The Buzz

From the staff of the Tampa Bay Times

Debt deal: Is it a real reduction or a reduction in the increase?

1

August

The Florida Director of the Division of Bond Finance, Ben Watkins said the protracted standoff in Congress over the debt ceiling “was playing chicken with some serious issues.”

But he wants to know whether the debt deal will result in a net reduction in the federal debt or just a reduction in the growth of the debt.

“My question is, how much is the projected deficit?,’’ Watkins told the Herald/Times.
“If it’s more than zero, we’ve made no progress.”

As head of the agency that issues bonds for all state agencies, he said a federal default would have had an impact on the state’s bond sales but he couldn’t say how much. Some experts said it would raise the cost of debt, while other experts said would have lowered the cost if federal treasury rates went down in the face of less federal government spending and less borrowing.

“No matter which way it went, it would have been disruptive,’’ Watkins said. “It would have presented challenges for the way the markets operate -- and that’s never good -- and it would have demonstrated extreme irresponsibility if they couldn’t get it together.’’

In the face of market uncertainly, the state would postpone issuing bonds, Watkins said. “We would be unlikely to sell in the face of such uncertainly,’’ he said. “We would wait until markets are functioning more normally rather than function in a vacuum.’’

Meanwhile, Watkins asks a good question: How much debt reduction will really happen?
“I hope it’s not a big disappointment, where it’s much ado about nothing,’’ he said. 

Judging by a flow chart being circulated, and printed in the Washington Post, the answer appears to be: no net reduction.


 

[Last modified: Monday, August 1, 2011 3:51pm]

    

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