Once again, in the current circumstance, the debt limit and the government shutdown are so closely tied together that is irresponsible to debate one and ignore the other. Increasing the debt limit has relevance for current obligations for the government (like whether federal employees and contractors will be paid up through March 27), but primarily the debt limit is relevant for future obligations.
Let me illustrate: a one trillion increase in the debt limit today would provide the cash to run the government through roughly the next year or so, but the government’s only pre-existing debts relate to payment on the national debt, Social Security, Medicare, and any spending through March 27. Of the one trillion in additional cash that would be available if the debt limit is increased, in the real world, the cast majority of it would be used for obligations that would occur for liquidiating obligations that would occur in the nine months or so after March 27.
So, my criticism is threefold:
Constitutional: Since the financial management of the country is primarily the constitutional responsibility of Congress, unless there’s some provision of law authorizing the President to issue scrip, I’m not inclined to believe he has the authority to do so; especially because you are expecting the scrip to be traded on the basis of the expectation that the government will retroactively compensate the bearer of the scrip when there is no existing law providing for that compensation. As a general principle, the government isn’t allowed to do things that would create an obligation for the government will take a future action, especially when one branch is acting alone.
Utility: the scrip would probably only be useful for a very short period of time, primarily but not only between now and the end of March.
Silliness: anyone who would honor scrip based on the expectation that the government will suddenly start getting along and agree to pay bearers of scrip whatever is owed has simply got to have mental problems. I would predict that congressional Republicans would feel strongly that the scrip is an unconstitutional end-run around the Art I Sec 8 powers of Congress – and it undeniably is an end-run, no matter what we may feel is the constitutionality of it. There may be those who would feel that “unconstitutional” actions by the President need not be retroactively blessed by Congress, because whatever economic chaos may come by rejecting the liquidation of scrip, it would be a case of “Obama made his bed, now he has to lie in it.” If financial institutions are so blind to the current state of political turmoil that currently engulfs the Capitol, and the banks wanted to pay money for what you agree is worthless paper, they have got to be out of their friggin’ minds. Seriously, if banks can’t figure out today that they could be left holding the bag of several tens of billions of dollars of worthless paper, they’ve got to be completely mental.
My criticism on these three points would be assuaged if there is any provision of law that actually authorizes scrip. It doesn’t sound like there is any.
The Prez can’t unilaterally make a legal obligation. But the obligation here was created by Congress when it passed the budget. The scrip would just be an acknowledgement of that obligation. (plus, I disagree with your “general principal”, entitlement programs are basically defined as the gov’t creating future obligations for itself. One branch acting alone can’t do so, but the gov’t as a whole certainly can and does)
The scrip would arguably create a moral or practical obligation to pass a bill redeeming the scrip, but there’s obviously no constitutional barrier to the President creating moral or practical obligations. Most of the stuff the President does is designed to pressure Congress to pass bills of one type or another, and Congress can ignore those obligations if they want (as they often do).
True. But the question is whether the Gov’t can issue the scrip to bypass the debt ceiling. How useful it would be to do so is another issue.
Worked in CA. And if anything, the legislature there is more dysfunctional then in the US. I don’t know anything about the mental states of the bankers there, but I doubt they’re anymore or less mentally deficient then bankers in general.
So, in your model Republican Congresspeople would act to leave banks holding the bad on the scrip which is now unredeemable. Know whose opponents in the next primary/election are going to get lots and lots of campaign donations from banks? Say they convince the banks not to take the scrip. Who gets hurt first? Social Security recipients. Why would they piss off one of the few voting blocs which still support them?
It is political suicide. Even I don’t think Tea Partiers are that stupid. Not enough of them to block repayment, anyhow.
On one hand it seems to be saying that only debt incurred under Chapter 31 USC falls under the debt ceiling but on the other hand where in the USC does the President have the autority to issue script and would it be guarantied.
I just had a thought. Other than the platinum coin or script, could Obama issue gold certificates backed by our gold reserves without running afoul of the ceiling? If so, could he make each dollar worth 1/2000 oz of gold thereby making it worthwhile for people to trade them in for face value rather than redeeming them when this fiasco is over.
So the solution to the debt crisis is to get banks to make interest-free loans to the government, with no guarantee that the loans will be paid back?
Why does the bank pay $50 for this scrip? Wouldn’t they expect you to sell at a discount, to make up for the fact that they can charge interest for loans of other sorts?
ISTM that if the government wants to sell its debt off at a discount, that starts to get close to questioning the validity of the public debt, which clause of the Constitution Obama apparently also hasn’t read.
Either the government can borrow at interest to pay the bills, which is incurring debt and then the scrip would be un-Constitutional, or it is hoping for a lot of really stupid bankers. I’m not sure which is worse.
