January 17, 2013
Guest Contribution: "Debt Ceilings, Bombs, Cliffs and the Trillion Dollar Coin"
Today, we're very fortunate to have as a guest contributor Jeffrey Frankel, Harpel Professor at Harvard's Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. His weblog can be found here.
Needless to say, the US has a long-term debt problem. The problem is long-term both in the sense that it pertains to the next several decades rather than to this year. (Indeed, the deficit/GDP ratio has been falling since 2009, despite the weakness of the economy.) The problem is also long-term in the sense that we have known about it for a long time; it was clear in 1991 and should still have been clear in 2001.
It should be almost as needless-to-say that the approaching debt ceiling bomb is not helpful in solving our fiscal situation, any more so than were previous standoffs: the January 1 fiscal cliff; before that, the August 2011 debt ceiling standoff, which led Standard and Poor’s to downgrade US debt for the first time in history; before that, the 1995 shutdown of the government, which largely discredited Republican House Speaker Newt Gingrich.
The current debt ceiling bomb is, of course, another attempt to hold the country hostage, under threat of blowing us all up. The conflict is usually phrased as a question of ideological polarization, a battle between strong fiscal conservatives and their opponents. This familiar frame does not seem right to me. There is in fact no correlation or consistency between the practice of federal fiscal discipline and the political rhetoric, either across states or across time.
What are the demands of the hostage-takers? Even if there existed an explicit ransom letter detailing specific severe spending cuts, in exchange for which it credibly offered to raise the debt ceiling, President Obama’s refusal to negotiate under such conditions would be fully justified. But the situation is worse than that. There is no specific set of demands, and never has been. I truly believe there does not exist any set of spending cuts that the blackmailers would accept if they came from Obama.
Remember the occasions in the past when he has announced that he will accept the Republican position on some issue, only to have his opponents switch places, saying “if you are in favor of it, we are against it”? One example was the idea of Obamacare itself, which originally came from conservative think tanks and Mitt Romney. Another example was the proposal for an up-or-down version of what became the Simpson-Bowles Commission.
There are only so many dollars that can be cut out of PBS and foreign aid. If, hypothetically, Obama were to come out in support of severe cuts in farm support, Medicare benefits, and other programs, Republicans would attack him for these hurtful cuts. (Remember attacks on Obama’s health plan for non-existent “death panels” and fictional cuts to Medicare benefits?) Simultaneously, Republicans would say that the cuts were not big enough.
What would be enough? Some debt crazies have said they think it would be fine if we failed to raise the debt ceiling. Some are crazy enough to think it is not a problem if the US government were to default on its legal obligations. (They may not realize that defaulting on the bill for office supplies that you ordered from Staples is as bad as missing interest payments on your debt.) But some want to enforce a balanced budget immediately: the refusal to allow the government to borrow any more is not just a negotiating tactic, but is the outcome they want. This is crazy in light of the adverse economic and financial impact (which would be much worse than that of the fiscal cliff that we just dodged two weeks ago). But the prize for ultimate insanity must go to those who want to eliminate the budget deficit rapidly and insist on doing it without raising taxes, cutting defense, or cutting programs for seniors. These people deserve the label “deranged” because what they want is literally for a false proposition to be true. It is arithmetically impossible to eliminate the budget deficit if the cuts are to come primarily in non-defense discretionary spending.
To be very clear, I don’t think most Republicans believe all of this. Certainly my many economist friends who are Republicans do not. The truly “deranged” people are just a subset of the “crazy” people, who are in turn a subset of those who are unwise enough to favor the debt ceiling threat as a tactic, who are in turn a subset of the Republican Party. The problem is that it is this minority of a minority that is holding the whole country hostage. The size of the minority evidently shrunk after the August 2011 debt ceiling debacle, after the November 2012 election, and after the January 1 cliff. But it still has its finger on the grenade pin.
