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Debates Forum

  1. Subscriber Sleepyguy
    Reepy Rastardly Guy
    12 May '11 21:47
    Two news items for your enjoyment today. First, the US will apparently hit our debt limit Monday.

    http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201105111542dowjonesdjonline000477&title=treasury-auctions-to-take-us-over-debt-ceiling-on-monday
    WASHINGTON -(Dow Jones)- The Treasury Department auctioned $56 billion in new debt Tuesday and Wednesday, enough to take the U.S. over its federal debt ceiling when the three- and 10-year notes settle on Monday.

    Treasury officials last month flagged May 16 as the day the government would hit the $14.294 trillion debt limit.

    The U.S. is selling $72 billion in new debt over three days this week. The Treasury auctioned $32 billion in three-year notes Tuesday and $24 billion in 10-year notes Wednesday, and will sell $16 billion in 30-year bonds Thursday. All of the auctions will settle Monday.

    As of Tuesday, total debt subject to the limit was $14.274 trillion, according to the Treasury Department.

    The Obama administration has asked Congress to raise the limit, warning that failure to act could lead the government to default by Aug. 2--and could spook investors even before then.

    And second, the GAO has apparently told GOP lawmakers that not raising the limit won't be a disaster, a shot in the arm for those radical radicals who feel like playing chicken with the full faith and credit of the US government.

    http://www.businessinsider.com/gao-stands-by-1985-ruling-2011-5
    We wanted to update you on a story we first wrote about yesterday...

    The buzz this week within the GOP conference surrounded a 1985 GAO ruling that said, essentially, that the Treasury did have the right to prioritize interest payments over domestic spending.

    This is a key tenet of the debt ceiling hawks, who claim there's no risk in not raising the ceiling, because the Treasury has plenty of revenue to pay off bondholders and avoid default.

    In other words: The Treasury would stop paying things like social services, various bureaus, possibly the military, etc., in order to have enough money to make interest payments.

    But there was some debate about whether the 26-year old ruling still applies due to some changes in the law since then.

    Well, the GAO believes it does. We hear that the GAO sent a message to Congress that the 85 ruling still applies, and nothing has changed in the statutes since then that would make it null and void. GAO attorneys signed off on it as well.

    So within the GOP, this should be a shot in the arm to the hard right, now feeling fully confident that failure to raise the debt ceiling won't cause a crisis.

    Boehner has been talking tough, which means approximately nothing if the last go round is any indication. Predictions? Will the GOP have the stones to actually deny an increase in the debt ceiling, and what will happen if they do?
  2. 12 May '11 22:47
    It's very telling that the Republicans are willing to put a gun to the country's head to try to get what they want. If the United States is forced to default on its debt for the first time in history, it will make the financial crisis of 2008 look like the end of the Clinton years.
  3. Subscriber Sleepyguy
    Reepy Rastardly Guy
    12 May '11 22:53
    Originally posted by USArmyParatrooper
    It's very telling that the Republicans are willing to put a gun to the country's head to try to get what they want. If the United States is forced to default on its debt for the first time in history, it will make the financial crisis of 2008 look like the end of the Clinton years.
    According to that 2nd article there will not be a default if the debt limit is maintained.
  4. Standard member telerion
    True X X Xian
    13 May '11 03:53
    Debt limits are stupid. Just gives politicians another way to sneak in all sorts of unrelated pet policies. They are completely impotent to prevent Congress from increasing the debt (they just keep raising the ceiling) and can only serve to give our debt holders reason to doubt that we will honor our obligations.

    Besides the cut in domestic spending would have to be immediate and brutal. We're talking soldiers not getting paid or old people getting big cuts to SS checks. All so that we can balk at something that we were going to do anyway.

    I mean even the Ryan plan, which is by far the most draconian of all proposals about cutting government spending, would still run deficits for some years into the future (and hence need to raise the debt ceiling).

    We should just do away with the thing. At best it's completely ineffective.
  5. Standard member telerion
    True X X Xian
    13 May '11 03:56 / 2 edits
    Originally posted by Sleepyguy
    According to that 2nd article there will not be a default if the debt limit is maintained.
    But investors aren't stupid either. They aren't going to care if it's technically not a default. They are going to grow concerned that the US won't work through its partisan bickering long enough to figure out a solution. I mean the government won't honor its promises to its people? How long before they stop (or delay) honoring it to debt holders.

    Edit: Not to mention building into their predictions of future US revenues the severe contractionary impact of a sudden, large disruption to government spending. (Making them more suspicious that the US will have trouble closing future deficits.)

    Edit2: Last word I read, the Treasury thinks it can avoid the ceiling until early August thanks to "extraordinary measures" the first few of which began to roll out last Friday.
  6. 13 May '11 08:09
    Originally posted by Sleepyguy
    According to that 2nd article there will not be a default if the debt limit is maintained.
    In that scenario, you'll need huge cuts to government spending, which means lots of useful expenses will need to be cancelled. This will harm the economy, particularly on the long term, and will also cause the yield of bonds to rise. So in both scenarios the US taxpayer is better off raising the ceiling, since they'll pay less interest with a low interest and higher debt than with high interest over a slighty lower debt.
  7. Standard member sh76
    Civis Americanus Sum
    13 May '11 11:56
    Originally posted by telerion
    Debt limits are stupid. Just gives politicians another way to sneak in all sorts of unrelated pet policies. They are completely impotent to prevent Congress from increasing the debt (they just keep raising the ceiling) and can only serve to give our debt holders reason to doubt that we will honor our obligations.

