U.S. Politics - the Default thread

[The Progressive]

Errr, I seem to remember billions of dollars flowing into commodities as a result of that announcement. Say what you will, but they still have power.

Citation? I don't recall this at all ................ was that during that whole episode during which you tried desperately and unsuccessfully to discredit Krugman, lol?

[Xenophon]

What make you think Obama has the authority to prioritize SS payment ahead of other federal government obligations?

In the absence of specific legislation prioritizing federal spending, the Secretary of the Treasury has the authority to determine this (as part of the executive's administrative powers). Congress could pass a bill forcing Geithner/Obama's hand, but absent that, they call the shots.

[Tormund Ukrainesbane]

In the absence of specific legislation prioritizing federal spending, the Secretary of the Treasury has the authority to determine this (as part of the executive's administrative powers). Congress could pass a bill forcing Geithner/Obama's hand, but absent that, they call the shots.

The fun thing is, Social Security is a separate trust fund from the federal budget. There are only 2 things it can be spent on per the Social Security act. Social Security payments, and loans to the Federal Government (in the event of a surplus). Legally, Obama can't stop the Social Security Administration from paying out benefits. The only thing he could conceivably do is direct the treasury not to repay the loans that are owed to the Social Security Trust Fund which, as I stated in the last thread, SS is only predicted to need 20B of those loans repaid to cover their projected deficit.

ETA: basically, when the president is saying he doesn't know if SS checks will go out, it is a bald-faced lie, and a scaremongering tactic. It is not based on reality regardless of whether the US defaults or not.

[The Progressive]

In the absence of specific legislation prioritizing federal spending, the Secretary of the Treasury has the authority to determine this (as part of the executive's administrative powers). Congress could pass a bill forcing Geithner/Obama's hand, but absent that, they call the shots.

I was under the impression that the Secretary of the Treasury has the authority to prioritize payment on federal debts first, so this is new to me.

Citation?

[The Progressive]

The fun thing is, Social Security is a separate trust fund from the federal budget. There are only 2 things it can be spent on per the Social Security act. Social Security payments, and loans to the Federal Government (in the event of a surplus). Legally, Obama can't stop the Social Security Administration from paying out benefits. The only thing he could conceivably do is direct the treasury not to repay the loans that are owed to the Social Security Trust Fund which, as I stated in the last thread, SS is only predicted to need 20B of those loans repaid to cover their projected deficit.

Right, this is my understanding of how Social Security payment are issued as well.

It's quite strange to hear that the Secretary of Treasury has the authority to determine whether or not SS checks are distributed.

[Former Lord of Winterfell]

Stupid thing for Obama to say. He just made it much easier for Republicans to back down from their threat not to raise the debt limit without antagonizing their base.

They can now claim that while hitting the debt limit doesn't require drastic cuts, they can't stop Obama from deliberately choosing to cut those things that would hurt the most. In essence, they'll accuse him of planning sabotage. And they'll point to this social security threat as evidence.

[Altherion]

They can now claim that while hitting the debt limit doesn't require drastic cuts, they can't stop Obama from deliberately choosing to cut those things that would hurt the most. In essence, they'll accuse him of planning sabotage. And they'll point to this social security threat as evidence.

It depends on who can spin this better. He can say that he didn't threaten anyone -- that was just a statement of fact. It's not outright false: there is some money owed to Social Security that may not be paid in the case of default which he can plausibly interpret as not being able to guarantee the Social Security checks. If the Republicans go through with McConnell's proposal, it should not be that hard to spin it as the Democrats averting disaster in spite of Republican opposition. Let's see who has the more competent propaganda team.

[Former Lord of Winterfell]

I agree -- it'll be a spin war. But he did give them ammo they didn't have before.

[The Progressive]

I could tell you right now already who's desperately spinning as fast as he could when all the polls so far have the majority placing the blame for any fallout from the US defaulting at the feet of the Republicans. :laugh:

[Xenophon]

I was under the impression that the Secretary of the Treasury has the authority to prioritize payment on federal debts first, so this is new to me.

Citation?

