Forget the Box

The last of the corporate world was six years ago, and now those Dilbert cartoons each morning in the business section no longer cause any excruciating pangs of recognition at all. They’re no more than echoes from another galaxy, somewhere long ago and far away. Maybe you once lived there, maybe you didn’t. Now it’s hard to tell. But there once was a pointy-haired boss, just like the guy in the cartoon. And once we all talked like those people. We talked about }at the end of the day” after we’d decided talking about “the bottom line” just wasn’t cool anymore. And everything that might just work was the next big thing, because we had crafted a win-win situation. And you had to multitask, but the issue was your core competency, which was of course cutting edge, or the new paradigm, or something. You had to speak the language, and keep it all straight. It was a tribal thing. The words were totems, and you really got points for thinking outside the box, or for talking about thinking outside the box. That just sounded so damned cool. Everyone was just stuck in a box, but you, you cutting-edge innovator, were not. You were the alpha-dog.

Yes, most people just talked about thinking outside the box – about coming up with something startling and new and devastatingly effective. But if you actually did just that, well, everyone around you would recoil in horror. The tribe sticks together. The job of the tribe is to perpetuate itself. Thinking outside the box is wonderful, but the tribe is the box, or the box is the tribe. It was never wise to say, hey, maybe we’re working on the wrong problem, that maybe we’re talking about the wrong things. You know, like someone in aerospace saying that maybe we should stop thinking of ourselves as the amazing folks who build nifty satellites and think about ourselves as being in the communications business. That is how Hughes moved on to invent DirecTV way back when, and change the business. Some of us were at that meeting. There were a lot of research engineers with their two or three PhD’s and all their patents – guys who were now department heads – who recoiled in horror. Thinking outside the box – those were just words, a kind of magic incantation. The idea was to be clever inside the box, unless you wanted the tribe to punish you, or even exile you to the wilderness.

But maybe there never was a box, or there are those who just don’t realize there’s one. And you can see that in our current national debate, as James Wimberley recently suggested that we’re having the wrong debate – “Why are the negotiations about raising the debt ceiling rather than abolishing it?” And his outside-the-box thinking was this – “You would think this ridiculous loaded gun lying round the House for the children to play with was a hallowed part of the US Constitution, and not a silly recent invention contrary to its clearly stated intent.”

Wimberley said that was just an idle thought, but some in the financial industry are beginning to see the dangers of leaving this particular loaded gun lying around:

“We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” Moody’s analyst Steven Hess wrote in the report, first reported by Reuters.

The congressional role in setting a limit on debt creates “periodic uncertainty” over the government’s ability to meet its obligations, Moody’s said.

And Steve Benen sets the record straight:

The law was created in 1939 by congressional Republicans. The need to revisit and eliminate the law never really came up – responsible policymakers in both parties always realized the ceiling needed to be raised, so that’s what they did 89 times in the last 72 years. Even during the Bush era, Republicans raised the debt ceiling, without strings or preconditions, seven times. No muss, no fuss.

But that was before the radicalization of the Republican Party was complete, and now the very existence of this law represents a serious danger to the nation’s stability and fiscal health. Going forward, there’s literally no reason to leave this threat intact.

And Benen argues that the whole thing is arbitrary and useless anyway – policymakers set an arbitrary limit for themselves, and then they raise it so we can pay our bills, and then they set a new arbitrary limit, as they pass more bills, creating new policy, all of which must be paid for. So you have to raise the limit again and again.

But Benen argues this has now become pointless:

Add to this an extremist majority party willing to use the ceiling to wreak havoc, and we’re left with an unnecessary law that has clearly outlived its usefulness. What’s more, it’s worth noting that there’s nothing partisan or ideological about scrapping the law. In fact, my message to skeptical Republicans would be pretty straightforward: there may come a point in the near future when a Republican president has to govern alongside a Democratic Congress (a divide last seen just three years ago). Do you want those Dem lawmakers to have leverage over the GOP White House, threatening to crash the economy unless the Republican president meets a series of demands?

He goes on to argue that the Democrats have never done this before, “but now that Republicans have changed the rules and created a hostage-taking blueprint, what’s to stop Democrats from pulling the same stunt?”

That’s the political argument. Maybe the Republicans should consider whether they’re willing to take their chances down the road. Yes, this is a threat. Two can play at this game.

But there’s the practical argument:

Practically no other industrialized democracy has a debt-ceiling law, and for good reason – it’s dumb. Congress could pass a measure in this Congress, saying that the measure will expire in 2013, which would let policymakers vote with no knowledge of which party will be in control of which branch.

