I warned you about this before the election. I warned you that if you put Republicans in charge of Congress they would take the country hostage again over their extortion demands about government spending – they only do this when a Democrat is in the White House – and the MAGAts in control of Congress are willing to sabotage the U.S. economy and the world’s economy with it by defaulting on the national debt – in violation of the U.S. Constitution – by their refusal to raise the national debt ceiling. But did you listen? Noooo. The six Republicans you elected to Congress from Arizona were enough to give the GQP its slim majority in Congress.
Keep in mind that the national debt ceiling is for money already appropriated by Congress, not for new spending or future debt. This is for debt obligations already incurred. Deadbeat Republicans now want to default on U.S. debt obligations owed to some bond holders, but not to others.
The New York Times reports, U.S. Will Hit Debt Limit on Thursday, Yellen Tells Congress:
Treasury Secretary Janet L. Yellen warned on Friday that she would have to begin employing “extraordinary measures” on Thursday to continue paying the nation’s bills if lawmakers did not act to raise the statutory debt limit and that her powers to delay a default could be exhausted by early June.
Ms. Yellen’s letter to Congress was the first sign that resistance by House Republicans to lifting the borrowing cap could put the U.S. economy at risk and signals the beginning of an intense fight in Washington this year over spending and deficits.
“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability,” Ms. Yellen wrote.
Ms. Yellen said on Friday that considerable uncertainty surrounded how long she could use extraordinary measures to delay a default. She said she would begin suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund and suspending reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan this month to avoid breaching the debt limit.
The letter is the beginning of what is expected to be a protracted and potentially damaging economic fight. Republicans, who assumed control of the House last week, have insisted that any increase to the debt limit be accompanied by significant spending curbs, most likely including cuts to both the military and domestic issues.
[Last] Monday, House Republicans adopted new rules governing legislation that make it more difficult to raise the debt limit and strengthen Republicans’ ability to demand that any increase be accompanied by spending cuts. Senate Republicans have also insisted that increases to the debt limit should be tied to “structural spending reform.”
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Top Democrats said on Friday that Republicans were threatening to damage an already fragile economy by risking a default.
“Once again, Republicans are demanding cuts to Medicare, Medicaid and Social Security, and if they don’t get what they want, they’re willing to tank the American economy, destroy a strong job market and jack up interest rates and inflation,” said Senator Ron Wyden of Oregon, the chairman of the Senate Finance Committee.
President Biden has said that he will refuse to negotiate over the debt limit, and that Congress must vote to raise it with no strings attached.
Those positions increase the likelihood of a debt limit breach, one that could result in the United States defaulting on its debt for the first time.
To avoid that, the White House is increasingly counting on a coalition of bipartisan support to bypass Republican leadership in the House and lift the debt limit.
That group includes the entire Democratic caucus in the House and Senate, plus a handful of Republicans needed to pass bills in both chambers. Such a coalition could employ a rare tactic in the House, called a discharge petition, to force a floor vote on raising the limit. But the move would take weeks or even months to produce a bill that Mr. Biden could sign into law, which could threaten default if lawmakers misjudge the date when Treasury can no longer pay the nation’s bills.
The closer the country gets to a potential default, the more damage the economy is likely to incur. Brinkmanship between congressional Republicans and President Barack Obama in 2011 resulted in higher borrowing costs for businesses and home buyers, along with plunges in stock markets and consumer confidence. An actual default could shock the economy into recession, as many government bills went unpaid, and saddle the nation with significantly higher borrowing costs for years to come.
After a protracted standoff in late 2021, Congress agreed to raise the borrowing cap to $31 trillion. Ms. Yellen has warned that breaching the debt limit and defaulting would do irreparable harm to the economy. She has dismissed suggestions and theories that the Treasury Department or the White House could lift the borrowing cap unilaterally as unrealistic and has called previously for the entire mechanism to be abolished.
Note: No other nation on Earth has this ridiculous rule, which only serves the purpose of political hostage taking and brinksmanship.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Ms. Yellen wrote in her letter.
White House and Treasury officials have repeatedly made the case that raising the debt limit merely allows the federal government to spend money that Congress has already authorized and that doing so is not a sign of fiscal recklessness.
Karine Jean-Pierre, the White House press secretary, repeated on Friday that Mr. Biden would not negotiate with Republicans on the debt limit and expected Congress to raise it in a bipartisan vote.
“This should be done without conditions,” she said at an afternoon press briefing. “There is going to be no negotiation over it. This is something that must get done.”
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Wall Street analysts believe that House Republicans could ultimately save face and settle on a solution that would “suspend” the debt limit to a certain date without actually raising the borrowing cap to a specific level. This tactic, which was employed by former Speaker John A. Boehner in 2013 and 2014, would give the Treasury Department the leeway to keep the government running.
“At that time, unable to secure a specific dollar increase in the debt ceiling, Boehner came up with the idea of a ‘suspension’ of the debt ceiling through a specific date,” Henrietta Treyz, the director of economic policy at Veda Partners, an investment advisory firm, wrote in a note to clients this week. “This avoided Congress voting on a net budget increase authorization and instead ceded authority to the Treasury Department to do essentially whatever it needed to do through a specific date.”
Wall Street had better think again. The MAGAt crazies have other plans. The Washington Post reports, House Republicans prepare emergency plan for breaching debt limit:
House Republicans are preparing a plan telling the Treasury Department what to do if Congress and the White House don’t agree to lift the nation’s debt limit later this year, underscoring the brinkmanship newly empowered conservatives will bring to the high-stakes negotiations over averting a U.S. default, according to six people aware of the internal discussions.
