As early as last December, I was raising the alarm bells about the debt ceiling. In a piece called Will Trump’s OMB Director Blow Up the World?, I noted that Mick Mulvaney is a debt-ceiling truther who doesn’t think anything overly bad will happen if the U.S. Government misses some bondholder payments. I followed that up with more pieces throughout this year. My primary focus has been on the fact that Speaker Paul Ryan will not be able to raise the debt ceiling without relying on Democratic votes. I don’t think the Democrats should be expected to provide these votes.
It’s admittedly a tricky question. The official position of the Democratic Party ought to be that the U.S. Government pays its debts, and it pays them on time without drama so that our creditworthiness remains rock-solid. Even debating whether we’ll pay our debts is bad for our reputation as a borrower, so the party should support eliminating the debt ceiling entirely. Refusing to vote to raise the borrowing limit is inconsistent with these principles, so a strong argument can be made that the Democrats should all vote as a bloc to raise the limit without making a fuss about it.
But I can say the same exact things about what the Republicans ought to do. The problem arises because many Republicans will not vote to raise the limit under any circumstances, and another group will only agree to do it if they can get concessions from the Democrats. The political dilemma for the Democrats arises from the fact that voting to borrow more money isn’t popular even if it is technically a vote to pay for what we’ve already spent. The GOP puts the Democrats in the position of taking damaging votes that allow Republican members to avoid taking damaging votes. This would be bad enough without the Republicans attaching unacceptable measures to the underlying bill. In fact, it’s a sucker’s game. In order to end this repeating cycle, the Democrats have to be willing to be irresponsible for once, otherwise they’ll get punished for being responsible from now until the end of time.
Edward D. Kleinbard, a former chief of staff of the Congressional Joint Committee on Taxation, has an editorial in the New York Times today that predicts that the Republicans will in fact blow up the world and explains how it will be blown apart. Unfortunately, the piece never mentions the Democratic Party.
This is understandable to a point, because the Democrats don’t control the White House, the House or the Senate, and so can’t be expected to pass or sign any legislation on their own. But the assumption in Kleinbard’s piece is that the Democrats won’t provide the needed votes to raise the debt ceiling as they have in the past. It’s actually quite likely that they will provide those votes. The question is only about what they’ll demand for their support. The way the Republicans are behaving at the moment, the Democrats will be expected to make concessions.
Kleinbard assumes that this dynamic won’t change. The administration is too incompetent to lead in a proactive and effective way. The Republicans’ congressional leaders are too weak to get their members to see reason. And the Democrats may cave in the end, but not to the degree they have in the past, and not until after some irreparable damage has been done. In other words, the world will end.
Sometime in October, the United States is likely to default on its obligation to pay its bills as they come due, having failed to raise the federal debt ceiling. This will cost the Treasury tens of billions of dollars every year for decades to come in higher interest charges and probably trigger a severe recession.
The debt ceiling is politically imposed, and the decision not to raise it, and therefore to choose to default, is also political. It’s something America has avoided in the past. This time, though, will be different…
…An increase in Treasury interest rates of just 0.2 percent a year would cost the government about $400 billion over the next 10 years. It also would lead to higher borrowing costs for American businesses, because borrowing rates are set by reference to Treasury rates. Moreover, each month holders of tens of billions of dollars in valid claims against the United States would go unpaid, triggering a major recession.
None of this is particularly speculative; almost all economists and policy makers agree on the enormous fiscal, economic and reputational costs of default. That’s why, in the past, we’ve always managed to avoid it.
When I say that OMB Director Mick Mulvaney is a debt-ceiling truther, what I mean is that he doesn’t believe all these negative consequences will actually happen. Many House Republicans and perhaps a few GOP senators agree with him. Therefore, fear of causing a global recession doesn’t motivate or influence them. John Boehner couldn’t talk sense to them and Paul Ryan can’t talk sense to them. That’s why they’re demanding drastic budget cuts that they know the Democrats will not support in return for their votes on the debt ceiling. And, as I’ve said, many of them wouldn’t vote to raise the limit even if they got everything else they demanded.
The Democrats are expected to grab the steering wheel at the last second and save us all from plunging over the cliff, and then they’ll take all the blame for their life-saving solution that isn’t politically popular. This is a bad deal even with no conditions attached.
