6 ms·

US hits debt ceiling, prompting Treasury to take extraordinary measures

20 points by zinekeller 4y ago

newaccount2021 4y ago
[dead]
neilwilson 4y ago
It’s way past time this went to court to sort out. Congress has issued spending instructions, tax instructions and bond issuing instructions. They don’t add up. Which means the balancing figure should be left at the Federal Reserve. It needs to go to court to decide whether the Federal Reserve has the power to say “no” to a Congress mandated payment or whether it just has to suck it up and pay it anyway.
- garciasn 4y ago
  Unfortunately Congress and only Congress has final budgetary spending authorization abilities via the Constitution. There is little that can be done here while we are in a deadlocked political situation in this country.
  - dpkirchner 4y ago
    It's ok that congress has that authority, however it should be implied that when they grant spending authority that the treasury may raise money to pay for what Congress granted.
    - neilwilson 4y ago
      Money isn't raised. It just appears as a function of the way banks account for transactions. That's the key misunderstanding here. There are no silver coins, just a bunch of promises.
  - gizmo686 4y ago
    Congress passed laws authorizing the spending. If they don't want that spending, they can pass new laws repealing it. Also the same Constitution that grants Congress budgetary authority also provides that: > 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. The debt ceiling is unconstitutional as it would cause the Government to default on lawfully authorized debts, in contradiction to the 14th amendment.
    - zinekeller 4y ago
      I heard that Biden's counsel might actually try to file a case against the legislative branch (as an institution, not specific people) about the debt ceiling (instead of negotiating with Republicans), which would be popcorn time.
- voxic11 4y ago
  Why do you say the balancing should be left to the Federal Reserve? If we are going to have executive branch institutions rectify Congresses instructions by disregarding one of them what is your principled reason for saying its the Federal Reserve's responsibility to fix the shortfall by issuing more debt in violation of the law instead of say the IRS's responsibility to fix the shortfall by collecting more taxes in violation of the law?
  - neilwilson 4y ago
    It's not a principled reason. It is how bank accounting works. If you put the numbers authorised by Congress into the accounting then the result will be a carried forward balancing amount on the face of the Federal Reserve balance sheet. Since the Fed is mandated by law to be agent of Treasury and to follow the Treasury Fiscal manual they have no legal right to say no. And even if there was a legal right then Congress setting an unbalanced budget repeals it under the doctrine of implied repeal. The reason why you can't write checks with gay abandon is because the bank can say no, and if you sue for breach of contract the courts will back the bank. If the Fed tries that with Treasury the courts will back the Treasury. IRS can collect no more taxes by law. The Treasury can issue no more bonds by law and the Treasury cannot avoid spending what it is required to spend by law.
    - voxic11 4y ago
      The Treasury could simply mint some trillion dollar coins, that is actually something they are authorized by law to do.
      - neilwilson 4y ago
        It can mint coins with 1tn on the front. Whether the Fed has to give them $1tn of bank deposits for that coin is a different matter. Once you have an unbalanced budget of this type, then Treasury dollars become like Canadian dollars. They stop having a 1-to-1 relationship with Fed dollars. Banks have the power of discount, and maintaining a discount between the Fed and the Treasury is how monetary policy is alleged to work.
lesuorac 4y ago
> She said the measures would expire on June 5 Probably don't tell lawmakers they need to urgently act and also tell them they have 6 months. White House also seems to have the wrong messaging here. Should really be talking about how Trump added 6.7T in 4 years which is the complete opposite of spending reductions; republicans (as a party) does not legitimately care about reducing the debt.
- amluto 4y ago
  The most recent president to seriously control (and even eliminate!) the deficit was Clinton, who was a Democrat. One can quite reasonably debate what the government deficit should be, but the idea that Democrats are big spenders and the Republicans are big savers is ludicrous. The debt limit, of course, is terrible policy.
- dragontamer 4y ago