The plan, which was not previously reported, was part of a private deal reached this month to resolve the impasse between House conservatives and Rep. Kevin McCarthy (R-Calif.) over the election of the House speaker. Representative Chip Roy (R-Tex.), a prominent conservative who helped broker the deal, told The Washington Post that McCarthy agreed to pass the paid priority plan by the end of the first quarter of the year.
The emerging contingency plan shows how Republicans are preparing to threaten to not lift the nation’s debt ceiling without major spending cuts from the Biden administration. Congress must pass legislation raising the current limit of $31.4 trillion or the Treasury Department cannot borrow any more, even to pay for spending that lawmakers have already authorized. Economists have warned that not raising the debt ceiling could cause the United States to default, triggering a huge panic on Wall Street and costing millions of jobs.
[In] the early stages being drafted, the GOP proposal would ask the Biden administration to make only the most significant federal payments if the Treasury Department comes up against statutory borrowing limits. For example, the plan is almost certain to call on the department to continue paying interest on loans, according to four people familiar with internal deliberations who spoke on condition of anonymity to describe private conversations. House Republicans’ payment priority plan could also determine whether the Treasury Department should continue making payments on Social Security, Medicare and veterans’ benefits, as well as funding the military, two of the people said.
Such a move would be unprecedented and hugely controversial, and even releasing the plan could turn into a major political liability for the GOP. A hypothetical proposal that protects Social Security, Medicare, veterans’ benefits and the military would still leave a huge chunk of critical federal spending on things like Medicaid, food safety inspections, border controls and air traffic control, just a handful. Program to name. Democrats are also likely to accuse Republicans of prioritizing payments to US bondholders – which include Chinese banks – over US citizens.
“Any plan to pay bondholders, but not school lunches or the FAA or food safety or XYZ is an exercise in targeting,” a senior Democratic aide said on condition of anonymity to discuss a proposal.
McCarthy and House conservatives intentionally left out details of the priority plan in their initial agreement, with the understanding that it could take weeks for Republicans to decide which federal spending programs should be preserved, two people familiar with the talks said.
In 2011 and 2013, when similar debt ceiling crises emerged, Treasury Department officials in the Obama administration stated that prioritizing payments was not technically possible, given the complexity of the millions of payments processed daily by the federal government.
For the plan to be binding on the Treasury Department, it must pass not only the House but also the Democratic-controlled Senate, and President Biden must sign it into law.
Some experts say that even if implemented, the debt priority scheme could still threaten the credibility of the US government. The motion would ask the government to withhold the payment of 20 percent of the money it has already promised to spend.
Nevertheless, many Republican lawmakers have long supported exploring such measures as a way to mitigate the worst economic consequences of breaching the debt ceiling. Two of the people with knowledge of the internal GOP plan said the priority plan would force Democrats to acknowledge that it is technically possible for the Treasury Department to continue paying bondholders even if Congress does not Increase loan limit. One of these individuals noted that the interest payments amount to approximately $500 billion per year, which could easily be met through federal revenue without additional borrowing.
Republicans have explored various ways to push priority debt payments over the years. Rep. Tom McClintock (R-Calif.) issued a bill in 2011, called the Default Prevention Act, that would require the Treasury Department to borrow above the debt limit to ensure that interest on the loan is paid. However, that version of the plan may not win universal support even among Republicans, some of whom see it as circumventing the intent of the debt ceiling. McClintock reintroduced the bill this week. More than half a dozen House Republicans voted against his legislation in 2015.
“We agreed to advance the debt priority bill through regular order until the end of the first quarter of 2023,” Roy said in a text message to The Post. “Now, its outline was not specified (there are various versions).”
Grover Norquist, founder and president of Americans for Tax Reform, a conservative advocacy group, said GOP lawmakers have discussed the debt priority plan in recent days. Then-Sen. Patrick J. Toomey (R-PA) proposed a similar idea in 2011 and 2013 during debt ceiling showdowns with the Obama administration. At the time, Treasury Secretary Jack Lew said that government computer systems could not be updated to triage hundreds of millions of dollars. Payment, arguing that “priority is a default by any other name.” Republicans said those claims were exaggerated in order to back down from their debt ceiling threats.
“The reason you do this is to say, ‘We offered you a bill that prioritized things, and this is what we’re getting instead,’” Norquist said. He said, ‘The leadership is talking about it because it is necessary to be prepared for it. If you come to an impasse, you want a fallback position.
These efforts are expected to prove controversial, even among some GOP allies. Neil Bradley, executive vice president of the US Chamber of Commerce, said the trade group opposes prioritizing payments.
“Prioritization doesn’t work. We had this discussion a decade ago,” Bradley said. Questions our commitment to faith and credit and paying our bills. And they both have very devastating economic consequences.
Some Republican policy experts believe such efforts will fail. Brian Riedl, a policy analyst at the Manhattan Institute, studied the priority plans in detail when he was a staffer in the offices of then-Sen. Rob Portman (R-Ohio). Riedl said such a plan would involve cutting off about 20 percent of federal spending immediately, or about $1 trillion, because revenue only covers about 80 percent of the $5 trillion spent each year. A large number of people could be hurt immediately, he said, adding that there is no good way to choose between options such as forcing hospitals to deal with the end of Medicare payments or depriving the Defense Department of funding.
“Studying this in 2011 convinced us that this would be a really bad idea and something we really didn’t want to do,” Riedl said. “We didn’t end the practice saying, ‘This is feasible and smart.’ We said, ‘Let’s avoid this at all costs because it’s going to be a disaster.’”
The GQP is the default party. They know nothing about economics, and they are dead set on proving their ignorance of economics. We will all wind up paying the price for their ignorance.