The truth is, it’s the Democrats who have the leverage here. They could be demanding all kinds of things in return for their votes but are instead just asking for a clean vote in which they aren’t expected to make concessions. That’s a loser for them, but one they’re willing to abide in the interest of the country and the economy.
I don’t think they should play along like this because they need to break the cycle here and now. They should be the aggressors for once, if only to shift the ground of this debate. While the leadership’s position should remain a clean vote, large blocs of Democrats should make clear that a clean vote isn’t good enough for them anymore. They won’t vote for a raise in the debt ceiling unless certain of their priorities are protected in the budget. They should say that they aren’t just going to line up behind what Pelosi and Schumer tell them to do.
The real reason to do this is because it will actually help McConnell and Ryan talk reason to their own members. If they want to pass their appropriations and not blow up the global economy, they’re going to have to make concessions to the Democrats, not ever-increasing demands. In truth, a clean bill will be satisfactory, provided that the Republicans provide most of the votes. But a clean bill where the Democrats provide most of the votes ought to be unacceptable, and if it takes a global recession to get the Republicans to believe they shouldn’t mess with our credit-rating, that will be most unfortunate but a lesson that needed to be learned one way or another.
The truth is, if the Democrats don’t adopt a stronger position now, I believe they will actually make default more likely. And this game is so rigged against them, that they have to be willing to let the world end in order to put a stop to it.
Demand a clean “debt limit” bill.
And yes, there IS one that Democrats can vote for: A bill that completely eliminates the debt ceiling.
Safeguards against Trump stupidity also, too.
That is about the only one for me. Otherwise I choose to not play this chicken game this time around. No more blackmail.
I think offering to vote for a clean increase is the way to go politically and policywise. If the Republicans demand concessions and blow up the world economy at least they’ll take the blame. If we’re demanding concessions there are two problems. First, it’s more likely things will get blown up, which is a VERY bad thing. Second, if things do go boom, the media will go bothsiderist and manage to put most of the blame on us even though the real cause is nutcases on the Republican side.
So, pushing for concessions increases the chance of disaster and gets us a big political penalty if disaster happens. Bad idea.
So if I were a republican I would plan this shit to happen every few months or so. That way I can make you fools and from time to time, especially when you have the president, get you to cut spending or some such. Nice game.
Time to end this shit.
It doesn’t do the Republicans any good under current circumstances. Now that the Democrats have learned to stick together on demanding a clean debt ceiling increase the Republicans have always given in. If they don’t, we’ll all suffer but the Republicans will suffer a lot more.
Abolishing the debt ceiling is a great idea, but it’s a really odd demand for a debt ceiling increase. Future threats to crash the world economy are so bad we’ll crash the world economy to stop them?
Why will the republicans suffer a lot more?
End this debt ceiling hostage taking once and for all or at the very least flip it around. Make it so congress has to vote NOT to extend the debt ceiling rather than to extend it.
“In order to end this repeating cycle, the Democrats have to be willing to be irresponsible for once, otherwise they’ll get punished for being responsible from now until the end of time.”
Being punished for doing the right thing pisses me off. My ex-wife threatening to do that to me was enough to make me stand up to her and convince her to back down. I’d like to think enough Democrats in Congress have the same reaction.
“[F]ear of causing a global recession doesn’t motivate or influence them. John Boehner couldn’t talk sense to them and Paul Ryan can’t talk sense to them. That’s why they’re demanding drastic budget cuts that they know the Democrats will not support in return for their votes on the debt ceiling. And, as I’ve said, many of them wouldn’t vote to raise the limit even if they got everything else they demanded.”
They would rather shoot the hostage than get the ransom. Wasn’t that the M.O. of the Scorpio killer in “Dirty Harry?”
Also in real life the M.O. of outfits like the Red Army Faction in West Germany. Did their cause no good (though their members were too blinded by ideology to notice).
Shooting the hostage is “being responsible about entitlements”, not calling the bluff on the debt ceiling.
Well, damn. I agree that the Dems should demand the elimination of the debt ceiling. Voting for spending means voting to get the money. Period.
Janet Yellen is and will be willing to supply all the money in the Universe at a low or null interest rate. Defaulting on bonds will cause a big drop in the value of those bonds and will hurt a lot of rich people and Asian countries, but doesn’t affect the US economy as long as Janet keeps printing money to “lend” to the USA.
I don’t know if that is legal but why not she was willing to give unlimited money to the banks. Why not the Treasury?
