Geithner: SURPRISE! USA to hit debt ceiling on Monday

[Blue3]

Geithner will take extraordinary measures to prevent default, but it will only last a month or two at most.

So yeah, about that fiscal cliff... can Boehner man up, allow the House to reassemble, and allow the Democrats' bill to be voted on (which will probably pass, just not have a majoirty of GOP votes)?? Hopefully they don't go to compromise in conference committee, that will give McConnell another chance to filibuster it.


EDIT: forgot the link:
http://money.cnn.com/2012/12/26/news/economy/debt-ceiling/index.html?hpt=hp_t2

[○∙◄☻¥tπ[╪AV┼cVê└]

The debt ceiling being held hostage at the expense of the nation's credit rating is ridiculous.

While there are clearly downsides, going over the cliff would help the deficit far more than any deal.

[Blue3]

The debt ceiling being held hostage at the expense of the nation's credit rating is ridiculous.

While there are clearly downsides, going over the cliff would help the deficit far more than any deal.

True on both counts, but going over the cliff may also put us back in a recession.

Would Republicans be willing to block tax cuts for 98% of Americans, because they want the rich to get tax cuts too, if we do go over the cliff? It would be political suicide, but the GOP has been acting really stupid lately...

[badgate]

Would a smaller recession help bolster a faster recovery once it passes?

[Blue3]

Would a smaller recession help bolster a faster recovery once it passes?

I don't see how that makes sense. Especially since the USA falling into recession could cause China and the other emerging economies to stagnate, causing another worldwide financial collapse and (with Republican likely to block any stimulus this time) a depression.

[Beet]

Hey, Obama chose to play this game, instead of doing what I suggested, which is being accommodating, even if he ends up looking weak to the netroots and lefties. It's more important that he can convincingly say he pulled out all the stops to avoid any breakdown in the process. O/c I blame the Republicans far more, especially after last week's clusterf--, but I focus on Obama because he's the one I most expect to do the right thing.

[memphis]

Hey, Obama chose to play this game, instead of doing what I suggested, which is being accommodating, even if he ends up looking weak to the netroots and lefties. It's more important that he can convincingly say he pulled out all the stops to avoid any breakdown in the process. O/c I blame the Republicans far more, especially after last week's clusterf--, but I focus on Obama because he's the one I most expect to do the right thing.

Obama should just give the Republicans everything they want even though he decisively won the election? Why even have an election? Just make Boehner emperor.

[LastVoter]

Would a smaller recession help bolster a faster recovery once it passes?

The question we should be asking is whether or not it will make Greece more likely to default, and what kind of turn will Greece take with radical politics.

[Landslide Lyndon]

Hey, Obama chose to play this game, instead of doing what I suggested, which is being accommodating, even if he ends up looking weak to the netroots and lefties. It's more important that he can convincingly say he pulled out all the stops to avoid any breakdown in the process. O/c I blame the Republicans far more, especially after last week's clusterf--, but I focus on Obama because he's the one I most expect to do the right thing.

Obama should just give the Republicans everything they want even though he decisively won the election? Why even have an election? Just make Boehner emperor.

Beet must have missed the news about Plan B's demise.

[politicallefty]

This is really getting ridiculous. If there was any common sense in this country (although it does obvious that there isn't any right now), we wouldn't have a debt ceiling at all. It really is stupid that we have to have a separate vote to approve borrowing for money Congress has already decided to spend. If anyone can make sense of that, I'd really like to know because its current existence seems only to constrain the hands of a Democratic President (primarily to extract budgetary concessions).

[krazen1211]

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” he said. “It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”

[Beet]

Ok, fine. Why are the Republicans so intransigent, that they can't even pass Plan B, the unilateral plan of their own Speaker? And won't raise the debt ceiling, which is just supposed to be a technical vote on appropriations that they'd already previously allocated? The only difference between not raising the debt ceiling and not allocating funds to begin with, is that the former unsettles the markets more and thus does more damage to the economy. I just don't understand why the Republican party wants to do more damage to the economy, just 'cause.

[krazen1211]

Ok, fine. Why are the Republicans so intransigent, that they can't even pass Plan B, the unilateral plan of their own Speaker? And won't raise the debt ceiling, which is just supposed to be a technical vote on appropriations that they'd already previously allocated? The only difference between not raising the debt ceiling and not allocating funds to begin with, is that the former unsettles the markets more and thus does more damage to the economy. I just don't understand why the Republican party wants to do more damage to the economy, just 'cause.

They didn't allocate those appropriations. At best, some other prior congress allocated those appropriations.

