Learned helplessness and the debt ceiling

“When young, [circus elephants] are attached by heavy chains to large stakes driven deep into the ground. They pull and yank and strain and struggle, but the chain is too strong, the stake too rooted. One day they give up, having learned that they cannot pull free, and from that day forward they can be “chained” with a slender rope. When this enormous animal feels any resistance, though it has the strength to pull the whole circus tent over, it stops trying. Because it believes it cannot, it cannot.”
Gavin de Becker, explaining learned helplessess

I realized the other day why I like Vladimir Putin, the man lives his life like he’s in a Guy Ritchie movie. That and because the former KGB Colonel reminds me of a certain former US Army Colonel.

Neither Putin nor TR, I’m certain, would let this whole debt ceiling business drag on like the Obama crew has, just as White House let it drag on in January and in 2011. Each time they give in, they’re just scheduling the time and place of their next surrender. “Nature, red in tooth and claw” is the reason why, (as Reagan taught us), sane people taking walks in the woods carry guns. That is a lesson the Administration has yet to grasp. One consequence of the Obama Administration being the worst negotiators in the world (some days Lambert Strecher’s theory they actually want to lose makes the most sense) is it gives aid and comfort to, well, foreigners we’re negotiating with. Did anyone doubt that Putin would end up eating Obama’s lunch on the Ed Snowden issue? Of course not.

Vis-à-vis the trillion dollar coin and the other tools the White House and Treasury have to un-screw the pooch, I I really don’t have much to add to what we’ve hashed over many times here— I feel like we’re taking bets on the last Super Bowl– but Dylan Matthews tweeted something (or, rather, linked to something) earlier that bugged me to no end. It was about a Politico op-ed, One way out on the debt ceiling, by Geithner’s Treasury chief of staff, Mark Patterson. Let me summarize, Please. Don’t. Hurt. Me. (the “one way” is Congress must vote to raise debt ceiling). If you’re going into Bigfoot-infested woods and your contingency plan is Bigfoot must leave you alone, I’m of the opinion that’s a pretty half-assed plan.

I fear the Obama White House is, at this very moment, hard at work thinking of bold, innovative ways to undercut Democrats in Senate by selling out spectacularly. The real problem for Democrats (which I’m not, I actually voted for Romney) is that except for Nixon, Obama is the only president to ever wreck his second term before he was even re-inaugurated. His New Year’s Eve fiscal cliff deal extended 3/4ths of the temporary Bush tax cuts permanently. That was the leverage, the only leverage, Obama had to get anything done in his second term (if the tax cuts were to expire every year or so, he could trade away the extension for something he wanted). Once Obama agreed that his team would not cross the 50 yard line, why is anyone surprised they’re stuck (and will remain stuck) playing defense?


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Hey is HR 807 from earlier this year not yet a law?



“Beowulf, Hey is HR 807 from earlier this year not yet a law? Thanks.”

I did answer your tweet yesterday (didn’t want you to think I was ignoring you). HR 807 passed the House, then it was sent to die in the Senate Finance Commitee (where, incidentally, Philip Diehl used to be staff director). So its not law except in the hearts of certain Members of the House of Representatives. Here’s the bill summary:
Passed House amended (05/09/2013)
Full Faith and Credit Act – Requires the Secretary of the Treasury, in addition to any other authority provided by law, to issue obligations to pay with legal tender, and solely for the purpose of paying, the principal and interest on U.S. obligations held by the public, or held by the Old-Age and Survivors Insurance Trust Fund and Disability Insurance Trust Fund, in the event that the federal debt reaches the statutory limit after enactment of this Act.
Prohibits: (1) the use of the issued obligations to pay compensation for Members of Congress, and (2) these obligations from being taken into account in applying the current $16.394 trillion public debt limit to the extent that they would otherwise cause such limit to be exceeded.
Requires the Secretary, if such authority is exercised after enactment of this Act, to report to specified congressional committees each week the authority is in use and provide an accounting of: (1) the principal on mature obligations and interest due or accrued by the United States, and (2) any obligations issued pursuant to this Act.


This is from this morning – although it says HR 804 (typo??)



Thanks Beo,

Twitter is bad at notifications so didn’t see yours and I assumed it didn’t even notify you of my question!



I have a quasi-technical question that I’m struggling with because of my lack of detailed knowledge of the US budget structure.

So I must appeal to the experts.

My understanding is that the shut-down constitutes a partial block on government spending (including some government employee compensation). I wonder what the monthly run rate on that blocked spending is?

My understanding is that failure to raise the debt limit constitutes a partial block on government spending – to the extent of what the deficit would otherwise be. I wonder what the monthly run rate on that is?

And so I wonder how those two run rates compare.

Furthermore, I wonder how the composition of the blocked spending compares as between those two scenarios.

E.g. why are social security (or maybe medicare?) payments automatically late in the case of a debt ceiling freeze? Isn’t there a prioritization choice?

E.g. they can certainly choose to pay the interest on the debt and they can roll over the existing debt since that doesn’t increase the debt.

And finally – why do people obsess about the idea of the government “not paying its bills” in the case of “default” but not in the case of the shutdown?


Felix Salmon touches on an aspect of my earlier question above – regarding the presumed difference between the government “not paying its bills” in the case of a debt ceiling impasse versus not making certain payments in the case of a shutdown:

“The situation is less binary than it looks, not least because the US government is already in default on its obligations.

The best way to look at this, I think, is that there’s a spectrum of default severities. At one end, you have the outright repudiation of sovereign debt, a la Ecuador in 2008; at the other end, you have the sequester, which involves telling a large number of government employees that the resources which were promised them will not, in fact, arrive. Both of them involve the government going back on its promises, but some promises are far more binding, and far more important, than others.

