debt ceiling

Debt Ceiling Approval Issue: Unbelievable

by Dave

I wrote on August 9, 2017 that the debt ceiling approval was not headline news, but in two weeks it would be.  Boy did I nail it!

Congress must act fast to increase the debt ceiling limit.   After September 29, 2017, the US will start to default on its debt obligations if they fail to act.  Congress goes back in session on September 5, 2017  after Labor Day.   Secretary Treasurer Mnuchin  has call the debt ceiling limit “ridiculous”  and I agree with him 100%.

Unfortunately,  commentators in the media constantly confuse the issues of budget approval (non-approval results in a shutdown of non-essential gov’t services)  and debt ceiling approval (non-approval lowers credit rating of the US with long term harm to our economy).  They fail to mention that the ceiling does not restrict spending, only the government’s authority to pay its bills for approved expenditures.  Perhaps it should be called,  “Pay your bills on time approval” to get popular support.

Trump’s recent tweets were down right scary,  chastising McConnell for not slipping into the recently passed Veteran Affairs budget  bill, the debt ceiling approval.   The VA bill was controversial because it allowed veterans to seek medical care outside of the VA hospitals (Choice Program).  The problem with any free health system is it gets abused.  It has been documented that non-veterans were also getting free medical care.    But, the Choice options to the VA medical system were put in the budget bill, so it would get approval.   So, the VA bill was already dirty in a way and it was the reason why the bill didn’t pass until VA funds were nearly gone.

Adding to this bill an approval for the debt ceiling was a horrible precedent, as it says either you approve the VA Choice program or the country will be in sovereign default.  I call that super ridiculous-  but it is exactly what Trump tweeted.

Treasury Secretary Mnuchin calls for a clean debt ceiling increase,  just as the former Treasury Secretary Jack Lew did before him.    Clean means clean.  It means that Trump’s administration request  for increased funding for the border wall, or anything else, including infrastructure spending must be passed on the merits of requests, and not a political deal.

There are just 12 working days between Sep 5 and 29, 2017.   The exact same arguments used by President Obama, in pleading with Republicans in Congress to pass a clean approval,  are being made by the Secretary of the Treasury.   But this time,  he is pleading with his own party and most likely will need the Democrats to get the job done.

There are Republican groups pushing for a dirty bill and to tie the ceiling approval to spending cuts or other things on the Trump neoconservative  agenda.   This is the same horrible idea that Obama had to deal with.   I particularly like the idea analogy of a President Trump putting a gun to his head, and declaring “You pass this bill with border security and debt ceiling in it, or I’ll pull the trigger.”

If President Trump really wants to go on the attack,  he can propose elimination of the debt ceiling altogether.    I certainly would support this.

Stay tuned,.

Dave

 

 

A Crisis in the Debt Ceiling Limit Approval – Again!

by Dave

I know this isn’t headline news, yet.  But in two weeks, it will be.

I knew if Hillary Clinton was elected, this crisis would happen.  With Clinton as President,  I knew the House Republicans would use this opportunity to threaten  to wreck the economy unless a “dirty” approval was signed into law.  A dirty approval contains additional riders outside of increasing the debt ceiling which the President and the Democrats oppose and would under normal circumstances never pass.   The threat of sovereign default is used as leverage.   This makes most economists cringe.

But I thought it would be completely different with Trump in the White House and Republicans in control of both the House and the Senate.  Boy was I wrong!

Obama and Treasury Secretary Jack Lew went through sheer hell in getting the debt ceiling approved in 2011.   There was another crisis in 2013.    Treasury Secretary Steven Mnuchin asked Congress to approve a simple and clean bill to increase the debt ceiling limit.  He is 100% right.

