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Thursday, October 10, 2013

There is no default

I'm not the biggest fan of Powerline, given their full-throated preference for all things Republican rather than conservative, but Hindrocket has provided the best explication of why all the talk of a federal "default" is sheer nonsense.
So the question is, if Congress does not raise the current debt ceiling, will the federal government run out of money needed to pay its existing debts? The answer is clearly No. A reader supplies the math: 

 On average the federal government’s daily expenditures are about $16.7 billion; receipts are about $14 billion, implying an average daily borrowing requirement of about $2.7 billion. So the planned flow of revenues is now about $650 billion less than the planned flow of expenses…about $2.7 billion a [business] day, $650 billion annually.

So the “default” scenarios are bogus. Interest on the $16 trillion in debt is covered by a factor of about 10x by revenues! That puts the federal government deep into AAA land. Revenues would have to fall by a staggering 90% to jeopardize interest payments.

And, of course, retiring principal by “rolling over” maturing debt can never require an increase in the debt ceiling, since there is no net increase in the nation’s debt, even if the money used to repay the original principal is borrowed.

So what will actually happen if Congress doesn’t increase the debt ceiling by approximately October 17? The government’s debt obligations will be paid, but reductions in other spending will start to become necessary. In effect, leaving the debt ceiling as is would function as a spending cut. This is why the Democrats hate the idea so much. They know there is zero chance of default, but they are horrified at the prospect that voters and taxpayers may find out that there is a relatively simple way to bring about spending reductions that would create, in effect, a balanced budget. Hence the hysteria.
If Republican senators and representatives give in to the Obama administration for fear of a nonexistent threat of federal "default", which is actually a real threat of reduced federal domestic spending, it will underline the fact that they have no genuine reason to exist.

As Rand Paul and others have pointed out, there are 10x more tax revenues than are required to pay the interest on the debt. It is absurd to say the Federal government is in any danger of debt default than to say a man who makes $10k per month is in imminent danger of losing his house because he has to make an $850 mortgage payment every month.

UPDATE: Apparently the minor fact of the threat being nonexistent wasn't sufficient to prevent the leading Republicans from aggressively pursuing surrender:
House Republican leaders said Thursday they will offer a temporary increase in the federal debt ceiling in exchange for negotiations with President Obama on longer-term “pressing problems,” but they stopped short of agreeing to end a government shutdown now in its 10th day.

In a news briefing following a closed-door meeting of House Republicans to present a plan to raise the debt limit for six weeks, House Speaker John A. Boehner (R-Ohio) said, “What we want to do is offer the president today the ability to move a temporary increase in the debt ceiling.” He described the offer, to be presented to Obama in a White House meeting with House Republicans on Thursday afternoon, as a “good-faith effort on our part to move halfway to what he’s demanded in order to have these conversations begin.”

Boehner did not immediately provide specifics of the plan. But the speaker made clear that House Republicans are not agreeing to Obama’s demand that they pass legislation to fund the government with no partisan strings attached, thereby ending the first government shutdown in 17 years.

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279 Comments:

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Anonymous FUBAR Nation Ben October 10, 2013 11:38 AM  

This is the Republicans chance to achieve the balanced budget they always talk about.

Anonymous AlteredFate October 10, 2013 11:44 AM  

"...it will underline the fact that they have no genuine reason to exist." -VD

How many underlines does this fact have now? If we are short of a million it isn't by much..

Anonymous JartStar October 10, 2013 11:45 AM  

The GOP just caved BTW.

The whole thing is stupid to begin with as now that the GOP has used this tactic twice and what happens when the Democrats face a centrist Republican President down the road and use the same tactic to get something they want like gutting the 2nd Amendment? The GOP will not be able to overcome the media blitz with the above math as DEFAULT! is well... easier to sell than understanding math.


It is absurd to say the Federal government is in any danger of debt default than to say a man who makes $10k per month is in imminent danger of losing his house because he has to make an $850 mortgage payment every month.

Good point! Obviously we can take on a lot more debt. Krugman was right! /s

Anonymous David October 10, 2013 11:47 AM  

The left's retort is that not making payments to beneficiary recipients like Social Security and Medicare counts as a "default". While it is a default on a financial obligation, benefit recipients are not creditors and have no legal contractual rights to what they are getting. Congress can change or eliminate their benefits at anytime by passing a law.

Anonymous steve g October 10, 2013 11:49 AM  

This has never been about true numbers but the
perception of confidence in the system as a whole.
Wall Street is in a panic. VD has written extensively
about the house of cards that is now the world financial
system. The top card placed will be the joker and
most likey a collapse will ensue

Anonymous Josh October 10, 2013 11:51 AM  

No Republican who caves on this should be supported in 2016. Even Rand Paul.

Anonymous Alexander October 10, 2013 11:54 AM  

Well of course they caved - another week of senior citizens being berated at the Grand Canyon and Lincoln memorial and college kids in Boulder blaming Obama and this could have been a real, visible defeat for the branch of the party that explicitly favors more spending.

Can't have that.

Anonymous JartStar October 10, 2013 11:54 AM  

Josh - So you are going to double down and create a Tea Party 2.0 and kick out the Tea Party 1.0?

Anonymous Josh October 10, 2013 12:00 PM  

Josh - So you are going to double down and create a Tea Party 2.0 and kick out the Tea Party 1.0?

The Tea Party 1.0 got co-opted years ago. What's the point of supporting people who will just end up increasing the debt?

Blogger IM2L844 October 10, 2013 12:01 PM  

The way I see it, Obama is essentially using the Cleavon Little strategy and, just like in Blazing Saddles, it's working.

#mpai

Anonymous Noah B. October 10, 2013 12:02 PM  

"It is absurd to say the Federal government is in any danger of debt default than to say a man who makes $10k per month is in imminent danger of losing his house because he has to make an $850 mortgage payment every month."

Of course, when he's an addict spending $11k a month on hookers and coke, that's a problem.

Anonymous Brother Thomas October 10, 2013 12:12 PM  

There are few greater joys than frustrating the plans of the arrogant and wicked.

You have to use street-fight tactics against the left... and it's fun.

Anonymous Jack Amok October 10, 2013 12:15 PM  

This is why the Democrats hate the idea so much. They know there is zero chance of default...

Given how capricious, venal and irresponsible the Democrats are - especially when it comes to money - I wouldn't say there's zero chance of anything. Since they've reacted to the SHUTDOWN by going out of their way to antagonize citizens, if they thought defaulting on the debt (while paying for more hookers and meth) was the best way to throw a tantrum, they might just do that.

Blogger James Dixon October 10, 2013 12:17 PM  

> I wouldn't say there's zero chance of anything

Agreed. It would be just like Obama to suspend the debt payments and keep everything else.

Anonymous Josh October 10, 2013 12:18 PM  

Since they've reacted to the SHUTDOWN by going out of their way to antagonize citizens, if they thought defaulting on the debt (while paying for more hookers and meth) was the best way to throw a tantrum, they might just do that.

Jack Lew is already saying that he won't be able to guarantee priority repayment of interest payments if the debt ceiling isn't raised.

By the way, wouldn't that be a fireable offense?

Anonymous Brother Thomas October 10, 2013 12:19 PM  

The fact the regime is antagonizing people is a good thing. It undrmines their legitimacy.

Blogger James Dixon October 10, 2013 12:22 PM  

Now personally, Obama likes ultimatums, so I'd play his game. Obamacare goes or the government stays shutdown until the next elections and there's no debt ceiling increase. Then when he says no, I'd recess the House and send everyone home. He wants to play hardball, let him learn what it's like.

Blogger swiftfoxmark2 October 10, 2013 12:24 PM  

Well, the GOP caved:

http://benswann.com/breaking-house-gop-caves-on-debt-ceiling/

Blogger James Dixon October 10, 2013 12:24 PM  

Who's going to fire him, Josh. He's doing what the boss wants. Now, call him in front of the House and make him answer questions he doesn't like. Then if he refuses or lies, lock him up for contempt.

Anonymous dh October 10, 2013 12:26 PM  

As Rand Paul and others have pointed out, there are 10x more tax revenues than are required to pay the interest on the debt. It is absurd to say the Federal government is in any danger of debt default than to say a man who makes $10k per month is in imminent danger of losing his house because he has to make an $850 mortgage payment every month.

This is true, however, where we are right now is that it's the last day before the end of the month and the checking account only has $32 bucks in it. In this case, it doesn't matter what was spent on candy earlier in the month, it only matters what cash you have available.

The default is coming towards the end of October because although we have 10x in the income, we don't have it when we need it. This is simply cash flow management.

Federal appropriations are straight forward, really.

1. Money is appropriated by Congress to an account (a clearing account, technically)
2. Commitments are made against the appropriation. This is say, hiring an employee or signing a contract.
3. Liquidations are carried out by the Treasury to satisfy the commitments.

Rand Paul and many others are 100% right that we can meet all of the commitments of expiring bonds with our existing tax revenue. However, what cannot easily be done now is something that our government has not had to do for a very long time - manage liquidations to account for cash flow. There are bonds that come up for liqudation all the time that exceed what we take in on any given day, week or even month.

Liquidations are requested by all manner of agencies, and bonds/obligations, on whatever day they happen to be due. It is not managed the way a person manages his finances against income.

From a technical perspective what the Treasury is saying is 100% true. They have robbed Peter to pay Paul for several months, and they are nearing the point where they do not have the cash flow to make all requested liquidations. There is no prioritization of liquidations at this point codified into law because for the last 35+ years the government can always finance it's cash flow on the open market.

So the solution is:

1. Prioritize bond payments over other payments. Probably needs to be, bonds, entitlements, payroll, discretionary spending. Or something.

2. Balance the budget.

Anonymous dh October 10, 2013 12:28 PM  

The problem is that GOP is caving based on a small government shutdown. OF course they were going to cave. But let's say that those who are right - that the US can pay bond holders off if they don't pay other things.

You have not seen any pressure until the first round of social security checks don't go out. Those people vote, they watch Fox news, and it will not be pretty. Because that's what's implicit when Rand Paul says to prioritize bond holders. What they have been doing is trying to prioritize the military, then social security, and then bond holders.

