Federal borrowing is on pace to hit the legal limit on the national debt in less than a week. …
As of the close of business Tuesday…the U.S. Treasury [had] the authority to borrow only an additional $25.635 billion before it hits the statutory debt limit. …
[D]uring the first 821 days of Obama’s presidency the debt increased by $3.700223 trillion—or $4.5 billion per day. …
[Moreover,] in the past six days, the debt has increased at a far faster pace… [I]n the six days of Thursday, Friday, Saturday, Sunday, Monday, Tuesday, the national debt increased $56.381 billion—or almost $9.4 billion per day.
At that pace, the Treasury would exhaust its $25.635 in remaining borrowing authority in less than 3 days. …When Treasury is about to reach the debt limit, the Treasury secretary can take certain extraordinary steps to stretch the Treasury’s borrow-and-spending authority. According to Geithner, however, these extraordinary measures would only give the government another $165 billion in borrowing-and-spending room.
Meanwhile, the GOP is sounding more inflexible in its demands for reforms to accompany any debt-limit increase.
Who’s up for a much higher-stakes game of chicken than the government-shutdown brinksmanship–on an apparently accelerated timetable–with the consequences of a failure to compromise involving a likely double-dip recession or worse?
Like I said… #PANIC!!
(Here’s a good backgrounder (PDF) from the Congressional Research Service on the technical details of the debt limit, the “extraordinary measures” Treasury can take to delay a default, and the various known knowns and known unknowns surrounding the consequences of default.)
Meanwhile, the GOP is sounding more inflexible in its demands for reforms to accompany any debt-limit increase.
You say that like it is a bad thing.
gahrie, it’s an awful thing. If the GOP wants to score political points, the debt limit is not the way to do it. And frankly, they needed to be taking aggressive steps years ago to be sure that we didn’t hit the debt ceiling if it was such an important point. Fact of the matter is, the GOP is manufacturing a crisis where none exists and in doing so, they’ll have ALL Americans paying back debt at a higher interest rate so that they can grandstand. It’s bad policy and it’s bad for America. The time to make a stink has passed. Now it’s time to raise the debt limit and THEN be sure that we’ll never have to raise it again via controls on outlandish spending, increased taxes etc. But this gamesmanship is despicable, transparent and expensive.
Well, I owed (slightly) on the federal side this year, so the feds can’t blame me.
I agree this is “a much higher-stakes game of chicken than the [previous] government-shutdown brinksmanship”, but default is not really on the table — there are multiple options to employ prior to having to default, including (ahem) government shutdown. As the report says,
Further, I don’t see any of this as a driver of a “double-dip” recession. To believe that, you’d have to buy into the idea that all of the extra government spending since 2008 actually had an effect on the economy (there’s little to no evidence to justify that claim), and whatever you might say about the recession having technically come to an end since GDP has stopped falling, employment and housing haven’t recovered whatsoever. This hasn’t been a V recession, and it isn’t looking like a W recession either — it’s looking more and more like an L recession. I project that L recession to continue until long-term budgetary outlays are brought under control (at least from a market-reacting-to-government-planning perspective), the housing bubble completes its deflation (extraordinary measures were taken to dampen the fall, but I’d argue that only delayed the inevitable), and the Fed’s “quantitative easing” is ended (allowing stability to return to commodity pricing and worldwide capital flows to normalize).
Ok Becky but why can’t reasonable people agree that we have to raise the ceiling AND change our habits. If I call my commercial loan officer and say raise my revolving loan limit, he/she will probably have some requirements I have to meet. In a small business case, I may have to pledge more collateral, agree to a more aggressive repay schedule, or specify why I need the money.
I agree that scoring political points is wrong by the GOP. However, I see value in BOTH parties agreeing to raise the limit now, but immediately implement actions to stop this country from heading to financial ruin. Look in the article Brendan cited, we have went from $4.5B to over $9B per day borrowing. That isn’t Bush, that isn’t GOP. The Dems have been in control of the purse strings since ’06. If we don’t stop this level of borrowing and spending we will crash our countries financial system way beyond anything that happened in ’08. It won’t be a double dip, it will be a depression the likes of which we have never experienced. So I say raise the limit, but NOW is the time to put serious controls in place.
