With the debt we've run up (and continue to expand) combined with the clowns running things in DC it's a wonder our government debt isn't rated on par with junk bonds.
EDIT: I find it humorous that people are taking offense and down-voting my comment as though I was referring to only a subset of the people in DC as clowns. We've been running a deficit annually since the early 80s (with one anomalous year in the 90s) and the fact we've not had blow-back in the credit markets is astounding. This is only possible when we enforce the petro-dollar system with the might of the US military, something the rest of the world has grown weary of. Once we lose reserve currency status our gov't debt will indeed slide to junk status and right quick.
I’m not taking offense, but I think your understanding of geopolitics is a little… I don’t know, simplistic? I’m not trying to say that to be rude, but look… as long as we have the power we have and can browbeat other nations, we cannot and will not be coerced in to making good on our foreign debt.
That’s it, that’s the whole reason. The entire global trade system depends on us flattening any bad actors with the threat of force. Other players would like to edge us out, but they can’t yet.
> ...as long as we have the power we have and can browbeat other nations...
I think the sunset on that ability is within view. The petro-dollar is key to our status as the world reserve currency and not only is oil now being sold in Rubles and Yuan but the push to eliminate fossil fuels also undermines the special status the USD enjoys.
Carl Icahn just lost billions betting against the USA. Your comment sounds interesting until you look at all the other countries in the world. We aren't competing with perfect, we're competing with a Europe still coasting off of it's Imperial power and forced wealth extraction from the rest of the world and China, a country whose central government has tangential control on it's regions, government is dependant on the sale of land to raise income, has levels of pollution that was horrific the last time I was there, population is declining when it is dependant on worker power to translate to world power, and brutal repression which does not lead to the independent thought necessary for dynamic intellectual growth. They are now removing economic numbers and discussion for the public and criminally investigating auditors which will surely to lead to a dynamic economic model that will generate growth for them.
Japan, Singapore, and Italy all appear to be a worse off than the US (a lot worse off, in the case of Japan), as far as government-debt-to-GDP ratio. They already lack the benefit the US gets from its "petro-dollar system".
The US is pretty much the definition of a top credit rating. Besides having the biggest economy, they can print more of the world's reserve currency.
Not defending government debt by the way - I think it's an especially insidious form of tax that devalues the entire currency and hits the poor the hardest.
> Besides having the biggest economy, they can print more of the world's reserve currency.
Both those things will soon become false - US economy will be eclipsed by China, and the process of de-dollarisation of world's reserves is accelerating. The fact that the US can print as many dollars as they want is one of the reasons for it.
Source? Growth rates in China have slowed significantly in the past two years, and demographic collapse is going to render their economy stagnant in the coming decades. Some analysts are reversing their expectation that China will ever pass the US. [1]
China's PPP GDP (which is a more accurate measure of the total size of an economy) is already somewhat larger than that of the US.
Slower growth still means about 5% GDP growth per year, which is much higher than growth in developed economies.
The "demographic collapse" is a gradual decline in population over many decades, offset by vastly improved education among the younger generation entering the workforce. Just to give you an illustrative example, if three workers with 8 years of schooling retire from the workforce, and two workers with college degrees enter the workforce, is that a demographic collapse?
> Just to give you an illustrative example, if three workers with 8 years of schooling retire from the workforce, and two workers with college degrees enter the workforce, is that a demographic collapse?
Yes, because, unfortunately, every economy depends on having workers willing to do occupations that don’t depend on high-level qualifications.
As China’s population ages while the pool of young workers without career aspirations shrinks, where are they going to find all the medical care-assistants, agricultural workers, and things like that? Other countries such as in the Middle East the “solution” was to import labour from India and SE Asia - I don’t believe that approach will work for China at all.
Why would he need a source for something you acknowledge has been the expert consensus for years? Its possible that consensus is wrong but your flat out objection is out of place.
We'll also soon be eclipsed on the technological front. Losing our leading position in semiconductor manufacturing is, I suspect, the first in what will become a pattern. And once we lose economic prominence, military superiority will quickly follow. In 1939, the U.S. Army was the 39th largest in the world, and the country produced just 3,000 military aircraft. In the next five years, the U.S. produced 300,000 aircraft: https://www.pbs.org/kenburns/the-war/war-production.
Honestly it’s confusing to me that India, not China, hasn’t overtaken the world in CS/SE/AI - considering the sheer size of their workforce and their (relative to China) uncensored Internet access.
I think the argument is pretty weak when you lay all the cards on the table.
China's economy was projected to overtake and eventually eclipse the economy of the USA. China is currently staring down an existential population collapse. China's also a net importer of both energy and food.
Pointing to BRICS nations dropping the USD for trade demonstrates a fundamental misunderstanding of what BRICS is.
