# An allegory

You are a teenager hosting a pizza party. Half an hour ago, your Mom called to order the pizza. Now the doorbell rings; it’s the pizza delivery guy; your Mom gives you $20 and tells you to go pay the man. But it turns out she ordered$40 worth of pizza.

(yelling upstairs) “Hey Mom, can I have another $20?” “Sorry! I only withdraw from the bank once a year around April 15, and we are out of cash.” Hm. Maybe you can borrow the$20 from your buddy Jin. (Well, he is not exactly a “buddy”. In fact, you suspect he secretly despises you. But he has loaned you money in the past. A great deal of money, actually. Also he pretty much owns the pizza parlor. But I digress.)

“Certainly, my dear friend, I would be honored to loan you $20. Although since you have no job or assets of your own, may I ask how you plan to repay me?” “No problem; my Mom promises to repay you.” “I see. Did she actually say that?” “Yes! Well, no. Er, sort of. She ordered$40 of pizza when we only have $20, so obviously she implicitly promises to repay you.” Jin is a very hard person to read, but he does not look convinced. (yelling upstairs again) “Hey Mom, can I borrow$20 from Jin? The delivery guy is getting impatient.”

“No.”

“But Mom, we always borrow money from Jin.”

“Yes. But I have been thinking about it, and you know what? You and your friends eat too much pizza.”

At this point, you have to be wondering whether your Mom is crazy, or stupid, or both. I mean, sure, she probably has a point about the pizza. But the time to make that point was before she placed the order.

You start to consider other options, like selling off family heirlooms or maybe offering the delivery guy an I.O.U… Seriously, has Mom lost her mind?

Maybe Jin will loan you the money anyway. Although he might charge you a punitive interest rate. And since the rate on those loans form the foundation for the rates on every dollar-denominated bond on the planet…

Hm. I guess the allegory is breaking down.

In case it is not obvious, “you” are the U.S. Treasury (or if you prefer, the Executive branch), and “Mom” is the American people as represented by our duly elected Congress. “Paying the pizza delivery guy” means everything from Social Security checks to the salaries of military personnel.

Some people think the Treasury can just issue bonds anyway, because by passing a budget that does not add up, Congress “implicitly” raised the debt ceiling. But in Bond Girl’s words, those people have forgotten what a bond is. A Treasury bond is a promise by the American people to hand over money in the future. The Executive branch cannot make such a promise. The Judicial branch cannot make such a promise. Only the Legislative branch can make that promise, and they are talking like they are in no mood to do so. So what would an unauthorized Treasury bond be worth? Nobody knows, because it has never happened.

Look, I am all for smaller government. (Also smaller banks, smaller oil companies, smaller labor unions, a smaller military…) But there was a time to have that discussion, and it was before we ordered $1.5 trillion more pizza than we can afford. The whole debate is ludicrous, and playing political games with the U.S.’s sovereign credit is reckless to the point of sociopathy. That said, I believe there will be a deal. Politicians love drama because it gets their names in the newspapers. Journalists love drama because it sells newspapers. So the “drama” will continue until the last possible moment, at which point some deal will be struck that lets both sides claim victory. You want me to be right. ### 7 comments to An allegory • mswaine While you and the pizza guy were standing there an obese cat has eaten all the pizza. • toddlohenry Sorry, but the analogy breaks down a little. Mom — the taxpayer — continues to order toppings that I hate and don’t want. Mom also orders way much more pizza than I actually need. I could have lived with a$10 cheese and sausage and worked down some of the past debt…

• Nemo

@toddlohenry:

Yes, great point. I mean, what if all 300 million people in a country want different things? How could any decisions ever get made? It’s totally impossible! Hey, if only there were some mechanism invented by a bunch of white guys in the 18th century — called “constitutional representative democracy” or something — that could actually address the problem.

Oh well, too bad. I guess it’s anarchy then. Or hey, maybe we need a king? This definitely deserves more study.

• bryanwi

There’s another problem with the allegory, and it’s about the same problem as with Larry Summer’s claim that he wouldn’t stiff visa to control his kids college spending.

The reality is that this kind of “awkward hard stop” is used all the time. So it’s more like this:

a. Kid wants pizza. Dad says OK, but it has to have vegetables on it, and has to come from the costly pizza parlor that gives him free drinks. Days says to order the pizza.

b. Mom gives kid $20. c.$40 of Pizza arrives, when the kid would have been fine with \$10, but wasn’t going to say no. He asks “Dad, can I have more money?” and is told “Ask Mom”. Mom, has been Very Frustrated (since she’s the one with the job and can’t get Dad to behave) says “No”.

And so the family defaults on a pizza. And then Dad maybe changes his behavoir, or not.

So long is government functions by being elected by group A by promising to tax group B to provide services to group A, this sort of debacle will occur. If not over the debt limit, then over appropriations or budgets. (No budget from the senate in how long?)

And if Mom doesn’t make it stop, eventually the bank, the credit card company, or the pizza parlor will. So one way or another, THERE WILL BE A CRISES. This particular crises looks stupid, but I don’t know that it’s actually more stupid than other crises that might substitute for it.

As for the parties saying “we need stimulus” – that would be fine if there weren’t a spectacular debt overhang at the start of the great recession. That counterfactual does not prevail.

• bob

A king! A king! Let’s have a king! Then we can have royal weddings, and our daughters can aspire to be princesses for REAL!

Oooo, ooo, and if he makes us mad, we can cut off his head!!