Will the US default on October 17th 2013?

[Gass3268]

Pat Toomey joins the crazy crowd. I thought he was a conservative leader? I guess not...

http://thehill.com/video/in-the-news/327399-toomey-no-need-to-raise-the-debt-ceiling

[illegaloperation]

No, gop isn't crazy enough.

Yes they are.

http://www.politico.com/story/2013/10/debt-limit-deniers-98041.html?hp=t2_3

[Person Man]

So, what are they expecting if we don't raise the debt ceiling? That we will just fund the Government through inflation? I cannot say that I will not incidentally benefit from that.

[Person Man]

You guys do realize it's not mathematically possible for us to default. In one month, the treasury department makes $240,000,000.000 in tax revenue while only paying less than $100,000,000,000 on interest.

You do realize that the government only has the authority (until congress grants otherwise, good luck with that!) to pay bills as they come in.  They can't prioritize what does or doesn't get paid, since that could pretty easily lead to an abuse of the system. 

But the Republicans are depending on abusing the system to stay relevant. In their perfect world, there would be no elections and everything would be settled by the "will of the people".

[The Mikado]

Yeah, that's the problem with the "prioritizing" argument.  It's not the technical issues, its that the Treasury doesn't have the legal authority to spend less than Congress requisitioned on everything that Congress requisitioned.  Jack Lew (or Barack Obama!) doesn't have the legal authority to say "stop paying Social Security before you pay interest payments on the debt."  The idea that we can reprioritize debt payment without a Congressional bill authorizing the Treasury to do so is simply illegal (unconstitutional is more like it, as it's a direct violation of Congress' power of the purse).

[Person Man]

Yeah, that's the problem with the "prioritizing" argument.  It's not the technical issues, its that the Treasury doesn't have the legal authority to spend less than Congress requisitioned on everything that Congress requisitioned.  Jack Lew (or Barack Obama!) doesn't have the legal authority to say "stop paying Social Security before you pay interest payments on the debt."  The idea that we can reprioritize debt payment without a Congressional bill authorizing the Treasury to do so is simply illegal (unconstitutional is more like it, as it's a direct violation of Congress' power of the purse).

Basically, the Republicans think that by not raising the debt ceiling, they can cancel all of the programs that they do not like by default?

So, any bill to prioritize spending would not have enough votes and if one passed, it would be struck down or at least struck down long enough for it not to go into effect. This, of course, assumes that the Federal Courts can hear the cases.

[Beet]

But that's just the problem. Congress has passed bills demanding the appropriation of certain funds to certain causes, but then has passed other bills effectively preventing the implementation of such appropriations. This is why the debt ceiling concept if fundamentally flawed to begin with, if it is treated as anything other than a technical formality. It is as if Congress were telling Obama to drive a blue car, and then passed legislation banning blue cars.

[bedstuy]

So, what are they expecting if we don't raise the debt ceiling? That we will just fund the Government through inflation? I cannot say that I will not incidentally benefit from that.

I think the idea would be that they would keep disbursements from the Fiscal Service going based on whatever cash reserves they have and whatever revenues keep coming in.   

Then, they would stop all automatic payments on other items.  They would try to figure out what they could afford to pay, while maintaining cash reserves to pay for debt service.  Unfortunately, this may not be legal and would put the US into a recession immediately.  The other problem is that a financial panic caused by this situation could cause credit markets to freeze.  This could put the economy into free-fall state and assuming there is still inaction from Congress, this would lead to the collapse of the capital markets and the insolvency of all commercial banks.  That would be something like the Great Depression³.  Some Tea Party people would love that though because their freeze dried food, gold and automatic weapons will come in handy.

[Gass3268]

Heritage is backing off the debt limit fight, this has good news. 

http://www.huffingtonpost.com/2013/10/09/heritage-debt-ceiling_n_4070242.html?1381331489

[Torie]

Yeah, that's the problem with the "prioritizing" argument.  It's not the technical issues, its that the Treasury doesn't have the legal authority to spend less than Congress requisitioned on everything that Congress requisitioned.  Jack Lew (or Barack Obama!) doesn't have the legal authority to say "stop paying Social Security before you pay interest payments on the debt."  The idea that we can reprioritize debt payment without a Congressional bill authorizing the Treasury to do so is simply illegal (unconstitutional is more like it, as it's a direct violation of Congress' power of the purse).

