The Washington Post headline is direct enough: White House without a plan to address debt ceiling. The debt ceiling may be far from the sexiest news item available to write about right now, but it’s important enough that it should be getting a lot more attention. If the ceiling is not raised in the relatively near future, probably by some time in September at the latest, the country will be unable to pay all its debts and our credit rating will collapse. Given the centrality of U.S. debt to the global economy, this could trigger a worldwide economic contraction or depression. If that doesn’t concern you, it’s also possible that some benefits programs will have to suspend their payments, meaning our most vulnerable citizens will be put at risk.
Raising the ceiling is theoretically simple. All it requires is a brief bill that authorizes the government to issue more debt. It’s been done in the past too many times to count, and usually without a ton of fanfare or controversy. During the Obama Era, however, the Republicans got it in their head that they could force the Democratic president to accept cuts he would otherwise veto by threatening to blow up the global economy. They concocted a variety of risibly false talking points to go along with this strategy, including that it was really about concern for the level of borrowing rather than resistance to how the money was spent, and a feigned reassurance that nothing too bad would result even if we did default.
Unfortunately for Trump, a lot of Republicans began to believe these talking points and now there are a lot of congresspeople who won’t raise the debt ceiling for him without getting concessions on spending as well as on other extraneous concerns.
One difference between now and the Obama years is that the Republicans are no longer dealing with a Democratic president. They don’t need to use this strong-arm tactic to shape or influence the budget. They also can’t necessarily depend on Democrats anymore in the minority to provide the lion’s share of votes for raising the debt ceiling. In essence, they’ve gone from blackmailing their political opponents to blackmailing themselves. Previously, the Democrats called in vain for a “clean” debt ceiling bill which meant both that it would raise the ceiling without making specific cuts but also that otherwise unpassable and unpopular legislation wouldn’t be attached to the must-pass bill.
This time around, it’s Treasury Secretary Steve Mnuchin who is requesting a “clean” bill. Yet, he is being contradicted by the director of the Office of Management and Budget, Mick Mulvaney, who wants to use the crisis to lock in cuts. Basically, Mulvaney is asking Congress to hold a gun to his own head.
The problem is that since the administration is divided they cannot come up with a coherent plan for getting the debt ceiling hike passed.
The White House budget director suggested in an interview Thursday with reporters that neither the Trump administration nor Capitol Hill lawmakers have set their terms for an agreement.
“It’s fair to say we haven’t settled on a final way to address the debt ceiling any more than the Hill has,” Mulvaney said…
…Mulvaney suggested he would like to have any increase in the borrowing authority be attached to other spending changes, a move that could attract Republican support but alienate Senate Democrats. President Donald Trump’s budget proposal seeks to beef up spending on the military and border security while cutting many social programs.
Treasury Secretary Steve Mnuchin has indicated he would like a “clean” bill to raise the debt ceiling, so it would not have to be tied to any spending changes, but Capitol Hill conservatives are resisting the idea…
…Mulvaney said Mnuchin would ultimately be in charge of handling the debt ceiling push “once we do settle on our formal policy, if we do.”
It’s remarkable that Mulvaney cannot even express confidence that the administration will eventually settle on a formal policy or strategy for raising the debt ceiling. All he can say is that “if they do” arrive at a strategy, the Treasury Secretary will be the main salesman for the plan.
Meanwhile, the folks who began to believe their own talking points are going to be a problem:
“Secretary Mnuchin believes it needs to be clean. I think the vast majority of the Republican conferences would not agree,” said Rep. Mark Meadows R-N.C., chairman of the Freedom Caucus, a group of strongly conservative House Republicans.
The Democrats are still incensed by how the Republicans behaved during Obama’s presidency and they do not want to provide most of the votes for raising the debt ceiling anymore now that they don’t control any lever of government. They might be willing to do it just because it’s the right thing to do, but not if it requires them to vote for a bill that isn’t clean. Secretary Mnuchin understands this, but that doesn’t mean that he will be persuasive.
This is why there’s a real threat that the Republicans won’t be able to pass the hike in time to avoid a downgrade in the nation’s credit rating or, even worse, a default that causes an international cascade of economic chaos and job loss.
There isn’t all that much time left to figure this out, especially because there is a long August recess scheduled for Congress. Currently, there’s no agreement about how to proceed between congressional Republicans and the administration, or even within the administration itself. The president is obviously distracted and clueless. So, I guess we should start preparing for the worst.
How would one prepare for the worst in the event of a default? Stockpile cash? Gold? Tins of Spam? So depressing…
Gold likely. Its not a collapse of civilization so not at the point where guns/food become the most valuable.
