It looks like Sen. Chuck Schumer (D-NY) is bungling the matter of raising (or suspending) the debt ceiling, coming due in mid-October supposedly. He could have tied it to reconciliation in August, but decided not to, intent on getting GOPster on board with participating in doing it. But Sen. McConnell (R-KY) is having none of it, and even though Schumer thought he had them by tying it to a continuing resolution to keep the government going past Sept. 30, well, McConnell is not going along, nor are any of his colleagues, with maybe one exception, Sen. Kennedy of Louisiana who wants money for dealing with the effects of Hurricane Ida. Anyway, it looks like McConnell is just fine with some economy-damaging crash, which may help GOP next year.
I really do not see why Schumer did not see this one coming. I think he thinks a year from now people will be remembering it was the naughty GOP that crashed the economy rather than the Dems doing so by mismanaging things. People are not that smart. He needs to keep the economy going, and we know the voters do not give a phoo about deficits or the debt, unless they see the economy not doing well, which a GOP crashing of the ceiling raise could bring about. He needs to bite the bullet and get this into the Reconciliation, although apparently now it will take some time for reasons I do not understand, and we may get a short government shutdown before it can be done. Bungling on this one. GOP now totally irresponsible and nihilistic.
Barkley Rosser
7 comments:
Why do the Dems even need to worry? They should just call McConnell’s bluff. The Fed these days routinely comes up with emergency authorizations and purchases Treasuries when the market shows signs of distress. Why can’t they just do the same thing here if the republicans threaten to blow up the market? And if they don’t, how will the Fed staff get a VP spot at Goldman after government “service”? The revolving door’s there for a reason. This is the big test. I’m sure they’ll rise to the occasion.
That the Fed can buy Treasuries does not solve this. The problem is that Treasury needs to keep issuing new Treasuries in order to do fresh borrowing to pay the bills. If cannot do that, bills do not get paid, at least not all of them. If they cannot be issued, the Fed being able to buy them does not help.
Agree redo the reconciliation, but perhaps he worries it may not pass again given the splintering Dems. It is the economy, stupid, as they used to say.
debt ceiling might be real, as barkley rosser observes: the 'legal authority' to sell bonds to the fed res balance sheet comes from legislation. congress doing its 'powers' and all.
reconciliation is flim-flam. how sensible is it to shove something that is almost real in to flim flam?
2022 no problem, we will still be counting allies stuck in kabul.
and film at 11 from del rio.
If they cannot be issued, the Fed being able to buy them does not help.
That's true, but there might be a convoluted way around that problem. And I do mean convoluted. The Fed could buy bonds from the general public and then sell those same bonds back to the Treasury at a steep discount...say a penny on the dollar. That would allow the Treasury to extinguish the debt on the 99 cents, which would create headspace for issuing additional bonds back to the debt limit. In effect it would be monetizing the debt. Not the best strategy by any means and a dangerous approach, but I think it would work in terms of the accounting. Personally, I think the debt limit law is unconstitutional because it clearly violates the 14th Amendment. I'd like to see it challenged in court so that it could be buried once and for all.
Anon,
I agree this should have been in the reconciliation package. Not having it there was Schumer's bungle. Apparently now it takes a bunch of time to put back in, which they may have to do.
paddy,
It is only US citizens and maybe green card holders Americans will be counting in 2022. Others will be forgotten, oh except for maybe on Fox Newws. Probably at least all the Americans will be out who want out, if they are in fact not already all out (they have been leaving again, but no news stories on it).
2slug,
Interesting. There are some other tricks possible, like the old make a trillion dollar coin. I am sure Janet Yellen is studying all these options and probably some we are not even thinking of. She is plenty smart.
2slug - yes, this sort of thing was what I was trying, unsuccessfully obviously, to get at. The Fed has repeatedly contrived ways around supposed limits in order to keep markets afloat. There is no more important market than this one and I’m confident they’ll be able to do so in this case above all others. The alternative is simply too grim.
Politically, rewarding Republicans’ constant hypocrisy and hostage taking is neither sustainable nor responsible. They should tell McConnell to shove it and rely on the (plenty smart) Yellen. I wouldn’t be surprised if she’s getting a covert assist from republican financiers who might rather not see their fortunes liquidated in service of a fleeting political advantage for McConnell. They might be both letting him know that and thinking about work arounds themselves. After all, market acceptance of whatever instrument is proposed will be needed and they might as well think about the type that would be best for them. I’m not sure I’d accord Trump’s Supreme Court with equivalent perspicacity if given the chance to weigh in, though.
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