You can't spend what you don't have, so you have to prioritize. You can't follow a law that is impossible to follow. In all events, of course the Pubs would pass legislation authorizing debt service payments as a priority or whatever, which Obama would no doubt veto, to prevent himself from having that technical legal authority.  It's all games.

But Bedstuy is right that there are risks in failing to pay other stuff, and the uncertainty, and a potential failing of confidence of the financial markets, so just because the debt service is paid, doesn't mean that there are not potential severe negative consequences. There just won't be a panic because debt service obligations are not met. In the end, Obama will pay the debt service no matter what the spin is now. Hopefully we will not have to find out if I am right, but I am confident that I am right.

[Person Man]

Yeah, that's the problem with the "prioritizing" argument.  It's not the technical issues, its that the Treasury doesn't have the legal authority to spend less than Congress requisitioned on everything that Congress requisitioned.  Jack Lew (or Barack Obama!) doesn't have the legal authority to say "stop paying Social Security before you pay interest payments on the debt."  The idea that we can reprioritize debt payment without a Congressional bill authorizing the Treasury to do so is simply illegal (unconstitutional is more like it, as it's a direct violation of Congress' power of the purse).

You can't spend what you don't have, so you have to prioritize. You can't follow a law that is impossible to follow. In all events, of course the Pubs would pass legislation authorizing debt service payments as a priority or whatever, which Obama would no doubt veto, to prevent himself from having that technical legal authority.  It's all games.

But Bedstuy is right that there are risks in failing to pay other stuff, and the uncertainty, and a potential failing of confidence of the financial markets, so just because the debt service is paid, doesn't mean that there are not potential severe negative consequences. There just won't be a panic because debt service obligations are not met. In the end, Obama will pay the debt service no matter what the spin is now. Hopefully we will not have to find out if I am right, but I am confident that I am right.

You think he will just have the treasury print money to pay the debt?

[Torie]

I never said that at all, but printing more money as it were could conceivably be part of the mix, at least short term. What I said, is that of course the cash available will be prioritized. Obama himself just said that his administration is "exploring all contingencies" if Congress fails to meet the deadline. "So obviously, you know, worst-case scenario, there are things that we will try to do — but I will repeat, I don't think any option is good." (emphasis added)

And despite all the assertions to the contrary, has the Administration said it is impossible for whatever reason to pay the debt service with the available cash, and they won't, and thus there will be a treasury debt default? No. And if it literally cannot do it for whatever reason (as opposed to just refusing to do it even though they can), the Administration is being reckless in not saying so now, and why, and what needs to be done to change that. But I don't believe that for a moment.

[The Mikado]

http://www.treasury.gov/initiatives/Documents/Debt%20Limit%20Myth%20v%20Fact%20FINAL.pdf

Everyone should check this out.  Straight from the horse's mouth.

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[Torie]

If we define "default" as failing to pay all government bills as they come due even though the debt service portion of them are paid, then obviously that is a true statement. It is all in the definition of the word - the capture the moniker game. But typically, the word "default" is used out there in the spin world in the same sentence as defaulting on government debt.

[Person Man]

I heard on NPR that if the US defaulted on its debt that it would be a "turning point in human history".

What would that turning point be? The end of the end? The beginning of the end? the end of the beginning? The beginning of a beginning?

[Lief 🗽]

http://www.nationalreview.com/corner/360815/costa-gop-moving-direction-short-term-solution-nro-staff

Robert Costa on MSNBC says the Republican leadership is moving towards a short-term (six week) debt ceiling extension, as they're becoming genuinely concerned they'll be blamed for a default.

[King]

http://www.nationalreview.com/corner/360815/costa-gop-moving-direction-short-term-solution-nro-staff

Robert Costa on MSNBC says the Republican leadership is moving towards a short-term (six week) debt ceiling extension, as they're becoming genuinely concerned they'll be blamed for a default.