In its simplest terms, the ongoing debt ceiling fiasco just continues to perplex me.
At first, Joe Biden says explicitly that there will be no negotiations over the debt ceiling. The United States pays its bills and that's that.
Fine. But the only way to do that is to instruct Treasury to keep paying bills regardless of the ceiling. Maybe you do this by minting the trillion-dollar platinum coin or, more likely, invoking the 14th Amendment. These aren't perfect solutions since eventually the Supreme Court will rule on them, and they might rule against you. My own guess is that the court would punt by declaring the whole thing a political question beyond their scope, but that's just a guess.
In any case, Biden's team has inexplicably deep-sixed all this as if they never knew in the first place that it was the only solution. The result is the only option left: negotiate over the debt ceiling, the one thing they insisted they'd never do. But there's no way they didn't know this going in.
So what's up? These things have a habit of winding down to the last minute before a deal is announced, so it's still possible things will turn out relatively OK. But what was Biden thinking in the first place? I just can't make any sense of it.
The optimistic perspective is that the White House knows full well that McCarthy can't actually deliver on any potential deal, and that Biden is simply trying to appear as reasonable as possible before they inevitably run out of time and have to do the 14th amendment or council bonds or whatever.
I wish I believed the Dems had such forethought and fortitude, but I suspect in reality they got spooked about how bad a default would actually be and determined that there was a pretty good chance the House GOP would actually execute the hostage.
Not a great position either way. Taking a West Wing-style integrity stand and refusing to negotiate seems preferable for esprit de corps, but that might not mean much in the face of a rapid economic collapse in a worst-case-scenario.
Democrats have been stupid and/or dishonest about the debt ceiling for more than a decade. They had every incentive to eliminate, but they didn't.
There's little doubt they would have during the lame duck session if it weren't for Sinema and Manchin.
This is wrong. They were cover but they were not the only ones. About a half to full dozen would have refused
They did it eliminate it by majority rule already; the Gephardt Rule (still technically alive, to my surprise) automatically attached a corresponding raise to the debt ceiling to every budget bill, and was in effect starting in the 90s. But the Republican majority in the early 00s "suspended" it to force political grandstanding votes every time since then, and almost certainly would have done it again this time.
Dems haven't had a reliable majority for a long time now. There have always been "Gangs" of centrists that gain power by getting into the middle and ruining attempts to permanently solve problems, generally in favor of solutions that require regular Congressional "action" (i.e., opportunities to grandstand for the cameras).
These, in turn, have been weaponized by the current MAGA regime running the House as another part of the ongoing malicious destruction of the current government. A few of them actually realize that's what they're doing and are part of the "watch it burn" crowd; most are useful idiots who live in their bubble and have almost never had to engage with the actual consequences of their actions.
+1
They did it eliminate it by majority rule already; the Gephardt Rule...and was in effect starting in the 90s.
Goes back longer than that. Implemented in 1979, IIRC, and was done away with after Newt won his big majority in the mid 90s.
"They had every incentive to eliminate, but didn't." I'm always amazed by such comments. When did they have the votes to do this? Last year? Manchin and Sinema made it clear they would not vote for this as past of the reconcilition bill. Other than that they would need 60 votes in the Senate which they clearly didn't have. You might as well have asked Biden to wave his magic wand.
I don't think the situation is as perplexing as Kevin makes it. I agreed with the don't negotiate with hostage takers position, but the press didn't like it much. It really is a case of what you are negotiating over. Biden isn't going to accept the demands of the hostage takers but he can bargain over things that could be included in future budget requests. I don't think McCarthy has any control over his nihilistic caucus so I don't think anything will come from this negotiation. At which point Biden will have to exercise the trillion dollar coin or 14th amendment option.
Unless 5(6?) Republicans get cold feet and sign the discharge petition. The best case for Democrats: no Constitutional issues, clean raise.
2009
Too bad the "Republicans" needed - & received - Democrats' votes three times to raise the debt ceiling to "authorize" the payment of our national debt when trump raised it, providing unfunded tax cuts to the wealthiest citizens!
McCarthy & his dishonest "Republicans" are even worse than previous members of their party who were fine with increasing debt when they held the WH, but suddenly changed their tune to cries for fiscal responsibility when Democrats were voted in & the new administration had to deal with debt incurred previously.
And talk of how families have to budget, as if they could teach the current administration how not to go into debt, is ludicrous - some Americans are simply poorly paid & in dire circumstances as a result, but many far more affluent ones have considerable debt.