So that leads us to the question of tactics. A variety of stratagems have been proposed for the White House to use to defuse the bomb, if it comes to that. These are all designed to be ways that the federal government can continue to meet its legal obligations beyond March, even if the Congress doesn’t raise the debt ceiling. While the unconventional proposals are beyond anything that would have been contemplated under normal conditions, they should be considered, in light of the correspondingly absurd situation in which the country would find itself. If Congress fails to do its job, the White House would have to choose between two contradictory laws: the one that Congress passed to authorize spending and taxes versus the debt ceiling law that purports to prohibit the government to borrow to make up the difference between spending and taxes. Following that prohibition would have disastrous impacts on the country and the world.
- Given the contradiction between the two laws, President Obama could just ignore the debt ceiling, and follow the direct implications of the spending and taxation laws. I am not qualified to judge the legality of this course of action. The courts would eventually have to sort it out. The hope is that by then the Congress would have come to its senses and raised the debt limit.
- In the meantime, the White House might try invoking the 14th Amendment, which includes the passage “The validity of the public debt of the United States...shall not be questioned,” as Bill Clinton suggested at the time of the last debt ceiling standoff, in 2011. Again the Supreme Court would eventually have to decide the issue.
- The Treasury could issue “IOUs” to the office supply stores, soldiers, Social Security recipients, etc. The IOUs would just be written acknowledgements of a legal fact: that the government owes these people money. Maybe the Federal Reserve could let it be known that it will honor these IOUs. (There is probably something wrong with this, or somebody besides me would have proposed it already.)
- The government writes an option to buy all its property and buildings for $1, and then sells that very valuable option to the Federal Reserve for something like its true value. This proposal has been made by the Yale constitutional expert Jack Balkin last time around, from which I infer that it is not obviously contrary to the law.
- And finally, the most colorful of the proposals: the trillion dollar coin. The Treasury would exercise its legal authority to mint a commemorative coin made out of platinum, with a face value of $1 trillion. The Federal Reserve would then buy the coin for $ 1 trillion, allowing the Treasury to pay its obligations by drawing down its checking account at the Fed up to that amount. This proposal originated in the blogosphere and was one of those anointed by Balkin in July 2011. Paul Krugman raised its prominence by declaring his support earlier this month.
Contrary to some fears, none of these proposals need result in the money supply being any larger than it would otherwise be. The Federal Reserve determines the money supply. If it creates a new component of money by buying a platinum coin, a property option or IOUs, it can offset it by shrinking other components of the money supply by the same amount, leaving the total unchanged.
The Obama Administration so far is eschewing gimmicks, and is calling on the Congress to do its job in a responsible manner. This is the right approach.
But in the event that the minority does succeed in blocking a debt increase, it may be worth turning to some legal gimmick to avert the financial and economic catastrophe. Of the five proposals bulleted above, the platinum coin is the one that seems to have the most experts currently expressing belief in its legality. It is certainly clever. Unfortunately, it would probably be the worst from a political standpoint. The reason is –- I am guessing here –- there is a fairly high overlap between the debt crazies (defined above) and people who have paranoid conspiracy theories that relate to the Fed, money and precious metals (especially gold, but platinum is too close for comfort). For all I know, some of these people are the same who believe that Obama was born outside the U.S. (That would fall into the category of deranged propositions, also defined above; but there is no need for us to go there.) When you are dealing with a crazy person, it is best to avoid anything that would pour gasoline on the flames of his paranoia. We actually want to win back some of those people who are merely misguided but not really insane. After all, just getting past the current debt cliff wouldn’t solve the problem, with sequester and shutdown deadlines also looming. So I’d go for some other legal gimmick, one that would be less likely to feed the paranoia and more likely to continue chipping away at the ongoing erosion of popular support for the extremists.
This post written by Jeffrey Frankel.
Posted by Menzie Chinn at January 17, 2013 10:12 AMdigg this | reddit
One comment accidentally deleted. Please repost if your comment does not appear. Apologies. MDC.
Posted by: Menzie Chinn at January 17, 2013 12:17 PM
As we sit here right now an army of trolls marches on your castle. They bring tales of the old warriors Von Mises and Rothbard and there war against the fabled statists of yesteryear.
Be afraid. Be very afraid.
Posted by: Shaun at January 17, 2013 12:21 PM
Funny that Mises and Rothbard sure believed in "market statism". Why nobody calls them on that is funny. Dissolve the Bourgeois state into international slave states based around "market law" sounds like degeneration. Even Ayn Rand was scared of it.