As this issue got politicized,  somehow what the debt ceiling really was got twisted out of shape.  It absolutely is not analogous to the limits on credit cards, which we all know stops someone from racking up huge debts. The debt ceiling is not a mechanism to control spending.   This is done through the budget and appropriation requests.   This is stated on numerous website including Wikipedia as follows:

Because expenditures are authorized by separate legislation, the debt ceiling does not directly limit government deficits. In effect, it can only restrain the Treasury from paying for expenditures and other financial obligations after the limit has been reached, but which have already been approved (in the budget) and appropriated.

The difficulty in approving this increase, is that it says to conservative Republicans, that they somehow approved huge government deficits.

If not approved by late September, the US will be  in default.   The US stock market crashed in 2011, when it looked like there would be no approval. According to Wikipedia:

The GAO estimated that the delay in raising the debt ceiling during the debt ceiling crisis of 2011 raised borrowing costs for the government by $1.3 billion in fiscal year 2011 and noted that the delay would also raise costs in later years.[39] The Bipartisan Policy Center extended the GAO’s estimates and found that the delay raised borrowing costs by $18.9 billion over ten years.

We are back in the same situation, and this time it could be far worse because of the White House in-fighting.    Mike Mulvaney of the Office of Budget and Management undercut the Treasury Secretary’s position by suggesting something truly frightening-  using the crisis to force changes to Medicaid.

I like the way the LA Times presented the crisis:

The debt ceiling fight: This time it’s different–and much more dangerous

It is a time bomb.  There are  ways to kick it down the road, but that’s a horrible idea, as it starts discussion of all sorts of ways to frustrate a simple approval.  Democrats and moderate Republicans should unite and pass what Mnuchin asked for, ASAP.  Mulvaney should just keep quiet if he can.

Most economists believe the debt ceiling shouldn’t exist.  I agree, as explained in the link.

Stay tuned,

Dave

Link:  Wikipedia Debt Ceiling

 

Who not to vote for, Again!

by Dave

I just apply 3 simple rules:

  1. Don’t vote for anyone who has zero government experience
  2. Don’t vote for anyone who  has rigid conservative and religious views
  3. Don’t vote for anyone who voted against the debt ceiling increase.

Few people understand rule #3.  Voting against an increase in the debt ceiling increase  would not have changed the US debt by one cent, but it would have created havoc in financial markets (including the stock market where I have my 401K).  We would have defaulted on our debt obligations.   McCain and Graham voted for the increase in the limit.

Zero government experience eliminates Trump, Carson and Fiorina.  Rule #3 eliminates Cruz, Paul and Rubio.  Rule #2 eliminated definitely Cruz,  Huckabee and Paul.

So Jeb Bush is sinking in the polls, but my set of rules don’t exclude him.  Lindsey Graham is way down on the polls, but would get high marks for his government service.

So, where have all the moderate Republicans gone, long time passing, as the song goes.  I guess compromise and moderation just doesn’t make good TV.

Stay tuned,

Dave

 

Who definitely not to vote for

by Dave

Rand Paul and Ted Cruz.  Probably Marco Rubio too.  They are not willing to pass a clean debt ceiling increase, which we need to avoid disaster.  We will see how the rest muddle through the question on Wednesday’s debate on whether to raise the debt ceiling.

We don’t want a president who lacks any government experience or who is so extreme that they would cause great harm to the US credit rating.

Stay tuned,

Dave Lord

Graham Ledger on the debt ceiling

by Dave

Graham Ledger of OANN (One American News Network)  said that congressmen should look up the word “ceiling”  because if they keep raising it, it isn’t a ceiling.   And I agree that it is a misnomer.   I will call it “Economic self destruct time bomb.”

There’s nothing constructive about the debt ceiling.   It doesn’t limit spending.  It doesn’t limit our debt.  It  empowers the government to pay its bills.  It doesn’t exist in other countries.  It is an anachronism.  It really  should be eliminated because it is being used by minority groups to try to extort from government what they couldn’t do by the democratic process in Congress- like defund Obamacare.

The day after Congress refuses to increase the debt ceiling,  the US debt will be just the same and  be over the debt ceiling limit.  Debt increases when spending exceeds revenue.  The cure to debt is to cut spending or increase revenue, not plunge the country into economic chaos.

