Debt Ceiling Poll: To Raise or Not to Raise

According to a new poll from the Pew Research Center and the Washington Post,  more people see raising the debt limit as a bigger risk than not raising it. Though it’s close, and the margin has shrunk over the last two months, 47% say they’re more concerned about the risks that raising the debt limit pose to the U.S. economy than they are over the fallout of failing to do so; 42% see it the other way around.

Sounds like a good time for a Freakonomics Poll:

 

Which are you more concerned about?

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  1. Clifton Griffin says:

    Two problems:
    1. I think it just let me vote twice.
    2. I also think it counted my vote the opposite of the way I intended. (I tried to vote for the 2nd option, but the 1st option incremented each time…the second time being a 2nd attempt because I thought it didn’t register the first)

    Thumb up 4 Thumb down 2
    • Michael says:

      Confirmed–guys, the poll is screwy, it lets you vote multiple times. I’ve put in seven votes (I voted for an opinion not mine 3 times to offset 3 of the re-votes), meaning this is even less meaningful than it was meant to be.

      Well-loved. Like or Dislike: Thumb up 14 Thumb down 0
  2. Joshua Northey says:

    I think it is pretty dumb to think preponderance of risk sit with raising the debt ceiling.

    In the long run we need to get our government under some sort of fiscal control but:

    A) this particular showdown is not going to be that occasion given the politicians currently in office.
    B) There are some pretty clear and foreseeable risks to not raising it.

    Well-loved. Like or Dislike: Thumb up 39 Thumb down 6
    • Clifton Griffin says:

      Hidden due to low comment rating. Click here to see.

      Disliked! Like or Dislike: Thumb up 27 Thumb down 34
      • Fitty Stim says:

        It’s a riot that you point out this article from Kurt Brouwer. Pretty much every comment on the page points out how wrong the premise of the article is.

        The basic jist of the article is this (according to him, I have no guarantee that his figures are correct): In any given month, the US has 200 billion clams of revenue and only $20B in interest debt payments. He then states that “the liklihood of not paying interest on the debt is zero”.

        There’s so much that’s wrong in his article that it’s tough to know where to begin. But I’ll offer only two counter points:

        1. The revenue-payment scheme is not fixed. The US might be required to pay $20B in interest on August 3. But it will have not received enough tax revenue to cover the debt. Result => default.

        2. The article assumes that the Treasury will prioritze payment of the interest debt over other expenditures (wars in Iraq, Afghanistan and Libya come to mind). Not to mention SS and welfare payments, soldier’s and worker’s paychecks. No where does the economic cost of firing all those gov’t employees come into the picture either.

        In summary, when referencing an article to back up an argument, you should double check to see if the article was written by a respected person, a biased hack or the result of random letters assembled by a chimpanzee.

        Well-loved. Like or Dislike: Thumb up 16 Thumb down 8
      • Trish P says:

        Why is this comment not shown? It is not poorly rated, just 22 like to 27 dislike. More will like it if it is not hidden and they can read it and see the facts mentioned. Also note that President Reagan and others have been burned (once, then you learn) that promises to cut spending in exchange to raising the debt ceiling were not kept.

        Thumb up 2 Thumb down 2
  3. Eric M. Jones says:

    Hidden due to low comment rating. Click here to see.

    Disliked! Like or Dislike: Thumb up 16 Thumb down 31
  4. Jonathan Baird says:

    You are a loan officer in charge of lending relationships. Two people come into your office at the same and ask you to analyze their relationship with you. They both have a huge amount of debt, say, I don’t know… $14 Million. Their income is high, say $2 Million a year each. One of them has decided to cut his credit cards up and start living within his means and another has no plans to but instead will borrow more money to pay on the interest they have already accrued and continue down the path they are on. Which one would you feel more confident about to loan more money in the future if need be? Which one should have the higher credit rating?

    We do not have a revenue problem in the US we have a spending problem!

    Hot debate. What do you think? Thumb up 47 Thumb down 45
    • Michael says:

      Ok, but lets not make up numbers instead. This person spends and receives a total of $100,000 a year. All their credit, including the oldest child owing the parents for her new car, and the parents owing that oldest child for babysitting, as well as the mortgage comes to $62,000. Yes, they plan to have more debt next year, but what bank in their right mind wouldn’t loan more money to them?

      More importantly, the analogy should be if that family goes to the bank and says given the above, can we have a loan at 0%? (This is akin to the treasury holding an auction and starting the bidding.) If the bank says no, the family reapplies at 1% (the treasury offers a higher rate). Then 2%. If they are a bad credit risk, the banks won’t loan them money until they are offering something crazy, like 15% or 50% interest on that loan. So what does treasury have to pay? Almost nothing. In fact, the returns on treasury bills being bought are negative. It isn’t because the government is buying its own debt, as QE2 is over. It stopped last month. So why aren’t rates high? Because the markets outside of sovereign debt are even worse.