So you're upset that Dems didn't play debt ceiling chicken?
Jeeze.
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Maybe THIS is our solution to the debt ceiling fiasco.
This is insanity. Negotiating *at all* enshrines this game of chicken as the norm and it will happen every time there is a Democratic President.
Kevin, you know better than that. If the White House leaves the 14th on the table, the House GOP has no incentive to do anything except score political points. It’s the default threat that's keeping people’s minds even marginally focused.
Right now all most people have heard is the GOP side of handling the debt, which is all a bunch of bloviating about out of control spending, etc. But we know that to meet the debt limit requires a lot of unpopular cuts that they refuse to make explicit, with only a lot of handwaving about eliminating handouts and enforcing work requirements. Perhaps the idea is to nail them down -- and so get them to supply fodder for the Dem's 2024 campaign. By taking Medicare and Social Security (and, of course, Defense) off the table the GOP has insured that draconian cuts to other programs are mandated. Let them take the heat...
We won’t negotiate with (blank)!
We won’t exchange prisoners over (blank)!
We won’t evacuate US civilians from (blank).
Until we do…
Kabuki
False analogy. We negotiate with terrorists, hostage takers, etc, routinely. What we shouldn't do is give into their demands.
Let me know when that happens.
We don't really know what's going on inside the so-called negotiations, do we?
No, we don’t.
Logged in to give your comment 10 likes ... plus 2. Speculation on matters whose facts are opague to us is exactly of the same order as speculation on what the folks in the loft apartment down the street are having for dinner, say, or their underwear brand, i.e., fruitless as well as ridiculous. And really annoyting.
I'm glad to see you're well enough to lament about this...
Damn it Kevin, we pay you to make sense of things.
I surmise - perhaps optimistically - that Biden is trying to get a deal that puts the debt limit AND the budget off the table until after next year's election. He's emphasising that the negotiations are about the budget, not the debt cap. In other words he's brought forward the negotiations he would have had to hold in a few months anyway in an attempt to prevent the debt cap blackmail being repeated this time next year. But it's all speculative at the moment.
Biden and McCarthy had relatively weak hands to play here, with only a 4 vote margin in the house and a 1 vote margin in the Senate (with Sinema and Manchin likely to bail on good old Joe). Unfortunately, McCarthy got enough votes to actually pass something and a vast majority of the Senate MAGA GOP seems to be giving him some leverage for now. Remains to be seen what deal can actually be passed in the House and Senate, since a large group of ultra right wing MAGA folks in the House will likely balk at any semi reasonable compromise.
Hold onto you knickers!
I'm guessing they must have figured out that a reasonable deal -- e.g. 2011 BCA complete with new sequestration levels -- is actually possible with McCarthy, otherwise, they're planning on playing a game of chicken with SCOTUS at the point where the global economy would shudder.
If this isn't the case, then Biden should have already announced that he directed Treasury to ignore the debt ceiling and put the onus on conservatives to challenge before the debt ceiling might be breached.
On the bright side, Biden has decided to allow other countries to transfer F-16s, and apparently the Dutch have moved forward with plans to do so. We can expect at least 50 F-16s to be transferred to Ukraine through the summer, which allows many countries room to budget for new capital expenditures on F-35s.
Why buy F-35s when you can still buy new F-16s?
Profit margins are higher on the 35s.
Stealth, the new array of sensors built into the F-35 and its variants, greater payload capacity, and its ability to communicate with each other.
Put simply, the F-35 can do way more than any F-16 variant, allowing it to avoid detection and being shot down.
Assuming most of these countries w/o aircraft carriers choose the F-35A variant, it would represent a ~20% premium over the latest block of F-16s, but with significantly more capabilities.
Hedy Lamarr never gets the credit she deserves for the development of spread frequency technology.
A great story of invention. Ms. Lamarr and the avant-garde composer George (Ballet Mécanique) Antheil.
Does anyone take the discharge petition strategy seriously? Doesn’t seem unreasonable that the necessary handful of Republicans might be pressured by big donors when the latters’ portfolios start to tank. This could only work as a last-minute move, though.
This is the break-glass-in-case-of-emergency ploy, and the (clean deb clng increase) bill is in place, waiting for the 30-day period to clear.
If you're a House Republican, you have to weigh your chances of being relevant through the rest of the session if you vote against leadership, including your future re-election chances. See: 2019 impeachment vote.
I think many of them prefer to hold onto power and use the blame game to divert attention from personal responsibility.