If the President continues to pay bills after Nov 3,  he  and the Secretary of the Treasury are in defiance of Congress and subject to impeachment.  If he does not pay the bills, the US is in sovereign default.

What have other President’s done in similar situations?   Nothing, because Congress has always raised the debt ceiling. It used to be automatically attached to spending bills.

“Economic self destruct time bomb” is more appropriate.   It has been at the door of congress since March  together with the instructions to defuse this bomb – pass the clean debt ceiling increase.

Stay tuned,

David Lord

Like I have been saying ….

by Dave

Debt ceiling

From Politico:

Now, House Republican leadership is saying Democrats need to give up something in order to convince a “minimum number” of GOP lawmakers to avoid a lapse in the borrowing limit.

House Minority Leader Nancy Pelosi (D-Calif.) bashed Republicans for their disarray on the debt ceiling during a news conference on Thursday.

“It’s only a matter of hours until we have to act in the House. We have to act really by tomorrow. This calendar of chaos … is really coming down to hours, days, weeks,” Pelosi told reporters.
Read more: http://www.politico.com/story/2015/10/house-republicans-debt-ceiling-scramble-215082#ixzz3pcdSSSM3

http://money.cnn.com/2015/09/14/news/economy/debt-ceiling/index.html?iid=EL

http://money.cnn.com/2015/10/22/investing/debt-ceiling-treasury-cancels-auction/

Trump wants a “pound of flesh”  in exchange for a debt ceiling increase.

Stay tuned,

Dave Lord

A pound of flesh for Republicans??? Gross stupidity

by Dave

We have until Nov 3 to avoid defaulting on our debt.   Trump wants Republicans to “extract a pound of flesh” in return to approving a debt ceiling increase.  Exactly what the pound of flesh would be,  Trump wouldn’t say, but it’s obvious that there has to be something there for Trump to say that the Republicans won on the debt issue.

Jack Lew talks about self inflicted wounds on the American economy.   Trump gets a bit more graphic,  but no substance.

Republicans +1,  US  -100.

There is no issue. Or perhaps I should say that there is no issue of substance.     We spent the money, now we have to pay up.

If you attach conditions to a debt ceiling bill,  you are destroying the democratic process by letting a small minority extort demands in return for doing what we have to do to avoid sovereign default.

Trump likes that as it draws attention to him.  Saying how stupid the Obama government because they keep increasing the debt gets higher ratings.   Blaming Obama for the national debt is really dumb, as it has been grew under both Republican and Democrat Presidents.

Sovereign default  is, unfortunately,  highly destructive to our economy and businesses.  And unnecessary.

We have never defaulted on our debt payment,  counter to the nonsense coming out of  Fox news,

The Tea Party could care less about the ramifications of not paying our debt.   It  just wants more Fox news  air time on the  trillion dollar debt.

Stay tuned,

Dave Lord

 

 

 

 

More frightening developments

by Dave

Moderate Democrats and Republicans have found common ground for decades to pass legislation.  For example, the core environmental laws which enhanced governmental powers of the EPA (Clean Air and Clean Water Act) were signed into law by Richard Nixon.

But, the tea party republicans are threatening to really bring ruin to the US by failure to raise the debt ceiling and action is needed within 3 weeks.

Kevin McCarthy pulled out of the race for House Speaker, because he would have to cut a deal with the Freedom Caucus to refuse to pass a clean debt ceiling bill.  Shep Smith of Fox News, got the story first:

http://www.breitbart.com/video/2015/10/08/shep-smith-freedom-caucus-demands-washington-grind-to-halt-wants-disarray/

Stay tuned,

David Lord

 

Debt ceiling again – and the white knight republicans

by Dave

Yes, the government spends too much, it borrows too much, it spends money on stupid things.  But just stop right there. PLEASE.

Nov 5, 2015 is when the debt ceiling has to be raised.  At least, it is now the best estimate of Sec’y Lew.