The bond holders don't vote. The old folks with medicare and social security - they vote.

Anonymous YIH October 10, 2013 12:29 PM  

Like you I thought the idea of default was ridiculous.
But this is something to think about:
I believe that President Obama may be planning to up the ante by orders of magnitude. How might this happen? The “government shutdown” over the continuing resolution bill has turned on the Democrats’ demand for a “clean” CR, but the real battle will come next week when the national debt limit is reached.

What will happen if President Obama and the Democrats in Congress demand a “clean” debt extension, with no upper limits and no attached conditions, just as they have demanded a “clean CR” to fund current government operations?

That could well be what 0bama and his handlers are aiming for - no more debt ceiling, and the way he'll get it? All he has to do is halt EBT at the end of the month - by Nov. 3 things will go to absolute hell on earth in the cities. A 'zombie apocalypse' indeed.

Anonymous Huckleberry - est. 1977 October 10, 2013 12:30 PM  

If Republican senators and representatives give in to the Obama administration for fear of a nonexistent threat of federal "default"

It's not due to fear.
They caved because in their heart of hearts they desperately want the exact same thing as their so-called opponents, they just have to be a little more bashful about it.
Next summer, the major headlines will reveal just how much it'll be Republicans and Democrats versus primary challengers.
If Nate's right about a 2015/16 econo-crumble, I would not be surprised if the GOP and the Dems merge into a single party, or at least an affiliated block.
As the wise sage Terrell Owens foretold, get your popcorn ready.
It should be one Hell of a finale...

Anonymous Anti-Democracy Activist October 10, 2013 12:31 PM  

There's a sucker born every minute, and anyone who lends the US government money believing that they'll be paid back in any meaningful way (i.e. not in dollars debased to the point of worthlessness) deserves to get ripped off.

Think of it as a tax on enabling bad governmental behavior.

Anonymous Josh October 10, 2013 12:31 PM  

Boehner points out that every bill the House has passed to reopen the government the Senate rejects. Boehner says that they will allow a temporary increase in the debt ceiling as long as the president is willing to actually attend conference with them and negotiate to reopen the government.

What kind of fucking retard thinks this is any kind of win for the republicans?

Anonymous dh October 10, 2013 12:32 PM  

Now personally, Obama likes ultimatums, so I'd play his game. Obamacare goes or the government stays shutdown until the next elections and there's no debt ceiling increase. Then when he says no, I'd recess the House and send everyone home. He wants to play hardball, let him learn what it's like.

It's fine, with the House out of session, Obama just stops transfer payments to Republican districts. The budget is balanced and he can run the government unilaterally until the next election. And, then the Democrats take back the House and Obama has two more years to run unimpeded across all three branches of government.

Anonymous Josh October 10, 2013 12:33 PM  

So the solution is:

1. Prioritize bond payments over other payments. Probably needs to be, bonds, entitlements, payroll, discretionary spending. Or something.

2. Balance the budget.


I think rand has already proposed this

Blogger James Dixon October 10, 2013 12:33 PM  

The order should be bond holders, social security, the military, then everything else, dh. But I expect we agree on that. And of course, congressional and executive payroll should be very last on the list. :)

Anonymous Josh October 10, 2013 12:36 PM  

It's fine, with the House out of session, Obama just stops transfer payments to Republican districts

If that happens, not only do all the attorneys general sue Obama, the house reconvenes and impeachs him.

Blogger James Dixon October 10, 2013 12:36 PM  

> The budget is balanced and he can run the government unilaterally until the next election. And, then the Democrats take back the House and Obama has two more years to run unimpeded across all three branches of government.

How can he run the government with no appropriations by Congress, dh? Of course, that's what been doing, so I guess as long as they're willing to let him get away with it.

And if the American people are stupid enough to believe the democrats and give them control, then I'd just as soon give them control and let things go bankrupt. It's not like I care anymore.

Blogger swiftfoxmark2 October 10, 2013 12:36 PM  

The Republican leadership is nothing more than controlled opposition. They didn't want to shutdown the government, even 17% of it, but were forced to due to the political pressure brought upon them. Recall that Boehner (pronounced "Boner") even stated in 2010 after the Affordable Care Act passed that they weren't going to repeal it.

The fact is, this is whole scenario was manufactured so that the dumb masses would actually believe that there was a point in voting. So long as there is the appearance of conflict, there will always be idiots who take one side or the other. Meanwhile, the good ole' boys will be laughing at them in the backroom as they take more and more of our freedoms away and get rich off of the parasitic system they maintain.

Anonymous dh October 10, 2013 12:37 PM  

What kind of fucking retard thinks this is any kind of win for the republicans?

Obama has steadily out-handled Republicans on this. It's tempting to see Ted Cruz as the genius here, but Obama has held a firm hand for months and the GOP has been engineering a way to kill it's grass roots and cave for three months.

Obama will come to the table, before the shutdown the GOP and the administration negotiated down to the current spending level, which was about $200 billion less than the Senate and WH wanted. Boehner couldn't deliver the votes because it funded Obamacare.

The real likelihood is that in conference, Obama and the Democrats actually get spending increases and a permanent end to the debt ceiling. Because once this deal passes, about 20% of Boehner's conference will not vote for anything, out of principle, and anything that passes will have to pass with Democratic votes. To secure the necessary Democratic votes, spending levels will be adjusted up. And course, Obamacare is off the table.

Those who read the polls and think that Obama is losing because his approval rating has dropped are delusional. Obama does not have to run for office again.

Anonymous dh October 10, 2013 12:37 PM  

How can he run the government with no appropriations by Congress, dh? Of course, that's what been doing, so I guess as long as they're willing to let him get away with it.

Because only 2 out of 10 dollars spent by the government are done via appropriation.

Anonymous dh October 10, 2013 12:39 PM  

If that happens, not only do all the attorneys general sue Obama, the house reconvenes and impeachs him.

So?

The suit will take years, by which Obama will be gone. In three more weeks the Federal Courts are out of money and can't hear cases.

Meanwhile the GOP is under pressure like you've never seen before to fund the government and allow them to borrow and resume entitlements.

Meanwhile, the Impeachment charge goes.. nowhere in the Senate. You seriously think that the GOP hasn't gamed this out?

Anonymous 11B October 10, 2013 12:39 PM  

The left's retort is that not making payments to beneficiary recipients like Social Security and Medicare counts as a "default". While it is a default on a financial obligation, benefit recipients are not creditors and have no legal contractual rights to what they are getting. Congress can change or eliminate their benefits at anytime by passing a law.

At least Social Security recipients, most of them anyway, have paid into the system their entire work lives. Why don't they discuss not paying foreign aid, for example the $3 billion to Israel and $2 billion or so to Egypt? Sure $5 billion is not much compared to a $2 trillion budget, but its the thought that counts.

Anonymous RINO October 10, 2013 12:40 PM  

No Republican who caves on this should be supported in 2016. Even Rand Paul.

Didn't his endorsement of Romney already eliminate him?

Blogger James Dixon October 10, 2013 12:41 PM  

> If that happens, not only do all the attorneys general sue Obama, the house reconvenes and impeachs him.

A waste of time, since the Senate would never agree.

Blogger swiftfoxmark2 October 10, 2013 12:42 PM  

Meanwhile, regular people like me lost their insurance coverage because of Obamacare.

And when I told people about this, many idiots kept saying it wasn't Obamacare's fault. But I'm pretty sure my insurance company would rather not risk losing a customer if they could help it.

Anonymous Brother Thomas October 10, 2013 12:42 PM  

The good news is that the whole issue served to further undermine the legitimacy of the regime.

Now on to the next fight. The sole purpose is The Struggle.

Anonymous dh October 10, 2013 12:43 PM  

The order should be bond holders, social security, the military, then everything else, dh. But I expect we agree on that. And of course, congressional and executive payroll should be very last on the list. :)

Just so you know, basically, it's bond holders, social security, and then we are out of money on any given month. So it's sort of moot after that.

That's where the GOP is just silly stupid. EVERYONE knows that they can't cut the budget fast enough to balance it.

Paul Ryan's budget, which was the closest thing we've had in 20 years to a budget that is honest, never really balanced. It only balanced if you squinted after 10 years, assuming you left in all the Obamacare taxes (the same ones that the GOP wants to repeal right now), you capped Medicare spending, collected 100% of taxes owed, did not have any new wars or military adventures, and reduced future Social Security benefits and current CPI calculations.

EVERYONE KNOWS that balancing the budget next month would lead to an immediate hard recession. It's simple math.

Blogger swiftfoxmark2 October 10, 2013 12:44 PM  

At least Social Security recipients, most of them anyway, have paid into the system their entire work lives.

That rationale is utter bullshit. All current Social Security recipient merely paid into a giant, legalized Ponzi scheme, pure and simple.

Blogger James Dixon October 10, 2013 12:44 PM  

> Because only 2 out of 10 dollars spent by the government are done via appropriation.

Technically, everything is done by appropriation. But I think I take you meaning.

Anonymous Josh October 10, 2013 12:45 PM  

Obama has steadily out-handled Republicans on this. It's tempting to see Ted Cruz as the genius here, but Obama has held a firm hand for months and the GOP has been engineering a way to kill it's grass roots and cave for three months.

Agreed. Republicans are idiots.

Anonymous cheddarman October 10, 2013 12:46 PM  

The republican party can burn in hell.

sincerely

cheddarman

Anonymous JartStar October 10, 2013 12:50 PM  

Obama and the Democrats actually get spending increases and a permanent end to the debt ceiling.

This is very possible, perhaps even likely. If one was cynical you might even suppose the GOP purposely bumbled this in order to eliminate the debt ceiling as they don't like it either, but in the words of Napoleon, "Never ascribe to malice that which is adequately explained by incompetence."

The GOP's biggest problem right now is the infighting between the two main groups: neo-cons and the Tea Party. I'd love to see a return of paleo-conservatives/constitutionalists but I think they are a nearly extinct species for the time being.

