$38.8 Billion in U.S. Treasury? For These Billionaires, That’s Nothing.
The cash balance at the Treasury Department is now lower than the net worth of some of the world’s richest people.
https://www.nytimes.com/2023/05/26/us/politics/cash-us-treasury-billionaires.html?
 | This isn't a crisis. This is a plot.The corporate media refuses to tell the American people what this is: a cynical political and media strategy devised by Republicans in the 1970s, fine-tuned in the 1980s, and since then rolled out every time a Democrat is in the White House. |
Thom Hartmann, May 26, 2023
"The only thing wrong with the U.S. economy is the failure of the Republican Party to play Santa Claus." —Jude Wanniski, March 6, 1976
As the Fitch credit rating service puts the United States on “watch” for a possible downgrade and Democrats dither about the 14th Amendment, Republicans just declared the House of Representatives in a break because, from their point of view, there really is no crisis.
In fact, from the GOP’s perspective, it’s all going according to plan.
As Teagan Goddard’s Political Wirenoted yesterday:
"RNC Chair Ronna McDaniel told Fox News that the U.S. potentially defaulting on its debt ‘bodes very well for the Republican field.’”
It’s no accident or coincidence that the threat of a failure to pay the nation’s bills never once happened during the presidencies of Reagan, Bush, Bush, or Trump. Or that it didhappen every single time during the presidencies of Clinton, Obama…and, now, Biden.
You could even call it a conspiracy: there’s an amazing backstory — with a unique name — here. And it all started with a guy named Jude Wanniski, who literally transformed American politics with a plan that the American mainstream media, astonishingly, continues to ignore.
Biden must resist Republican debt ceiling demands. Here’s what he needs to do instead
US economy out of touch with lives of most Americans. Biden must resist GOP debt plan that would make things worse
By Sen. Bernie Sanders
We are at a pivotal moment in American history. In the coming days, decisions will be made with respect to our federal budget and the national debt that could impact the lives of virtually every American in our country for decades to come.
In my view, the debate we are having on the debt ceiling is about our national priorities. It is about what we value as a nation and whose side we are on.
At a time of unprecedented wealth and income inequality, when the top 1% has never had it so good and when three people on top own more wealth than the bottom half of our society, do we finally demand that the billionaire class start paying their fair share of taxes? Or do we shower the wealthy and well-connected with trillions of dollars in new tax breaks?
At a time when corporations are making enormous profits by jacking up the price of health care, prescription drugs, gasoline and groceries, do we finally end the huge loopholes that exist in our rigged tax code that allow large corporations to avoid paying their fair share of taxes?
Or do we eliminate the corporate minimum tax passed last year that prevents giant profitable corporations from paying nothing in federal income taxes after making billions in profits?
At a time when we pay, by far, the highest prices in the world for prescription drugs do we finally take on the greed of the pharmaceutical industry and substantially reduce the price of what Medicare and the American people pay for life-saving medicine?
Or do we continue to allow the pharmaceutical industry to bankrupt Medicare and cancer patients by charging outrageously high prices at the pharmacy counter?
At a time when the United States spends more on the military — $877 billion — than the next 10 nations combined, do we finally begin to eliminate the enormous waste, fraud and cost over-runs that exist at the Department of Defense?
Do we address the information revealed in a recent "60 Minutes" investigation that documented the billions in price gouging that defense contractors steal from taxpayers? Or do we continue to appropriate more money for the Pentagon than our generals have requested?
Sadly, the Republicans have made their priorities abundantly clear throughout the budget negotiations.
If Congress does not agree to impose massive cuts on the needs of working people, the elderly, the children, the sick and the poor — they will allow, for the first time in our history, the U.S. to default on the national debt.
This action will have a devastating impact on our economy, destroy millions of jobs and cause interest rates on mortgages and auto loans to skyrocket.
The hypocrisy of Republicans in Washington is truly breathtaking. Over and over again, we hear from the Republican leadership about how deeply concerned they are about the large deficit and national debt that we have.
