News Should Obama invoke the 14th Amendment and bypass Congress?

[WhoWee]

Not the same argument. On the right, we have people dedicated to a principle. On the left, we have people trying to respond to real needs - social security checks for the elderly, pay for soldiers, food stamps for those who can't afford food, services for the disabled and war veterans [remember them?] ...

Come on Ivan - who on the Right wants to (specifically) hurt elderly people on SS, US soldiers, people who can't afford food, and any veterans? Please support.

 

[Proton Soup]

Obama refuses to sell out the poor and the middle class, for the rich. He went way too far already and they still wouldn't take the deal.

oh really? this is a bankers' president, not a mortgagees' president.

this man hasn't talked like a democrat since the campaign

https://www.youtube.com/watch?v=UErR7i2onW0


and that "who are you going to believe?" line with Giethner, please. I'm tired of having my intelligence insulted that the bankers have anyone's interests but their own. the problem is we have too much faith and credit, not too little. how long until we end up like Greece and can afford to do little more than pay the interest? this has got to stop, it's not sane.

 

[WhoWee]

oh really? this is a bankers' president, not a mortgagees' president.

this man hasn't talked like a democrat since the campaign

https://www.youtube.com/watch?v=UErR7i2onW0


and that "who are you going to believe?" line with Giethner, please. I'm tired of having my intelligence insulted that the bankers have anyone's interests but their own. the problem is we have too much faith and credit, not too little. how long until we end up like Greece and can afford to do little more than pay the interest? this has got to stop, it's not sane.

I doubt if you'll ever hear President Obama make SUCH naive promises in the future. Unfortunately, (other than FOX News) the media doesn't hold him to his promises much - do they?

 

[MarcoD]

This is all nonsense with regard to any plausible outcome of August 2nd. The 'worst case' is only possible years from now if the deficit continues at current levels, in which case the government would become mathematically incapable of paying interest on the debt.

How do you imagine the US will pay back on their debt (bonds) if they cannot raise the capital to do so?

 

[mheslep]

How do you imagine the US will pay back on their debt (bonds) if they cannot raise the capital to do so?

With the $2.17 trillion it will take in tax revenues this year. The 'worst case' come August 3, and this is highly unlikely, is that a couple of coupon payments will be missed, which happens to large bond holders all the time. The treasury bonds will not "go up in smoke."

 

[mheslep]

Interview with famous bond trader Druckenmiller:

"Here are your two options: piece of paper number one—let's just call it a 10-year Treasury. So I own this piece of paper. I get an income stream obviously over 10 years . . . and one of my interest payments is going to be delayed, I don't know, six days, eight days, 15 days, but I know I'm going to get it. There's not a doubt in my mind that it's not going to pay, but it's going to be delayed. But in exchange for that, let's suppose I know I'm going to get massive cuts in entitlements and the government is going to get their house in order so my payments seven, eight, nine, 10 years out are much more assured," he says.

Then there's "piece of paper number two," he says, under a scenario in which the debt limit is quickly raised to avoid any possible disruption in payments. "I don't have to wait six, eight, or 10 days for one of my many payments over 10 years. I get it on time. But we're going to continue to pile up trillions of dollars of debt and I may have a Greek situation on my hands in six or seven years. Now as an owner, which piece of paper do I want to own? To me it's a no-brainer. It's piece of paper number one."

http://online.wsj.com/article/SB10001424052748703864204576317612323790964.html

 

[MarcoD]

With the $2.17 trillion it will take in tax revenues this year. The 'worst case' come August 3, and this is highly unlikely, is that a couple of coupon payments will be missed, which happens to large bond holders all the time. The treasury bonds will not "go up in smoke."

I said part of the capital of banks will go up in smoke. Failure to (partly) redeem debt, or redeem debt on time is the same thing. If I don't get $100 back on time to reinvest it, I take a loss, it's that simple. Banks will just not know whether they are capitalized enough to take all the hits. Moreover, if the US don't pay on time just _once_, future interest on debt will go up, because of the added risk, and they will have a bigger problem.

Of course, the government may chose to give higher priority to US debt than wages of officials - and I guess that could happen. But in that case policemen, soldiers and nurses will not receive enough money, banks become underfunded, possibly people can't pay their mortgages, people will spend less money in the economy and the economy still takes a big hit.

The US government spends $3.5 trillion - failure to raise the debt ceiling, or/and increase taxes, will have major consequences.

