Patterico's Pontifications

5/16/2011

Debt Limit Reached

Filed under: General — Aaron Worthing @ 8:37 am



[Guest post by Aaron Worthing; if you have tips, please send them here.  Or by Twitter @AaronWorthing.]

So we learn that the debt limit is going to be reached will be reached sometime today, maybe it has been already:

The U.S. government is expected to hit the $14.294 trillion debt ceiling Monday, setting in motion an uncertain, 11-week political scramble to avoid a default.

The Treasury Department plans to announce Monday it will stop issuing and reinvesting government securities in certain government pension plans, part of a series of steps designed to delay a default until Aug. 2.

The Treasury’s moves buy time for the White House and congressional leaders to reach a deficit-reduction agreement that could clear the way for enough lawmakers to vote to raise the amount of money Congress allows the nation to borrow.

Gene Sperling, director of the National Economic Council, said reaching the debt ceiling “should be a warning bell to the political system that it’s time to get serious about preserving our full faith and credit.” The Obama administration says a default would tip the U.S. back into a financial crisis.

And then  of course he could blame Republicans for refusing to go along with the ever-spiraling debt.  And that is the fear, here.  Recently it was shown that the American people don’t want to see the debt limit increased by a 2 to 1 margin.  But what the GOP is scared of is that the economic disaster will come and the same people encouraging them now will blame them when the s___ hits the fan.  That’s why they are hesitating.

Meanwhile, over the weekend the indispensible Mark Steyn wrote on the subject:

The current debate on the “debt ceiling” testifies to how thoroughly public discourse has flown the coop of reality. Sure, Congress can vote to raise the debt ceiling – just as you and your spouse can reach a bipartisan agreement on raising your own debt ceiling. Go on, try it: Hold a vote in your rec room, come up with a number, and then let MasterCard know what you’ve decided on.

In the real world, debt ceilings are determined by the lenders, not the borrowers. In March, Pimco (which manages the world’s largest mutual fund) calculated that 70 percent of U.S. Treasury debt is being bought by the Federal Reserve.

So under the 2011 budget, every hour of every day, the United States government spends $188 million it doesn’t have, $130 million of which is “borrowed” from itself. There’s nobody else out there.

In other words, however Congress votes, we’re rubbing up against the real debt ceiling – the willingness of the world to continue bankrolling American debauchery.

Read the whole thing.

[Posted and authored by Aaron Worthing.]

40 Responses to “Debt Limit Reached”

  1. So basically we have another example of Geitner not being able to do his job.

    SPQR (26be8b)

  2. And we haven’t even really hit the entitlement bomb yet.

    You can inflate your way out of some of our debt. That’s just a de facto tax increase on anyone who spends or saves American money. But you can’t inflate your way our of cost of living adjusted entitlements. In a way, we’re speeding up as we approach the cliff.

    And if you do the right thing, and propose a nuts and bolts real solution, Newt will claim you’re just being radical. Our ‘leaders’ are too busy playing silly political games to fix the problem.

    But anyhow, Steyn’s point is disturbing in its own right.

    Dustin (c16eca)

  3. When in the course of human events…

    Dan S (b5ccb6)

  4. So we will be 3rd world by next week.

    DohBiden (15aa57)

  5. So we will be 3rd world by next week.

    DohBiden (15aa57)

  6. the entitlement bomb? – our faily faily joke of a country will go tits up under the burden of returning to historical interest rate averages…

    That’s the bomb what Obama has planted at the heart of our little country’s finances.

    happyfeet (a55ba0)

  7. SS and survivors benefits should not be a part of each other.

    Boy ain’t I a genius?

    DohBiden (15aa57)

  8. returning to historical interest rate averages…

    Yes, that can’t happen. Also, that has long term ramifications for property. Houses will not be steadily increasing in value to the degree they did from 1980 to 2005. A lot of people have made assumptions that correlated with steadily dropping interest rates, but rates can’t go much lower, so they won’t keep falling. And they won’t go up, either.

    The government used up this policy for their short term needs.

    Dustin (c16eca)

  9. Muammar Gaddafi just had an arrest warrant for shooting unarmed libyans but didn’t Maobama just execute an unarmed Osama bin Laden?