Really? If that's the case, why have they been pushing for the complete repeal of the estate tax which benefits a handful of multi-billionaire families and would increase the federal deficit by $1.8 trillion?
Why are they pushing for an extension of the Trump tax breaks that disproportionately benefit the wealthy and large corporations and would increase the federal deficit by $3.5 trillion?
Why do they want huge increases in defense spending that would increase the national debt by hundreds of billions of dollars?
While defaulting on our nation's debt would be a disaster so would enacting the budget Republicans passed in the House in April. Here are just some of the estimated impacts of what is included in their budget to cut non-defense discretionary spending by at least 22% next year:
In other words, while the top 1% owns more wealth than the bottom 90% of our population, and when 60% of our workers are living paycheck to paycheck, the Republican budget would cause massive suffering for the most vulnerable people in our country.
The willingness of Republicans to hold the world's economy hostage to their Draconian and cruel demands has made it extremely difficult to enact a bipartisan budget deal at this time.
So where do we go from here?
In my view, there is only one option. President Biden has the authority and the responsibility under the 14th Amendment of the Constitution to avoid a default.
The language in that amendment is quite clear. It says, "The validity of the public debt of the United States ... shall not be questioned." This is a constitutional guarantee that the U.S. will always pay all its debts, period.
This is not a radical idea. Making sure that the United States continues to pay its bills regardless of whether the statutory increase in the debt ceiling is raised or not is an idea that has been supported by Republicans and Democrats.
Back in 2016, then-President Donald Trump was correct when he said: "This is the United States government. First of all, you never have to default because you print the money."
Using the 14th Amendment would allow the United States to continue to pay its bills on-time and without delay, prevent an economic catastrophe, and prevent huge cuts to health care, education, childcare, affordable housing, nutrition assistance and the needs of our veterans.
It must be exercised.
Now is not the time to cave in to GOP hostage takers on the debt ceiling. Now is the time for President Biden to use the 14th Amendment to protect working families and prevent an economic catastrophe.
Add your name if you agree:
Republican Votes Helped Washington Pile Up Debt
As they escalate a debt-limit standoff, House Republicans blame President Biden’s spending bills for an increase in deficits. Voting records show otherwise.
Republicans, who are demanding deep spending cuts in exchange for raising the nation’s borrowing cap, will almost certainly greet that proposal with a familiar refrain: Mr. Biden and his party are to blame for ballooning the debt.
But an analysis of House and Senate voting records, and of fiscal estimates of legislation prepared by the nonpartisan Congressional Budget Office, shows that Republicans bear at least equal blame as Democrats for the biggest drivers of federal debt growth that passed Congress over the last two presidential administrations.
The national debt has grown to $31.4 trillion from just under $6 trillion in 2000, bumping against the statutory limit on federal borrowing. That increase, which spanned the presidential administrations of two Republicans and two Democrats, has been fueled by tax cuts, wars, economic stimulus and the growing costs of retirement and health programs. Since 2017, when Donald J. Trump took the White House, Republicans and Democrats in Congress have joined together to pass a series of spending increases and tax cuts that the budget office projects will add trillions to the debt.
https://www.nytimes.com/2023/03/06/us/politics/federal-debt-republicans-democrats.html?
Josh Bivens,
In a political system beset by many stupid and destructive institutions, the statutory limit on federal debt might be the worst. The debt limit:
Given all of this, the debt ceiling should be abolished or neutralized in absolutely any way politically possible. It serves no good economic purpose and plenty of malign ones. Below we expand on these points.
The U.S. Treasury draws on banking accounts at the Federal Reserve to fund federal governmental activities—remitting paychecks to federal government employees, sending Social Security checks, reimbursing doctors for treating Medicare-covered patients, paying defense contractors and interest to bondholders, and so on. These accounts are fed on an ongoing basis by both tax revenues and the proceeds from selling bonds (debt). But, because the United States has a statutorily imposed limit of how much outstanding debt is allowed, once this limit is reached on issuing new debt, Treasury can no longer sell bonds and deposit these proceeds, and hence accounts at the Federal Reserve will dwindle as they are now only fed by ongoing taxes, which are insufficient to cover all spending. This limit is being rapidly reached, and by mid-October (current guesstimate) the Treasury accounts will be too small to finance that day’s governmental activities.