 

[WhoWee]

I said part of the capital of banks will go up in smoke. Failure to (partly) redeem debt, or redeem debt on time is the same thing. If I don't get $100 back on time to reinvest it, I take a loss, it's that simple. Banks will just not know whether they are capitalized enough to take all the hits. Moreover, if the US don't pay on time just _once_, future interest on debt will go up, because of the added risk, and they will have a bigger problem.

Of course, the government may chose to give higher priority to US debt than wages of officials - and I guess that could happen. But in that case policemen, soldiers and nurses will not receive enough money, banks become underfunded, possibly people can't pay their mortgages, people will spend less money in the economy and the economy still takes a big hit.

The US government spends $3.5 trillion - failure to raise the debt ceiling, or/and increase taxes, will have major consequences.

Care to support how you've made these determinations?

 

[MarcoD]

Care to support how you've made these determinations?

Which determinations, it is just economics? The 3.5 trillion is from wikipedia, the rest is just plain economics and financials.

 

[WhoWee]

Which determinations, it is just economics? The 3.5 trillion is from wikipedia, the rest is just plain economics and financials.

Why and how will the capital go up in smoke?
Soldiers are paid by the Government - but not civilian police and nurses - please explain?

Your reference to wiki really doesn't help clarify.

 

[MarcoD]

Why and how will the capital go up in smoke?
Soldiers are paid by the Government - but not civilian police and nurses - please explain?

Your reference to wiki really doesn't help clarify.

Oh, I don't know all of the US spending. I thought nurses would be in the government spending, but it doesn't matter which officials, or otherwise indirectly employed, get paid for the argument.

Capital goes up in smoke when you assume you hold debt, but it turns out that that debt is not good. If I only get 80 cents on a dollar of debt I assumed to be guaranteed, 20% disappeared. If I own a dollar of debt, but that debt is redeemed later, then I make a loss equivalent to the profit I could have made by reinvesting that dollar on time, and capital goes up in smoke too.

If the US doesn't pay back all debt, or all debt on time, the owner of that debt takes a loss. Normally, these are banks, and ultimately the owners and clients of that bank. If government debt becomes bad, banks can only assume that it will happen again, and will just charge larger interest rates to make good for the loss (the increased risk). (In the end, you'll even notice it yourself, since banks need to be recapitalized, they'll charge more for deficit/mortages and give less interest on savings.)

The banks problem is just similar to what Greece/the EU is experiencing, and is explained in lots of webpages around the internet.

(I am from the Netherlands: all this is from just following the financial news during the subprime mortgages period and the current EU PIIGS crisis.)

 

[ParticleGrl]

When the US defaulted temporarily in 1979 due to a logistical difficulties in the Treasury office, bond rates jumped 60 basis points and stayed high for months. People who think nothing will happen don't know what they are talking about.

How much debt needs to be rolled over in August?

 

[MarcoD]

When the US defaulted temporarily in 1979 due to a logistical difficulties in the Treasury office, bond rates jumped 60 basis points and stayed high for months. People who think nothing will happen don't know what they are talking about.

How much debt needs to be rolled over in August?

I don't think they will roll over debt any time soon. The US government must avoid that scenario at all costs since rolling over debt will only mean that it will become harder to raise capital (interest rates will go up) in the future. It's not a political but a technocrat issue.

Unless everybody is totally insane, they will need to raise the ceiling, cut spending, (and increase taxes).

(Although there is a scenario that the owners of debt will accept rolling over debt because of nationalistic/economic reasons. Banks make a larger loss if the US economy starts failing than if they just roll over debt. But that will need a lot of talking to achieve.)

 

[WhoWee]

When the US defaulted temporarily in 1979 due to a logistical difficulties in the Treasury office, bond rates jumped 60 basis points and stayed high for months. People who think nothing will happen don't know what they are talking about.

How much debt needs to be rolled over in August?

Do you see a downside to raising the debt level to the amount needed to meet all obligations 5 years out (assuming Congress would be prevented from reaching the limit sooner or to accelerate spending) then working on revenues and spending to stay within that framework? The reason is short term emergency funding and lack of extended planning allows for a moving target - no discipline.

 

[joesmith]

,,,,,my goodness,,,this woke me up
a joe in Texas

 

[BobG]

How can a failure to raise the debt ceiling result in defaults. Failure to make at least interest payments raises the debt. Failing to pay on bonds, etc, does not lower the debt. Failing to make social security payments, pay employess required to work, etc, increases the debt since the government still owes those payments.

