Can the Rest of the World Ignore Congress?

Nob Akimoto

Nob Akimoto

Nob Akimoto is a policy analyst and part-time dungeon master. When not talking endlessly about matters of public policy, he is a dungeon master on the NWN World of Avlis

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43 Responses

  1. Avatar Burt Likko says:

    You’ve got no graphic or picture to go with this post, Nob. Might I suggest, if you can find or create one, perhaps a mushroom cloud over a dollar sign?Report

  2. Avatar Brandon Berg says:

    Why are we talking about the US government being unable to service debt as if there were any chance of that?

    Interest on the debt is on the order of $200 billion—well under ten percent of total federal spending. Revenues coming in are more than sufficient to cover this. The obvious thing to do is to continue making payments on the debt and make the cuts elsewhere.

    Is this just a rhetorical tactic? Talk about default on the debt because people aren’t sufficiently terrified of spending cuts?Report

    • Avatar Brandon Berg says:

      It was a bit of an understatement to say that revenues are more than sufficient to cover interest on the debt. Projected federal revenues for 2013 are over ten times protected interest payments.Report

    • Avatar Kolohe says:

      Because it’s the difference between having money and having cashflow. The bulk of receipts come in (no surprise) right after April 15, with smaller spikes in the middle of the first month of each fiscal quarter.

      There are not little gnomes carting gold and silver into the US Treasury every day – the day to day accounting depends on the Fed and open market operations.Report

      • Avatar zic says:

        There are not little gnomes carting gold and silver into the US Treasury every day – the day to day accounting depends on the Fed and open market operations.

        +1, to both comments, but double+1particularly this bit.Report

      • Avatar Brandon Berg says:

        On April 15? How? Employers don’t hold onto withholdings all year, do they? Most people get money back on tax day.Report

      • Avatar Kolohe says:

        http://www.fms.treas.gov/mts/mts.pdf

        ‘bulk’ was not the right word (and my recollections were from the bigger deficit years where the spike was more pronounced) but regardless, there’s a cyclic factor to government receipts because people that *owe* money (which includes corporations and the self-employed making quarterly payments) wait till the last possible minute – which is utterly logical and good business sense.Report

    • Avatar Kolohe says:

      And the people that are supposed to prioritize government expenditures are the Congress, *not* the Executive.Report

    • Avatar Francis says:

      You’re aware that such a thing is utterly illegal? The President lacks the power not to spend appropriated money.

      Also, it’s not at all clear that the “obvious” thing to do is to make interest payments on our debt and fail to send out Social Security checks. What legal basis do you have for prioritizing payments? (a cite to statutory authority would be nice.) And how do you respond to the multiple statements from Treasury officials who say that such a thing is just not practically possible — massive reprogramming of Treasury computers would be required?

      And don’t be quoting the 14th amendment back at me. What is the scope of the unquestionable “public debt”? Is it just T-bills? Says who? Who even has standing to bring such a case? Is it even justiciable?Report

    • Avatar North says:

      What Kolohe said basically. Money comes in irregularly but goes out irregularly as well. Also there’s a question of spending priorities. Social Security payments go out on the 1st along with military pay. Are you suggesting that the Government should try and not pay social security or soldier pay in order to reserve money to pay off t-bill rollovers later on in the month? That is not only difficult, it’s also flagrantly flat out illegal. If anyone thinks treasury bureaucrats are going to risk their jobs to cover some politicians asses in congress I suspect they’re going to be sorely disappointed.Report

      • Avatar James K says:

        @north
        The trouble is that anything the Treasury does will be illegal, since it will be failing to pay out duly appropriated funds. Arguably the Treasury has a superior obligation to honor debt as there is a constitutional obligation to protect the integrity of the debt.Report

      • Avatar North says:

        Agreed James, but the -least- illegal thing to do for Treasury would be to pay out the bills as they come in with the available cash, no effort at prioritizing at all. It’s also the ‘”simplest”. The basic point is the idea that we simply will prioritize debt payment is a hugely complicated assertion and is nowhere near as likely or easy as conservatives think.Report

    • Avatar Morat20 says:

      Plus, Brandon, your argument is basically: “Well, if I stop paying my utility bills so I can make my credit card payment and my mortgage, my credit rating won’t fall!”.

      Yeah, you kept rolling over the Debt. While simultaneously failing to pay money you owe that isn’t in the form of T-bills. SS payments, contract payments, Medicare, paychecks to soldiers…..

      Tell the world “We’ll pay the T-bills, but every other penny we owe is fair game to get the shaft” is gonna hurt our lending rates, because it’s a sign of fiscal craziness. Doubly so when we actually have the ability to pay, and choose not to due to some internal political slapfight.

