national debt

Interesting column in yesterday's The New York Times by Jesse Eisinger of ProPublica about the budget strategy the U.S. might be following if it were a private equity firm, that is, if it were run as if it were Bain Capital, Mitt Romney's former employer.

Eisinger's conclusion: Given the current incredibly low interest rates, the management of a private equity firm would be rushing to borrow more to finance its activities rather than to be repeatedly demanding that it deleverage and do less.

In other words, running the U.S. as a business as Romney says if elected he could/would/will do, would actually get him to do the opposite of what he and others running for president and Congress are insisting needs to be done: They would be increasing the deficit and borrowing more rather than reducing it and shrinking federal activities.

(originally posted on The Will and the Wallet

For thirty-five years, the Egyptian people believed the myth and lived in fear, fear of the security forces and fear of the chaos and instability that might exist without a strong ruler.  They have just overcome that fear and created hope.   That collective psychic shift was the key to making the change they needed to bring about.

According to this Bloomberg story from last Friday, a just-completed Barclays survey shows that 40% of Japanese institutional investors now think there's an increased possibility that the United States will default on its debt.

I don't think there's any chance the United States will default on its debt, but the fact that such a large percentage of the buyers of our debt from our second largest  lender thinks so is not a good thing, especially as we're about to borrow much, much more.

As the article points out, this is already increasing our cost of borrowing as foreign demand for U.S. debt falls.

My guess is that this this is one of the reasons we keep hearing the White House talk about a long-term get-our-budget-in-order strategy.

Here's the full story.

I'm haunted these days by a single budget-related question: what if, as Bill Clinton promised as he left and George W. Bush promised as he entered office, the national debt had actually been paid off by the end of this decade, that is, by just about now?

The bailouts we're implementing and talking about today would have been of far less concern than they are.  Indeed, the $2 trillion or so in additional debt the federal government is going to incur this year would likely have been welcomed by the bond market.  The additional interest payments that we're going to have to pay for decades would have been on top of an annual interest bill that by now would have been less than $100 billion a year and, therefore, not much of a concern.

Does anyone else think that not paying down the debt was a huge lost opportunity that may not happen again in our lifetime? 

Today's required reading is actually from last Sunday, but I've been traveling and catching up this week and am thus a bit late to comment on it.  It comes from Andrew Bacevich, in last Sunday's Washington Post.  The more I hear him speak and read his books and columns, the more I admire his thinking on the challenges we face as a nation and the pitfalls in the way we have confronted them to date. 

The title of the column says it all, "He Told Us to Go Shopping. Now the Bill Is Due."  Well, almost all.  Here's a key excerpt: