Debt Limit

[SubGod22]

Debt Drama in House Today

In case Democrats need any convincing of how difficult it is going to be to obtain President Obama’s requested increase in the federal borrowing limit, House Republicans will remind them today.

More than 100 House Democrats recently signed a letter demanding that Speaker John Boehner bring forward a vote for an increase in federal debt levels without any conditions for cuts or future spending curbs. Imagine their surprise when Boehner agreed and will serve up a bill that would provide enough borrowing to cover all of president Obama’s spending requests for next year without any preconditions.

The legislation will go down to a bipartisan trouncing. Even many of those Democrats who were seeking such a “clean” vote will now oppose the plan on the grounds that it was not offered sincerely. One Democratic communicator described the vote to Power Play as “cheap theatrics” worthy of the cast of “Jersey Shore.”

But the political reality is that increasing the nation’s swollen $14.3 trillion debt is a political loser. Voters hate it and lawmakers don’t even get anything new to give away since the money is going to cover existing obligations.

[1979Shocker]

What Happens if the Debt Limit Isn't Raised?
By Bearemy Glaser | 05-19-11 | 01:00 PM

The United States is now officially playing with fire with regard to its debt. On Monday, the government borrowed as much as legally possible and can no longer issue more debt to fund expenditures. The Treasury is now taking extraordinary measures to stop the country from defaulting on its obligations. The government can play creative accounting for a few more months. However, sometime in August, several tough choices will have to be made, and some checks will stop going out.

So far, the market believes that this political struggle will end in an agreement. Treasury yields have barely budged, and there isn't a sense of a crisis in the market. This faith that it will all work out is likely because in the past it always has. Many impasses aren't settled until the last minute (see the government shutdown averted earlier this year), and investors are betting that this one will also eventually get solved. And the fact that the Treasury can use extraordinary measures-- such as tapping sources like the exchange stabilization fund for cash to extend the date of default--has also created some breathing room. The market may very well be right, and Congress might find a solution. But it is still worthwhile to make some guesses as to what the consequences of truly breaking the debt ceiling would be.

Cost of Borrowing Soars
The U.S. government is able to borrow at rock-bottom rates because investors assume there is almost no chance they won't get their money back. Any sign that the return is not 100% guaranteed is going to send rates much higher. There will be a demand for higher returns as the perceived risk of not getting paid goes up.

Lower Spending Levels
Even if the Treasury is able to keep making interest payments, the cutting of funding to other programs is going to have an impact on the economy and the recovery. The prospect of not paying Social Security, Medicare, contractors, and other government employees could mean a sharp contraction in government spending, not exactly the greatest thing for the recovery at the moment. Similarly, if the debt ceiling is raised but only on the condition of a sudden sharp contraction in spending, it will be somewhat of a Pyrrhic victory. We can look to the recent events in the United Kingdom to see how sharp budget cuts can have a deleterious effect on growth rates.

Huge Lack of Confidence
One of the biggest X-factors is how scared investors will be if Congress fails to lift the debt ceiling. The enormous amount of uncertainty created by that event could look very similar to the enormous swings in stock market indexes we saw at the peak of the financial crisis. Open questions about how much businesses' costs of capital will rise, the stability of regulatory and taxation regimes, worries of a further-stumbling economy, and the quality of capital that banks hold could send shares much lower. The lack of confidence could easily spill over into the consumer mind-set, leading to a contraction in spending that would only compound the other problems.

[MoValley John]

What Happens if the Debt Limit Isn't Raised?
By Bearemy Glaser | 05-19-11 | 01:00 PM

Bearamy Glaser, huh.

[SubGod22]

House Republicans Meet With Obama After Rejecting Debt Ceiling Increase

The proposal to raise the nation's $14.3 trillion ceiling by another $2.4 trillion failed by a wide margin Tuesday evening, as expected. The vote was lopsided, with just 97 in favor of the measure and 318 against. Eighty-two Democrats joined Republicans in opposing the increase.

House Republican leaders claimed the vote was an explicit endorsement of their call to extract significant spending cuts before increasing the government's borrowing limit.

Rep. Paul Ryan, R-Wis., said the vote should prove to the president that his call to cleave the debt limit vote from spending cuts "won't fly" in the House.

"We couldn't pass it even if we wanted to. You've got to cut spending," Ryan told Fox News.

