News Article: Treasury secretary says US to hit debt limit on Jan. 19

[Tidewater]

I'm not convinced that it's fair to compare national economics to family economics.

It was probably me.
There are some enormous differences.
Families can be sued and compelled to pay. Nations are sovereign and can repudiate debt (once every few centuries, in practice).
Families do not set the value of the currency. Nations do.

That said, if I have a certain income (say $100,000/year for simplicity) and buy a house for $250,000, the bank will judge the risk involved and loan the money. If I repeat that process and buy 17 houses with the same income, the bank is probably not going to loan the money out of fear that they will not get their money back. Likewise, if the US GDP in FY 2022 was $23T. US debt is ~$31T. That is a pretty unhealthy number. At some point, maybe not today, maybe not tomorrow, but at some point, creditors are going to worry they won't get their principal back and interest rates are going to skyrocket to cover the risk. When that happens the $475B we spent last year to service already-contracted debt is going to mushroom. Like buying a house using an Adjustable Rate Mortgage right before you know interest rates are going to climb.

 

[2003TIDE]

Most everything needs to cut back. We don't have to eliminate things overnight, but we have to face the reality that if we don't reduce spending we will eventually default, or God forbid the dollar lose its status as the global reserve currency. Either way, this cannot go on indefinitely.

That is only half the problem. We have an expense problem, but we also have a revenue problem. Geniuses in DC have reduced taxes while failing to reduce spending at an equal rate.

 

[PaulD]

A short article on the extraordinary measures that Treasury will use to put off default.

“Extraordinary Measures” and the Debt Limit

The Federal employees' retirement fund as well as the Government securities fund of the Thrift Savings Fund (the Federal employees' 401(k) equivalent) are normally invested in special Government bonds instead of in cash. Those bonds mature on a daily basis and count against the debt limit. They now will not be reinvested (the normal practice) and will be held as cash, which doesn't count against the debt limit.

There is a law that requires the Government, when things are resolved, to pay in the interest that would have accrued so that the employees aren't harmed.

 

[PaulD]

And the extraordinary measures have begun...

U.S. begins ‘extraordinary’ steps to avoid debt ceiling

 

[Tidewater]

There is a law that requires the Government, when things are resolved, to pay in the interest that would have accrued so that the employees aren't harmed.

There is also habitually a requirement to pay civil servants for the pay lost during the shutdown.
In 2012, I had to drive to my employees house (I was on active duty with the Army) and get them to sign a document.
Once the "shutdown" was done, the employees got their full pay, but they did not work, so, through the magic of civil service, the taxpayers incurred the same costs they would have without the government closure, but got no work out of these employees during the shutdown.* The employees got their normal pay, but they got to spend a few days at home watching tellie or whatever (the shutdown was not their fault). Well done, federal government.

* The Antideficiency Act mandates that nobody, including non-essential workers cannot obligate federal money (including their salaries) without a legal appropriation.

 

[92tide]

There is also habitually a requirement to pay civil servants for the pay lost during the shutdown.
In 2012, I had to drive to my employees house (I was on active duty with the Army) and get them to sign a document.
Once the "shutdown" was done, the employees got their full pay, but they did not work, so, through the magic of civil service, the taxpayers incurred the same costs they would have without the government closure, but got no work out of these employees during the shutdown. The employees got their normal pay, but they got to spend a few days at home watching tellie or whatever (the shutdown was not their fault). Well done, federal government.

seems to me that’s not the fault of the “federal government” as an entity, or the civil service employees, but the specific parts of the federal government (republican congress) who were big enough dumb asses to use default as a hostage for their bs

 

[Tidewater]

seems to me that’s not the fault of the “federal government” as an entity, or the civil service employees, but the specific parts of the federal government (republican congress) who were big enough dumb asses to use default as a hostage for their bs

It is interesting that you used the word hostage.
In the 2012 government shutdown, the Obama Administration, just before the government shutdown for lack of funds, went to the World War II monument, which is an open-air monument, and spent money the government allegedly did not have, to erect barriers to keep out veterans of the Second World War for their monument.

In effect, the Obama Administration said, "Give me the money I want, or I'm going to punish these old veterans." They did not have to erect barriers. It is an open air monument. All they had to do was nothing. Instead, Obama made hostages of the American people in a dispute with Congress. Nice work.

Then, the Administration placed one single six-foot section of fencing along the sidewalk in front of the Second Infantry Division monument, with a sign saying, "Closed."

Of course, anyone could walk three feet left or right and circumvent the "barrier," but it served as a metaphor of the administration's ridiculous attempts to punish the American people, so I guess it served a purpose.

 

[92tide]

i am amazed that we are 5 pages in the most recent version of this hand wringing about the debt/deficit and so far i have not seen references to fiat currency, ponzi schemes, or the fall of the roman empire

 

[CrimsonJazz]

i am amazed that we are 5 pages in the most recent version of this hand wringing about the debt/deficit and so far i have not seen references to fiat currency, ponzi schemes, or the fall of the roman empire

Dammit, I'm falling down on the job here. Allow me:

"Ahem.....FIAT CURRENCY IS WORTHLESS! SOCIAL SECURITY IS A PONZI SCHEME! THIS IS HOW THE ROMAN EMPIRE FELL!!

We now return you to your regularly scheduled rational discussion.