I didn't mean to imply that he would have the authority to put SS above the debt. There is specific legislation that arguably prioritizes payments on the debt above everything else in the budget (the 14th amendment, not legislation exactly, but you get the point). However there are plenty of government programs that don't have such constitutional/congressional prioritization, so Geitner could easily find enough money to keep SS going. (Here's a washington examiner article with a link to the Bipartisan Policy Center's study showing he could find enough money to fund the debt, social security, etc. without running a deficit in August by cutting into other programs.)

For example, Geitner clearly has the authority to prioritize SS payment ahead of obligations to outside contractors, payments to troops/civilian federal workers, etc.. As Kevin Midgetsbane, pointed out, it's the opposite proposition that's legally dubious. It's not an obvious violation of the Social Security Act for Geitner to prioritize other spending above repaying the SS trust, but it's a lot more questionable than the reverse.

[awesome possum]

Stupid thing for Obama to say. He just made it much easier for Republicans to back down from their threat not to raise the debt limit without antagonizing their base.

It would have been a stupid thing for Obama to say if, for example, he had sold out to the minority extremist elements in his party; had helped turned a fringe group of tolerated, but ridiculed fools into the vocal majority who worked themselves into a frenzy any time someone strayed from their message of ignorance. Would have been a stupid thing to say then.

Might there instead actually be a chance he said such a thing because he wanted Republicans to be able to do so? Wouldn't a responsible leader provide a path for people, who are surely coming to regret ceding so much control to the far right loons, to back down from the ridiculous precipice they found themselves standing on? You know, so they can actually work and get some tiny measure of anything accomplished?

[ThinkerX]

The Admin at one of the oil boards I frequent has had this little gem as his sig for better than half a decade now. It does seem appropriate in the light of the current discussion, does it not?

Our pending energy supply contraction= no economic growth= insufficient debt service= chaos + oilwars

The energy supply contraction is a given - right now its manifesting in the form of higher prices at the pump and elsewhere, but there are other effects.

The 'no economic growth' bit is also a given. We are going on three years of high unemployment and stagnant wages for most of those who do have jobs.

Right now, we are staring 'insufficient debt service' square in the face. Even if a deal is reached before the deadline, it will still have to be dealt with again and again.

And 'Chaos' doesn't seem to be that far off, given everything else.

[Shryke]

Ezra Klein was talking about that too: http://www.washingtonpost.com/blogs/ezra-klein/post/in-praise-of-mcconnells-plan/2011/07/11/gIQAoiHHBI_blog.html?wprss=ezra-klein

I should say that I don’t know why House Republicans would go for it and it seems clear that this is going to be a big black eye for McConnell. But that doesn’t make it a bad plan. In essence, McConnell is proposing to permanently disarm the bomb that is the debt ceiling. He’d formalize the informal arrangement the parties have had in recent years, which is that the debt ceiling is used to embarrass the party in power, but it’s not allowed to threaten the American economy. If his plan passed, it’d become easier for the minority party to embarrass the majority party, but harder for them to threaten the economy. It’s win-win.

If you want to take a generous view of McConnell’s motivations here, you’d say that the canny Kentuckian, whose understanding of the way polarization and party discipline dominate today’s congress vastly exceeds that of any other politician, realized that it was no longer safe to assume that the two parties would always reach agreement in time to lift the debt ceiling, and in that world, the debt ceiling was too dangerous to the American economy.

The cynical interpretation of McConnell’s motivations is that McConnell sees that the White House is winning the politics of this issue, and he knows that Republicans will eventually be forced to agree to something. When they do, President Obama will be the great Compromiser-in-Chief. He’ll have shown himself willing to face down his party to make a deal and he’ll get credit for making it impossible for Republicans to continue to say no. After three years during which McConnell had slowly but surely destroyed Obama’s reputation as a postpartisan unifier, the White House will see its core political brand revived and invigorated. Obama will be a lock for reelection.

I don't really buy all his stuff here, but the general idea is solid:

This is McConnell desperately trying to avoid destroying the economy while still getting to savage Obama.