Then the capital owners are overthrown thus begins the rule of the slaves.........hence, the new world order isn't "one world government", but a stateless, casteless world of no culture, identity or race. Just organic individuals living in a hunter/gatherer lifestyle pursuing their own carnal ambitions.
Guenon shakes in disgust..........
Posted by: The Rage at January 17, 2013 01:38 PM
It's not "different this time". The total amount of public (local, state, AND federal) AND private debt (including especially non-financial corporate debt at a record to GDP and back to record highs of 1929 and Japan in '89-'95) to after-tax wages, profits, and gov't receipts is what will bury us.
All "money" is a debt instrument, the value of which is the compounding interest to infinite term, i.e., a contract that requires the promise to repay the existing debt-money claims with more debt-money growing at a sufficiently fast rate to service existing debts AND provide purchasing power for incremental growth of goods and services.
However, total US credit market debt owed, i.e., "money", to term now carries with it an imputed compounding interest claim equivalent to virtually 100% of wages, production, profits, and gov't receipts for all eternity.
Therefore, there can be no further growth of public and private debt, i.e., "money", to GDP because all future marginal labor product, profits, and gov't receipts are committed to the total claims by the top 0.1% owners of the debt-money and its imputed interest claims.
What the bottom 90%+ of households need is after-tax INCOME, purchasing power, and affordable medical services, not more debt, higher taxes, and medical "insurance".
Labor needs INCOME not additional claims from gov't taxes and increasing debt service burden from the "rentier tax", i.e., compounding interest in perpetuity.
The top 0.1% hold all of the debt-money claims against households, firms, and gov'ts. The next 0.9-9.9% hold subordinate claims via various debt-money instruments against the claims of the top 0.1%. The bottom 90% own nothing and merely borrow "their money" at interest and circulate it for subsistence, if they're lucky. This is a self-defeating, feudal-like, manorial system of rentier land tenure serfdom for the bottom 90%.
Until debt/wages and /GDP falls by 40-50% and onerous labor taxation is reduced or eliminated, including on self-employment, real GDP per capita will continue to contract, tax receipts will not increase, and we will continue on the path towards collapse and the zombie apocalypse.
We are becoming increasingly debt-money zombies who will eventually be unable to subsist because there is no possible mathematical way to make good on the promises implied by the debt-money claims by the top 0.1% on the necessary growth of wages, profits, and gov't taxing and spending.
The next 9% professional middle class think that they will be protected by their lucrative incomes, pensions, and stock market holdings; however, all of these debt-money proxies are derivative of, and dependent upon the growth of, the claims by the top 0.1% on the labor of the bottom 90%, profits of the Fortune 25-300 firms, and local, state, and gov't receipts.
We are all debt-money zombies now, only most of us have yet to be forced into developing a taste for human flesh; but we will.
Posted by: Bruce Carman at January 17, 2013 02:04 PM
Some debt crazies have said they think it would be fine if we failed to raise the debt ceiling. Some are crazy enough to think it is not a problem if the US government were to default on its legal obligations.
By your own definition, President Obama must be included in your list of "crazies". He held this position in the past, and would no doubt hold this position again if he was a senator we had a Conservative president.
"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. ... I therefore intend to oppose the effort to increase America’s debt limit.” — Then-Sen. Barack Obama, floor speech in the Senate, March 16, 2006.
Posted by: tj at January 17, 2013 02:09 PM
Two earner households to be hardest hit by tax increases, says Bloomberg
Posted by: Steven Kopits at January 17, 2013 02:09 PM
tj Unlike the Tea Party crazies and not a few posters on this blog, at least President Obama has shown that he is capable of learning from his mistakes.
Prof. Frankel Thanks. For what it's worth, the US govt has already started issuing IOUs (i.e., Krugman's "moral coupons") to cover employee Thrift Saving Plan (the govt's version of a 401k plan) that are applied towards acquiring government bonds. The Treasury has also been "borrowing" against pension funds to support daily cash management. Most govt agencies are supposed to identify by COB tomorrow all of the contracts and temporary employees that will be terminated. For example, virtually all repairs of military equipment scheduled to be inducted after 1 April 2013 were cancelled a couple of days ago. That's going to have a huge impact on certain Red State congressional districts where most of the work is done.
