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The debt limit and the White House

Races for the Senate, U.S. House, etc. and other issues of national importance.

If Congress can't reach an agreement, what should the Executive Branch do?

(1) Ignore the debt limit, under the rationale that it conflicts with the 14th amendment.
8
57%
(2) Unilaterally decide what obligations to pay, and what to default on.
1
7%
(3) Unilaterally raise taxes to whatever level is needed to pay obligations.
0
No votes
4) Engage in various gimmicks (e.g., trillion-dollar platinum coins).
2
14%
(5) Start issuing IOUs.
1
7%
(6) Something else (what?)
2
14%
 
Total votes : 14

Re: The debt limit and the White House

Postby DCB » Fri Jan 11, 2013 1:07 pm

green union terrace chair wrote:
snoqueen wrote:2) Social Security can be fixed by having it apply to all wages, without a ceiling. And it's not even part of the regular budget, so why continue the pretense it is?

SS is inexorably linked to the budget. How do you mean it's "not part of it?" Benefits are paid from SS payroll taxes and the current surplus is added to the regular federal budget income.
SS has its own accounting. It is not part of the federal budget. Even the senile Reagan understood that "SS has nothing to do with the deficit".
green union terrace chair wrote: The "crisis" down the road will come when SS payroll taxes no longer cover benefits and the federal government has to either raise taxes, borrow to cover it, or adjust benefit levels or the retirement age.

Its a separate issue. The best estimates are that SS is solvent for a few more decades. Its not a crisis. It would be be better to address sooner rather than later. But there is no need to make things more complicated than need to be.

The deficit scolds are constantly trying to entangle the SS issue with the deficit. Why? I suspect their motives are less than honorable.
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Re: The debt limit and the White House

Postby kurt_w » Fri Jan 11, 2013 1:15 pm

Comrade wrote: Were Congress to take no action, there would be a government shutdown like we had back in 95 or 96.


It's a little bit different this time. In 95/96, the issue was just that we'd reached the end of the year, Congress didn't pass a new budget, and it didn't pass a "continuing resolution" (basically, a mini-budget that says "everybody keep doing what they're doing now while we try to get this straightened out.") So without a budget, there was no authorization for the government to spend money, and the government shut down.

That's a bit different from this situation. In this case, there's still a budget in operation (well, a CR) and that budget is supposed to pay for all sorts of commitments. The president is not legally allowed to refuse to pay bills that Congress has already run up. President Obama might think that, say, purchasing a hundred new Humvees is a waste of money or whatever, but Congress ordered them and they've already been delivered and now the bill is due.

But a different law (the debt limit) says that the President can't add to the national debt. If the president has to pay the bills, and can't raise taxes, it's mathematically necessary to add to the national debt (unless one adopts a gimmick like the platinum coin thing).

So ... the 95/96 government shutdown was about the government stopping spending because its budget had expired. This February crisis is about the government refusing to pay bills that it's already incurred.

It's like the difference between saying "I'm not going to order steak because I don't have enough money" versus "I'm not going to pay for this steak I've ordered because I don't want to add to my credit card debt." The first one might or might not be a good idea, but the second one is fundamentally immoral.

Now ... just to complicate things ... in addition to the wholly artificial "crisis" of the debt ceiling (which will probably hit in February) there's also the separate problem of the need for a new budget (in March? I think). If Congress doesn't pass a new budget, and doesn't pass a "Continuing Resolution", then the government will shut down, for the same reasons it did in the 1990s.

That would be bad, but it wouldn't be as awful as the government being unable to pay its existing obligations for a purely artificial reason. Some people have suggested that the Republicans could avoid a PR disaster by making their stand on the budget (i.e., threatening to shut down the government) instead of on the more extreme debt-ceiling issue (i.e., threatening to default on the government's already-existing obligations).

IF we don't want this, (and I don't think we do) then all of us should petition Congress to do their jobs. I mean really lean on those idiots.


Yes. This really is a national embarrassment. Congress needs to let the president pay the bills it's already run up, and then pass a budget or CR to keep the government operating.
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Re: The debt limit and the White House

Postby kurt_w » Fri Jan 11, 2013 1:17 pm

DCB wrote:The deficit scolds are constantly trying to entangle the SS issue with the deficit. Why? I suspect their motives are less than honorable.