Yellen is allowed to loan effectively unlimited amounts to banks, but not the Treasury. It’s totally nuts, but that’s the law of the Federal Reserve act and the debt ceiling.
So she can buy treasuries on the open market (quantitative easing) but not directly? That does sound goofy, but then the treasury needs only one bank willing to be a conduit (for a fee of course).
In any case, the Fed has historically “foregone” interest on the treasuries, so they are effectively zero interest.
Funny that eh?
Maybe we should enable the Treasury to NOT sell bonds, just let the Fed create whatever has been approved in the budget.
Exactly! Bonds made sense when we were on the gold standard, but not when we switched to fiat money. T-bonds are just an anachronism. The government should spend what it takes for full employment and tax what it takes to control inflation. Balance is irrelevant.
Or maybe let the Treasury create whatever has been appropriated in the budget and use tax rates to reduce inflation with automatic stabilizers.
Then the Federal Reserve could get back to being a reserve of banking assets that prevents a private banking meltdown (a financial panic).
That would entail creating a Third Bank Of The United States to function as the central bank dealing with the Bank of England, the Bank of Japan, et cetera. Not a bad idea.
Jackson was wrong to destroy the Second Bank.
And what would this bank do that the Treasury of the United States couldn’t do?
Nothing.
The functions of the Fed.
Reserve banking could still be done by the Fed.
Economic policy and action could be done by Treasury.
Monetary supply management could be done by the Fed for the the private banking system needs and by the Fed for economic policy through setting of taxes for witholding and for release of funds for government spending.
Separation of private (Fed operations) and public (Treasury operations).
Unless there is a separate monetary standard (gold, silver, cobalt, oil) that has absolute limits in a given time period (all metallic and mineral standards can be extracted to increase the supply), there is no need for a bank. No need for government borrowing just so long as the Treasury is prudent enough to manage the money supply that government creates and the Fed is prudent enough to manage the money supply created through loans and call-backs from the private banking system. What is being managed are the network effects of the public and private money exchanges in the economy and the international flow of funds into and out of the national economy.
Sure, but the bank could be a subsidiary of the Treasury department. The Bank of England is owned by the crown (Unlike the Fed which is legally owned by its member banks) but I don’t think that it falls under the Chancellor of the Exchequer.
The reason for a “bank” is to interface with other countries that have a bank as a face.
I’m not wedded to any particular organization boxes, but I do feel the function belongs in the government, not a creature of the private banks, even though the Senate confirms the Chair (and the regional governors?).
It is indeed goofy, and it’s also the law.
More directly, thought, the debt ceiling law means the Treasury can’t even create securities to sell to the Fed, so that restriction is moot anyway. They’re not allowed to print money, either, under any circumstances – the Federal Reserve act gave that power to the Fed. The only thing they could do would be issue platinum coinage, due to what was essentially a drafting error in a 1990’s law. I wouldn’t expect Trump to, although it’s possible Mnuchin might choose to, and I think he’s the one that actually has the authority. Of course the coins need to be minted before the event for logistical reasons and I don’t think Mnuchin wants to take the heat of having a couple billion of face value in platinum coins sitting around.
So if treasury can’t sell bonds, who cares about the interest rate? It only matters to the financial markets.
My original comment was based on a default followed by an eventual ceiling raise. If the budget must be balanced that will indeed cause a Depression.
You’re missing a couple of points.
The Fed sets the interest rate on its loans to banks. That is used by banks to set the rates they charge borrowers. It’s also what bond underwriters use when they float an offering. Bond brokers underwrite and sell Treasury bonds — presumably offered by the underwriters at the lowest possible and marketable interest rate.
Quantitative Easing opened a whole new universe. The Fed sets the bond rates now, by buying the infinite buyer, practically a monopsony. If the treasury defaults, bond prices fall, but only if the Fed doesn’t offer to buy them at face value using their infinite money supply.
The universe QE opened was the FED purchasing private debt. It was to strengthen the financial position of banks and inject cash into the system. The worry for some was that it would lead to inflation and in turn to interest rate increases and others were concerned about deflation and negative interest rates, so, QE looked like proper medicine to them.
The facts and not so much the mechanics are what ordinary people need to grasp — the USG bailed out that banks/brokers and the cost to do so is sitting in our national debt account. In eight years GWB added 90% to the national debt to pay for his wars and tax cuts. Obama added 80% in his eight years.