I'm pretty sure I don't know any of the work from experts but isn't it incredibly unlikely that the US will be unable or unwilling to pay their debt? And doesn't that form the basis of their rating? asking genuinely because that's the limit of my understanding.
Government debt is usually denominated in the currency that government issues. They can print themselves out of debt at any time. At the cost of inflation. And that currency getting devalued against the world's trading currency, the US dollar.
So if the country in question has a huge and diversified economy, this is less of an issue. And if the country in question can print more US dollars, and has never defaulted on its debt in centuries, I don't see how they would let that go.
The actual risk to an investor in US government debt of not getting paid is zero, unless their name is China and they start WW3.
Now, does this mean US government debt is a good investment? That's a different question.
This whole thing is just a negotiating tactic, no one actually expects the US to default. Except maybe the media who is greatly enjoying the extra views from concerned viewers.
That is the definition of a Black Swan. US political parties have audaciously risked the foundations of democracy for the advancement of their own political agendas. It is my forecast that the Speaker of the House's political fragility in ensuring adherence to any concurred deal, may well manifest as the Black Swan, potentially precipitating a default.
If you don't know your political leanings this is a great way to find out: If you actually believe a default is possible you are a Democrat. If you don't think it's possible you are a moderate or a Republican.
Read the comments with this in mind and see how people just have such different worldviews.
A lot of Americans are really tired of some of the things the federal government has been doing and would be more than happy to see it stop by whatever means possible, even if that means some short term economic hardship.
It's a barbell. The Ironclad guarantee or default, there is no mid-rating for USA. This is just wall street pageantry to drum up noise to get a compromise.
If you think it's GOP brinksmanship you are entitled to, but a savvy operator knows, It takes two to tango.
edit1: note: the keyword in the above post is 'savvy operator'. I am not taking political sides and happy to bet $1000 that at the end of the hour there will be compromise. I have seen this song and dance before. So please take your political talking points elsewhere.
The threat of default has been a tool wielded solely by conservatives. And negotiating with terrorists (destructive threats to achieve political ends) is never "compromise".
If you think it's GOP brinksmanship you are entitled to, but a savvy operator knows, It takes two to tango.
You don't need to be a savvy operator at all, you just need to have followed US politics for more than a few years. The parties have been doing this since, what? 2014? We're going on a decade of this. Both parties do it and always compromise just fine in the end. Blaming one party or the other shows a distinct lack of self-awareness.
That was my recollection, but I thought maybe I'd gotten it wrong.
Gotta say, the "takes" I've read on HN while this has been going on have been illuminating. If quite a few people believe this is a "both sides" thing and that both parties are playing games with the debt ceiling, it explains how the GOP could possibly think it's sound strategy. I guess maybe they're even right. It would never have occurred to me that a lot of folks are "reading" this as about-equally the fault of the Democrats, but evidently, they are, and that explains some things.
To be simplistic about it: Republicans want to reduce spending, Democrats want to increase it.
So obviously Republicans would be against raising the debt ceiling, and just as obviously it's the fault of the Democrats that we need to raise it in the first place.
Does that help you understand better what people are thinking? And who they are blaming?
This is disingenuous though. The debt ceiling is about paying for spending that was already budgeted for. The spending has happened.
If the Republican-controlled House wants to reduce spending, they can do that during budget talks. That would be an appropriate time. And it's their Constitutional power.
What they are doing now is using the threat of default to try to get spending concessions. So they are trying to reduce spending, but the debt ceiling is not coupled to it. It just happens to be a piece of leverage they currently have. This entire thing is in bad faith.
> is using the threat of default to try to get spending concessions
I mean McCarthy went on the record to say "We won't default". That's like .. the opposite of a threat.
It's so weird to me how Democrats keep thinking there's actually a possibility of a default, while every moderate and Republican knows very well there is zero possibility of it.
There must be something in the mentality of how people view the world that causes this correlation.
So your assertion is that the gun the GOP is pointing at the US economy isn't a big deal because the economy has a bulletproof vest on?
Or you think that the Democrats are to blame for not capitulating to a hostage-taker's demands?
I'm not a trained economist, so I can't weigh in on the "how big a deal is this really" conversation. But I know how the debt and the debt ceiling have been explained to me, and it sounds as though the "debt ceiling" should not exist. It is not a budgeting item. It is an arbitrary constraint that now only exists to allow the Republicans to play chicken with the world economy.
Want better spending habits? Want federal budgets tied to fiscal caps? Write a bill that requires debt to be factored into budgets at the budget building stage. No one should get to tell the Treasury to stop payment on things we've already told citizens and bondholders we would pay for.
Of course, building a budget on an annual basis is too much for Congress, too, which is why we should radically transform our federal government. Articles 1,2 and 3 need a rewrite. I digress.
