Boehner bill passes House- now onto the Senate

myp · Jul 30, 2011

1st off the social contract between citizen and government is not the same as that between shareholder and CEO.

2nd, my point is some people (voters) do not want a deal unless there are big spending cuts. What you want might not be what everyone wants.

3rd, game theory is a big field and used and taught in most political and economic disciplines. Political strategists use this all the time in guiding the very movements we see and are talking about. In fact, here is a nytimes op-ed article from a couple days ago that talks about it: http://www.nytimes.com/2011/07/27/opinion/27Barash.html?_r=2

Typist · Jul 30, 2011

1st off the social contract between citizen and government is not the same as that between shareholder and CEO.

Ok, interesting, please elaborate.

2nd, my point is some people (voters) do not want a deal unless there are big spending cuts. What you want might not be what everyone wants.

Ok, this is a good point, and true.

I am stating that such people are thinking and acting like children.

The adult thing to do would be to continue to articulate their point of view about big cuts, and elect people who will vote for big cuts in an orderly budget process.

If they don't win the majority and get their way, then the adult thing to do is to come to a constructive compromise.

Using the financial reputation of the country as a chip in a game of economic chicken at a time when the global financial system is already suffering from a body blow is not a responsible thing to do, whatever one's point of view might be.

3rd, game theory is a big field and used and taught in most political and economic disciplines.

I'm not disputing that game theory is a valid field, so no need to defend it.

myp · Jul 30, 2011

Typist said:
Ok, interesting, please elaborate.

Well for one, a social contract is obviously not defined completely and varies depending on who you talk to. There is also no ownership claim in the citizen-government relationship (and if anything with eminent domain the ownership claim is reversed compared to shareholders-corporations). My point is you can't take what shareholders expect and should get from a company to what citizens expect and should get from a government.

Typist said:
I am stating that such people are thinking and acting like children.

They might say the same about you

Typist said:
The adult thing to do would be to continue to articulate their point of view about big cuts, and elect people who will vote for big cuts in an orderly budget process.

They did elect those people- the tea partiers. But as always, politics is about leverage and this is the leverage those politicians need to get the big spending cuts through- otherwise, especially with this Congress and President, it might not happen.

Typist said:
Using the financial reputation of the country as a chip in a game of economic chicken at a time when the global financial system is already suffering from a body blow is not a responsible thing to do, whatever one's point of view might be.

Unless it is the only thing that would work, which is what some people undoubtedly feel. With this President and Congress, I too think it is one of the strongest bargaining chips.

Typist · Jul 30, 2011

Well for one, a social contract is obviously not defined completely and varies depending on who you talk to.

Ok, fair point.

But shouldn't we be able to have certain basic expectations? Whatever our philosophy, shouldn't we expect that those we pay to serve us in Congress should perform certain fundamental housekeeping tasks, like complete responsible budgets according to some predictable routine schedule?

My point is you can't take what shareholders expect and should get from a company to what citizens expect and should get from a government.

Ok, your technical point is accepted.

My point is that these folks are our employees, and as employers it's our job to hold them to some standard.

They might say the same about you

I'm sure some would, and in the appropriate circumstances, I would welcome them being right. Where IS my party hat anyway, and I don't mean political party!

But as always, politics is about leverage and this is the leverage those politicians need to get the big spending cuts through- otherwise, especially with this Congress and President, it might not happen.

This is the heart of our debate.

There are reasonable and responsible ways to use one's leverage, and unreasonable and irresponsible ways to do so.

Do you accept this general principle, or is it all just game theory to you?

Unless it is the only thing that would work, which is what some people undoubtedly feel. With this President and Congress, I too think it is one of the strongest bargaining chips.

Define "work" please.

There have been plenty of opportunities to reach a reasonable compromise which addresses many of the goals of those playing with fire. There has been plenty of time to move the country's interest forward. All this time has been squandered because...

The game players define "work" as "totally get my way". It's not just irresponsible, it's stupid in terms of their own interest.

What's their credibility going to be going forward if this blows up the economy?

myp · Jul 30, 2011

Typist said:
There are reasonable and responsible ways to use one's leverage, and unreasonable and irresponsible ways to do so.

Do you accept this general principle, or is it all just game theory to you?

Responsibility is subjective. Some of those Congressman undoubtedly have constituents (and more important to them special interest money) who believe the responsible thing to do is cut spending at all costs- including taking this risk. At the end of the day there are ALWAYS tradeoffs- this situation is no different. Ironically the leverage is what makes the game of chicken so intense, so it is a part of the game

Typist said:
There have been plenty of opportunities to reach a reasonable compromise which addresses many of the goals of those playing with fire. There has been plenty of time to move the country's interest forward. All this time has been squandered because...

In this situation because those who wanted to cut never got the leverage to make it happen.