Poor President Truman thought people cared about the national debt and that paying it down was important and he paid a political price for doing so. Congress is hooked on deficits and can’t stop smoking it.
They still do, unfortunately. That’s why we are riding this neoliberal toboggan to Hell.
Not neccesarily. In November 2010, the Fed announced a second round of quantitative easing, buying $600 billion of Treasury securities by the end of the second quarter of 2011
The Fed was buying $600 billion of Treasury securities from private owners of those securities who had bought them from Treasury earlier.
Treasury sells notes; Federal Reserve buys Treasury notes for cash (Federal Reserve notes) from banks.
Pay attention to the direction of the flows here.
Hitting the debt ceiling prevents the Treasury from selling additional notes until it can pay down the holders of already existing notes. As long as the good faith and credit of the United States is good, those holders can wait on the terms of those notes.
What the GOP is doing with this debt ceiling stunt is questioning the good faith and credit of the United States of America, which is contrary to the plain words of the 14th amendment, added to avoid taking on the Confederate debt as a US obligation. That had consequences for the private borrowers of foreign funds during the Confederacy.
It now guarantees patience unless the US is clearly not able to pay. What the GOP wants to do is be deadbeats. If not to US creditors, to the people who expect to receive the “entitlements” they have contributed to and have been promised.
There really is not financial transactin in the debt ceiling. It is being read by financiers as the GOP willingness to pay US debts. If financiers want to read it that way, let them take the risk of loss. Most will be more patient.
The original postulate was that the debt ceiling is not raised and the government has to default on payments. Of course, if the debt ceiling is never raised then the economy is well and truly screwed.
My understanding of the scenario is:
My point being that the private market is not needed as long as the Fed buys bonds and the Fed controls the interest rate.
It was pointed out that the Fed is forbidden to buy directly. I responded that an intermediary would have to be found. I’m sure any number of banks or corporations would be willing to buy and resell to the Fed at a markup. The markup need not be extravagant. One percent (a BIG markup) on three trillion dollars is HUGE. Surely Fidelity, Vanguard and the like would love for their bond funds to be intermediaries if Chase, G-S, Citi do not.
The government only defaults if it doesn’t raise revenues and continues to spend up the money that would normally be used for debt service (paying off the due debt). The first thing that Obama did every time the threat of failure to raise the debt ceiling came around was to ensure that debt service could be paid for some time to allow time for bargaining. The executive has the authority to reduce expenditures except for those mandated by Congress; the Department of Defense happens to be a discretionary expenditure that can be brought down but is generally politically dangerous to do so. Social Security is mandated but the funds to pay for its distribution is not. Lots of Congressional monkey-wrenching going on in the details of how this shakes out.
Why guess when all the information is provided in the Treasury Daily Statement: Daily Treasury Statement for August 7, 2017.
Table III-C lists all the public debt subject to the debt limit of $19,808,772 (in millions). Of that $14,394,023 is public debt. If Treasury didn’t borrow another penny, but OASDI payroll receipts exceeded disbursements during the subject period (day, month, FY), (which is the case since 1982), the total debt automatically increases.
Look at the FY to date public debt issues: $74,176,049 and FY to date public debt redemptions: $73,904,633 but most of that is in non-marketable securities (the Fed portion and FY to date redemptions exceed issues by $125 billion). The public debt cash issues (FY to date) is $7,607,991 and public debt cash redemptions is $7,254,600; issues exceeded redemptions by $353 billion. So, you’re wrong that the public sector isn’t needed.
Congress has three options (or some combination of the three): 1) increase revenues 2) decrease expenditures, or 3) increase the debt limit.
Good point re 14th Amendment.
Bolding is mine. Why do (R)’s consider the sovereign government as just another household or firm? This is not the Middle Ages.
The problem is that US treasuries are used as the basis for a lot of complex derivatives with very thin margins. If the value of US treasuries changes, many such companies will go under. Yellen can provide money in general, but she can’t generally target specific companies having problems, and certainly not thousands of them all over the world at once. When those companies go bankrupt, their derivative contracts go into receivership and their counterparties don’t get paid, causing many of them to go under even if they officially still have net positive assets, bringing down more of their counterparties, and so on, and so on. This is the “web of derivatives” which can result in a minor player bringing , down the entire world economy. This was already true with the LCTM crisis in 1998 and it’s far worse now.
Screw the derivatives and the banks that issue them. They should have died in 2008 anyway.
