Sunday, July 17, 2011

What is the purpose of raising the debt ceiling when they plan to cut the budget deficit anyway?

The public budget deficit is a function of private sector deleveraging and cannot be cut without further undermining the economy. If they plan to undermine the economy anyway by cutting the budget deficit, why bother raising the debt ceiling? Without further budget deficits, public debt should stop growing anyway. Is it to allow further trade deficits?

2 comments:

edd browne said...

Either that's a trick question, or it appears that you have little knowledge
about deficit reduction over several years, and debt limit of next month.
The reductions in deficit are large, but are spread over years; and they
they are not sufficient in annual amount, nor soon enough, to avoid a
train wreck next month, or even next year.

Rogue Economist said...

Ah, so the people who who like to invoke 'little knowledge' are finally here . Lost your way here from Seeking Alpha, did you? If I had the time I would teach you a thing or two about using metaphors. I do realize that the deficit reductions being proposed will have to be spread over a period of time. What I was asking is whether the discussion on the new debt ceiling takes the trade deficit into account. I don't see any cuts being proposed about the massive importing of goods and services, when it is the biggest contributor to the growing debt. Why is there no discussion on cutting net imports, even over a period of time? And why didn't you pick this up in my discussion? Perhaps you have little knowledge of the global trade settlement process.