The statutory debt ceiling is a completely arbitrary value—there has never been any economic justification for any of its historical values and it is raised (or suspended periodically) purely based on congressional whim. It is not indexed for inflation, even as federal government payments (like Social Security checks) are so indexed.
Further, it measures gross debt, which includes debt the federal government owes itself. The biggest difference between the debt held by public and gross debt is the Social Security Trust Fund (SSTF). To help pre-fund the now-arrived retirement of the Baby Boomer generation, for years the Social Security system taxed current workers more than what was needed to pay current beneficiaries. The surplus was credited to the SSTF. As dedicated Social Security revenues fall a bit short of benefits in coming decades, the system (as designed) will draw down the SSTF.
But this means that in those years that saw the SSTF rise, this actually inflatedmeasures of gross debt. And it means, for example, that proposals to narrow the long-run actuarial shortfall of the Social Security system would actually see us hit the federal debt limit sooner. How can that make sense?
Finally, the gross debt also excludes the roughly $2 trillion in financial assets(mostly student loans) held by the federal government. Any measure that aims to measure the balance sheet health of an entity probably shouldn’t ignore trillions of dollars in assets.
Higher interest payments that put stress on the federal government’s ability to pay and raise the cost of capital for private businesses is the entire economic reason to keep an eye on public debt. But interest rates have collapsed as debt has risen. In 1996, gross federal debt stood at $5.2 trillion. By 2019, it was at $22.7 trillion. Yet in 1996, debt service payments—the interest costs needed to be paid on outstanding debt—were 3.0% of GDP, but by 2019 they were just 1.8%. The reason why interest rates have collapsed while debt has grown is simply that both variables have been driven by pronounced economic weakness over most of the post-2000 period. But the larger point is that the level of gross federal debt has no reliable relationship to any economic stressor faced by governments or households, so hinging something as high stakes as a hard limit on the federal governments’ legal ability to borrow on this measure makes no sense.
Currently, the Congressional Budget Office (CBO) forecasts a budget deficit of just under 12% of GDP for 2021. The Bureau of Economic Analysis (BEA) indicates much of this was front-loaded—federal government borrowing averaged 16% of GDP for the first six months of the year. For the rest of the year, assume borrowing averaged about 8% of GDP. This is the gap between tax revenues and spending, so if no more borrowing is allowed due to the debt ceiling, it is de facto a measure of how much spending would have to be cut. A spending cut of 8% of GDP is a mammoth shock, and to have it slam into the economy in an instant would be spectacularly damaging.
For comparison, the much-touted private-sector “deleveraging” (an abrupt swing from borrowing to saving) that led to the Great Recession in 2008–2009 was about a 9% contraction in spending as a share of GDP—but that was spread over more than two years. This means that the mechanical shutdown of spending caused by hitting the debt ceiling would be sharper and larger than the one that led to the Great Recession. Worse, as the negative fiscal shock ripples through the private economy, the austerity becomes self-reinforcing. Say that in the first month, the 8% of GDP cutback in federal spending has a multiplier of 1.5, so economic activity in that month is slowed by 12% of that month’s GDP in total. (While it’s true that multiplier effects may well not happen right away, illustratively this is the dynamic we’re facing.)
With GDP and incomes 12% lower, tax collections will fall by roughly 4% of GDP. So the next month, not only will the original cutback in spending be needed, but the new and lower tax collections will ratchet down spending even more—and pretty quickly! Normally the federal budget acts as an automatic stabilizer when recessions hit—taxes fall and spending rises and debt increases, all of which spurs economic activity. But a recession caused by an arbitrary legal rule that spending cannot exceed (falling) taxes means that the budget would actually act as an automatic destabilizer.