This is why so many Democrats (and possibly some moderate Republicans) are pushing for Biden to act unilaterally, don't you think? Moderate Republicans don't have to shoulder any responsibility while pointing the finger at Biden for screwing things up.
You’re probably right. Nobody has gone broke betting on Republican ‘moderates’ to be chickenshits.
Right?!?!
I remember last time they did this; and the Tea Party seniors of that moment were quite peeved about it; no social security checks and national parks closed. That same demographic is the heart of the GOP House's voting strength. Those national park passes for seniors are very important.
There's no precedent for failure to lift the debt ceiling, and nobody knows what the consequences would be, but they would be different to government shutdowns, which are what you are referring to. In a shutdown, the government cannot spend any money because Congress has not appropriated any, and only Congress can appropriate money for the government to spend. If government debt reaches the ceiling, it will still have plenty of money coming in via taxes and other revenue sources. There just won't be enough to meet all the spending that Congress has already instructed the government to spend. How they would decide who gets paid and who doesn't is unknown.
I remember last time they did this; and the Tea Party seniors of that moment were quite peeved about it; no social security checks…
That’s the heart of the White House’s problem here: the Biden people thought they could score a political win if the public perceived that Republicans were pushing for cuts in Social Security, Medicare, or Medicaid, but they got outmaneuvered, badly so, by Kevin McCarthy of all people: he is pushing for work requirements, not entitlements cuts. I also think many top Democrats have erred in not realizing that much of the Republican conference in both chambers is now sufficiently radical, extreme and nihilistic to gleefully welcome the prospect of a default, and the ensuing economic carnage, as they calculate, probably correctly, that such a scenario will boost their chances in next year’s election.
The work requirements alone don't come near to balancing things last time I checked.
The only way to "balance" things is to do stuff like higher capital gains taxes and defense spending cuts.
The work requirements alone don't come near to balancing things last time I checked.
You're just learning now that Republicans aren't remotely serious about public policy?
As with all things concerning GOP "policy" positions—all things—McCarthy's current stance is a matter solely concerned with seeking political advantage.
Didn't John Bahner trigger a government shutdown by refusing to raise the debt limit? Like I said, the reliably conservative GOP voters were very peeved they could not visit the national parks that summer. It did not last long, they broke down pretty quickly. But it actually costs billions because it's so expensive to shut the federal government down and then open it back up again.
That shut-down bill is already running, too; they have to prepare for it.
No you are remembering wrong. Bohner threatened at the same time we were under a CR with the debt limit approaching. The shutdown did not actually occur - instead a coalition of centrists from both parties brought sequestration the ugly budget cuts that resulted in first time ever furloughs for DOD personnel in 2013. Separate from that there was a government shutdown on fall of 2012 that lasted about a week for the DOD and 2 weeks for the rest of the government.
Jasper, you are right that the MTG-wing of the party probably thinks it will boost their chances.
I think it will tank them if they force a shut down.
It will keep a lot of old people (who's votes they need) out of the National Parks. Lots of those folk are already disgusted by the last president, and do understand what the Dominion and E. Gene Carrol settlements mean.
But it also costs a lot to shutdown, too. The Megan McCardles of the world have a field day with that stuff, and it becomes very embarrassing for the GOP.
I think it will tank them if they force a shut down.
I was thinking more in terms of a debt default. The ensuing economic cataclysm is unlikely to help Democrats: the election is not for another eighteen months. In the short term the GOP could see its favorability numbers drop, sure. But I doubt a harsh downturn that lingers into next year can be anything but bad news for Democrats.
The electorate seldom—actually never—rewards the incumbent party during recessions.
Let's hope it doesn't come to that.
Yes the sad fact of the matter is that elections typically hinge on economic conditions about 2-3 months ahead of the election - i.e. how folks are doing in August of the election year. The GOP didn't pay a huge price for their shenanigans in 2011, 2012 and 2013.
Care to give the wherefores and particulars on how, precisely, the administration was 'outmaneurved, badly so'? That's not snark, I really do want to hear you think, your reasoning and the evidenciary chain backing it up.
I’d like to hear also. Actually, I thinks it’s McCarthy that scored the own-goal — there’s video now of the GOP walking out of the negotiations, and probably also of the last episode, where the White House staff wheeled in lunch but the GOP never showed up. Great footage for D campaign ads.