Posted by: 2slugbaits at January 17, 2013 03:18 PM
Thanks Bruce Carmen for underlining the obvious. Our tragedy remains the absolute fecklessness of the international banking system and G10 government "regulators". Instead of letting the over-leveraged shadow-banking system collapse, freeing resources and property for future generations, we have subsidized the trolls, ensuring that the mountain of debt will plague society for many decades into the future.
Posted by: MarkS at January 17, 2013 04:18 PM
first, the GOP is already planning how, not if, the best way to cave is.
second, the nutbags who think default is ok are a minority in the GOP.
third, if Obama mints a coin the GOP will spin it as "see he just makes stuff up to spend spend spend." most people don't understand the bizarre logic of a continuing resolution that ends March 15th, but Congress only authorized financing through Dec 31. Obama will immediately lose the political argument by resorting to a "gimmick" to spend. perception is reality.
thankfully he has ruled it out, calling the GOP bluff. see #1.
Posted by: dwb at January 17, 2013 05:03 PM
Once upon a time an uncle, Uncle Sam, visited the home of distant relatives. He told his relatives that he wanted to reward them for their goodness by taking their children to the circus. The parents thought this a wonderful idea and gave their consent. As the night wore on the parents began to worry because their children had not returned.
Early the next morning Uncle Sam came up the walk and, greeting the parents at their door, asked them for $50 per child.
“Why should we pay $50 per child?" the father shouted. "We want you to bring our children home.”
Uncle Sam explained that the children were at his 24/7 circus. "They can eat what they want, there are places to sleep, and they can enjoy the show."
The father became more angry and demanded that his children be brought home. With a dejected look Uncle Sam spoke softly, “Why do you want your children to starve?” He then turned and walked away.
That evening the newspaper was delivered and on the front page in large letters above the fold was the headline, PARENTS STARVE CHILDREN.
As the second night fell news reporters began to surround the home, but the parents were more distraught because their children had been taken. Through the darkness Uncle Sam once again walked with great strides up the walk toward the house. He was magnificent in the light of the TV cameras. He pounded insistently on the door. Once the parents came to the door before they could utter a word he spoke to the cameras.
“These parents are insisting that their children not be allowed to go to the circus, and additionally they are refusing to pay for any of their needs. Only heartless people would do such a thing.” Then he turned and walked away.
Through the throng of reporters following Uncle Sam and the shout of questions, the parents attempted to explain what had happened, but the news media was more interested in Uncle Sam and his circus.
The following morning Uncle Sam returned to the home and now demanded $100 per child and he played a tape recording of the youngest crying because he was hungry. The parents shouted and fumed but eventually to save their children they consented and paid the ransom.
“When will we see our children again,” the mother pleaded in agony.
“They may return anytime they want to as long as all of their bills have been paid,” replied Uncle Sam and he walked away.
That afternoon once again in the light of the media Uncle Sam stood in front of the home and began to speak.
“The children who were raised in this house were refused food and the right to go to the circus. Through my efforts that has been resolved, for the time being, but these children have not been to school. It is shameful that the parents have not paid for the children’s schooling. We will be presenting them with a modest proposal. Statistics show that the cost of schooling for one child is $2,000 per week. We will ask the parents to only pay half that amount.”
The Uncle Sam walked to the door and handed the parents his new “request,” $1,000 per child for schooling and $50 per child for food.
As the days continued Uncle Sam continued to return demanding more and more: costs for health care, cost for security, maintenance of their housing, clothing, a retirement fund. The parents said they did not have the money and they revealed that a local investigator found that that Uncle Sam only spent $0.25 of every dollar on the children while taking $0.75 for himself.
Uncle Sam was indignant that they would refuse to pay him for his cost of caring for their children. Did they expect him to do this for free? The parents insisted that they had no more money.
"Finance your car and take a second mortgage on your home. These are your children!" Uncle Sam insisted. "Surely you will not attempt to blackmail your poor uncle who cares for your children simply because of your debt limit?"