Stockpile cash. The most likely big risk is a shutdown of the banking network, so you couldn’t use plastic or ATMs. Of course, don’t if there’s a significant risk of robbery. Beyond that, keep an extra supply of nonperishables – dry food, toilet paper, etc., again only if your circumstances allow (don’t live like you’re a hoarder if you’re in a studio apartment). Only keep things you actually use, and rotate through them. If you eat peanut butter, for example, keep a couple of jars and use the oldest one when you need a new one.
Don’t you have confidence in the King of Debt? C’mon, Martin. Trump will just make a better deal.
This could really put a spanner into the wife’s desire to retire early.
Or at all…
Are you explicitly saying democrats should allow a default?
They baked that into the appropriations and revenue bills — both parties.
The debt limit increase doesn’t prevent a default. It just allows a larger debt.
Can’t we get clear on this Congressional buffonery for once?
Oh, I’ve argued since the beginning the debt ceiling is unconstitutional. Full Faith and Credit means the United States will always service it’s payments by any means. And budgets mean Congress has authorized the spending. That means the debt limit is implicitly whatever the congress has authorized + servicing payments.
I’m seeking clarity on Booman’s position.
mean Congress has authorized the spending.
Only appropriations do that.
Should we allow a default? Shit ain’t my donkey can’t find his way home.
huh?
“the country will be unable to pay all its debts” should read “the majority in Congress will be choosing not to pay the country’s debts”
It will never change unless and until they feel the pain of a default (whatever that is). Otherwise the game will go on and on since some of them will feel vindicated if they get the cuts and/or the spending they want. Some day, maybe in the distant future, someone will decide to do away with the absolutely stupid debt ceiling. So I would not lift a finger to help the stupid bastards. Obama is gone.
Let Trump explain to his friends why they can’t get paid. I recall that dumb ass saying something like he wants to “negotiate” the debt. Right ask Japan or China about negotiating the debt. Or ask American banks to tell their customers, FU.
Soooo. The GOP wants to actually try the “newspapers without government” form of governance.
No raise in the debt ceiling means that before the government reaches the debt ceiling, Trump must generate enough in savings to keep the basis functions of government operating until the next tranche of tax revenue comes in. That means cutting government spending drastically.
And the people dependent on that government spending will not be pleased to be treated arbitrarily by someone who decides based on whim.
Do I smell a manufactured crisis to justify runaway executive action? Yes, I do. Classic “shock doctrine”.
What can you do individually? Get ready to help those of your neighbors who are likely to be caught in arbitrary cuts. Increased contributions to food banks, increased organizing of shelter for folks evicted. And helping RIF’d federal employees and contractors find new jobs.
The Democrats need not participate in increasing the debt ceiling without some effort by Republicans to reduce the debt from their constituencies. That’s the reciprocal principle to what went on in the Obama administration.
There are lots of potentially popular targets in those Republican gimmees. Eliminating fossil fuel subsidies and imposing high fossil fuel severance taxes would be a good start. Taxes on lobbying services that would bring some of the lobbyists revenues to pay off the debt is another. Raising the minimum wage immediately to $15/hour for all jobs is another.
Provably would offset the deficit.
Are the Democrats going to hang tough and force Republicans to eat their own dog food?
The conditions provide cover for that sort of forcing McConnell to walk his own plank.
If there is to be panic, it should not come from the Democrats but from the people who will be most immediately hurt — investors who depend on US government securities being the most safe and secure investments to benchmark against. Let Wall Street panic and put pressure on their guys (the ones who want to undo Dodd-Frank).
Once again, ridding the farce of the debt ceiling altogether would be the best outcome. That removes it from legislative action and requires the White House to manage the appropriations and advocate for revenues.
Time for the fiscal shell game to end.
Whether he needs to cut or how much depends on the deficit we are running. I’m too lazy at the moment to look it up. But I doubt it is as much as some years past. But some cut he prolly must since taxes won’t be enough to cover it all. Well, I suppose he can issue script or some such thing. How about gold?
Every kind of script or coin other than platinum currently requires Congressional approval to issue. He could go the Trillion dollar Plat. coin route, but even that route has legal pitfalls. And that’s before you even get to the fact that everyone not in the US and lots of people in the US are going to loose faith in US bonds.
That right there is the end of the US economy as currently structured. The US is the only country in the world that has never defaulted on it’s debt. Hell US T-bonds don’t even have a clause on who gets paid and how in the event of a default unlike every other governments bonds. We enjoy a very special status even among countries that hate us for everything else because of that. Break that and everything crumbles.
And that is before things like credit rating drops and everything else that will go along with that.
If you understand anything about fractional reserve banking and modern economics, the US defaulting is the nightmare scenario.
I’m not really serious about script. But, as a thought experiment, why can’t banks do it? They can issue promissory notes? The platinum coin also runs into constitutional objections as I understand.