I nominate that for Howler of the Year. There are no crises here, folks! Move along, nothing to see.
Beyond that nonsense, “gamesmanship” is exactly how you win and lose concessions in negotiations — whether it be political or in car-buying. It’s a fundamental part of the process and really not worth freaking out about.
Look in the article Brendan cited, we have went from $4.5B to over $9B per day borrowing. That isn’t Bush, that isn’t GOP.
It also is by no means exclusively Obama or the Dems. The increase in borrowing is, of course, due in significant part to the massive recession that hit the country just as he was about to take office, which both decreased revenues drastically (for the very reason cited in the post that Joe Mama linked elsewhere, i.e., the fact that our tax revenue system depends heavily on variable streams of income that invariably fall steeply in a recession) and increased mandatory outlays for social safety net programs. The Obama stimulus, the Bush/Obama auto bailouts, the Bush bailout of AIG (I specify AIG because the bank bailouts have, as I understand it, made a profit), and various other factors are also relevant, including certain Obama domestic policy choices — I’m not denying any of that. But it’s not as if Obama snapped his fingers and doubled our daily borrowing load just because he felt like it. The context for those numbers has to be considered, at the same time that the troubling reality they represent has to be grappled with. It’s wrong for Dems to say “OMG THIS IS ALL BUSH’S FAULT” and it’s wrong for the GOP to say “OMG THIS IS ALL OBAMA’S FAULT.” It’s also unhelpful and counterproductive. What’s needed is a long-term, forward-looking solution, not backward-looking finger-pointing that makes everything needlessly partisan and reduces the chances of compromise.
Further, I don’t see any of this as a driver of a “double-dip” recession. To believe that, you’d have to buy into the idea that all of the extra government spending since 2008 actually had an effect on the economy…
Huh? I don’t follow. The reason a default could cause a double-dip recession (or the “L” turning into a half-swastika, if you prefer) is because of the bond markets freaking out and whatnot, not because of a lack of government spending.
P.S. I think it’s quite clear from the context of Becky’s comment, as well as her previously expressed views on the issue, that, when she says “the GOP is manufacturing a crisis where none exists,” what she means is that the GOP is unnecessarily (and for political rather than policy reasons) turning our medium- and long-term fiscal problems, which I think Becky would agree constitute a “crisis” in the broad sense, into a short-term, immediate, #PANIC!!! sort of “crisis,” by turning what should be a routine vote on an administrative necessity into a game of extremely high-stakes political chicken. This view, of course, has the benefit of being right.
Perhaps you’re right, AML, that the GOP’s move is politically astute and historically unsurprising. Certainly, both parties have played this game before, including Obama and Reid, who foolishly voted against debt-limit increases under Bush (votes whose wrong-headedness they’ve now rather self-interestedly acknowledged), albeit without any realistic prospect of triggering a default in that instance, since everybody knew the debt limit increase would pass (not that that’s a defense of bad votes). But the stakes have rarely, if ever, been quite this high, with the economy so fragile, and the political base of the objecting party so radical and seemingly willing to jump off a cliff to make a point.
I just hope somebody walks back from that cliff’s ledge before it’s too late. (And even if they don’t, those “extraordinary measures” Treasury can and will take are a waste of money in and of themselves, as the linked PDF piece makes clear.)
P.P.S. Jeff, I just went back and realized you’re misreading the article. The average under Obama is $4.5B per day, not $9B. The $9B is just over the last week or so, which isn’t too surprising — the borrowing per day always fluctuates wildly throughout the year, so it’s not like those six days reflect some permanent policy-related increase. The $4.5B number is the one to look at if you want to assess the increase under Obama. It is up somewhat from Bush, but it’s not double.
