By Brendan Loy
The “debate” between Democrats and the Anti-Arithmetic Right over whether or not the nation should be economically ruined now seemingly boils down to three options:
1) John Boehner’s utterly disastrous plan, which I hereby dub the Omnibus Kick-The-Can-Down-The-Road Act of 2011, to pass a short-term debt ceiling increase, then re-run this entire charade in the middle of an election year, when it will surely be much easier to put aside naked partisanship and reach a mutually acceptable bipartisan deal (!?!?!) … really, we should call this the “Make Obama Veto A Debt Ceiling Bill So He Can’t Blame Us For The Crisis We Caused” plan, since that’s all it’s intended to accomplish;
2) Harry’s Reid’s plan to cut $2.7 trillion in spending without any revenue increases, which is such a complete capitulation to the Republicans’ core demand that it will undoubtedly be rejected by hardline Republicans and Tea Partiers, who wouldn’t know a favorable deal if it smacked them in the face and dumped tea on them while waving a Gadsden flag and reading aloud the collected works of Ayn Rand;
3) Default. Or technical default. Or “semi-default.” Or whatever you want to call it if the United States government is unable to make payments required by law — probably not including debt interest or principal, though that can’t be guaranteed because it depends in part on how the markets react, which cannot be confidently predicted because this is a completely unprecedented circumstance brought about by fuzzy math and right-wing nutters — and is forced to operate on a daily (not monthly! not yearly!) cashflow basis and shut down 40+ percent of its operations instantly, including a wide variety of services that everyone regards as essential.
Regarding option #3, it’s not clear that next Tuesday, August 2, is the actual date on which this would happen, as we’ve been hearing for months. That was Treasury’s estimate back in May of when the money would run out, but we may have an extra week or so:
In a note published Friday, the Barclays Interest Rates Research team wrote that “the date on which the Treasury will run out of cash to pay its obligations might not be August 2; it might be around August 10 instead.”
Why the change? The note explains that previous projections showed the Treasury running out of money on the morning of Wednesday, August 3. On that day, it was predicted, the Treasury would need to spend $32 billion, including $22 billion in Social Security payments — and it was only projected to have $30 billion at its disposal.
That projection was made on July 13. But since then, the researchers say, the Treasury has taken in about $14 billion more than expected, and paid out about $1 billion less than expected. Hence, the deadline date might actually be August 10, a week later than previously believed.
Other reports suggest August 9 might be the “real” deadline. Either way, August 2 is Treasury’s story, and it’s sticking to it, presumably for the rather obvious reason that if you tell Congress that it has an additional week to dither, delay, grandstand, posture and bloviate, Congress will proceed to dither, delay, grandstand, posture and bloviate for an additional week. I imagine Treasury will announce this “extra week” at the moment it becomes clear Congress is going to miss the August 2 deadline, and not a second sooner.
Anyway, I have a question, and it’s an honest one — I’m not trying to make a rhetorical, partisan point here; I really don’t know the answer to this. But it’s been perplexing me for a while now. The debt ceiling is a federal law saying Treasury can’t borrow more than X amount. But there are also lots of other federal laws saying Treasury must spend money on various things — paying prison guards, funding air traffic control systems, sending out Social Security checks, etc. If the money runs out, and Treasury can’t borrow any more money because of the debt ceiling, then it can’t do some of the spending required by law. So, if the debt ceiling isn’t raised, Treasury will be required (by arithmetic) to violate federal law, one way or another. Why does everyone assume that Treasury would necessarily violate the various federal laws requiring it to spend money? Why is that any more justifiable than violating the debt ceiling law? They’re all federal laws, presumably of equal weight, right? Mind you, I’m not talking about the 14th Amendment argument, which I believe is bunk. Rather, I’m merely talking about conflicts among federal statutes. It’s not like there’s 40+ percent of federal spending that Treasury can just discretionarily choose, without violating the law, to stop overnight. (Or is there?!?) I’m not advocating one course of action or another, I’m just saying I don’t understand why the debt ceiling is presumed to take priority over the countless other federal laws that I imagine Treasury would necessarily violate by failing to make required payments (of various sorts; I’m not just talking about debt interest payments, I’m talking about everything Treasury does, all of it pursuant to laws passed by Congress). What am I missing here?
P.S. For the record, among the three options listed above, my order of preference is: #2, then #3, then #1. Yeah — it’s a close call, but ultimately, I’d rather risk the consequences of a brief semi-default (and hope those consequences finally set the Republicans straight before things get too bad) than go through this nightmare again next spring. Partly because I suspect the market consequences of such a punt would be pretty bad in and of themselves. And partly because, at some point, you have to stop giving ever more power to economic hostage-takers. They cannot be allowed to pull this stunt again so soon, and certainly not in the midst of a presidential election, when everyone will have more motive than ever to be intransigent and inflexible. Really, it’s insane that anybody is even proposing such a ridiculous option. But then again, this whole situation is insane, so I guess I shouldn’t be surprised.
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