Failing to pay grants to states, etc, that are required by the budget that Congress passed presents a grey area, especially if the grantees have met the conditions to receive the money. You could say the federal government is legally obligated to make those payments because of the budget that was passed, and that those grantees are owed the money whether they receive it or not - hence failing to pay them still raises the debt the government owes.

Failure to raise the debt ceiling means the government has to stop paying for things it hasn't yet received - such laying off government employees, suspending some contracts, etc. Doing things like this wouldn't raise the debt, but it is a grey area about whether the federal government can just stop providing services that Congress budgeted for without Congress passing a resolution to repeal those parts of the budget.

The only way the federal government can 'avoid exceeding the debt ceiling' is to use some creative definitions on what it means to owe someone money. For example, the federal government could pretend that failing to pay social security benefits to people that have paid into the system and are authorized by law to receive those benefits doesn't really count as debt. Or failing to paying military retirement benefits to people who were guaranteed those benefits as a condition of staying in for at least 20 years doesn't really count as debt. Or deciding that missed interest payments don't count as debt - only new loans. And so on.

Saying the federal government cannot legally exceed the debt ceiling is like saying a person falling from a tall building can't legally hit the ground. Both are going to happen regardless of the law.

Seeing as how the US government is going to surpass the debt ceiling whether we like it or not, what's the punishment for exceeding the debt limit and who gets punished?

 

[russ_watters]

If they don't raise the debt limit, S&P will lower our credit rating on or about Aug 3. If they don't reduce the deficit, S&P will lower our credit rating on some as yet unspecified date. The obvious solution is to lower the debt and raise the debt limit, but I'm not sure that makes sense.

You've got my vote!

 

[russ_watters]

Not the same argument. On the right, we have people dedicated to a principle. On the left, we have people trying to respond to real needs...

Well that's just some high quality crap you're spewing, Ivan. Nonsense, every bit of it.

Since Obama himself has already rejected your premise for starting this thread and you've fallen back to pure propaganda, I'd say there isn't really any reason to continue, is there?

 

[BobG]

I'm convinced your either deliberately pretending to be dense, or simply trolling for a reaction. There is no authority under the 14th amendment or anywhere else for the president to bypass Congress. No court in the history of that amendment has held that it prohibited from the Treasury from deciding what to pay and how, subject to the laws passed by Congress. The cloest parallel in American history was when we left the gold standard behind; effectively, the Treasury was authorized by Congress and instructed by Roosevelt to default on its gold contracts (don't believe that nonsense about "the United States has never faulted on its debts"; every elementary school child knows the history of the gold standard in this country). In four separate cases, the court found that Congressional power over debts and the money supply was plenary or absolute, each time asserting this authority under different avenues of argument (including the 14th amendment).

So, you're saying the executive branch has to continue to do the things specified by the budget even if they exceed the debt limit? Or that the debt limit puts the executive branch in violation regardless of what it does?

This isn't like the government stopping because Congress can't pass a budget. With no budget, the executive branch has lost its authority to spend.

We already have a budget and the executive branch has to execute that budget or violate the Constitution.

The 14th Amendment isn't the place to find the answer, but there is a valid question of what's the most legal way for the executive branch to handle the situation.

 

[MarcoD]

How can a failure to raise the debt ceiling result in defaults.
... Seeing as how the US government is going to surpass the debt ceiling whether we like it or not, what's the punishment for exceeding the debt limit and who gets punished?

Failing to raise the debt ceiling means that, since the US government is running a substantial deficit, that they just can't pay the bills. (Effectively, the US cannot sell bonds at this point in time because the ceiling is in place - they ran out of money, this happened in may, btw.)

In the short term, that will indeed probably mean that they won't pay retirements or job wages of officials.

In the long term, and I assume this is more a matter of months than years given the substantial deficit, it means they also cannot pay back their issued debt. They will be forced to default. (Paying back debt is just one of the bills. It's just like a household where you took out a loan for a car, which means a regular bill which needs to be met once a month for a period of time. Not paying that bill means you're bankrupt, a default.)

(It is completely comparable to the Greek situation. One might argue that they just could have chosen to not pay the officials wages too and only pay the bank debt. But nobody in Greece would have stood by that they don't get their wages but the banks do...)

As far as I know, the debt limit is in place. There is nobody who gets punished, bills will just not be paid. But of course, people will go to court to get what they were promised; but this is a classical case of bankruptcy, you mostly don't go to jail for that.

But don't take my word for it, read more here: http://www.guardian.co.uk/business/2011/jul/14/us-debt-ceiling-deadlock-questions-and-answers

 

[Ivan Seeking]

Well that's just some high quality crap you're spewing, Ivan. Nonsense, every bit of it.