Doesn’t this hurt an awful lot of little people too? I get that letting everything blow up can be awfully cathartic, but shouldn’t we at least try for a controlled demolition a few more years first?
What little people do you know who are deep in derivatives (essentially very risky) investments?
The people who’s businesses sell basic goods and services to those “derivative people.” The people who work for those “derivative people.”
The problem you and Voice have is that you have a villain you shout is powerful and evil, and yet you expect that villain to not take everyone else down with him when he goes, or worse yet, recoup loses from other people down the chain. You act like its not even possible that if you blow the world financial markets up that no little people will get hurt.
It’s like you’ve never even heard of Black Thursday. Or that the most recent “derivative people” crash didn’t fuck over a whole shit ton of little people.
So let me ask this. If they decide they want something big, like the repeal of a Obamacare, in exchange for raising the debt limit. Ok by you?
That scenario is a hostage taking scenario. I seriously doubt that Beauhmont or others here are arguing in favor of that. It will end badly for the GOP, if that is the approach taken. Are the Democratic congressional leaders saying they would gut the ACA for debt ceiling increase? I seriously doubt it. I suspect that there are a number of us here who would be okay with a clean debt ceiling raise, while cognizant of the argument that the whole debt ceiling thing is totally stupid.
That is exactly what this is all about. Hostage taking. If not today then next time and surely when a dem is president, as they did to Obama. If I were a republican I would most certainly ask for something in return. Time to stop it. Make them repeal the law for the votes.
It goes like this. We want to repeal Obamacare, reduce taxes, repeal Dodd Frank, build a wall, expel immigrants and ban Muslims and then maybe cut Medicare and social securit but first we want you to help us pass this debt ceiling bill. Ok? I can’t go there.
What I see happening is that someone says something fairly straightforward, namely that failing to raise the debt ceiling and defaulting on US debts would screw not just the folks that seem popular to screw with (those in finance will inevitably be whipping boys by populists from a variety of ideological orientations), but also us regular folk (too many pensions are tied to the equities markets – a whole other can of worms I would prefer to deal with in a more relevant thread). Hence an argument for a clean debt ceiling vote seem perfectly reasonable. Then another commenter comes in and twists the previous commenter’s by making a red herring argument. As far as I know our party’s leaders and rank and file members are NOT the ones arguing to take hostages (and certainly not the hostages you are talking about), and probably correctly have assessed that doing so would backfire. There may be some Freedom Caucus types among the GOP who are spoiling to take hostages of their own, but who’s got their backs at this point? If they’re counting on Ryan or McConnell, good luck. However awful those two are, they will watch their dreams of a tax reform bill (already looking shaky) go down in flames if the US defaults and sends the US and global economy into depression.
I have no desire to lend support to their evil agenda, and all they plan, which could cause immense damage. That’s pretty straight forward. They are terrorists. Hence, I do not support helping pass the debt limit bill short of repeal of the law. They own the government. Let them deal with it.
My guess is they’ll run to the Dems as in years past. Once all gets sorted out, a clean debt ceiling will get voted on and passed, probably at the last possible moment.
I hope not with dem help. But we are fools for this game and it needs to end.
Of course not. My comment wasn’t made to advise one course of action or another. My comment was a rebuttal to Voice and TarheelDem blatantly insinuating that doing what they wanted wouldn’t hurt everyone just ‘derivative people’ who they implied deserved it.
I didn’t think the Dems should have given in the first time, and I don’t think they should give in now. But I’m fully aware that the whole world, including billions of little people, will burn when we blow up the world. But I also think that in this particular case, if the hostage taking doesn’t stop the world is going to blow up anyway.
Nominally I believe it is the duty of a progressive, liberal, or lefty to delay such events as long as possible in the hopes a solution can be found, but in this particular case now that the fallout is all on Republican hands, delaying dealing with this decreases the chance of fixing the problem, not increases.
This is exactly what I was talking about. Thank you. Too many people are letting their (justified) anger cloud their better judgement.
I’m all for taking the silly hostage taking out of the debt ceiling. If the GoP puts up a clean bill, we should take it. No hostages for us, none for them.
My problem is simpler than you describe. In 2008, we were concerned about the little people who worked or traded with the derivatives people.
We bailed out the derivatives people to the extent that they couldn’t crash the economy. That took about 16 trillion of liquidity (in and then out) to ensure that $100 trillion of derivative exposure did not become real.