  Politically speaking, one thing pisses me off the most. > Trump added 6.7T in 4 years That debt was "paid for with tax cuts". And a lot of Republicans still think that cutting taxes is the best way to reduce the debt. I can almost assure you that we're going to hear more about Laffer Curves and tax cuts to solve this debt issue as the debate moves on. Its been over 20 years, maybe over 30 years now... of this crappy argument, pretending that tax cuts improve our financial situation.
  - lesuorac 4y ago
    Yeah funny thing about the Laffer Curve is that the optimal rate is actually rather high ~70%. https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve
amluto 4y ago
A few weeks ago, a group of far right Republicans extracted concessions out of McCarthy. I imagine a group of Democrats could have helped vote McCarthy in with a much milder set of concessions. (Heck, a small group of Democrats could still join McCarthy to survive a re-vote and change the rules back.) My guess is that the Democrats like it when the Republicans look bad even if they eventual outcome is a loss for the country as a whole.
- lostlogin 4y ago
  Ah, so it’s the Democrats fault that the Republican fiasco rolls on?
  - deleted 4y ago
    [deleted]
- lesuorac 4y ago
  I mean for the vast majority of the votes the Democrats had the lead [1]. It seems much easier for 6 Republicans to ask for some pork projects or other concessions instead of 15 Democrats. [1]: https://en.wikipedia.org/wiki/2023_Speaker_of_the_United_States_House_of_Representatives_election#Election_of_the_speaker https://en.wikipedia.org/wiki/2023_Speaker_of_the_United_Sta...
  - amluto 4y ago
    Huh, interesting. I stand corrected.
- kaczordon 4y ago
  Far right is a pretty loaded term. I’m actually really happy that they extracted terms from McCarthy. Everyone who spent time slamming these 20 Republicans should publicly apologize and write them a thank you card because they got more victories for their constituents than most politicians ever do. Here’s what they got: - Jeffersonian Motion to vacate the chair. This allows a single person to make the motion to remove the speaker if he goes back on his word or policy agenda. - A "Church" style committee: this allows us to look into the weaponization of orgs like the FBI against the American people. - Term Limit Vote - Single Subject Bills(that can't be loaded with irrelevant nonsense - Texas Border Plan - A budget that stops an increase in the debt ceiling and holds senate accountable. - Ending emergency funding and all COVID mandates and funding. - 72 Hours to read a bill. These all sound like objectively good things regardless of your political orientation.
exabrial 4y ago
Step 1) Stop writing blank checks for dumb crap. A certain political party in the US has had unchecked power and lead us down this path.
- nso95 4y ago
  You mean both parties
- klyrs 4y ago
  Our veterans are "dumb crap" now? When I was growing up, that kind of talk would get a hippie's face smashed in. Wild times.
  - exabrial 4y ago
    I think you're attacking a scarecrow. There are plenty of dumb things the fed government incinerates money on. Caring for the people that _it itself_ put in harms way is not one of them.
    - klyrs 4y ago
      However, they do represent a significant fraction of the government's budget and they are directly impacted by government shutdowns. That Republicans continue to play childish games regardless of their impact on veterans is shameful.
  - ss108 4y ago
    I believe Trump mentioned 911 conspiracies a couple times and Republican voters approved of it. There are no mores anymore.
- ss108 4y ago
  Not sure which political party you mean, given they've traded power multiple times over the course of the past 35 years.
jiveturkey 4y ago
> As part of the debt issuance suspension period, the agency will begin to sell existing investments and suspending reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Also, it will suspend the reinvestment of a government securities fund of the Federal Employees Retirement System Thrift Savings Plan. ah! ye olde 'sell the motorcycle on craigslist' and 'cancel the cable subscription' technique!
snake_plissken 4y ago
amluto (https://news.ycombinator.com/item?id=34442824 https://news.ycombinator.com/item?id=34442824) already made the good points and I have been pondering the same thing. What if the Dems got their game theories wrong: they decided making the Repubs look disjointed and in disarray was a better outcome than just voting McCarthy in without all the concessions. My best guess was they were really hoping to get a few defections to get Hakeem Jeffries. But what will be the consequences of the concessions and new rules? Also one thing I still don't understand is, can anyone call the snap vote to oust the speaker? Or does that rule only allow Republicans to call that vote?
- johnny22 4y ago
  only those of the majority party can is how the rule goes.
- skinnymuch 4y ago
  Repubs could have gotten their game theory wrong. It’s likely both sides are doing the wrong thing because that’s what both sides and the status quo always do.

