A warm-up to what I suspect will occupy a lot of media space this upcoming week.
It’s worth reminding everyone over and over in the coming days what most establishment reporters will not or cannot. Kevin McCarthy and the House GOP are holding the federal govt and the US constitution hostage. They have issued a series of demands and said that if their …
— Josh Marshall (@joshtpm) April 28, 2023
2/ demands are not met they will force the US government into bankruptcy for the first time in almost 250 years. Here’s how they plan to do it. Congress already passed a law requiring Joe Biden to spend money to run the federal government. The GOP House now proposes to make …
3/ it illegal for President Biden to get the money he needs to buy the things Congress passed a law forcing him to buy. This isn’t budget making. It’s just more parliamentary terrorism. It will crater the US crater, the global economy, violate the US constitution and …
4/ imperil the US’s privileged role in the global order. But you will hear lots of reporters say that since Kevin McCarthy has now sent out a list of demands from the bank vault where he’s holding the hostages that he’s done the responsible thing and Joe Biden must …
5/ negotiate with him because McCarthy is acting in “good faith”. There’s no such thing as good faith hostage taking. There’s no responsible way to engage in parliamentary terrorism. You can’t negotiate with terrorists. There’s an actual budget process where these questions …
6/ get hashed out. That’s for next years budget. It’s not a good faith negotiation if one side has a gun to the hostage’s head. We shouldnt let anyone forget that’s what’s happening.
For the IRA it's worse than that. Killing the IRA isn't their threat. It's their demand. If Biden doesn't kill the IRA they'll force the Govt to default.
— Josh Marshall (@joshtpm) April 29, 2023
another media coverage failure:
to make crystal-clear that, if default crisis occurs, it will be because House Republicans chose it
their turn toward extremism has created the threat
it's not about the economy or even the debt
if it were, they'd have forced Trump to deal w/it https://t.co/mVp9tnN7Uv
— John Harwood (@JohnJHarwood) April 29, 2023
without even reading, you’re right. Rs are totally ready to shoot their hostage. Meanwhile Ds see it as one of their foundational lessons of the last generation that they will never get played like they were in 2011; won’t negotiate w parl terrorism. Hard to span that divide.
— Josh Marshall (@joshtpm) April 29, 2023
From Paul Kane’s article (unpaywalled gift link):
… Graves believes that McCarthy has done his job by winning approval for a bill that would lift the debt limit into next year while also imposing nearly $5 trillion in reduced spending. Coons dismissed that “gauzy, broad but unspecific” House proposal as merely an attempt at holding the full faith and credit of the U.S. Treasury hostage.
Like other Democrats, Coons is willing to haggle over federal spending levels in the annual process for funding federal agencies in the House and Senate Appropriations committees. But that negotiation can only begin once Republicans agree to separately raise the debt limit without any strings attached.
Congress has oftentimes raised Treasury’s borrowing authority without any strings attached, as lawmakers did twice in 2021. But in times of divided government, the debt limit has often been raised as part of a broader budget deal, as it was in 2019 under House Speaker Nancy Pelosi (D-Calif.) and in 2011 under Speaker John A. Boehner (R-Ohio).
That Coons, 59, and Graves, 51, are taking these diametrically opposed views should make Wall Street titans pay much closer attention to this political game of chicken…
One missing ingredient to all this bluster is an official deadline, something that will hopefully come very soon from Treasury Secretary Janet L. Yellen. Once analysts have finished the incoming and outgoing cash flows of tax season, Yellen can issue what insiders call the X date for the deadline when Treasury will run out of budget gimmicks for handling the more than $31 trillion national debt.
Congress, in this era, simply doesn’t take things seriously until there’s a formal deadline, so it’s possible that cooler heads will prevail when countdown clocks start to appear on cable news shows…
Agreed. McCarthy keeps asking “what changed?” between 2011, when Biden spearheaded negotiations; and today, when he won’t negotiate. The answer is: he learned his lesson from last time!
Giving in to hostage-takers encourages more hostage-taking https://t.co/vwiWOb1IGZ— Catherine Rampell (@crampell) April 29, 2023
Edmund dantes
The Dems can’t blink and I still don’t see the GOP way out of this that doesn’t involve a ton of threading the needle that seems impossible considering what happens to McCarthy as soon as he allows a clean bill to happen without stopping it.
So I hope Biden is prepared to go the 14th amendment route (still I think the most viable) or one of the more absurdist ones. I’d love to see the platinum coin of course but that’s just the dramatist side of me.