    DohBiden (15aa57)

  10. This country is headed for a disaster of biblical proportions, real wrath of God type stuff.
    Fire and brimstone coming down from the skies! Rivers and seas boiling! Forty years of darkness! Earthquakes, volcanoes… The dead rising from the grave! Human sacrifice, dogs and cats living together… mass hysteria!

    Neo (95d77c)

  11. if we keep spending like a crack whore, rates will rise

    for reals ask a crack whore what her Visa apr is

    happyfeet (a55ba0)

  12. Oh wait we’re hitting the debt ceiling now.

    DohBiden (15aa57)

  13. if we keep spending like a crack whore, rates will rise

    for reals ask a crack whore what her Visa apr is

    Comment by happyfeet

    I’m sure there’s some way the world will ultimately make sure this happens. We are increasingly a default risk, so why shouldn’t the rate go up? But the government has granted itself a lot of power over rates.

    Either way, that just can’t happen because it will be a disaster. Even if it can happen.

    Dustin (c16eca)

  14. SPQR, it’s really difficult for me to see where this is Geithner’s fault. The total amount of spending is mandated by law. Congress has basically given the executive two conflicting orders: borrow no more than $x, and spend $y (which requires borrowing more than $x). Treasury has been warning for weeks that it wouldn’t be able to comply with both after a certain date, and that date has come.

    aphrael (9802d6)

  15. aphrael, he had earlier stated that the government had methods of not reaching the debt limit until August.

    SPQR (26be8b)

  16. SPQR: if you read the news today, you’ll see that the news is saying basically two things: (a) we’ve hit the debt limit, and (b) through sleight of hand, treasury can juggle things to not have a real problem until august.

    see, eg, the chart attached to http://online.wsj.com/article/SB10001424052748703421204576325583050561022.html?mod=WSJ_hp_LEFTTopStories

    aphrael (9802d6)

  17. Ah, my mistake, aphrael.

    SPQR (26be8b)

  18. However, with Bernanke buying almost 3/4trs of Geitner’s worthless paper, the shenanigans could go on for quite awhile.

    SPQR (26be8b)

  19. Since money is now created in bits and bytes instead of paper you don’t even need a printing press anymore.

    I can’t be the only one that will never forget that the very bankers that caused the crisis were the first ones bailed out, and continue to be bailed out borrowing at roughly 0% while lending rates are still set at a rate more suitable to the banks borrowing at 2-3%. That bell can’t be unrung and we’ll be living with the consequences for quite some time. Faced with massive banking failure the government could have ‘promoted’ medium sized banks that had steered clear of the problems or enticed business leaders outside of banking to enter the field in order to keep funds flowing. Instead they double downed on the same idiots that caused the problem.

    East Bay Jay (2fd7f7)

  20. Obama wants this “crisis” so he can blame the republicans. Two big entitlements – social security and medicare – have already been raided the Obama Administration. During the tax debate, Obama cut employee SS payments rate from 6.2% to 4%. Of course his ObamaCare program steals $500 B from medicare. That’s why the financial collapse of both these programs have been intentionally accelerated.

    As for monetizing debt, if you deposited a check from one empty account to cover an another overdrawn account, it’s a crime called check kiting. Unfortunately, with electronic transfers, kiting doesn’t work like it did in the 1960s when I was in college.

    There is a problem with the US government appropriations process. With Geithner selling treasuries and buying them back, he’s creating expenditures without congressional authority (specifically, the House). I doubt it is legal, but that doesn’t seem to stop this administration.

    Arch (0baa7b)

  21. Does anyone even know what the income tax rates will be in 3 years?

    It’s practically impossible to know what the hell the implications are of earning or paying a wage anymore. I don’t even know if Obamacare will apply to me because of the waiver nonsense.

    We can’t get our of debt without an economy. That’s the bottom line. Sure, we need to stop spending so much, but we can’t pay our debt without a roaring economy, and it’s hard to invest in this country with this hyper political administration making things very hard to predict.

    The only way we can all have more is by producing more, not by bickering over how to share less.

    Dustin (c16eca)

  22. This could all be fixed by making the rich and corporations pay their fair share, not freeloading on the backs of the workers.

