Just listened to the video several times.
He offered a short term debt ceiling increase in return for discussions on how to reopen the govt.

That way govt stays closed but no default.

So, it seems they’ve decided to use only the passing of the continuing resolution as leverage, at least until the short term debt ceiling extension expires.

The slow motion train wreck continues…

Boehner’s Offer

http://www.cnbc.com/id/101093035

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Deep down, I suspect most of Congress believes what Rand Paul believes.
They believe balancing the budget is the right thing to do for our children and grandchildren.
And, of course, they have widespread popular support for a balanced budget and probably enough votes for a balanced budget amendment to the US constitution as well.

So maybe that’s why both sides are OK painting themselves into a corner.
There is no way out apart from one side completely losing face and credibility.
And when something can’t happen, sometimes it doesn’t happen, and we actually do go cold turkey into a balanced budget.

So what happens when the automatic fiscal stabilizers are disabled?
When the slowdown slows tax revenues, instead of the deficit going up as spending then exceeds revenues, spending is instead cut, which slows things down further, which means more spending cuts, which slows things down further, all the way to 0, as ‘balance’ combined with the fixed ‘demand leakages’ puts the system in ‘default’.

Said another way, the dollars to pay taxes and net save come from govt spending.
(You can’t do a reserve drain without a reserve add.)
With a balanced budget and automatic net savings/demand leakages, govt isn’t allowed to spend enough dollars to cover the tax bill.
And when taxes don’t get paid, spending is further constrained, so additional taxes can’t get paid, further restricting spending, etc. etc. etc.

So given our current institutional structure, the answer is yes, if we balance the budget and leave it that way, the world as we know it is definitely going to end.
(And with a bang, not a whimper.)

And given the policy of going cold turkey to balance probably does ‘sound like a pretty reasonable idea to the American public,’ it’s looking more and more like both sides are setting up to let it happen.

Massive deflationary bias in general
Sales and creditworthiness collapses
Major corps turn into Lehman and Bear Stearns
Bad for stocks
Bad for credit product
Good for the dollar (harder to get)
Good for US tsy secs (Fed low forever)
Blood in streets if allowed to persist

“It really is irresponsible of the president to try to scare the markets,” said Senator Rand Paul, Republican of Kentucky. “If you don’t raise your debt ceiling, all you’re saying is, ‘We’re going to be balancing our budget.’ So if you put it in those terms, all these scary terms of, ‘Oh my goodness, the world’s going to end’ — if we balance the budget, the world’s going to end? Why don’t we spend what comes in?”

“If you propose it that way,” he said of not raising the debt limit, “the American public will say that sounds like a pretty reasonable idea.”

And I’ll bet a lot of Dems aren’t either.
They all think a balanced budget is a good thing.
And they all have been led to believe the year and tax hike and sequesters didn’t hurt the economy as feared. So how can they not suspect it’s all a bluff?

Meanwhile, it’s the going cold turkey to a balanced budget that’s potentially catastrophic, not the risk of higher rates, downgrades, etc, etc.
And no one I’ve read writes about that risk as they all probably think it’s a benefit.
Both sides do agree we have a long term deficit problem and that it would be a good thing to take at least $2 trillion out of the budget over the next 10 years.
They just don’t agree on how to do it.

Good luck to us, mates.
The USS Stupidity is going down…

:(

Worried about the debt ceiling? Republicans aren’t.

By Chris Cillizza and Sean Sullivan

October 8 (The Washington Post) — Treasury Secretary Jack Lew has described Congress as “playing with fire” when it comes to the ongoing debate over whether to raise the debt ceiling. Goldman Sachs warns that not raising the debt limit could result in a “rapid downturn in economic activity if not reversed very quickly.” The vast majority of economists use words like “recession” and “catastrophe” to explain the impact of breaching the debt ceiling later this month.

And yet, a majority — yes, a majority — of self-identified Republicans in a new Pew Research Center poll agreed with the statement that “the country can go past the deadline for raising the debt limit without major economic problems.” Almost two-thirds (64 percent) of Republicans who identify with the tea party expressed that sentiment.

What explains that level of skepticism in the face of such dire warnings?

Some of the Republicans doubt about the true danger of the debt ceiling is based on the fact that, well, lots and lots of people — Republicans, Democrats and independents — don’t really know what it is or does. (Overall, 47 percent of people said that raising the debt ceiling was “essential” to avoiding an economic crisis while 39 percent said the economy would be okay if the debt limit wasn’t increased.) The reflex reaction to warnings about how terrible something you don’t really get might be is to assume people are exaggerating about the consequences.

That doubt goes double — or maybe triple — when you are a Republican who is already distrustful of what a Democratic administration tells you is fact. And, there are several Republican voices in Congress — most prominent among them Michigan Rep. Justin Amash — insisting that the Obama administration is shouting “disaster” when the economic reality is far less catastrophic.

The numbers in the Pew poll may help explain House Speaker John A. Boehner’s comments on the debt ceiling in recent days. Late last week, Boehner (R-Ohio) made news by telling Republican members that he would not let the country go into default and that political realities meant a debt deal would have to be attractive enough to win some Democratic support. Days later, however, Boehner told ABC’s George Stephanopoulos that there weren’t enough votes in the House to pass a “clean” debt-ceiling increase, meaning that Republicans would only be for such a move if it meant concessions from Democrats.

If the Pew numbers explain Boehner’s shift, they also make clear the difficulty of his bargaining position and the real possibility of a debt default.

Boehner — through his actions in the run-up to the government shutdown and his statements since the government went dark — has shown that he understands that the way he keeps his job is to placate cast-iron conservatives. And he wants to keep his job.

But, how far is he willing to go to do that? If a majority of Republicans don’t believe breaching the debt ceiling is such a big deal, how does Boehner make the case to House Republicans of the seriousness of the stakes? And, if he can’t make that case and/or wring concessions out of the White House, does he let a default happen?