Budget Fight (FY23 and Beyond...)

[HOF44]

These fools gonna crash the economy. 

[China]

2 hours ago, HOF44 said:

These fools gonna crash the economy. 

 

God I hope not.  I'm counting on the big players from the financial sector and elsewhere to start putting pressure on McCarthy to get his act together and let him know how bad it will be if he doesn't get something done in time.  Otherwise it will be a ****show.

[Larry]

2 hours ago, HOF44 said:

These fools gonna crash the economy. 

I'm pretty sure that there's at least a dozen who steadfastly believe that they can do it, and claim Biden Did It. 
 

Or at the very least, that it won't hurt them.  

[Fergasun]

GOP vote is going on now.  It will be interesting to see if it passes. 

 

I know most were skeptical about it passing.  I know there is some fear at this vote being used against them in 2024.  I know this will be embarrassing for McCarthy for this to go down. 

 

I have no idea how the vote will go, if there is vote changing drama, etc.

[LadySkinsFan]

It won't pass the Senate and if it by some way does, Biden will veto it and they don't have enough for an override.

 

I still say that the money people will never allow the US to default on the debt. It hurts them here in the US and globally. 

[Fergasun]

@LadySkinsFan

The issue is not this bill.  If the GOP passes this bill, it allows them to get to the negotiating table.   Everyone knows it us going nowhere.  If they can't pass this bill, it will indicate that a clean debt ceiling raise is likely. 

 

The GOP is actually trying to take 2 bites at the apple.  Using both the debt limit and FY24 budget for cuts.  I know there was discussion some of them wanted to do a clean debt limit and FY24 budget is where they would dig in. 

 

It's possible they will exhaust and piss off the public talking about all the cuts they want... this is what the Democrats want them to do. 

 

[LadySkinsFan]

I agree with you that anything other than a clean debt bill doesn't stand a chance. It's what everyone but the Fascists want. And in reality there's not enough of them.

[Fergasun]

GOP passed this bill.  Looks like McCarthy hsd two votes to spare.  "Win" for McCarthy.  I don't know how much draconian cuts sway voters.  Screwing the VA should be huge for the Dems in 2024.  I would think any Federal employee paying attention should be concerned with spending getting cut to FY22 levels and only 1 percent increases in budget moving forward.  This essentially means either pay or services get reduced.  

 

This ends with McCarthy-Biden-McConnell negotiations.  I wonder if GOP takes the debt ceiling to after 2024 elections or they keep the hostage.  

 

Already saw Manchin talking about this too, he is up for reelection.  As is Sinema.  2011 to 2013 all over again. 

[Larry]

Just pointing out, Biden's position all along has been that he will negotiate a budget, he will not negotiate about raising the debt limit. 
 

Not sure that he can sell that position. 

[Jabbyrwock]

7 hours ago, Larry said:

Not sure that he can sell that position. 

 

One of the provisions in the GOP debt limit bill is to repeal the clean energy tax breaks that were put in place the last couple of years.  Thats right: the GOP's bill, which they basically all voted for, raises taxes.  Why have I not heard this everywhere yet?  They just jammed their own foot in the door on increased taxation.

[EmirOfShmo]

 

[Cooked Crack]

 

 

[China]

**** Gets Real—Fiscal Cliff Edition

 

Yesterday, the Times published an article reporting that Biden administration officials have an active discussion about whether the debt-ceiling law is unconstitutional and thus whether President Biden has the right and the duty to disregard it rather than default on the government’s debt and spending obligations. That along with Secretary Yellen’s June 1 announcement hit like a thunderclap against D.C.’s conventional wisdom about how this drama plays out. On a dime the insider newsletters decided that this probably isn’t going to be settled by a simple negotiation, or maybe any negotiation. The extraordinary measures a lot of us have been talking about for some time suddenly started to seem real to them too. The addition of the June 1 quasi-deadline signaled to still others that there probably isn’t time for a negotiated settlement even if the administration decided to negotiate.

