http://money.cnn.com/2011/05/16/news/economy/debt_ceiling_deadline/index.htm?hpt=T1
We can’t just keep borrowing indefinitely. There has to been an end to it. But is this the right time to get cut off? Or should the debt ceiling be raised?
It’ll be raised. But the Republicans have to do all their chest thumping first.
BTW, this doesn’t really become a $$ problem until sometime in August. Don’t remember why, but I heard that on NPR this morning.
The government is raiding the federal employees pension funds to keep the government solvent. Federal law allows for this type of borrowing, with principal and accrued interest to be paid back. The actual crunch date is 02 August 2011. If the debt ceiling is not raised by then, the government will begin defaulting on its debt obligations, including the possibility of not paying out any social security benefits to recipients.
Why do we need a debt ceiling at all? Can Congress simply authorize Treasury to borrow as needed, without limit? Is the debt ceiling a legal necessity (e.g., to satisfy the constitutional requirements around appropriations), or a political one?
Its a legal necessity in that there’s a law that requires it, but there isn’t any reason Congress couldn’t pass a new law getting rid of the ceiling. Its not a Constituional Requirement or anything.
But as to the OP, yea it will certainly be raised, both sides are pretty much on record saying that it has to be raised and not doing so would be nuts. The “controversy” is just play-acting until they figure things are getting close to where seniors won’t get Social Security Checks at which point they’ll go ahead and up the ceiling.
Got a thread on this, sort of.
At any rate, it’s been pointed out there that we did this back in '95; I wonder if there are any parallels to today’s situation. It may certainly answer my question of whether skating so close to default will itself have consequences.
And, as I said in that other thread, it may be a question of who comes out on top politically “when” the ceiling is raised. Obama’s especially progressive supporters are urging him to draw a line in the sand (something he is not wanting to do yet, according to reports), while many on the other end of the aisle persist in not seeing what’s so bad about default. It’s hard to say where things’ll end up, especially if the latter group holds enough sway over enough Republicans; could the ceiling actually fail to be raised?
Raiding the retirement fund to pay for government because you’re confident it’ll be paid back is a bit like stealing your kid’s college money because your bookie told you that horse is a sure thing. If the debt ceiling doesn’t get raised, a whole lot of old people are going to be hurt. And by borrowing their money, Geithner just made them hostages.
Nice work if you’re in government. If a private penion fund manager did that, he’d be doing time.
I think you missed the part where the morons in the Republican party are causing all of this.
What would you recommend Geitner do? He either starts breaking gov’t obligations to people today, or he depletes funds so that he can delay doing so, and hopes (pretty reasonably), that the debt sealing gets raised and he can repay the funds.
If a private pension manager tried to breed plutonium or print his own money he’d be doing time to. Gov’ts get to do a lot of things that individuals don’t.
Actually, if the debt ceiling isn’t raised quite a few people are going to be hurt. Federal employees and federal retirees are the least of the worries.
You can believe it’s a glass ceiling.
So how close can we get without actually defaulting until serious consequences actually happening because of perception?
Depends. How much could we get for the Lincoln Memorial?
Well, treasury rates aren’t exactly skyrocketing, so apparently we aren’t hurting ourselves yet. There doesn’t look to be any spike in the mid-nineties either. Investors seem to have a lot of faith in US debt, even when the Congress plays chicken like this.
Its a stupid risk to take, but I don’t really think its likely to actually cause any long-term damage even if it goes on for a while. Everyone seems to realize that even Congress isn’t nuts enough to let this go to the point where the US can’t redeem Treasury bills.
I think the analogue is incorrect. Children have no responsibility or say in the matter of indebting the nation, and besides education represents an investment in the future which should return a profit. The people who are going to profit from a retirement fund very much have a responsibility for and choice in the matter of indebting the nation. Saving up for your own retirement by taking out loans to be paid for by your children is wrong. There should be no savings for retirement as long as the nation runs a deficit.
Greece has started selling off state owned land, infrastructure and enterprises big time. Doesn’t the USA have stuff it can sell to cover its expenses?
I wonder (sorry if I brought this up in the other thread): will every ceiling vote from now on be a series of “hostage takings” based on who’s got the numbers in Congress at the moment? Does it at all depend on what happens this time?
Or will it cause a movement to do away with it (supported by both sides of the aisle) once it gets so silly that things can’t get done?
(Semi-related link: what one liberal pundit thinks is going on at the White House on this issue, and why.)
What about the appropriations vs debt ceiling idea? As I understand it, the argument is that Congress has passed two laws that are in conflict, the appropriations and the debt ceiling. The specific (the appropriations), not the general (the debt ceiling), should be the law followed and, as a result, the debt ceiling ignored. Anything to this line of thought?
If you don’t want to be Greece, yes it should be raised. If you want to be a shitty fucked up country on the verge of economic collapse, well…
The US has plenty of borrowing capacity left, your Debt/GDP ratio is a wee bit over avg right now, but not shockingly so. There is no proper reason - no economically rational reason - not to raise the ceiling.
Really Stone, is it possible for you to reply in a non-ludicrously ideological fashion for once? I am more on your side of politics, but these knee-jerk idiocies really are tiresome and absurd.
There is no rational comparison between a finance minister working the solvency of his bloody country in the face of irrational parliamentary posturing and a private pension manager - even the fiducuiary duties are rather and fundamentally different. by any non slavering partisan standard, the parties cited are ALREADY hostages to congressional game playing and posturing. Geithner is saving their bloody asses now. And you trot this out.
I would think the US would want to avoid the Greek situation, there really isn’t any economics behind the US defaulting, it would just be sheer politics and idiocy. Greece, now they’re right fucked, and their damned fault I would add. I would presume also the sale arrangements would end up being at once tardy and disadvantageous. In any case, given US government can borrow medium to long presently at absurdly low prices, and in its own currency, it makes absolutely no sense to sell off long-term assets just because some illiterate cretins want to pointlessly posture.
Frankly the American political system is looking more and more Latin America c. 1980s as to its seriousness.
Pardon me, but Greece’s problem is that it’s getting grosly overleveraged. Pretending that America will follow because we refuse to get overleveraged is quite the rhetorical feat.
:dubious:
The fact that you can leverage yourself into a hole is no good reason to actually do it. The average contains a ton of countries with ridiculous problems. As it is, the country is in a giant fiscal mess and us evil, stupid right-wingers are the only ones who want to do something practical about it. We may agree to some tax increases. But that’s a problem right now because it could easily stamp on economic activity in a recession that may finally be ending (long after, and much less robustly than stimulus proponents claimed, I might add). Spending must be cut, and the so-called “discretionary” spending will not do. Entitlements must be cut. If a thing can’t go on forever… it won’t. We don’t need more debt. We need better more fiscal prudence. We may increase the debt ceiling - but the first step in getting yourself out of a hole is to stop digging. Or in this case, before we agree to a bigger shovel we need a plan to start filling in the hole.
By cutting taxes.