Convincing argument, Russ.

 

[russ_watters]

Convincing argument, Russ.

I think most people here see it, Ivan. There's an obvious symmetry here that you're simply unwilling to accept and as a result, you need to paint the right as being ideologically driven while the left is driven by pragmatism. It just plain isn't true and it is very easy to see. Both sides are clearly adhering to their fallback ideology: the left wants to tax the rich and the right wants to cut spending, each based on an opposite premise for how government should work and if either side gives in, the "crisis" ends. Claiming that your ideology isn't an ideology is just laughable. And it's not like you can't find this issue framed properly in the mainstream media:

Those on the far right would rather have the federal government default on its financial obligations than give ground on what is anathema to most conservatives: raising taxes. Those on the far left would rather risk default than give ground on what is anathema to most liberals: reducing entitlements.

http://www.cnn.com/2011/OPINION/07/23/zickar.silent.majority/index.html?hpt=hp_t2

But you want specifics? Fine:

On the right, we have people dedicated to a principle. On the left, we have people trying to respond to real needs - social security checks for the elderly, pay for soldiers, food stamps for those who can't afford food, services for the disabled and war veterans [remember them?] ...

Please cite the prominent Republican who says (explicitly) s/he wants to not make these payments next week. Otherwise, we'll need to lock the thread.

 

[BobG]

Please cite the prominent Republican who says (explicitly) s/he wants to not make these payments next week. Otherwise, we'll need to lock the thread.

Why? What does that have to do with the validity of the thread? (And shouldn't you move it to the nuclear engineering subforum first?)

While the 14th Amendment idea is ludicrous, how the President handles two conflicting Congressional directives is an interesting question.

 

[russ_watters]

Why? What does that have to do with the validity of the thread?

While the 14th Amendment idea is ludicrous, how the President handles two conflicting Congressional directives is an interesting question.

Etiquette says the OP picks the direction of the thread; anything else would be a hijack. However, I do recognize there is some legitimate discussion here -- I suppose we could do some pruning, but it would seem odd to me to be taking the thread away from the OP!

 

[Proton Soup]

Etiquette says the OP picks the direction of the thread; anything else would be a hijack. However, I do recognize there is some legitimate discussion here -- I suppose we could do some pruning, but it would seem odd to me to be taking the thread away from the OP!

i find the OP quite odd. if I'm reading the 14th amendment right, it is basically saying the union is going to welch on the obligations incurred by the confederates. so is the idea that we just brand enough congressmen as insurrectionists, label their spending as illegitimate and welch on it?

it's a wonder that BC didn't get disbarred a lot sooner.

edit: oh, and one more thing. you know how the US paid debts then? with fiat notes generated out of thin air.

 

[hbjon]

Come on Ivan - who on the Right wants to (specifically) hurt elderly people on SS, US soldiers, people who can't afford food, and any veterans? Please support.

Who on the right does not want to hurt the elderly etc.? Easy way to tell. Find out if they would vote to raise the ss eligibility age. In my mind, that would be a qualifier. Ivan is a wise old owl, You tell them Ivan.

 

[hbjon]

i find the OP quite odd. if I'm reading the 14th amendment right, it is basically saying the union is going to welch on the obligations incurred by the confederates. so is the idea that we just brand enough congressmen as insurrectionists, label their spending as illegitimate and welch on it?

it's a wonder that BC didn't get disbarred a lot sooner.

edit: oh, and one more thing. you know how the US paid debts then? with fiat notes generated out of thin air.

Not exactly. You could exchange them for an amount of gold that did not double in value yearly.

 

[Jimmy Snyder]

Both sides are clearly adhering to their fallback ideology: the left wants to tax the rich and the right wants to cut spending, each based on an opposite premise for how government should work and if either side gives in, the "crisis" ends.

I got the impression that the left was willing to compromise on cutting spending, but that the right is not willing to compromise taxing the rich. Did I get it right?

 

[russ_watters]

I got the impression that the left was willing to compromise on cutting spending, but that the right is not willing to compromise taxing the rich. Did I get it right?