And it took $74 billion in TARP funds that were later repaid on generous terms after the players that created fraud and and a bubble that tanked the economy got huge bonuses. People who did absolutely nothing wrong except get a job and buy a house during what appeared to be prosperity lost their jobs and their houses. And their losses seem trivial to you? An act of nature? Something unavoidable?
You are clear that this is a hostage taking. But you are not clear that it is really the interests of the derivative investors that is being served by the ransom.
So how do progressives and Democrats in the short term extract the people who are likely going to be the worst hurt from the “heads I win, tails you lose” box that the GOP is trying to put the Congressional Democrats into?
Or would you just rather complain about how unreasonable people are for being clear about the situation and asking for a different alternative from last time.
Oh come on. You’re smarter than this. A massive financials crash isn’t just going to hurt bankers. It would be nice if it did, but that isn’t how these things work. Less than 2% of Americans owned stock in in 1929, but the 98% were hurt by the crash just the same. It would be the same thing now. Crashes hurt a lot more then the people who are responsible. Hell, the wealthy are probably better able to ride out a crash than the working class.
Is it going to hurt bankers — at all?
Who knows? I’m worrying about the non-bankers here. They WILL get hurt.
The 98% were hurt by the fact that those who lost capital in the crash took it out of their productive assets at fire sale prices and essentially sold plant and equipment out from under workers, crashing the aggregate demand through unemployment, which spiralled into a depression because private investors did not have the incentive to fork over lots of money to get demand started again (what FDR called pump priming).
Only the government has that incentive and only when there is a political demand that it do something.
The GOP demands that the government do nothing.
I confess, Tarheel, you’ve lost me. Are we arguing or agreeing vehemently?
How many more years did you have in mind? Will it get better when there is a dem president in office?
Well, for which? To break up the oversize banks and outlaw some of the crazier instruments? That might take a Dem congress as well as President. Just nuking the debt ceiling might have bipartisan support. I’m not sure how long I want to wait, but every once in a while we manage to fix a problem before it actually explodes. The Great Depression didn’t really end until there was a World War. I’d prefer to avoid both if possible.
I did not know there were derivatives around treasury bonds, but I suppose anything can be a bet on what happens in the future. It just doesn’t seem terribly profitable. But Yellen loaned or guaranteed between $16 t to $26 t during the crash a few years ago. That money was to protect the big banks, investment houses and AIG. I recall a lot of folks saying she should not have done that? So we got Dodd Frank to prevent the need in the future but this admin is doing what it can t take it apart.
. . . the crash a few years ago“.
Unless of course you mean by “the crash a few years ago” something other than the Great Recession of 2008-10.
I.e., a crash occurring after Feb. 1, 2014.
So it appears you “recall” what never happened.
Yellen wasn’t the Fed chair in 2008.
The $16 trillion of money was to prevent the terms of derivatives that were shorting the economy from going into effect by allowing liquidity in the system.
The TARP $74 billion dollars was loaned to stimulate the economy by allowing those US institutions hardest hit to repay their counterparties and stop the invoking of derivative contracts in a different way.
Apparently from news coverage, some of the “counterparties” who benefited were the executives who created the crisis in the first place. They are quite willing to create the next crisis, if they don’t get their tax cuts or get cuts in “entitlements”.
Dodd-Frank was a half-measure that somewhat prevents exactly the derivative meltdown that we saw before but does not prevent different creative finance from creating a meltdown by insulating consumer deposits from investment banking.
Derivative meltdowns need not be the first order effect of a failure to pay treasury bonds for one tranch of investors for however long it takes the GOP to come to its senses. What is hit for those investors in a given month is one part of their most conservative investment portfolio.
Intragovernment funds like the Social Security Trust Fund will not get posted their usual payments but that will be just an accounting entry unless the fund gets rapidly drawn down. That will be where the “little people” are most likely to get hurt.
Most individuals who directly have treasury notes are affluent enough to sustain a temporary loss. Most people who indirectly hold treasury notes hold a mixed basket of issues specifically to offset this sort of event. And the management of those indirect holdings mixes other securities with treasury notes.
Most cashing in of smaller bonds (savings bonds) are voluntarily timed.
But we are supposed to jump immediately to Pete Petersen’s tune, are we?
