The Sky Is About to Fall. Are Your Eyes Glazed Over?
I read a bunch of analysis about the debt ceiling so you don't have to
For many months now, an elaborate budget dance has been taking place on Capitol Hill. It’s really not about dollars the government spends, despite claims to the contrary by the House majority GOP.
Word today is that President Biden and Kevin McCarthy are edging closer to a “deal” involving most symbolic budgetary promises down the road in exchange for letting the treasury pay bills. Sadly, what “closer” means is that they agreed to make negotiating teams smaller and less prone to over-complicating matters.
A Reuters/Ipsos poll released this week found that three-fourths of Americans fear a default would take a heavy toll on families like theirs. Businesses have a whole bundle of fears that such an event would hurt their operations.
Today, more than 140 leaders of the biggest U.S. companies published an open letter to the president and congressional leaders “to emphasize the potentially disastrous consequences of a failure by the federal government to meet its obligations.” They noted that when the government approached a default in 2011 under similar circumstances, the U.S. lost its AAA bond rating (which it has never regained), the stock market lost 17% of its value for more than a year, and “Moody’s reported that the heightened uncertainty from this crisis resulted in 1.2 million fewer jobs, a 0.7 percentage point higher unemployment rate, and a $180 billion smaller economy than it otherwise would have—dire impacts that occurred without an actual default.”
We should all be able to agree that ominous clouds are forming on the horizon.
On the line in this situation are monies we’ve already spent.
Since Republicans are fond of using excess spending on the family credit card as an example in these situations (it’s not), let’s play along and say the issue here is that the statements of what we owe have arrived.
Normally what happens is the U.S. Treasury sells bonds -which promise a secure income for investors somewhere down the road- and uses the proceeds to pay what’s owed. On the surface this might seem to be an unsustainable process, but as long as interest rates stay reasonable and the economy shows growth things work out.
The nation has not been able to keep up with its obligations only once in history; during the War of 1812, when the British burned Washington DC.
(Remember, I’m keeping it simple. Don’t nod off.)
Republicans, some of whom are likely to know the truth of this matter, are in effect saying “we’re not going to allow those bills to be paid” unless you agree to spend less on items they don’t like.
There are consequences for not paying your bills, regardless of who or what you are. In terms of the federal government, this is what gets called a US debt default. One reaction, so we are told, would be Treasury bond investors wouldn’t feel as secure about parking capital with the US government.
The reason we have this line in the sand is that a century or so ago, Congress got tired of having to vote each time treasury bonds went on sale during World War I, changing the approval process to a more long range procedure.
The process of setting the debt ceiling is separate and distinct from the United States budget process is separate and distinct from setting the debt ceiling; an artificial construct that neither directly increases nor decreases the budget deficit, and vice versa,
None-the-less, a faction of the Republican party has decided to use the threat of running out of cash (there’s plenty more to be had) to shape spending to its liking. Nobody knows what such a budget would do, primarily because the GOP can’t agree among themselves about priorities.
But we do know, based on the rhetoric coming out of the far right corners of the GOP, that the intention is to undermine the power of the executive branch and reverse mostly non-military programs.
This is what Democrats are speaking of when they warn about consequences of not paying our bills, manifesting itself as interrupting the operations of many popular government programs.
The Washington Post’s Jeff Stein calculated what seven likely consequences could be. Suffice it to say, he and other economic observers fear a downward spiraling effect on the country, not easily correctable by after-the-fact actions.
Legal scholar Lawrence H.Tribe studied the legalities of the President telling Congress to stuff it.
The question isn’t whether the president can tear up the debt limit statute to ensure that the Treasury Department can continue paying bills submitted by veterans’ hospitals or military contractors or even pension funds that purchased government bonds.
The question isn’t whether the president can in effect become a one-person Supreme Court, striking down laws passed by Congress.