Boehner and others have called for spending cuts exceeding the amount by which the debt cap would be increased -- the speaker on Wednesday released a statement from 150 economists backing that demand.

Few details, though, have emerged from negotiations among congressional leaders and Vice President Biden, though Biden said recently the negotiators had made progress. He expressed confidence they would be able to agree on specific cuts in excess of $1 trillion over the next decade, and then look to procedural mechanisms known as "triggers" to force further automatic deficit cuts adding up to another $3 trillion or so.

House Majority Leader Eric Cantor, a participant in the talks, said he's "confident" the negotiators can achieve more than $1 trillion in savings, "and hopefully more."

[SubGod22]

Biden Digging for Tax Hike Deal

“The ‘Affordable Health Care Act’ was not as affordable as we expected.

The ‘Open Government Initiative’ was not as open as we expected.

The ‘stimulus’ was not as stimulating as we expected.”

-- Suggestions from the office of Speaker John Boehner for follow up “jokes” to the one President Obama made in North Carolina Monday that “‘shovel-ready’ was not as ‘shovel-ready’ as we expected.”

The lousy economy has helped push Democrats to the negotiating table in a bid to cut a deal to increase the federal government’s $14.3 trillion borrowing limit, but the blue team is still hoping to gain some leverage from the nation’s economic woes.

In order to keep their party’s rank and file on board, Democratic negotiators, led by Vice President Joe Biden, need to offer some kind of a tax increase as part of a package of cuts being negotiated with Republicans.

But if the deal includes a tax hike on incomes above $200,000, or anything else, Republicans won’t be able to deliver the seven Senate votes and 24 House votes needed to pass a plan that had unanimous Democratic support.

The gambit from the administration now is to offer an extension and expansion of President Obama’s payroll tax cut in a bid to spur hiring and to offer Republicans a trade off in favor of a tax hike on high-income earners.

An aide to one senior House Republican described the possibility of a tax rate increase in exchange for the extension of a temporary tax break on payrolls as “a non-starter,” but the administration is desperate to get a deal and look active on the economy.

The Republican complaint about the Obama payroll tax break is that it is too small to jolt the economy back on the wrong track. Obama has long favored the imperceptible tax break, like the one in his 2009 stimulus that put another $6 in the weekly paychecks of most workers. The theory is that the money is spent quickly helping the economy.

Republicans, meanwhile, favor low rates overall and lean toward shock and awe when it comes to tax cut stimuli. Recall that one Republican plan for the 2009 stimulus was to simply zero out the payroll tax for the remainder of that year, rather than a small adjustment.

Biden’s group meets again today. While there is new optimism about the size of the cuts that can be achieved, the looming question remains about taxes.

With Democrats taking a pounding over the condition of the economy and Republicans still denouncing Obama’s joke about the failures of his stimulus package, Democrats may eventually be convinced to drop calls for a tax hike.

[SubGod22]

Cantor, Kyl Pull Out of Budget Talks, Call on Obama to 'Resolve' Tax Hike Dispute

Republican aides expressed hope that the president would get more involved, and concern that Democrats in the talks seem "committed" to raising taxes. One senior GOP leadership aide said the meeting held Wednesday was "unserious" with "no movement on spending."

"It was ridiculous," the aide said.

House Speaker John Boehner reiterated those concerns in a briefing with reporters late Thursday morning. "Tax hikes are off the table," he said. "First off, raising taxes is going to destroy jobs. If you raise taxes on people we need to grow the economy and hire workers, guess what? They're not going to do it."

Congressional Budget Office Director Douglas Elmendorf, testifying elsewhere on Capitol Hill, lent some weight to that concern. Questioned on whether the debate over tax hikes was keeping capital on the sidelines, Elmendorf said, "Uncertainty about federal policy is diminishing household and business spending."

Cantor, in his written statement, offered a glimmer of hope. He applauded Biden for his work "in bringing us this far."

"I believe that we have identified trillions in spending cuts, and to date, we have established a blueprint that could institute the fiscal reforms needed to start getting our fiscal house in order," Cantor said.

[1979Shocker]

Could Obama ignore Congress if they refuse to raise the debt ceiling? Yes, and he should, some experts say

Critics of the debt limit cite the Fourteenth Amendment to the Constitution, which states: "the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." (Emphasis ours)

Of course, the Fourteenth Amendment is open to wide, and varying, interpretation and debate. The most basic question here is, does a limit on debt "question" the "validity" of the debt?

