US POLITICS SPRING 2011: Let's just call off this country.

xp for remy

If the debt limit is not raised, the Treasury will not be able to borrow money. Some obscure arguments have been raised, based on the 14th amendment, claiming that Obama could ignore the debt limit, but for all practical purposes this will not happen.

The administration would then be faced with a crisis, because it would not have the funds to meet all of its financial obligations. Those obligations include paying federal employees, paying contractors, and paying creditors who hold Treasury notes (T-Bills and bonds). Because these immediate obligations are generally met through issuing short-term notes upon future revenues, most of them would go unpaid.

The first, most obvious and predictable consequence would be furloughs of huge swaths of federal employees and suspension of work done on federal contracts. Large areas of the government would simply stop activity. However, services considered vital to the security of the nation would continue, just because they must continue (but this would not be true forever).

The next obvious and predictable consequence would be a big drop in the value of already-issued US bonds, creating a big rise in interest rates. The bond market keys off government bond interest rates. Those rates are set in two ways:

1) The government auctions off newly issued debt and the low bids win (this activity would be suspended).

2) Then there are old gov bonds being sold by their owners before their expiration. The "face value" of all these bonds were set when they were issued and originally auctioned, but in the bond market, this value floats.

For example, I might want to sell a $100,000 bond that has ten more years to run and pays 3% interest. Except now that bond is viewed as much riskier than before the default. You, the buyer can offset that risk by paying me $80,000 for it, which means the nominal 3% on $100,000 interest the bond accrues will represent a much higher return than if you paid me the full $100,000 for it. Effectively, the interest rate has risen considerably, but I am out a shit load of money. You, the buyer, otoh, have your fingers crossed that when the bond matures, you'll get a tidy $100,000, along with all that interest.

The longer the Treasury is broke (can't pay all its obligations out of current revenue), the worse all this gets. The circulation of money will slow down, vast numbers of federal employees won't get paid, business will slow drastically and unempployment will risestill further.

In a nutshell, bad news city.

The Republicans may gamble that a very brief shutdown won't have any drastic effects, but every day of uncertanity will pile up worse and worse problems, like a snowball rolling downhill, so they can't force the issue beyond a certain point, maybe five days or so, and it is imperative they think Obama is getting the major balme, because otherwise they're slitting their own throats.

wow, thanks! i am a total economic naive, unless it concerns ed. spending. it's kind of embarrassing, and it keeps me from wading into these threads more often.

The political system in DC Cab seems so dysfunctional that even if good ideas are put into it they're just going to come out fucked up. The dysfunction belongs to deep, fundamental problem with so many factors involved, all this feels like treating the fever to cure the cancer. Cutting the deficit? Pointless. Tinkering with Medicare and SS? That should be in the footnotes of the priority list. It's important stuff, but it pales in comparison to the Real Deal(TM), I think.

Just cuz we hear people talking about issues like a mantra doesn't increase their actual value and importance... Feels like our thoughts and words are taken over by what is ultimately not productive.

it could be a constitutional crisis (hey i'm not lawrence tribe here, i'm just saying)

the 14th says the debt "shall not be questioned." which is weird language when u think abt it.

but article something-or-other says all spending of revenues must originate in congress

so conceivably, the treasury (exec) spending money not authorized by congress would be unconstitutional, even if trying to satisfy the 14th

the implication is that it is congress that's contitutionally hamstrung -- the must, under the 14th, appropriate money to cover the debts. how they do that is up to them. which is basically where we are?

in a way, the government does use debt the way that a lot of private businesses do ... e.g., businesses use bank lines of credit for payroll, make interest payments on company debts, etc. to oversimplify, this is one of the reasons why everything went to shit post-Lehman Brothers. banks and other financial institutions cut credit to businesses, who couldn't meet expenses, and the whole thing snowballed.

i guess a lot of right-wingers claim that debt is outta control, and if they just keep raising the ceiling, we will sooner or later find ourselves in a similar situation as Greece...?

The argument has a grain of truth, but that grain is magnified by at least an order of magnitude in order to play on people's fears. Managing the whole baby boom aging thing will place a burden on society, but cutting taxes relentlessly on the wealthy is a sorry-ass way to go about it. Most of the current "debt crisis" is as manufactured as the Reichstag fire.

if they just keep raising the ceiling, we will sooner or later find ourselves in a similar situation as Greece

this is true in a long-game sense, they just decided to have this discussion now at crunch time instead of when it would have been sane to do it.

like, before we are staring at default or after we raise it

Bohener pulls out

http://www.politico.com/news/stories/0711/58630.html

Pulls out of the vagina of appeasement.

this is an O win, right? "i proposed the biggest spending cut of anybody in the room, and john boehner's house said no"

that was the plan all along, i'm guessing

yet politoco sez

The setback would appear a clear victory for conservatives in Boehner’s own conference — and the Republican leadership.