If the spending cutbacks occur for a month, say, and then federal transfers make up for the lost month, then lots of the damage could be undone pretty quickly. But not all of it. The multiplier effects—the consumption foregone because, say, the workers at diners serving the retirees who didn’t go out to eat for a month because their Social Security checks didn’t come—will not be made up by subsequent government payments.
Finally, all of this is just a description of the strictly “mechanical” effects of hitting the debt ceiling. The ripple effects stemming from distress in financial markets that would be sparked by missing interest payments on Treasury bonds and bills could be extreme as well. But these mechanical effects are useful to keep in mind when some misleadingly claim that the Treasury can “prioritize” payments to bondholders and hence the U.S. can avoid technical “default.” Besides being likely impossible for both logistical and legal reasons, prioritizing interest payments to bondholders just means defaulting even more heavily on Social Security beneficiaries, doctors’ reimbursements for seeing Medicare and Medicaid patients, federal contractors’ bills, and all other federal payments. And “prioritizing” some payments over others doesn’t change the grim mechanical arithmetic run through above.
People often invoke the damage done by the 2011 showdown over the debt ceiling. They point to stock market losses, increases in “economic uncertainty” indices, and estimates of how much higher interest rates went in the showdown’s aftermath. But they tend to miss what was by far the greatest damage done by the 2011 debt ceiling episode: the passage of the Budget Control Act (BCA), a piece of legislation that is relatively unknown to the lay public, but that delivered an anti-stimulus to the U.S. economy about two times as powerful as the stimulus provided by the Obama administration’s Recovery Act in 2009.
The BCA’s caps on federal spending explain a large part of why this spending in the aftermath of the Great Recession was the slowest in history following any recession (or at least since the Great Depression). This federal spending austerity fully explains why the recovery from the Great Recession was so agonizingly slow. If this spending had instead followed the normal post-recession path, then a return to pre-recession unemployment rates would’ve happened 5–6 years before it finally did in 2017.
The BCA was the GOP demand for raising the debt limit in 2011, and the Obama administration acquiesced to it. The leverage provided by the debt limit led directly to the worst recovery following a recession since World War II. If the debt ceiling manages to fatally wound prospects for the budget reconciliation bill wending its way through Congress now, we’ll see history repeat itself, with fiscal policy turning sharply contractionary in mid-2022 as the boost from the American Rescue Plan (passed earlier this year) begins quickly running out. This leverage the debt ceiling provides to those looking to enforce austerity is its greatest—and often most-overlooked—danger.
Given all of this, it is obvious that the U.S. should join the vast majority of rich countries around the world who don’t have a debt ceiling. It would be most straightforward if Congress would abolish it straightaway. Alternatively, if a large enough group of members of Congress demand that the reconciliation bill raise the debt ceiling to some laughably large number ($100 trillion? $500 trillion?), this would effectively abolish it (for arcane procedural reasons I don’t understand, under the rules of budget reconciliation the only change that can be made to the debt ceiling is to raise it).
If Congress won’t act sensibly, the Biden administration should act unilaterally. There is plenty of support for citing the fact that Congress has given the executive branch conflicting instructions and, hence, the administration is free to choose which path it follows. Congress’s taxing and spending instructions require the administration to issue debt to cover the shortfall, yet the debt ceiling would bar debt issuance. One of these congressional “decisions” must be ignored, so the administration should decide. A more fun solution—one that highlights the stupidity of the debt ceiling—is minting the trillion-dollar platinum coin. I’m a fan, mostly because of the educational value of it, and because it treats the debt ceiling as a problem with the contempt it deserves.