It is very likely – a surety – that rates will go up. But bonds could still be traded (at increasing discount over time) and the fed may have the power to buy them, as it did during QE and to loan money as it did during the financial crisis. I also saw a web site that talked about a Fed plan to deal with this eventuality for a short time.
I think the first fall out will be all the rating agencies lowering their ratings. They may do that even without a default. But in the end that may have little to do with our long term ability to sell bonds, and as I have said here before, there is no real reason we have to sell bonds to get money in the first place, since ours is a freely floating fiat currency.
But the killer may be the stock market. I think there is where it all comes apart. They would have to close it, but after a few days all bets are off. That seems to be the place where our panics have expressed themselves in years gone by.
Do you think any damn fool would wait until then to fix it?
That’s just silly. No single modern nation has all the materials and manufacturing to be self sufficient. If we’re a dead beat, we can print all the cash we want, but if no one thinks it’s worth anything, then it isn’t worth anything.
Fiat currency has value because we’ve convinced people it has value after cutting out the middle men(gold, silver, platinum, etc…) who only had value because we convinced people it had value beyond what you could make industrially out of it.
Gold is actually a pretty worthless metal save for a few uses in electronics and some uses in the space industry. But it’s one of the most valuable metals on earth because 6000 years ago some huckster tricked everyone else into thinking his pretty metal was worth 10 chickens because it was pretty.
If we default, the dollar isn’t going to be worth the cotton fiber paper it’s printed on because no one will believe it’s worth the cotton fiber paper it’s printed on. You’d have just as much luck paying your bills with rocks.
The very ideal of ‘what is money’ is the reason you see various crypto currencies (dogecoin, bitcoin, Ethereum, etc.) taking off. Despite not having a government back them, with all the good and ills that come with that, people believe they have value and are worth other currencies… so they do have value and are worth other currencies.
People in other countries think the US Dollar has value because the US pays it’s fucking bills, always. They lend us lots and lots of money, extend really good credit ratings, and let us get a way with a lot of things they don’t let other countries get away with because they know at the end of the day they are going to get paid. If that goes away, so does the entire US economy with it’s absolutely massive trade deficits because if they aren’t going to get paid, then they are not going to finance the lending of all that money we use to buy things from them.
Now, now, in TrumpWorld, Donny will throw the country into bankruptcy, work out a deal for pennies on the dollar, and walk away with his holdings intact while some other schmuck (like, the rest of us) will be left holding the bag.
Well, that’s how it’s always worked for him before, right?
I heard him say so. He thinks he can negotiate our debt down. Can you imagine anyone agreeing to that? I think if he defaults that is a constitutional crisis, and he can be impeached for failing his oath of office. But then I am not a lawyer.
There is another question here. This is a debt limit. Presumably the fed can pay debt off but not issue no new debt?? In that case we would need to cut the spending.
If you mean these guys wish to destroy the nation, they have a good shot at it. And we allow them. And the longer we do not pay our debts the worse it gets. Interest rates go up first and the market crashes.
But wise up. Absent these idiots our currency is the best in the world and we can print any amount we need so long as there are goods and services denominated in dollars. There is no restriction on it. But don’t try to pay your taxes in bit coin. You gotta have the real thing. So yes if we, the governed, consent to the destruction of the country, this could be a way to do it. In that case there won’t be a police force or army or…..except as the local citizens organize it.
Bit coin value is built on speculation. Nothing backs it up. There is no nation, no productive capacity and no gold. And there is no government. In that sense it is lawless. Those who use it may be trying to hide something. That, I would suppose, is the value. You wouldn’t want to put your retirement funds in it, or would you?
The dollar has productive capacity behind it. That and the fact you gotta have it for taxes means you need it. Have you tried using euros to buy something lately?
Do you really think China is loaning us money? Or are we and they using bonds as their savings account? I mean we could open a savings account at Bank of America I suppose, if that makes them feel better? They have all that money from selling us goods, and they have to do something with it, like maybe buy a football stadium?
Since those bonds are in dollars we could pay them all off tomorrow, if we chose. The government issues bonds bc congress requires it. They are not necessary to fund anything anymore than the fed needed to issue bonds to bail us out of the recession. The fed actually buys bonds. they have around $2.4 trillion of our debt now I believe. It was called QE. Where did they ever get the money to do that?
Credit ratings? O man whatever will we do with a poor credit rating and all those idle printing presses?
This is Bannon in a nutshell: his entire governing policy is “HULK SMASH”. It pretty well describes every policy”decision” coming out of the WH, even the chaos is useful.
Republicans have never had any plan other than to Obstruct the Obama Admin, and they were planning to do the exact same thing for Clinton.