In time the parents lost their home and their cars. With no transportation they lost their jobs and simply had no way to pay their Uncle. They were in total poverty.
On learning this, Uncle Sam brought their children back to them.
“I am leaving this area and taking my circus to where the people are not so selfish that they will starve their own children.”
The parents and the children huddled together. Yes, they had lost all of their worldly goods but at least they still had one another.
That afternoon Uncle Sam and his circus had one final parade down main street. All of the media hailed it as the most magnificent event ever, especially the line of armored cars that brought up the rear. But all the media stories had a hint of sadness because the selfishness of evil parents who refused support for their children had forced the "Great Benefactor" to leave them.
Posted by: Ricardo at January 18, 2013 04:36 AM
Ricardo, stick to your day job. Fiction writing is not your forte.
Posted by: randomworker at January 18, 2013 06:52 AM
I see absolutely no reason NOT to mint the platinum coin NOW and keep it in reserve for emergency use if the crazies don't agree to raise the debt ceiling. The remedy should be in place in advance to frustrate their creating a sudden crisis. Once they knew it existed resistance would be futile and their blackmail efforts would be simply laughable. And it might even be used after that to get the debt ceiling law repealed, for good.
Posted by: Chris Marquesas at January 18, 2013 06:54 AM
Thanks for bringin up Mises. Check out the following from his LIBERALISM confiscation.
"Liberalism is a doctrine directed entirely towards the conduct of men in this world. In the last analysis, it has nothing else in view than the advancement of their outward, material welfare and does not concern itself directly with their inner, spiritual and metaphysical needs. It does not promise men happiness and contentment, but only the most abundant possible satisfaction of all those desires that can be satisfied by the things of the outer world."
"It does not aim at creating anything but the outward preconditions for the development of the inner life."
"...The first requirement in this regard is private property. When private property must be respected even in time of war, when the victor is not entitled to appropriate to himself the property of private persons, and the appropriation of public property has no great significance, because private ownership of the means of production prevails everywhere, an important motive for waging war has already been excluded."
"...This goal, at which all men aim, is the best possible satisfaction of human wants; it is prosperity and abundance. Of course, this is not all that men aspire to, but it is all that they can expect to attain by resort to external means and by way of social cooperation."
Posted by: Ricardo at January 18, 2013 07:29 AM
After reading this blog post, I thought I had accidentally stumbled on a screenplay writing blog. I imagined being in a Hollywood producer's office, pitching the concept:
"Although many Republicans are socially acceptable, there are a small bunch of crazies in the party,terrorists who intend to bring the world to the brink of financial armageddon if their demands aren't met. This small group of hostage takers, who have somehow seized enormous power, is making obscene demands: they want to deny medicine to cancer patients, spend grandma's social security on weapons, and snatch the food stamps from the hands of starving children. Fortunately our noble and resolute President will not negotiate with terrorists. He demands a "clean" debt ceiling bill unencumbered by any conditions. He will not tolerate a short extension of the debt ceiling but one long enough to take the issue off the table until after the 2014 Congressional elections. His Treasury department insists it will not develop any commonsense preparations to safeguard interest payments on Treasuries. He has resurrected the MAD policy--mutually assured destruction. Congress, he intones, must do its job. He has nothing to do with it."
"Meanwhile, objective, independent observers in the Democratic party, who do not have the courage and steely determination of the President, waver and start proposing back up plans. Realizing that James Bond-level villainy on the part of Republicans may require James Bond-style solutions, they come up with trillion dollar platinum coins and options to sell federal buildings. Maybe a satellite-based ray gun in the last scene."
As a movie, this might work as long as Hollywood mixed in the usual amount of gun violence and mayhem to appeal to its typically ignorant audience. But for an audience that
that demands realism and nuance, this movie is just a cartoon with giant holes in the plot, a political version of X-men.