Brendan, I realize the $9B figure is not statistically relevant, but accelerated growth of debt accumulation certainly appears to be occurring. I also accept that this is not all the Obama administrations doing. It is an accumulation of events transpiring over a lengthy period. President Obama is at the wheel now and has to guide us through this. It won’t be easy and our investment club meeting last week just proved how contentious this debate can get. We were nearly throwing things at one another before cooler head prevailed. The one indisputable reality we ALL agreed on…we just can’t afford to keep supporting every worth expenditure. The spending eventually has to get in line with revenues. Yes they are variable, and there is a time for debt, and a mechanism for utilizing the debt, but at some point we have to try and align spending with revenues and begin to lower the debt burden. Just as S&P.
OK..since I am apparently the unreasonable one…can someone please explain to me why we have a debt ceiling if we are never going to pay attention to it and instead just constantly raise it (sometimes several times a year)?
Optionally, anyone know how I can get my credit card companies to perpetually raise my debt ceiling?
Try this sometime. Go to your local bank. Tell them that you need a loan. They will ask why, in one way or another. When they ask why, explain to them that you already have a massive loan to someone else that you will not be able to repay unless you get this loan from them. When they ask how you got that loan in the first place, then explain to them that this loan was taken out because otherwise you couldn’t have paid a previous loan.
And when they ask how you plan to pay off this loan, explain to them that surely someone else will loan you that money.
Then, let me know in the comments when they stop laughing at you
Aaron Worthing over at Patterico’s Pontifications
Perhaps folk are concerned for reasons such as this ?
Perhaps we are concerned because we have yet to see objective evidence of recovery from the current recession – and we have yet to see any serious efforts on the Dem side to cut back spending …
Becky – it is all fine to blame the GOP for brinksmanship about the Debt Ceiling – except that it ignores the point that brinksmanship requires at least TWO sides for it to occur … yup, the GOP seem to be threatening to force the issue by not agreeing to a Debt Ceiling increase … and yup, the Administration could cut its spending way back, so that the Debt Ceiling would not need to be raised …
Remember that the Dem track record is to “agree” to spending cuts to accompany tax increases – and then NOT follow through on the spending cuts even though the tax increases went through … the Dems did it to Reagan … the Dems did it to Bush I … do you *really* want the Congressional GOP to trust Lucy again with that particular football ?
Two issues:
1. Now that you’ve acknowledged the bulk of the fall in revenue is due to lack of money coming from rich folks, and we’re now three years into this recession / flat-line, at what point do you take the data at face value and recognize that increasing taxes on reach people absolutely and permanently has to be off the table (forget temporary extensions) if we want to see GDP growth — and thus, variable revenue streams derived from that — rebound? What about the last three years of non-progress makes you think that variable factor of rich people making taxable income will bounce back given the policies and priorities Obama has been implementing?
2. The “mandatory outlays for social safety net programs” is hardly the main driving component of the rate of spending increases under Obama. TARP, the Obama stimulus, Obamacare, and other selective hikes in discretionary spending are far more responsible for the spending increase. That is, unless by “mandatory” you mean everything a good, Keynesian liberal should do in an economic downturn, in which case, *of course* all of the outlays were “mandatory”.
I already stated that default is politically highly unlikely even in the case that the debt ceiling is not raised. Then, even if default happens, we have to distinguish true default from temporary default. If Congress simply stopped paying bondholders until a debt ceiling resolution is reached, there would be a temporary hiccup but no real recessionary impact because eventually the government would get around to paying back the bondholders (and probably with added interest, to restore faith and credit). If Obama and Geithner took that opportunity to in fact truly default and decide not to pay back bondholders ever, then yes, the economy would freeze up quite painfully.
But no, a government shutdown (a much more likely outcome of this debt ceiling impasse than default) would not drive a double-dip recession.
*increasing taxes on rich people
I’m with Gahrie on this one. I actually agreed with the President’s logic for voting against it last time, and I still think if we’re having threats of financial armageddon so much then maybe we need some serious, lasting fiscal changes. Sorry, but that was the logic for TARP…the stimulus…and now, OMG, we gotta raise the debt ceiling or we’ll all DIIIIIIIEEEE. Especially since Turbotax Timmy was just saying we had until May 16…now suddenly it’s as early as Friday? And this is the person we should have in charge of the newly expanded debt limit?