It's basic leverage and negotiations. The GOP has to show their base they fought and hanged in there. Just like Democrats have to show that they stood firm. This is more or less PR stunt for respective bases and hoping other side would flitch to get a better deal. A last minute deal will be ironed out and everyone wins.. well except for future American citizens.
The linked article says it plainly: U.S. Treasuries are in a category of their own. But the facade of fair and uniform rules for all is important to keep, so everyone insists on the polite fiction of credit ratings. The cracks only appear when some external event, like the debt ceiling impasse, threatens to undermine that fiction.
2007/2008 showed that there is incredible momentum in credit ratings, and that despite the "rules" there is a log scale relationship with rating, momentum, and risk.
The A/B/C rating system might be more of a disservice than a 0-100 scale.
The debt ceiling "debate" is farcical. The House GOP is arguing we shouldn't pay our bills, even when the laws and actions that generated that spending were passed legally through Congress. I'm of the opinion that the WH should simply ignore the debt ceiling, invoke the 14th Amendment, and keep paying our debts as legally required.
The debt ceiling is about issuing new debt to fund expenditures. It has nothing to do with paying existing debts, or the 14th amendment.
Calling on Biden to bypass Congress is asking him to to violate one of the foundational provisions of Article I. Section 8 makes clear that the power "to borrow Money on the credit of the United States" belongs to Congress.
But if Congress has passed budgets telling the Executive branch how much to tax and how much to spend, and also tells the Executive not to borrow to make up for the shortfall, what is the Executive supposed to do?
The constitution clearly grants congress with the sole powers to tax and borrow, and nothing in the 14th amendment changes that. Interestingly, it is silent on the power to spend. So while the executive must generally faithfully execute the laws congress passes, if they are in conflict there is no choice but to break one of them, and adjusting spending is the one most within the executives defined powers.
Spend what's in the treasury on the highest priority items. Remember that line from Hamilton, where George Washington says "I'm working with a third of what the Congress has promised." Revenues falling short of budgets is not a new problem justifying novel solutions.
By not spending all the money that congress has appropriated.
Technically appropriations are a maximum the government can spend, not a requirement to spend that money. However, Congress does not like the idea of the present just refusing to provide all the appropriated funds to some programs, so they wrote the Impoundment Control Act of 1974, which requires the president to make all the appropriated funds available to the specified programs. Note the word available. Programs are not technically obligated to use all the money, but technically that is up to the program's head. In practice programs will almost always use as close to all of the money as they can get, since if they don't use all the funds, Congress might choose to reduce their appropriation next year.
Because the constitution seems to mandate mandates paying the debt, and leaves the amount of debt up to congress (Article I Section 8), upon hitting the debt ceiling, the president must continue to pay the debt, and must not issue more debt. But the Constitution does not require making all appropriations available so the Constitution will overrule the Impoundment Control Act of 1974, in such a scenario. Clearly if it is impossible for a president to adhere to both the constitution, and a statutory law, it is the statutory law that gives way, not the constitution itself.
So X-day should trigger a partial government shutdown, while the government continues to pay its debt, and fulfill contracts and other statutory payments, but cuts off enough other spending to stop exceeding revenue. This would be similar to what happens when congress fails to pass an appropriations bill.
> But the Constitution does not require making all appropriations available
There are some wrinkles, but generally, litigation over the President’s ability to decline to spend appropriated funds has indicated that it largely does. Now, if Congress had connected the debt ceiling to either a specific formula for funding reduction or a specific grant of authority to impound appropriations, that would be different, but as it is the President, assuming both are independently valid, cannot faithfully execute laws appropriating funds and the law setting the debt limit.
Congress already passed laws approving these expenditures which the president is supposed to execute on, also as per the Constitution. Congress has currently created a situation where they are demanding that certain activities are created and acted on, and are simultaneously refusing to agree to fund them. The 14ths wording seems pretty clear that the American government is required to pay its bills. If Congress didn’t want to have these bills they shouldn’t have approved the programs.
> The 14ths wording seems pretty clear that the American government is required to pay its bills.
It clearly doesn't say anything about "bills." Section 4 says:
> 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. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
The distinction between "debt" and "expenses" is clear and longstanding. Even in the middle ages people would be able to tell you the difference between the crown repaying borrowed money and the crown paying expenses: https://pdxscholar.library.pdx.edu/cgi/viewcontent.cgi?artic....
The debt ceiling was created so that Congress does not have to pass a new bill for each time bonds are issued. It's purpose is to streamline running a modern country, not to be a weapon against the running of the country. It is not and was never intended as a sword of Damocles to keep debt down. It is also carries less weight than the 14th amendment as the Constitution supersedes laws created by Congress like the debt limit was.
You've got it backwards. Congress has effectively delegated its power to issue debt to the Treasury. That would ordinarily be unconstitutional. But the Supreme Court has authorized such delegation so long as Congress provides an "intelligible principle" by which the executive must exercise the power: https://en.wikipedia.org/wiki/Nondelegation_doctrine. The point is that Congress ultimately remains in control.