Or, also, trying to entangle Social Security with Medicare.
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Re: The debt limit and the White House

Postby green union terrace chair » Fri Jan 11, 2013 1:36 pm

DCB wrote:
green union terrace chair wrote:
snoqueen wrote:2) Social Security can be fixed by having it apply to all wages, without a ceiling. And it's not even part of the regular budget, so why continue the pretense it is?

SS is inexorably linked to the budget. How do you mean it's "not part of it?" Benefits are paid from SS payroll taxes and the current surplus is added to the regular federal budget income.
SS has its own accounting. It is not part of the federal budget. Even the senile Reagan understood that "SS has nothing to do with the deficit".
green union terrace chair wrote: The "crisis" down the road will come when SS payroll taxes no longer cover benefits and the federal government has to either raise taxes, borrow to cover it, or adjust benefit levels or the retirement age.

Its a separate issue. The best estimates are that SS is solvent for a few more decades. Its not a crisis. It would be be better to address sooner rather than later. But there is no need to make things more complicated than need to be.

The deficit scolds are constantly trying to entangle the SS issue with the deficit. Why? I suspect their motives are less than honorable.

Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they did between 1983 and 2009,[36] the excess is invested in special series, non-marketable U.S. Government bonds, thus the Social Security Trust Fund indirectly finances the federal government's general purpose deficit spending.

http://en.wikipedia.org/wiki/Social_Sec ... ted_States)#Trust_fund

While SS revenues exceed expenditures, they help reduce the federal deficit.

When revenues no longer exceed expenditures, how do you think benefits will be paid?
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Re: The debt limit and the White House

Postby Stella_Guru » Fri Jan 11, 2013 3:47 pm

green union terrace chair wrote:When revenues no longer exceed expenditures, how do you think benefits will be paid?

Any shortfall we owe only to ourselves. We can repay over time as long as we can maintain "full faith and credit" and the empowerment to levy taxes and print money. "Please keep the faith, we need you."
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Re: The debt limit and the White House

Postby DCB » Sat Jan 12, 2013 3:10 pm

green union terrace chair wrote:While SS revenues exceed expenditures, they help reduce the federal deficit.

When revenues no longer exceed expenditures, how do you think benefits will be paid?

I'm not sure what you're asking. Do you mean SS revenues? We have good people looking at it. If we take some sensible steps (upping the payroll tax cutoff like Sno mentioned), its all good.

But again, the accounting of the Social Security trust fund is separate from the Federal budget.

If you're serious about spending that directly affects the Federal deficit, you'd be looking very closely at the defense budget. But it seems to me like the people who are making the biggest stink about the Deficit That Will Kill Us All keep talking about social security (which doesn't affect the deficit) but are rather quiet about defense. Which tells us they aren't really serious.

Darth Cheney wrote:Reagan proved that deficits don't matter

http://en.wikiquote.org/wiki/Dick_Cheney

And besides, its really fucking stupid to make the deficit The Only Thing That Matters when you have high unemployment.
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Re: The debt limit and the White House

Postby green union terrace chair » Sat Jan 12, 2013 4:36 pm

DCB wrote:
green union terrace chair wrote:While SS revenues exceed expenditures, they help reduce the federal deficit.

When revenues no longer exceed expenditures, how do you think benefits will be paid?

I'm not sure what you're asking. Do you mean SS revenues? We have good people looking at it. If we take some sensible steps (upping the payroll tax cutoff like Sno mentioned), its all good.

But again, the accounting of the Social Security trust fund is separate from the Federal budget.

If you're serious about spending that directly affects the Federal deficit, you'd be looking very closely at the defense budget. But it seems to me like the people who are making the biggest stink about the Deficit That Will Kill Us All keep talking about social security (which doesn't affect the deficit) but are rather quiet about defense. Which tells us they aren't really serious.

You are simply wrong. Social Security directly affects federal deficits and surpluses (when we had them). Excess revenue from SS is used to buy non-marketable securities and that money goes to general federal revenue.

From http://www.socialsecurity.gov/OACT/Prog ... ndFAQ.html
What happens to the taxes that go into the trust funds?
Tax income is deposited on a daily basis and is invested in "special-issue" securities. The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.

Furthermore, if you look at: http://www.socialsecurity.gov/OACT/STATS/table4a3.html
... the column under "Assets" titled "Net Increase During Year," (take special note to 1983 - 2011) is the excess after benefits have been paid that goes to general federal revenue. If not for this, the deficit would have been that much greater in each year.