So, is it, like, ok to start giving you a hard time again, like , about inflation, being, you know, transitory? I don’t want to rush it until you are really ready to get back in the mix of things…,
They may have taken it off the table in negotiation but that doesn't mean they won't just go ahead and invoke it in the event the wingnuts actually refuse any serious compromise and shoot the hostage.
A minute after midnight works as well as a minute before, doesn't it?
Read Jonathan Turley at your peril: https://thehill.com/opinion/white-house/4012134-congressional-democrats-beg-biden-to-nullify-their-existence/
Many readers (not the intelligent commenters here) would come away knowing less than they did before. Turley literally states that Congress would be relinquishing the ‘power of the purse’ if Biden were to invoke the 14th Amendment. Though not, apparently, if he were to pay bondholders but withhold other payments.
Of course, paying some of the Federal Government’s obligations but not others would be the functional equivalent of a line-item veto, which actually has been ruled unconstitutional by SCOTUS (Clinton v. City of New York).
In Turley’s own words: “there is more than enough federal revenue coming in each month for Biden to avoid default by paying the interest on the debt under existing federal law.”
Actually, this is, at least theoretically, a possible strategy: the President could order the Treasury to pay bondholders but stiff some other creditor; then have that creditor sue for emergency relief via SCOTUS’ ‘shadow docket’, citing Clinton v. City of New York — the Constitution does not grant this discretion to the Executive. The Court that has weakened and could further restrict Chevron deference would be wildly inconsistent if it did not grant the petition.
Normally yeah, but my impression is that this iteration of the court wants specific results and doesn't care about consistency. I'd be worried enough about what results they want that I wouldn't try to set up any tests before x-day.
Instead, I think the way to implement this is to take a page from Lincoln's treatment of secession for all those months when Congress wasn't sitting and he was running the US response on his own authority.
So when x-day comes, or a few days before x-day when it's inevitable on current information, and the Treasury Secretary informs him that current obligations will momentarily exceed current cash, he directs the secretary to continue paying obligations and to issue whatever kind of debt he's decided to rely on, regular bills or consols or whatever, and explains it with reference to conflicting legal obligations and the 14th amendment's directive, and says, as Lincoln did, that he believes his actions are constitutionally valid and awaits further judgment.
Then whoever wants to sue or moan can sue or moan, but at least securities will be sold and money will be raised. But it can't be done until default is imminent.
I'm glad you read Turley so I don't have to. He isn't good for the little gray cells.
I confess I only skimmed his piece; tried to avoid a toxic overdose. Just those excerpts were bad enough.
Hopefully this is moving in the direction of testing whether the 14th Amendment applies. Going through the motions, at least, of negotiating is necessary to establish good faith. But this practice of holding every Democratic president (and the nation) hostage by a Republican House needs to end.
I think there's probably more than one dimension here and I'm not sure I'd do it differently than Biden has so far.
The other dimension is the biggest question hanging over us for the next 19 months, which is how do we solve a problem like McCarthy. He's not only personally an untrustable weasel, but he's in an impossibly unstable position because of his enslavement to the crazy caucus and the constant threat of a motion to vacate. If that trigger gets pulled, the R caucus will openly become the cage-match of death it's latently been since day one. In that case the House will grind to a complete stand-still until January 2025. It wouldn't be able to do anything, not even what's required by law or constitution.
To me that seems to be the really serious governance problem we have. Default is just the first major issue we face with that stress point on the fulcrum.
Just a suggestion, but it might not be completely stupid to give McCarthy a chance to strengthen his hand within his caucus. If he can sell his crazies on a last-second deal that's going to be pretty small-ball compared to what they want, then you'd have averted the current crisis and maybe taken some steps toward developing a negotiating counterparty who can actually get deals through. That's a long shot, and it means bolstering somebody who's particularly detestable and despicable, but it has a chance of salvaging something from the next 19 months.
Probably more likely is that McCarthy lets himself get pulled away from the table by the crazies' choke collar, or that he claims a deal and it either loses because the crazies vote no or it passes with D votes. If the first, he's shown himself to be completely feckless and useless, speaker in name only; if either of the other two, the R caucus turns into something out of a bad adaptation of Medici court life. In any of those three cases, the House does nothing for 19 months, short of some wish-casting solution ex machina.
If I wanted to set up this kind of clarifying situation, I don't think I'd want to announce ahead of time, "hey, I've got the way out of this-- I'm going to just keep on paying bills no matter what you folks do." Saying that would take all the pressure off the situation in McCarthy's caucus, plus it would give them a rallying point and maybe strengthen the crazy caucus's standing. I think I'd rather keep the pressure on them.