The debt-ceiling is what makes that whole exercise constitutional to begin with. Congress said: "okay, Treasury can borrow money, but only up to this much." If the executive disregards the debt ceiling, that would break the fiction of delegation, and the executive will have fully wrested a fundamental Congressional power away from Congress. That's the same reason why the 14th amendment cannot override the debt ceiling. Yes, the debt ceiling is a statute. But without it, Treasury has no power to issue any debt.
Dude that is what I said. It's only purpose is so that Congress doesn't have to approve EVERY BOND issue. Congress can for sure approve a new bond issue separate of the debt ceiling. The Dems should put forward a special bond bill to fund keeping the government running that isn't a raise on the debt ceiling but just a bond bill for a specific bond sale. Good luck seeing the Republicans argue not passing that (it's not an increase to the debt ceiling after all). The debt ceiling is purely to make issuing debt easier but was created for and has no other purpose than administrative ease and lower the amount of bills Congress has to pass. It was never intended as a sword of Damocles, and it is definitely superseded by the 14th Amendment.
Hope the Republicans enjoy the civil rights violation lawsuits from everyone who suffers actual damages when their mortgage interest rates go up due to the Republican's violating the 14th Amendment so that the Republicans can benefit from that fallout. Especially now that the head of the Republican party is on the record stating that a failure to raise the debt limit will benefit the Republican's politically come election time.
> The debt ceiling is about issuing new debt to fund expenditures. It has nothing to do with paying existing debts, or the 14th amendment.
This is absolutely incorrect. The debt ceiling is also about existing debt because servicing that debt is one of the government's expenditures.
Specifically:
> By hitting the limit and failing to pay interest payments to bondholders, the United States would be in default, lowering its credit rating and increasing the cost of its debt.
And doing so would violate the 14th amendment which states that "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."
In short, in past years Congress authorized the government to spend, and in doing so drove the issuance of government bonds. By failing to increase the debt ceiling now, Congress is effectively stopping the government from paying interest on the debt previously issued to pay for those past expenditures they authorized. In effect, they ran up the credit card and now they're stopping the executive from paying the bill.
The US can cover debt servicing costs indefinitely without raising the debt ceiling. It would cause a lot of other cuts to essential services though, so obviously that is not a desirable outcome either. But it is incorrect to frame this as hitting the debt ceiling necessarily forcing a default.
And it's equally incorrect to claim that the debt ceiling does not, in any way, have an impact on existing debt, as was claimed by the person I was responding to.
Moreover, the executive's ability to independently trim spending absolutely has limits, and I've seen no credible claims that the executive can service debt costs "indefinitely":
> So-called “prioritization” of payments, or making sure certain obligations among the more than 80 million that get paid per month are paid before others – such as servicing debts to bondholders before making other payments in order to avoid technical default – has been criticized as unrealistic by Treasury officials and economists.
The government takes in close to $5 trillion a year [0], debt servicing is $496.5 billion [1]. So it's easily able to be covered by existing revenues.
With respect to prioritization, I'm sure Treasury officials don't want to be put in that position, but if we end up hitting the debt ceiling they will need to make it work.
> First, under any hypothetical prioritization scenario, the federal government would be failing to meet some of its obligations. There is no legal precedent for choosing to pay certain bills before others. Immediate court battles would likely arise over the legality of paying, for example, foreign bondholders over American citizens. What would be the logical interpretation of a court ruling in favor of a legal claimant? A default on the full faith and credit of the United States?
Given that the constitution talks about "debts" without being specific about what that means, I think it's also debatable whether or not the 14th amendment applies to other types of spending obligations beyond just interest owed to bondholders.
“Debt” isn’t an ambiguous term that requires creative interpretation. The Magna Carta from 1215 has several provisions addressing “debt,” “interest,” “sureties,” etc.
Debt payments are a small fraction of government revenues. The executive doesn't need to borrow money to make interest payments.
It's also not clear to me the 14th amendment means that the federal government can't default on the debt. A fairer reading is that it means that the government can't repudiate particular bonds. E.g. Biden can't say "I'm not going to pay any bonds issued under Trump."
Congress controls expenditures already. The president is required make all appropriated funds available to the programs in question. Now technically the programs are allowed not to spend all the appropriated money, but that is up to those running that program, and as a general rule those programs will spend all the money, to within a rounding error. If the president were to issue orders to agencies to not spend all appropriated money on specific programs that would be considered "impoundment", which was prohibited by the Impoundment Control Act of 1974.
Congress also largely controls revenue. The overwhelming majority of revenue is taxes. There is little that the president can do to significantly change the revenue received. [1] Since congress has left a deliberate deficit, the president is left with no choice but to issue more debt to make up that shortfall. But the debt ceiling would prevent that.