Right now, with the shutdown, we’ve already reached the point at which the government is breaking very important promises indeed: we promised to pay hundreds of thousands of government employees a certain amount on certain dates, in return for their honest work. We have broken that promise. Indeed, by Treasury’s own definition, it’s reasonable to say that we have already defaulted: surely, by any sensible conception, the salaries of government employees constitute “legal obligations of the US”.



As a further variation on this, my understanding is that just prior to October 17th, there was an expected risk that some veterans’ payments might not be made – and that this would have been the result of the continuation of the shutdown – not necessarily because of insufficient funds in the TGA account. This would be part of the “spectrum” that Salmon refers to.

Philip Diehl

At the risk of accepting your characterization as an expert, I’ll give you my best shot on these questions:

1) the number I’ve seen in the media is $1.4 billion a week. I understand this to include all spending, not just salaries. I have no idea how reliable this number is since the run rate depends on agency-level decisions about what constitutes essential services and exemptions Congress has made, like military pay and direct support to troops in theater.

2) the daily run rate for spending post-Oct 17 depends on the rate at which revenue hits the general fund every day, and that’s variable and unknowable.

3) as i understand, no category of spending is automatically delayed. Treasury will prioritize at their discretion. One might think that payments on the debt would come first, but then how do you like the idea of 24/7 of news interviews of poor seniors who can’t buy groceries because they didn’t get their SSI checks. Or troops in the field? And it’s Treasury’s fault because they paid the goddam Chinese and TBTF bankers first?

4) shutting down the government is like telling your vendors and employees you won’t be able to pay them for future work, and because of some crazy law, they can’t decide to do business with you or come to work anyway since they know the situation is temporary. Default is like those vendors and employees rendering their services, you writing a check and the check bouncing. And not because you can’t pay the bill, but because you decided to close your account for a few days.

If I’ve gone wrong on any of this I welcome corrections.


Thanks for taking a shot at it.

Interesting numbers – so the monthly run rate for the shutdown might be $ 5 or 6 billion or thereabouts.

As I understand it, shutting down the government prohibits spending in various applicable areas as defined/chosen.

Freezing the debt ceiling in effect prohibits a deficit, which in turn prohibits spending in the same amount as what would have been the deficit, with that pain to be determined through some sort of allocation process. The monthly deficit run rate (on average) is probably around $ 60 billion right now.

So it seems to me both have the same type of effect on spending.

But the numbers are very different.

The media and political spin, for what it’s worth, seem to focus on some perceived difference in the economic nature of the effect, as in the emphasis on “default” and “not paying bills” in the case of the debt ceiling.

But I see only a difference in numbers, with the debt ceiling being much more serious based on the difference in run rates.

I find it all very puzzling. Attempting to parse the various popular explanations (not yours Philip) of these two issues in combination is quite a challenge.

Philip Diehl

Perhaps it boils down to expectations and conventions. By now, everyone knows that occasionally the US will, for short periods, stop buying things it was scheduled to buy and furlough people who’ll soon be called back to work. Not that big a deal.

On the other hand, the US has never failed to pay a bill when due, and whenever that’s happened in other countries, very bad things occurred.

I know my banker would see a big difference between me laying off the gardner and maid, and cutting back on my wife’s online shopping for a week versus my checks to the gardner, maid, and Nordstrom bouncing.

And when my banker called me and said, “WTF! You have an endless line of credit here. Why are you bouncing checks?”, I doubt it would help my standing to say, “My wife and I had a spat and she closed that line of credit because I bought health insurance for the kids.”



my (superficial) impression also is that the distinction between essential and non-essential seems pretty mushy

Philip Diehl

I am comforted by the knowledge that Senate Democrats will not allow another Obama capitulation.

However, I am baffled that someone who voted for a candidate who happily joined the cause of the default extortionists, and would have empowered them, would be so critical of one who failed to take a stronger stand against them. 🙂


“However, I am baffled that someone who voted for a candidate who happily joined the cause of the default extortionists, and would have empowered them, would be so critical of one who failed to take a stronger stand against them.”

The bigger mystery is that I find myself rooting for the the KGB colonel who still has thousands of nukes pointed our way. :o)

Philip Diehl

Now, I wrote that off to irony.

Detroit Dan

If Obama is such a loser, what does that make Romney?

“If Obama is such a loser, what does that make Romney?” In the land of the blind, the one eyed man is king. Simple answer, he hired Stuart Stevens instead of Mike Murphy as campaign strategist. Its not that Romney had to move to the right in the primaries that doomed him, its that he didn’t understand he needed to find issues to get to Obama’s left (left/right isn’t the right paradigm, what I mean is he had to fracture Obama’s base). Naturally, I think, and advocated here last year, he should have endorsed a higher minimum wage (he did endorse indexing it to inflation, that every voter didn’t know that was criminal negligence on Stevens’s part) , balanced trade and condemned drone strikes on US citizens. As to the last point, its sort of amusing the Beltway crowd was stunned that Rand Paul’s citizen drone strike filibuster resonated across party lines. The Administration capitulated the next day when the Attorney General wrote Sen. Paul a letter, taking his point. I think the real neutron bomb (again, which I advocated last year) would have been endorsing an annual net wealth tax of the sort Ronald McKinnon proposed in a Wall Street Journal (!!!) op-ed. http://online.wsj.com/article/SB10001424052970203462304577139232881346686.html What’s devious about that it would let Romney attack Obama with his (Romney’s) own tax returns! He could have released his taxes and year by year, shown the difference between “what my wife and I paid under the Obama tax system and what we would have paid under the Romney tax system”. He had so much passive income that even if capital gains (and estate) taxes were eliminated in the bargain, as a percentage of income, he would have paid closer to 50% than his actual 14% under McKinnon’s suggested 3% rate (with an estate… Read more »