Update on the Debt Limit

So now it's official--Treasury Secretary Paulson says that the federal government will hit the current debt ceiling of $8.965 trillion in early October.  And he says Congress needs to act to raise the debt limit for the fifth time during Bush's presidency.  In September.  Right around the report from General Petraeus that will give Bush his marching orders on Iraq, and Congress will finally deal with the war funding issues, and right in the middle of the debates on the appropriation bills. 

The Herald Tribune notes that 

Economists doubt Congress will refuse to raise the limit. A federal default is considered unimaginable because it would rattle bond markets, force interest rates higher and shake the economy. (snip)

In the past, Treasury has resorted to numerous accounting maneuvers to pay its bills while the government waited for Congress to expand its borrowing authority. Paulson argued against being forced to use such measures, saying they "would create unnecessary uncertainty for the financial markets and result in costs to the government." Such actions, he said. "should be reserved only for extraordinary circumstances, and should be avoided."

But these are extraordinary times.  To many of us, we are already in a constitutional crisis, with an incompetent and mendacious Attorney General presiding over an overtly political Justice Demartment that serves the interests of the GOP and its patrons rather than the country as a whole; with a President and Vice President who consider themselves a unitary monarch and thumb their collective nose at the Congress; and a Congress that has so far mostly been afraid to see much less do its constitutional duty in this crisis.

So maybe the debt limit will become a factor in the war funding battle and the fight over the appropriations bills, at least eight of which (out of 12) Bush has already threatened to veto.  Clinton won the showdown with Newt Gingrich in 1995 because the public supported the programs that he wanted funded, and viewed Gingrich, who refused to pass a funding bill after Clinton's veto, thereby shutting down the government, as a Grinch.  Now it is Bush who is unpopular.  But does the public still support the kind of spending that the Dems champion?  Part of Bush's strategy has been to make government look so incompetent that it undermines public support for government programs, traditionally part of the Dems'  appeal.  But it is likely the public still supports funding security measures at the ports, higher education, children's health and the myriad of other programs included in the spending bills. 

Every confrontation actually weakens the Bush/Cheney regime, because it fractures the GOP coalition; this one is no exception.  The Dems need to play their full funding hand and play it well, and that includes not rolling over prematurely on raising the debt limit.  There are a great many things the Bush/Cheney regime can do on their own, but authorizing borrowing and spending are the two big things that they can't do alone.  Congress must get something tangible on the war in return for accommodating Bush/Cheney's fiscal needs. 

Comments

[Mimikatz]

So even though an increase in the debt ceiling was in the Budget Resolution, it still has to be voted on by Congress. This could be done separately or as part of another bill, I believe.

[mighty mouse]

So we are literally living on borrowed time? I know nada, zilch about economics/government finance but this is truly terrifying. Does Paul Krugman know about this? thank you for tracking and hounding this, Mimikatz. Tough important stuff you have here...

[endoftheworld]

One of the best things about Bush administration is its ability to clearly demonstrate how much power a government possesses.With physical limitations,which protected privacy,crumbling it is about time to re-thing governmental role in present society.
From personal experience,it some time seems that in some areas citizens in third world countries enjoy more freedom than us.These governments simply lack resources and technical ability to limit personal space of their citizens.
Should not we constitutionally put a limit on public expenditure and government's ability to borrow to limit the ability of a President to do any harm even if he
succumbs to the temptation of tyranny?

[...]

what is the point in a debt limit if it is always being raised? the whole thing just makes everyone look like fools, which is basically how i view politicians anyway.

[marc sobel]

I think it is a wonderful opportunity to include necessary legislation. If you remember the Iraq Funding Capitulation Act included minimum wage increases without the extensive Business giveaway. I think a limitation on Iraq spending (in order to limit the debt expansion), perhaps some suitable trimming of OVP funding dependent on passing security audits etc. Also saving some money in medicare by supporting funding of pre-medicare preventive care for all adults etc.

[oldtree]

will anything really scramble the gop coalition? they don't appear to disagree, and they know they are going to lose their upcoming elections due to their support of some very unpopular things the believe in with all their hearts.
no, there is no indication that these people listen to their constituents. there are numerous that have taken out loans from jack ab off, and no congress person has been indicted yet.
sorry, watch the recess appointments end the government as we thought we knew it

[JGabriel]

Emptywheel @ Top: "The Dems need to play their full funding hand and play it well, and that includes not rolling over prematurely on raising the debt limit."

Yes. I would like the Dems to force a debate on this, just so we can see them over and over repeating:

"When this President took office, the debt limit was 5.2 trillion and the budget was balanced. How is it that he's added another 3.8 *trillion* in debt, and wants us to raise the limit even further? WTF? Whatever happened to the fiscal responsibilty Republicans claim to favor? Without a plan to begin reducing the debt, I don't see how we can responsibly approve anothter debt increase. Think of the children!"

[Marky]

Hey, I hope someone here posts on Specter's cryptic threat today---saying that the WH has 18 years to clarify Gonzalez's testimony. Apparently some new information is going to be revealed tomorrow.
Any ideas?

[endoftheworld]

Federal spending levels,broadly speaking, depends on a nation's choice of economic system,degree of centralization,degree of preference for equality,current position of actual GDP relative to potential GDP and GDP itself.
The best way to set limits on federal spending is to tie it to GDP.An alternative option is to follow a technique called zero-based budgeting and than inflate the figure to the extent of annual(estimated)inflation for next five year,then repeat the process.A allowance can be created for situations such as weak demand in the economy.

[Dismayed]

I think this will be a damn good time to roll back the tax breaks on the top one percent. Perhaps we should pass some retroactive taxes on big industry. They didn't mind retroactive tax breaks when we were running surplus. Surely they won't mind picking up the tab now.

Just joking about the retroactive taxes, but it's time to get the richest of the rich paying their due, and big oil needs to give up a big 'ol slice. That's all there is to it.

[ab initio]

What we have is a system of funny money. Alan Greenspan more than any Fed Chairman was a serial bubble blower. I am skeptical that the Dems will make the Cheney and the Repubs pay a price for raising the debt limit as they will succumb to the beltway gasbags talk about being "responsible".

No one will ever take a look at what do we spend the trillions on and do we really need to. Like do we need all those billions in the black budget to data mine and spy on Americans on our soil? Do we need to spend billions on B2 bombers and cruise missiles and more carrier battle groups? Do we need to subsidize Exxon and ADM? Do we want to allow the majority of the Fortune 500 to not pay any taxes? Does the top 1% of wealthy Americans need more financial breaks?

Instead on a bipartisan basis the DC elites will happily pass on to our kids a $59 trillion debt that increases exponentially each year! Its time that the debt limit is not increased and Congress make real choices on where to spend.

[Davis X. Machina]

WTF? Whatever happened to the fiscal responsibilty Republicans claim to favor?

Dick Cheney: “Reagan proved deficits don’t matter,” he [Cheney] said. “We won the midterms. This is our due.”

[clive]

Hi
As an outsider can anyone tell me how the USA can exceed it,s debt ceiling as it is doing right now (usa government,s own website shows debt at 8.967 trillion and climbing, isn,t this illegal?

Also the real figure is already over 9 trillion as the money guru,s hide borrowing from the pension fund already in progress (which has to be paid back immediately the debt ceiling is increased) which explains the big "jump" in debt of approx 200 billion immediately after the debt ceiling is raised.....

who is trying to kid who?

thanks

clive

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