Mike in NC
“Speaker” Kevin McCarthy, the guy with half the IQ of Matt Gaetz.
Damien
How about any negotiations include a permanent removal of the debt ceiling, or alternatively tie it to approved budget spending.
Or even better, how about the next time we have power we just vote to eliminate it entirely?
ETA: I’m not advocating negotiating with these shitheel terrorists, just spitballing ways to fix this issue forever.
mrmoshpotato
Economic TERRORISTS!
NotMax
All of this tempestuous foofaraw is slapdash window dressing done Ed Wood style, had he migrated to that job.
Will say it anew. A clean ceiling bill will be passed, although it’ll come right down to the wire.
Goku (aka Amerikan Baka)
Related, should I pull my money out of my Treasury money market mutual fund? I have around $7600 invested into it, which is apart of my emergency savings. I was trying to get some extra yield on what is supposed to be the safest investment in the world
I also have $3000 invested in I Bonds, but only $2000 can be redeemed at this time, but with a 3 month interest penalty
NotMax
@Goku (aka Amerikan Baka)
Follow the dictum of The Hitchhiker’s Guide.
DON’T PANIC
Timill
@Edmund dantes: I prefer consols – bonds that have no maturity date, but just pay interest ad infinitum. Apparently they don’t count as debt for these purposes, but do raise money. No tricks, just use the accounting rules to the Govt’s advantage.
Citizen Alan
@Goku (aka Amerikan Baka):
This is a concern to me as well. Right now, from the money I got from selling my house in 2021 before i went to new york and money I inherited after my mother’s death in 2022, I have over $200k sitting in a bank account I’ve been afraid to touch because my job situation has been so uncertain. But now, I’m moving to California in July, which is (assuming nothing unexpected happens) is a month after the debt ceiling deadline. So is it better to leave that money where it is? Is it safe to put it into a CD? If the worst happens and the terrorists crash our economy, where is the safest place for my life savings to be?
Omnes Omnibus
@NotMax: Probably too late for that advice.
randy khan
I think the point that the Republican demands are to essentially undo everything good from the last two years can’t be repeated often enough. That’s not an opening bid for a negotiation, particularly when you control only 1/2 of one of the two branches responsible for the budget, and that by the tiniest margin.
Goku (aka Amerikan Baka)
On Twitter, I’m seeing a lot of people, presumably conservatives, trying to claim that the House R’s have done their job by passing a budget, and that whatever happens is on Biden’s head if he refuses to sign it. They utterly disagree with the notion that this is hostage-taking, some even going so far to claim that “both sides” have done it in the past. They also disagree that this budget bill is cutting anything, that it’s merely capping spending at 2022 levels for the next 10 years. Also too, capping growth at 1% is reasonable because the national debt is already at $34 trillion, which will weigh heavily on economic growth
I also found it interesting that when anybody in Harwood’s replies suggested that the media is anti-Biden/Dem and would not cover this issue as the House GOP’s fault if default occurs, this was dismissed by right-wingers as false, that the media is a “tool of the Democrat Party”.
They really do live in another world, don’t they?
Ken
@randy khan: Perhaps one way to emphasize the House Republicans’ true powerlessness would be for the Senate to refuse to take up their bill. It would also illustrate that the first step in any
“negotiation” wouldn’t be with Biden, but the other legislative chamber.
Raoul Paste
@NotMax: Sometimes I think that House Republicans who say there will be no consequences for default are just performing. The old “madman“ approach to intimidate others.
Needless to say, I hope you are right about the clean bill
Goku (aka Amerikan Baka)
@NotMax:
The share price is fixed at $1/share, so it’s not like I’d lose any money if I pulled out from the MM mutual fund. I suppose if the worst happend it wouldn’t much matter whether it was in the fund or in an FDIC-insured bank account. Banks invest in treasuries and so does the FDIC itself with it’s money.
Perhaps for my piece of mind I’ll do it anyway. I don’t care too much if I miss out on the interest
I hope you’re right on the clean bill passage!
prostratedragon
Prairie State premonition, or what Gov Pritzker is still cleaning up:
Chris T.
@Citizen Alan:
Leave it where it is.
Here’s the fundamental issue: if the financial system freezes up, nobody knows what “one dollar” means any more. Imagine you’re trying to fit widgets into a box, and you know that the widgets are 5 inches long and the boxes are 20 inches long. So four widgets fit lengthwise; that’s obvious enough. But suddenly “inch” means “10 millimeters” to Fred, and “one yard” to Susan. Now how many inches are there per inch? Nobody knows!
So if it all goes to hell, you’re screwed no matter what you do. Just assume you won’t be screwed, because you can’t predict what the right move in hell will be.
Chetan Murthy
@Chris T.: This is why I don’t make moves in crazy times, either. I remember at the beginning of the pandemic, lots of people were selling. And sure, if you knew when to do it, you could make a bundle (by selling at the right time, then buying again later). But I figured: I don’t know how to time it, and since this is retirement savings, I won’t be needing it during the pandemic, so I should just leave it where it is. Sure, I didn’t make a profit from the later-on recovery, but then, I would have had to know when to buy, to do that.
The one caveat that I know of is: if you really do know you’ll need money soon, then it’s better to move that to something that’s resistant to economic craziness. So I always keep some portion of my savings in cash — enough so that if something bad happens, I have that rainy-day fund.
Citizen Alan
@Citizen Alan: Actually, an even greater personal concern is: What happens to my new job that I don’t start until July in the event of a global economic meltdown in June?
Goku (aka Amerikan Baka)
@Chris T.:
Do you think it’s a mistake for Dems to rule out things like the Trillion Dollar Coin? My impression is that they want to do things the “proper way”, but this is a game of chicken and the consequences of default are grave. I think all alternatives should be on the table. This isn’t Mr. Smith Goes to Washington
Chris T.
@Goku (aka Amerikan Baka): Nothing is ever ruled out, even if someone says it is, unless it isn’t actually done, and then it was actually ruled out. Or, it gets done and the courts say “no you can’t do that”, and then it was actually ruled out.
So for now, just hang on tight. One should always have some emergency cash (as in, cash at a bank where the ATMs should still work, or even a couple hundred stashed under the mattress or whatever) just as one should always have some dry pasta and water in case of earthquake (fire, flood, tornado, whatever you have in your area) and an emergency medical kit and so on. If you can camp in your own yard / neighborhood for a few days if necessary, you’ll probably make it through to whatever happens next.
Ken
@Goku (aka Amerikan Baka): It’s possible that capitalism will solve the problem. As in, the GOP’s Wall Street contributors invite a bunch of House Republicans to a special conference, where the Representatives all mysteriously fall down elevator shafts (twice).
Steeplejack
@Edmund dantes:
Yeah, I think the 14th Amendment is the way to go.
Eunicecycle
@Ken: I think this is the most likely scenario (well not so sure about the elevator shaft but maybe a good smack up beside the head).
JaneE
If this were a TV drama, the hostage taker would be taken out by a sniper before he can kill the hostage(s). What is the equivalent for the current situation?
Can the Administration just ignore the debt ceiling? Cite the constitution and say they are required to pay the debts?
Chris T.
@JaneE:
Yes, that’s the “14th amendment” method. It leads to SCOTUS, who then rule whether the 14th amendment applies. (So does the platinum coin trick, probably, although that one is less clear.)
Given that SCOTUS is susceptible to the C.R.E.A.M. rules as well, this probably ends the same way as the “Rs to go Wall Street” method.
Ascap_scab
Mint the fucking coin and be done with these asswipes.
ColoradoGuy
A “Balanced Portfolio” is the way to go. Some long-term medium-risk (that’s an indexed stock fund, such as S&P 500 or Wilshire 5000, which capture the entire US stock market), shorter-term low-risk (indexed bond funds), and short-term cash equivalents (money markets, FDIC-insured bank balances, actual cash-in-hand, etc.). Basically, you spread the risk around in different places.
Also, keep in mind that lack of liquidity is part of the risk spectrum (can you afford to have an asset that takes weeks or months to sell?). That’s the huge gotcha with REITs or real estate … lack of liquidity, which means you can’t get the money when you might really need it. By contrast, all of the assets mentioned above can be sold in a day or two.
Jay
Goku (aka Amerikan Baka)
@Chris T.:
I’m not sure I’d do too well under those circumstances : /
I guess all I can do is hope that the worst doesn’t happen
Meaning these methods work?
@Ken:
The thing that surprises me is that these guys have investments/businesses of their own that would be adversely affected. I suppose they believe it won’t come to it and D’s will cave
Chetan Murthy
@Goku (aka Amerikan Baka): One way or another, these guys won’t suffer: their pay comes from the US government and they’re privy to all manner of inside info, so if the shit hits the fan, they’ll know about it sooner than the rest of us, and when and if a rescue is mounted, they’ll know about that too.
Heads they win, tails we lose.
Eolirin
@Edmund dantes: If we peel off five Republicans we can do a discharge petition, no?
dp
@Edmund dantes: I think this is right. It’s time to start thinking about who would have standing (assuming those rules still apply, see mifeprestone) to challenge this or the platinum coin option. Personally, I’d do both.
dp
@Goku (aka Amerikan Baka): I expect Biden to give Republicans every chance to do the right thing, to avoid busting norms, but for him ultimately to do the platinum coin and/or the 14th Amendment option.
dp
@Chris T.: Standing is an issue. Most (state and local; I have no knowledge of federal) bond issues are pursuant to statutes that explicitly allow for challenges to ensure their validity; this would be a different animal. Without that, it’s not clear to me who would have standing to bring a challenge.
Chris T.
@dp: The 5th Circuit seems to have run roughshod over standing recently. Does that affect things?
(I imagine the possible answers are “no” and “yes, but nobody knows how yet”)
randal m sexton
Once we get close to the debt default date things will get really crazy on the equity and bond markets. This will cause the billionaire boyz to start getting involved. If we were really getting to the point where the Platinum coin or citing the 14th amendment ( or those weird bonds ) were being considered – the timing of anything getting pushed to the SCOtUS would be challenging — It would be like that strange part of the last financial crisis where there was one weekend where if the fed/treasury did not act on Monday morning a big part of the SP500 companies were going to default. Could the SCOtuS act that fast ? I think if it got to that point and the SC ruled against, the Biden admin might tell the SC to buzz off. I have been thinking that the SC might just make so many bad rules that they eventually will get UnMarburyMadisonned somehow. My guess is that we will get close, the markets will start gyrating then Harlan Crow (and his pals ) will call up McCarthy and tell him to throw in the towel. Then the markets will snap back up.
TriassicSands
Only partly. It’s not as though most Americans really pay that much attention to critical issues. Someone pointed out not too long ago on B-J that most Americans just want to live their lives and raise their kids. What’s missing there is ensuring that the government is representative of the people and what it is doing. For most Americans the government is on autopilot as far as they’re concerned. They may be willing to spend a few minutes here and there around election time, but they aren’t going to make being well-informed a priority.
There is no question the media could do a better job, but there needs to be a receptive, engaged audience.
Frank Wilhoit
@randal m sexton:
And then next time?
trnc
Worth noting that republicans say tax hikes are off the table, which is not only ridiculous for demanding that that inflation reduction and climate change funding be sacrificed in order to protect every penny of billionaires, but also purposely misrepresents their overall position on taxes. The 2017 republican tax act raised taxes for poorer families, military families and other non-wealthy people starting 3 years in to compensate for the tax cuts for wealthy individuals and corporations. Property and other local taxes have to be raised to compensate for the funding cuts it took to get to their magic 1.5 trillion number.
Geo Wilcox
@randal m sexton: And fortunes will definitely be made or lost. Who pulls the strings and ends up with the money is the one who makes the call to McCarthy.
Another Scott
As I said a week or two ago, no “deal” is going to happen until the last minute. That’s the way it always happens. We all know this. It’s not close enough to the deadline to focus the monsters’ attention yet.
Worry about other things right now.
I don’t think that they will force a default. Supposedly Qevin was only able to get his default plan through the House by telling his team that it would never be enacted. Causing an actual default would damage their MotU funders. They have a weak hand.
Have a good week.
Cheers,
Scott.
Peke Daddy
@Another Scott:
The danger here is that a hard looming deadline encourages and empowers the hard liners, rather than sobering them up. It could go over the cliff simply because McCarthy can’t hold the majority, he won’t risk his speakership and time runs out because of too many moving parts. Madman theory meets banana peel.
Bobby Thomson
Why is this even a thing? Just spend the money. That’s exactly what they would do if they were in this position (and cared about default). It’s not like laws matter anymore.
Another Scott
@Bobby Thomson: It’s a long and complicated story. The Congress has the “power of the purse” – they used to have to approve the cutting of every single check. That’s obviously untenable in a modern government, so they came up with the debt ceiling (saying that the executive cannot exceed $X).
The best solution is to “deem and pass” to automatically increase the limit when the funding bills are signed, aka “the Gephardt Rule”.
The main issue with this stuff is confidence – will I get my interest payment when promised? If there’s doubt, then I’ll demand higher interest rates for the risk, or send my money elsewhere. Ignoring the limit won’t help the confidence issues (lawsuits, etc.,).
Cheers,
Scott.