And of course I'd keep paying the bills when the time came. That's because I know that if our debt securities suddenly took a valuation hit we'd be looking at SVB exponentiated and it'd be so bad that everybody would blame me no matter who really caused the disaster. Not to mention it's actually the right thing to do. So that's in the back pocket.
But doing it this way is hard on my own supporters, not to mention other citizens and the rest of the world, so it isn't something I'd do lightly. I'd only do it if a) I had to know what the next 19 months look like, and b) I knew I'd take every step needed to save the full faith and credit no matter what. And it could only work if I kept my cards very close to the vest.
Just a theory, and one that I know might not survive a close encounter with Occam's razor. But maybe something a really wily fox might set up.
“If [McCarthy] can sell his crazies on a last-second deal that's going to be pretty small-ball compared to what they want”
If pigs could fly …
Biden has to know that negotiations will fail because McCarthy is hamstrung by his Crazy Caucus. And McCarthy is not a profile in courage, to put it mildly. If failure is not 100% certain, then we could argue how many 9's there should be in 99.99......%
But politically speaking, Biden must be seen to be negotiating and taking negotiations seriously. It makes no sense to invoke 14 until he absolutely has to, and no sense to even suggest it until then.
But when he does, all hell will break loose. Republicans will sue all the way to the Supreme Court. I am far from legally literate, but I am wondering what kind of standing they will have for their complaint.
I am baffled too.
However there seems to be an explanation or at least a possible scenario:
Let's assume the administration is ready to invoke the 14th amendment or sell premium bonds. In the mean time they want to make sure the public blames the GOP for the mess (the last few times the public did that but it is always good to be sure). So they play "reasonable" (NYTimes meaning of the word) and negotiate. It is impossible that they don't know that McCarthy may personally agree to a deal but that he can not deliver votes; he can not antagonize the MAGA folks in the house without losing his job. And the MAGA folks really want to shoot the hostage. So they would be ready to use the alternative rather than conceding way too much.
So they let the negotiations fail and then invoke the 14th. To breathe a word about their alternative now would risk someone suing and the Supreme court, Corrupt as it is, may declare the 14th inapplicable to this situation before the dead line and take this solution off the table. Much better to invoke the 14th and then have the Court make the decision when a decision against the the administration would immediately cause havoc and the Court would be blamed for it by the public. I don't think the court has appetite for that.
I doubt they'll resort to simply invoking the 14th amendment (or the platinum coin). Premium bonds are the way they'll go is my guess. It doesn't seem remotely rational to publicly repudiate the concept of simply ignoring the debt ceiling (multiple administration officials have made statements to this effect) only to do a 180 in early June. But AFAIK they've been conspicuously quiet about premium bonds. To me this strongly suggests this is the work-around they'll utilize as a last resort.
Much better to invoke the 14th and then have the Court make the decision when a decision against the the administration would immediately cause havoc and the Court would be blamed for it by the public. I don't think the court has appetite for that.
I've been thinking along those lines, too. If they do have a work around in mind, it might be worth risking a bit of market turbulence to delay its unveiling until one minute before DEFCON 1—when there isn't enough time for a lawsuit to stop its implementation.
I think you're viewing this in the wrong light. Trying to avoid a lawsuit before the debt ceiling is reached is not going to (a) create stability after the fact, or (b) reduce its odds of being successfully repealed/suspended by a lawsuit after the fact.
Biden said today, "The question is could [the 14th Amendment] be done and invoked in time that it would not be appealed as a consequence past the date in question."
If you wanted to avoid market turmoil, you would invoke the 14th Amendment right now, not at the last minute. This way, you force others to sue and have SCOTUS issue one of their ((not) rare /s) shadow docket decisions with enough time to move onto the next tactic to work around House Republicans.
That is what Biden was trying to say. Like I keep saying, if you really think 14A (or any other Constitution-based tactic) is the way to go, you can't wait until the debt ceiling is about to hit.
Dont discount the possibility that 'centrist Dems' in the Biden admin are really excited about some of the measures being proposed by the GOP.
This was the ultimate answer as to why the Obama admin made curious decisions that appeared to align with the GOP on healthcare, stimulus and deficit worries even when the GOP had no leverage.
How quickly we forget history even in the recent past. Obama had to deal with the last generation of Blue Dog Democrats like Max Baucus and Evan Bayh who were even more to the right than Manchin.
Can there be too much debt? Everyone on this blog thinks the more debt, the better.