      “Let’s loan that country money! It’s not risky at all! Sure, they stopped honoring every obligation but one because, I dunno, they elected morons. I’m sure it’s a well run country where things won’t get worse!”.

      Also, I understand that there is argument as to whether “Debt” refers to money owed from just lending (T-bills) or all obligations owed. Contractual payments owed. Payroll for work done. Pay for materials ordered, etc.

      It’s really convenient to claim “Oh no, just the National Debt is Debt” but are you sure the world is gonna see it that way? Plus, as noted — inflows and outflows are lumpy. If Treasury gets lucky, they might be able to hoard cash and manage the lumps of T-bill turnovers, but probably not. And even then — they don’t have the authority.

      Nor the ability. Treasury’s not set up to prioritize payments, even if they were legally allowed. And they system is a mess of three antiquated programming languages, and I can assure you that even IF they weren’t shutdown and on minimal staff, there’s no way on God’s Green earth even the most accomplished programming team in the world could get it ready to do that inside of six months.Report

    • Avatar Kim says:

      Brandon,
      In twenty days, the world as we know it now may not exist.
      Investors are used to trading in risk (look at oil futures if you don’t believe me).
      I know an investor or two — the ballsy kind that shorted the last bubble.
      They’re out of the market right now. Too Damn Risky.Report

  3. Avatar J@m3z Aitch says:

    Good post, Nob. Our saving grace is having been as or more reliable as anyone else and just damned bigger than anyone else. We’re big enough to get away with more fishing around than other countries. But only if it doesn’t become a habit.

    Maybe we’re creating an opportunity for bitcoins to become the world’s reserve currency.Report

    • Avatar Will Truman says:

      Maybe we’re creating an opportunity for bitcoins to become the world’s reserve currency.

      So you’re on Townhall’s mailing list, too?Report

    • Avatar North says:

      What’s more likely to happen (best case scenario) is we’re going to remain in our current position but be paying a noticeably higher interest rate. Of course that plays into the GOP’s whole, supposed, fiscal responsibility/reduce the debt agenda… oh wait, no it totally doesn’t.Report

    • Avatar NewDealer says:

      I’ve seen some people say “it is damn well good you have a large military”… I think the rest of the world is rather pissed that they are so dependent on the US Economy or our actions can raise or destroy the world.Report

      • Avatar Kim says:

        Pissed and taking action to reduce risk, as is in their charter, you mean.
        Canadian and Australian dollars are now also reserve currency.
        Breton Woods II is falling apart, just not in the shortest of terms.Report

    • Avatar Mike Schilling says:

      That’s completely ridiculous. Bitcoins’ value is purely imaginary, while the dollar is backed by the full faith and credit of the United States government.

      OK, not completely ridiculous.Report

      • Avatar KatherineMW says:

        The Republicans’ madness is seriously raising the question as to whether “full faith and credit of the US government” may really be a far inferior basis for value compared to “price of an arbitrary yellow metal”. If they go on this way, Ron Paul may get what he wants.Report

      • Avatar LeeEsq says:

        So this is just an elaborate scheme by the goldbugs to bring back gold-backed currency and increase poverty?Report

      • Avatar Kim says:

        Lee,
        I’d hardly think Koch and Scaife count as goldbugs.
        They’re recaltrant reactionaries, not idiots.Report

    • Avatar J@m3z Aitch says:

      Heh, glad to get that line out there and give everyone the chance to riff before Roger’s No Snark November policy takes effect.Report

  4. Avatar Morat20 says:

    That’s a REALLY bad linked explanation of the debt ceiling. If I didn’t know better, after reading that I’d conclude the Debt ceiling is what prevents the President from spending whatever he wants.

    In fact, I’d probably conclude the President actually set the budget and Congress was uninvolved and created the Debt Ceiling to reign in the President’s power of unlimited spending.Report

  5. Avatar zic says:

    @nob-akimoto, just wanted to make sure you (and other OTers) saw Bruce Bartlett’s column on the debt limit; an excellent historic overview and primer on the risks at hand; a good conservative view to balance Simon Johnson’s.Report

  6. Just wanted to add my voice to the chorus of praise, both for the totally space awesome featured art and for the content of this interesting and informative post as well.Report

  7. Avatar Chris says:

    Thank you for this, Nob.Report

  8. Nob Akimoto Nob Akimoto says:

    Kind of feel like doing a follow up post describing how the US could engage in massive economic warfare by defaulting, using Spy vs Spy graphic with Obama and XiReport

  9. Avatar Damon says:

    Foreign countries that have tried to ignore the us and not use dollars often get their countries invaded: libya, iraq, or get sanctions, iran.

    Regardless, I try to ignore congress as much as possible.Report