If the House Republicans really want to trigger a deep recession that will still be biting hard on election day 2018, I say with Napoleon: never interrupt the enemy when he is making a mistake. They’re going to crash the clown car sometime, may as well be when it has the maximum detrimental effect on their own political prospects. Continued Democratic enabling of this craziness will end in tears anyway- there really isn’t a non-harmful option here.
We’ve got a president whose entire business model was predicated on refusing to pay his bills. Tens of millions of Americans thought that was what they wanted in a leader. America is going to get an economic kick in the teeth, and we’ve more than earned it. Shame about all the collateral damage. But I’d rather that be how these loons are reacquainted with reality than, say, nukeyular winter.
It would sure be a shame if this issue created serious divisions in the GOP.
I’d love to watch that.
Looks like Dem leaders have already given the game away by making clear as long as they don’t have to eat some Repub shit their members will vote to keep Der Trumper’s Team of Incompetents in action. And by setting the bar so low, traditional negotiating theory would indicate that Dems will even eat some Repub shit as well in order to save the Treasury.
It appears that the various demonic lib’rul sub-caucuses, like the Progressive, refuse to vote as a bloc, unlike the infamous Freedumb Caucus. They don’t even make threats, apparently, and thus have no say. If they started demanding things and if people thought they were serious, then things could get mighty interesting on this debt ceiling circus, a malady which no other reputable nation suffers.
But it seems clear Ryan can calculate that the Dems can be expected to provide 90% of the votes on a clean bill for nothing in return, and he never has to worry about providing any concessions to avoid being the Speaker Who Done Blowed Up the World. And his irresponsible flock of Repub imbeciles gets to keep playing their little game of financial musical chairs.
Leave aside the fact that one would think that for America’s “conservatives” (who all claim they want to Starve the Beast and dismantle the illegitimate federal gub’mint), specifying massive budget cuts as the price for raising the ceiling would be met with wild enthusiasm by more than enough of their 240 boobs to pass easily. Yet apparently they can’t get a majority do it. Once again, do “conservatives” believe their own bullshit or not?
Screw their clean bill unless it repeals the fucking silly debt ceiling law.
Yeah. But what concessions? I think they should be staggered. You get 20% of the Democrats to vote if Mnchin shaves his Eyebrows. For 50% you get that plus Yellowstone National Park is renamed Obama National Park. and so on.
I think the problem with the concession demands is that the debt ceiling bill is limited as to the types of riders that can be placed on it. The reason the clean bill makes sense is that holding out for concessions means holding out for things that will appear to be trivial.
I’ve been telling my dad we’re going over the cliff, but he refuses to believe it.
Personally, I think he’s right: the Democrats WILL ride in to save the day. But like you, I don’t think they should. And who knows, given how fucking crazy the Freedom Caucus is, they may not be able to anyway.
Right now,I’m betting 60% we don’t go over the cliff, 40% we do.
Democrats have no leverage.
Threatening to cut the baby in half doesn’t work if one of the parties is a cannibal.
Depends on what the baby is.
The game is to cut spending that affects Democratic constituencies and not cut spending (often done by reducing revenues) that affects Republican constituencies.
The elephant in the room is the national security budgets that are financing endless global war with 800 bases in approaching 200 countries. And the scientific and technological research, development, and procurement that keeps lots of US industries alive in the face of poor management of the domestic economy.
The constituencies with targets on their backs are the elderly, disabled, veterans, and people temporarily out of work — and the pension funds of federal employees — so-called entitlements.
Who exactly is it that assigns “our credit rating”?
What will be the benchmark of “conservative” investment if the GOP blows up the US government debt as a reliable payer?
What the Democratic punch would be under realistic fiscal, instead of magical thinking, circumstances would be the GOP having to raise taxes on its major affluent constituencies and end the ability of GOP constituencies to sidestep taxes. The poster child for this would be President Trump and his family paying the taxes that would be consistent with those of most Americans. And an end to sheltering income in corporate forms.
That is much too complicated to achieve in a “debt ceiling” window.
Who does the world end for if the “world ends”?
The GOP wants it to end for Social Security, Medicare, Medicaid, Veterans benefits, and public pensions. Can the Democrats get out ahead of that?
Because if those constituency lose their incomes currently under so-called entitlements, the cratering of the economy will be much more serious than if Standard and Poors and Moody’s downgrades US creditworthiness and the US misses bond payments to “conservative investors”.
“The constituencies with targets on their backs are the elderly, disabled, veterans, and people temporarily out of work…”
That looks very familiar.