"According to the Office of Management and Budget, net interest payments on the debt are estimated to total $395.5 billion this fiscal year, or 6.8% of all federal outlays. That’s more than $100 billion more than the government expects to spend on veterans’ benefits and services and more than it will spend on elementary and secondary education, disaster relief, agriculture, science and space programs, foreign aid, and natural resources and environmental protection combined."
Yes, there can be too much debt. I’m not an economist, but common sense (to me) says that you can’t put more and more of your annual outlays into paying interest on debt and not expect bad things to happen.
While it’s completely absurd that the Republicans refuse to do anything to increase government revenue - through taxing the wealthiest or even enforcing current tax laws, it is also (somewhat less) absurd for Democrats (and now most Republicans) to say that Medicare and Social Security cuts are also off the table. Both sides need to make compromises….I think Biden and his team know this and are acting accordingly. If he doesn’t compromise and the economy falls off a cliff because of default, Trump (perhaps from jail) and the MAGA Congress will make draconian cuts on January 21, 2025.
As an aside, in case if default, the first thing Yellen shouldn’t fund is SCOTUS.
Common sense that might be coming from your own household budget or even a business budget might not actually be sensible when thinking about a country.
Your personal common sense would likely be very different if you didnt have to worry about retirement, catastrophic incidents, losing a job, finding money to pay for things.....it would also be different if you had access to invest cheaply in an unlimited number of businesses at all stages of development.
beware of applying common sense to situations that you have literally no experience with. common sense brain surgery is fraught with risk. so is national budgeting.
When we get there it will be too much but bargaining in good faith means discussing our failure to properly fund the IRS and close loopholes allowing a lot of potential revenue escaping to off shore tax havens. Once we exhaust those avenues then if we are still too deep in the red we can decide what among the guns and butter we need to invest in and/or cut.
Can you cite anyone on this blog other than perhaps one stray commenter who says the more debt the better ?
The interest paid on domestically-held debt goes back into the domestic economy, it doesn't disappear into a black hole. Maybe you even hold some Treasury bonds, directly or indirectly (I do). The interest you pay on your family debt is lost to you.
When the debt is held by foreigners the story is different and more complicated, having to do with trade policy.
Here's a theoretical exercise for you.
What if we eliminated all US debt -- good or bad?
Before you answer, consider how modern markets work. In periods of uncertainty, global investors flee to Treasuries, and Americans near or at retirement age are advised to direct their investments to bond funds which are generally weighted towards Treasuries.
Maybe eliminating debt isn't a good thing. But what if we stopped growing debt?
You expect GDP to keep growing, I assume. If we stopped growing debt, the debt-to-GDP ratio would rapidly shrink.
Of course, a portion of that GDP results in savings which in turn becomes investments. But a decade later, with the amount of Treasuries for all practical purposes frozen, now there is more money chasing fewer Treasuries, to the point where, during recessions, the yields will always go negative.
Still think it's a good idea to freeze debt?
We stopped growing debt in the past: in the mid 19th century and in the 1990s. Massive amounts of land speculation were involved in the first one, and a big crash followed. There are also those who believe the limited access to the safety of US treasury debt in the 90s helped fuel the desire for US mortgage debt (then viewed as nearly as safe). We know how that turned out!
Cutting spending enough to get rid of the deficit would immiserate a lot if people - we'd need huge cuts to Medicare, medicaid, and social security. We'd see big drops in consumer spending as a result. Lower living standards for the majority to avoid debt that is clearly manageable seems silly, like starving yourself just to pay the mortgage faster.
Right on.
Not the best way to think about debt; even for individuals and businesses, debt and other liabilities are compared to assets — and the Federal Government’s assets are vast.
Businesses will issue bonds if they see an opportunity to invest that will more than repay the debt. Governments act wisely if debt is incurred for spending on infrastructure, education, research, health that increase productivity and expand the economy, the source of government revenue.
I think it's pollsters and pundits. Biden seems extremely vulnerable to what his political advisors tell him. My guess is the pollsters told him "the Republican message that you are at fault for not negotiating is getting 'traction' and 'resonating' with swing voters." So he caves. But at the core, I don't understand why Biden is even involved! Janet Yellen keeps saying "It's Congress's responsibility to raise the debt ceiling." The president is not part of The Congress. He should echo what Yellen says and say "This is Congress's responsibility, so it should be up to McCarthy and Schumer to get it done." Say no more. If asked about the 14th Amendment, he should just answer "We are not going to default" and say no more. Why does he put himself in the position of being the whipping boy when this is purely a legislative matter? It's politically foolish. He can't seem to stop tripping over his own feet.