The classical thinking (for some reason) is that if the debt ceiling is hit, the president will be forced not to pay the interest on the debt, since the appropriations are mandatory. This is the view that sees the debt ceiling itself as questionably constitutional, viewing the act of appropriating more than expected revenues to be authorizing the issuance of debt. Unfortunately it is also a wrong view.
The correct view is that it is the Impoundment Control Act of 1974 that is unconstitutional, and that upon hitting the debt ceiling the President is obligated to impound appropriations as needed to avoid going over the debt ceiling. The result would probably be a partial government shutdown, similar to what happens when congress fails to pass an appropriation bill.
This, of course, only works if the revenue received still exceeds the required interest payments on the debt.
-----
Footnote:
[1] The treasury cannot even print more paper money, since that is up the federal Reserve for Federal Reserve Notes, and while U.S. Notes are technically still authorized, Congress has set a limit of $300,000,000 U.S. Notes. It could mint more coins and deposit them with fed, but manufacturing costs are appropriated funds, and it is not possible to mint enough normal coins with the appropriated amounts to make a dent. Many coins (including the penny, and the >$1 precious metal ones cost more to make then their face value). Hence why the trillion dollar coin proposal used a platinum coin, which is the only category where the Treasurer gets to pick the size design and face value.
There is one additional wrinkle. The Treasury issuing bonds in disregard of the debt ceiling creates a constitutional problem. Although the debt ceiling itself is statutory, Treasury issuing bonds is an exercise by the executive of powers committed to Congress under Article I, and delegated to the Treasury under specific terms. If there was no debt ceiling, there the Second Liberty Bond Act of 1917 is probably an unconstitutional delegation of power to the executive. The debt ceiling is the "intelligible principle" that saves the whole scheme from non-delegation doctrine.
Given that, you're correct. Faced with a choice between unconstitutionally exercising powers delegated by Congress in violation of the express terms of delegation, and violating an ordinary statute, clearly the correct course of action is to violate the statute.
This is why the WH isn't budging on negotiating on this, and I agree with them on that. The time to debate has come and gone, threatening to put the credibility of the US in peril because one side wants to get some bill passed is just silly.
Also we need to look at which presidencies inflate the debt burden, and that's more and more commonly solely one side, the same side threatening to put our country in peril. It's almost like massive tax cuts for the rich have left our country with less money to pay our bills. Weird!
Exactly. The budget itself is a law that the executive is required to carry out. If Congress passes contradictory laws, the president has to make a decision on which to obey, and is supposed to do whatever gives him the least arbitrary power. Just following the budget is less arbitrary than effectively wielding a line-item veto by deciding which items get funded.
Then the economy will carry on, and if the GOP sues and actually wins, it will be very clear that they were the ones who blew it up. I doubt they'd be dumb enough to carry through with that.
Unfortunately that cant work as you like. UK has their Feds too and can print more easily than US but debts require purchase. Saudi and China already stop buying. Liquidity of T-bills have dropped drastically compare what it was 10 years ago. Now Fed can step in and buy those debts pumping printed money directly to US government coffers. This in turn fire up inflation. Already many countries actively aboid using USD. Reduction of using USD in worldwide commerce now hit back American shores. So as long as US governments not reigning the expenditure, Fed showing printing money DIRECTLY, inflation will keep penalising Americans. This time, there are alternatives compare to 70s. People can migrate. Immigrant can stop migrating to USA (Asians now stopped significantly migrating and investing in US in the last 3 years). Anytging Americand needed like Russian uranium and Chinese goods are now sold to American market via blackmarket. This in turn fuel the criminal organization. This is why Americans now facing rampant crimes as the increase in crime couldnt be match by law enforcement. So all this talk of ignoring debt ceiling already happening since a decade ago and the repercussions already in the works. The more you want to ignore the ceiling the more of the above hitting Americans.
> The House GOP is arguing we shouldn't pay our bills
No they are arguing if we didn't spend so much we wouldn't be in this problem in the first place.
The mistake you are making is thinking that there is any chance whatsoever the GOP will actually let the US default on it's debts. There is zero chance of this.
This is simply an opportune time to negotiate, that's all. "Wait till the last minute."
I'm gong to be honest, I don't care about what debt agencies say. I remember the US was downgraded a decade or so ago by another rating agency, and literally no consequences happened because of it.
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[ 4.9 ms ] story [ 186 ms ] threadEDIT: I find it humorous that people are taking offense and down-voting my comment as though I was referring to only a subset of the people in DC as clowns. We've been running a deficit annually since the early 80s (with one anomalous year in the 90s) and the fact we've not had blow-back in the credit markets is astounding. This is only possible when we enforce the petro-dollar system with the might of the US military, something the rest of the world has grown weary of. Once we lose reserve currency status our gov't debt will indeed slide to junk status and right quick.
