The Debt Ceiling, Plan B, and the Mother of All Impasses

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Reuters is reporting that Treasury Secretary Timothy Geithner is weighing options on how to manage the nation’s money if the debt ceiling isn’t raised.

I guess it’s no secret now, huh? Except the article doesn’t say he has a plan, just is weighing options, and the options are all options I’ve seen discussed in public here and there. According to Reuters, here are the options:

  • Whether the administration can delay payments to try to manage cash flows after August 2
  • If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt
  • Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments.

Matt Yeglesias says that there are questions about the legality of all of these options, but of course not paying debts isn’t exactly aboveboard, either. “All the federal government’s spending obligations are spelled out in appropriations bills or laws providing for mandatory spending,” Matt says.

So, in other words, if the debt ceiling isn’t raised the Treasury Department will be walking on questionable legal grounds no matter what it does.

They’re looking at the constitutional option, they’re looking at old memos about payment prioritization, they’re looking at the attitude of the New York Fed, etc. Reuters portrays this as somewhat at odds with the fact that “Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money.” But the right way to understand this is that Geithner really doesn’t have any great tricks up his sleeve. Obviously, if Congress doesn’t do the responsible thing, something or other will happen. The U.S. Treasury won’t just vanish into a puff of smoke. But anything they do will be legally controversial and probably damaging to American credit.

And yes, already a Republican congressman is saying that if the White House goes with the 14th Amendment option, the President should be impeached.

I’m seeing conflicting stories about what might possibly be on the table as we go to the wire. I just hope that whatever is given away can be taken back by a future Democratically controlled Congress.

Update: Joseph Stiglitz —

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government. Alas, that has not been the case. On the contrary, a resurgence of right-wing economics, driven by ideology and special interests, once again threatens the global economy—or at least the economies of Europe and North America, where these ideas continue to flourish. . . .

. . . Do we really need another costly experiment with ideas that have repeatedly failed? We shouldn’t, but increasingly it appears that we will have to endure another one nonetheless. A failure of either Europe or the United States to return to robust growth would be bad for the global economy. The failure of both would be disastrous—even if the major emerging-market countries have attained self-sustaining growth. Unfortunately, unless wiser heads prevail, that is the way the world is heading.

21 thoughts on “The Debt Ceiling, Plan B, and the Mother of All Impasses”

  1. I can’t see acting on the 14th amendment (so to speak) as a high crime or misdemeanor, but have read that what constitutes an impeachable crime is what Congress decides it is (remember President Clinton). This surely seems to be the Republicans counter to the President appearing to stand up to them the other day. (Even though he now appears to be ready to throw the rest of us under the bus, again).
    A big game of poker.

  3. The repugs have done such a lovely job of dragging our country through the mud with their starting wars under false pretenses, kidnapping and torturing..why would their adding to that list the fact of being a deadbeat nation who refuses to honor it’s financial obligations bring any more shame than they already have? Essentially what’s happening is the Repugs are stiffing those people who put their trust in the full faith and honor of the American people…They got their war in Iraq and now they don’t want to pay for it.

  4. From Keynes to catfood in about 80 years!

    “I just hope that whatever is given away can be taken back by a future Democratically controlled Congress.”

    I think, like no increases in taxes on the wealthy or corporations, that any changes made will likely be permanent – barring any paradigm shift, like a 2nd (or 3rd) Great Depression, or some great awakening amonst the people in this “Idiocracy.”

    I’m waiting to see what’ll happen in the next few days. Like I said on the earlier post, I hope this is some example of 11th Dimensional chess, or political jujitsu – but I have no way of knowing since if he has those, he’s been keeping them close to the vest.

    I think he should say, “You have a couple of days to make a deal. After that, I’m going to use my Constitutional Option via the 14th Amendment to pay our bills. I can’t let the US default on its debt, and throw our own and the worlds economy into chaos and new recessions or depressions. I believe this is perfectly legal, and I’m willing to face lthe usual ludicrous impeachment charges from the Repbulicans for trying to save the country and the world from economic turmoil. You want to try to impeach me? Make your case! Our debts are paid. Next!”