 

[Tug Tide]

Here’s what I’d do if I was Biden.
Call a press briefing with Pete Buttigieg, and assure America that all Infrastructure Bill projects that have approval/funding in place will proceed.
Then I would have Pete go state by state and list the proposed (unapproved/unfunded as of this instant) projects in each Republican held Congressional district. For each project listed I would have Pete state how much money would have been spent and how many jobs it would have created. Then I would tell the constituents of those districts that as long as their elected Reps are holding our nation hostage, those future projects are hereby cancelled.
Drop the mic and walk away

 

[AWRTR]

Here’s what I’d do if I was Biden.
Call a press briefing with Pete Buttigieg, and assure America that all Infrastructure Bill projects that have approval/funding in place will proceed.
Then I would have Pete go state by state and list the proposed (unapproved/unfunded as of this instant) projects in each Republican held Congressional district. For each project listed I would have Pete state how much money would have been spent and how many jobs it would have created. Then I would tell the constituents of those districts that as long as their elected Reps are holding our nation hostage, those future projects are hereby cancelled.
Drop the mic and walk away

You think Pete would be able to count that high?

 

[PaulD]

There is also habitually a requirement to pay civil servants for the pay lost during the shutdown.
In 2012, I had to drive to my employees house (I was on active duty with the Army) and get them to sign a document.
Once the "shutdown" was done, the employees got their full pay, but they did not work, so, through the magic of civil service, the taxpayers incurred the same costs they would have without the government closure, but got no work out of these employees during the shutdown.* The employees got their normal pay, but they got to spend a few days at home watching tellie or whatever (the shutdown was not their fault). Well done, federal government.

* The Antideficiency Act mandates that nobody, including non-essential workers cannot obligate federal money (including their salaries) without a legal appropriation.

The shutdowns we've had have all been because there were no appropriations. (I was furloughed in 1995 and determined to be required to work because my expertise in the funding laws in 2013. I'm safely retired now.)

We don't know how a default would be handled. Would we shut down the government to avoid incurring new obligations? Perhaps, but that doesn't address the existing obligations that are required to be paid.

Prioritizing payments? Several problems with that. First, a practical one. There isn't any one office in the government that handles payments. The military has one (DFAS) and there are others. The USDA has one in New Orleans, the National Finance Center in New Orleans, which handles multiple agencies. I'm sure there are more. Even within those systems, there isn't an ability to say pay this one but not that one.

Second, a financial one. Some Republicans have said that if we make sure the interest on the bonds is paid, we aren't in default. Maybe technically so, but several people have written that they don't think the world financial markets will make the distinction and be satisfied.

Finally, a political one. Are we going to risk cutting off Social Security payments as well as so many others to pay foreign investors, including the Chinese?

 

[TexasBama]

i am amazed that we are 5 pages in the most recent version of this hand wringing about the debt/deficit and so far i have not seen references to fiat currency, ponzi schemes, or the fall of the roman empire

The Fair Tax and invisible hand can serve as alternates.

 

[Tug Tide]

You think Pete would be able to count that high?

Pete was a Rhodes Scholar….
I imagine he could handle it

 

[AWRTR]

Pete was a Rhodes Scholar….
I imagine he could handle it

He just hasn’t been very successful at much of his job so far so I was concerned.

 

[crimsonaudio]

i am amazed that we are 5 pages in the most recent version of this hand wringing about the debt/deficit and so far i have not seen references to fiat currency, ponzi schemes, or the fall of the roman empire

One can realistically worry about the our debt load logically.

Very few think our current spending path is healthy (which is not Biden's fault alone - we've been on this path basically as long as I've been alive).

IOW, this is one of the few issues that most agree is a problem, yet it's also one that no representative will touch with a ten foot pole (poll? ).

 

[dWarriors88]

It sounds a lot like my household finances, more bills then income. Doesn't feel so good does it Uncle Sam?

 

[92tide]

One can realistically worry about the our debt load logically.

Very few think our current spending path is healthy (which is not Biden's fault alone - we've been on this path basically as long as I've been alive).

IOW, this is one of the few issues that most agree is a problem, yet it's also one that no representative will touch with a ten foot pole (poll? ).

yes one can. that doesn't change the fact that for the past few decades at least, the idea is a bludgeon used by the gop/conservative movement in their attempt to dismantle and neuter the federal government.

 

[crimsonaudio]

yes one can. that doesn't change the fact that for the past few decades at least, the idea is a bludgeon used by the gop/conservative movement in their attempt to dismantle and neuter the federal government.

Well, I believe they think that's what people want to hear.

In reality, (loonies aside) most people just want to know that there's a plan to get our spending under control, regardless as to whether they lean left or right.

The repubs have used this to garner votes while expanding the government like crazy, it's insane people still fall for it.

 

[CrimsonJazz]

Well, I believe they think that's what people want to hear.

In reality, (loonies aside) most people just want to know that there's a plan to get our spending under control, regardless as to whether they lean left or right.

The repubs have used this to garner votes while expanding the government like crazy, it's insane people still fall for it.

Political theater isn't limited to just the politicians themselves. The voters also engage in this ludicrous spectacle. I kind of see this as audience participation in a Broadway show. Everyone in the building knows this is a presentation and not reality, but still they engage. The obvious difference is: what is happening in D.C. is not entertainment; it really is our current reality. I don't know that voters are necessarily "falling for it", but I could be wrong. Either way, the optics aren't good because that leaves only two possibilities: either voters live in a constant state of denial or most of them are just idiots.