Legal scholar Garrett Epps, writing in The Atlantic in April, said that a case could [sic] easily made for simply ignoring the congressionally mandated debt limit.

"This provision makes clear that both the monies our nation owes to bondholders, and the sums promised in legislation to those receiving pensions set by law from the federal government, must be paid regardless of the political whims of the current congressional majority," Epps wrote.

[SB Shock]

Could Obama ignore Congress if they refuse to raise the debt ceiling? Yes, and he should, some experts say

Critics of the debt limit cite the Fourteenth Amendment to the Constitution, which states: "the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." (Emphasis ours)

Of course, the Fourteenth Amendment is open to wide, and varying, interpretation and debate. The most basic question here is, does a limit on debt "question" the "validity" of the debt?

Legal scholar Garrett Epps, writing in The Atlantic in April, said that a case could [sic] easily made for simply ignoring the congressionally mandated debt limit.

"This provision makes clear that both the monies our nation owes to bondholders, and the sums promised in legislation to those receiving pensions set by law from the federal government, must be paid regardless of the political whims of the current congressional majority," Epps wrote.

Let me get the popcorn for the show.

[InWuWeTrust]

oh sheesh.. this would be something like the 40th debt ceiling rise in the last fifty years.. totally old news.

its politics, and will be increased.





remember taxes were supposed to go up last year, and the estate tax was going to revert to $1,000,000... i hate politics.

[1979Shocker]

China, Moody's weigh in on US debt talks impasse

WASHINGTON - United States President Barack Obama and top Republicans faced growing pressure yesterday to surmount acrimonious divisions over how to avoid a sovereign default as an Aug 2 deadline looms for raising the national debt ceiling.

China, the US' largest foreign creditor with more than US$1 trillion (S$1.22 trillion) in Treasury debt as of March, yesterday called on Washington to adopt responsible policies to protect investor interests.

China's comments followed a warning by Moody's Investors Service that it might strip the US of its AAA credit rating in coming weeks if the US$14.3 trillion limit on America's borrowing is not raised.

[SubGod22]

House GOP Takes New Tack in Debt Talks -- Schedules Vote on 'Cap, Cut and Balance' Pledge

House Republican lawmakers are strategizing how to get a debt deal done in short order and avoid any potential loss in the U.S. credit rating, saying Friday they will vote on legislation next Wednesday to "cap, cut and balance" the budget.

The legislation -- an extension of a pledge introduced by Sen. Mike Lee, R-Utah, and signed by dozens of GOP lawmakers this week -- aims to reduce federal spending, impose spending caps over the next decade and require the eventual passage of a balanced-budget amendment to raise the debt ceiling.

The "cap, cut and balance" provision would include a debt ceiling increase, though the size of the package and period of time it would cover is still being debated.

The proposal was the latest movement over a debate that has been festering for months and led to President Obama holding his second news conference of the week Friday in which he reiterated calls for a "grand bargain" and a balanced approach that includes new revenues along with spending cuts.

Speaking in a press conference, House Majority Leader Eric Cantor said the GOP approach will "demonstrate that we are getting things under control and so that the people who put is here can gain some confidence that we're going to live like they do ... We hope our Democratic friends on the other side of the aisle can join us in that balanced approach."

"We need real spending cuts, and spending cuts that would exceed the amount of debt" that would be increased, House Speaker John Boehner said.

"We asked the president to lead, we asked him to put forward a plan, not a speech, a real plan, and he hasn't, but we will," Boehner said.

So, the House will probably pass this and the Senate will vote it down and we'll be right back where we started.

[shockmonster]

This is the best plan but is going to be trashed by all sides.

Coburn deficit plan offers $9 trillion in savings

Tom Coburn (R-Okla.) on Monday released a plan that he says would achieve $9 trillion in deficit savings over the next decade through a combination of ...

[RoyalShock]

According to this column, the U.S. defaults on it's debt regularly, in different forms.

http://www.realclearmarkets.com/articles/2011/07/12/get_over_it_weve_already_defaulted_99120.html

[SubGod22]

According to this column, the U.S. defaults on it's debt regularly, in different forms.

http://www.realclearmarkets.com/arti...ted_99120.html

None of that surprises me and makes a lot of sense. Thanks for sharing.

[RoyalShock]

Open Letter to John Boehner from Andrew Napolitano:

http://www.tenthamendmentcenter.com/2011/07/19/not-a-penny-more/