. . . here’s a list of assets that Treasury can use to avoid default. My colleague Jason Fichtner and I put the list together after being asked over and over again what Treasury can possibly do if the debt ceiling isn’t raised.
Congress has raised the debt ceiling ten times in the last ten years. Raising the debt ceiling for the eleventh time in as many years without recognizing and correcting the systemic problems, and instituting real spending reforms, would be irresponsible, and it would have consequences beyond merely tapping revenue and assets to meet FY 2011 budget commitments.
The United States should not consider defaulting on its debt, nor should it put itself in a position where it has to postpone payment to contractors or “manage” other non-debt obligations. However, Congress shouldn’t be forced to raise the debt ceiling under false pretenses. That’s why lawmakers should check this list of assets. There’s roughly $2 trillion in assets on that list, in addition to $2.2 trillion in tax revenue. (Lawyers may have a different take on this than we do.)
The bottom line is that the United States has enough expected cash flow (tax revenue) and assets on hand to avoid either defaulting or raising the debt ceiling without a firm commitment from Congress that it will control spending.
At this point, what would be considered "a firm commitment from Congress that it will control spending" absent a refusal to raise the debt ceiling?
If Congress agrees to raise it---again---aren't they simply admitting they have no such firm commitment?
Reply to this commentLinkReport AbuseVeronique (fantastically lovely name BTW) -- you really missed the boat here. What the FOREX traders and Bondholders (other than Helicopter Ben and Darn the Torpedoes Full Borrowing Ahead Dudley) DEMAND to see before they buy any Dollars or Treasuries is SERIOUSNESS from Congress, the Obamaniac and Americans. Seriousness is defined as cutting spending NOW to match tax receipts NOW. The FOREX traders and Bondholders don't want gimics like asset sales, that gimicie stuff was the nonsense that doomed California, Illinois and Greece. US Debt is as serious as a heart attack -- why? What happens if 10 year rates go to historical average say 6% -- debt service payments explode and all other Federal expeditures get crowded out-- this is the doomsday serious men like Ryan and Bowles are warning about. No gimics aren't the answer, real and deep and immediate spending cuts are the only way to avoid the calamity. They won't happen of course, Dems will demagogue and Repubs will compromise. Then sometme this summer, the ChiComs and Japanese central bank annunces they are SELLERS of Treasuries. Après être -- le deluge. Cheers.
Reply to this commentLinkReport AbuseIsn't liquidating trust funds set aside for pension accounts taking on debt by another name? And the optics of liquidating military retirement funds because Congress won't raise the debt ceiling is toxic.
Reply to this commentLinkReport AbuseAll I know is, I'm going to Yosemite while the signs are still in English
Reply to this commentLinkReport AbuseThis is all a farce. You do realize that the powers that be are simply getting their own ducks in a row before they begin a race to the bottom, don't you?
Reply to this commentLinkReport AbuseSince what the country actually needs is a firm commitment from the congress to restrain spending - and since the country can't in fact spend anything without congressional authority to do so, making it decidedly disingenuous to pretend they can't stop, this is exactly the wrong line to take on all of it.
There is No. Excuse. for congress not actually cutting spending. Stop playing games and vote for actual spending cuts already. Yesterday.
Reply to this commentLinkReport AbuseTeflon93 - a budget! You know, the thing they were required by their own rules to produce *last year*, that is now *6 months overdue*? Vote for a budget that actually cuts spending. Nothing else counts as serious, everything else is playing political blame games while ducking the problem.
Grow up, stop pointing fingers at each other, looking for angles to try to make the other guy more hated for your failures, and pass a dang budget already. One without deficits of 10% of GDP as far as the eye can see.
These people are irresponsible children and they should all be spanked...
Reply to this commentLinkReport AbuseAmen, JasonC!
Wasn't the whole point of GOP control of the House to rein in spending?
Didn't the failure to do so during the Bush II years contribute to Nancy Pelosi taking the gavel in the first place?
This is a very easy problem to solve---pass a budget which returns government spending to pre-2008 levels. If the Senate refuses to pass it or Obama vetoes it---as is likely---pass another at 2006 spending levels.
If the government shuts down, congratulations! We're already saving money.
If the American people elect Democrats because Republicans spend too little of taxpayers' money, we'll deserve the second-rate power status which will ensue.
Reply to this commentLinkReport AbuseWhat a surprise, Veronique writes yet another article in which she clearly has no idea what she is talking about. The Treasury Secretary has no authority to disinvest any of the other trust funds you listed except for the civil service fund. And in that case, he can only disinvest enough to pay benefits estimated over the life of the debt issuance suspension period. That gets you about $7 billion a month, or approximately nothing. This is the extent of the law:
External Link
It gets you to the end of July, maximum.
Reply to this commentLinkReport AbuseVeronique,
I normally love your posts, but this one struck me as odd.
Is it even legal for Emperor Geithner to use any of those options you suggest? Can he just unilaterally liquidate DoD retirement funds and the other stuff you mention. Isn't that just another way of increasing debt (government debt to itself is still debt, I think -- its still money that's needed later).
Can he just say "viola" and liquidate US Federal Gold and foreign monetary holdings?
I did not realize treasury secretary had such power.
And would any of this even be wise? Some of the stuff you say to liquidate would seem to be a temporary stopgap that would ultimately leave us in a WORSE position than if we just authorize more debt. Or maybe not. I don't know really. But it seems SPENDING is the problem. Not bending over backward to liquidate the government in order to pay out medicare/SS/interest on our current debt for another year or two. Then we're just screwed, I think (we may be anyway).
Reply to this commentLinkReport AbuseWhat about property? The Feds own a *lot* of redundant property (including something like 87% of Nevada). I'm sure GSA, BLM, and a few other departments and agencies could come up with at least a trillion dollars if they really tried.
Reply to this commentLinkReport Abuse