One way to make the story more realistic is to fill in some holes. In this tale, it seems only Republicans exist in the House. But in the real
House, there are Democrats, lots of them as it turns out. In fact, there are 200 Democrats and 233 Republicans at present. But then why is there
a crisis at all? Why can't the President demand that all 200 Democrats vote for a 2-year, clean extension of the debt ceiling? He got them for Obamacare after all? He'd then need to get just 18 socially acceptable Republicans on his side. Surely if he walked the streets of Washington with a lantern, he could find 18 honest Republicans and the crisis would be averted. Since the President's votes are already in hand, how can a small group of terrorists have obtained so much power?
The answer suggests a much more interesting and complex story, one filled with hidden motives and duplicity. TJ pointed to then Senator Obama's speech in 2006 on the debt ceiling. It's instructive to read the whole speech, as he sounds like a right wing Republican. Senator Obama voted against the extension of the debt ceiling, as did Joe Biden and Hilary Clinton. Why did they vote against it?
The most painful vote for any politician, Democrat or Republican, is an extension of the debt ceiling. Traditionally, the deal between the parties is that the party in power has to deliver the majority of the votes to extend the debt ceiling after a negotiation in which it is decided which members will have to vote for it. What's different now is that many of the new Republican members, the so-called "crazies"
have constituencies that will not tolerate an unbridled extension of debt. If they vote for it, they risk at least a primary challenge and may lose their seats in 2014. They can't support a long extension of the debt ceiling without conditions.
But the President, having been in the Senate, surely understands their dilemma. Why then he is refusing to negotiate? Why be confrontational and intransigent after he's just rubbed their faces
in a tax increase? Historically, the President and Congress negotiate, and extensions of the debt ceiling are sometimes accompanied with conditions or legislation. If the consequences are so bad, why put his adversaries in an impossible position, one that risks a terrible outcome, especially when he knows that he can end it anytime by negotiating?
This story is more interesting because a small number of Republicans believe they should call the Administration's bluff. They understand that the administration is playing chicken and they don't want to swerve. Their leaders wish they'd be quiet, not only because playing the administration's game is reckless but also because it allows the entire party to be painted with the cartoon version of the story.
The Republicans need to stop playing the Administration's game. They need come up with a more effective political strategy, one that will smoke out the Democrats the President is protecting, those who don't want to vote for an extension before 2014. That strategy should also make people begin to understand that blame for the debt ceiling crisis is much more complicated than the gullible accolytes of the Administration would have us believe.
Posted by: Rick Stryker at January 18, 2013 01:12 PM
Rick Stryker Why can't the President demand that all 200 Democrats vote for a 2-year, clean extension of the debt ceiling?
Because the Democrats are in the minority and the House rules are such that the Speaker schedules all bills for a vote. Democrats cannot vote on a bill that the Speaker doesn't bring up for a vote. If the tan-man did bring up a clean bill, then I'm 99.99999% sure that 200 Democrats would vote for it.
Historically, the President and Congress negotiate, and extensions of the debt ceiling are sometimes accompanied with conditions or legislation.
I don't think so. Historically most debt ceiling bills were simple statements with a "fill-in-the-blank" place for the revised debt limit. Usually less than 25 words. Historically one of the parties offers some grandstanding speeches and press releases and tries to embarrass the party in power. Then they all vote for a clean bill.
The debt ceiling is just another one of our country's bad ideas that won't die. It serves no useful purpose and can only cause problems. And the eventual outcome is always a foregone conclusion. Instead of these periodic clownshows in which congress critters get to display their stupidity, why don't we just abolish the debt ceiling entirely?
Posted by: 2slugbaits at January 18, 2013 02:01 PM
Bad news for Shell in Alaska.
Posted by: Steven Kopits at January 18, 2013 02:16 PM
Well that was quick and certainly good news. It seems Republicans have wised up and stopped playing the Administration's game as I had hoped.
As I have already argued, this never was a genuine crisis. The president and his media allies (along with a few blog post writers) manufactured this pseudo crisis by falsely and hysterically asserting that a band of Republicans was holding the country hostage even though that was never the policy or intention of anyone in the leadership. The goal was to damage Republicans by trying to force them to vote for a policy that would surely kill them in the 2014 election and to protect Democrats from having to cast the same votes as much as possible. Regrettably enough Republicans took the bait to make it work.
