higher-education costs reach a settled peak, it’s not clear that this would have a severe effect on Nebraska’s schools. The University already has faced several rounds of budget cutting over the past decade, as state appropriations have shrunk and health-care costs for employees spiral out of control. Even so, they continue to be a stable, large-scale employer in the area.

If Lincoln is vulnerable, it might be because of general difficulty attracting or retaining major employers in pace with the city’s growth, or to weakness in the industries of large employers like Crete Carrier, Kawasaki, Goodyear, or various insurance companies.