A reminder for everyone writing about the debt ceiling games: We don't reach the debt ceiling on August 2nd. We reached it two months ago, on May 16th. Treasury has been playing games ever since ("borrowing" from pension funds, suspending securities that help states manage their finances, etc. etc.).

August 2nd is merely the date when the games run out and we actually stop paying some bills. But just for the record, Congress blew through the debt ceiling long ago and has been mucking around ever since.

From Upton Sinclair, on politics:

It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

This goes a long way toward explaining Congress and its indifference to our economic woes in a single sentence.

Via YouGov, here is all of modern American politics explained in a single handy chart. Enjoy.

It's finally time for Friday catblogging, and not a moment too soon. It's been pretty warm around here this past week, so the cats have been stretching out to cool themselves off. On the left, Inkblot is striking his beached-killer-whale pose. On the right, Domino is hiding. Can you find the cat in this picture?

Karl Smith, Matt Yglesias, Paul Krugman, and others have a bunch of good charts today showing that public sector employment has fallen pretty dramatically over the past three or four years. Karl estimates that compared to trend growth, government at all levels has shed about 2 million jobs. So as Paul Krugman says, "When you hear Republicans saying that what we need to do to create jobs is slash government spending and cut government payrolls, that’s exactly what has been happening for the past year, as the Obama stimulus has faded out."

But here's another chart. It's not as dramatic as the others because it covers a longer time period, but it shows something important: federal employment really isn't all that important. It's been relatively flat for the past four decades, while the real action in public sector employment has mostly been at the state and local level. So when conservative politicians rail against the explosion of the federal bureaucracy, they're wrong on multiple counts. It's mostly local government jobs that have grown over the past few decades, and it's mostly local government jobs that have been lost over the past few years — and this has acted as a huge drag on the economy. If stimulus money should be going anywhere, that's where it should be going.

The Cost of Default

Here's an interesting factlet from Bruce Bartlett. He's addressing the question of whether a "technical" default — i.e., one in which the Treasury Department misses payments to bondholders for just a few days — would affect interest rates. It turns out that we actually have a case study on just this question:

Some may think that a rise in rates would be temporary. But there was a case back in 1979 when a combination of a failure to increase the debt limit in time and a breakdown of Treasury’s machines for printing checks caused a two-week default. A 1989 academic study found that it raised interest rates by six-tenths of a percentage point for years afterward.

Yikes! Six-tenths of a percentage point is a lot of money. My back-of-the-envelope chicken scratching suggests that if this happens again it would cost the government something like $50-100 billion per year. In other words, no matter what debt ceiling deal we reach, upwards of half of it could be wiped out by higher interest costs if it comes too late to prevent default on the debt.

That probably won't happen, since even in the worst case I assume that Treasury will prioritize debt payments ahead of everything else (and Treasury's check printers will continue to function). But that's still a mighty big chunk of money to be gambling with.

This story is close to unbelievable. It's worth sitting through the 15-second ad to watch it. The moral, apparently, is that big banks figure they can do anything they want, and unless you get a lawyer on your side they just don't give a damn about whatever damage they've caused. This is just appalling.


I have some friendly advice for all my good friends who are currently competing for the Republican nomination for president: you should refuse to sign pledges. Sure, the first one seems harmless. Maybe it's a pledge not to raise taxes. No problem. Then the next one is a pledge to oppose gay marriage. OK, you can do that too, even if you'd rather not. But then the next one is something like this. And you're stuck. You can't pretend to have a principled objection to pledges, but you're toast with the tea party crowd if you refuse to sign because you disagree with parts of it. These folks accept no shilly shallying from politicians with "nuanced" views.

So your best bet is to simply register a broad objection to presidents signing interest group pledges at all, along with a noble-sounding statement that you want people to judge you by your past actions and character etc. etc., not by who can out-pledge the other. Just say no to pledges.

Via Andrew Sullivan, Alex Goldmark directs us to the the MIT Senseable City Lab's Connected States of America mapping project, which sports an interactive map showing who we talk and text to. The map wouldn't show Orange County for some reason, so I tried Los Angeles instead. Two things immediately jumped out at me:

  • Connection volume seems to be a pretty simple combination of geography (we know more people near us) and population density (we know more people in big cities because big cities just have more people).
  • The maps are surprisingly similar for both call and text volume. Should I have expected them to be different? Maybe not, but I did.

Of course, there are also a few weirdnesses. Why so many calls and texts to Codington County, South Dakota, and Tulsa, Oklahoma? Big call centers? What about Fayette, Tennessee?

Today's jobs report sucks, as usual. CBPP's chart is below. This is from Chad Stone, their chief economist:

Today’s very disappointing employment report shows that two years after the technical end of the recession and after 16 straight months of private-sector job creation, the jobs deficit remains huge....It makes no sense that in an economic recovery still struggling to gain momentum, policymakers are easing up on the gas and threatening to slam on the brakes. But that is just what is happening. 

Paul Krugman puts it a little more caustically:

Ugh. That was a seriously ugly jobs report. Almost no job creation, with slow private-sector growth offset by falling public-sector employment; a falling employment-population ratio; and (I don’t know how many people have picked this up), an actual decline in wages, albeit a small one.

Let me emphasize that last point. My bottom line on the inflation-deflation issue has always been to look at wages; you can’t have a wage-price spiral if wages ain’t spiraling. And they aren’t, to say the least.

We are ruled by charlatans and cowards. Our economy is in the tank, we know what to do about it, and we're just not going to do it. The charlatans prefer instead to stand by and let people suffer because that's politically useful, while the cowards let them get away with it because it's politically risky to fight back. Ugh indeed.