    Impeachment could make everything clearer to the stenographers in the MSM, and the non-30% knuckledraggers, and he might get a 2nd term, and a Democratic House and Senate if the Republicans DO try to impeach. Impeachment hearings might be the best thing that happened to country in decades. There is no, ZERO, chance that he will be impeached by the Senate, so, if the Republicans want to play one-person Kabuki, go right ahead.

    This may well be the most critical time in our lifetimes regarding this nations future.

  5. Since the Republicans are so obsessed with the enumerated powers of Congress I’ve been studying Article I Section 8 lately, and I’m coming to feel more and more that these are not just powers but responsibilities. I mean, “To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions” doesn’t sound optional to me.

    So, first off, “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States…” Based on that, I’m wondering if you could make an argument that the Republicans are failing to exercise their constitutional responsibility by refusing to use their tax power to pay the nation’s debts.

    If the powers are just as much responsibilities, then the Republicans are clearly in dereliction of duty. I’m sure I’m not the first person ever to think of this, so I’ll have to look into it.

  6. It’s ironic how the repugs screamed so loud about how immoral it was for homeowners to use a strategic default to combat the lending scams perpetrated by the banks..And here we have the repugs in Congress doing exactly the same thing to further their political agenda. I guess that morality really is relative, huh?

  7. I’m wondering if you could make an argument that the Republicans are failing to exercise their constitutional responsibility by refusing to use their tax power to pay the nation’s debts.

    The Repugs aren’t even close to being responsible. They are playing games and threatening to destroy the financial credibility of the United States to achieve a political agenda..Boehner claims to be helpless in ending this nonsense..He can’t get the votes. It’s Paulie Ryan and the” Young Guns” who are determined to drive us into a ditch as a nation so that they can prove themselves as real thinkers…a la Ayn Rand.

  9. All of this is so amazing to me because it all worked so well for the Republicans last time. Shutting down the government and impeaching the president was a horrible political move for the Repards. And slash Medicare and Social Security, do they really think they won’t pay a price at the polls for this? And this is right in the political wheel house time, too. People will remember, after being reminded none stoppably, that it’s the Repugs that did it. We’ve got them on record voting to end Medicare; the crazy is deep with these people.

  11. The USA (via the IMF) has lent billions to the developing world at high interest rates, and demanded full payment. Attempts to give the poorest nations “debt forgiveness” have been hampered by privatizations demands from the IMF, and many poor countries have rightly scoffed at selling off their nation’s assets (like water supplies and oil) to pay off IMF loans.

    It occurs to me that if the USA defaults on its debt, it will trigger numerous other defaults. Why, for example, would The Congo feel any need to pay off its enormous debts if the USA won’t? They could simply default, telling the USA “we’ll pay when you pay.”

  12. Seems to me now, any action he takes will be legally problematic, except one:
    Stop paying except what he chooses to, in our behalf.

    That’s a bloody traditional sovereign right. So there. Hope he does better than that, though; we didn’t elect him to be dull-witted.

    In other news, shall we all freak out now (as they are at Sadly, No! of all places) because some guys in some newspaper say Obama is at this moment plotting to totally betray us on the budget? Or shall we get a good night’s sleep first? The Some Newspaper is, of course, the NYT; I’d like to see a show of hands over there from everyone who believes the Times is highly accurate and reliable; or rather, who did 24 hours ago before this panicked them.

  13. Flash: Followed joanr’s link (thanks) to HuffPo and found this:
    S&P Raises California Credit Rating To Stable From Negative
    (with pic of Jerry Brown)

    All together now, let Nelson lead us: HA-haa!

  14. Not sure how you guys feel about this but the 14th Amendment Solution may be in the Republicans best interest. It would get them off the hook in terms of Medicare/SS/Medicaid, plus they wouldn’t have to debate whether we should raise taxes on billionaires, when all the poles show that Americans want us to. They could generate some pretty good faux rage, even threaten some Impeachment stuff but come back saying they don’t have the votes for it. Maybe even have some hearings on it. All the while not having the nation’s economy hung around their neck, they could put it back around Obama’s plus call him an extremist unconstitutional president. But that would be assuming that they are acting rationally, mind you not in the best interest of the country, but rationally in their own best interest; which would be contrary to my last comment.

  15. Here is a way we can save some money. It isn’t billions; but, it is–IMHO–a waste of tax dollars. That is to cut the salaries of all members of Congress. As stated above, they are guilty of dereliction of duty. I have come up with the arbitrary number of cutting their salary by 2/3. I can’t remember the last time I felt Congress has earned its pay. Just a thought.

  17. If we look back in history to the British empire in the late 1800’s early 1900’s we see some similarities. The global string of military bases from Europe to the former Soviet Central Asian Republics, wars/ “conflicts” in Kosovo, Colombia, the horn of Africa, the Arabian Penn., Libya, Iraq, Afghanistan, Pakistan; and God knows where else covert/ black ops are taking place. All of the above is killing us and the dopes are talking about cutting Medicare? They are afraid to raise taxes to pay for their foreign adventures?
    How DARE these idiots allow the banks to pull a ponzi scheme, then kick millions out of their homes, THEN allow those homes to sit idle for years?
    It has killed the housing market, construction, and threatens to kill the middle class.
    Unbridled capitalism and usury are killing the “American Dream”.
    The military is an extension of big business, we can no longer deny this.
    The strange thing is that a number of “regular” Americans have been convinced that they are players in this big PONZY scheme.We can’t raise taxes on the rich because some day, I might become rich!
    As Chris Rock explained, Shak is not the Rich guy, the person who signs his contract and check is the rich guy.How’s that for perspective?
    It ain’t the “small business ” person making $250,000 per year, and actually, most small business people incorporate so they can avoid paying a portion of their taxes and gain the advantage of the “corporate veil”.
    As far as Bonnies idea goes, many of the congress members are already very wealthy, and I understand thet after so many years they continue to draw their salaries and benefits until they crap out.
    Why attack them when teachers are an easier target? The unions are the obvious problem, the unemployed and the elderly need to “step up” and do more!
    Don’t blame the rich, because if you play the game right or win the lottery, you too could become rich; and let’s not forget, the mega rich are that way because they are “special” and will help you along the way.
    I don’t hate the wealthy, but it’s way past time to “give back”, and I’m not talking 10%, or “mentoring”.

  18. “Come on you free loading deadbeats..It’s time to ante up and pay”

    Right on Swami, I can’t for the life of me figure why the democrats are not wearing this theme out? This plus the fact that they (rethugs)) are not defending our constitution, they are defending Grover Norquist’s “tax pledge”. They are free-loaders, and like little children they want everything for nothing. The unfortunate thing is whatever deal is struck they will lie at the feet of President Obama. They have done it on everything so far, Obama’s wars, Obama’s deficit, Obama’s recession, Obama’s economy, hell I heard a wingnut on the tube actually call the tax cuts the Obama tax cuts? That’s the problem when you negotiate with people who have no interest in doing what’s best for the country. They only are interested in protecting their corporate overlords, and making Obama look weak.

  19. Joanr16, thanks for the link!
    I agree with Buffett on how to balance the budget, and in telling the “leaders” that if they would rather stomp their feet than do their jobs, just go home.
    They’re like a bunch of petulant brats.

  20. As an example of Republicans out of touch with any reality, they have decided to balance the budget on the backs of the poor, the elderly, the sick and children, and just yesterday have declared that the poor and the middle-class must begin to bear some of the nation’s financial burden.

    So, create an economy that will break the backs of the poor, elderly, sick…then ask them to help carry the economy on their (broken) backs. People with broken backs, you idiots, can’t carry anything.

  21. twtfltrd…That tax pledge bullshit really aggravates me. To think that any Senator or Congressperson could be so easily intimidated as to pledge away their autonomy in decision making is really disgusting. Don’t they realize if for some reason a deal beneficial to the American people can be struck that would require them to renege on their pledge that their pledge will be used against them for political fodder. A thinking person and an honest broker wouldn’t put themselves in such a foolish position..And it does show that their allegiance isn’t properly placed…Maybe I’m just old fashioned and think that making a pledge is not just a meaningless act to be used for political posturing or tossed about without understanding of what a pledge is….My word is my honor…not something to be used as a stunt to advance my standing among unscrupulous characters.

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