Anonymous Josh October 10, 2013 12:50 PM  

Meanwhile, the Impeachment charge goes.. nowhere in the Senate. You seriously think that the GOP hasn't gamed this out?

Given that they've been soundly beaten on every opportunity, I doubt it.

The point of the impeachment wouldn't be to remove him from office, since obviously the senate isn't going to do that.

Anonymous dh October 10, 2013 12:52 PM  

Technically, everything is done by appropriation. But I think I take you meaning.

No you are incorrect. For example, Social Security money is never appropriated. Obamacare money is never appropriated.

Anonymous Josh October 10, 2013 12:53 PM  

Didn't his endorsement of Romney already eliminate him?

No. He said in 2010 he would endorse whoever the nominee was.

Anonymous Josh October 10, 2013 12:54 PM  

EVERYONE KNOWS that balancing the budget next month would lead to an immediate hard recession. It's simple math.

Yes. But it's going to eventually happen. We can't keep papering it over indefinitely.

Anonymous dh October 10, 2013 12:54 PM  

of paleo-conservatives/constitutionalists but I think they are a nearly extinct species for the time being.

Yeah, there might be 20 left in the House and Senate combined. But these people are also deal makers. They don't have clean hands.

People like Bernie Sanders are vastly more honest about their positions than most of Republicans. It is almost impossible to figure out what Ted Cruz, for example, actually wants, other than power.

Anonymous civilServant October 10, 2013 12:55 PM  

Given debt currency will not any reduction in borrowing lead inevitably to default?

Anonymous dh October 10, 2013 12:55 PM  

Yes. But it's going to eventually happen. We can't keep papering it over indefinitely.

That's one view. There is another view which is that we can, actually, by continuing to debase the currency, reduce spending, and stay just ahead of the disaster, having periodic contractions.

Blogger Ephrem Antony Gray October 10, 2013 12:59 PM  

The SpiteHouse will reject the debt ceiling rise, in the hopes that they can pin whatever kind of default-type-thingy that might ensue/be orchestrated by administration officials on the Republicans.

"Those Republicans, if they wouldn't have shut down the government we wouldn't have to default on our debt and enact martial law!"

Anonymous civilServant October 10, 2013 1:01 PM  

All he has to do is halt EBT at the end of the month - by Nov. 3 things will go to absolute hell on earth in the cities. A 'zombie apocalypse' indeed.

A default by any other name ....

But such an event would be uncontrollable and would have consequences not conducive to Democrat intent.

Blogger Nate October 10, 2013 1:04 PM  

" On average the federal government’s daily expenditures are about $16.7 billion; receipts are about $14 billion, implying an average daily borrowing requirement of about $2.7 billion. So the planned flow of revenues is now about $650 billion less than the planned flow of expenses…about $2.7 billion a [business] day, $650 billion annually."

I would very much like to see the data behind these numbers.

Anonymous civilServant October 10, 2013 1:05 PM  

There is another view which is that we can, actually, by continuing to debase the currency, reduce spending, and stay just ahead of the disaster, having periodic contractions.

In short-term theory yes. In long-term practice no. Presently we are undergoing demographic decline. It is impossible for any currency debasement to keep up with this in any controllable manner.

Blogger Nate October 10, 2013 1:06 PM  

I would also love to see who has a plan to cut 650 billion of spending. To put that in perspective... you'd have to cut medicaid and medicare. completely.

Anonymous Will Best October 10, 2013 1:11 PM  

By the way, wouldn't that be a fireable offense?

If the DoJ can run guns to Mexican drug cartels in what constitutes an act of war against Mexico. Actively deports whites who are in real danger of being persecuted by their own country while letting any other color in for fear of the gun violence the DoJ created, and 3-4 other major scandals, then I am pretty sure the Sec. of Treasurer could go on a 5 state shooting rampage and merely be suspended with pay pending an investigation.

Powerline's problem is they have bought into the notion that whatever is in Israel's best interest is in America's best interest. They occasionally think outside the box during the primary season and when GWB but they might speaking RNC talking points the rest of the time. In fact, the RNC should probably hire them because they do a better job than the RNC does.

Anonymous dh October 10, 2013 1:12 PM  

I would also love to see who has a plan to cut 650 billion of spending. To put that in perspective... you'd have to cut medicaid and medicare. completely.

Yup. Or 66% of the military spy state, including the entire CIA, NSA, and DNI.

Heh.

That's why they were always going fail to Nate. It's not honest. There is no plan to balance the budget. None. The Obama-budget never achieved balance, no matter how long you go out. No GOP budget was every proposed to be balanced. They wouldn't stand and fight on the Ryan budget, which was almost fiscally responsible. If they won't stand and fight for a budget that's still not balanced, why would they stand and fight for one now?

Anonymous MrGreenMan October 10, 2013 1:12 PM  

Maybe the president should ask those self-employed individuals who have been brutalized and crushed and demonized and had their health insurance destroyed and reduced down from 1.1% historically to about 0.7% now to put in another estimated payment early?

Blogger IM2L844 October 10, 2013 1:14 PM  

But I'm pretty sure my insurance company would rather not risk losing a customer if they could help it.

Insurance companies are either the biggest dupes on the planet or they are entirely complicit (instrumental) in the creation of the stepping stone that is ObamaCare. From my perspective, it looks like it was designed to systemically fail and move everything toward the real goal of a single-payer healthcare system. Sure, ObamaCare was crazy. It just wasn't crazy enough, but now that we have everyone used to the idea and a health care infrastructure roughed-in, a tweak here and a tweak there and shazam - Social Security style Federal HealthCare Insurance Trust Fund.

Blogger Nate October 10, 2013 1:14 PM  

"That's one view. There is another view which is that we can, actually, by continuing to debase the currency, reduce spending, and stay just ahead of the disaster, having periodic contractions."

That is a view. But its a very myopic view.

Anonymous dh October 10, 2013 1:17 PM  

That is a view. But its a very myopic view.

True. But you have to admit, so far, it has proven correct. The many - for example Karl Denniger - for example who have been predicting complete calamity right around the corner for as long as I can remember - have been serially incorrect.

I guess we won't know until 2030-ish comes around and the long-game estimators are proven correct or incorrect.

Anonymous 11B October 10, 2013 1:22 PM  

Of course if the democrats and RINOs were really interested in fiscal responsibility, then there would be no way they would be pushing to legalize 20 million Mexican and Central American peasants, the majority of which, will be net tax consumers over their entire lives. The last thing one would do if one were fiscally responsible would be to import a permanent underclass twice the population of Sweden.

Anonymous dh October 10, 2013 1:24 PM  

Insurance companies are either the biggest dupes on the planet or they are entirely complicit (instrumental) in the creation of the stepping stone that is ObamaCare.

Obamacare is the last ditch effort to save the idea of medical insurance as a product you buy. This is it. The last hope. Insurance companies have been in a selection death spiral for many years. Pricing out less healthy more expensive customers, fighting like dogs for the healthy young customers, trying like hell to limit payouts to those who need coverage. Obamacare/ACA is the life raft for them.

ACA helps them because they are a cost plus operation. They have no incentive to control costs. And now they have a captive customer base.

Anonymous Josh October 10, 2013 1:25 PM  

I would also love to see who has a plan to cut 650 billion of spending. To put that in perspective... you'd have to cut medicaid and medicare. completely.

Or a combination of cuts to medicare/medicaid, welfare, unemployment, and our massive military/security/intelligence infrastructure.

Blogger Doom October 10, 2013 1:34 PM  

My question doesn't concern whether the fed gov is out of money, but whether zero has the power to default in spite of having the receipts to fund the debt. Can he choose to not pay the debt? I believe he might consider it. Who, exactly, would make that decision if not zero? If it is an appointee, or group of appointees, count on default. Or at least an attempt to do so.

Anonymous Scott October 10, 2013 1:36 PM  

Vox,
I would appreciate this being gamed out by people who know more about it than I do. While not raising debt ceiling will not cause default, it will result in instant cuts to the budget down to zero deficit level. If I recall, you did some calculations in the past that indicated real GDP growth, absent deficit spending, is highly negative. This will result in massive revolt among the people and a return immediately to deficit spending. The real problem is not R weakness (although they are weak) but that the American people will not tolerate anything less than the feeding of their open maws, even when they proclaim otherwise. That is the real problem and that is why simply not raising debt ceiling will not solve the problem. It will be a temporary solution, at best. I don't see any scenario in which failing to raising debt ceiling does not eventually result in complete reversion back to current deficit spending levels, at the latest by the 2014 congressional elections. I think the best argument that could be made is that this would be good anyhow as it would quicken the confrontation with the inevitable. I would love to hear a realistic scenario that disagrees with this but I am not optimistic.

Blogger Nate October 10, 2013 1:41 PM  

"I guess we won't know until 2030-ish comes around and the long-game estimators are proven correct or incorrect."

Actually we'll find out a lot sooner.

Blogger JartStar October 10, 2013 1:41 PM  

The many - for example Karl Denniger - for example who have been predicting complete calamity right around the corner for as long as I can remember - have been serially incorrect.

This is my main beef with the collapse talk as I've heard it since I can remember anything about the economy. There's a cottage industry of book writers, bloggers, and talking heads who play on people's fears and make a tidy sum. Predicting an economic collapse is like predicting the time of Armageddon. You get one shot at it, and if you are wrong your credibility is shot in that area forever.

Also, when I look at historical economic collapses outside of ones brought directly about by war I see very little if any in which the cities spontaneously combusted and there's millions of bodies everywhere overnight. The more likely scenario is perhaps like Russia after communism, or many of the South American countries in which the currency is constantly debased and in flux, there's rampant corruption, an increase in crime, and political chaos being headed by various strongmen. This is a far cry from the top 20 cities in America looking like Syria.

Blogger IM2L844 October 10, 2013 1:42 PM  

Obamacare is the last ditch effort to save the idea of medical insurance as a product you buy.

Or, by design, the insurance companies will make billions through pseudo-prescient asset reallocation when ObamaCare is abandoned in favor of a single-payer system. We'll see how it pans out.