Such is the utter nonsense of mandatory spending that is not subject to reauthorization.

[Beet]

Ok, fine. Why are the Republicans so intransigent, that they can't even pass Plan B, the unilateral plan of their own Speaker? And won't raise the debt ceiling, which is just supposed to be a technical vote on appropriations that they'd already previously allocated? The only difference between not raising the debt ceiling and not allocating funds to begin with, is that the former unsettles the markets more and thus does more damage to the economy. I just don't understand why the Republican party wants to do more damage to the economy, just 'cause.

They didn't allocate those appropriations. At best, some other prior congress allocated those appropriations.

Such is the utter nonsense of mandatory spending that is not subject to reauthorization.

So the Republicans want to repeal Social Security and Medicare now?

[krazen1211]

Ok, fine. Why are the Republicans so intransigent, that they can't even pass Plan B, the unilateral plan of their own Speaker? And won't raise the debt ceiling, which is just supposed to be a technical vote on appropriations that they'd already previously allocated? The only difference between not raising the debt ceiling and not allocating funds to begin with, is that the former unsettles the markets more and thus does more damage to the economy. I just don't understand why the Republican party wants to do more damage to the economy, just 'cause.

They didn't allocate those appropriations. At best, some other prior congress allocated those appropriations.

Such is the utter nonsense of mandatory spending that is not subject to reauthorization.

So the Republicans want to repeal Social Security and Medicare now?

Some of them might. At the minimum they seek to reduce spending on those programs and have openly said so.

In any case why didn't the fellows who created such programs raise the debt ceiling to pay for their spending that they voted for? They are the ones who created the problem.

[Torie]

Krazen makes a key point in the dynamics of all of this, and why each of the parties acts the way that it does. Entitlements/taxes go on forever unless repealed - appropriations are ephemeral lasting the life of but one Congress - no Congress can bind a future one. So any spending deal not involving entitlements expires at the end of the session, while a taxing deal, and/or no entitlement cut deal, continues on forever, unless one party has the trifecta with 60 votes in the Senate - a high hurdle indeed.

The Pubs are just not as dumb as some would like I guess, putting aside whether or not you agree with their agenda on this. They are just not going to go into long term debt as it were in exchange for one real hot flash in the pan date.

[Beet]

Ok, fine. Why are the Republicans so intransigent, that they can't even pass Plan B, the unilateral plan of their own Speaker? And won't raise the debt ceiling, which is just supposed to be a technical vote on appropriations that they'd already previously allocated? The only difference between not raising the debt ceiling and not allocating funds to begin with, is that the former unsettles the markets more and thus does more damage to the economy. I just don't understand why the Republican party wants to do more damage to the economy, just 'cause.

They didn't allocate those appropriations. At best, some other prior congress allocated those appropriations.

Such is the utter nonsense of mandatory spending that is not subject to reauthorization.

So the Republicans want to repeal Social Security and Medicare now?

Some of them might.

Which ones?

You must be logged in to read this quote.

Well, yes, we have quite a problem here. The next time the Democrats are in control of government, they'll have to repass every open-ended appropriation from 1776 until now to eliminate unfunded mandates that have, by a technicality, remained hidden in our system. This is surreal.

Or, Treasury can just print silver dollars, or whatever.

[Beet]

Krazen makes a key point in the dynamics of all of this, and why each of the parties acts the way that it does. Entitlements/taxes go on forever unless repealed - appropriations are ephemeral lasting the life of but one Congress - no Congress can bind a future one. So any spending deal not involving entitlements expires at the end of the session, while a taxing deal, and/or no entitlement cut deal, continues on forever, unless one party has the trifecta with 60 votes in the Senate - a high hurdle indeed.

The Pubs are just not as dumb as some would like I guess, putting aside whether or not you agree with their agenda on this. They are just not going to go into long term debt as it were in exchange for one real hot flash in the pan date.

Wait, is this really true? So Congress cannot enact a bill that says, "Those who are of age 65 shall collect X amount, and we authorize the government to borrow the funds to implement this law?"

What then accounts for the Treasury's ability to mint a $1 trillion coin? Or is printing money not counted in the notion of one Congress "binding" a future one?

Conceptually, wouldn't it seem that the basic idea of a permanent social insurance scheme inherently involves earlier Congresses "binding" later ones? Otherwise, what is the difference between mandatory and discretionary spending? If each Congress is entirely fiscally sovereign, then isn't all spending basically discretionary? Programs like Social Security would have to be reauthorized with each Congress, in 2-year intervals.