The new policy is much better. They will support only a 3 month debt ceiling increase tied to conditions that are very hard to oppose politically: that the Senate pass a budget. Amazingly the Senate has gotten away with not passing a budget for 4 years but let's hope that will change now.
I think it makes sense to drop the White House for now and and take the fight to Harry Reid in the Senate. I had hoped that Republicans would come up with a strategy that would smoke the Democrats out on these budget issues and they seem to have done so. It will be much harder for the President and his gullible accolytes in the media and the blogs to demonize the Republicans now.
By proposing only a 3 month extension, Republicans move the battle to the sequester, where they have advantages. Here's hoping they can execute the strategy.
Posted by: Rick Stryker at January 18, 2013 04:10 PM
I don't understand this obsession with passing a budget resolution other than it has become a Fox News talking point for civics illiterates.
A budget resolution is not a law and it is not signed by the President. A budget resolution is simply a statement of intent or opinion which is internal to the Congress. It has no binding effect on the law or spending. A resolution can be as trivial as honoring Ronald Reagan's birthday. It has no legal force.
All spending must be authorized separately by appropriation bills which really are laws and are signed by the President. You can have appropriations without having a budget resolution.
A overall budget agreement is difficult when there is divided government for the simple reason that the two sides disagree. Instead of an overall agreement, there is negotiation and bargaining on individual portions of the budget through the appropriation bills.
You might also note that there were no budget resolutions for 2004 and 2006 when the Republican majorities controlled the Senate, House and Presidency. So you can see that budget agreements can be difficult even within a single party.
Posted by: Joseph at January 18, 2013 05:50 PM
Rick Stryker When the Tea Party clowns took over the House in 2011 one of the things they promised was that every bill proposed by Congress would site the clause in the Constitution that supported the bill. According to Politico the GOP plan grants a 3 month extension to the debt ceiling and requires the Senate to pass a budget or forfeit their pay. I'd like to see how this bill passes constitutional muster. What clause will they site to support this bill? Not only does the 14th Amendment obviate the need for a debt ceiling, but the 27th Amendment quite specifically says no law can affect congressional pay for a current Congress.
Posted by: 2slugbaits at January 18, 2013 05:59 PM
The fact that the Speaker schedules all votes is not a problem. The President just needs to go on television and say "We need to avert a national catastrophe. That's why I'm asking all Democrats in the House and a few Republicans tonight to support me in voting for a clean, 2-year debt ceiling increase. I ask that the Speaker schedule a vote on this important matter by the end of the week." Wonder why he didn't do that?
On the debt ceiling I said "sometimes" and you refuted "most." Most debt ceiling increases end up being uneventful. But when the President and Congress are from different parties, it can be different. For example, the landmark Gramm Rudman Hollings act was attached as amendment to the debt ceiling increase in 1985. It followed the debt ceiling crisis in 85 in which the GAO issued and opinion that it is legal for Treasury to prioritize payments. There was also much negotiation in the mid-90s over debt ceiling which ultimately broke down, leading to 2 government shutdowns.
More recently, 3 of the 4 debt ceiling increases that President Obama signed into law were not clean.
Posted by: Rick Stryker at January 18, 2013 06:59 PM
Maybe you should take up your 27th amendment point with Democrats Barbara Boxer and Bob Casey. In 2011, they introduced a bill in the Senate that in the event of a government shutdown members of Congress and the President should not be paid. The bill passed unanimously as I recall.
This is politics and the Republicans put the pay condition in for a reason--it's very difficult to vote against.
Posted by: Rick Stryker at January 18, 2013 07:07 PM
Posted by: Ricardo at January 18, 2013 08:57 PM
Now that I know that Menzie wants the government to take on the responsibility of distributing food to 100% of the people in the US his logic becomes much more clear. Menzie does not just want to do away with the debt ceiling but to do away with the private sector totally. I don't think I have ever heard even the most avid socialist propose such absurdity.
There are two countries in the world that I have watched since the 1970s as laboratory experiments in the effectiveness of socialism.
First is Zimbabwe. In the 1970s the nation of Zimbabwe (Rhodesia) was called the "bread basket of Afriica." Socialist Robert Mugabe took control in 1980 and in 20 years turned Zimbabwe from a net food exporter to a net food importer. The socialist government cannot feed its own people.