That’s it, that’s the whole reason. The entire global trade system depends on us flattening any bad actors with the threat of force. Other players would like to edge us out, but they can’t yet.
I think the sunset on that ability is within view. The petro-dollar is key to our status as the world reserve currency and not only is oil now being sold in Rubles and Yuan but the push to eliminate fossil fuels also undermines the special status the USD enjoys.
Are any of their bonds rated "junk"?
Not defending government debt by the way - I think it's an especially insidious form of tax that devalues the entire currency and hits the poor the hardest.
Both those things will soon become false - US economy will be eclipsed by China, and the process of de-dollarisation of world's reserves is accelerating. The fact that the US can print as many dollars as they want is one of the reasons for it.
[1] https://asia.nikkei.com/Economy/China-s-GDP-unlikely-to-surp...
Slower growth still means about 5% GDP growth per year, which is much higher than growth in developed economies.
The "demographic collapse" is a gradual decline in population over many decades, offset by vastly improved education among the younger generation entering the workforce. Just to give you an illustrative example, if three workers with 8 years of schooling retire from the workforce, and two workers with college degrees enter the workforce, is that a demographic collapse?
Yes, because, unfortunately, every economy depends on having workers willing to do occupations that don’t depend on high-level qualifications.
As China’s population ages while the pool of young workers without career aspirations shrinks, where are they going to find all the medical care-assistants, agricultural workers, and things like that? Other countries such as in the Middle East the “solution” was to import labour from India and SE Asia - I don’t believe that approach will work for China at all.
China's economy was projected to overtake and eventually eclipse the economy of the USA. China is currently staring down an existential population collapse. China's also a net importer of both energy and food.
Pointing to BRICS nations dropping the USD for trade demonstrates a fundamental misunderstanding of what BRICS is.
there is no external context for a buyer of debt to assess value outside of sovereign currencies, which are basically ALL junk for G7 nations
the other G7 nations with worse stats all have AAA...its meaningless...if you want to buy G7 debt, you MUST buy toxic waste
maybe one day Mars will issue high-quality debt backed by hard assets...until then...
Government debt is usually denominated in the currency that government issues. They can print themselves out of debt at any time. At the cost of inflation. And that currency getting devalued against the world's trading currency, the US dollar.
So if the country in question has a huge and diversified economy, this is less of an issue. And if the country in question can print more US dollars, and has never defaulted on its debt in centuries, I don't see how they would let that go.
The actual risk to an investor in US government debt of not getting paid is zero, unless their name is China and they start WW3.
Now, does this mean US government debt is a good investment? That's a different question.
Almost there. Come on, just a bit further.
That is the definition of a Black Swan. US political parties have audaciously risked the foundations of democracy for the advancement of their own political agendas. It is my forecast that the Speaker of the House's political fragility in ensuring adherence to any concurred deal, may well manifest as the Black Swan, potentially precipitating a default.
Read the comments with this in mind and see how people just have such different worldviews.
bet you 50 bucks it won't happen
If you think it's GOP brinksmanship you are entitled to, but a savvy operator knows, It takes two to tango.
edit1: note: the keyword in the above post is 'savvy operator'. I am not taking political sides and happy to bet $1000 that at the end of the hour there will be compromise. I have seen this song and dance before. So please take your political talking points elsewhere.
Do you believe the Democrats would decline, if the GOP House offered a "clean" debt ceiling increase?
You don't need to be a savvy operator at all, you just need to have followed US politics for more than a few years. The parties have been doing this since, what? 2014? We're going on a decade of this. Both parties do it and always compromise just fine in the end. Blaming one party or the other shows a distinct lack of self-awareness.
When have the Democrats refused to raise the debt ceiling without conditions? Maybe they have and I've just missed it.
Reading through history, it seems it has always been Republicans doing it. You could even say they invented it.
Gotta say, the "takes" I've read on HN while this has been going on have been illuminating. If quite a few people believe this is a "both sides" thing and that both parties are playing games with the debt ceiling, it explains how the GOP could possibly think it's sound strategy. I guess maybe they're even right. It would never have occurred to me that a lot of folks are "reading" this as about-equally the fault of the Democrats, but evidently, they are, and that explains some things.
So obviously Republicans would be against raising the debt ceiling, and just as obviously it's the fault of the Democrats that we need to raise it in the first place.
Does that help you understand better what people are thinking? And who they are blaming?
If the Republican-controlled House wants to reduce spending, they can do that during budget talks. That would be an appropriate time. And it's their Constitutional power.
What they are doing now is using the threat of default to try to get spending concessions. So they are trying to reduce spending, but the debt ceiling is not coupled to it. It just happens to be a piece of leverage they currently have. This entire thing is in bad faith.
I mean McCarthy went on the record to say "We won't default". That's like .. the opposite of a threat.