20 points by zinekeller 4y ago

newaccount2021 4y ago

[dead]

It’s way past time this went to court to sort out. Congress has issued spending instructions, tax instructions and bond issuing instructions. They don’t add up. Which means the balancing figure should be left at the Federal Reserve. It needs to go to court to decide whether the Federal Reserve has the power to say “no” to a Congress mandated payment or whether it just has to suck it up and pay it anyway.

garciasn 4y ago
Unfortunately Congress and only Congress has final budgetary spending authorization abilities via the Constitution. There is little that can be done here while we are in a deadlocked political situation in this country.
- dpkirchner 4y ago
  It's ok that congress has that authority, however it should be implied that when they grant spending authority that the treasury may raise money to pay for what Congress granted.
  - neilwilson 4y ago
    Money isn't raised. It just appears as a function of the way banks account for transactions. That's the key misunderstanding here. There are no silver coins, just a bunch of promises.
- gizmo686 4y ago
  Congress passed laws authorizing the spending. If they don't want that spending, they can pass new laws repealing it. Also the same Constitution that grants Congress budgetary authority also provides that: > 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. The debt ceiling is unconstitutional as it would cause the Government to default on lawfully authorized debts, in contradiction to the 14th amendment.
  - zinekeller 4y ago
    I heard that Biden's counsel might actually try to file a case against the legislative branch (as an institution, not specific people) about the debt ceiling (instead of negotiating with Republicans), which would be popcorn time.
voxic11 4y ago
Why do you say the balancing should be left to the Federal Reserve? If we are going to have executive branch institutions rectify Congresses instructions by disregarding one of them what is your principled reason for saying its the Federal Reserve's responsibility to fix the shortfall by issuing more debt in violation of the law instead of say the IRS's responsibility to fix the shortfall by collecting more taxes in violation of the law?
- neilwilson 4y ago
  It's not a principled reason. It is how bank accounting works. If you put the numbers authorised by Congress into the accounting then the result will be a carried forward balancing amount on the face of the Federal Reserve balance sheet. Since the Fed is mandated by law to be agent of Treasury and to follow the Treasury Fiscal manual they have no legal right to say no. And even if there was a legal right then Congress setting an unbalanced budget repeals it under the doctrine of implied repeal. The reason why you can't write checks with gay abandon is because the bank can say no, and if you sue for breach of contract the courts will back the bank. If the Fed tries that with Treasury the courts will back the Treasury. IRS can collect no more taxes by law. The Treasury can issue no more bonds by law and the Treasury cannot avoid spending what it is required to spend by law.
  - voxic11 4y ago
    The Treasury could simply mint some trillion dollar coins, that is actually something they are authorized by law to do.
    - neilwilson 4y ago
      It can mint coins with 1tn on the front. Whether the Fed has to give them $1tn of bank deposits for that coin is a different matter. Once you have an unbalanced budget of this type, then Treasury dollars become like Canadian dollars. They stop having a 1-to-1 relationship with Fed dollars. Banks have the power of discount, and maintaining a discount between the Fed and the Treasury is how monetary policy is alleged to work.

lesuorac 4y ago

> She said the measures would expire on June 5 Probably don't tell lawmakers they need to urgently act and also tell them they have 6 months. White House also seems to have the wrong messaging here. Should really be talking about how Trump added 6.7T in 4 years which is the complete opposite of spending reductions; republicans (as a party) does not legitimately care about reducing the debt.

amluto 4y ago
The most recent president to seriously control (and even eliminate!) the deficit was Clinton, who was a Democrat. One can quite reasonably debate what the government deficit should be, but the idea that Democrats are big spenders and the Republicans are big savers is ludicrous. The debt limit, of course, is terrible policy.
dragontamer 4y ago
Politically speaking, one thing pisses me off the most. > Trump added 6.7T in 4 years That debt was "paid for with tax cuts". And a lot of Republicans still think that cutting taxes is the best way to reduce the debt. I can almost assure you that we're going to hear more about Laffer Curves and tax cuts to solve this debt issue as the debate moves on. Its been over 20 years, maybe over 30 years now... of this crappy argument, pretending that tax cuts improve our financial situation.
- lesuorac 4y ago
  Yeah funny thing about the Laffer Curve is that the optimal rate is actually rather high ~70%. https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve

amluto 4y ago

A few weeks ago, a group of far right Republicans extracted concessions out of McCarthy. I imagine a group of Democrats could have helped vote McCarthy in with a much milder set of concessions. (Heck, a small group of Democrats could still join McCarthy to survive a re-vote and change the rules back.) My guess is that the Democrats like it when the Republicans look bad even if they eventual outcome is a loss for the country as a whole.

lostlogin 4y ago
Ah, so it’s the Democrats fault that the Republican fiasco rolls on?
- deleted 4y ago
  [deleted]
lesuorac 4y ago
I mean for the vast majority of the votes the Democrats had the lead [1]. It seems much easier for 6 Republicans to ask for some pork projects or other concessions instead of 15 Democrats. [1]: https://en.wikipedia.org/wiki/2023_Speaker_of_the_United_States_House_of_Representatives_election#Election_of_the_speaker https://en.wikipedia.org/wiki/2023_Speaker_of_the_United_Sta...
- amluto 4y ago
  Huh, interesting. I stand corrected.
kaczordon 4y ago
Far right is a pretty loaded term. I’m actually really happy that they extracted terms from McCarthy. Everyone who spent time slamming these 20 Republicans should publicly apologize and write them a thank you card because they got more victories for their constituents than most politicians ever do. Here’s what they got: - Jeffersonian Motion to vacate the chair. This allows a single person to make the motion to remove the speaker if he goes back on his word or policy agenda. - A "Church" style committee: this allows us to look into the weaponization of orgs like the FBI against the American people. - Term Limit Vote - Single Subject Bills(that can't be loaded with irrelevant nonsense - Texas Border Plan - A budget that stops an increase in the debt ceiling and holds senate accountable. - Ending emergency funding and all COVID mandates and funding. - 72 Hours to read a bill. These all sound like objectively good things regardless of your political orientation.

exabrial 4y ago

Step 1) Stop writing blank checks for dumb crap. A certain political party in the US has had unchecked power and lead us down this path.

nso95 4y ago
You mean both parties
klyrs 4y ago
Our veterans are "dumb crap" now? When I was growing up, that kind of talk would get a hippie's face smashed in. Wild times.
- exabrial 4y ago
  I think you're attacking a scarecrow. There are plenty of dumb things the fed government incinerates money on. Caring for the people that _it itself_ put in harms way is not one of them.
  - klyrs 4y ago
    However, they do represent a significant fraction of the government's budget and they are directly impacted by government shutdowns. That Republicans continue to play childish games regardless of their impact on veterans is shameful.
- ss108 4y ago
  I believe Trump mentioned 911 conspiracies a couple times and Republican voters approved of it. There are no mores anymore.
ss108 4y ago
Not sure which political party you mean, given they've traded power multiple times over the course of the past 35 years.

jiveturkey 4y ago

> As part of the debt issuance suspension period, the agency will begin to sell existing investments and suspending reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Also, it will suspend the reinvestment of a government securities fund of the Federal Employees Retirement System Thrift Savings Plan. ah! ye olde 'sell the motorcycle on craigslist' and 'cancel the cable subscription' technique!

snake_plissken 4y ago

amluto (https://news.ycombinator.com/item?id=34442824 https://news.ycombinator.com/item?id=34442824) already made the good points and I have been pondering the same thing. What if the Dems got their game theories wrong: they decided making the Repubs look disjointed and in disarray was a better outcome than just voting McCarthy in without all the concessions. My best guess was they were really hoping to get a few defections to get Hakeem Jeffries. But what will be the consequences of the concessions and new rules? Also one thing I still don't understand is, can anyone call the snap vote to oust the speaker? Or does that rule only allow Republicans to call that vote?

johnny22 4y ago
only those of the majority party can is how the rule goes.
skinnymuch 4y ago
Repubs could have gotten their game theory wrong. It’s likely both sides are doing the wrong thing because that’s what both sides and the status quo always do.