I’ll believe this is financial armageddon when three things happen:
1.) President Obama calls Congress back in session after he’s caught the fastest thing smoking from California;
2.) All unspent TARP and Stimulus funds are immediately diverted to pay down the debt effective the moment the President hits the tarmac at Andrews in #1;
3.) Both sides come together without any talk of killing grandma, murdering babies, taking 100% of Bill Gates income and selling his family into perpetual slavery to a random UAW member from Detroit, or any of the usual BS that passes for discourse in this nation.
Or to put it another way, when both sides start reacting in the same way they would if an alien deathship showed up over D.C. and said, “Solve this mathematical equation in the next 24 hours or we will start consuming humankind beginning with the roasted brains of this government’s leaders government…”. Until I see that, I’m not going to “panic,” I’m just going to be glad that I don’t have an ARM or any particular need to get a loan anytime soon.
P.S. Oh, and I forgot:
4.) We immediately tell the Libyan rebels and the Europeans, “Eff y’all, this is too expensive and we got other sh*t to worry about.”
AMLT – I thought you were just channeling your inner Tattoo (from Fantasy Island) with “Da Reach ! Da Reach !” …
I am still fascinated by the pass the Left gives Obama for the period when he was one of the majority of the 100 legislators in the Senate …
Question: Do you believe that Congress, even split as it is, would impeach Obama if he tried to truly default ?
Is defaulting an impeachable offense when Congress controls the purse and just recently passed a budget? I would argue not just no, but HELL NO.
I maintain my original position. This is NOT the issue to play political roulette with because the gun has too many bullets pointed right at Mr. Economy. I don’t disagree with the points being made here about the necessity of curbing gov’t spending and I’d be happy to see the military, social security, medicare and medicaid subjected to efficiency experts and significant cuts. However, I’m not about to threaten the stability of our fragile economy to do so. It’s irresponsible for either party to play these kinds of games. I want legislators who govern with what’s best for the country at heart, not what’s best for their damn political party. That’s why I was so disappointed in Obama’s SOTU for not tackling spending and setting the agenda on how to move forward with the most pressing and important political issue of our day.
This debt ceiling debate is bullshit. Pure and utter bullshit. Raise the debt limit and let’s start overhauling entitlements and military spending and closing some loopholes in the tax code so that we can actually lower rates while increasing revenues.
I call shenanigans on this one. It’s a distraction from the actual hard part of governing–working out a compromise that will reduce both short and long term expenditures. It’s a lot easier to piss on a strawman than it is to tell the bratty baby boomers that their entitlements are on life support.
Out of curiousity, was there a Loy outraged post back when Senator Obama voted against raising the debt ceiling, or is outrage over political brinksmanship reserved for the GOP?
I would have at least a grudging respect for those who would come out and advocate getting rid of the debt ceiling altogether, rather than have to endure this constant political theater that anyone in power really cares about the debt.
Cartman
Re: your 21
I believe over 40 other Democratic senators, many of whom remain in the Senate, joined then Sen. Obama in voting against the debt ceiling.
@Cartman, to be honest, I wasn’t paying all that much attention to such politics in 2006. I was happily slaving away as a preschool teacher and trying to slog through the sunless, miserable, soul-sucking environs of northern Indiana for one last winter.
OK guys, bear with me…I’m going to climb out on a limb here…
Gold is currently trading at a very healthy $1,300+ an ounce, right?
So, if someone happened to be sitting on literally tons of gold, and needed some cash to pay off their debts…now would be the time to sell right?
I mean, it’s not like anyone is going to try and seriously argue that Fort Knox is propping up the value of the dollar in today’s world are they?
Wow…according to Wikipedia, the value of all the gold at Fort Knox at a price of $1,400 an ounce is only 206 billion…..
We really are broke.
Cartman & gahrie, I already addressed the Obama ’06 issue:
Not sure what else you want me to say.