In any case Torie, what is being discussed here is the debt ceiling, which is temporary, so your point is rather off topic. But entitlement cuts are certainly on the table regardless, so your point is invalid still.

[Torie]

Krazen makes a key point in the dynamics of all of this, and why each of the parties acts the way that it does. Entitlements/taxes go on forever unless repealed - appropriations are ephemeral lasting the life of but one Congress - no Congress can bind a future one. So any spending deal not involving entitlements expires at the end of the session, while a taxing deal, and/or no entitlement cut deal, continues on forever, unless one party has the trifecta with 60 votes in the Senate - a high hurdle indeed.

The Pubs are just not as dumb as some would like I guess, putting aside whether or not you agree with their agenda on this. They are just not going to go into long term debt as it were in exchange for one real hot flash in the pan date.

Wait, is this really true? So Congress cannot enact a bill that says, "Those who are of age 65 shall collect X amount, and we authorize the government to borrow the funds to implement this law?"

What then accounts for the Treasury's ability to mint a $1 trillion coin? Or is printing money not counted in the notion of one Congress "binding" a future one?

Conceptually, wouldn't it seem that the basic idea of a permanent social insurance scheme inherently involves earlier Congresses "binding" later ones? Otherwise, what is the difference between mandatory and discretionary spending? If each Congress is entirely fiscally sovereign, then isn't all spending basically discretionary? Programs like Social Security would have to be reauthorized with each Congress, in 2-year intervals.

In any case Torie, what is being discussed here is the debt ceiling, which is temporary, so your point is rather off topic. But entitlement cuts are certainly on the table regardless, so your point is invalid still.

Well yes, if all else fails, and you get the ephemeral budget cuts for forever tax increases and no entitlement cuts, you still have the debt ceiling nuclear button to just blow it all up in desperation - unless the tax increases make it all go away of course, and the cash flows balance. You're right.

[True Federalist (진정한 연방 주의자)]

Beet, while politically it could never be done, legally Congress could simply scrap Social Security and Medicare altogether anytime it wished and leave all those seniors that currently receive benefits dependent upon the kindness of their friends and family.  It has been quite careful to make those benefits not be a contracted obligation.

[krazen1211]

Which ones?

Well, yes, we have quite a problem here. The next time the Democrats are in control of government, they'll have to repass every open-ended appropriation from 1776 until now to eliminate unfunded mandates that have, by a technicality, remained hidden in our system. This is surreal.

Or, Treasury can just print silver dollars, or whatever.

http://thehill.com/blogs/floor-action/house/219093-paul-ryan-budget-passes-house-with-ten-republican-defections


These Republicans voted to significantly slash the Medicaid program that your guys created to run deficits into perpetuity.

The legislative record shows that this congress has only allocated limited funds. There is little surreal about them not wanting to borrow for someone else's programs. Only in your 2 year scenario would the current congress have authorized these programs spending.

At the minimum, numerous GOP governors have stated that they have no interest in adding more deficits and debt for the Medicaid program. Not surprising that they don't want to give gifts to the other guy's voters.



There is nothing hidden about these programs. They were always there; they merely have swelled to gargantuan proportions during this presidency.

[Beet]

Beet, while politically it could never be done, legally Congress could simply scrap Social Security and Medicare altogether anytime it wished and leave all those seniors that currently receive benefits dependent upon the kindness of their friends and family.  It has been quite careful to make those benefits not be a contracted obligation.

That was never in question.

The issue is whether Congress could enact such a program that legally (not contractually) spends an unspecified amount of money over different Congresses. This seems like, in general, something governments in most countries do as a matter of course. Either a Congress can say, "We enact a program to pay those over 65, $10,000 per year, adjusted for inflation, from here on out, and authorize this and future executives to conduct the financial & other operations necessary & proper to carry this out", or it cannot. The issue here is that it's an open-ended commitment. Congress can never know how much a program will eventually cost. So that Congress is binding all futures Congresses to this open-ended commitment, unless, as you said, they explicitly repeal the commitment. But future Congress are bound in the sense that they have to take affirmative action to repeal it; if they do nothing, the commitment continues as part of the status quo. So if the original Congress can do that, then of course it should be the manner of enacting social entitlements.

But if a Congress cannot do that, and can only allocate fixed amounts (such as by raising the debt ceiling to a fixed amount), then a Congress is stuck with either trying to raise the debt ceiling by some absurdly high amount (such as $1 quadrillion), or it just has to be accepted that each Congress must reauthorize all of these programs. As opposed to just refraining from repealing them. But both of the latter two options seem very strange.

