Sentences to ponder

This week also saw the release of the first annual report of America’s Financial Stability Oversight Council (FSOC), a regulatory body that was set up by the Dodd-Frank act to monitor systemic risks to the country’s financial system. It has little to say about the risk of a self-harming government…

Here is more.

Comments

I disagree with the statement that the report doesn't address government risks.

From chapter entitled Macroeconomic Environment :"Even before the recession and the attendant increase in the deficit, government finances were acknowledged to be on an unsustainable path, partly owing to the increased expenditures for Medicare and Social Security anticipated with the aging of the baby-boom generation. The unsustainable path of government debt under the continuation of certain revenue and expenditure policies is widely recognized (Charts 4.3.2 and 4.3.3). The need for long-run fiscal balance has been a focus of recent attention from credit rating agencies. Current pricing of U.S. government debt implies that markets assume a long-term solution to the fiscal imbalance will be found and that, in the short run, the debt limit will be raised without disrupting market functioning (Chart 4.3.4)."

I guess we should not assume that Congress will act responsibly and adopt a balanced approach.

See also discussions of federal and local and state debt in this section.

Also interesting are the charts and tables showing US financial institution exposure to Irish and other EU bonds as well as the credit ratings and risks of TBTF institutions.

What you get is a picture of an overleveraged financial system with high household debt limiting potential consumption.

Wouldn't any highlighting of the risk of a return of Republican control of the Federal government be considered hyperpartisan, even though the data supports that conclusion?

Wouldn't the risk of a balanced budget amendment also be considered hyperpartisan, unless the BBA specified a rule like "three years of deficits would trigger a tax law rule allowing tax hikes to be passed by 40% vote, and any tax reduction requiring 60% vote"? (Look at how dysfunctional California has become since the restrictions placed on hiking taxes - taxes are higher since the tax hike restrictions were put in the constitution.)

The truth is that we currently have a 60% rule given the fillibuster and cloture rules.
I think we could make more progress with majority rule, as our founding fathers believed.

That's a nice fairy tale Bill, but you might want to scan some of these quotes from our illustrious Dem leaders

"I think we could make more progress with majority rule, as our founding fathers believed."

You must not have read the Federalist Papers.

Ron, I have. Don't confuse supermajority voting with separation of powers and bicameral legislative bodies.

I thought that the excerpt was referring to the concept of government as the visible foot, as contrasted with the invisible hand, but when I saw the link was to the Economist, I knew that couldn't be the case. That was confirmed by reading the piece.

I note from instapundit that the debt ceiling was breached in 2009, when the Dems controlled Congress. I don't remember a big stink then.

Rich,

What does that tell you when you said : "I note from instapundit that the debt ceiling was breached in 2009, when the Dems controlled Congress. I don’t remember a big stink then."

Nor do I remember a big stink then.

Funny how some want to make big stinks to their advantage to negotiate what they want, unless it is not paying for previous tax cuts.

In two years, 25% of the debt will be from the Bush tax cuts. Unfunded wars have cost more than $1 trillion dollars.

That stinks.

I guess I should have been more specific. There was no big stink then because the Dems controlled Congress and what's a little misdemeanor among friends? Now the Dems need to create a climate of fear in order to force passage of the debt ceiling that will take the issue off the table until after the 2012 elections. We have seen this scenario before - with TARP, with the stimulus, with Obamacare. Fear leads to bad decisions.

I want this issue front and center with the voters in 2012. Let them decide. No increase past the elections.

Also, Rich, as economistmom at the Concord Coalition notes:

"Paying for any extension of the tax cuts, versus not paying for them, could make an up to $2.5 trillion difference over ten years relative to the “current policy extended” scenario of extending all of them without paying for any of them, according to CBO. "

In other words, we have to pay for the Bush tax cuts, or cut them, or else face $2.5 trillion over 10 years.

I do not want my taxes increased. I want the government to reduce its expenditures. Bring on the 2012 elections.

Rich,
At least you're honest, but do you have to put us through this crisis so that your taxes will not be increased.

Who chooses to vote down the bill because it lacks tax increases?

The crisis already exists, since 2007. It's been papered over, and not fixed since then.

S&P says it will downgrade even if the debt ceiling is raised, if there is not a long-term solution for the solvency of the United States.

The divide is between people who recognize the serious economic and governmental problems, and those who think the "recession" was just a regular blip in an otherwise normal economy.

Or, who fails to articulate what they would cut?

Bill, but do you have to put us through this crisis so that your excessive spending continues?

Tom, During a recession there will be deficits, or at least I hope so.

I do not want my taxes increased. I want the government to reduce its expenditures. Bring on the 2012 elections.

Rich, when was the last time that Republicans reduced government spending?

It wasn't Nixon, though he promised to reduce the rate that government spending grew.

It wasn't Eisenhower.

If you want to reduce government spending, and you vote for a Republican, you are an idiot.

On the other hand, there's no reason to expect reduced government spending from Democrats, either.

So here's the plan: First, vote against any incumbent. If he's in office, he hasn't done his job.

Second, vote against any Republican and most Democrats. The Democrats are not an organized party and it's possible for Democrats to vote their conscience against their party. You might find a few individual cases that are OK. But Republican legislators don't do that. They all follow the party line, when they vote. They're all bad.

If you want reduced government spending, vote Libertarian. Republicans and Democrats have had their chance. Throw them both out.

If you're a Republican in 2011 and you aren't getting paid off in graft, then you're selling yourself too cheap.

2009 debt limit link here . Back then the Treasury apparently had about $150 billion of accounting tricks.

What would happen if politicians took an oath similar to physicians, "do no harm"?

First, it would create a building boom as we'd need hundreds of new prisons to house all the politicians. But that would also place a drag on state's finances as housing prisoners is expensive. So we'd want these new guests of the state to be productive and running fibre optic cable into the prisons might just be the solution. Just farm them out as "customer service" to Dell and Microsoft where they could apply their skills as BS artists.

That's a better job creation plan than Nancy Pelosi's unemployment benefit scheme. It's a net plus to state budgets.

I was very angry at first when reading a lot of these comments. I always have to look twice at an article when someone is calling someone else an idiot?! Hondo69, you do make some sense in your comment. I'll just leave it at that because why sound as goofy as the rest of some of these. The circus is in Washington at the moment! JB

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