What is the purpose of the debt ceiling today?
I don’t know, gahrie. I read somewhere that the U.S. is one of the few countries to have a legislatively set debt limit. It seems foolish to me. Congress already has control over how much we need to borrow, because it sets fiscal policies that determine whether we have surpluses or deficits. Why does it also need to set an arbitrary limit on borrowing every few years? It seems the height of irresponsibility for Congress to be able to say to the executive branch, “you must do the following things that cost X amount of money, you can only collect Y in taxes, and oh by the way, you can’t borrow more than Z.” If Congress had its shit in order regarding X and Y, then Z wouldn’t be an issue.
I would support abolishing the debt limit.
P.S. One thing that remains unclear to me is why the law establishing a debt limit necessarily trumps all the other laws that would be violated by a default. For instance, I assume there are Acts of Congress requiring us to pay back our debts. I know there are Acts of Congress requiring all sorts of ongoing spending, the issuance of tax refund checks, Social Security checks, etc. Why does everyone just assume that it’s OK for Treasury to violate any of those laws in order to stay in compliance with the debt ceiling law? A default would force Treasury to choose between a variety of options that are all illegal. Why isn’t one of those options, “violate the debt ceiling”?
@ gahrie #28 again, here’s a Felix Salmon blog post addressing this very issue.
Sadly, such contempt is often justified.
This is NOT the issue to play political roulette with because the gun has too many bullets pointed right at Mr. Economy.
Becky, in case you haven’t noticed, Mr. Economy is already dead; a gangster showdown in a cemetery is unlikely to harm any innocent bystanders. If GDP were rebounding and the unemployment rate dropping, I might have shared your concern.
As it is, I don’t see a lot of long-term, downside risk to temporarily shutting down the government to forestall exceeding the debt limit; the default talk is simply an empty threat the administration is hanging over the debate to get folks like you to freak out and line up on their side rather than the Republicans. Once you realize the default talk is just as much political manipulation as the Sarah Palin “death panels” were, there’s little reason to be bothered — unless politics as usual really does get under your skin. In which case you might want to go back to not following and commenting on politics, for your own sanity’s sake.
Elaborating on my comments #30 and #31, this point by Howard Gleckman, which, aside from the nonsensical notion of “impeaching” a legislator, I agree with:
You know what Obama should do? He should agree to some of the GOP’s demanded concessions as part of a debt limit increase — but at a price. Such concessions should not be given in exchange for another incremental increase in the debt limit, to get us through another fiscal year or two. Instead, he should only make those concessions in exchange for a gargantuan increase, to take this opportunity for ridiculous grandstanding off the table for a while. How gargantuan of an increase? How about, the exact amount needed to pay for the Paul Ryan budget over the next 10 years. What possible objection could the GOP have to that?
Ramesh Ponnuru makes a good point: Why would anyone who acknowledges that budget deficits are a problem want to increase the debt limit unconditionally while attacking the party using the debt-limit debate to achieve some deficit reduction?
The debt ceiling doesn’t limit the Fed’s ability to finance the deficit at all. Even if there were ZERO taxes and government borrowing were illegal, the Fed could still fund government spending by printing money. This is sometimes called the “inflation tax”, and it is popular among those African governments which enjoy creatively destroying their economies.
Here’s how it might look in the US. Suppose the debt limit is $14 trillion, and say the government needs to raise another $300 billion to operate this year. Suppose that $500 billion in debt comes due this year. When that debt comes due, the government will roll $200 billion of it into new debt, but pay off $300 billion of it in new cash (injecting that money into the economy and causing inflation). Now there is $300 billion in additional debt capacity available to fund government operations.
It still looks like the government just repaid some debt. After all, the original purchasers of the debt paid the government in cash, and the government is now just paying them back. But in reality, the government is just creating $300 billion in cash that wasn’t there before, and inflation will result.
This will destabilize exchange rates, government bond prices, and international trade. Investors will retreat to the sidelines until the situation plays out. Interest rates on everything will rise, and liquidity will dry up until the situation resolves. Another financially driven recession will result. Several foreign countries on the brink of bankruptcy will likely default.
