Larry Fink on the rising dollar

Larry Fink leads BlackRock, the world economy’s largest asset management firm. Today’s FT home page features Fink making a critical case against US dollar appreciation, given the negative impact a rising dollar has on exports. I don’t disagree. But at the moment a stronger dollar could benefit the US consumer by providing greater purchasing power in lieu of higher nominal wages, and therefore putting much-needed upward pressure on aggregate demand and economic growth.

But that debate aside, I admire Fink’s ability to employ parts/whole logic. See the passage below. Exports are not central to the economy as a whole, he admits, but they impact certain parts of the economy. And these particular parts employ unique social power, evidenced by Fink’s getting the home page. Here’s my favorite bit of the text:

Larry Fink, chief executive of BlackRock, plans to express his concerns in a foreword to the company’s annual report, due out next week. The warning comes against the backdrop of the 25 per cent rise in the dollar versus a basket of other currencies in the nine months from last June to March. …

“While the US economy as a whole is not overly exposed to exports, many of our largest and most influential companies are,” Mr Fink has written.

“We believe that this will lead to an erosion in confidence on the part of CEOs with the potential to slow both investment decisions and future growth in the US.”

Other executives at BlackRock, which controls $4.7tn of assets in global financial markets, have also expressed concern about the effect of the strong dollar, which they say is hurting the US economy.

On corporate power

US intellectuals face the challenge of how to think about rising corporate power. This is not because corporations or corporate power are inherently bad things. I don’t believe they are. Instead, the problem of corporations has to do with the steady economic power corporations have amassed relative to households. Here are five graphs to make this point:

1. Real median household income. In 2012 the median household income was $51,017, a meager rise since 1984 ($47,181). In fact, today’s median household income is basically at the same level it was in 1995/1996. Remarkable.

2. Real median household income/GDP. As we see above, median household income, in absolute terms, is stagnating or even falling. This second graph shows how far median household income is falling behind economic growth as measured by GDP. See the following as more or less a ratio between HH income and GDP.

3. Total corporate profits/GDP. In contrast to household income, corporate profits are not only keeping pace with economic growth, corporate profits are rising relative to growth.

4. Domestic corporate profits/GDP. Perhaps US households aren’t seeing any returns from economic growth because corporate profits are based offshore? Put another way, perhaps domestic profits are as stagnant as domestic household income gains? No, they are not. Unlike HH income, domestic corporate profits are more than keeping pace with growth.

5. Overseas corporate profits/GDP. This is one to keep an eye on. Essentially, corporate profits from outside the US are now as high as total corporate profits were barely a decade ago (offshore corporate profits in 2011: $419 billion. Total corporate profits in 2000: $482 billion). Indeed, as we’ve seen, corporate profits across multiple categories are at historically unique levels. But the continued ability of US corporations to extract profits outside the US domestic economy could continue to have deleterious effects for households and even small businesses anchored to the domestic economy. The more US corporations can earn profits with emerging market consumers, the less incentive the US political structure will have to invest in middle-class institutions like education, infrastructure, and health here at home.

In sum: US households’ incomes, in absolute numbers, are at best stagnating. They are, in relative terms, falling dramatically behind. Meanwhile, corporate profits are at record highs, and even outpacing economic growth itself. US does not have a well-functioning domestic economy, in the sense that wealth gains right now are not being broadly shared.

(I originally posted this at previous blog, here)

Discretionary spending under Democratic and Republican Administrations, Reagan-Obama

Data for the graph above and the following observations come from table 5.6, found here.

If you look at the above graph you see that under Republican administrations, discretionary spending tends to go up. Under Democratic administrations, discretionary spending tends to go down or stagnate.

Since 1981, Republican administrations have raised discretionary spending 18 out of their 20 years in power. Democratic administrations have had 13 years in power, and raised discretionary spending in five of them.

Republicans: 18/20
Democrats: 5/13

These data suggest that Tea Party-types might want to grapple with the possibility of a party change.

These data also suggest it is wrong to use the Murray-Ryan budget to conclude the “conservative movement won” and “Obama lost” the fiscal showdown. To be sure, discretionary spending has dropped since 2010, when the GOP took the House. Indeed, it has dropped to levels Paul Ryan advocates. Given the context of slow economic recovery (high unemployment), combined with already bottomed-out interest rates, I’m of the position any fiscal austerity is macroeconomically indefensible.

But the other side is this: discretionary spending was always meant to come down off 2009’s stimulus — it was a stimulus, not a new deal. (For that fact, federal unemployment insurance was also meant to be reduced, or eliminated.)

So while I agree discretionary spending came down too much, too soon, we’ve probably witnessed the last large-scale budget war for a while. How long a while is, I don’t know. Here’s a guess: no new budget showdowns until at least after 2016. Winning in 2016 requires the GOP to court wider audiences than the Paul Ryan-tea-party-cut-cut-cut single-option allows. And if we’ve now re-set the baseline for discretionary spending, $1 trillion isn’t the worst-case scenario: we’re basically back at pre-recession levels.

And also, as shown above, there is this: discretionary spending usually goes down during Democratic administrations anyway. Perhaps the victory happened before the Tea Party even ocurred, when Obama in 2009 was able to pump more than $300 billion into non-defense discretionary spending. Ryan has effectively rolled that stimulus back. But he merely turned the new baseline into the old baseline. From this baseline going forward, will we see a stable rise in discretionary spending, as history suggests? We shall see. It will be interesting to note what happens to discretionary under the next Republican administration, given the party’s recent fiscal profile.

In the meantime, politics should not blind us to the most important domestic trend: activity is picking up on the demand-side of the private sector.

The Keller-Greenwald debate

Is Glenn Greenwald the future of news?: A debate between Bill Keller, former executive editor of the NY Times (and current opinion writer), and Glenn Greenwald, the opinion writer/journalist who, among other things, recently reported the NSA scoops. The debate is on objectivity and the future of journalism. Available at the link above.

My comment:

Greenwald’s argument, more than Keller’s, seeks to exploit the important truism that journalism is made and consumed by individuals who are shaped by their surroundings, values, and interests; the view being that the act of journalism, and the act of reading journalism, are subjective, not objective, enterprises. Journalists, as everyone knows, are not robots of “impartiality”; they have contexts that create them, mold them, respond to them. Because Greenwald better acknowledges the truism, his case rests on firmer theoretical ground than Keller’s. Overall, I find Greenwald’s debate performance to be both successful and unsuccessful. He has succeeded in further delegitimating the objectivity of Keller and what he is seen as representing. But Greenwald has failed to make progress toward an alternative definition of objectivity underlying his own knowledge.

* * *

The statement that people are shaped by context is only boring if it remains merely acknowledged; it must be explored. Subjective, activist, partisan, opinion journalists have biases; indeed, Greenwald’s point is that everyone by definition is biased. Keller fails by trying to hide his bias, Greenwald argues.

If all journalists have biases, what kinds of biases does Greenwald have?

What does Greenwald think his biases are?

In what ways does Greenwald think his biases impact his journalism?

Here’s one inherent source of bias: opinion journalists experience the need to reproduce audiences. If they do not get clicks, they do not exist. Given this imperative, they ask: What do my audiences like, what would they follow, what do they expect? And performers must spend time at least having a theory of the answers. This audience can be readership, a segment of readership, an editor, a publisher. Indeed, expectation is the key word. Would Greenwald reproduce a sustainable audience if he were to consistently cross his audience’s expectation, by surprising them with, say, a pragmatic position identifying a case in which NSA spying were in fact in his audience’s interests? Possibly. But it’s a gamble. Instead, Greenwald produces something tending more toward absolutism: all spying is wrong. (Quickly, note that Greenwald did not get an audience overnight. He has been a popular blogger for years.) He is, in short, a radical, but there is an aspect of conformity in what he does. He is a performer, working an audience, at least to some extent. I think the extent is quite great. Importantly, so does Greenwald. This relationship between performer and audience is not unnatural, but it cannot be ignored.

For both Greenwald and Keller, the relationship came down to trust. Can audiences trust the performances put forth by journalists? On the question of ‘trust,’ Greenwald believes he has lots of room to operate against his opponent, and he uses it. He brings up the NY Times sitting on the original NSA story back in 2004. He brings up the pro-Iraq war coverage in 2002 and 2003. Indeed. Greenwald is not being unfair here. Without doubt these were untrustworthy episodes in “objective” American journalism. News was covered up. News was distorted. Both consciously and unconsciously.

But can Greenwald be trusted? My framework for answering this question is this: Once an expert has expressed his or her opinion on a given subject, the most important question that an expert can ask him or herself is: under what conditions would the opposite of my current opinion become more tenable to me?

Finding and explaining the conditions under which a current opinion could change — this is to me the basis of objectivity. Under this framework, I fail to see Greenwaldian progress on the question of objectivity. When he says—

I personally think honestly disclosing rather than hiding one’s subjective values makes for more honest and trustworthy journalism

—he makes a rather weak stab at the question. It is not enough to disclose subjectivities. One must interrogate these subjectivities, over and over. Any legitimate piece of intelligence depends on this interrogation. What would make me wrong? What would being right look like under alternative scenarios? Demanding of yourself:

Why am I wrong? How am I wrong? What would being wrong look like? Under what circumstances can I envision being wrong? Under what conditions would I change my mind?

In my observation, Greenwald does not engage these kinds of questions.

I am happy Greenwald’s journalism exists. But does he make journalism more trustworthy? I don’t think so. I think he brings a lawyerly, win-the-case style to journalism. I think objectivity requires a scientific, question-the-results-at-all-costs set of habits.

In human history, these habits struggle to find political audiences. But they find ways to emerge nonetheless.

Obama should not lend his name to any entitlement cuts

From today’s NY Times report on the “civil war” in the GOP:

“You have to have a specific agenda,” said Jeff Bell, a policy director in the 1976 Reagan campaign, citing the supply-side tax cuts that were so in vogue with Republicans of that era. “That’s a missing element in today’s conservative revolt.”

This quote strikes me as a good insider assessment. Its substance should be taken into account by those who wish to make sense of Washington. In my observation, the lack of a positive agenda on entitlements is a problem shared by congressional GOP radicals like Cruz and Rand Paul, and by the slightly lesser radicals like Ryan and Rubio. And it could even afflict governors like Walker and Christie. The affliction is the difficulty of turning theoretical pronouncements against “entitlements” into specific legislation that can garner broad public support and harm the Democrats when they stand in the way.

The source of the problem is this: entitlement programs are popular. And this: entitlement programs are popular even to Tea Party supporters.

Furthermore, interesting things happen when you talk to Tea Party supporters about their anti-government ideas. First, they prefer to talk abstractly. Second, when pressed, they prefer ineffectual, targeted spending cuts to things like “international aid” — a small fraction of the federal budget — rather than cuts to the behemoths, Social Security and Medicare.

Unless the GOP is totally bereft of intellectual capital, they have knowledge of this knowledge, and are well aware of what the public actually thinks about entitlements. It is safe to assume the GOP has enough intel to know it cannot be seen as sole author of cuts to popular entitlement programs. But, they still want the policy. So, the answer is, they need to bring Obama on board as co-author.

In sum, it is like this: Republicans are (rightly) afraid to be known as the sole instigators behind cuts to programs that help a lot of people, and that polls show are quite popular. So they need Obama. Obama, however, has so far refused to co-author entitlement cuts. Hence, the GOP manufactures crises trying to create enough leverage to coerce Obama into co-authoring entitlement cuts. In 2011, they used the debt-ceiling against Obama, trying to effect a “grand bargain.” Obama (rightly) gave in — the leverage at that time was against him, unlike it is now — but he gave in only on non-entitlement spending. These non-entitlement cuts became known as “sequestration.” As policy, on one hand these cuts are bad because they harm growth. On the other, the cuts include defense spending, which arguably should be cut given the last decade of overly militarized foreign policy.

Politically, the takeaway point is Obama did not give an inch on entitlement cuts, even coming off the disastrous 2010 midterms, and even though he was looking ahead to his re-election fight — meaning even when the leverage he had was at an all-time low.

Now comes word the GOP thinks they can trade the reversal of sequestration in return for Obama’s co-authorship on cuts to entitlement programs.

Under no circumstances should Obama even discuss the merits of such a deal.

If Republicans want to cut popular programs that are also good policy, Obama should make sure the Republicans get full credit for doing so. Obama should not give one inch on Social Security or Medicare. Make the GOP come out as sole authors. Indeed, it is a major flaw in GOP strategy that they have a domestic policy agenda they can only talk about theoretically for fear of backlash against any specifics. Obama should not send them a gift and lend his name to any specific entitlement cuts. No grand bargains.

And anyway, receiving the reversal of sequestration as the prize? Bullshit. Important elements in the GOP — namely, the war hawks — despise sequestration, as this tweet by Max Boot makes clear:

ICYMI Sequestration is not an achievement the GOP should be proud of. My take: http://t.co/BUucCMYcfF

— Max Boot (@MaxBoot) October 19, 2013

Two more links on section 1002 of the “default prevention act of 2013”

More reporting and commentary is becoming available for those interested in the implications of section 1002 of the recent debt-ceiling bill (the “default prevention act of 2013”). Below are two more links.

First some background on section 1002. As I wrote this morning, my reading is that by making Congress record a vote against a debt-ceiling increase to stop it, rather than a vote for it to ensure it, thereby giving Congress a more passive role in the process, section 1002 of the deal makes a crisis come February (when the US is next scheduled to hit the ceiling) far less likely. Even if a majority in Congress does vote against an increase, Obama would still retain the power of veto. So, come February, the radicals will need a majority willing to vote against an increase, probably even two-thirds (it takes two-thirds to override a president’s veto power). None of this takes a debt-ceiling crisis completely off the table, but does make the manufacture of a repeat crisis more unlikely.

Qualification: I will be subjecting all my comments on section 1002 to others’ hopefully more informed understandings, and I suggest you do too. I will report on this blog what I learn.

In that vein, two new sources of information have come to my attention.

First, Ezra Klein. Nothing he reports contradicts my take on section 1002 — I think — even as he tries to stamp out the overly optimistic interpretation. As he writes, no, “we didn’t get rid of the debt ceiling forever.” He is right. But that’s not the point. The point, or rather the main questions are, how it will shape the next debt-ceiling showdown, and what kind of precedent will section 1002 — what Klein calls the “McConnell mechanism” — introduce into the future? Here’s Klein:

“We’ve been using the McConnell mechanism to raise the debt ceiling since 2011. If we made the McConnell mechanism permanent — something the Obama administration favors — it would basically disarm the debt ceiling forever. But last night’s deal didn’t make the McConnell mechanism permanent. It’s only valid until Feb. 7, 2014.”

One clarification I think we still need: does the fact the McConnell mechanism runs out on February 7, 2014 make it applicable to the debt ceiling scheduled to run out that exact day, or inapplicable? I haven’t seen an answer precisely laid out. But I think we need one.

Meanwhile, a second source of information comes via the Heritage blog. Long story short, Heritage is right now a leading fount of radical conservative intellectual and strategic work. They were against raising the debt ceiling. Now, Heritage wants to make sure their audiences know they think section 1002 of the deal is “nonsense” and particularly “troubling.” Heritage’s displeasure is striking. And probably a sign the bill will be effective in preventing a repeat come February. The radicals need crises, and losing the ability to manufacture them would indeed be troubling, from their point of view.