Here's a table I spent far too long making to illustrate this:
Code: Select all
All figures in billions of dollars
       Federal   Excess SS    Federal Deficit
Year   Deficit   Revenue      w/o SS added
2000   -236.2    153.3       -82.9
2001   -128.2    163.1        34.9
2002    157.8    165.4       323.2
2003    377.6    152.8       530.4
2004    412.7    156.1       568.8
2005    318.4    171.8       490.2
2006    248.2    189.5       437.7
2007    160.7    190.4       351.1
2008    458.6    180.2       638.8
2009   1412.7    121.7      1534.4
2010   1293.5     68.6      1362.1
2011   1299.6     69.0      1368.6


And the answer to my question:
green union terrace chair wrote:When revenues no longer exceed expenditures, how do you think benefits will be paid?

... is that we have to start cashing in the non-marketable securities that make up the Social Security Trust Fund. In order to cash those in to pay benefits, we need additional tax revenue or borrowing, which will IMPACT THE FEDERAL DEFICIT.

Yes, there are tons of other things we can do to improve the federal budget (and yes, cutting military spending is a big one), but you cannot ignore the historic and future impact of Social Security on overall federal revenue, deficits and debt. It does not exist in a vacuum.
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Re: The debt limit and the White House

Postby kurt_w » Sun Jan 13, 2013 12:57 pm

The White House, and the Treasury, apparently have ruled out options (1) and (4) in this thread's poll. And nobody really believes (3) is an option for the White House.

Some people have suggested (2) -- i.e., use available funds to pay some bills (such as interest on the debt) but don't pay other bills, or pay them with some form of IOUs (5). The President, however, is not legally empowered to refuse to spend money that Congress has directed:

Columbia Law Review wrote:Regarding the spending power, the picture is a bit more nuanced. In the early years of the Republic, Congress passed laws that authorized the president to spend “up to” certain sums of money, and the president was accordingly able to carry out his constitutional duties while spending money in amounts not precisely specified by Congress.

In most areas of the federal budget, however, that practice has long since ended. Congress now typically specifies precise amounts of money (or, in the case of so-called entitlement programs, precise formulae to determine amounts of money) that the president must spend for each authorized program.
When Congress appropriates the money necessary to fund those authorized programs, it effectively orders the president to spend no more and no less than those amounts. It would be odd, indeed, if a president were to assert that he could choose to, say, send Medicare beneficiaries (or their medical care providers) less money than they would be entitled to receive under the relevant statute.

Moreover, we need not speculate about what would happen if a president were to assert such authority. The impoundment controversy during the Nixon Administration involved a direct confrontation between the executive and legislative branches, with Congress objecting to Nixon’s theory of an “imperial presidency,” in which the president would have the power to selectively reduce certain spending programs at his discretion.

The result was the Impoundment Control Act of 1974, under which the president may only propose “rescissions” of appropriated spending. Congress, however, need not act on such proposals, and the president’s power to withhold funds ends after forty-five days. Congress, therefore, has made a strong statement of principle, affirming its power under the Constitution to set the exact sums of money to be spent on each program, not merely the upper limits.


As far as I can tell, then, if Congress does not reach a deal to either lift the debt ceiling, raise taxes, or cut spending, we are in deep trouble. There is no way out of this that does not involve either Congress reaching an agreement, the President breaking the law, or the US defaulting on its financial obligations.
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Re: The debt limit and the White House

Postby Stella_Guru » Mon Jan 14, 2013 9:27 am

kurt_w wrote:As far as I can tell, then, if Congress does not reach a deal to either lift the debt ceiling, raise taxes, or cut spending, we are in deep trouble. There is no way out of this that does not involve either Congress reaching an agreement, the President breaking the law, or the US defaulting on its financial obligations.

Don't worry about Kurt. With all the conservative Clintonesque Democratic Leadership Council types hovering around the White House, the groundwork has been laid for a grand austerity bargain.

Erskine Bowles; former DLC member, co-chair of the Simpson-Bowles Committee, Clinton's former Chief of Staff, Board of Directors of Morgan Stanley.

Bruce Reed, former head of the DLC, Biden's Chief of Staff, Executive Director of the National Commision on Fiscal Responsibility and Reform.
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