i mean

politico

its a "victory" for them in the news cycle, not for the next election year

totally a victory for them; Boehner switches positions right just as O starts talking about cutting into Social Security? This is a calculated move to get someone besides Obama in the Oval Office next year

watch how they spin this as "liberals" giving away their God-given American entitlements

like it's so obvious that they would start taking O's appeasement tactics for granted and start actually using them against him, I can't believe we didn't see this coming

I think you're giving them too much credit.

im with hoos--this is basically "republicans in disarray"--but the fun thing about this situation is that technically we all lose

i mean what well get now is a short- or medium-term spending bill that still fucks up the economy, doesnt add any jobs, cuts important spending, in exchange for republicans doing something that should be automatic. and obama doesnt get the "political" win of a grand bargain.

max otm

Don't take anything Politico runs seriously.

that post needed more quote marks

"political" "win" of a "grand" "bargain"

also it is a "clear victory" for the right wing of the GOP, since they basically just made boehner back down!

can I do a v. minor on those quote marks, I'm really getting attached to "political win" of a "'grand'" "bargain"

Add a piano overdub.

Watching "This Week" was like wandering into a nursing home common area where the residents are falling asleep on wheelchairs and drooling. Every one of these Very Serious People insisted that the Dems had To Do Something about "entitlements."

We Unserious People need to come to understand that we're not entitled to anything. We're too, what's the word, uppity.

maybe Obama has won a tactical "victory," but this is like listening to two mental patients trying to win an argument about whether aliens from Mars are green or red.

so kent conrad has dropped the senate democrat budget

http://www.washingtonpost.com/business/economy/senate-democrats-draft-debt-reduction-plan/2011/07/08/gIQAFQbS4H_story.html

"Senate Democrats are proposing to stabilize borrowing through sharp cuts at the Pentagon and other government agencies, as well as $2 trillion in new taxes, primarily on families earning more than $1 million year."

"Under the blueprint, the top income tax rate would rise to 39.6 percent for individuals earning more than $500,000 a year and families earning more than $1 million. That group, which constitutes the nation’s richest 1 percent of households, would also pay a 20 percent rate on capital gains and dividends, rather than the 15 percent rate now in effect."

oh my god more democrat attempts to tax america's middle class

it smells like leadership!

u kno the average millionaire is barely making ends meet so idk what the democrats are thinking taxing our most vulnerable families

http://www.nytimes.com/2011/07/10/business/the-unemployed-somehow-became-invisible.html

In some ways, this boils down to math, both economic and political. Yes, 9.2 percent of the American work force is unemployed — but 90.8 percent of it is working. To elected officials, the unemployed are a relatively small constituency. And with apologies to Karl Marx, the workers of the world, particularly the unemployed, are also no longer uniting.

Nor are they voting — or at least not as much as people with jobs. In 2010, some 46 percent of working Americans who were eligible to vote did so, compared with 35 percent of the unemployed, according to Michael McDonald, a political scientist at George Mason University. There was a similar turnout gap in the 2008 election.

No wonder policy makers don’t fear unemployed Americans. The jobless are, politically speaking, more or less invisible.

Michael McDonald: what a fool believes.

that's a good article

yeah good piece

Just ask Rick McHugh, who worked in Michigan as an employment lawyer for the United Automobile Workers from the 1980s through the 1990s. He represented workers who were appealing denials of unemployment insurance benefits. The union footed the bill for people he represented who were not, and had never been, U.A.W. members.

Today, however, many unions are fighting for their own survival. They no longer provide such support for nonmembers. “They just don’t have the staff and the resources to support these programs and the recipients like they used to,” says Mr. McHugh, now a staff attorney at the National Employment Law Project.

ending is kinda glib but w/e

got my letter from bam asking me to donate to the DNC! this was the take-home message

President Obama cannot keep the Republicans from stopping the progress he has made without your support.

and yeah thirding - v interesting article (knew iatee would like it) - i was only up to the part i quoted when i posted that

its hard not to think that wed be in much better shape right now if organized labor had even half the organizing clout and political power it used to

haha why did you know I would like it!

other than it being good

Obama had a speech a couple weeks ago where he said the economy is gonna get worse.
Take home message: He doesn't care much because if he did he could prevent the economy from getting worse.

boom

u like unemployed ppl

no but it was the part about the movement of people to the suburbs that made me think you'd find it interesting in particular

xxp

haha I do like unemployed people and like to find ways to blame the suburbs, it's true

Obama had a speech a couple weeks ago where he said the economy is gonna get worse.
Take home message: He doesn't care much because if he did he could prevent the economy from getting worse.

― Muttley vs. Mumbly (CaptainLorax), Sunday, July 10, 2011 10:35 PM (5 minutes ago) Bookmark Suggest Ban Permalink

cap whats the over/under on obama doing another 9/11

shutup with your 9/11 jokes already

over/under is obviously 9/11