Debt ceiling has nothing to do with how much the government can spend or borrow.  It is not like your credit card limit. It is called a debt ceiling, but it should be called “Permission to pay what the US Government has already spent.” It is like permission to pay your credit card bill when it arrives.  But it’s worse, because if the US Government fails to pay, they have now defaulted on their obligations.

The US has never, ever defaulted.  Companies who fail to pay their obligations find their credit ratings cut very quickly, and soon they are facing bankruptcy.

A temporary debt ceiling “patch”  was passed in 2014, which temporarily suspended the debt ceiling  to March 15, 2015.

So,  the alarms at the Treasury have been sounding since March 6, 2015 that Congress has to take action.   Eight times, Lew sent letters to Congress.  Obama has stated the same thing countless times.  This is the economic nuclear bomb.

If a debt ceiling bill is passed with demands that Obamacare or Planned Parenthood are to be defunded (which has nothing to do with the debt ceiling)  you basically destroy the power of the President to execute those laws passed by Congress.  Obamacare is in effect because was passed into law by Congress.  Now Congress can defund Obamacare, they can defund Planned Parenthood, but not as a condition to prevent an economic crisis.

Secretary Jack Lew sent letters on March 6, 13, 16 and 17 warning that he was forced to take emergency step (extraordinary measures) to avoid default.  He then sent letters on 7/29, 7/30, 9/10 and two days ago (Oct 1, 2015) with the Treasury’s best estimate of when the funds used during this period would be exhausted.  Each letter stated the exact date could not be predicted, because it would depend on the money coming in and out of the Treasury every day.

There was a nice way to deal with this.  Congress used to pass budgets,  and when the budget passed, automatically the debt ceiling was raised.  This is why during the Bush administration, nobody was concerned with debt ceilings.  But, this was done away and the rest is an awful mess.

Republicans have the chance to make a major and permanent change in our economy, by pushing our country into default for refusing to pass a simple clean debt ceiling increase.  Ted Cruz, Marco Rubio, and Rand Paul may lead the charge. Why not, they are behind in the polls.

Republicans will try to put the blame on Obama, as crisis hits, and they will get plenty of air time on Fox news, by emphasizing that we are trillions in debt and they are some kind of white knights to save the day.  All they really do, is slay the princess and let the dragon loose.

Is it worth it?

Stay tuned,

David Lord

 

Debt Ceiling

by Dave

Sec’y Lew letter, moving up the date to likely default to November 5, just 5 days after Boehner leaves.  What a mess!

Countries usually fall into sovereign default after a number of disastrous economic decisions.  We’re doing if so the Republicans can get more air time on Fox news.  It is scary, and the Republicans are crazy to play a game of Russian roulette with the economy.  The problem with Russian roulette is sometimes the gun does go off.

http://www.treasury.gov/Documents/Treasury%20Letter%20to%20Congress%20100115.pdf

Could be one screaming stupid mess.  I know Marco Rubio voted against raising the debt ceiling last time.  Tom Cruz and Rand Paul likely voted against it too.

Stay tuned,

Dave Lord

 

Debt ceiling and self inflicted wounds

by Dave

Congress must pass a clean debt ceiling hike.  This is the real big one.

Don’t worry about October, and the spending bill.  Failure to pass the spending bill means essential government services are shut down.  There will be a lot of press coverage, and blaming who’s at fault.   Holding up the bill because of Planned Parenthood non-scandal, is silly.

Failure to raise the debt ceiling is catastrophic.  It might happen.  It means the US refuses to pay for spending already authorized by Congress.  Many economists have said debt ceiling authorization shouldn’t exist and doesn’t exist in almost all countries.

The failure to raise the debt ceiling will result in the lowering of US credit, a disaster for business and crashing stock market.

The change out of the Speaker of the House on Oct 30 has been worried.

If it does happen,  it is the fault of the Republicans.  And it is supremely dumb.

Stay tuned,

David Lord