Anonymous Porky October 10, 2013 1:46 PM  

EVERYONE KNOWS that balancing the budget next month would lead to an immediate hard recession. It's simple math.

You say it like it's a bad thing.

Anonymous Will Best October 10, 2013 1:47 PM  

Pricing out less healthy more expensive customers, fighting like dogs for the healthy young customers, trying like hell to limit payouts to those who need coverage. Obamacare/ACA is the life raft for them.

There was a study recently that medicare denies twice as much as private insurance. So I find it hard to believe in the pure profit motive of the insurance industry. Time, had a really good article on how Hospitals gouge customers even though they are "non-profit" a few months back. There was even a nice line of how they get kickbacks from pharmaceutical companies in order to fleece medicare.

The ACA was actually split the healthcare industry into half on the lines of who stood to benefit from it.

Blogger Zachriel October 10, 2013 1:50 PM  

Vox: As Rand Paul and others have pointed out, there are 10x more tax revenues than are required to pay the interest on the debt.

Paying the mortgage, but stiffing the plumber, still means a default on a legal obligation. Not raising the debt ceiling will result in default.

Anonymous dh October 10, 2013 1:50 PM  

I believe he might consider it. Who, exactly, would make that decision if not zero? If it is an appointee, or group of appointees, count on default. Or at least an attempt to do so.

I don't think there is any prioritization in the system right now. The whole stinking mess is based on having unlimited money. There have been numerous bills floated to put in prioritization, which leads me to believe that the Treasury could do whatever it wanted.

Anonymous dh October 10, 2013 1:51 PM  

You say it like it's a bad thing.

Didn't mean. I think it would be better to do it now than later. But it might be better to wait a few decades until more boomers are worm food.

Anonymous Josh October 10, 2013 1:55 PM  

You say it like it's a bad thing.

It IS a bad thing. That doesn't mean that other future options aren't possibly worse. We're at the point now where pretty much all options are full of bad things.

Blogger JartStar October 10, 2013 1:57 PM  

You say it like it's a bad thing.

Yes it is, unless you can present very conclusive evidence that the forced recession down the road will be much worse than a horrendous voluntary one now. The common mantra on VP is that it will be worse, but I've never seen one iota of economic evidence with projections estimating how much worse it will be, it is just assumed.

Anonymous Josh October 10, 2013 1:58 PM  

Paying the mortgage, but stiffing the plumber, still means a default on a legal obligation. Not raising the debt ceiling will result in default.

Oh right, double secret probation default.

Let's say I own a company. Let's say that I took out a bank loan. Let's say that I've made some horrible business choices. Let's say that I can either pay the bank or pay for future inventory. If I pay the bank, and don't order any inventory, am I defaulting on my supplier?

Anonymous jay c October 10, 2013 2:03 PM  

The republican party can burn in hell.

sincerely

cheddarman


They very likely will.

Anonymous dh October 10, 2013 2:04 PM  

So I find it hard to believe in the pure profit motive of the insurance industry

Really? Let me put it this way:

Do you want to make 10% on 10,000 in payments OR Do you want to make 10% on 100,000 in payments.

Insurance is a straight cost + profit pass through. There is very little room for efficiency. For the industry, they will grow so long as the per-year medical payments exceeds the loss of unhealthy expensive subscribers - up until the shell game collapses and no buys the product anymore.

Blogger Ephrem Antony Gray October 10, 2013 2:06 PM  

I was thinking about this, and the issue of defaults comes down to a couple of things, but one in particular more than any other.

Defaulting on debt is not automatic in any situation. Someone has to initiate the default. I would suppose that in the case of a bank (let's say) most cases of default (bankruptcy in that case) would involve the person not being able to pay at all, and the bank then trying to recoup some of what is a total loss by forced liquidation of the debtor's assets. Imagine for a moment that, however, the debtor is not *not* paying his debts, but rather, not paying all of his obligations. He is still taking in plenty of money, though it isn't enough to cover the payments. If the bank forces him into bankruptcy, it might have to liquidate assets (lets say) which might jeopardize their income stream from him. Now, I don't know how exactly that works (someone with knowledge of that case law can correct or fill out details) but I would assume that, legal things aside, the bank would want to continue getting SOME money from their loans rather than possibly almost none of it.

Thus the problem with sovereigns is as follows: (In the EU, because the EU 'controls' the sub-sovereigns, they can force their hands, I think.) if the other sovereigns want to still get their interest payments, they would not make a peep. In fact, they might continue buying US bonds to keep the US going, so as to keep getting their payments even if in the long run those payments may not be equal to what is really the obligation, mathematically.

Now generally speaking the sovereign itself would not initiate a default, since it is a sovereign, unless that is somehow a better course of action than not doing it - hard to imagine. But that's not to say it couldn't, but rather, outside a force great enough to force its hand, we could guess that it will never default on its loans.

Add this to the fact that these countries - China for instance, must keep the US going because they rely on those interest payments to keep themselves going.

My thought is as follows: if the debt ceiling does not increase, they will simply borrow money under the table.

Anonymous civilServant October 10, 2013 2:07 PM  

I think the best argument that could be made is that this would be good anyhow as it would quicken the confrontation with the inevitable.

The "inevitable" will involve no cash anywhere. If you are ready for that then it may be good for you.

Anonymous jay c October 10, 2013 2:07 PM  

Josh - So you are going to double down and create a Tea Party 2.0 and kick out the Tea Party 1.0?

A Concord Bridge Party doesn't sound so bad about now.

Blogger Zachriel October 10, 2013 2:08 PM  

Josh: Let's say that I can either pay the bank or pay for future inventory. If I pay the bank, and don't order any inventory, am I defaulting on my supplier?

No, but if you order inventory, then not pay the bill, then you are in default.

In the case of the United States, the law mandates that the government issue checks for such things as doctors doing work under Medicare/Medicaid law, essential personnel, all sorts of things. These have to be paid, that is, unless Congress passes a law to stop making the payments, which they have not, and will not do.

Anonymous Jack Amok October 10, 2013 2:12 PM  

That rationale is utter bullshit. All current Social Security recipient merely paid into a giant, legalized Ponzi scheme, pure and simple.

And mandatory. Giant, legalized, mandatory Ponzi scheme.

Anonymous Porky October 10, 2013 2:13 PM  

It IS a bad thing. That doesn't mean that other future options aren't possibly worse.

Is putting down a dying dog a bad thing?

Anonymous Samuel Scott October 10, 2013 2:13 PM  

Vox,

I'm not a lawyer, but I think there are two constitutional conflicts:

1. The president, as per Supreme Court decision, is mandated to spend all money that has been authorized by Congress and signed into law. He just cannot NOT pay for certain things in order to stave off a default.

2. The president must also uphold the full faith and credibility of the United States in regards to debt and whatnot.

It's a mess, and the fault lies at the feet of the Tea Party, which isn't letting the Republican leadership send a clean continuing resolution -- one without defunding the Affordable Care Act -- to fund the government.

Blogger Ephrem Antony Gray October 10, 2013 2:15 PM  

Another interesting thing is that

1. If insurance companies dealt with only healthy customers, they would make more profit
2. If people were always healthy, insurance would be useless and there would be no business

Preventative care and medicine is even more subject to snake oil than other kinds of medicine. I mean, consider the number of fad diets there are! When it comes to surgery, it is pretty clear when it works or it doesn't. With diets, there is a huge margin of 'may have worked, may have not worked' that is even more massive. Vaccines, which are preventative medicine, have this same problem. (We may use the term 'horse grease' instead of 'snake oil', in that case.)

Expect that instead of medical costs going down, they will continue to go up, as the industry of snake oil promotion, behavior regulation, and so on, expands in the name of cutting medical costs. By linking the two costs (as I think you must in ACA's system as well as in any Single-Payer system) you probably guarantee this outcome.

Anonymous Jack Amok October 10, 2013 2:17 PM  

Insurance is a straight cost + profit pass through. There is very little room for efficiency.

Yes, but this is only true when the industry is heavily regulated and uses a subsidized third-party payer. Which is exactly what the health insurance industry is, but not what it has to be. Efficiency comes from competitive pressure and scrutiny. Regulation eliminates the competition and subsidized third-party payers eliminate the scrutiny.

Blogger Ephrem Antony Gray October 10, 2013 2:18 PM  

Samuel Scott

Wrong.

Anonymous Brother Thomas October 10, 2013 2:20 PM  

There is only The Struggle.

So the Republicans failed. That's to be expected. Despite this Obama still managed to make himself look the ass.

And that's a good thing.

Anonymous Huckleberry - est. 1977 October 10, 2013 2:21 PM  

Which, at this point, is zero.
Hence the shut down.
No passed budget, no passed resolution to continue the previous budget.

Anonymous Huckleberry - est. 1977 October 10, 2013 2:22 PM  

Sorry, my previous comment was responding to this:

The president, as per Supreme Court decision, is mandated to spend all money that has been authorized by Congress and signed into law

Anonymous Porky October 10, 2013 2:25 PM  

There is only The Struggle.

What struggle is that, Brother Thomas?

Anonymous dh October 10, 2013 2:28 PM  

The president, as per Supreme Court decision, is mandated to spend all money that has been authorized by Congress and signed into law

I dont think is true. Are you quite sure? Appropriations are returned unspent all the time.

Anonymous FUBAR Nation Ben October 10, 2013 2:33 PM  

dh, why not just end this charade, eliminate the debt ceiling and put Paul Krugman in charge of the economy?

Anonymous Jack Amok October 10, 2013 2:36 PM  

Didn't mean. I think it would be better to do it now than later. But it might be better to wait a few decades until more boomers are worm food.

That's exactly what the effin Boomers expect - that they'll be dead before they have to suffer the consequences of their wastrel lives.


In the case of the United States, the law mandates that...

Laws can mandate all sorts of things, but if they mandate the impossible, it won't happen. And even if they mandate the possible, men can chose to ignore them. We have a ruling class that things laws are for the little people. All this debate about what the law currently says or what we could change it to say is trite. When we were a government of Laws and not Men, laws mattered. Now that we're a government of Men and not Laws, only men matter. We can't fix our problems by passing laws, we need to fix them by choosing better men for leadership.

