Q. and A. on the Debt Ceiling

"At first, it was just too hot to get familiar with the ins and outs of the debt ceiling debate, and then it was just too nice outside. Besides, if Wall Street did not seem overly concerned that the United States was headed toward default, why should anyone else worry? Then there is the long history of crying wolf in Washington: in April everyone finally got up to speed on the threatened shutdown of the federal government just in time to see it averted by an 11th-hour deal.

But now, palms in Washington are beginning to get sweaty and President Obama is breaking into “The Bachelorette” to address the nation about the debt crisis. Perhaps the time has finally come for a crash course in all things debt ceiling."

http://www.nytimes.c...t...rss&emc=rss

Q This sounds like an odd system. Do you mean that Congress can pass a budget that requires borrowing, and then argue later about whether to approve that borrowing?

A That’s right.

From Robt Folsom, EWI email today [no link]-

The federal budget is arguably the most basic responsibility of the Congress, and has been literally from the start. The Articles of Confederation failed because of huge problems related to taxing and spending, which in turn led to the Constitutional Convention in 1787.

But as I write this, Congress has come to an historic deadlock over the budget, specifically the debt ceiling. Legislators must raise the debt ceiling by August 2 or the federal government's ability to borrow and spend will be in peril.

How much peril depends, of course, on who you ask. The crisis has been building for most of this year; the approaching deadline has made it the top political story for days on end. It's big enough now to spill into the financial news. (It won't matter whether the market goes up, down or sideways, and it won't matter if the politicians decide on compromise or default -- you'll still read stories which fictitiously connect the dots from politics to markets.)

I have no intention of assigning "blame" to either party, though I will observe that both sides are guilty of shameless hypocrisy. In 2006, then-Senator Obama voted against raising the debt ceiling. South Carolina Senator Jim DeMint is a Tea-party favorite, yet his votes include debt-ceiling raises which amount to some $3 trillion.

The screamingly obvious question is, Why Now? Why the high-stakes showdown, when all parties agree that markets and the economy are fragile? Why can't Congress act on its most basic responsibility?

Plenty of answers seem to make sense, I'm sure you've read a few. Yet I'd like to introduce you to an answer that you will not read elsewhere. It has to do with social mood, and how this debt ceiling crisis is a near-perfect reflection of the current trend in that mood.