So we could hold fast to the debt limit, not affect government spending at all, and create inflation and global recession. Or Congress could just talk and not hold the economy hostage. I vote for the former. More fun that way.
Well, that first part is a bit overstated. The Fed would be restricted in terms of methods available to finance the deficit. But it could still do it.
1.) Debt can be paid without hitting print on the printing press. Indeed, I seem to recall there being an amendment offered on the 2011 deal by both Reps and Senators to the effect that the first thing paid be service to the debt.
2.) Likewise, Grandma could still get her check and the soldiers still get paid with the amount taken in this year. All this is explained in readily available links on the internet, to include articles in the Examiner and Fox News.
3.) So, basically all those blithering on about “Russian Roulette” and “Obama should tell the GOP to go *bleep* themselves…” are actually blaming the wrong party. Indeed, the fact that Secretary Geithner is going on every show possible saying that the Republicans would have ownership of it is far more partisan, in my humble opinion, than anything the Republicans have said.
4.) But more importantly, I don’t give a *censored–rhymes with duck* whose fault it is. Once again, how about we stop trying to score points on which side is the more idiotic and, you know, have a discussion about how to fix this long-term? Because I’m sorry, from 2006 on the Dems owned Congress, and from 2008 on they had a supermajority (A FREAKIN’ SUPERMAJORITY) which means that I know NO ONE from that side should be fixing their pie hole to talk about things they inherited. Likewise, from 2000-2006, especially from about 9/12/2001-2006, the GOP could have passed a law requiring all male Democrat Reps and Senators to be gelded with sewing shears on the House floor and the only response would have been Senator Boxer gleefully screaming “I’m on the way to Hobby Lobby! How many sets to we need?”
5.) Ergo, all are to blame…so how about we stop things before we get to the “all are punished!” phase? Because if you think the Chinese are going to let us just hit print on the printing press without ramifications, I want some of what you are smoking–it will probably numb the pain of whatever PRC gets around to doing to stop chaos in their _own_ country.
Oh, and I have no idea how a bonehead like Ramesh Ponnuru finds his rank among conservative intellectuals. You’d think given their Darwinian attitudes about competition, Ponnuru would have been caught and eaten by more powerful conservative intellectuals a long time ago.
In 1979 the top marginal income tax rate was 70% and 18.3% of the total taxes paid were collected from the top 1% of taxpayers. By 2007 the top tax rate was 35% (half of the 1979 rate), and the tax share of the top 1% had more than doubled to 39.5% (from 18.3% in 1979).
Get that? Ever since the Reagan revolution, the very rich (top 1%) have been paying an ever increasing share of the income tax, even as their rate has dropped.
Citation for the quote above:
http://mjperry.blogspot.com/2011/04/tax-rates-and-share-of-tax-revenues.html
The proportion of tax revenue contributed by the top 1% has increased, but it hasn’t kept pace with the growth in the proportion of income they earn, which went from 24% in 2007.
Also, the Reagan tax cuts did not change effective rates by as much as the posted rates.
Even Arthur Laffer would tell you that the whole cutting rates = more revenue thing only applies when rates are confiscatory. I think even he sets the “confiscatory” threshold as pretty high, more than 50% effective rate (which, to be fair, many people in NYC come close to paying in total income tax).
End of rant.
Oops, typo there. Proportion of income earned by top 1% went from less than 9% in 1976 to more than 24% in 2007.
I forgot that HTML doesn’t really like greater than or less than symbols.
If the top 1% earned 9% of the income in 1976, shouldn’t they have only paid 9% of taxes — not 18%? And likewise in 2007, if they earned 24%, shouldn’t they only have paid 24% — not 39%? How in the world did we ever get to a notion of fairness that says the amount of tax you pay should be driven not by what you earned but by who you are?
Interesting article about the “rich” and how much taxes people think they should pay.
http://www.stat.columbia.edu/~cook/movabletype/archives/2011/04/upper-income_pe.html