[Beet]

Which ones?

Well, yes, we have quite a problem here. The next time the Democrats are in control of government, they'll have to repass every open-ended appropriation from 1776 until now to eliminate unfunded mandates that have, by a technicality, remained hidden in our system. This is surreal.

Or, Treasury can just print silver dollars, or whatever.

http://thehill.com/blogs/floor-action/house/219093-paul-ryan-budget-passes-house-with-ten-republican-defections


These Republicans voted to significantly slash the Medicaid program that your guys created to run deficits into perpetuity.

The legislative record shows that this congress has only allocated limited funds. There is little surreal about them not wanting to borrow for someone else's programs. Only in your 2 year scenario would the current congress have authorized these programs spending.

At the minimum, numerous GOP governors have stated that they have no interest in adding more deficits and debt for the Medicaid program. Not surprising that they don't want to give gifts to the other guy's voters.

There is nothing hidden about these programs. They were always there; they merely have swelled to gargantuan proportions during this presidency.

It's surreal, or bizzare, because what are in most countries, and I would also contend, generally understood to be in this country as well, open-ended commitments, are being capped. Because a program such as Social Security is understood to be defined based on the payments it makes and the taxes used to fund those payments without an absolute limit on the amount of debt that can be taken up to meet the legal commitments in the program. If there was a hard limit, then that limit would be quite significant and would be closely tied to the image of the program in the popular imagination but, even now, it is not. It would also mean that every increase in the debt ceiling is effectively an expansion of the Social Security program, but again, I have never heard it described in that manner. Nor have I ever seen any description on how benefits are to be distributed in the event that the program had to be 'crammed down' by the debt ceiling. I wouldn't be surprised if such a description does not even exist in the law.

[True Federalist (진정한 연방 주의자)]

The issue is whether Congress could enact such a program that legally (not contractually) spends an unspecified amount of money over different Congresses. This seems like, in general, something governments in most countries do as a matter of course. Either a Congress can say, "We enact a program to pay those over 65, $10,000 per year, adjusted for inflation, from here on out, and authorize this and future executives to conduct the financial & other operations necessary & proper to carry this out", or it cannot. The issue here is that it's an open-ended commitment. Congress can never know how much a program will eventually cost. So that Congress is binding all futures Congresses to this open-ended commitment, unless, as you said, they explicitly repeal the commitment. But future Congress are bound in the sense that they have to take affirmative action to repeal it; if they do nothing, the commitment continues as part of the status quo. So if the original Congress can do that, then of course it should be the manner of enacting social entitlements.

But if a Congress cannot do that, and can only allocate fixed amounts (such as by raising the debt ceiling to a fixed amount), then a Congress is stuck with either trying to raise the debt ceiling by some absurdly high amount (such as $1 quadrillion), or it just has to be accepted that each Congress must reauthorize all of these programs. As opposed to just refraining from repealing them. But both of the latter two options seem very strange.

The way Social Security is structured, all money passes through the off-budget trust funds.  So long as those mythical trust funds have a positive balance, then they pay out as authorized.  If they ever go empty, the law calls for them to pay out on a pro rata basis.  So if the trust fund goes empty and they can only pay 73% of the authorized benefit with what they are taking in in payroll taxes, then the law says everyone gets only 73% of what they would if the trust fund had the money to pay in full.

In fact, the debt ceiling hasn't really affect Social Security in the past, but it may now.  Back in the days when the payroll taxes were higher than the payments, one of the tricks used when the debt ceiling was being approached was to have the trust funds hold off on buying government debt so that it could be borrowed to fund other outlays instead.  However with the trust funds starting to be drawn down, they are now cashing in debt on a regular basis, which means there needs to be money in the general treasury to redeem the Social Security debt, which once redeemed it can reissue in the general marketplace.  When we near the debt ceiling, there isn't nearly as much wiggle room as there once was.

More generally, subject to being repealed later, the only limitation on how long an appropriation can be for is that army appropriations (but not navy appropriations) are limited to at most two years in advance.

US law used to have procedures to deal with budgets being passed that had deficits that were above certain limits, but the GOP found them restrictive and so repealed them last decade.  However, unlike the deficit ceiling, there never was a procedure in place to deal with hitting the debt ceiling.  Constitutionally, I would see no other option than for Obama to impound appropriations for lack of money in the treasury to pay for them. This is despite Congress saying presidents can't impound any more because they got upset with Nixon for using the impoundment power as back-door line item veto.  However, it's like the War Powers Act.  No president has ever acknowledged Congress' power to bind his hands in such a fashion.