Typist said:
What's their credibility going to be going forward if this blows up the economy?

It is arguable and there are arguments that even with a default we might be better off in the long run if those defaults come with big government cuts instead of just raising the ceiling and potentially have a real default (one where no one will lend us money not where the government isn't legally allowed to issue more debt) which is much more serious.

I find it ironic and unfortunately not surprising through all this though that even those who are for making big cuts aren't really doing it- Boehner's plan is a joke, but of course Reid's is even worse.

Typist · Jul 30, 2011

...and potentially have a real default (one where no one will lend us money not where the government isn't legally allowed to issue more debt) which is much more serious.

Given how we're acting, it's a valid concern that the world may someday decide to stop doing business with us.

The solution to that is to make resolutely clear that we are going to pay our bills, and pay them on time, no matter what.

It's just a complete joke to say "We are for financial responsibility!" while at the very same time being financially irresponsible.

Putting our ability to pay the obligations we've already undertaken at risk is irresponsible.

Respectfully, I feel you are over thinking this.

If we don't pay our bills on time, people will stop lending us money. The solution is to pay our bills on time.

It's third grade level finance.

myp · Jul 30, 2011

People won't stop lending us money just like that- it doesn't work that way and I think you are underthinking it

For one, putting money anywhere is a risk, so all risks are relative and relative to other places (EU anyone?), the US might still be safer, especially if we cut our budget even with a temporary default period.

Second, the big holders are in the same squeeze they've been in for years. It is no secret that China has been upset with our monetary policy (namely how inflationary and loose it was) over the past few years, yet they didn't dump treasuries. Why? Because evening starting to dump a bunch at once means the rest of their treasuries tank due to the sheer rise in supply and if they aren't buying, drop in demand. That's why even reductions in treasuries for countries like China have been in the form of buying new treasuries while also selling treasuries at the same time(more of the latter if they are cutting holdings or trying to of course) and this is a much more gradual drop out.

Third, the biggest holder/buyer for a while now has been the Fed and they would probably step in and buy in the case of low demand since Bernanke is all about that QE anyway- especially when his Wall St. buddies call for it.

myp · Jul 30, 2011

Looks like a tentative deal might have been reached: http://blogs.abcnews.com/thenote/20...ike-tenative-deal-to-raise-debt-ceiling-.html

Typist · Jul 31, 2011

Hi MYP,

First, I think it's good that we have somewhat different perspectives, as that helps create a discussion that is hopefully interesting to somebody. So, if you're taking a counter point of view just to keep the tennis game going, I'm up for that.

To anybody who sincerely holds the point of view you are articulately expressing...

It troubles me a bit to see some trying to rationalize irresponsible behavior, in the name of fixing irresponsible behavior. To me, that seems to be more of the same illogical double talk disease that has brought us to this place.

Your posts don't seem to have the clarity to simply declare the behavior in question irresponsible and reckless.

I sincerely doubt you would hire these guys to run your company in the way they are running the federal budget process. I could be wrong though.

Would you hire these people to run your companies budget?

You would either hire them, or not, one or the other, so it seems a yes/no answer should be possible.

If yes, then I respect the intellectual honesty of your position.

If no, then why are we debating this?

myp · Jul 31, 2011

Typist said:
It troubles me a bit to see some trying to rationalize irresponsible behavior, in the name of fixing irresponsible behavior. To me, that seems to be more of the same illogical double talk disease that has brought us to this place.

These things happen in negotiation. They are tradeoffs. It is nothing new and big in politics and generally any negotiation. When the police sends in pizzas to a hostage taker in exchange for 1 out of 5 hostages, they are making it easier for the hostage taker to stay in the place for longer, but they are getting 1 hostage in return. The ideal situation would be to get the hostage without giving pizza, but that never happens.

As for hiring these guys- no. I have very little faith in our Congress and President. But that does not downplay the current situation and the chips they need to use to push their agendas. There is a lot of misinformation out there- most people don't even understand how treasuries are issued or what they do and that is why they don't understand what will happen if they can't issue more treasuries temporarily. A lot of fearmongering and sensationalism is out there because for one, it sells, and second, some have their money on starting a bad contagion in financial markets.

Anyway, as I said they will get it done since most everyone wants it in the end. Tentative deal reached according to Bloomberg now: http://www.bloomberg.com/news/2011-...reach-tentative-deal-on-u-s-debt-ceiling.html

Typist · Jul 31, 2011

These things happen in negotiation. They are tradeoffs. It is nothing new and big in politics and generally any negotiation.

Um, this particular negotiation endangered the good faith and credit of the U.S. for the first time in over 200 years.

As for hiring these guys- no. I have very little faith in our Congress and President.

Ok, reasonable point of view.

We might note that further spreading this lack of faith even farther around the world does little to address the main problem created by the recent financial meltdown, a lack of confidence in the economy, and those who lead it.