It appears that the registered warrants issued by California were somehow legally authorized, because they had a date of redemption, provided for an interest rate, and were regulated by the SEC as securities. None of which are features of this proposal, all of which would give banks confidence in the warrants not being meaningless pieces of paper.
The government does not give a discount on the scrip, but banks are perfectly able to charge one if they so desire. I don’t believe the banks in California did, at least I heard no complaints about it.
As for questioning the validity of the debt, you should talk to your Republican friends, who do not want to raise a totally artificial ceiling in order to be able to spend money they in Congress has mandated.
As immoral as incurring obligations and not allowing them to be paid? It is just a trick to prevent the Tea Party morons from blackmailing the majority.
IOW the government is issuing scrip in the expectation that it will not be redeemable at face value. As I said, the government apparently wants banks to issue a lot of interest-free loans.
I don’t think we should avoid the debt ceiling crisis. Let the Republicans run the train off the tracks. It will be painful for a time, but in the long run, we will finally be rid of the Republican extortionists. They won’t win another election for a generation.
Do you have a cite for that? If this is true then what happened in CA makes a lot more sense, and what’s being proposed at the federal level is completely different from what CA did.
Does anyone (preferably with first-hand experience to back it up with) have any idea whether or not the federal government could even realistically implement something like this in the amount of time left before money runs out?
Although I am on the other side of the aisle I agree 100% with you in letting this become a crisis. We need a clear answer - is Congress going to take spending limitations seriously i.e. Congresses budgeting themselves or are we going to have no controls on spending? Either way, it is ridiculous that they put spending caps into law that they either:
Change whenever they want to spend more money
or
Ignore and then address after the fact
And I would so love to blame the Dems over this but I just can’t. As long as the Pubs control the House, I have to ask my own party “How the fuck do you spend more than you are legally allowed and then complain about it?! Obama can’t introduce spending bills and in the budget negotiations you look him dead in the eye and say ‘The law says you can only spend this amount of money.’”
Oh and no one answered my question about gold certificates so I’m bumping it. Can Obama issue gold certificates* against our gold reserves? That way he can spend money without increasing the debt. If so, can he set the oz/$ amount?
If Kenya were on the gold standard there would be an added bonus. Many of the CTs’ heads would explode like in Scanners.
At the risk of alienating you just when we reach agreement, the debt ceiling is not a spending cap. It is a borrowing cap, which prevents the President from paying for spending that has already been mandated by Congress. I think Congress should pass a law that would raise the debt ceiling by a corresponding amount every time they pass a spending bill. This nonsense about authorizing spending but not paying is childish.
No, the President cannot issue gold certificates. Only Congress could do that.
The problem with the “Debt Ceiling” is that Congress votes to spend $X trillion dollars, and we don’t take in enough money in taxes to pay for it. The Republicans in congress could easily avoid this debt ceiling nonsense if they voted for a budget that didn’t exceed the debt ceiling that congress created for themselves.
Either vote for a budget that is under the debt ceiling, or abolish the debt ceiling. Either one would be sensible. What is not sensible is every year passing a budget that exceeds the debt ceiling that you created for yourself, then complaining that you’re spending too much money. The debt ceiling is not the issue, the issue is that you’re voting to spend more money than you said you’d spend.
Actually the way Congress view budgeting it is a spending cap
Spending is capped by (Ceiling - existing debt) + Revenue
While I agree that it is not a spending cap per se as in “Congress shall only spend up to $X per year.” I would argue that it is a de facto spending cap as long as Congress refuses to come up with a coherent tax/spend policy. In other words, until Congress decides to actually link spending to taxation and cap themselves (e.g. you cannot spend more than 105% of revenue. You want more spending, raise more revenue.) they are merely taking whatever revenue they have, spending whatever they want and borrowing to make up the difference and the only cap to that spending is what they can borrow.
So I think we are both right and that is part of the problem: spending expands up to the borrowing cap.
No, the problem is not that spending expands up to the borrowing cap. The problem is that spending expands depending on what Congress votes to spend, and tax revenue expands depending on what Congress votes to tax, and borrowing expands depending on what Congress votes to borrow.
The problem is that the three variables–spending, revenue, and borrowing–are not connected. There are votes to spend, votes to tax, and votes to borrow. But a vote to spend more is uncoupled to votes to either tax more or borrow more. Votes to cut taxes are uncoupled to votes to spend less or borrow more.
So Republicans in Congress love to vote to cut taxes, and love to vote to increase spending, and love to not vote to increase borrowing. The problem is that we can’t do all three. If we want to cut taxes and increase spending, there is no choice except to increase borrowing. If we want to borrow less, we are obligated to spend less or tax more or both. There is no other option.
But we’ve already voted to cut taxes, we’ve already voted to increase spending. Now the House is balking at the notion of increased borrowing. Except they already voted for increased borrowing when they voted for lower taxes and higher spending.