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:

 

[poll id=”11″]

 


Clifton Griffin

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)

Michael

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.

Joshua Northey

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.

Clifton Griffin

If you peel back the demagoguery, there are fewer risks to not raising it than those in charge are willing to admit.

http://blogs.marketwatch.com/fundmastery/2011/07/12/the-u-s-treasury-will-not-default/

This is a great opportunity to actually do something that matters and will actually benefit future generations. Our debt has been rising for nearly 100 years straight, through every presidential term, and the pace we are accumulating it now is at an all time high.

Even the 4 trillion (over 10 years, 400 billion a year) maximum theoretical cuts they are talking about are laughable in the face of the nearly 1.5 trillion dollar deficit we are running just this year.

We need real action now, not denial.

Eric M. Jones

We're too fat and lazy anyway. A few decades of dystopian dog-eat-dog massive dehumanization, totalitarian government, rampant disease, post-apocalyptic terrains, cyber-genetic technologies, societal chaos and widespread urban violence...might just be the ticket.

Jonathan Baird

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!

Michael

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.

Read more...

Joe

There will be short term pain associated with not raising the debt ceiling but it can be dealt with now and contained. Raising the debt limit means there will be pain down the road and it will be worse.

I liken it to changing the brake pads on a car...it's going to cost time and money to have the work done now but could still be driven, choosing the option of delay however will result in having to not only changing the pads but rotors as well.

Alex M

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?

Clifton Griffin

Delayed catastrophe is still catastrophe.

DaveyNC

And usually more catastrophic.

pablo

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?

DanSanto

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.

Read more...

Joshua Northey

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.

Lance

What if we just temporarily raise the debt ceiling until after we balance the budget? Or until a more socially acceptable debt ratio is reached? The problem with polling the general public about this lies in the fact that most have little understanding of the financial implications of default, unless of course you put it in terms of the massive default seen in the residential mortgage market. The public's short term memory has zero context for what a US Treasury default would do to local and global economies. Greece's default is threatening to destroy one of the worlds most significant currencies (euro), a US default would further weaken an already anemic economy. I suspect there was too much tea served in this Wash Post poll.

Clancy

Any conversation about the debt ceiling is meaningless unless we first dispel the myth that the debt ceiling has anything to do with getting spending under control. The debt limit is NOT a limit on how much congress can spend. It is a limit on whether the Treasury is allowed to pay for the spending that congress has already approved. There is a discussion we can have about whether there should be a hard cap on congressional spending, but that is not what we’re talking about. Hitting the debt limit is not analogous to a family budget, it’s more like the government version of a dine-and-dash. And it’s probably just as illegal.

Also of note: We hit the debt ceiling sometime in June, we’ve been doing some creative accounting to avoid breaking any laws, but by August 2, we run out of tricks and our government will have no choice but to do something illegal.

Geoff

I'm in the minority so far (I viewed "The risks of raising the debt ceiling" as higher). If I've found anything in the last few years, on financial matters the minority is probably correct. For example: Keynes or Austrian School? (Hint: which is both taught in American universities and has been roundly discredited after being applied in the U.S. for 80 years?)