Put that together and we seem to be in a new place on this just in the last day or so.

 

For what it’s worth, I don’t think that last point is really true. If both sides wanted to cut a deal the principals could get together and come to one over dinner. Then, if the leadership was on board, there’s always a way to hold quick votes. The issue remains that the House is controlled by the Freedom Caucus and other Freedom Caucus-adjacent Republicans in the House and the Senate. They want to hold the Treasury and the full faith and credit hostage. Meanwhile the White House and virtually all Democrats refuse any replay of the 2011 hostage-crisis debacle. These aren’t technical or procedural issues. It’s that political impasse and the Democrats’ refusal — at least to this point — to negotiate with parliamentary terrorists.

 

D.C. conventional wisdom shapes and constrains action in the capital. That conventional wisdom has changed significantly over the last 36 hours or so, and not entirely or mainly because of Yellen’s announcement.

 

Quickly, what are the extraordinary measures? There are a ton that people talk about. But I’m just going to focus on four key ones, which I think frame the parameters of the question.

One: Mint the coin. (I include this one less because it’s plausible than because it’s discussed so much.) Because of a quirk in the empowering legislation, the Treasury does seem to have the ability to mint a trillion dollar (or any amount) platinum coin to come up with plenty of money to meet government obligations. In theory, this solves the problem. The law seems clear. But I’m pretty sure this will never happen for two reasons. First, it just seems weird and absurd. Second — and barely discussed for reasons I don’t fully understand — creating a trillion dollars out of nowhere must have some inflationary effect on the dollar, especially since inflation is only now coming down off four-decade highs.

 

Two: The Fourteenth Amendment. There is a strong (and I believe correct) argument that the Fourteenth Amendment not only makes it unconstitutional to default on the national debt but even to put the “full faith and credit” into question. That puts even the kind of “pay this and don’t pay that” triage we discussed yesterday under the shadow of constitutional prohibition. There are countless permutations of how this could work. But the gist is always the same: The President announces that the Constitution requires servicing the government constitutional debt obligations and statutory spending obligations.

 

One additional wrinkle to this. Were the President to go this path I imagine he would add one additional point to the analysis. The debt-limit cliff forces the President to violate the budget law or the debt-limit legislation. Placed in this impossible situation I suspect he would resolve the dilemma in favor of the budget law since the Constitution provides the guidance of the Fourteenth Amendment. It allows him to make a somewhat less definitive constitutional claim.

 

Three: Consol bonds. This is something that came up in our conversation with Paul Krugman back in February. The whole topic got surprisingly little attention until quite recently. But I think it’s the most likely option. In short, the Treasury can issue bonds that have no “face value” but pay interest forever. That piece of paper has a lot of actual value since it’s a guarantee of payment forever. Thus people will pay a lot for it. But it has no “face value.” Thus it doesn’t add to the national debt. The debt limit doesn’t cover it. It increases the the government’s obligations but it’s not debt.

 

If this sounds silly, you’re right. It is silly. But debt-limit hostage taking is also silly. And it’s not a wild or unprecedented idea. The Bank of England used to issue them. If you want more details look up “consol bond.” The point is that it’s not a new idea. It’s been done before. And it does seem to satisfy the language of the debt ceiling law.

 

The complication is that you can’t just spring these on the debt markets with no warning. You need at least some period of time to explain how they work, gauge demand, etc. The government would also have to pay some premium because of the novelty and political uncertainty.

 

Four: Simply service the debt and let some government spending go unpaid. Think of this as thunderdome government shutdown. You’ll know it applies to you when your check doesn’t arrive. As I noted yesterday, it’s not even clear the Treasury has the technical ability to pull that off. So who knows how plausible this is? It’s a very messy and destructive approach. But the White House would likely be confident that public pressure would build against Republicans to relent.

 

Click on the link for the full article

 

 

[Fergasun]

There needs to be a deal in 2 to 3 weeks... so let's play "make a deal".  I am annoyed that the GOP loves pulling this hostage garbage when they only have a hand on the reins of government.  When they have the full power of government, they don't cut anything.  It's only when they can blame Democrats for it that they cut.  