Replace Boehner with Ryan and it still works.
Yep, 2010 all over again but with a different Presidential view.
“Who exactly is it that assigns “our credit rating””
The same corrupt rating agencies that rated junk mortgages as AAA.
We have a winner.
That was junk securitized mortgages. In some big dollar, high finance arenas, nobody actually looks at the quality of the underlying assets and/or the contracts. Instead it all just piggybacks on the financial rating of the issuing company.
Enron knew how to play that game with all it’s affiliates and left the creditors with nothing to go after. Also related to those credit default swaps issued by that AIG affiliate.
The trick is not to be the last guy holding the junk. All those derivatives helped with that, like credit default swaps and options contracts. At some point it just became impossible to pretend anymore and the junk was no longer saleable. In normal times credit counts and corporate debt trades at more or less based on the credit. Treasury debt not so much, but probably non zero impact of poor rating.
Credit default swaps need to be banned. Again. They weren’t called CDS ninety or more years ago, but the financial instrument is the same: guarantee (insure) the value of a stocks and bonds. Once it was classified as an insurance product, banks and Wall St were locked out from issuing them. New York went further and delineated the conditions under which an insurance company could sell such a product — which effectively shut large insurance companies (if they were stupid enough to offer the product) out. It wasn’t something that small insurance companies dabbled in; plus, a guarantee from a podunk insurance company wouldn’t have sold. Then Glass-Steagall separated commercial banks, investment banks, and insurance companies.
Remember the hype about what consumers could get with the repeal of Glass-Steagall? One stop shopping for banking, investment, and insurance.
The credit agencies do it, but it is based on political risk for treasuries as opposed to credit worthiness. One of them lowered the rating during Obamas debt credit fight. That political risk could impact someone like China from buying debt. They could sell the dollars for euros or keep the dollars at the fed. Bonds for them are like savings accounts.
clean bill plus 175 votes in the House and 40 in the Senate
That’s what the Dems should want, we’ll close the gap with safe members
Everyone else just abstains, they don’t vote against
Which Dems would be ducking the vote and why?
“which Dems” isn’t the point, because the why is to absolutely minimize the number of Repubs who get away with ducking the vote.
thank you exactly
It’s not about ducking the vote it’s about making sure the republicans own it
There is a stronger position that Democrats can adopt that will improve the economy:
A one-time debt jubilee of all public and private debts. All of them, including state and local debts.
It would be interesting to know how much of cross-owed debt will get cancelled out and what the impact really will be of a debt jubilee.
Then maybe we can get a bunch of people out from under 20% compound interest for the rest of their life.
That’s a really interesting thought, wonder if anyone has done any in depth studies on this
If it came right down to it, you can be rather certain the republican finance people on Wall Street will take a few of the hold outs in the back room and read the the riot act. I would also bet they find a way for the fed to pay off maturing debt if the treasury ran out of money. Anyway. It just ain’t my problem. But a lot of billionaires and foreign governments will not,look with favor on their favorite party taking their money. Oh what a shit fight this could be for the GOP.
I think the Dem demand should be a tax increase on the rich and only the rich sufficient to make a significant dent in the deficit. Take the deficit issue away from the Republicans by making them blow up the debt ceiling in opposition to deficit reduction.
I think you’ve exactly right. A surtax of 10% on all incomes over $10,000,000 a year ought to do it. Or a luxury tax on yachts and jet planes. Something no sane ordinary person could ever think he/she will pay. Republicans won’t go near it. Turn the tables on those SOBs and make them either fuck over Grover or piss off their base or take a huge hit for taking down the whole damn economy. The world as we know it may end but there’ll be one party’s fingerprints on it.
That will displease the Democratic donor base like Soros, Bezos, a myriad of Hollywood actors and so forth. Therefore it will not be done because pleasing the donors is more important to them than pleasing the voters.
Most of those (though not Soros, I think) donate both ways. That much more reason they will have to pressure the Repubs to cave. Sanders has shown they don’t really need the donor class if they pursue popular policies.
The people he’s cited — particularly Soros — support higher taxes. If he read the Podesta emails and his contacts with Herb Sandler, one would know that Sandler is probably more liberal than most senators.
That’s why I left Buffet off.
Thank you.
As it’s been stated a thousand times before.
The ONLY responsible vote by any Democrat (or representative) is to vote to eliminate the debt ceiling.
Period.