[TrackerNeil]

Paging Commodore. At last, the House of Representatives has answered your prayers with an attempted repeal of the light bulb tyranny.

They don't have time to tend to the "replace" part of "repeal and replace", but there's plenty of opportunity to work on minor legislation signed four years ago by a Republican president. This House can't produce its own policy, but it's doing a bang-up job of trying to repeal the policies of others. Yes sir.

[The_BlauerDragon]

Without diving headlong into the fray, and hopefully without derailing the thread, I would like to ponder something that I found amusing. Why is it that in a forum that is dedicated to glorifying GRRM and aSoIaF, the "Default Thread" would be U.S. Politics?

[awesome possum]

Without diving headlong into the fray, and hopefully without derailing the thread, I would like to ponder something that I found amusing. Why is it that in a forum that is dedicated to glorifying GRRM and aSoIaF, the "Default Thread" would be U.S. Politics?

The debt ceiling debate and letting the US default on its loans is currently a hot topic.

[The Progressive]

This is McConnell desperately trying to avoid destroying the economy while still getting to savage Obama.

I'm not sure who's getting savaged here by their base:

http://news.yahoo.com/blogs/ticket/fury-mcconnell-outlines-plan-obama-raise-debt-ceiling-204213811.html

FreedomWorks, a Washington-based group that organized some of the largest tea party rallies in 2009 and 2010, sent McConnell's office number to its member lists and urged them to help him "find his spine."

Conservative bloggers were no friendlier.

"Mitch McConnell wants to make it even easier by allowing Congress to go through a dog and pony show of feigned cuts that never get cut while allowing escalation of our national debt," wrote RedState.com editor Erick Erickson in a post originally titled, "It's Time to Burn Mitch McConnell in Effigy." "2014 cannot come soon enough to destroy the political future of this weasel."

"Three letters come to mind," wrote Michelle Malkin, a conservative commentator. "W.T.F.?!!"

:laugh:

[Commodore]

McConnell thing is a sideshow. Won't happen.

Obama thinks he's quite clever letting this get down to the wire for maximum leverage. Problem with that is everything originates in the House, so any debt limit raise comes with GOP strings attached. As soon as they do, the ball is in his (and Reid's) court and he will have to accept or reject what the House passes.

The House will raise the debt limit, with significant spending cuts, caps, and a Balanced Budget Amendment attached. Then Obama and Reid will have to decide whether to default or accept those (politically popular) strings.

Obama will then have to say, "we have to default because I can't accept a BBA and spending cuts". Good luck with that.

Only card Obama has is if the GOP doesn't raise the debt limit. Once that happens, he's cooked, and he doesn't control the terms.

[Altherion]

Obama thinks he's quite clever letting this get down to the wire for maximum leverage. Problem with that is everything originates in the House, so any debt limit raise comes with GOP strings attached. As soon as they do, the ball is in his (and Reid's) court and he will have to accept or reject what the House passes.

The House will raise the debt limit, with significant spending cuts, caps, and a Balanced Budget Amendment attached. Then Obama and Reid will have to decide whether to default or accept those (politically popular) strings.

Obama will then have to say, "we have to default because I can't accept a BBA and spending cuts". Good luck with that.

This would work if Republicans controlled both the House and the Senate. If they could put a bill on his desk and say "Here's your debt limit raise, sign it or veto it", then he could be blamed for the consequences. The House originating such bills is a technicality and it generally doesn't matter: the House and Senate very rarely pass identical versions of major legislature and they must typically be reconciled in a conference committee. I guess you can try to sell the technicality as Republicans starting the process and Democrats stalling it, but that's a really, really tough sell (mostly because I don't think most Americans are even aware of these rules).

The reason he is letting it go down to the wire is that sooner or later, the real masters of the show are going to step in and say enough is enough. The Republicans are trying to appeal to the Tea Party rabble, but these are no more than useful tools -- it's better not to antagonize them, but the House will do it once they have no choice. Going against the people who will lose billions (trillions?) if Congress fails to act is taken is not an option.

[Galactus]

and a Balanced Budget Amendment attached[/quote

Err... I don't think either party is really in a position to pass an amendment.