Anonymous civilServant October 10, 2013 2:37 PM  

Is putting down a dying dog a bad thing?

I feel happy

Anonymous Huckleberry - est. 1977 October 10, 2013 2:39 PM  

I dont think is true. Are you quite sure? Appropriations are returned unspent all the time

He's referring to mandatory spending items I think, not everything signed into law.

Anonymous Brother Thomas October 10, 2013 2:40 PM  

Porky October 10, 2013 2:25 PM
"What struggle is that, Brother Thomas?"

In the political sense, it is the struggle between those that seek power and those that seek freedom. My point is that the struggle is eternal. There is no ultimate resolution. There is only the struggle. This realization is important.




Blogger James Dixon October 10, 2013 2:41 PM  

> For example, Social Security money is never appropriated. Obamacare money is never appropriated.

They exist under a continuing appropriation that was part of their original passage. They still had to be appropriated originally. And they can be de-appropriated by the House any time they want. Only the Constitution is binding on the Congress, not previously passed bills.

Anonymous dh October 10, 2013 2:43 PM  

They exist under a continuing appropriation that was part of their original passage. They still had to be appropriated originally

Okay, that sounds right. But I am skeptical it's called an appropriation instead of an expenditure. But that's hair splitting.

Anonymous David October 10, 2013 2:49 PM  

Paying the mortgage, but stiffing the plumber, still means a default on a legal obligation. Not raising the debt ceiling will result in default.

@Zachriel Your claim is false. Laying off employees is not stiffing them, and employees are not creditors. In the government scenario, the plumber is let go, not stiffed.

Anonymous Noah B. October 10, 2013 2:55 PM  

"The many - for example Karl Denniger - for example who have been predicting complete calamity right around the corner for as long as I can remember - have been serially incorrect." -- dh

""When anyone asks how I can best describe my experience in nearly 40 years at sea, I merely say, uneventful." -- Captain Edward Smith, RMS Titanic

Just sayin.

Anonymous Sigyn October 10, 2013 2:56 PM  

Ohhey, guys. Watch out for truckers this weekend. Also, expect the stores to be a bit empty.

Anonymous Daniel October 10, 2013 3:04 PM  

It is not surrender. It is blown cover as cover.

Blogger RobertT October 10, 2013 3:08 PM  

Well good. Somebody finally made an obvious point. How long do you think it'll take someone with a national audience to make the same point? More evidence that MPAI.

Anonymous DonReynolds October 10, 2013 3:08 PM  

Thank you, Vox. I wish the entire country understood the factual information in this posting.
There is no default. There is not going to be a default. It is not even a remote possibility. Those who say otherwise are probably lying through their yellow teeth, since I will assume they have even a basic understanding.
Johnny Boehner has been saying for months how he was going to make this fight to the bloody end and once AGAIN he has proven he cannot take the heat or the pressure to do this job. Cantor is even worse and so is Ryan. (And to think I voted for that spineless weasel.)
Stop the spending. If they cannot stop it in the budgetary process, then at least force spending cuts by refusing to raise the debt ceiling. If they cannot hold this line, then they cannot win anywhere. If they do not have the stomach for this, tell the Republicans to get the hell out of the way! I will do it, myself.

Anonymous Will Best October 10, 2013 3:12 PM  

Paying the mortgage, but stiffing the plumber, still means a default on a legal obligation. Not raising the debt ceiling will result in default.

The plumber in your analysis that has performed a service or has signed a contract to perform that service obligating payment will still receive payment. However, the SC has ruled that SS recipients are not creditors. Payroll is general taxes, and any requirement to pay SS is a political not a legal one..

Whats more is there will still be some money available so the proper analysis is paying the mortgage and then buying chickens to eat instead of ribeyes.

Blogger James Dixon October 10, 2013 3:15 PM  

> But that's hair splitting.

Yes, which is why I said I understood and it was a technicality.

Anonymous Low Information Voter October 10, 2013 3:18 PM  

Children are not getting cancer treatments because of the Republican sequester shutdown.

#teapartyhateskids

Anonymous dh October 10, 2013 3:20 PM  

However, the SC has ruled that SS recipients are not creditors. Payroll is general taxes, and any requirement to pay SS is a political not a legal one..

The obligation is legal. The payment is political.

Blogger Zachriel October 10, 2013 3:21 PM  

dh: Appropriations are returned unspent all the time.

Sure, but other expenses must be paid, such as reimbursing a doctor for work under Medicare.

FUBAR Nation Ben: why not just end this charade, eliminate the debt ceiling

The debt ceiling is an anachronism that is unique to the U.S. It should be eliminated.

Jack Amok: Laws can mandate all sorts of things, but if they mandate the impossible, it won't happen.

That's right. So, when a government has contradictory financial laws, it leads to chaos.

James Dixon: they can be de-appropriated by the House any time they want.

Sure, but that requires an act of Congress, not mere neglect, such as not passing a budget.

David: Laying off employees is not stiffing them, and employees are not creditors.

We're not talking about laying off workers. Consider that the U.S. is at the debt limit. Meanwhile, a doctor treats an elderly patient, under the Medicare law, and the government incurs a bill. Multiply millions of times over multiple programs, and the U.S. is in default.

Will Best: However, the SC has ruled that SS recipients are not creditors. Payroll is general taxes, and any requirement to pay SS is a political not a legal one..

The Congress can repeal Social Security at any time, through the regular legislative process. Until that happens, though, the government must continue to write Social Security checks, and checks to doctors for Medicare reimbursement, and much of the government that is not furloughed as part of the budget shutdown.

Anonymous DonReynolds October 10, 2013 3:24 PM  

Sam Scott....."I'm not a lawyer, but I think there are two constitutional conflicts:"

One need not be a lawyer to guess at the law. Guess all you like.

Sam Scott....."1. The president, as per Supreme Court decision, is mandated to spend all money that has been authorized by Congress and signed into law. He just cannot NOT pay for certain things in order to stave off a default."

FALSE. Money is returned to the Treasury every fiscal year.....unspent. There is no such requirement.

Sam Scott...."2. The president must also uphold the full faith and credibility of the United States in regards to debt and whatnot."

Yes......14th Amendment of the Constitution, Section 4.....and there is no danger of a default on the national debt. I wish there were actually. So tell all your friends to lay off the big lies this week.

Sam Scott....."It's a mess, and the fault lies at the feet of the Tea Party, which isn't letting the Republican leadership send a clean continuing resolution -- one without defunding the Affordable Care Act -- to fund the government."

Such a shame, Sammy. I thought you were going to blame the Jews.....or the Arabs......or the Roman Catholics. Just when I thought you might be more honest than most, you have to write this dribble about the Tea Party. Gotta admit, you CAN follow orders but your credibility just went down the toilet, sonny.

Anonymous WaterBoy October 10, 2013 3:28 PM  

Sigyn: "Ohhey, guys. Watch out for truckers this weekend. Also, expect the stores to be a bit empty."

Short version: Much Ado About Nothing.

Anonymous Noah B. October 10, 2013 3:29 PM  

Typical leftist puke. The Republicans are to blame for not acting "responsibly" but Hairy Reed gets a complete pass.

Blogger Ephrem Antony Gray October 10, 2013 3:31 PM  

@Brother Thomas

There is no motion. There is no stillness. There is no rest. ONLY THE STRUGGLE

Anonymous WaterBoy October 10, 2013 3:46 PM  

dh: "I dont think is true. Are you quite sure? Appropriations are returned unspent all the time."

Discretionary vs. mandated.

At least in one case, the US Court of Appeals determined that:

Our analysis begins with settled, bedrock principles of
constitutional law. Under Article II of the Constitution and
relevant Supreme Court precedents, the President must follow
statutory mandates so long as there is appropriated money
available and the President has no constitutional objection to
the statute. So, too, the President must abide by statutory
prohibitions unless the President has a constitutional
objection to the prohibition. If the President has a
constitutional objection to a statutory mandate or prohibition,
the President may decline to follow the law unless and until a
final Court order dictates otherwise. But the President may
not decline to follow a statutory mandate or prohibition
simply because of policy objections. Of course, if Congress
appropriates no money for a statutorily mandated program,
the Executive obviously cannot move forward. But absent a
lack of funds or a claim of unconstitutionality that has not
been rejected by final Court order, the Executive must abide
by statutory mandates and prohibitions.

Those basic constitutional principles apply to the
President and subordinate executive agencies. And they
apply at least as much to independent agencies such as the
Nuclear Regulatory Commission. Cf. FCC v. Fox Television
Stations, Inc., 556 U.S. 502, 525-26 (2009) (opinion of Scalia,
J., for four Justices) (independent agency should be subject to
same scrutiny as executive agencies); id. at 547 (opinion of
Breyer, J., for four Justices) (independent agency’s
“comparative freedom from ballot-box control makes it all the
more important that courts review its decisionmaking to
assure compliance with applicable provisions of the law”).


This ruling also references earlier SCOTUS cases, so it appears settled to me, as far as mandated spending goes.

Blogger JartStar October 10, 2013 3:46 PM  

It's not that the Tea Party isn't right about the out of control budget, it's just that their methods are ham-fisted and ultimately counter productive. That's the frustrating part and why I don't like them very much at all.

Anonymous patrick kelly October 10, 2013 3:48 PM  

"Money is returned to the Treasury every fiscal year.....unspent. There is no such requirement."

Even if the SC ruled such a requirement, they don't have any enforcement mechanism other than the House to vote for impeachment and the Senate to convict, and someone big and bad enough to actually remove the POTUS from office.

A constitutional crises in waiting, but not gonna' happen with this administration.



Anonymous David October 10, 2013 3:49 PM  

@Zachriel

We're not talking about laying off workers. Consider that the U.S. is at the debt limit. Meanwhile, a doctor treats an elderly patient, under the Medicare law, and the government incurs a bill. Multiply millions of times over multiple programs, and the U.S. is in default.