However it is done, it is imperative to not just squeak through this latest crisis. Either Congress or the Biden administration needs to do future policymakers a huge favor and render the debt ceiling moot forevermore. It has already done enough damage.
|
 | By Paul Krugman Opinion Columnist |
Yesterday every single Republican senator voted to shut down the U.S. government and provoke a global financial crisis. |
Of course, they claimed otherwise; Mitch McConnell, the Senate minority leader, portrayed the vote against raising the debt limit as a test of Democrats’ ability to govern, and some of his colleagues claimed to be taking a stand for fiscal responsibility. But everyone involved understood that this was an act of political sabotage. And the terrible thing is that it might work. |
The U.S. debt limit is a very peculiar institution, because when combined with the filibuster it gives a minority party the ability to undermine basic governance. You might think that once Congress has passed fiscal legislation — once it has passed bills that set spending levels and tax rates — that would be the end of the story. But if this duly enacted legislation leads to a budget deficit, which requires that the U.S. government issue debt, as few as 40 senators can then block the needed borrowing, creating a crisis. |
And the crisis could be very severe. It’s not just that the federal government would run out of money, forcing curtailment of essential services. U.S. government debt plays an essential role in the global financial system because Treasury securities are used as collateral in financial transactions around the world. During the brief Covid-induced financial panic of March 2020 interest rates on short-term Treasuries actually went negative, as frightened investors piled into the safest assets they could think of. |
Make U.S. debt unsafe — make the U.S. government an unreliable counterparty, because its ability to pay its bills is contingent on the whims of an irresponsible opposition party — and the disruption to world markets could be devastating. |
So why would Republicans flirt with such an outcome? Because they’re completely ruthless — and they’ve learned the lesson of the New Jersey sharks. |
Or, if you want to put it in slightly more pedestrian terms, the G.O.P. has now weaponized retrospective voting. |
It has long been clear that voters are far less informed about parties’ policy actions than we’d like to imagine, even when those policies touch their lives directly. Earlier this year most Americans received stimulus checks thanks to the American Rescue Plan, which was enacted by Democrats on a straight party-line vote. Yet a poll of rural voters found that only half gave Democrats credit for those checks; a third credited Republicans, not one of whom supported the plan. |
So what do voters respond to? In general, they tend to support the incumbent party when things are going well, oppose it if things are going badly — even if the positive or negative events have no conceivable relationship to that party’s actions. |
The political scientists Christopher Achen and Larry Bartels like to use the example of the 1916 election, which was much closer than most people expected; in particular, Woodrow Wilson lost his home state of New Jersey. Why? Achen and Bartels make a compelling case that one major factor was the panic created by a wave of shark attacks along New Jersey’s beaches. Whatever you think of Wilson, he wasn’t responsible for those sharks. But voters blamed him anyway. |
More prosaically, many presidential contests turn on how the economy was doing in the few quarters before the election, even though presidents usually have relatively little influence on short-term economic developments, certainly as compared with the Federal Reserve. When people voted against Jimmy Carter, they were really voting against Paul Volcker, the Fed chairman at the time, who pushed the economy into recession to curb inflation — but they didn’t know that. |
Of course, retrospective voting isn’t new. What is new is the complete ruthlessness of the modern Republican Party, which is single-mindedly focused on regaining power, never mind the consequences for the rest of the country. |
So ask yourself: If a party doesn’t care about the state of the nation when the other party is in power, and it knows that its opposition suffers when bad things happen, what is its optimal political strategy? The answer, obviously, is that it should do what it can to make bad things happen. |
Sometimes the sabotage strategy is almost naked. Consider Ron DeSantis, governor of Florida. DeSantis has done everything he can to prevent an effective response to the latest pandemic wave — trying to block mask and vaccine requirements, even by private businesses. Yet this hasn’t stopped him from blaming President Biden for failing to end Covid. |
And now comes the debt crisis. Nobody has ever accused McConnell of being stupid. He knows quite well just how disastrous failing to raise the debt limit could be. But the disaster would occur on Biden’s watch. And from his point of view, that’s all good. |
Quick Hits |
The economy consistently does better under Democrats. |
But Republican presidents often win re-election because the economy does wellin their fourth year. |
Americans deny receiving government benefits even when they actually do. |
Partisanship and the Covid death toll. |
