April 13, 2011

"The Next Big Lie" [updated]

Bill Wilson, ALG:

Barack Obama is threatening that if Congress does not increase the $14.294 trillion national debt ceiling, the nation will default. In a letter to Congress, Obama’s Treasury Secretary, Timothy Geithner wrote, “Failure to raise the limit would precipitate a default by the United States.”

It is a rather curious formulation. Note that the Administration is not saying that if we continue to borrow trillions of dollars year on end without ever presenting a plan to repay the debt, we will default. But that if we do not continue borrowing, we cannot meet our obligations to creditors.

Call it the next big lie.

And it is nothing more than a scare tactic. Just like a consumer credit limit, if the debt ceiling is reached, this will simply mean that the Treasury cannot issue new debt. The existing debt could still be refinanced, but interest owed on the debt would have to be paid out of revenue and the budget would also have to be balanced immediately. That is not a default.

Surely, it would mean big cuts in spending. Of the $2.173 trillion in revenues, $430 billion would have to be dedicated to paying total interest owed on the national debt, including to the Social Security and Medicare trust funds. That would leave $1.743 trillion to pay for the remaining $3.612 trillion of the budget, requiring approximately $1.869 trillion of immediate cuts.


To take the Obama Administration’s threat off the table, Republican Study Committee (RSC) Members Tom McClintock, along with RSC Chairman Jim Jordan, Rep. Virginia Foxx, and Rep. Scott Garrett have introduced the Full Faith and Credit Act. It mirrors a bill in the Senate offered by Pennsylvania Republican Senator Pat Toomey.

According to an RSC description of the bill, “The Full Faith and Credit Act directs the United States Treasury, in the event the debt ceiling is reached, to pay principal and interest due on debt held by the public before making any other payments.”

Critically, the description notes, “This bill would merely codify standard Treasury practice.” So, which is it? Does the Treasury, as standard practice, pay the debt first or not?

In reality, the Treasury makes the decisions of who it needs to write checks to every day. The only difference is that every week it holds new auctions to sell U.S. debt, and so has a relatively limitless supply of funds to meet all of the government’s obligations. The sensible thing to do would be to pay the creditors first.

And if there is any question, then the only other sensible thing to do would be for Congress to pass the Full Faith and Credit Act.

Of course, the real reason for the Obama Administration to pretend that the nation will default if the debt limit is not raised is because it does not wish to make any concessions to achieve the vote. Republicans need to say: Too bad. And to use its leverage to achieve something big.

Like maybe an uncorrupted BBA.

What I don’t understand is why the GOP isn’t making the case to the American people that the quickest, biggest, and most easy cut to make would be the erstwhile “stimulus” money that was sold as a one-time budget item, but which total is now included as a baseline in Obama’s new budget proposal. Honestly, can we not even sell that?

Then we could condition any raise to the debt limit on a balanced budget amendment and other key reforms, as suggested by Marco Rubio, among others.

Of course, all of this takes political will. And frankly, I’m just not sure the GOP has it — or that it necessarily even wants any of this, in the aggregate. Just appearing to seems to them to work if the real goal is merely re-election and an eventual GOP re-ascendency. As the early and very public cheerleading over the GOP jungle cats’ enormous budget victory suggested…

update: Rush Limbaugh is warning that the same GOP establishment types who gave us the fearsome budget victory are planting the seeds for avoiding a fight on the debt ceiling — preferring instead to once again save their ammunition for the Ryan budget fight.

If he’s right, that will mean the GOP — given 3 leverage points to negotiate for fiscal sanity — will have punted on two of them.

Readying themselves for the really really really big pounce, no doubt.


Posted by Jeff G. @ 10:21am

Comments (23)

  1. Last I checked, the donks led the pubs by twenty points on the optics of this issue, yet if one checks the numbers and their causes, the issue is entirely one of failed federal leftism.

    This nation literally runs on bullshit. We’ll literally go down believing it’s up.

  2. Give the people what they want. More bullshit.

  3. Boehner thinks showing some balls is something you do on a golf course.

  4. But JHo, that was before he realized how big of a recession he was inheriting from Bush Wall Street Paul Ryan. /prog-think

  5. I agree with this guy……….. for once.

    The fact that we’re here today to debate raising America’s debt limit is a sign—is a sign of leadership failure. Leadership means the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.