And the mythical swing voters the pollsters mention are five guys in a diner somewhere out in the Midwest. Meanwhile they alienate millions of working class female voters of childbearing age by negotiating with the villains who wish to take away their bodily autonomy.
Interesting choice of words in Axios article today:
"Biden teases 14th Amendment "authority" on debt ceiling"
https://www.axios.com/2023/05/21/biden-debt-ceiling-japan-14th-amendment-mccarthy
The grownup is on his way back from Japan, where I suspect he got an earful on possible U.S. default.
"Biden, who has previously said that he'd consider invoking the 14th Amendment to raise the debt ceiling without an act of Congress, said Sunday that he thinks he has the "authority" to do so."
"The question is could it be done and invoked in time that it would not be appealed as a consequence past the date in question," Biden said.
Hmm... a choice between the consequences of impending default vs. legal uncertainties about time frame..... sounds like a no-brainer to me.
This is really the exact same thing that used to go on in California under the gerrymandered districts. D's would control everything but come in just short of the necessary votes to do the budget. So, R's would hold it up, and hold it up, until they got something they wanted. Redistricting cured that.
That said, I have trouble with both sides, just not for all of the usual reasons.
At some point, we have to take debt and spending seriously. A balanced budget is not only a thing of the crazies, it's a real thing, even Krugman has admitted as much. D's have been saner on this than R's but they aren't really facing it either. In fact, I'd argue that D's have become pretty close to just as delusional as R's on the topic.
However, R's are just batshit dumb on this. The only answer here is some combination of spending cuts and tax increases, period! If you want a balanced budget you have to increase taxes, and you have to cut spending in some form, there's just no way around it given how spending is mandated in this country. Instead, all we hear is tax cuts, tax cuts and more tax cuts, with never any meaningful discussion on hard spending cuts. As if waste, fraud and abuse amounts to more than a trillion dollars.
However, spending cuts, and tax increases have negative economic effects too. I think the most unfortunate thing with the recent Fed increases, is that we won't raise taxes. What Keynes seemed to be saying to me is buy low / sell high, or increases taxes in an overheated economy, and spend more in a slow economy, when things are cheaper. It's an ideal time to raise taxes on the wealthy.
But since we won't face reality, either side, we'll just muddle along until some day when we can't. Whether that day is sooner or later, I have no idea.
The spirit of Grover Norquist is still strong with the R party-- starve the federal government of revenue until it shrinks small enough to be drowned in the bathtub. They're convinced that anarchy favors the rich and clannish. And a toothless federal government is the next best thing.
There are also close allies of that view, like Gingrich and Santorum, who haven't minded a federal government with some authority as long as they get to decide who to turn it loose on after they've set up the grift for profiting from that control.
At root, most of the gop movers and shakers have shifted since the Cold War and think the federal government is almost exclusively a machine for vacuuming money from people who have no way to avoid paying taxes and then transferring it to connected inside interests. They may disagree about how big the machine should be, but most of them now agree that's all it should do. They're willing to go along with the MAGAs who want it to enforce behaviors on the little people, but they don't really care about that themselves.
Just a long-winded way to say the Rs' tax resistance is fundamental for them and I can't conceive of any conditions where they'd agree to a budget solution that involves taxes on anything besides payroll income.
So what you're saying is they're running another Delian league.
Of the Periclean period, with the tributaries being anybody who depends on W-2 income . . .
A balanced budget is actually a bad thing. There is a demand for Treasury bonds as the ultimate safe investment; it is the anchor for interest rates, others are linked to it.
When boomers like me were working, we paid more FICA taxes than Social Security administration needed to pay retirement benefits to the smaller cohort of retirees preceding us — special-issue Treasuries are the vehicle by which the excess was held to pay us now that we are retired.
Federal debt can actually grow indefinitely, so long as it grows no faster than the economy over the long term. Since the Great Recession and Covid spiked the debt, we ought to hold its growth below the rate of economic growth for a time, but it is not unsustainable even at its current level.
I'm willing to be educated. Please explain why a balanced budge is an imperative. Take all the time you need.
Don't get me wrong: I'm all for tax increases. Let's go back to the Eisenhower years when the top marginal tax rate was over 90%. If you're serious about a balanced budget, start there. Then cut the defense budget by 50%. That's what reality looks like.