Honestly, I'm puzzled by your posts, because while you seem sincerely concerned about our leadership, you also seem intent on rationalizing their behavior at every turn.

But anyway, how about this?

If games of chicken are inevitable, suppose we arrange it somehow so they are playing chicken with something other than the global economy.

How about their own salary, perks or job perhaps?

If they don't pass a balanced budget by some agreed upon deadline each year, all salaries and perks are withdrawn. We'll know they're serious when they start talking about things like this.

myp · Jul 31, 2011

Typist, let me try to clear up my position because I guess if you read only this thread alone it might seem like I have conflicting views.

Essentially, I believe that people respond to incentives. I believe that under the current system and general public's knowledge and sentiment, the politicians are incentivized to sell out to special interests and in the process to do what might not be the best for the nation. I mean even if people were harsher on the politicians at the end of the day most of them would do what is best for them most of the time anyway- most people do.

In the case of this debt ceiling, their interests (including the ones they have due to their sell outs) also point to increasing the ceiling. And that is why I had so much faith in it being passed.

The games that are played along the way are NOT preventable. They will always happen in this system because of conflicting opinions among politicians. Within any system people follow incentives- when incentives clash or align in a way where there is some strategy involved, games begin. In fact, they happen with almost any bill that is being passed and has a sufficient opposition.

As for this negotiation endangering faith in the US for the first time in over 200 yrs- first off, it's a trade-off as I said earlier (trade-offs are generally bad things that you trade for the good

). Furthermore, this is by no means the 1st time it's been questioned- it undoubtedly was when Bretton Woods ended, during past deficit debates, during the Great Depression, etc.

There are some strategists who are actually claiming it came down to the last minute because of another incentive the politicians had- keeping all the details of the bill from the public before it passed. It reduces voter pushback, especially when there is basically no way to change it now. And as we all know it is easier to pass a bill than to reverse it. This is how the healthcare bill was rammed through and how unfortunately a lot of the most important bills are passed.

Typist · Aug 1, 2011

Thanks for the ongoing dialog. Hopefully we are accomplishing something useful together.

Typist, let me try to clear up my position because I guess if you read only this thread alone it might seem like I have conflicting views.

You are the expert on your views of course. I read them from here as, you see the problem, and you'd rather explain it than do anything about it.

Essentially, I believe that people respond to incentives.

Agreed, so if we wish to change the reality, we have to take control of the incentives.

I believe that under the current system and general public's knowledge and sentiment, the politicians are incentivized to sell out to special interests and in the process to do what might not be the best for the nation.

Ok, sounds about right to me.

I mean even if people were harsher on the politicians at the end of the day most of them would do what is best for them most of the time anyway- most people do.

Agreed. So whatever we choose as "harsher" has to be effective.

In the case of this debt ceiling, their interests (including the ones they have due to their sell outs) also point to increasing the ceiling. And that is why I had so much faith in it being passed.

But it doesn't seem to concern you that steadily eroding the public's confidence in the financial system is actually not good for the financial system.

Passing the bill is about about building confidence. Passing the bill in a professional manner is all about building confidence. The entire financial system runs on trust and confidence. We tinker with that essential element at our peril.

When I said you were "over thinking" what I meant was that your focus on the details of realpolitik, game theory, history, treasury bills etc seems to have blinded you to the ruthlessly simple reality at the heart of the entire operation.

If people don't believe in the financial system, the financial system is in big trouble. If people don't believe they stop spending, they stop hiring, and that process feeds up itself.

Given that confidence in the system has recently received a major body blow, it seemed highly irresponsible to me to give it another blow now, for no good reason.

The games that are played along the way are NOT preventable. They will always happen in this system because of conflicting opinions among politicians.

Wow, what a defeatist viewpoint.

I still believe that we the people hold the ultimate power. We are the employers, the owners, and the buck stops with us.

Within any system people follow incentives- when incentives clash or align in a way where there is some strategy involved, games begin. In fact, they happen with almost any bill that is being passed and has a sufficient opposition.

I'm only arguing that there be some limit to the game playing, and consequences when those limits are exceeded.

As for this negotiation endangering faith in the US for the first time in over 200 yrs- first off, it's a trade-off as I said earlier (trade-offs are generally bad things that you trade for the good ).

Right, what I'm saying is, we made a bad trade. Nothing positive was accomplished by putting this off for months, and lots of damage was done.

Here's the deal.

Lots of people out here are really hurting. Lots of people are losing their businesses, their marriages, their futures, even their lives because of all the clever game playing that's been rolling through Wall Street and Washington.

So when yet another game is launched, it seems inappropriate to me to try to rationalize it with a detached academic outlook.

If the game playing continues, and if it crashes the economic system, we are well on our way to the next global war. These people are playing games with our lives, a little emotion is in order, imho.