Medicare is 23% of the US budget. Interest payments are about 6%. If your position is that the government is borrowing more than 70% of its operating budget per year I would like to know where you are getting your numbers.

Regardless, in your scenario, if doctors aren't going to get reimbursed by Medicare, they will start charging seniors directly and let the senior citizens complain to Congress. Again, your claim about not raising the debt ceiling means workers will get stiffed doesn't hold water. Doctors don't have to be stupid.

The Congress can repeal Social Security at any time, through the regular legislative process. Until that happens, though, the government must continue to write Social Security checks, and checks to doctors for Medicare reimbursement, and much of the government that is not furloughed as part of the budget shutdown.

The President must wait for Congress to declare war before going to war. And what happens when he doesn't? Absolutely nothing. If President and Congress decide to ignore the law, nothing happens, unless the voters decide to punish them in the next election.

Now, of course, because Medicare and SS recipients vote in greater numbers than bond holders, I would expect bond holders to get stiffed first.

But that is up to Congress and the President, they decide whether or not if they default on bond holders, or break promises to monetary recipients, or lay off the entire Pentagon. If they don't borrow more, they will have to make one of those choices. But only one of several possibilities are required, not all of them.

BTW, as Vox has pointed out before, every time you borrow more money, you increase the chances you will default in the future.

Anonymous Noah B. October 10, 2013 3:57 PM  

"That's the frustrating part and why I don't like them very much at all."

It's amazing how often this argument comes up: there is no perfect solution, so it's better to do nothing at all.

Anonymous Dr. Doom October 10, 2013 4:03 PM  

Vox, have you ever considered that if Fairy Queen Obama doesn't get what he wants and exactly the way he wants it that even if he had Trillions of Dollars more than he needed to pay the debt he STILL WOULD DEFAULT just to score political points against Republicans?
Look at what he's done during the shutdown! Sending goons to harass elderly WWII veterans by erecting barriers at open-air memorials, not paying death benefits to families of soldiers killed in combat, and chasing groups of tourists out of national parks at gunpoint - while still paying for his golf games!
Who in the media wouldn't go along with blaming the Republicans for the default? Faux News? The morons that vote Democrat get their news from Jon Liebowitz Stewart and the alphabet soup networks that are manned by people who have probably all sent resumes to work for the Obama Administration!
Don't put ANYTHING past Obama! He cares NOTHING about America!

Blogger JartStar October 10, 2013 4:04 PM  

It's amazing how often this argument comes up: there is no perfect solution, so it's better to do nothing at all.

Did you miss the part where I said their methods are counter productive? They certainly are in this case as there's a real possibility of eliminating the debt ceiling because of their failure here. They could have used the angst over Obamacare to get concessions on a variety of issues of their choosing, and Obama would likely have played ball, instead they opted for the losing circus.

Anonymous patrick kelly October 10, 2013 4:04 PM  

"But that is up to Congress and the President, they decide whether or not if they default on bond holders, or break promises to monetary recipients, or lay off the entire Pentagon. If they don't borrow more, they will have to make one of those choices. But only one of several possibilities are required, not all of them."

Or they could just write the checks and when whoever (Fed? Banksters? Jews? Pope? Illuminati? Aliens from Uranus?) comes to collect do this: THHHPPPPPTTT

Anonymous patrick kelly October 10, 2013 4:07 PM  

@strawman:"It's amazing how often this argument comes up: there is no perfect solution, so it's better to do nothing at all."

Nope, sometimes there is no solution better than doing nothing at all or at least waiting till there is one.

Anonymous Noah B. October 10, 2013 4:09 PM  

"Did you miss the part where I said their methods are counter productive? They certainly are in this case as there's a real possibility of eliminating the debt ceiling because of their failure here."

No, but your argument is nonsensical. You seem to be saying that "tea party" methods are counterproductive because RINO's are going to cave (or already have). What the RINO's do is the RINO's responsibility. You do understand and agree with the concept of a person being responsible for their own actions, right?

Anonymous Stilicho October 10, 2013 4:09 PM  

Citizens are turning against Obama (largely because of his ongoing hissy-fit and attempt to make the shutdown painful for people who otherwise wouldn't even notice), so Boehner had to do something to help Obama win this battle. It is apparently part of his job as a GOP leader.

Anonymous VD October 10, 2013 4:11 PM  

Paying the mortgage, but stiffing the plumber, still means a default on a legal obligation. Not raising the debt ceiling will result in default.

Incorrect. What services have most of the recipients of federal distribution largesse provided? There are no contracts or invoices going unfulfilled.

Anonymous JoeyWheels October 10, 2013 4:12 PM  

There is no money, only Zuul.

Anonymous Stilicho October 10, 2013 4:13 PM  

they decide whether or not if they default on bond holders

No, they do not. They are required to pay bondholders. Social Security is also not at risk until the Treasury has issued an additional $4 trillion in bonds specifically to cover SS payments. Beyond that, they have to choose what spending they wish to support.

Blogger JartStar October 10, 2013 4:14 PM  

Noah. On a whole was the Tea Party for or against the shutdown?

Anonymous Noah B. October 10, 2013 4:14 PM  

"Nope, sometimes there is no solution better than doing nothing at all or at least waiting till there is one."

OK, then explain why it would be better for Cruz and Lee to just go along with whatever Obama wants to do instead of putting up a fight.

Anonymous Noah B. October 10, 2013 4:18 PM  

"On a whole was the Tea Party for or against the shutdown?"

The choice was not whether or not to have a shutdown. The choice was to have a shutdown imposed by Hairy Reed or to continue to fund Obamacare. Between the two, the shutdown was the preferred choice.

Anonymous Jack Amok October 10, 2013 4:20 PM  

It's not that the Tea Party isn't right about the out of control budget, it's just that their methods are ham-fisted and ultimately counter productive. That's the frustrating part and why I don't like them very much at all.

Ham-fisted? And delicacy has been so successful...

You claim they're counter-productive, but that's simply speculation. There's a real possibility of eliminating the debt ceiling? What difference will that make? The debt ceiling has never actually existed. Sure, sure, they put a number down on paper, but every time they get close to it, they raise it. The old number meant nothing, the new number will mean nothing when it's time comes.

Anonymous WaterBoy October 10, 2013 4:21 PM  

patrick kelly: "Even if the SC ruled such a requirement, they don't have any enforcement mechanism other than the House to vote for impeachment and the Senate to convict, and someone big and bad enough to actually remove the POTUS from office."

Incorrect.

As enacted by law in the Congressional Budget Act of 1974, Section 1016:

SUITS BY COMPTROLLER GENERAL
SEC. 1016. [2 U.S.C. 687] If, under this title, budget authority is required to be made available for obligation and such budget authority is not made available for obligation, the Comptroller General is hereby expressly empowered, through attorneys of his own selection, to bring a civil action in the United States District Court for the District of Columbia to require such budget authority to be made available for obligation, and such court is hereby expressly empowered to enter in such civil action, against any department, agency, officer, or employee of the United States, any decree, judgment, or order, which may be necessary or appropriate to make such budget authority available for obligation. No civil action shall be brought by the Comptroller General under this section until the expiration of 25 calendar days of continuous session of the Congress following the date on which an explanatory statement by the Comptroller General of the circumstances giving rise to the action contemplated has been filed with the Speaker of the House of Representatives and the President of the Senate.


Given the process under which suits and countersuits and appeals would take place, there's bound to be no action taken in the end, anyway. Even then, the President could still ignore the court order, as he ignored the original budget authority. Still, impeachment is not the only avenue of enforcement open to Congress.

Anonymous Stilicho October 10, 2013 4:24 PM  


Sam Scott....."It's a mess, and the fault lies at the feet of the Tea Party, which isn't letting the Republican leadership send a clean continuing resolution -- one without defunding the Affordable Care Act -- to fund the government."


Don't get the news in the Promised Land? Two different bills that do not defund Obamacare have been passed in the House and sent to the Senate. One merely delays implementation for a year (and as we've seen already, Obamacare isn't ready for prime time yet) and the other doesn't even delay it, but makes its provisions equally applicable to Congress, companies/unions that have been granted exemptions in return for political donations, and citizens. This whole "shutdown" theater is just a matter of a few spending cuts that are making the leftists howl while normal people barely notice except for Obama's revenge cuts (barricading parks, declaring parts of Atlantic "closed" etc.). Don't worry though, the GOP never fails to snatch defeat fro the jaws of victory, so Obama's refusal to negotiate and his holding of the government hostage to his desire to selectively implement Obamacare immediately will likely succeed.

Blogger JartStar October 10, 2013 4:28 PM  

Between the two, the shutdown was the preferred choice.

But it is going to be funded anyways and they lost in the polling. What did any of this due besides hurt GDP .1% next quarter? I fail to see how they won anything.

There's a real possibility of eliminating the debt ceiling? What difference will that make?

If it didn't exist the shutdown wouldn't have happened. It most certainly matters.

Anonymous Baldrick October 10, 2013 4:30 PM  

I would also love to see who has a plan to cut 650 billion of spending. To put that in perspective... you'd have to cut medicaid and medicare. completely.

I have a cunning plan....

Anonymous Noah B. October 10, 2013 4:32 PM  

"But it is going to be funded anyways and they lost in the polling."

The only way Obamacare is going to be funded is if the House funds it. So how is it "going to be funded anyways?"

Anonymous Stilicho October 10, 2013 4:34 PM  

they lost in the polling

What are you talking about? Everything I've seen shows Obama losing ground in the polls over this. Sure, maybe the NYT and Huffpo et al. could run a push poll, but I'm not seeing it yet. Obama screwed up with his public hissy fit trying to make America feel his personal pain. People are either disgusted with him or laughing at his antics. Either is poison for a politician.

Blogger JartStar October 10, 2013 4:36 PM  

Even House Budget Chairman Rep. Paul Ryan, R-Wis., urged his colleagues to back off their crusade. He encouraged them, instead, to barter for concessions on a longer-term deficit reduction plan.

That's how you do it! No circus necessary. Of course by negotiating with Obama it makes one a traitor to the cause, then Ryan is another RINO, correct?

