tag:blogger.com,1999:blog-4039434.post6641010951175341277..comments2024-02-26T06:46:53.171-05:00Comments on Rajiv Sethi: Some Thoughts on the UnthinkableRajivhttp://www.blogger.com/profile/13667685126282705505noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-4039434.post-70317912380368329072011-07-21T21:21:47.611-04:002011-07-21T21:21:47.611-04:00rjs, thanks again for the link to Megan McArdle...rjs, thanks again for the link to Megan McArdle's <a href="http://www.theatlantic.com/business/archive/2011/07/debt-ceiling-whats-the-end-game-for-republicans/241959/" rel="nofollow">article</a>, it's very good. Especially this:<br /><br />"If we had to cut spending--if no one would lend us any more money--could we do it? Definitionally, yes. But it would mean an enormous amount of real suffering: homeless families, hungry old people, nursing homes closing their doors to indigent patients. And the fact that we could do it if we had to <i>doesn't mean that we can therefore do it when we don't have to</i>. If you try to artificially create a situation that requires drastic cuts, voters are going to get rid of you, not the spending."Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-39460987530089392172011-07-19T10:50:51.912-04:002011-07-19T10:50:51.912-04:00I did not know everytime they exceed the budget th...I did not know everytime they exceed the budget they have to go for congress authorization for increase in debt which I presume is throuh issue of govt. Bonds. But here in india they go in for supplemenatary estimates and the discretion whether to cover the deficit by borrowing from the Central Bank or by isssue of Bonds is left to the executive.<br />Increasing debt increas money supply through higer expenditure for which the debt is incurred but it also withdraws money from the market if subscibed by not only by banks but public.manmohanhttps://www.blogger.com/profile/12457444757162680426noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-1793072221092413142011-07-19T05:32:39.478-04:002011-07-19T05:32:39.478-04:00Barkley, I'm no constitutional scholar but it ...Barkley, I'm no constitutional scholar but it seems to me that the amendment refers to debts <i>incurred</i> for payment of pensions and bounties in the past, and not to any promises, implicit or explicit in laws, to make payments to individuals in the future. Nonpayment of interest and principal would be unconstitutional, while nonpayment of social security would be illegal. That's how I read it in any case.<br /><br />I am not in favor of ignoring the debt ceiling, but if this is done then I would prefer the option described in my post (running up an overdraft at the Fed) rather than issuing new bonds. Otherwise yields could spike, possibly resulting in panic and chaos.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-27163117121330404612011-07-19T02:09:21.723-04:002011-07-19T02:09:21.723-04:00Rajiv,
In fact this statement from the 14th amend...Rajiv,<br /><br />In fact this statement from the 14th amendment does not prioritize principal and interest. The "debts" that must be paid include "pensions" and indeed legally any payment authorized by the Congress and signed onto by the president is a "debt." Indeed, you are right that illegality is unavoidable. It is just as illegal for the Secretary of the Treasury to prioritize payments as it is to violate the debt ceiling. And caving means this will happen again, even though no other nation in world history has had a nominal debt ceiling of this sort (although the US's has been around since 1917). So, if there is no agreement, and he should not agree to anything too drastic, he should declare it unconstitutional and ignore it. Let them impeach him, a big nuisance, but he will win on that in the end, and he will save the world economy.Barkley Rosserhttps://www.blogger.com/profile/13114257724762074636noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-3549742001469644142011-07-18T18:28:43.319-04:002011-07-18T18:28:43.319-04:00rjs, thanks for the links.
Som, the constitution...rjs, thanks for the links. <br /><br />Som, the constitutional imperatives I had in mind are contained in the 14th Amendment: “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.”Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-10766038018765559772011-07-18T18:04:52.548-04:002011-07-18T18:04:52.548-04:00"Interest and principal on the debt would pro..."Interest and principal on the debt would probably receive the highest priority, given constitutional imperatives."<br /><br />Why so? Because failing to meet these rather than other obligations would hurt the richest the most? And because the White House is almost as fully controlled by the richest as the Republicans?Somhttps://www.blogger.com/profile/04404718947873288765noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-42346865947368065222011-07-18T14:26:59.681-04:002011-07-18T14:26:59.681-04:00a 38pp debt limit analysis (PDF) from the bipartis...a 38pp debt limit analysis (PDF) from the bipartisan policy center:<br /><br />http://www.bipartisanpolicy.org/sites/default/files/Debt%20Ceiling%20Analysis%20FINAL_0.pdf<br /><br />a post from libertarian blogger megan mcardle @ the atlantic, in which she is attempting to convince her right wing followers that stonewalling the debt ceiling vote is a non-starter:<br /><br />http://www.theatlantic.com/business/archive/2011/07/debt-ceiling-whats-the-end-game-for-republicans/241959/rjshttps://www.blogger.com/profile/15681812432224138582noreply@blogger.com