I've heard no more compelling argument for a balanced budget than I have for a return to the gold standard. But, as I say, I'm willing to be educated if you have more than just slogans.
"My own guess is that the court would punt by declaring the whole thing a political question beyond their scope, but that's just a guess."
Normally, I'd agree with you, but I think the current court would use this to increase their influence and rule against him on some reasoning. I don't see this court sitting many of these out with a 6 justice majority.
meh.
as a person "of age" I'm chagrined and slightly confused by all of this.
where or when did it become an annual event? And why?
when did it become OK to spend a LOT more than we take in? when did it become fashionable to deficit spend?
just how much of a difference is there between what we take in and what we spend? Don't get me wrong I'm all for a little wriggle room in our budgets. Disasters happen, conflict is unavoidable.
something tells me no one on either side wants to tell it straight
In 1789, Alexander Hamilton had to borrow money from a couple of banks to pay the fed government's bills that year. Running a deficit has been the rule more than the exception ever since. Since 1970, there's been a deficit every year except the final four years of Clinton's presidency. This is nothing new.
If you want to bitch about it, bitch about the Republicans. I remember reading we'd have paid off our debt by now if Clinton's tax rates were in place and Bush II and Trump's tax cuts didn't happen. (That was pre-pandemic, I believe.)
"something tells me no one on either side wants to tell it straight"
The both-sides thing is a bunch of b.s.
"The both-sides thing is a bunch of b.s."
I'm not so sure about that
How many D's have voted to raise the debt limit? How many R's have voted the same way.
They have politicized all of this and have been doing so for decades
My priors coming in:
1. Biden was on solid ground refusing to negotiate
2. He blew it (yes, he "caved") by negotiating
3. Any outcome now will be less than optimal
(Also: US media is doing an atrocious job informing the public about what's going on. And a lot of the smarter commentary is still looking at only part of what's going on and not the full picture.)
So here we are. "Invoke the 14th" is the easy out, per many, but that may be more complicated than advertised.
The 14th Amendment says "public debt ... shall not be questioned." That's a clear mandate to make all necessary payments on existing debt. Even Scotus, if ruling on a case, would likely agree. No default! Hooray!
But what about new debt? That's not covered by the 14th. Elsewhere, the Constitution says authority to issue debt rests with Congress. Without GOP House OK to issue new debt, Biden cannot legally do so. I suspect Scotus would agree with that. So no new debt? Is that OK? No! That means gov't would lack funds to continue business as usual. In some form or other, a government shutdown. Oh, and growing turmoil in financial markets with no new US debt becoming available.
So if the government has money to pay some bills but not all bills, can Biden prioritize what bills (and services) to continue paying (operating). Not really. That is effectively the Exec using line-item authority, which Scotus has ruled is unconstitutional. What about payments on debt then? That's a conflict between the 14th and past Scotus rulings. Unchartered territory.
What happens then is probably less about legal arguments than makeup of the court, and I think this court would find a way to steer clear of default but doesn't grant Potus broad new authority to issue new debt without explicit authorization from Congress. NOT a good outcome.
So what does "invoke the 14th" lead to? Probably:
-US avoids default
-Market turmoil
-Fed government shutdown (perhaps the longest ever)
-Biden takes a massive political hit (look at how the media has covered this story so far)
Is there anything Biden can do? Yes! Lots:
1. Capitulate/pay ransom (not a real solution but maybe most likely as things go)
2. Platinum coin (gimmicky, but who cares; admin was stupid to rule it out)
3. Premium bonds (see Krugman)
4. EO to declare intergov't debt not subject to debt limit constraint* (frees ~$5T till hitting ceiling)
5. Ask/instruct Fed to "refrain from tendering for redemption its holdings"*
* See Ira Goldman for more info:
https://twitter.com/KDbyProxy/status/1659653105955270656
The discharge petition is another way out of this mess, but I believe that's likely to happen until something breaks, and until the White House begins to do a much better job of messaging, I'm going to assume the political fallout for any economic pain will rest with Biden (unjustly, but that's it goes when you screw up).
A commenter on an Ezra Klein opinion in the New York Times cited the Impoundment Control Act of 1974, which requires Congressional approval for the Executive to not spend money appropriated by Congress. So, again, if the debt ceiling is not raised by Congress, Biden cannot by himself act within the law. He can’t limit payment on any obligations, he can’t borrow more to cover them. Under the 1974 Act, he can ask Congress to rescind spending authorizations. There’s no chance they could agree on cuts of the necessary magnitude.