The right question is whether Congress — after passing the spending bills that created these debts in the first place — can invoke an arbitrary dollar limit to force the president and his administration to do its bidding.
There is only one right answer to that question, and it is no.
These negotiations in progress are just a hostage situation. It’s a manufactured crisis to put our economy on the brink of collapse, egged on by extremists hoping to get policy concessions they could never otherwise attain.
It’s not like the GOP position represents a school of economic thought. The only principle involved here is nihilism, by way of destroying social safety net programs supported at least in part by a super-super majority of the population.
Former President Bill Clinton disagreed with then-President Barack Obama when the Republicans tried to use this tactic in 2011, saying he’d continue paying for legally authorized expenditures. A “win” in this situation would put this sort of shenanigan to rest, no matter who the president is in the future.
Here’s Michael Hiltzik in the Los Angeles Times:(emphasis added)
A ruling forcing a default might provoke Biden simply to defy the court, as FDR was prepared to do. Does this court really want to provoke such a confrontation — especially since a ruling upholding the debt ceiling would disadvantage the wealthy investor class that some of the majority’s members have reportedly relied on as patrons?
Nothing would please me more than to have Biden relieve me of the duty of writing about the incredibly stupid maneuvering the debt ceiling regularly provokes in Washington. The path is clear. It’s long since time that a U.S. president treated the debt ceiling not as an instrument of sound fiscal policy but as a pointless obstruction.
If McCarthy and his minions refuse to honor their own fiscal obligations, Biden should disregard them; that’s his most valuable bargaining chip. If past is precedent, the Constitution and the Supreme Court would have his back.
Significant Snippets From Today’s News
The Book Ban Backlash Begins Via Progress Report. There were elections in many places on Tuesday; generally speaking voters gave the party of no empathy thumbs down. But the biggest win was a surprise in Jacksonville, Florida, where Democrat Donna Deegan overcame corporate cash and Gov. Ron DeSantis’ endorsement by running against the GOP candidate’s racist, transphobic, and fear-mongering rhetoric.
The fact that DeSantis won by 20 points last fall wasn't so much an expression of his political strength so much as the weakness of the Florida Democratic Party. All the media hype about him, despite his clear personality defects and sociopathy, was clearly a desperate projection.
Polls have long showed that his pet obsessions with banning books, abortion, and civil rights are wildly unpopular. Now that he has spent the entirety of this year inflicting such cruelty on people, while allowing quality of life in Florida to crumble in deference to corporate donors, is catching up with him.
***
CNN's Trump Town Hall Spectacularly Backfires as Ratings Fall Via Newsweek
In the wake of the controversial town hall attended by former President Donald Trump last week, CNN's prime-time viewership figures have continued to drop, falling below those of right-wing channel Newsmax on Friday.
***
How a grocery store mega-merger could cost workers millions Via Popular Information. The proposed merger between Albertsons and Kroger looks even worse, once studied, according to a report by the Economic Policy Institute.
According to the report, the merger would "lower wages for 746,000 grocery store workers." This impact would be felt in 55 metropolitan areas where both Kroger and Albertsons currently operate stores. Notably, it would not just be Kroger workers that are impacted. Since the merger reduces competition across the industry, it would lower wages for all grocery workers in affected areas.
EPI's analysis finds that if the merger is approved, workers from coast-to-coast will lose millions in annual earnings.
PS- The estimated earnings loss for 27,029 grocery workers in the San Diego market would be $12,437,000 annually.
***
You can follow me at:
Post —→DougPorter@wordsdeedsblogger
Tribel ——> DougP Porter@dougporter506
Mastodon ——> DougPorter506@mastodon.social
Spoutible —>@dougporter506
Facebook —----> https://www.facebook.com/WordsAndDeedsBlog
Email me at: WritetoDougPorter@Gmail.com
You've just managed to make boring reading entirely digestible ! Thanks, Doug! Your ability to condense all the talking points of many different subjects into one readable newsletter is remarkable.