  6. geoffb I bet that guy would want to cut our deficit in half in his first term.

  7. I agree with Monty Python: we should put a tax on all foreigners living abroad.

    Because it’s an *income problem*, baby!!!!!!

  8. I’d default – on purpose. It’s mainly China we owe the money to, and they’re the enemy. Fuck-em.

  9. I am so stuck on who to contact – I have a freshman Rep, Tea Party type, who is pretty staunch but my Senators are Dick Durbin and RINO Kirk, gah!

  10. I’d bang on the RINO most, Colonel. The Tea Party guy shouldn’t need it, and it won’t work on Durbin.

  11. And what was “Presidential leadership failure” in 2006 is actually “Winning The Future” in 2011.

  12. 2011-2006 = 5

    We are in the new improved 5 year plan now see.

  13. I’m beginnning to wonder if default isn’t the answer. It is going to be painful as hell, but it’s going to happen eventually because there are no adults left in power, so the sooner the better as the pain will still be less now than if we wait another five years and have, or, I don’t know, AL Franken as president.

  14. Default, Baby, Default.

  15. LTC,

    You’re better off than I am.

    I’ve got Kevin “Beltway Confidential” McCarthy (reliably pragmatic conservative) uber dimwit leftist Boxer and pragmatically dogmatic lefty Feinstein.

  16. The Tea Party guy shouldn’t need it

    Shouldn’t, but probably will.

    He’s been immersed in the Congressional Academy of Pickpockets, Burglars and Carjackers for three months now. He’ll need periodical deprogramming if he’s to be of any use from here on out.

  17. Rrrawr!

    What sound do RhINOs make? “Bump, Bump”? “Stomp, Stomp”? “Bumble, Stumble”?

  18. Anyone who’s read this book knows how right you are, McGehee.

  19. Timothy Geithner wrote, “Failure to raise the limit would precipitate a default by the United States.”

    It is a rather curious formulation. Note that the Administration is not saying that if we continue to borrow trillions of dollars year on end without ever presenting a plan to repay the debt, we will default. But that if we do not continue borrowing, we cannot meet our obligations to creditors.

    Call it the next big lie.

    And it is nothing more than a scare tactic.

    Not really. What they are saying is if you don’t give them more money they won’t be able to pay you the money they already owe you, which is what life is like for any habitual gambler or junkie.

    The only difference is junkies aren’t allowed to steal.

  20. Serious question.

    Why do these fuckers with the free magazines keep calling me to “renew my information”? What’s the scam here?

    My information is the same as it ever was. Stop calling me!

    They ask me to verify my phone number.

    Hey dickhead, how the hell did you get on my phone?!?

    Stop calling me!

  21. Entropy,

    Chances are good that the “free” magazines are free for a year, after which you’ll be charged a hefty premium for the ten-year subscription that you “agreed” to. Or else the magazine is free, but the “processing fee” is fifty bucks.

    I don’t get so many of these calls since I re-upped on the Do Not Call list, but they occasionally slip through. I usually go with “You can send me any goddamn thing you want, but before you send me any kind of bullshit invoice, you should bear in mind that I work in the Attorney General’s office.”

    It’s sorta true. I mean, he’s the state AG, and I work in the state.

  22. That is a good suspicion Squid, and my first one as well. But not the case.

    We’ve had those before and I’m familiar with them.

    This is mostly trade magazines they are genuinely free and they just send them to whomever the hell they can. Probably to pimp the ads, which are quite relevant – being trade magazines, they hawk tools of the trade. Not all bad magazines either.

    But damn if I don’t get 9 calls in a day some days of goobers asking to me to “update” all the info they already had on file, none of which has changed. I tell them “nothing has changed dammit, use what you got” and they give me this crap about how they have to verify it all and waste my time, like the phone isn’t aggravating enough when I’m not being spammed with people selling tiewraps or mailing magazines I mostly chuck in the trash.

    Some of that is probably what you get with company requirements on minimum wage idiots. Maybe that’s all of it. It is damn frustrating some days.