    JD (306f5d)

  23. Dustin, I don’t even know what estate tax will be in three years – so I sound pretty silly when I try to give advice to estate planning clients.

    SPQR (26be8b)

  24. So, Aaaron says Americans are saying 2-1 that they don’t want to see the debt limit increased. That is, of course, because those Americans are well-read and sophisticated at economics, eh? It would have nothing to do with the meme hammered for months by the folks that brought us the debt — meaning the ones who cut taxes while pushing two unpaid wars and more. That would be the Republicans who had the earlier meme that cowed reluctant Democrats into this mess — the why-do-you-hate-America and eat Freedom Fries stuff.
    I hope you understand that you could do a poll of Appalachians who made it only to third grade in school and find a way to find that a high percentage of them believe particle-beam accelerators could easily be converted into wine cellars, or whatever you want the result to be.
    Yeah, huh.
    Don’t dare look to the fiasco that is England after doing the debt thingy like the Republicans are now pushing here.
    The real crime here was Obama being cowed by Republicans into just a half-priming of the pump a couple of years ago. We got half a trickle of growth. Some had to be done to correct the horrific economic mess massive deregulation and cutting taxes on the rich did to this country.
    And it wasn’t.

    Larry Reilly (0e1b2d)

  25. I agree, Larry. It’s Obama’s fault/crime.

    Dustin (c16eca)

  26. …meaning the ones who cut taxes while pushing two unpaid wars and more.

    Because Obama cut taxes while pushing three unpaid wars.

    SPQR (26be8b)

  27. Here are Obama’s thoughts on the debt limit in 2006, when he voted against increasing the ceiling:

    The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

    Neo (95d77c)

  28. Neo, there just is not a thing he’s ever said that he has not directly contradicted once in office.

    SPQR (26be8b)

  29. The real crime here was Obama being cowed by Republicans into just a half-priming of the pump a couple of years ago. We got half a trickle of growth. Some had to be done to correct the horrific economic mess massive deregulation and cutting taxes on the rich did to this country.

    Larry, I counted 5 brazen lies packed into three sentences.

    SPQR (26be8b)

  30. SPQR – Larry is a f@cking JournoList. The likes of him and Hax shape news coverage. They are economically illiterate. If the stimulus would have been 2 trillion it would have worked? Why not 4?! 8?!

    JD (85b089)

  31. JD, image how wealthy we’d all be if the “stimulus” was 100 trillion!

    SPQR (26be8b)

  32. Hell, why stop there? 200 trillion! 3! Do I hear a zillion?

    Milhouse (ea66e3)

  33. Sold! Sold to the gentleman in the Hu Jintao mask. Oh wait, that isn’t a mask.

    Milhouse (ea66e3)

  34. SPQR – did you see that study on the effects of the “stimulus”? I think it was from Ohio State University. Granted, that is not Hahvahd, and is a bunch of bitter clinger Big 10 racist rednecks…

    JD (3ad5b9)

  35. No more credit? No problem… we can just raid the Social Security Trust (heh, suckers) Fund.

    Anon Y. Mous (cb1134)

  36. The what? That money’s already been spent. It’s like Homer’s emergency doughnut stash, which contains an IOU for one doughnut.

    Milhouse (ea66e3)

  37. It’s like Homer’s emergency doughnut stash, which contains an IOU for one doughnut.

    LOL.

    Anyway, we can just put more IOUs in there, then. Maybe we can sell Alaska to China.

    Dustin (c16eca)

  38. “In the real world, debt ceilings are determined by the lenders, not the borrowers”

    People will happily lend to the united states. This is not the ‘debt ceiling’ that policy is discussing. It fundamentally misunderstands the debate to pretend otherwise.

    Bruuuce (f450ba)

  39. It fundamentally misunderstands the debate to pretend otherwise.

    He knows that, genius. He’s explaining a larger point.

    People will happily lend to the united states.

    Except we’re buying our own debt to a very large degree, so no, people are not lending all the money this government is trying to borrow.

    Nice try with the lame strawman that Steyn already described before explaining his point. How dare he deviate from your terms.

    Dustin (c16eca)

  40. Bwuuuuuce’s record for mendoucheousness remains unblemished.

    JD (85b089)


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