Well it's certainly often framed that way (particularly in this forum, but at least the mainstream media has been admirably more balanced), that the left is willing to compromise but the right is not, but there are several problems with that:

1. There are a lot of different issues and a lot of different people with a lot of different positions and those that matter most (Obama's and Boehner's) aren't even out in the open since they are holding the discussions behind closed doors. Oversimplification leads to error and in addition, we have to be careful that everyone know's who's position is being discussed at anyone time. Ie, are Republicans unwilling to raise taxes on the rich? I don't know about others, but I'd be willing to raise taxes on everyone (let all of the Bush tax cuts expire) in the interest of [my perceived] fairness. It sounds like there are liberals in this forum who aren't willing to compromise at all on entitlements. Why ignore their 'unwillingness to be reasonable'?

2. If there is a binary (yes or no) choice, there can by definition be no middle ground. It's not non-compromising to pick one side of a binary choice.

3. "No new taxes" can be framed as binary on one side and sliding on the other, but that's a mathematically incorrect twisting of the issue. 0 is just a number, like any other, and the scale of numbers even has negative numbers. That option isn't being discussed, but it still exists and is the historical position of Republicans (cutting taxes to stimulate the economy, I mean). That it isn't being discussed could be said to mean the Republicans have already made a major concession, but is spun as saying they're not compromising.

4. Everyone has an "as far as I'm willing to go" position, even if they later go back and re-think it. That's the whole problem with negotiations - if you could take people's initial offers, slice them down the middle and make a deal, negotiating would be easy, but it just doesn't work that way. And depending on who you're dealing with, you may get their "as far as I'm willing to go" position right up front. Personally, I like that style - I hate negotiations.

5. Compromise is often seen as virtuous, but that isn't necessarily true. If we're bank robbers and I want to kill 10 hostages and you don't want to kill any, a split-it-down-the-middle compromise is still murder. More directly relevant, some people on each side currently appear to have "no compromise" positions: "Don't touch SS" on the left, "no new taxes" on the right. So it is just plain factually wrong to imply 'democrats are willing to compromise and republicans are not'.

6. A deal isn't necessarily a deal. This is the biggest problem here and it isn't even being discussed. It's easy to raise or lower taxes, but extraordinarily difficult to lower spending. So regardless of how hard a line the Republicans try to toe, ultimately they're probably going to get screwed by Democrats not living up to their end of the deal (and realistically, Republicans won't really want to make cuts when it comes to sign the paperwork either). See history for a clearly relevant example:

In 1981, President Reagan's plan for revitalizing the economy was a four-fold one:
1) Reduce tax rates across the board.
2) Decrease unnecessary regulations.
3) Work with the Federal Reserve to maintain stable monetary policy.
4) Slow the growth of federal spending...

The ratio in the final deal — the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) — was $3 in spending cuts for every $1 in tax increases. It sounded persuasive at the time. Believing it to be the only way to get spending under control, most of the president's colleagues signed on. He disliked the tax hikes, of course, but he agreed to it as well...

You don't have to be a Washington veteran to predict what happened next. The tax increases were promptly enacted — Congress had no problem accepting that part of the deal — but the promised budget cuts never materialized. After the tax bill passed, some legislators of both parties even claimed that there had been no real commitment to the 3-to-1 ratio.
In fact, spending for fiscal year 1983 was some $48 billion higher than the budget targets, and no progress was made in lowering the deficit.

http://www.usatoday.com/news/opinion/forum/2011-07-22-reagan-obama-economy-1980s-taxes_n.htm

7. Math problems. If we have a $1 deficit and both say we want to eliminate it, but I want to raise taxes by $.25 and you want to cut spending by $1, a cut-it-down-the-middle compromise still yields us a $.25 deficit and hasn't fixed the problem both of us say we want to fix.

8. Starting positions aren't necessarily equally reasonable. If you want to sell me something for $1 and I want to buy it for $.50, a cut-it-down-the-middle compromise requires me offering $0 to buy it. That's obviously absurd, but if $.50 actually is a reasonable price, then no matter what I offer for a starting point, you're going to have to come down further because you picked a ridiculously high starting position.

Oversimplifying with propaganda techniques doesn't help here. The issues really are more complicated.

 

[WhoWee]

Who on the right does not want to hurt the elderly etc.? Easy way to tell. Find out if they would vote to raise the ss eligibility age. In my mind, that would be a qualifier. Ivan is a wise old owl, You tell them Ivan.

Well the "wise old owl" has not yet supported his claim. Now that you've expanded it to include everyone on the Right - please cite specific examples in response to my challenge of Ivan.

"Come on Ivan - who on the Right wants to (specifically) hurt elderly people on SS, US soldiers, people who can't afford food, and any veterans? Please support. "

If EVERYONE on the Right wants to hurt the elderly - it should be easy to quote them saying the same. If you can't support specifically - please retract.