Second is Venezuela. In the 1970s Venezuela was one of the most prosperous and productive countries in South America. Many say that this was due to the exxplosion in the price of oil, but if that were true then Venezuela should be booming today with the price of oil as high as it is. In the 1980s the economy of Venezuela diversified and food production increased such that food as a percentage of exports increased even faster than their booming oil exports. Food production peaked in 1998 at 3.85% of total exports, just as Hugo Chavez introduced Cuban socialism to Venezuela. Today Venezuela's people face both shortages and price controls on fool. The government blames the shortages on haording and routinely confiscates food that does not conform to the state price control.
So if you feel you need to lose a few pounds you migh consider embracing Menzie's socialist plan for food in the US. I don't think the people of Zimbabwe and Venezuela are worried about obesity.
Who needs a debt ceiling? The government does such a masterful job of producing and rationing.
Posted by: Ricardo at January 19, 2013 04:40 AM
Rick Stryker The Democratic Senate did not set a rule to include a constitutionally supporting reference in every bill. I'm not saying that Democrats don't do plenty of dumb things. I was simply pointing out the irony of writing an obviously unconstitutional bill while at the same time requiring a constitutional reference. It almost defines the phrase "cognitive dissonance."
Posted by: 2slugbaits at January 19, 2013 10:04 AM
Ricardo There are two countries in the world that I have watched since the 1970s as laboratory experiments in the effectiveness of socialism.
Only two? So today you're claiming that Sweden since the 1970s was not then and is not now a socialist country???
Posted by: 2slugbaits at January 19, 2013 10:08 AM
2slugs claims Sweden is a socialist country. Nope! This is how the socialists describe Sweden: "Sweden has always been a solid market economy", states the present right-wing government on its website. And that is certainly true. Sweden has never been a socialist society - based on public ownership of production, workers’ control and management, social equality and a democratic plan of production. Neither has Sweden been a ‘mixed economy’ or provided a ‘third way’ - an alternative to both capitalism and socialism, if such a thing were possible." http://www.socialistalternative.org/news/article11.php?id=1171
Only left leaning Americans seem to think Sweden is socialist.
Posted by: CoRev at January 19, 2013 12:28 PM
Wow this post certainly brought out the crazies. Kudos 2slugbaits but methinks sometimes indifference is far worse than the alternatives when dealing with the irrational. Personally I just skip over the Ricardo and similar posts. Reading them just takes up valuable time I will never get back.
Posted by: econimonium at January 19, 2013 04:48 PM
There are many countries in the world who have allowed socialism to impoverish their countries, but I only concentrated on these two from the 1970s to prove to myself in a real world experiment is socialism could live up to its claims. Choosing Mugabe was directly related to analysis of socialism. Choosing Venezuela was actually to draw a comparison to Colombia. At the time I had no idea how revealing the Venezuela/Colombia comparison would be.
But these two countries are the best example of the destructive nature of socialist food policy. Another good study is to compare Jamaica’s economy through its swings from capitalism to socialism back to capitalism. The impact of hunger is not as dramatic but the changes are pretty revealing.
Normally socialists do not want to consider the real implications of their policies. They are more interested in rationalizations especially through Sudoku calculations. Theory is important but only when it does not run afoul of the real world.
Today we are racing down a road to serfdom. Hopefully eyes will be opened before we cannot feed our people. It should be clear that if the US goes the way of Zimbabwe and Venezuela there will be no one to import from.
Posted by: Ricardo at January 20, 2013 06:05 AM
Only 86 Democrats voted for the debt ceiling increase, not 200. That's what the President and the Democrats in Congress were playing for all along. If the country was being held hostage by Republicans and we need to pay the bills we've incurred, why did only 86 Democrats vote for it? Why did their leaders try to get fewer than that to vote for it? You can't tell me that these Democrats object to the requirement that the Senate pass a bill, which they are required by law to do, or that they have 27th amendment concerns. They made a deal, just as I said, and the party in power delivered most of the votes. There never was any debt ceiling crisis.
Posted by: Rick Stryker at January 23, 2013 06:41 PM