Anonymous Noah B. October 10, 2013 4:39 PM  

Even so, some short term damage in the polls is hardly surprising, giving that the leftist media control so much of what people hear. The House has voted to fund most of the functions of government that people actually miss. This is Hairy Reed's shutdown now. He and Obama are throwing a fit because they're not getting their way, and people like you are failing to require any responsibility or accountability from them at all.

Anonymous Noah B. October 10, 2013 4:41 PM  

Obama has said he won't negotiate until he gets everything he wants, JartStar. Ryan is wasting his time.

Blogger JartStar October 10, 2013 4:41 PM  

The only way Obamacare is going to be funded is if the House funds it. So how is it "going to be funded anyways?"

In an op-ed for USA Today, Republican Congressman James Lankford wrote, "Republicans have asked for two things on Obamacare and one thing on the debt ceiling." Lankford did not mention defunding Obamacare.

"That's currently off the table now," Lankford said in an interview on "The Lead with Jake Tapper."

"That's obviously not going to happen at this point," said Lankford, adding that Republicans are instead asking for a one-year delay of penalties if people fail to sign up for health care. <---Which Obama will never agree to as it will destroy the ACA.

Everything I've seen shows Obama losing ground in the polls over this.

He's not running for reelection. This is partially his legacy. In 2014 if he can't win a Democrat House he's a lame duck regardless. The polls hardly matter for him now.

Anonymous Vidad October 10, 2013 4:44 PM  

"Ryan is another RINO, correct?"

Yes. And clueless on economics, as well as being a spineless bastard.

Anonymous Vidad October 10, 2013 4:46 PM  

Of course, the RINO tag no longer means much, since Republicans are weaselly big government stooges. It's hard to get further left.

Blogger Zachriel October 10, 2013 4:52 PM  

DonReynolds: Yes......14th Amendment of the Constitution, Section 4

That interpretation would render the debt limit moot. However, that interpretation of the 14th Amendment has never been tested, and any bonds issued by the U.S. would probably be considered junk until this is resolved in the courts.

David: Medicare is 23% of the US budget.

As we said "multiple programs". If the debt limit is not raised, the government would quickly run out of cash, certainly by the time the next Social Security checks were due.

David: if doctors aren't going to get reimbursed by Medicare, they will start charging seniors directly and let the senior citizens complain to Congress

Doctors not being paid for work they've done according to the law is called default. Until Congress repeals Medicare, the government must pay for medical care under the law.

VD: What services have most of the recipients of federal distribution largesse provided?

Doesn't matter. The law requires the government to cut the checks. Congress can change the law, but it is very unlikely they will repeal Social Security and Medicare.

Anonymous Noah B. October 10, 2013 4:52 PM  

You didn't answer the question, JartStar. How is Obamacare going to be funded other than a vote by the House?

Blogger JartStar October 10, 2013 4:56 PM  

Of course, the RINO tag no longer means much,

That's what I was about to say. It's arguable they are no longer the "Tea Party" (whatever that was exactly in the first place), but just eccentric Republicans who are starting to fall in line with the old guard.

Blogger Zachriel October 10, 2013 4:58 PM  

Noah B: How is Obamacare going to be funded other than a vote by the House?

Most of ObamaCare is funded by mandatory spending.

Blogger James Dixon October 10, 2013 4:59 PM  

> Of course by negotiating with Obama it makes one a traitor to the cause, then Ryan is another RINO, correct?

What part of "We will not negotiate" from Obama is so hard to understand?

Blogger JartStar October 10, 2013 5:00 PM  

It can't be, but they are going to fund it.

Anonymous Jack Amok October 10, 2013 5:02 PM  

If it didn't exist the shutdown wouldn't have happened. It most certainly matters.

But the shutdown is, by your estimation, ham-handed and counterproductive. So you're saying the debt ceiling only matters in a negative way?

Anonymous dh October 10, 2013 5:02 PM  

What are you talking about? Everything I've seen shows Obama losing ground in the polls over this. Sure, maybe the NYT and Huffpo et al. could run a push poll, but I'm not seeing it yet. Obama screwed up with his public hissy fit trying to make America feel his personal pain. People are either disgusted with him or laughing at his antics. Either is poison for a politician.

1. You are watching right-wing news. Try mainstream sources. Gallup shows the Republican generic approval tanking even more. http://www.gallup.com/poll/165371/americans-satisfaction-gov-drops-new-low.aspx. Even worse than Democrats.

2. Obama is not ever running for office again.

Blogger JartStar October 10, 2013 5:06 PM  

So you're saying the debt ceiling only matters in a negative way?

In this case yes, as the goal was to defund Obamacare. In the previous case the GOP got a few concessions out of Obama. So it's not entirely useless.

Anonymous patrick kelly October 10, 2013 5:07 PM  

@NB:""Nope, sometimes there is no solution better than doing nothing at all or at least waiting till there is one."

OK, then explain why it would be better for Cruz and Lee to just go along with whatever Obama wants to do instead of putting up a fight."

Perhaps we perceive "doing nothing" differently. If congress were to do nothing, not vote on anything, just go home, the Senate and President would not be able to implement "whatever Obama wants".

Anonymous Noah B. October 10, 2013 5:07 PM  

"Most of ObamaCare is funded by mandatory spending."

The subsidies for healthcare coverage probably are. But I don't believe the actual enforcement of Obamacare is mandatory spending, which the House would still have to approve in order for the IRS to levy penalties for non-coverage.

Anonymous Noah B. October 10, 2013 5:08 PM  

I see where you're coming from then, Patrick.

Anonymous fritz October 10, 2013 5:09 PM  

Well, we are finding out more and more that Frank Zappa was right about removing the curtain and revealing the bare wall. The curtain has certainly been removed. Long time ago. That curtain has been thoroughly shredded and burned. The wall is bare and plainly in sight. It is just that not enough people see the bare wall. More to the point, not enough WANT to see the bare wall.

I want to just go and find Hegel's grave. Piss on his gravestone. Then dig up his remains and piss on them as well. After all that, I'm still not satisfied.

I was reading about the Etruscans lately. About the Roman republic. It was never a constitutional republic. Before empire, it was best described as oligarchical republic. In this land, we have both. They are practically interchangeable. It doesn't matter whether we agree we have empire or oligarchy. Neither are constitutional.

Anonymous DonReynolds October 10, 2013 5:09 PM  

David...."Medicare is 23% of the US budget."

Sorry David. Medicare and the rest of the Social Security system are not part of the US budget. It is an off-budget item, paid for out of the Social Security trust. Stop thinking Social Security is part of the Federal budget.

Anonymous patrick kelly October 10, 2013 5:09 PM  

@WaterBoy:

You describe an enforcement mechanism that ultimately doesn't enforce anything, then include this gem " the President could still ignore the court order, as he ignored the original budget authority". Then what? Sure looks like what you wrote doesn't substantially challenge my observations about impeachment etc.

Anonymous Jack Amok October 10, 2013 5:10 PM  

You are watching right-wing news. Try mainstream sources...

I dunno dh. At the meeting of the local civic group I belong to Monday night, the usual liberal fanatics were pretty subdued about defending Dems on this. They'd gone into the weekend making all sorts of noise about Republicans being responsible for the SHUTDOWN and how horrible it was, but by Monday they were... embarrassed is maybe the best word. Very odd. I've never seen them like that. I think they're losing.

Anonymous Jack Amok October 10, 2013 5:12 PM  

In this case yes, as the goal was to defund Obamacare. In the previous case the GOP got a few concessions out of Obama. So it's not entirely useless.

You still seem to be making circular arguments. Are you saying there is a non-ham-handed way the GOP could have used the debt limit?

Anonymous DonReynolds October 10, 2013 5:13 PM  

Zachriel......"Most of ObamaCare is funded by mandatory spending"

There is no mandatory spending. No Congress can obligate another. Spending in the Federal government is in two steps...... authorization, which is in the bill that created the program....and appropriation, which is funded in whole or in part by the next Congress, or it may not appropriate any money at all.....no matter how much is authorized.

Blogger Zachriel October 10, 2013 5:13 PM  

Noah B: The subsidies for healthcare coverage probably are. But I don't believe the actual enforcement of Obamacare is mandatory spending, which the House would still have to approve in order for the IRS to levy penalties for non-coverage.

Just because you can't get the IRS on the phone during the shutdown doesn't mean you don't incur taxes.

Blogger JartStar October 10, 2013 5:15 PM  

Are you saying there is a non-ham-handed way the GOP could have used the debt limit?

Yes, this has been proven. I conceded this point.

Anonymous DonReynolds October 10, 2013 5:17 PM  

How do we attract so damned many shills and trolls in this blog?.....so many new faces and names......
Like ants at the picnic.

Blogger Zachriel October 10, 2013 5:18 PM  

DonReynolds: There is no mandatory spending. No Congress can obligate another.

The term "mandatory spending" refers to money that is automatically appropriated without the need for additional legislation. Congress can certainly stop mandatory spending, but that requires passing legislation.

DonReynolds: Spending in the Federal government is in two steps...... authorization, which is in the bill that created the program....and appropriation, which is funded in whole or in part by the next Congress, or it may not appropriate any money at all.....no matter how much is authorized.

That is incorrect. With so-called mandatory spending, if the next Congress does nothing, the money is automatically appropriated. It takes legislation to stop it.

In the case of the Affordable Care Act, there are far too few votes in Congress to pass a repeal, much less an override of Obama's veto.

Anonymous Noah B. October 10, 2013 5:18 PM  

"Just because you can't get the IRS on the phone during the shutdown doesn't mean you don't incur taxes."

Excellent point. The repeal of the Obamacare tax needs to be packaged into every funding bill the House passes if it isn't already.

Anonymous Will Best October 10, 2013 5:19 PM  

The Congress can repeal Social Security at any time, through the regular legislative process. Until that happens, though, the government must continue to write Social Security checks, and checks to doctors for Medicare reimbursement, and much of the government that is not furloughed as part of the budget shutdown.