    Besides the cut in domestic spending wo ...[text shortened]... bt ceiling).

    We should just do away with the thing. At best it's completely ineffective.
    A scaled down Ryan Plan + a reasonable tax hike (say, to Clinton levels plus eliminate the capital gains and qualified dividends tax breaks plus eliminate the SS tax cap) would balance the budget in a few short years.
  8. 13 May '11 12:08
    Originally posted by sh76
    A scaled down Ryan Plan + a reasonable tax hike (say, to Clinton levels plus eliminate the capital gains and qualified dividends tax breaks plus eliminate the SS tax cap) would balance the budget in a few short years.
    Unfortunately, ever since George H.W. Bush, politicians seem to think people prefer huge deficits to tax hikes.
  9. Standard member telerion
    True X X Xian
    13 May '11 14:14 / 1 edit
    Originally posted by sh76
    A scaled down Ryan Plan + a reasonable tax hike (say, to Clinton levels plus eliminate the capital gains and qualified dividends tax breaks plus eliminate the SS tax cap) would balance the budget in a few short years.
    After having read the "Roadmap" as well a handful of professional assessments of it (including the CBO, though MacroAdvisor's scathing review was the best one), I really don't know what "a scaled down version of Ryan's plan" is. You see other than changing Medicare and reforming Medicaid into block grants, there's no real specifics in his plan. The CBO report basically says as much when it admits that the path of all other spending (besides debt financing) and the path of all revenue for the CBO analysis came from Paul Ryan's office. Further investigation finds that Paul Ryan avoided using the customary, independent Joint Committee on Taxation for his revenue estimates and instead had the uber-conservative Heritage Foundation do the analysis. Their results have baffled economists from all across political spectrum (again Macroadvisor's has the most thorough debunking). It has become apparent that the HF clearly broke all manner of standard practice to force the model to deliver its results.

    So yeah, in my mind the Ryan plan = black box or maybe = Medicare reform with a whole bunch of noise tossed in.
  10. 13 May '11 16:10
    Originally posted by telerion
    Debt limits are stupid. Just gives politicians another way to sneak in all sorts of unrelated pet policies. They are completely impotent to prevent Congress from increasing the debt (they just keep raising the ceiling) and can only serve to give our debt holders reason to doubt that we will honor our obligations.

    Besides the cut in domestic spending wo ...[text shortened]... bt ceiling).

    We should just do away with the thing. At best it's completely ineffective.
    I have to say I agree. Debt limits are stupid.....except for being political footballs to gain support from various people. It's kida like the recent spending cuts. They fought tooth and nail over an insignificant amounts of money, just so they can score political points and make the populace think that there is actually a difference between the two party's. Really its a sad attempt to rally support for a particular party, and nothing more. So you will see the Republicans try to appeal to conservatives and the Dems the libs with this issue when really they all plan on doing pretty much the same things. Pathetic.
  11. 13 May '11 16:51
    Originally posted by whodey
    I have to say I agree. Debt limits are stupid.....except for being political footballs to gain support from various people. It's kida like the recent spending cuts. They fought tooth and nail over an insignificant amounts of money, just so they can score political points and make the populace think that there is actually a difference between the two party ...[text shortened]... ibs with this issue when really they all plan on doing pretty much the same things. Pathetic.
    Plan on doing the same things? Not even close. Case in point Ryan's plan to eliminate Medicare and replace it with a voucher program. That is dramatic, and miles apart from anything the Dems would ever do.
  12. 13 May '11 17:00
    Actually, the expectation that we should automatically lift the ceiling is stupid. It seems to me that if the US is approaching a limit it is time to make touch decisions and since most people don't want to pay more taxes STOP SPENDING may be the best idea.
  13. Standard member telerion
    True X X Xian
    13 May '11 17:40
    Originally posted by quackquack
    Actually, the expectation that we should automatically lift the ceiling is stupid. It seems to me that if the US is approaching a limit it is time to make touch decisions and since most people don't want to pay more taxes STOP SPENDING may be the best idea.
    The time for a tough talk about spending (and taxes) has been here for a years. The debt ceiling has nothing to do with it.

    In reality, congress already decided, via its passed budgets, to spend more than the debt ceiling allows. Now they at just fighting over whether to let the Treasury actually pay for it.
  14. Subscriber Sleepyguy
    Reepy Rastardly Guy
    13 May '11 17:59
    Originally posted by telerion
    The time for a tough talk about spending (and taxes) has been here for a years. The debt ceiling has nothing to do with it.
    But if the debt ceiling can be a catalyst for that tough talk isn't that a good thing? What reason have they given us to believe they will ever have the discussion absent a crisis?
  15. Standard member telerion
    True X X Xian
    13 May '11 19:47
    Originally posted by Sleepyguy
    But if the debt ceiling can be a catalyst for that tough talk isn't that a good thing? What reason have they given us to believe they will ever have the discussion absent a crisis?
    On the face of it, you would think the debt ceiling would do that. But effectively the debt ceiling has failed to instill any sense of urgency about our fiscal problem. It's been raised many times in the past. Usually, the majority party takes the hit and votes yes to increasing it and the minority party free rides, taking its turn to decry congressional irresponsibility.

    The congress will probably raise the debt ceiling several more times (each with a new round of political fanfare) before passing any long-term fiscal reform package.

    I really do think that they'll keep this up until they're faced with market pressure to come up with a credible plan.

    On a bright note though we have reduced deficits in the past.