The “Default Prevention Act of 2013” makes a February debt-ceiling crisis unlikely

On one hand, the deal signed by Obama provides debt-ceiling relief only till February, when the debt ceiling will once again be reached. On the other hand, come February, it is unlikely the United States will manufacture another homemade debt crisis. Not because Obama “broke the GOP fever.” He didn’t. And not because Felix Salmon is wrong that an element of “revolutionary nihilism” will continue to pervade the GOP. He isn’t. Rather, a crisis is unlikely because of a substantive change to law. Included in the bill signed by Obama is what is called the “Default Prevention Act of 2013,” which temporarily changes the way Congress will vote on debt-ceiling hikes. The change is not being widely reported, but it’s right there in the bill. You can read it for yourself: section 1002, under the heading DEFAULT PREVENTION.

In a nutshell, this part of the law places in the executive more power to raise the debt ceiling, and does so by taking power away from Congress. Politico describes the act this way:

The legislation also includes a McConnell-written proposal that would allow Congress to disapprove of the debt-ceiling increase. Lawmakers will formally vote on rejecting the bump of the borrowing limit – if it passed, it could be vetoed by Obama.

Jonathan Chait paints a picture of what the change means in practice:

[T]he gist is that it changes the mechanics of the vote to make failure nearly impossible. Instead of needing Congress to approve a debt-ceiling increase, Congress has to override an Obama veto in order to prevent it. So now it would take a two-thirds vote to trigger the kind of terrifying failure that before could have been triggered by a 50 percent–plus–one vote.

That mechanism would utterly defang the debt ceiling, returning it to its historical place as an opportunity for ineffectual posturing rather than extortion. Alas, it only applies to the next debt-ceiling vote. But Democrats hope that using this method this time will set a precedent that eases the way for Congress to make it a permanent procedure. It seems unlikely to happen anytime soon, but the groundwork is being laid to one day lock up dangerous weaponry lying around the American political system and prevent future crises.

Because the “Default Prevention” part of the deal is not being widely reported, you probably haven’t heard about it. But it’s important; it effectively takes crisis off the table come February. I share Chait’s dismay that the change is only temporary, but I also share his optimism that, given a successful dry run this time, the change could well become permanent down the road. It ought to, for the good of the country. A rabidly revolutionary element of the conservative movement was willing to use the debt-ceiling to sow crisis and hold responsible actors hostage. Such tricks are necessary because a rabidly revolutionary minority of a minority can’t win national elections in the United States of America.

As such, a total win would have been eliminating the debt ceiling altogether. The “Default Prevention Act of 2013” is more like one quarter of a win. Given the context, I’ll take it.

Debt-ceiling deal appears imminent

Jonathan Chait is exhorting us to “stop fretting: the debt-ceiling crisis is over!” And indeed, it appears Speaker Boehner is finally willing to bring a vote to the House floor, even if it is the Senate bill, and even if it will not earn the support of the radicals. Speaking of whom, Heritage Action, Jim DeMint’s headquarters, is on record urging the radicals to vote against any such bill. Conventional wisdom says Boehner puts his job as Speaker on the line as soon as he brings a vote. Maybe, maybe not. The person who perhaps should be more worried is Senate minority leader Mitch McConnell, who is in the process of being “primaried.” And who faces rhetorical onslaughts like these by radicals with media audiences:

Someone told me #DitchMcConnell was like “the devil himself.” I pointed out he’s worse. The devil is more honest.

— Steve Deace (@SteveDeaceShow) October 16, 2013

Chait suggests we see the debt-ceiling deal as “a huge Democratic success — or, at least, the closest thing to success that can be attained under the circumstances.” This is a victory, Chait argues, because Obama did not cave and give a ransom, thereby refusing to institutionalize extortion into everyday American politics. The delegitimation of debt-ceiling extortion would indeed be a victory, but we should not get ahead of ourselves. We will only know for sure come January and February — when the continuing resolution keeping government open runs out and the debt-ceiling is reached once again. As usual, I’m with Martin Wolf: the only real victory would have been to eliminate the debt ceiling altogether. As a structure of law, the debt-ceiling makes no sense. Congress has already enshrined the spending; the debt-ceiling only makes possible the paying of bills and financing of debt already put in motion. It is an obstacle without a purpose; a risk with no reward. Unfortunately, the radicals prefer to think “the debt ceiling is a built-in balanced budget mechanism.” This is because default would mean “prioritization” — the government would pay only those it can afford to pay: creditors, presumably, at the expense of Social Security and Medicare recipients. Such prioritization would save the US Treasury. More to the point, it would cut entitlement spending like the radicals want. But it would almost certainly push the domestic economy into a recession.

