From the WSJ:
The Treasury Department on Friday began taking preliminary steps to extend the length of time before breaching the federal borrowing limit, which technically will be reached Sunday when a congressionally imposed suspension expires.
Treasury’s emergency moves, along with the government’s best revenue outlook since the recession, are expected to offer a relatively long runway for funding maneuvers that prevent financial turmoil without a debt-ceiling increase. Independent budget analysts estimate the Treasury will be able to use extraordinary measures, such as halting certain pension payments, to continue borrowing money until October or November.
This time, there are two dynamics that could complicate the debt-ceiling talks. Now in charge of Congress, Republicans are deeply divided over raising the borrowing limit. Senior Republicans have pledged to increase the debt ceiling without threatening a default, but they will likely face a revolt from some conservatives who view such a move as politically toxic. Meanwhile, the negotiating window could extend into this fall when lawmakers in Congress also need to approve a federal budget.
The President continues to spout that the U.S. will “default” on its obligations if the debt ceiling is not raised. That is poppycock.
In the first place, “default” is a technical term that refers specifically to not paying interest on debt. The federal government has plenty of revenue that will enable it to pay debt interest with plenty of cash left over.
There will only be a “default” if Obama and his team make the deliberate choice to divert cash to other uses than paying interest–such as the large base of social welfare constituents that voted exclusively for Obama and depends on taxpayer money for sustenance.
If you or your business is totally dependent on government for your income, this is the risk you take. Except for a small number of truly disabled people, individuals so dependent could choose to go look for a job, and companies so dependent could diversity their customer base.
The truth is that the failure to raise the debt ceiling will force Obama and his appointees to make choices about where to allocate limited cash, and they don’t want to do that. Some vendors would have their payments delayed–this is what California does when it periodically experiences a cash crunch.
I’m sure the Obama team will make sure to have the White House political office direct the delays to the Congressional districts where they think they can best leverage cuts for political gain.
I say force them to make the cuts and weather the political storm. The only other choice is to continue fueling the spending frenzy, which is a pathway to bankruptcy.
The President, through the Treasury Department, has an obligation under the 14th amendment to pay all debts. These include servicing the debt on bonds held by China, the social security trust fund , the federal reserve bank, and any other bond holder.
Regardless of the non-sense being put out by the administration there is sufficient revenue to service this debt. What current revenue isn’t enough to service is the future programmatic obligations needed to continue many programs congress passed at their current levels.
Oblation authority for these programs does not constitute debt and paying for these programs isn’t covered by the 14th amendment because they don’t meet the definition of “authorized by law”. Although they were passed under the continuing resolution these payments were not legal as they themselves violated an existing law–specifically the one that created the debt ceiling in the first place.
As has been a customary and successful ploy under President Obama, he will yet again use the media (as an unofficial 4th branch of the Federal Government) to drown out reason, impugn, and demonize the Republicans -- using threats and scare tactics -- in order to get his way and not only increase the nations' credit card, but refuse to do meaningful cutting of an outrageous spending binge since he took office.
The only chance Republicans have in the House is to publicly get in front of the problem right now to blunt the threats and overblown charges by Obama with sober facts and take America on a stroll down memory lane with regards to how we used to run this country before Obama took over as a monarch.
All wise and informed people know this is going to bite us very badly unless limiting the debt ceiling isn't coupled with meaningful and immediate legislated spending cuts, but it's the uninformed (read: purposely ignorant) that Obama reaches and unfortunately they seem to outweigh in numbers those that want to right this ship as it meanders on the shoals of destruction.
In reality, the Debt Ceiling has nothing to do with the ability of the U.S. to pay its debts, and with defaulting on debts.
The economists at S&P who downgraded the U.S. after the last debt ceiling fight are simply Krugman-style Keynesians at heart. They thought reduced government spending would permanently shrink the economy.
Reduced government spending does have a short-term effect, but only a very brief one until capital can readjust and redeploy.
The rational thing for a rating agency to do after the Summer of 2011 would have been to increase the credit rating of the country (if that were possible) after the bruising negotiations that summer. This is because those negotiations showed that at least some elements of our country's political system were finally willing to stick their necks out and say "no more."
That was very, very unusual. And a cause for hope rather than a cynical credit downgrade.
If your child reaches their $1,000 credit ceiling on the card you co-signed for, refusing to increase it for them does not make them less credit-worthy. It actually caps their leverage.
It keeps them from becoming more leveraged. It means they don't become even more dangerously unstable from a debt standpoint.
S&P should have increased the U.S. rating after the Summer of 2011. Republicans need to be able to explain this. Don't the Republican politicians and party leaders understand anything? When Ayn Rand wrote about our country becoming too complex for even our elected leaders to understand, she was apparently right.
Refusing to raise the debt ceiling has nothing to do with default or inability to pay debts. It simply prevents more debt from being issued.
And the Debt Ceiling has nothing to do with previously approved spending. The Debt Ceiling is agnostic as to which spending gets cut if other poorly designed programs on automatic pilot grow at rates we didn't expect and can't afford and spending reaches the ceiling.
The President wants Republicans to make the choices so that Democrats can run more ads depicting grandmothers getting pushed off cliffs and further increase their political stranglehold on the country.
Don't let him do this. Force Obama to make the choices under this massive, existing spending authority. Obama has already shown that he will demonize any Republican who tries it.
Fine then. Obama owns it.