DodgeFB · Aug 1, 2011

Typist said:
If the game playing continues, and if it crashes the economic system, we are well on our way to the next global war. These people are playing games with our lives, a little emotion is in order, imho.

I agree about the game playing. As someone that voted for a "tea party" candidate in 2010 I am not happy. They have damaged themselves in my opinion. As far as the republicans, They are basically helpless right now. Democrats, I was one for 22 years. I only support them in local elections.

I for the first time in my adult life am so disgusted with them all I may never vote again. Those arrogant bastards seem to be a waste of my time and effort at this point. And why burn my overpriced gas to go support people that care nothing about me or anyone like me.

myp · Aug 1, 2011

Typist, you say the game stops with the people- except it doesn't. These games are as much a part of the people

olitician relationship as they are between politicians. They want our votes, so they need to appeal to us somewhat, but they might be able to afford to do some things we don't like that might help them elsewhere (like financially)- the games are kicking everywhere all the time and we are a part of them whether or not we realize it (since we do make decisions such as who to vote for).

And on the financial system, it hasn't done much damage (heck if anything it semi-deflated what is probably a bubble anyway) and I think at the end of the day they knew they would pass a deal.

Typist · Aug 1, 2011

myp said:
Typist, you say the game stops with the people- except it doesn't.

Um, no offense intended, but I think your obsession with game theory may be making it hard for you to see anything else. Did you just finish a great book on the subject?

This is the simplest thing.

We have employees. We have to set standards for them, and there have to be consequences if the standards aren't met.

I'm open to discussion, but for starters I would suggest one standard should be that they produce balanced budgets according to some set schedule.

I'm agreeable to an emergency exception, perhaps a 3/4 majority vote to over ride.

What's your opinion of such a standard? Care to suggest an alternative?

Assuming we agree on a standard in regards to the budget process, what should the consequence be if the standard isn't met?

As example, the anti-tax folks have set their standard via their pledge, and they seem pretty good at enforcing it.

Why not a "balanced budgets on time" pledge, with consequences attached for failure?

How would elected officials dodge such a pledge? What reason could they give for not signing?

ChapelHillDentist · Aug 1, 2011

Headed for Major Problems

David said:
No, we haven't. This is the 1st time we've ever come to the brink. The stock market is already in a nose dive and there's talk of downgrading us even with a deal. If we default people aren't going to just sit by as they lose their paychecks to taxes yet don't even have police protection. People will rise up and unless they crackdown with force (like they did last time a major populist uprising broke out), which i don't think they have the will to do, they will lose control of the situation. It might not be civil war but there will be mass rioting over redundant taxes. I mean I'm for raising taxes but I'll be right there with a TP crazy if I'm just paying to pay.

Just saw on Fox News a person interviewed who claims we will get the credit downgrade, as the measure set by Moodys was 4 trillion that we needed to cut. We're headed for a double dip recession and trouble on the streets...

myp · Aug 1, 2011

Typist, no I did not just finish "reading a book" about it. I think the point you fail to see here is that the situations which game theory deals with are not necessarily entered into consciously by the players. They just happen as a result of how humans behave.

With all due respect, to me it seems like you have this [somewhat rosy] idea of how simple things are in the world, when in reality things are not nearly as simple as you make them out to be.

Typist · Aug 1, 2011

Typist, no I did not just finish "reading a book" about it. I think the point you fail to see here is that the situations which game theory deals with are not necessarily entered into consciously by the players. They just happen as a result of how humans behave.

I don't dispute this. I'm sure game theory has it's value as a framework to understand human behavior.

The thing is, I'm more interested right now in how we can stop fatheaded corrupt game players from crashing civilization on to the rocks.

If you can bring some game theory that would address this specific goal, I'm interested.

With all due respect, to me it seems like you have this [somewhat rosy] idea of how simple things are in the world, when in reality things are not nearly as simple as you make them out to be.

With all due respect in return, we pass balanced budgets on time, or we don't.

Yes or no. On or off. Black or white. Simple.

If we need to do complicated sophisticated game theory stuff to reach the simple goal, I'm agreeable. It seems we share the goal, and I'm open to your preferred topic if it can help us reach the goal.

myp · Aug 1, 2011

Typist said:
With all due respect in return, we pass balanced budgets on time, or we don't.

Yes or no. On or off. Black or white. Simple.

Balanced budgets? Did you mean raise the debt ceiling? Either way, both parties wanted something else in this bill which is why it isn't so black and white.

Typist said:
If we need to do complicated sophisticated game theory stuff to reach the simple goal, I'm agreeable. It seems we share the goal, and I'm open to your preferred topic if it can help us reach the goal.

It might be a simple goal, but it will never be reached without the games and actions and emotions of humans (which create those games in the first place).

Boehner bill passes House- now onto the Senate

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