The deadline for Social Security payments is November 1.

All in all, at the moment it appears that, yes, the United States will live to see another day. We shall see at what cost. Survival can often extract so much.

Three days till debt-ceiling breach

What would it take to foster an actually thriving domestic labor market? What kind of political and policy relationship between government and private industry would it take? I am of the mind these questions, or variants of them, should represent the central topic being debated by the US governing class. They are not. Instead, we have manufactured fiscal crisis after manufactured fiscal crisis. Both parties are willing to live with these manufactured crises: pushing them fires up the GOP’s base audience. GOP leaders willingly pretend they have no choice but to succumb to whatever the base wants. The Democrats play along, because as the opponent ever-intensifies its audience, any chance that opponent has to expand to new audiences becomes impossible due to widespread alienation. GOP has their loud minority. Democrats look reasonable by comparison. Fiscal stalemate, seen this way, is win/win. And so it continues.

Only, this picture is a lie. Stalemate is a fictional performance, a mask for radical changes that continue to take place underneath the surface. Check out two graphs, presented by Bill McBride at the wonderful blog Calculated Risk. In one it shows that under the Bush Administration (2001-2009), private sector employment actually fell. That’s right: there were fewer private-sector jobs at the end of his eight years, than at the beginning. Pretty remarkable. Granted, most of the problem was the historic recession that nailed the US economy at the end of his eight years. Which means he can be forgiven; what really needed to happen was proper recovery-driven policies coming out of the recession. Except look at the second graph, which is my main point. Under Obama, we see an unprecedented fall in public-sector employment. And by unprecedented, I mean unprecedented: No recent administration was subject to the drop in public-sector unemployment that has been foisted upon the current one. What makes that fact, and McBride’s graph, all the more remarkable is the context in which it has occurred. For one, we are coming out of a historic recession, with stubbornly high levels of unemployment. For two, as Krugman points out, we have now reached five years of liquidity trap economics — that is, five years of zero-bound interest rates. In this context, monetary policy’s effectiveness is severely limited; fiscal expansion becomes the more effective tool. Instead: fiscal austerity, US style. Fiscal contraction, not out in the open but behind the backs of citizens who don’t know what they don’t know.

So, here’s the situation: While the House GOP is said to suffer from historically bad poll numbers — a recent poll puts the Tea Party at 21 percent favorability — on policy, the Tea Party has won. Under Obama, the US governing class has indeed gutted government, as measured by employment. US political economy is being run by Tea Party infused principles, only nobody realizes it because they are watching the spectacle, listening to the noise, not seeing the signal.

So, then, three days out, will the US breach its own arbitrary debt-ceiling limit? I still put the chances low: I say, 10-15 percent likely, based on the assumption that at the last moment Speaker Boehner will bring a Senate bill to the House floor for a vote, and it will pass with mostly Democratic support plus enough Republicans.

Still, while I don’t want to say a default doesn’t or won’t matter, to some degree the damage is already apparent. Read Felix Salmon’s post “The default has already begun” from this morning for a similar take. For now, let me wonder: Why does it seem nobody in policy or political circles emphasizes the needs of the domestic economy? Why does nobody ask, or seem interested in asking, what it would take to foster an actually thriving domestic labor market? The answer is because, even as it has pretended to do the opposite, US governance has become dominated by the Tea Party. The Tea Party has won, even as it has become ever more despised.

Indeed, how can it be that the year after Obama’s re-election is the year in which Paul Ryan spending levels became the new “middle ground”?

The damage from these years of lies will take years to undo, if the damage is undone at all.