This is not hard:

Article I Section 8 of the United States Constitution gives the Congress the sole power to borrow money on the credit of the United States. From the founding of the United States through 1917 Congress authorized each individual debt issuance separately. In order to provide more flexibility to finance the United States’ involvement in World War I, Congress modified the method by which it authorizes debt in the Second Liberty Bond Act of 1917. Under this act Congress established an aggregate limit, or “ceiling,” on the total amount of bonds that could be issued.

This was set up as a housekeeping matter, to streamline financing a specific war, and then was extended:

The modern debt limit, in which an aggregate limit was applied to nearly all federal debt, was established in 1939. The Treasury has been authorized by Congress to issue such debt as was needed to fund government operations (as authorized by each federal budget) as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.

But when you say spend the money in the way we just authorized, you already committed the money. And it gets spent, by law. It’s odd to then say yep, you’ve spent the money, just like we told you to, but now don’t pay the bills. That’s why the debt ceiling has been raised those eighty-nine times. The one authorization – to spend the money – has to be realigned with a second authorization – to pay the bills for spending that money when those bills become due. There are two steps when there ought to be one. Either spend the money or don’t, as authorized. Why dick around with a second law about paying the incoming bills? It creates a bizarre situation where the dialog might go something like this – I spent the money, just like you said, exactly as you said, so can I pay the bills now? – No, you’ve spent too much money already. – But you told me to spend that money! – Well, yes, but you shouldn’t have spent all that money! – But you told me to spend that money! – Well, yes, but you shouldn’t have spent all that money! – But you told me to spend that money! – Well, yes, but you shouldn’t have spent all that money!

What you have is an endless loop of nonsense, all inside the box, as it were. Even Moody’s gets it now. This is absurd, and no other major nation has this sort of mechanism. It may be time to think outside the box – even if it’s painful to write those silly words.

But sometimes people do just put themselves in silly boxes:

“The American family has to balance its budget; companies that are trying to create jobs have to balance their budget; why wouldn’t we expect that a great nation can continue on indefinitely without balancing its budget?” said Rep. Jeb Hensarling of Texas, the chairman of the House Republican Conference.

Yep, Jeb here is arguing for that Balanced Budget Amendment, where the government assumes no new debt and retires all previous debt and only spends what comes in. Outlays equal income, and that’s that. Yes, this is both a bad idea and impossible to pass, but the argument here is what is interesting. It’s the family box, and again, Steven Benen is all over this:

Families and businesses borrow money and run deficits all the time. This is a positive, not a negative, development.

When a family goes to buy a home, its members don’t simply write a check; they take out a mortgage. Almost no one can afford to simply and literally buy a home, so we take out very large loans, and make payments, with interest.

The same is true when a family wants a car, tackles college tuition, or thinks about starting a small business. American families, in other words, take on debts, some of them huge relative to their incomes, all the time. There’s nothing wrong with any of this – these are just routine examples of people investing in themselves, as they should.

Businesses do this, too, borrowing money to make capital improvements, expand locations, buy smaller companies, etc. “Companies that are trying to create jobs have to balance their budget”? Actually, companies that create jobs often run deficits, with Wall Street’s blessing.

Jeb Hensarling hasn’t thought this through, as he’s still in the Family Box, but Benen is clear enough:

The government’s debts aren’t identical, but officials take on debts to invest in things they consider worthwhile, too. A family that relies on student loans to pay for college should be able to relate to a government that relies on loans to pay for public services. The family thinks it’ll be worth living in the red for a while, so long as it can make the payments and afford the interest, because they’ll be better off in the long run – and the government believes the exact same thing.

And they’re both correct.

So Benen has a follow-up question for Jeb Hensarling – “If Mr. and Ms. America take on debts they can afford to improve their position in life, why is it outrageous for their government to do the same thing?”

But he already knows the answer:

The answer from Republicans, I suspect, is that our current debt is simply too large and we can no longer afford it. (They weren’t thinking this way when they inherited a national debt that was $5 trillion and shrinking, and turned into a debt that was $10 trillion and growing, but let’s put that aside.)

But we can afford it; that’s the point. Like a family making its monthly payments, the government is doing the same. Indeed, we’re doing so well on this front that others keep loaning us money at low interest rates, confident that we’re good for it.

So these guys really are stuck in a box:

Families and businesses face debt crises when they run out of money and have exhausted all loan options. The federal government hasn’t run out of money and has all kinds of borrowing options, but Republicans, led in part by Hensarling, nevertheless want to create a debt crisis, on purpose.

No they don’t. They actually do think we have a debt crisis. They’re just stuck in a box that they conjured up out of thin air, and maybe it’s a tribal thing, where certain words – like Family – are magical totems. But magic is a poor way to run a country. And there is no box. There never was. It’s just that people in the corporate world talk funny.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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