August 2nd, 2011

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Long term, short term debt ceiling damage

Nate Silver, who I trust with numbers, thinks that the initial stages of the budget cuts are actually rather small and that we won't see any (additional) damage to GDP as a consequence until 2012-13, at which point a new Congress may decide to do something entirely different.

Longer term, it's hard to tell what the lasting impact here is. Every pollster I've seen and talked to doing focus groups comes to pretty much the same conclusions:

1. People are very fed up;

2. People do not believe that what they do matters, because Washington and business are in collusion with each other;

3. Therefore, while more people generally agree with Democrats in terms of policy priorities, they do not support Democrats. They believe Dems are utterly ineffective and a total waste of time. As a result, they tend to simply tune out Democrats and what Democrats say.

Also long term, we are pushing the global financial system to really look for alternatives to the U.S. As it happens, we are in luck from a paucity of alternatives. Europe is looking worse, no one trusts Russia or China, Japan is looking in sorry shape, and emerging economies like Brazil are still too new. The list of stable countries with AAA ratings is fairly small, and they simply do not produce enough currency and sovereign debt to replace us.

But our position as the default is not a good long term strategy. Especially as we lurch from dysfunctional fight to dysfunctional fight.
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OK, I'm Out of Touch

This from Nate Silver at fivethirtyeight.com

Just 44% of voters approve of debt deal in CNN poll. Dems (63%) more likely to approve than indies (35%), Republicans (35%),

Apparently, the majority of Dems approve the debt deal, despite the fact that Rs dictated the agenda and got pretty much everything they wanted. Meanwhile, Rs and indies dislike it.

Apparently, the Democratic leadership is right about what Dems want.