Tuesday, August 1, 2017

Is Mick Mulvaney "The Most Dangerous Man In Washington"?

This claimed by Catherine Rampell on the Washington Post ed page today, with a column entitled what is in quotes in the title of this post, with the answer being caveated as only being true after "the tweeter-in-chief," clearly the most dangerous man in Washington.  Mulvaney is the Office of Management and Budget (OMB) chief who has been questioning the need to raise the debt ceiling and voted against doing so on a regular basis when he was in Congress.  While Treasury Secretary Mnuchin wants a "clean" increase in the debt ceiling, Mulvaney has been saying since at least May that such an increase must be accompanied by "crippling spending cuts," unlikely to be accepted by Congress, thus threatening to bring a default.

On Sunday on Jake Tapper he sided with the declaration by Trump that nothing should be passed by the Congress until a Repeal and Replace of Obamacare is passed.  Given that this  does not look very likely at all, such a position also clearly signals a lack of concern about what might happen if the debt ceiling is not raised in time, which is probably mid-October at the very latest.

In an earlier discussion on this, some have argued that this might not be any worse than one of those "government shutdowns" we have previously seen, which did not amount to much. Social Security checks went out, the military kept operating, with aside from some bureaucrats in Washington being told to stay home the main thing the public saw was temporary closures of national parks.  In contrast, Rampell argues that a failure to raise the debt ceiling would be followed by "a constitutional crisis, political and global financial crisis."

As it is, during the 16 day shutdown in 2014, according to  OMB stats, about $2.5 billion was not paid to furloughed workers, although then paid later after the shutdown was over.  However, something is off here, as that is equal to about 25 days of a $3.7 trillion overall federal budget.  It is unclear how such programs as Social Security and Medicare were being paid, much less the interest on the national debt under these circumstances. Perhaps those 16 days were timed just right to catch two paychecks covering a 30 day period, which still does not quite cover things.  Maybe this wonder can be repeated, but offhand I am skeptical, even if  Rampell is overstating things.

Barkley Rosser


2slugbaits said...

I'm not quite following you. The 2014 shut down was due to Congress not authorizing a budget. Keep in mind that not all government salaries come from appropriated funds...most do, but not all. Also, the shut down only applied to FY2015 programs. For example, I had to work because I was working on a DoD project that was funded using prior year monies. Any unexpired authorizations from previous fiscal years were not touched. Also...and this is tricky...authorizations are not the same as disbursements. The 2014 shut down was all about new authorizations, which meant not only that the government couldn't pay federal workers from FY2015 projects, it also meant the government could not "obligate" FY2015 authorizations to new contracts.

Failing to increase the debt ceiling is a very different problem. It means the Treasury cannot issue any new debt that would breach the ceiling, so Treasury would be operating entirely out of on hand cash balances from revenue streams. What people often miss is that it also means Treasury cannot take FICA payments and apply them towards the Social Security Trust Fund because those SS bonds are part of the public debt, although not part of the debt held by the public. Basically the Treasury takes the FICA revenues and pays ongoing expenses without crediting the Trust Fund. In other words, the Treasury keeps a set of offline books and issues bonds to the Trust Fund after the debt ceiling is lifted. But this may or may not be entirely legal...I don't think anyone (at least not yet) has wanted to press the issue. But with the Trumpsters in charge, who knows.

rosserjb@jmu.edu said...


I agree these are different. I was trying to be a step ahead of various Anonymous people here who claimed on a previous thread on the debt ceiling I had that there is no difference between a debt ceiling crisis and a govt shutdown. So I went to check what sorts of money were involved in the govt shutdown and posted the numbers here, although they do not seem to make any sense. I confess I am not sure what is going on with parts of this, with supposedly way too much being saved during the govt shutdown.

I think that some of those matters you mention are what are involved in the temporary fixes that the Treasury uses to hold off the debt ceiling moment, now being reported to be Sept. 29, with only 11 days of Congress being in session supposedly between now and then. As it is, it was March, not May, when we supposedly passed the moment when the ceiling should have hit, but it has been hit. But I confess I do not know the details of what the Treasury does to hold it off, but it is clear that these tricks have their limits, and apparently Sept. 29 is now that moment.

Anonymous said...

The prior anon comment was that the difference is non-payment of public debt to creditors on time and in the amounts due and a gov't shutdown... those being two entirely different things, although both predicated on leverage of 'debt ceiling' limits. Don't conflate them.

rosserjb@jmu.edu said...

Sure anon,

But the problem is that the supposed amount of money not spent on a portion of government salaries during the shutdown exceeds all payments by the US government, including payments on debt instruments as well as transfers such as Social Security and Medicare, with none of those shut off. So something is off on the numbers somewhere, but I am not sure where. I am fully aware of your point, which is why I was saying the numbers were off. The temporarily halted fed salary payments should have been far less than 16 days of total fed government spending, which includes all those other items not shut off, but the claimed $2.6 billion is more like about 25 days of total govt spending, including all that stuff not cut off. This does not add up, but I do not have the explanation why, and your added comment provides a big fat zero in terms of figuring it out, pretty much par for the course for you, I might add.