This isn't true. In the SS law there is a rule that automatically adjust payments downward in the even there isn't enough money to cover the benefits as prescribed. Based on their fuzzy math if nothing is done, payments will be maintained until I believe its 2033, at which point they will be cut by 35% going forward.

Anonymous DonReynolds October 10, 2013 5:23 PM  

DonReynolds: Yes......14th Amendment of the Constitution, Section 4

Zachriel....."That interpretation would render the debt limit moot. However, that interpretation of the 14th Amendment has never been tested, and any bonds issued by the U.S. would probably be considered junk until this is resolved in the courts."

Unlike you, I did not provide any interpretation. It says what it says. No interpretation necessary. If the debt ceiling is not raised, maturing debt can be re-issued without raising the debt ceiling. ONLY Congress can raise the debt ceiling, which is only correct since they control the taxing and spending of the Federal government.

Anonymous dh October 10, 2013 5:24 PM  

This isn't true. In the SS law there is a rule that automatically adjust payments downward in the even there isn't enough money to cover the benefits as prescribed. Based on their fuzzy math if nothing is done, payments will be maintained until I believe its 2033, at which point they will be cut by 35% going forward.


The "money" though comes from bonds held by the Treasury, every dollar that comes out of those deficit spending. The "money" that won't run out til 2033 or whatever is all borrowed from general fund or via deficit spending. That's why everyone wants to reform Social Security. All of the "assets" are just deficit spending.

Blogger Zachriel October 10, 2013 5:25 PM  

Will Best: This isn't true.

Social Security has a significant Trust Fund, so payments can't be reduced as long as there is equity in the Fund. However, the general fund has to redeem those bonds as they mature and are surrendered by Social Security. Ultimately, it means the federal government has to write checks in late October exceeding their available cash.

Blogger Zachriel October 10, 2013 5:27 PM  

dh: That's why everyone wants to reform Social Security. All of the "assets" are just deficit spending.

The problem isn't Social Security, which prudently raised taxes and saved the money, but the general fund, which saw the cash surpluses grabbed them to lower taxes; that, and the the 2008 financial meltdown. Some adjustment to Social Security may be necessary, but it's the general fund that is out of whack.

Anonymous Josh October 10, 2013 5:28 PM  

Sorry David. Medicare and the rest of the Social Security system are not part of the US budget. It is an off-budget item, paid for out of the Social Security trust. Stop thinking Social Security is part of the Federal budget.

The social security trust fund doesn't exist. It's a bunch of IOUs from the federal government.

Anonymous dh October 10, 2013 5:28 PM  

Unlike you, I did not provide any interpretation. It says what it says. No interpretation necessary. If the debt ceiling is not raised, maturing debt can be re-issued without raising the debt ceiling. ONLY Congress can raise the debt ceiling, which is only correct since they control the taxing and spending of the Federal government.

The Tres. Sectary has pointed out, however, that the government already rolls over about $100B a week in bonds. A lot of them are actually at a higher yield than what they can sell for right now. So, a $100B bond rolls over, and they issue a new one at a lower yield, which sort of saves us all money.

However, this roll-over happens imperfectly, as the market flucuates. All it takes is one little blip, the Treasury can't sell any debt on the market because of the blip, and now it wipes out the governments entire cash position, and causes a default on another obligation.

If you are living hand to mouth, you have to properly manage cash flow. Every nickel and dime has to be watched, and timing matters. That's what being poor is - knowing precisely how much every bill you have is, and when it is due, down to the day.

As a government, we haven't "lived" this way in at least 60 years, probably more like a 100 years.

Blogger veinarmor October 10, 2013 5:29 PM  

This seems a glaring illustration that both parties are in collusion to some extent. With the supposed agregation of above-average intellect assembled within these gangs, simple understanding of basic info-spin techniques would have resulted in the Republican camp hammering this fact to every venue available. It should have been the single message delivered repetitively until everyone, sentient or imbecile, had heard it. They could have reduced it to a couple lines:
At this particular point in history, it is impossible for the Fed to default. Given a few more years of unrestrained profligacy, a default becomes statistical possibility.
By now, this tactic would have shuffled Obama's Praetorian Press guard onto some other distraction.

Blogger Zachriel October 10, 2013 5:30 PM  

Josh: The social security trust fund doesn't exist. It's a bunch of IOUs from the federal government.

Those IOUs are very valuable. Normally, the government would just roll them over, but not raising the debt limit will preclude that option. The government will run out of cash in late October.

You are right, though, in that they have to be redeemed by the general fund.

Blogger Zachriel October 10, 2013 5:31 PM  

veinarmor: At this particular point in history, it is impossible for the Fed to default.

It's certainly possible, but completely unnecessary.

Anonymous dh October 10, 2013 5:32 PM  

The problem isn't Social Security, which prudently raised taxes and saved the money, but the general fund, which saw the cash surpluses grabbed them to lower taxes; that, and the the 2008 financial meltdown. Some adjustment to Social Security may be necessary, but it's the general fund that is out of whack.


Agreed. I often point this out, that Social Security can be easily "Saved" by a combination of future benefit reductions and tax increases, or one extreme of one option. Moving the goal posts out to extended social security another 50 years is not a huge problem.

The huge problem is that the entire asset base is fictional and is owed as special obligation notes to the treasury. There is nothing there but deficit spending. Hence why it is now urgent to "Reform" it.

Anonymous WaterBoy October 10, 2013 5:33 PM  

patrick kelly: "Sure looks like what you wrote doesn't substantially challenge my observations about impeachment etc."

Questionable effectiveness ≠ nonexistent.

You asserted that impeachment was all that Congress could do, but it isn't.

And I would be dubious that a sitting president would ignore a valid court order that was initiated like this via the Comptroller General, since it likely would lead directly to impeachment. It's far more likely that a mid-term president would look to tie it up in the court system until his term of office expires...but that probably wouldn't help a newly elected president, who would eventually have to comply.

Blogger Ephrem Antony Gray October 10, 2013 5:33 PM  

I think the salient point is that they only default if they want to. If they don't want to default, they never have to.

Anonymous dh October 10, 2013 5:34 PM  

Yes. And clueless on economics, as well as being a spineless bastard.

And I would just point out - he is the 'wonk' of the party. The top guy for ideas and policy.

Anonymous Josh October 10, 2013 5:37 PM  

And I would just point out - he is the 'wonk' of the party. The top guy for ideas and policy.

Ain't called the stupid party for nothing.

Blogger Zachriel October 10, 2013 5:37 PM  

dh: The huge problem is that the entire asset base is fictional and is owed as special obligation notes to the treasury.

That's a problem with the general fund. They should have kept the surpluses in a "lock box". In other words, they should have allowed cash surpluses to continue at the end of the Clinton Administration. Not only would there have been much lower debt, very useful in case there was an economic shock, but it would have tempered the impending economic bubble.

Blogger JartStar October 10, 2013 5:37 PM  

Who's the Democrats' wonk?

Anonymous Noah B. October 10, 2013 5:38 PM  

"Those IOUs are very valuable. Normally, the government would just roll them over, but not raising the debt limit will preclude that option."

The IOU's are the equivalent of me breaking into your house, stealing all your stuff, and leaving a note that says, "Hey Bro, I stole all your stuff. I'll pay you back someday!"

They are unmarketable securities. Literally worthless IOU's.

Blogger Zachriel October 10, 2013 5:40 PM  

Noah B: The IOU's are the equivalent of me breaking into your house, stealing all your stuff, and leaving a note that says, "Hey Bro, I stole all your stuff. I'll pay you back someday!"

Huh? It was an explicit contract. Social Security would run surpluses. The general fund would use those funds, then return them later. Instead of paying down the debt, the Americans chose tax cuts, and the bill is now due. That's how it works.

Anonymous civilServant October 10, 2013 5:43 PM  

2. Obama is not ever running for office again.

But many other Democrats are.

Anonymous Noah B. October 10, 2013 5:51 PM  

"It was an explicit contract."

That's nice. That way, we can all pretend to be shocked when Social Security defaults and utter the familiar refrain -- "Nobody could have seen this coming!"

Anonymous Noah B. October 10, 2013 5:53 PM  

And by default, I also include the possibility of payment of nominal Social Security benefits in a currency is basically worthless.

Anonymous Jack Amok October 10, 2013 6:04 PM  

The problem isn't Social Security, which prudently raised taxes and saved the money

Where did it save it?

Anonymous Tawmmy from.Quinzee October 10, 2013 6:07 PM  

That's nice. That way, we can all pretend to be shocked when Social Security defaults and utter the familiar refrain -- "Nobody could have seen this coming!"

THOSE FACKING JEWBAGS AND DAHKIES STOLE AWL OWAH MONEY? OF COURSE THEY DID. FACKING JEWSBAG GONNA FACKING JEW US HAHD WOHKING BLUE COLLAH WOHKAHS OUT OF OWAH RETIREMENT? AND FACKING DAHKIES AH LAZY THUGS WHO SPEND ALL OWAH HAHD EAHNED MONEY ON MAWLT LIKAH AND ON STRIPPAHS!

NO ONE DENIES THIS!

Blogger Zachriel October 10, 2013 6:07 PM  

Noah B: That way, we can all pretend to be shocked when Social Security defaults and utter the familiar refrain -- "Nobody could have seen this coming!"

Bush said that tax cuts would pay for themselves, so a lot of people were reassured as the country sped towards financial calamity.

Some people did see it coming.

Blogger Zachriel October 10, 2013 6:08 PM  

Jack Amok: Where did it save it?

U.S. government securities.

Anonymous Noah B. October 10, 2013 6:08 PM  

"Where did it save it?"

In public housing, welfare benefits, medical care for illegal aliens, foreign aid to countries that want to kill us, unneeded military hardware that's currently rusting and filling up with sand... places like that.

Anonymous Golf Pro October 10, 2013 6:09 PM  

Only 2 words are necessary to describe how stunningly stupid VD's and the Tea Bagger's debt theory is:

Dunning-Kruger!

Anonymous Noah B. October 10, 2013 6:10 PM  

"U.S. government securities."

Nope. The SSA does not hold marketable securities.

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