I’d like to exhume this one, given its new relevance. Maybe there’ll be more traction this time.

Yellen says minting a trillion dollar coin is off the table. I wonder if republicans are crazy enough to see this to the end.

It should not be an issue. Newt Gingrich was the malevolence that started this entirely inane and destructive tactic in modern American politics. Everyone should be clear that raising the debt ceiling is a legislative requirement that is required to cover the debts incurred by all Federal governments, be they Republican or Democrat. Using that requirement to try and bludgeon any current government into cutting so-called 'excessive spending' is completely illegitimate, a form of political blackmail. If the Republicans really want to cut programs, fine, let them run on it, and win the election and implement it. But as is amply documented, if this gamesmanship really did result in a US default, then it would make the Great Depression seem like a walk in the park. However I'm cautiously optimistic that the whole gambit will in the end only result in further humiliation and estrangement for the lunatic MAGA clownshow and that sanity will prevail before disaster. (After all, McConnell assured the media just the other day that 'America will always pay its debts'.)

It should also be recalled the one of the last installments of this political insanity actually increased the overall Government debt, AND contributed greatly towards Republican losses in the subsequent elections. But then, it's no use trying to explain the obvious to those unable to understand it.

The debt ceiling was created by the Second Liberty Bond Act of 1917. The law was not intended as a means to paralyze the government. Rather, it established the plan whereby the government could undertake new borrowing to cover expenses. Yes, it could have been done differently, but it wasn't.

The national debt stands at what? 31 or 32 trillion dollars. A large hunk of that was accumulated during the governments support of the economy during the 2010 crash and then during the Covid 19 pandemic. In 2010 the national debt was at 13+ trillion dollars.

The GDP is currently -2022- around 20 trillion dollars.

Democrat and Republican congresses have both raised the debt limit. This year it will probably be a prolonged battle because some members of the far-right are what David Brooks calls 'nihilists'. They seem to be prepared to see the government burn down. There are not enough Nihilists in the House to definitely block a higher debt ceiling. There are enough, that they could force the government to default IF the rest of the republicans fail to vote for override.

Default would be bad for government employees, Social Security and Medicare recipients, Disability program recipients, military employees, suppliers, and all the US bond holders around the world (like China) who might want to cash a few million of the bonds in. A default would seriously damage the US Government's credit rating.

If they block raising the debt ceiling, then we might hope that the congressional nihilists will all have some kind of an unfortunate accident. It's not that many, maybe... 15.

Default would be bad for government employees, Social Security and Medicare recipients, Disability program recipients, military employees, suppliers, and all the US bond holders around the world (like China) who might want to cash a few million of the bonds in. — BC

I've read that a US Bond Default would credibly cause a financial apocalypse, an 'all the banks are closed and there's no money' scenario. I think it's an exaggeration but not much of one.

I'm a thrifty individual, and I would prefer the government have exercised thrift more often than it has. 32 trillion dollars is a hell of a lot of debt. On the other hand, only a mad man would think it should be dealt with in one fell swoop. Entitlements (like Social Security) and interest on the debt are not deferrable (unless you are a crazy nihilist). So, in order to pay down the debt we would need to reduce military expenditures and quite a bit of civilian discretionary expending, It would be pretty painful.

Will the government become thrifty? I doubt it very much.

Will Congress eventually raise the debt ceiling? Oh, probably -- at the last possible minute.

There's a lot in what Brooks says about nihilists. These MAGA lunatics are completely out of touch with reality. (What was the saying from a few years back, 'reality appears to have liberal bias?') It's true that Government indebtedness is a huge problem, but nobody in the advanced economies dare utter 'tax rises' even while their populations age and the expectation from public services continues to grow.

The 50 states are not allowed to print money or to operate at a deficit. This can produce happy outcomes. Minnesota (my state) has collected $17 billion dollars more than it spent. To governor and legislature are busy arguing about what to do with it. We have a rainy-day fund of a few billion, which is drawn on when tax collections come up short. Some of the surplus will go into that. Some will go into education. Some will probably be rebated.

A surplus this big is unprecedentedly large. Minnesota is a high-tax state. Consequently, we have better schools, better health, and better social services than many states. Our roads aren't good, but that's the fault of cold winters and hot summers.

A share of federal spending is good, of course. If the feds collected all the taxes that are due, if they spent less subsidizing industries that would still do just fine without it, and similar measures, the federal budget could come closer to being at least balanced on a year to year basis.

Our state Republicans are currently outnumbered in the legislature and the governor is a Democrat. It's the way things ought to be.

I have family in Wisconsin. Lovely place, hope to be back there again in August. The political scene has been extremely fraught, beginning with Scott Walker who oversaw gerrymandering of the whole state and whose party basically attempted a silent coup. I'm really glad Tony Evers won in November.

This is something of a theater happening every now and then.

I think now the question is if the current Senate is so dysfunctional, so bitterly venomous, that they take the theater way out of the comfort zone and force (I guess in the summer) a government shutdown or even a missing of a payment (which is called a debt default).

If someone or enough people really, really want to make things hard for the Biden administration or then make minority leader Mitch McConnell to look even worse, by all means make this the new issue.

Yet in the end likely the whole financial system will crash. But that can take a while to happen...

I have family in Wisconsin. Lovely place, hope to be back there again in August. — Wayfarer

It's kind of unfortunate that you travel all the way to North America to visit Wisconsin. :confused:

Hey, let's not be denigrating the upper midwest. Wisconsin has several points of interest.

Hey, let's not be denigrating the upper midwest. Wisconsin has several points of interest. — BC

Do they involve cheese?

It's kind of unfortunate that you travel all the way to North America to visit Wisconsin. — frank

I've only began to visit the United States later in life, I've had, I think, 7 trips there now. (Highlight was catching the California Zephyr from SF to Chicago about ten years ago). America has always exceeded my expectations - it's a lot like it looks on television, but I've always been treated with courtesy and friendliness, and it was just better than I expected. Just as well, as I now have two American grandkids (although they will be dual Australian citizens.) I get the Wisconsin is kinda dull, but Lake Michigan is something.

Anyway, to get the discussion back on track, here's today's updates.

Do they involve cheese? — frank

Well, yes, I suppose. Cheese is important. Do you have something against cheese? Who doesn't want to visit an ice castle made out of cheese curds? Kohler, WI is famous for making toilets and Green Bay is the toilet paper capital of the world. That's where "splinter-free toilet paper" was introduced in 1935. Then there is bratwurst and beer. Milwaukee has Pabst, Miller, Schlitz, and Blatz breweries.

In Wittenberg, WI, you could buy some really fine apple wood smoked liver paté, bacon, ham, or wieners at the Nuesky plant.

What more do you want?

Lake Michigan is something — Wayfarer

This is extremely true. Lake Michigan is... something.

Do your relatives live in or near Madison? The capital of Wisconsin is unlike the rest of the state so it is more interesting. I haven't been there recently, but it used to be a sort of east coast outpost on the prairies.

but I've always been treated with courtesy and friendliness, and it was just better than I expected. — Wayfarer

I'm glad to hear that. :up:

as I now have two American grandkids (although they will be dual Australian citizens.) I get the Wisconsin is kinda dull, but Lake Michigan is something. — Wayfarer

True. I used to live in Ohio and I was enchanted by Lake Erie. I would so move to Australia if I had dual citizenship.

Cheese is important. Do you have something against cheese? — BC

I love cheese. NY style sharp cheddar is my favorite.

Who doesn't want to visit an ice castle made out of cheese curds? — BC

Good question. :chin:

Then there is bratwurst and beer. — BC

Columbus, Ohio also prides itself on its bratwurst. They have a festival and everything. It's so exciting.

Madison is a nice place, we visited late August last and went down to the lakeside of the University campus. My son lives in Oconomowoc, it’s kind of a satellite suburb of Milwaukee. Got taken to a ball game at Milwaukee Stadium. Beginning to feel very at home there.

There's an interesting Frank Lloyd Wright church in Oconomowoc, Greek Orthodox. The sanctuary is bowl shaped, I believe -- based on the post card. The day we arrived the staff was too annoyed by previous unscheduled visitors to show the place. Understandable.

Never noticed that. Will seek it out next visit (which may well be in about 6 months.)

What will be the outcome?

I’m guessing Biden caves.

There are those who say that even by negotiating he's caved, but I don't know about that. You can't negotiate with extortionists without emboldening them to keep doing it. What bothers me is that the MAGA extremists really might be willing to cause a financial catastrophe rather than compromise.Trump said in the disgraceful display on CNN last week that they 'might as well do it'. Or they might leave it so late that it causes a default on one or another payment, which the market interprets as worst-case, causing the mother of all stock-market crashes. Not too long to wait to find out, in either case. :yikes:

You can't negotiate with extortionists without emboldening them to keep doing it. — Wayfarer

Yes. I almost want to say: you want to blow up the global financial system? Go for it. Call their bluff. If they’re not bluffing, then they really are insane.

What’s hilarious is that McCarthy talks as if this is Biden’s doing — as if he’s not manufacturing this entire thing. The whole thing is quite pathetic.

McCarthy is a spineless hypocrite. . Especially compared to his predecessor. He's not a leader, rather he's on a nose-ring being pullled along by the Freedom Caucus., That's what happens when you sell your soul and any remnant of principle just to get into office. The extremists in the GOP are a greater threat to the world than Putin, in some ways.

What will be the outcome? — Mikie

The Dems will use a parliamentary procedure with the help of several GOP congressmembers to force a vote in the House that will pass and go on to easy passage in the Senate for Biden to sign the clean debt ceiling raise into law by the first of June. McCarthy is Dead Speaker Walking –'even if he were to get everything he wants out of Biden – so both men are just engaging in political kabuki theatre in order to give Minority Leader Jeffries time to engineer the Dem's parliamentary rescue of the US Debt from the pathetic default-ransom by the GOP Insurrection Caucus.

Of course, worse case, Biden invokes the 14th Amendment and keeps paying on US Treasuries until the constitutional crisis is litigated in SCOTUS ... sometime next year (maybe in time for the general election). No US Default -– come hell or highwater! – is my prediction.

go on to easy passage in the Senate for Biden to sign the clean debt ceiling raise into law by the first of June — 180 Proof

Which is 13 days away, and (I think) 4 sitting days....

I have vivid memories of the day Lehmann Bros failed.

Yeah, by next Wednesday the bill we be on Biden's desk or he will have to invoke the 14th Amendment the week after. This ain't silly shit like the Lehman Bros fiasco.

https://news.harvard.edu/gazette/story/2023/05/laurence-tribe-explains-how-14th-amendment-can-help-biden-avoid-default/

No US Default -– come hell or highwater! – is my prediction. — 180 Proof

Hope you’re right. Whatever happens, I can’t imagine the powers that be will allow a default.

:up:

A reminder on what the GOP hostage-takers are demanding for the release of their victim:

The Republicans want major spending cuts, but they want to force those cuts through by threat instead of having to legislate normally. And the cuts they’re asking for are appalling: they include slashing funds to things like cancer research, rental assistance for the poor, support for schools with large numbers of low-income students, and pay for Americans in uniform. The Republican bill would end Biden’s attempt at student loan debt relief, repeal tax breaks for renewables and clean energy while increasing reliance on fossil fuels, raise already-onerous work requirements to receive food stamps and welfare benefits, and decrease the efficiency and abilities of the IRS.

The Republican proposal would leave a great many Americans worse off – but (OF COURSE) it would be a boon for oil executives and wealthy tax avoiders. ...

Today’s Republicans are a party of destruction. As much as they claim to want to make America great again, they seem much more intent on sowing division, fomenting chaos and embracing an ethos of nihilism. There is no school shooting brutal enough to make them reconsider America’s extreme gun laws; no pregnant woman who suffers enough to make them take a step back on criminalizing abortion; and virtually nothing their unelected leader Donald Trump can to do make them reject him – allowing a deadly attack on the Capitol, being deemed a sexual abuser by a New York jury, and undermining America’s tradition of free and fair elections have not been enough to end the Republican party’s love affair with Trump. As the party has not only embraced Trump but molded itself in his image, it has become all the more dangerous to the nation. — The Guardian

Oh, and the MAGA nutcase MTG has just introduced articles of impeachment against Biden. They will go nowhere, of course, but she obviously has an ax to grind, and nothing better to do.