Trump’s win, for better or worse, threw a big old monkey wrench in the “plans” of Republicans, aka, now they have to actually PLAN and DO things, rather than Obstruct, Obstruct, Obstruct.
It’s like watching headless chickens running around.
So unfortunate for We, The People, who are getting shafted right, left and center. Ugh.
In other news on the monopoly front, Amazon just made a $13.7 billion bid for Whole Foods. Amazon stock is up 3.7% on the news while Whole Foods is up 29%. The loser thus far is Kroger down 11.4% and Walmart down 3.13%. So what you say?
Amazon is cornering the market on upscale Dumbasfuck Yuppie Wallet-Emptying Stores?
I don’t understand why this would affect Kroger stock, unless they were in the running to buy WF.
It’s not like people are thinking “Oh should I shop at Whole Paycheck or Krogers?”
Amazon is buying expertise in food logistics, is what they are doing.
And brick and mortar stores for it’s food shipping business and connected logistics that could use WF stores as local pickup points for any Amazon shipped product.
WF has 450 stores. That’s a lot of places Amazon can reach out and touch that much easier with all of its non-data-center services.
They also bought it for a pittance. It’s a very good deal for Amazon. It also might be a good deal for consumers as well as it should mean more and better competition with other big chain stores, especially Wal Mart.
We’ll see though.
Amazon is buying Whole Food locations.
Some analysts have opined that the value of Whole Foods as a business was negligible and that the real estate is fully worth the valuation they paid.
Whole Foods will be learning logistics from Amazon without any doubt.
Amazon is a disrupter. It went after books and took Borders out and Barnes and Noble sales are way down. They went after on line sales of nearly everything. And now Sears has warned it may be going out of business and Penny’s and Macy’s and malls are in trouble. They got into electronics and now Circuit City and others are gone. Best Buy though is doing well but they responded well too. Now it is groceries, and it could be for home delivery who knows. So investors are a little wary about other grocery chains. Hence, the stock price drop.
Now if you think the market is wrong about this, Kroger has to be a good buy about now.
Are you worried about monopoly power?
Leading at last to the implosion of the late-finance stage of the capitalist mode of production-for profit, and its inevitable replacement by a socialist mode of production-for-use.
I’m not saying we wouldn’t get our hair mussed….
Please proceed!
Thanks for making me clean the coffee off my screen.
Please proceed, indeed.
What exactly should be the Democratic caucus’s position.
My thought:
The (D)’s should vote 100% for a clean bill with no riders. It’s every man for himself on a clean bill with a short expiration date. They should vote 100% against a bill with riders attached, even if the riders aren’t so bad.
They should offer their own bill or an amendment deleting everything in the bill (if it isn’t a clean extension for at least the fiscal year) and replacing it with a repeal of the (1926?) debt limit requirement. A budget implies a debt limit. A separate debt limit is just a waste of time and shows a 1920’s understanding of economics (i.e. nothing past Adam Smith).
Or n1colas’ plan below. It’s more aggressive than mine, but I’d go along.
The only vote the Democrats should provide is a vote to get rid of the debt ceiling altogether, which solves this upcoming self-inflicted “crisis”, and doesn’t allow the Republican party to continue holding the economy hostage to their inanity.
I think the M&M boys have a couple of alternatives in mind that they will, seemingly, pull out of the hat at the last moment.
There’s no possibility on getting the debt limit raised in any non-crisis situation, I.e. at the deadline.
They also know there’s no upside to proposing a realistic compromise to be torn to shreds well in advance of deadline.
The Democrats are the only ones negotiating here. They need to stay firm because the Republicans have to cave or face severe consequences.
My guess is that the (Republican) House pleases the (Republican) Senate on the debt limit if the Senate passes Trumpcare, pleasing the House.
No sense hardening positions until the fate of Trumpcare is clear.
Yup … the Repubs’ masters would never allow a default … too damaging to THEIR bottom line, no matter what the Teabaggers want. A way will be found, and I hope the Dems have the b$^ls to stand firm.
I am still unclear of the problem here. The debt limit relates to the debt and prevents the Treasury from issuing any new bonds in excess of the limit. If there is a budget, the government does not need to shut down. the Treasury can spend up to the limit of the budget and the debt limit. Obviously it cannot spend in excess of the tax revenue, i.e. no deficit. It can also redeem bonds as they come due and issue replacements.
But if this is a two-for with no budget authorization to spend, the government shuts down, since there is no authorization to spend anything. That seems to me to be a suicide pact. It is likely congress would approve some spending to avoid that, like paying the military.
Even with a budget to spend the spending cuts would have to be around 600 billion, the annual deficit, or 15% of the expected spending level. That sort of cut will lead to recession. And the stock market will likely not take the news easily.
Here it is from Wikipedia: