Saturday, October 5, 2013

Ted Yoho's Backwards Thinking

God help us all:
“I think we need to have that moment where we realize [we’re] going broke,” Yoho said. "If the debt ceiling isn’t raised, that will sure as heck be a moment. I think, personally, it would bring stability to the world markets," since they would be assured that the United States had moved decisively to curb its debt.
First of all, we're not going broke. Or at least, the world markets don't think we are. Bond yields are very low for both short and long term Treasury bonds. The US Treasury Bill is one of the safest assets on the face of the earth:


One thing that might change that is to do what Yoho seems hell-bent on doing--driving the U.S. into a completely avoidable default. Indeed, while markets are still relatively calm, you can see a small hint of panic in certain bond yields:



A default by the U.S. would certainly elicit a lot of things in financial markets the world over, but stability probably is not one of them. It also wouldn't tell markets that America is moving to "decisively curb its debt," since not raising the debt ceiling doesn't cause us to spend any less money. Ironically enough, not raising the debt ceiling would likely make our debt problems far worse due to higher borrowing costs as investors relegate the US government to "banana republic" status. 

As for dealing with our debt "problem," Yoho conveniently ignores the rapidly shrinking U.S. deficit. And it has been rapid, as you can see below (2013 is circled):



I know I shouldn't expect too much in the way of sanity from Tea Party members, but it's hard not to get depressed that this guy is a member of Congress.