 

First of all, I think the easiest and most logical solution is to kick the can to October 2023.  The GOP is already using both the debt ceiling and budget levers.... I am not sure why they are trying to just get 1 year of a debt limit fight.  This dysfunction is not a political winner.  Who knows what Trump would say come 2024 primary season. 

 

Second, I am not sure what constituency they are serving with this.  Only true believers and not the business leg believe this is good stuff.  Business funds the GOP...  way more than the true believers... but we'll all be quiet about that.  

 

I am waiting to see if GOP on the problem solvers reach out and start to waiver.  If I am McConnell, I would take a compromise at $1.6T discretionary (it is an actual cut!) but kick the debt limit to March 2025.  Setup spending caps that increase about 2.5 percent a year.  I think if you are the GOP you take it. 

 

McConnell will have to save McCarthy here if he can't find terms.  Biden should go to the 14th Amendment and challenge the GOP to sue 

[GoCommiesGo]

I’ll preface this with I’m a federal employee. I do not want them to negotiate with the GOP, I want Biden or one of his surrogates to go  on major news networks and explain that the GOP is refusing to pay the budget that was already passed. 
 

They are refusing to pay the debt of the country they already agreed to and are using this one mechanism to hold the entire country hostage. I want the Dems to blast it constantly on every major network they can. I then want Biden to invoke the 14th amendment and give a speech on why he’s doing it, and how the government shall pay its debts. 
 

If they negotiate at all, this is going to repeat itself indefinitely. At some point you have to make a hard choice and not negotiate with the hostage takers. 

[Larry]

I think my "fantasy Presidential speech" is slightly different.  

 

I'd explain that our system of checks and balances gives the Republican House legitimate power to negotiate, to have their input on the budget process.  I'd point out that, for example, next year's federal budget cannot pass without the House literally voting to approve one.  

 

But, I'd point out.  That's not what's happening here.  

 

What's happening here, is the entire Republican Party literally threatening to harm the country, unless the branches of government which they do not control, comply with their demands.  

 

This is literally the definition of terrorism.  Threatening harm to civilians, in order to achieve a political goal that they don't have the votes to pass, on their own.  

 

(And, I'd point out:  If they had the votes, they wouldn't do it.  Because they don't want to own the results of their actions.  They want to make demands and pretend that somebody else did them.)  

 

I would publicly state that there's a matter of principal involved, here.  That I, as President, am perfectly willing to negotiate with an equal branch of government, concerning next year's budget.  But that I will not negotiate with terrorists holding the national economy hostage.  

 

[GoCommiesGo]

@Larry Completely agree with that. They need to put it out there in straightforward terms, keep it short and simple. 
 

If the GOP has a budget goal, that should be dealt with in the budgeting process, not by holding the nation hostage to pay for the already approved budget. 

[Fergasun]

Here is the thing.  I have always thought the national debt is an existenstial crisis and a plan to balance it in the 15 year timeframe is reasonable. The financial markets don't actually seem to care though. In fact, it seems like the financial markets favor US government spending.  

 

I forgot to mention that Manchin and Sinema (or one of them) will be key to navigating this. I I think they would side on the Dems with avoiding default but with the GOP on budget cuts.   I would expect Schumer to start to take up clean debt limit votes within the week.  Would the GOP filibuster so that the Dems need 60 votes?  And can't pass it without 9 GOP Senators?  Maybe they would initially.  A clean debt ceiling not passing the Senate by June 1 would certainly be something that should cause Biden to invoke the 14th Amendment.  The GOP is just following the playbook they used with Obama.  They love to push the country to the brink and blame Dems for it.  

[The Evil Genius]

And I'd hope Biden used the 14th to show how the debt ceiling in unconstitutional. 

