Subject: Shutdown showdown (AEI Economics Ledger)If you have trouble reading this message, click here toview it as a web page.
The clock keeps ticking
We can delay default, but we shouldn’t.
Michael Strain:“The U.S. could in theory honor our debtobligations while not honoring other obligations, such as Social Security payments, federal-employeesalaries, and payments to government contractors. The Treasury could still conduct auctions to roll over maturing securities past the X date, and the Treasury probably could ensure that it has enough cash topay interest payments on the debt. But this strategy is not as rosy as many conservatives believe.”
The reasonable right.
Stan Veuger :“At this point, the reasonable voices in this debate come from theright. It is time for the Senate to show its willingness to negotiate. They should recognize that they haveoverplayed their hand. The fact that House Republicans have managed to turn an overly extreme strategyof full repeal that looked like it would backfire politically into a sensible and responsible strategy deservesapplause. Now would be a moment time for President Obama to show leadership.”
Officials forced to be lawbreakers.
Vincent Reinhart:“If the Treasury is unwilling to stretch the definitionof extraordinary measures, on the day that the Federal Reserve predicts the Treasury will run out of cashin its account and the Treasury is bound by the debt ceiling, it suspends all payments and awaitsinstructions from the Treasury. . . . At the end of the day, officials will avoid violating the Constitution byindicating that they have been given inconsistent instructions and are obeying the one with the mostimportant precedent.”
AEI Top Three videos on the shutdown and debt ceiling:
James Capretta:“No doubt the speaker and his allies arelooking for an end-game strategy on the CR and debt-limit fights that has a chance of producing a modestvictory for the GOP. That’s understandable. But, at this point, they are better off sticking with the fight theyalready started over Obamacare than with pursuing broader budget talks that could easily backfire.”
Speaking of Obamacare
Obamacare and jobs.
Kevin Hassett:“Labor-force participation is already lower than at any point since1980, and the number of workers as a proportion of the population has remained persistently low sincethe start of the Great Recession. The health care law will make an already grim situation worse. Therewards for work are about to plummet, and one can be sure that the fraction of Americans working willdrop as well.”
How the economy is holding up
A recession in 2014 unless . . .
John Makin:“Congress needs to adopt quickly a budget for 2014 andraise the debt ceiling high enough to preclude further disruptions for at least a year and a half. Meanwhile,the Fed needs to stop trying to fine-tune its tapering message, end board members’ public second-guessing of its decisions, and declare its willingness to hold steady until the economy stabilizes. Themore unlikely these steps become, the more likely a 2014 recession becomes.”
The middle class is shrinking . . .
James Pethokoukis:“While 60 percent of the jobs lost during theGreat Recession were mid-wage occupations, 73 percent of the jobs added in the recovery have beenlow-wage jobs. Many of those disappearing middle-level jobs are what economists call “routine, manualtasks” that can be easily automated.”
. . . But take heart.
Aparna Mathur :“Rising inequality does not preclude an improvement in standards of living at the bottom of the income distribution. . . . People are better off today than they were 30 yearsago. The typical low-income household today possesses many more appliances and gadgets — itemsthat have traditionally been considered the preserve of the rich — than at any time in history.”
Edward Pinto:“FHA continues to sell hope and deliver harm by pushing familiesinto homes they can't afford, saddling them with loans that barely build equity. By tolerating such a highfailure rate, families are left in financial ruin and communities are left reeling.”
Bye-bye, Fannie and Freddie
. Alex Pollock:“In the intense politics of American housing finance, it is agood start to have bills in both the House and Senate which agree on the main point of ending thedisastrous political experiment of Fannie and Freddie.”
A housing bubble in the making.
Alex Pollock:“More than seven years after the bubble peak in U.S.house prices, and four years after suffering the 2007-09 price collapse, American house prices are nowrecovering and indeed rising rapidly. . . . The Fed should stop trying to stoke house prices further and turnoff its unprecedented allocation of central bank credit to mortgages.”
Mark your calendar
10.11 AEI’s Kevin Hassett testifies before the Joint Economic Committee on the debt ceiling10.17 US scheduled to hit the debt ceiling10.17