Four days till debt-ceiling breach

What do you need to know about US politics? How about this: The policies it would take to foster an actually thriving labor market are not on the table. But unprovoked debt default is.

The Republicans are no longer interested in fostering domestic economic growth; that would take finding a nuanced position on the relationship between government and markets. It would take eliminating the ‘manufactured crisis’ from their playbook. It would take a willingness to grow deficits when private spending slacks. It would take investments in things like infrastructure, universal preschool, science, and welfare.

Democrats are no longer interested in pushing Republicans to the middle or left; they are content letting the GOP live out on the edge of sanity where they harbor no chance at growing their audiences. Indeed, nothing has been better for the Democrats’ chances in 2016 than this past month’s Cruz-led suicide caucus. Obama and Democrats can give the GOP Paul Ryan-level spending levels, which are stunting economic growth, and look sane while doing it, because the GOP refuses it anyway without a fuller ransom. This makes the Democrats look good by comparison, but it masks a very bad policy outcome. It is a loss-loss: we get a stupid party (GOP) while maintaining a stupid policy (sequester).

Republicans are at all-time low favorability ratings, but the country is not better off for it, because the GOP will get what they want anyway: lower government spending. That is their answer to everything: lower spending. Even when the context is a weak recovery coming out of a historic recession, lower spending. Even when private spending remains anemic, lower spending. Even when beset by a liquidity trap in which interest rates cannot go any lower, lower spending. Always lower spending.

This lower government spending is damaging the US domestic economy. Brookings Institution researchers Greenstone and Looney estimate post-recession cuts in public spending have cost 2.2 million jobs. They conclude:

By cutting jobs during a period of already high unemployment, budget policies have contributed to the tepid pace of labor-market recovery and stand out as a departure from typical policy responses after recessions.

Notice what Greenstone and Looney are saying: Budget policies during this recovery have been at odds with how we reacted during previous recoveries. If the goal is to help the domestic economy, budget policy has been demonstrably irrational: we have ignored policy truths that we used to simply know.

Which leads me to the debt ceiling.

Last week I put the chances at a debt-ceiling breach somewhere between 6-10 percent. Today, four days till the so-called “X date” I put the chances higher, but not by much: maybe solidly 10-15 percent. But rising. Why I don’t say fifty-fifty like many others is the sheer consequence that could (probably will) entail. Every remotely reasonable Washington actor must be keenly aware, and should right now be fearful of being responsible for home-made catastrophe.

Why is the percentage not zero then? Why is there any chance at a default?

Because neither party shows much inclination in pushing a truly domestic growth-centered set of policies, and neither party is being held accountable for terrible fiscal policies. Republicans push crisis after crisis, firing up their base audience but no one else. Democrats happily let them, because it is good politics on their part.

A debt-ceiling breach would harm the US economy, probably the world economy. But so does sequestration. So did 2011’s debt-ceiling debate. So does the Paul Ryan budget. So does putting the debt-ceiling on the negotiating table to begin with. Almost every action Washington has taken since 2010 has been bad for the domestic economy.

Furthermore, I’m not sure how much a breach would harm, if at all, the GOP’s main clients, the world-economic and financial elite, who have been doing quite well throughout this period of never-ending crisis. Profits are extraordinary. And amazingly, 95 percent of post-recession wealth is going to the wealthiest 1 percent. So yes, GOP clients seem pretty well insulated. As Krugman put it, “the modern GOP is bad for business, [but] it’s arguably good for wealthy business leaders.”

And, I’m fairly confident a debt-ceiling breach would politically help the Democrats, both in 2014 and 2016.

Bottom line: Those who matter are less susceptible, perhaps almost totally immune, to the risks of a debt-ceiling breach. It is possible a debt-ceiling breach would further the interests of the most powerful. That this is possibly true is the only reason default remains on the table.

That said, these predictions and analysis are presented with caution. There are complex incentives here. The only thing I’m certain is nothing is as it seems. To make sense of it I’ll be following the interests.