      Well-loved. Like or Dislike: Thumb up 25 Thumb down 4
    • Jonathan Baird Junior says:

      But what if one of your borrowers stopped paying back part of his debt. The other one is still paying, even if he had to use credit to do it. In that case the borrower who is paying will be the better bet.

      Thumb up 7 Thumb down 7
      • Michael says:

        I don’t follow your argument. To clarify my point, debt is a perfectly acceptable 62% of GDP. Treasury rates are low, so the markets disagree with you that government debt is a risk. It sounds like you’re saying that if we default, then the bad private markets will look better by comparison. I agree, so let’s not default.

        Don’t forget that the government is not different than taxpayers. If the government defaults, taxpayers have to pay more in interest. That is like saying an tax-paying investor should let his taxpaying investments (treasury bonds) go sour so his private investments don’t. That doesn’t make any sense.

        Thumb up 1 Thumb down 1
  5. Joe says:

    Hidden due to low comment rating. Click here to see.

    Disliked! Like or Dislike: Thumb up 17 Thumb down 24
  6. Alex M says:

    Surely no serious economist thinks it’s more dangerous to raise the limit…. right? Am I in some sort of alternate universe where half the world is insane?

    Well-loved. Like or Dislike: Thumb up 46 Thumb down 18
  7. pablo says:

    Good idea! Let’s poll people on things they don’t understand, and then use that to influence policy!

    Seriously, guys, shouldn’t you at least comment on the actual policy and economics thinking about this, rather than providing a stupid poll with whatever semi-legitimacy this blog confers?

    Well-loved. Like or Dislike: Thumb up 55 Thumb down 2
  8. DanSanto says:

    It might be helpful to elucidate the concerns.

    I am much more concerned about the long-term effects of raising the debt ceiling in the manner which has become so common in the last decade or two. If we don’t raise the ceiling, I don’t anticipate a harmful long-term effect. I am worried about the long-term effects if we do raise the debt ceiling now because I believe raising the debt ceiling now without some significant accompanying changes will set a very bad precedent which will result in nasty results in the future.

    In the short-term the greater risk is obviously with not raising the debt ceiling. One possible occurrence is that Social Security, Medicare, Medicaid and other things get shut down. That is a financial disruption on the scale of $150 billion dollars per month (extremely conservative estimate).

    That will have VERY nasty effects. However, unless it goes on for weeks or months, it will be strictly temporary.

    Hot debate. What do you think? Thumb up 17 Thumb down 19
    • Joshua Northey says:

      I don’t think not raising the debt ceiling now actually gets us any closer to a fiscally responsible government. It is just political theater.

      Neither party has shown the slightest interest in governing responsibly in decades, and they both still hold a death grip on the political infrastructure of this country.

      Well-loved. Like or Dislike: Thumb up 27 Thumb down 2
    • duke says:

      I suspect for a lot of SS recipients, a one or two week delay is pretty disruptive.

      Well-loved. Like or Dislike: Thumb up 15 Thumb down 4
      • David Clayton says:

        Except that Social Security benefits are not threatened by the debt ceiling limit. They are funded by dedicated payroll taxes which cannot be diverted to other purposes without (wait for it) increasing the debt!

        Thumb up 5 Thumb down 2
      • Clifton Griffin says:

        Well, yes and no.

        They are really no more guaranteed than anything else the government pays for. As Obama revealed passive aggressively, they are subject to the debt limit like everything else.

        The reason they will be paid is:
        a) There’s *plenty* of monthly revenue to pay them
        b) No politician will take the rap for the time SS payments didn’t go out
        c) There are dozens of ancillary expenditures that can be halted with almost no one noticing.

        I’m so sick of hearing about all of the suffering and dying that will happen if the debt limit isn’t immediately raised. It’s utter rubbish. It’s a lie both parties seem willing to give lip service too to keep the public interested in the debate.

        Clif

        Thumb up 8 Thumb down 7
      • David Clayton says:

        See, lots of people, including the President, appear to be completely wrong about this.

        Think about it: in the past, whenever payroll taxes were used for uses other than paying for program benefits/expenses, the program was compensated through special issue Treasury securities. This happened every year that Social Security ran a surplus; the Social Security Act mandated that the surplus was invested in these Treasuries on a daily bases, and intragovernment and gross lending increased.

        Today, gross lending could not increase because of the debt ceiling. So the payroll taxes that are specifically collected for Social Security would have to spent on Social Security benefits. Any other use would force violation of the debt ceiling.

        Thumb up 2 Thumb down 0
    • Lawrence says:

      The debt ceiling has been raised 74 times in the last 50 years; I don’t see how doing it one more time could possibly be considered a precedent of any kind. Quite the contrary, defaulting on government obligations for the first time in the nation’s history, that would be a new precedent.

      Well-loved. Like or Dislike: Thumb up 25 Thumb down 9