It's so weird to me how Democrats keep thinking there's actually a possibility of a default, while every moderate and Republican knows very well there is zero possibility of it.
There must be something in the mentality of how people view the world that causes this correlation.
It... definitely helps me understand what I'm seeing on here better, yes.
And likewise spending did get reduced, although not maybe as much as Republicans would like.
Basically the two parties need each other. And the best legislation happens from a mixed Congress.
Or you think that the Democrats are to blame for not capitulating to a hostage-taker's demands?
I'm not a trained economist, so I can't weigh in on the "how big a deal is this really" conversation. But I know how the debt and the debt ceiling have been explained to me, and it sounds as though the "debt ceiling" should not exist. It is not a budgeting item. It is an arbitrary constraint that now only exists to allow the Republicans to play chicken with the world economy.
Want better spending habits? Want federal budgets tied to fiscal caps? Write a bill that requires debt to be factored into budgets at the budget building stage. No one should get to tell the Treasury to stop payment on things we've already told citizens and bondholders we would pay for.
Of course, building a budget on an annual basis is too much for Congress, too, which is why we should radically transform our federal government. Articles 1,2 and 3 need a rewrite. I digress.
Posturing that you are willing to nuke the economy is bad, even if it's fake.
The A/B/C rating system might be more of a disservice than a 0-100 scale.
Calling on Biden to bypass Congress is asking him to to violate one of the foundational provisions of Article I. Section 8 makes clear that the power "to borrow Money on the credit of the United States" belongs to Congress.
Personally, I’d like to see what happens if the entire executive branch just goes on-strike, French-style.
Technically appropriations are a maximum the government can spend, not a requirement to spend that money. However, Congress does not like the idea of the present just refusing to provide all the appropriated funds to some programs, so they wrote the Impoundment Control Act of 1974, which requires the president to make all the appropriated funds available to the specified programs. Note the word available. Programs are not technically obligated to use all the money, but technically that is up to the program's head. In practice programs will almost always use as close to all of the money as they can get, since if they don't use all the funds, Congress might choose to reduce their appropriation next year.
Because the constitution seems to mandate mandates paying the debt, and leaves the amount of debt up to congress (Article I Section 8), upon hitting the debt ceiling, the president must continue to pay the debt, and must not issue more debt. But the Constitution does not require making all appropriations available so the Constitution will overrule the Impoundment Control Act of 1974, in such a scenario. Clearly if it is impossible for a president to adhere to both the constitution, and a statutory law, it is the statutory law that gives way, not the constitution itself.
So X-day should trigger a partial government shutdown, while the government continues to pay its debt, and fulfill contracts and other statutory payments, but cuts off enough other spending to stop exceeding revenue. This would be similar to what happens when congress fails to pass an appropriations bill.
There are some wrinkles, but generally, litigation over the President’s ability to decline to spend appropriated funds has indicated that it largely does. Now, if Congress had connected the debt ceiling to either a specific formula for funding reduction or a specific grant of authority to impound appropriations, that would be different, but as it is the President, assuming both are independently valid, cannot faithfully execute laws appropriating funds and the law setting the debt limit.
It clearly doesn't say anything about "bills." Section 4 says:
> 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. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
The distinction between "debt" and "expenses" is clear and longstanding. Even in the middle ages people would be able to tell you the difference between the crown repaying borrowed money and the crown paying expenses: https://pdxscholar.library.pdx.edu/cgi/viewcontent.cgi?artic....
The debt-ceiling is what makes that whole exercise constitutional to begin with. Congress said: "okay, Treasury can borrow money, but only up to this much." If the executive disregards the debt ceiling, that would break the fiction of delegation, and the executive will have fully wrested a fundamental Congressional power away from Congress. That's the same reason why the 14th amendment cannot override the debt ceiling. Yes, the debt ceiling is a statute. But without it, Treasury has no power to issue any debt.
Hope the Republicans enjoy the civil rights violation lawsuits from everyone who suffers actual damages when their mortgage interest rates go up due to the Republican's violating the 14th Amendment so that the Republicans can benefit from that fallout. Especially now that the head of the Republican party is on the record stating that a failure to raise the debt limit will benefit the Republican's politically come election time.
This is absolutely incorrect. The debt ceiling is also about existing debt because servicing that debt is one of the government's expenditures.
Specifically:
> By hitting the limit and failing to pay interest payments to bondholders, the United States would be in default, lowering its credit rating and increasing the cost of its debt.
https://www.investopedia.com/terms/d/debt-ceiling.asp
And doing so would violate the 14th amendment which states that "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."
In short, in past years Congress authorized the government to spend, and in doing so drove the issuance of government bonds. By failing to increase the debt ceiling now, Congress is effectively stopping the government from paying interest on the debt previously issued to pay for those past expenditures they authorized. In effect, they ran up the credit card and now they're stopping the executive from paying the bill.
