Its not a debt crisis. Its a political crisis being played out as a "debt crisis"

A post over at that bastion of socialism The Economist this morning brought one thought to my mind--- Its not a debt crisis we face; its a political crisis being played out as a "debt crisis."

Mining the safe harbour

One thing seems clear: America's government is making its economic road harder than it needs to be. Debt problems loom, but there is no immediate fiscal crisis and no need for drastic short-term cuts. When debt issues came up during my trip to China, officials had a consistent message: China is a patient investor. It wants America to take steps toward fiscal sustainability, but it's happy to have this happen over a 5- to 10-year period. By cutting drastically now, America is undermining its economy for no good reason.

Treasury yields tell the tale; they continue to tumble. The yield on the 10-year Treasury fell below 3% on today's bad economic news. Treasury yields have fallen on reduced American economic prospects, but they've also moved down as part of a broad flight to safety. Trouble in Europe and a slowdown in Asia have made the safe haven of American government debt more attractive. Which makes the tussle over America's debt ceiling look even more unnecessarily dangerous. The other consistent message from Chinese officials on debt matters was that any failure to make good on American obligations would be catastrophic. Even a very short disruption in payments, of a week or two, would be totally unacceptable.

Neither Chinese leaders or markets think a disruption is likely. Today's downward move in Treasuries followed on the heels of the failure in Congress last night of a "clean" (that is, without tacked on spending cuts) increase in the debt ceiling. And Congress will almost certainly lift the debt limit. But the decline in Treasury yields indicates the nature of the fire with which legislators are playing. If Congress called into question the safety of the one safe asset for which markets have an almost unlimited appetite, all hell would break loose.

Here is an example--a little itty bitty one that says a lot in a way that people won't see it.  In a discussion about tax rates over at Cato, Bruce Bartlet gets called "center left."

As usual, Bruce frames the debate as between sensible center-left economists like himself vs. crackpot Republicans.

That's one sentence in a very in-depth post on a quite complex issue.  

Still my gut says that it is a telling remark on our political debate in this country which has been skewed so far off the landscape known as reality.  A political debate where center-right wall street backed politicians like Bill Clinton or Obama can be framed as "left wing socialists" without those saying stuff like that being laughed out of a room has an impact.  The debt ceiling debate is pure politics.  The actual debt crisis is a long term health care spending crisis but it is being reframed by the right wing machine as out of control government spending which we must address via cuts right now.

That is a very real threat to the health of our economy.  Republicans are parading around on TV bragging that they want to increase the unemployment rate via spending cuts and Democrats are standing silent when they could actually be doing something...  

Robert Reich-- over at that bastion of socialism the Financial Times--says its a DC thing...

Under normal circumstances, this would be the time for the federal government to take bold action to ward off a double dip. For example, it could put more cash in peoples’ pockets while giving employers an extra incentive to hire by exempting the first $20,000 of earnings from payroll taxes, for a year or two. It could lend money to state and local governments. It could launch a new Work Projects Administration (modelled after its antecedent during the Great Depression) to put the long-term unemployed to work on public projects. It could amend the bankruptcy law to allow people to include their prime residences in personal bankruptcy, thereby giving homeowners more leverage to get mortgage lenders to mitigate the terms of their loans.

But these are not normal circumstances. America has been through a devastating recession that poked a giant hole in the federal budget. And with a presidential election coming up next year, both parties are already manoeuvring for tactical advantage. Since taking over the House of Representatives in January, Republicans have focused on cutting government spending and paring back regulations. Their colleagues in the Senate, whose leader has proclaimed his major goal to unseat President Barack Obama, are almost as single-minded. Cynics might suspect Republicans of quietly hoping the economy stays rotten up until election day.

Democrats, meanwhile, are behaving as if they are powerless to affect the economy, even though a Democrat occupies the White House and his appointees run the federal government. They would rather not dwell on the slowdown because they do not want to spook the bond market or add to the prevailing gloom (Jimmy Carter’s ill-fated comment about the nation’s “malaise” during the stagflation of the late 1970s has served as a permanent admonition for presidents to stay upbeat). Democrats are staking their electoral hopes on continuing disarray among Republican presidential aspirants, as well as the Republicans’ suicidal plan to turn Medicare, the popular health insurance system for seniors, into vouchers that would funnel money to private, for-profit insurance companies.

The result is as if Washington were on another planet from the rest of the country (many Americans would argue this is hardly a new phenomenon). The noisiest battle in the nation’s capital is over raising the statutory debt limit – a game of chicken in which Republicans are demanding, in return for their votes, caps on future federal spending while Democrats insist on preserving the possibility of tax increases on the wealthy. Countless budget analysts are combing through endless projections of government revenues and expenditures in five or 10 years. Think tanks and blue-ribbon panels are issuing voluminous reports on how to tame the budget deficit in decades to come. The president, meanwhile, is trying to appear as fiscally austere as possible – keeping a lid on non-defence discretionary spending, freezing the wages of civil servants and offering his own deficit-reduction plans.

Washington’s paralysis in the face of a stalled recovery is bad news – not just for average Americans but for the world. Ironically, it also worsens America’s future budget crisis because it postpones the day when the debt begins to shrink as a proportion of GDP. Yet as the 2012 campaign season looms, the prospects for sensible policy seem to decrease by the day.

And I have to agree with his solutions... I just disagree its a DC disconnect.  Its a "DC thing" that is being beamed into the houses of people all over the nation and those frames, bullet points, and terminology then in turn get pushed back into the local politics which in turn elects local state house and senate candidates building careers for future congressional and senatorial runs up the chain.  When people who have no clue about the core ideological discussion or the fundamental questions, work there way up the political food chain we end up at the impasse our nation faces.  So i'm not sure its fair to say its a disconnect in Washington.  There are lots of people on the ground here in Henry County GA cheering on the economic hostage situations that Republicans keep putting into play.

We don't have a debt crisis right now.

Its a political crisis.  A political crisis that is keeping our unemployment numbers high--destroying lives of millions, creating a lost generation who will be forced to survive through the coming lost decade.