 

The debt from the budget was already approved. And the 14th says,

 

Quote

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

 

Edited May 10, 2023 by The Evil Genius

[GoCommiesGo]

11 minutes ago, Fergasun said:

The GOP is just following the playbook they used with Obama.  They love to push the country to the brink and blame Dems for it.  

This is precisely why they can’t negotiate, if you keep allowing them to dictate and bypass the budget process they will always do it. 
 

Put a clean debt ceiling bill out for  vote. Get people on the record for blowing up the country, invoke the 14th and let them fight against the economy in court.
 

Ideally you can remove the entire stupid mechanism totally and allow the budget process to be what it should be. But, that’s a pipe dream. 

[bearrock]

Saw an interview where the GOP voter didn't want to default, cut military spending, or cut medicare or SS but wanted US to stop "printing money".  I guess that leaves raising taxes?

[Larry]

42 minutes ago, Fergasun said:

I have always thought the national debt is an existenstial crisis and a plan to balance it in the 15 year timeframe is reasonable.

 

I'm not even sure that balancing the budget is desirable.  

 

Although yes, we need to be improving things.  

 

Now, the Republican demand that it:
1)  Must be balanced
2)  Within 10 years
3)  Entirely through spending cuts
4)  By somebody else.  The GOP will not own the cuts they're demanding

 

That's a load of manure.  

 

 

[Larry]

34 minutes ago, bearrock said:

Saw an interview where the GOP voter didn't want to default, cut military spending, or cut medicare or SS but wanted US to stop "printing money".  I guess that leaves raising taxes?

 

Oh, the world is full of people who are strongly in support of magic.  .  

 

(On both sides).  

[MartinC]

2 hours ago, Fergasun said:

Here is the thing.  I have always thought the national debt is an existenstial crisis and a plan to balance it in the 15 year timeframe is reasonable. The financial markets don't actually seem to care though. In fact, it seems like the financial markets favor US government spending.  

 

National debt and the budget defect is not necessarily a bad thing - it can actually be positive. Provided you can keep servicing it without it causing significant inflation (and current higher than norm inflation rates have little to do with Government debt levels). Its also worth noting that the US Government owes around 25% of its debt to ... itself.

[Fergasun]

@GoCommiesGo

It's not entirely true they are bypassing budget process.  Their debt ceiling deal would institute FY24 spending caps, thus providing appropriators spending levels, which are at least a target for FY24 appropriations, It's just, they want to do the whole thing again in 1 year (March 2024) with the debt ceiling.  This really is this House's chance to do something as debt limit/budget fights are not popular in election years.  So I don't see them actually getting 1 year on the debt limit. 

 

The Dems have already won a huge concession by exempting/protecting Social Security and Medicare/caid.  If I were Dems I would push debt ceiling out to October 1, 2024.  Link debt ceiling to the budget process.  

 

Again... the GOP rolled the budget back to $1.47T.  The current FY23 budget is $1.65T. 

 

So, let's say inflation is 8 percent.  That FY22 of $1.47T goes to $1.54T in  FY23 and $1.66T in FY24.  But the GOP want to act like inflation is only 1 percent moving forward... that is how they will limit.  On the flip side it's the jump from $1.3T in FY19 to $1.6T in FY20 that the House is pushing against.  In reality they are arguing that Trump pushed the budget way beyond what they liked for the pandemic.... without loudly saying it. 

 

If you assume 5 percent inflation from the $1.3T in FY19 than you still get a spending level of $1.65T for the FY24 budget. Assuming 2.5 percent inflation through those years would put us at $1.47T in FY24. 

 

So Republicans want to deny that inflation exists (I think they argue federal spending causes inflation).  I don't know what spending exploded related to COVID.  Was it really $300B?  I think $1.6T with caps at 2  percent... you take that deal if you are McConnell/McCarthy.  Because we already know future Congresses will move a bit on the caps.  

 

Any deal should preclude a shutdown and a debt limit again... until 1 October 2024. 

 

It will be painful for agencies..  but it is what it is as no one wants to go after mandatory spending.