Moreover, the executive's ability to independently trim spending absolutely has limits, and I've seen no credible claims that the executive can service debt costs "indefinitely":
https://www.crfb.org/papers/qa-everything-you-should-know-ab...
> So-called “prioritization” of payments, or making sure certain obligations among the more than 80 million that get paid per month are paid before others – such as servicing debts to bondholders before making other payments in order to avoid technical default – has been criticized as unrealistic by Treasury officials and economists.
With respect to prioritization, I'm sure Treasury officials don't want to be put in that position, but if we end up hitting the debt ceiling they will need to make it work.
[0] - https://fiscal.treasury.gov/reports-statements/financial-rep...
[1] - https://fiscal.treasury.gov/reports-statements/financial-rep...
https://bipartisanpolicy.org/explainer/prioritization/
Of note is this:
> First, under any hypothetical prioritization scenario, the federal government would be failing to meet some of its obligations. There is no legal precedent for choosing to pay certain bills before others. Immediate court battles would likely arise over the legality of paying, for example, foreign bondholders over American citizens. What would be the logical interpretation of a court ruling in favor of a legal claimant? A default on the full faith and credit of the United States?
Given that the constitution talks about "debts" without being specific about what that means, I think it's also debatable whether or not the 14th amendment applies to other types of spending obligations beyond just interest owed to bondholders.
It's also not clear to me the 14th amendment means that the federal government can't default on the debt. A fairer reading is that it means that the government can't repudiate particular bonds. E.g. Biden can't say "I'm not going to pay any bonds issued under Trump."
Congress also largely controls revenue. The overwhelming majority of revenue is taxes. There is little that the president can do to significantly change the revenue received. [1] Since congress has left a deliberate deficit, the president is left with no choice but to issue more debt to make up that shortfall. But the debt ceiling would prevent that.
The classical thinking (for some reason) is that if the debt ceiling is hit, the president will be forced not to pay the interest on the debt, since the appropriations are mandatory. This is the view that sees the debt ceiling itself as questionably constitutional, viewing the act of appropriating more than expected revenues to be authorizing the issuance of debt. Unfortunately it is also a wrong view.
The correct view is that it is the Impoundment Control Act of 1974 that is unconstitutional, and that upon hitting the debt ceiling the President is obligated to impound appropriations as needed to avoid going over the debt ceiling. The result would probably be a partial government shutdown, similar to what happens when congress fails to pass an appropriation bill.
This, of course, only works if the revenue received still exceeds the required interest payments on the debt.
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Footnote: [1] The treasury cannot even print more paper money, since that is up the federal Reserve for Federal Reserve Notes, and while U.S. Notes are technically still authorized, Congress has set a limit of $300,000,000 U.S. Notes. It could mint more coins and deposit them with fed, but manufacturing costs are appropriated funds, and it is not possible to mint enough normal coins with the appropriated amounts to make a dent. Many coins (including the penny, and the >$1 precious metal ones cost more to make then their face value). Hence why the trillion dollar coin proposal used a platinum coin, which is the only category where the Treasurer gets to pick the size design and face value.
Given that, you're correct. Faced with a choice between unconstitutionally exercising powers delegated by Congress in violation of the express terms of delegation, and violating an ordinary statute, clearly the correct course of action is to violate the statute.
Also we need to look at which presidencies inflate the debt burden, and that's more and more commonly solely one side, the same side threatening to put our country in peril. It's almost like massive tax cuts for the rich have left our country with less money to pay our bills. Weird!
Then the economy will carry on, and if the GOP sues and actually wins, it will be very clear that they were the ones who blew it up. I doubt they'd be dumb enough to carry through with that.
less than 10% of Americans even know who McCarthy is, no one will blame him
Unfortunately for the Republicans that are trying to play brinksmanship, that will make Biden look like a hero.
A huge economic disaster occurs, doesn't matter who caused it, but then Biden gets to swoop in and solve it with the flick of a pen. Cue victory lap.
Sure, the Republicans will try to tie it down and to make it seem like he caused it. Doesn't matter though, because he's the one that solves it.
As Rove said, never let a good crisis go to waste.
Democrats think that.
Republican voters are well aware that the the GOP is not actually going to let the US default.
But because Democrats seem unaware of this the GOP is using it as a good time to negotiate with little risk.
No they are arguing if we didn't spend so much we wouldn't be in this problem in the first place.
The mistake you are making is thinking that there is any chance whatsoever the GOP will actually let the US default on it's debts. There is zero chance of this.
This is simply an opportune time to negotiate, that's all. "Wait till the last minute."
Seems reasonable, who would argue that the US 2022 - a Democrat controlled budget - was fiscally austere? It also has automatic budget increases.
Senate has has a month to reject it, modify it, propose something else. They did nothing.