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News Link • Government Debt & Financing

Debt Talks Still At Impasse; Republicans Go For Unilateral, Short Term Gambit

• NakedCapitalism.com/
 
But the flip side is that the game board has been set up so that there are no winning outcomes for average citizens. Drastic government budget cuts in a deleveraging economy are the equivalent of wearing a hair shirt. That approach has made debt to GDP ratios worse in every country that has tried it in Europe. The brinksmanship, if it leads Treasury to have to stop sending checks, is going to hit the economy harder, faster, both via the direct economic impact and the damage it will do to the mood of the public and businesses, than pretty much every other option under consideration. But the Dems aren’t wrong to be leery of short term kick the can down the road strategies that just assure more Republican efforts at economic hostage-taking. They are likely to lead to a downgrade (and if you doubt my not terribly alarmed view about that, which is contrary to consensus reality, then that is an outcome worth avoiding).

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