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Why The 2013 'Debt Ceiling' Debacle Will Be Worse Than 2011

Tyler Durden's picture




 

Having passed the 'easy-do-nothing' bill that created a 5% uplift in US equities, D.C. have left the most difficult set of issues for last: entitlement reform, which Republicans have said they will insist upon in return for raising the debt limit, and tax reform, which the President has said he will insist on in return for entitlement reform. The upshot is that reaching an agreement on the next debt limit increase could be at least as difficult as the last increase in August 2011. As Goldman notes, over the next two months, policymakers will have to focus on three issues: (1) how to raise the debt limit, which will begin to constrain Treasury borrowing by early March; (2) whether to reform entitlement programs and/or the tax code to reduce spending or increase revenues by a similar amount as the increase in the debt limit; and (3) how to address the spending cuts scheduled to take effect under the "sequester," which was delayed to March 1. The next debate on the debt limit will be the fifth "showdown" on fiscal policy in the last two years. However, one new twist to this now familiar routine may come from the rating agencies, which look likely to be more active in 2013 than they have been since 2011.

 

Via Goldman Sachs,

We had previously estimated that fiscal policy at the federal, state, and local level would weigh on growth by 1.6pp on a Q4/Q4 basis in 2013; we believe the final package will be similar at around 1.5pp drag on growth. As before, we expect the effects to be weighted toward first half of the year, as shown in Exhibit 1.

 

One aspect of the fiscal cliff remains somewhat uncertain. The spending cuts under "sequestration" that were slated to begin January 1 2013 have been delayed until March 1 as part of the compromise just passed. Lawmakers are apt to attempt to delay sequester implementation further, probably once again taking a piecemeal approach and enacting a temporary delay of a few quarters or a year.

Although we continue to think Congress will delay the sequester at least once more, it does seem likely that it will eventually take effect, or at least that policies targeting some of the same areas of the budget (i.e., defense and domestic appropriations) will be implemented instead.

Raising the debt limit will be the more significant policy challenge over the next couple of months. Congress last raised the debt limit in August 2011. The Treasury formally reached the debt limit of $16.394 trillion on December 31, 2012 and is now operating under "extraordinary measures" (accounting strategies used to minimize Treasury securities held in government accounts). While the timing is always hard to predict, at this point it appears that the Treasury will exhaust its financing capacity by March 1, when it must make a number of large monthly payments, particularly related to Social Security and Medicare. Congress will need to raise the debt limit by that point if it has not already. While a failure to raise the debt limit should not have implications for the Treasury's ability to make interest payments or to redeem existing securities, it could lead to a sharp reduction in spending, including fiscal transfers to individuals, payments to contractors, and payment of tax refunds which tend to be fairly heavy during this period.

Unfortunately, the upcoming increase may be more difficult to enact than the increase in 2011. Few spending cuts had been enacted before the previous increase, which left lawmakers with several areas of the budget from which to pull potential savings. Congress eventually settled on $2.1 trillion in spending cuts, essentially all coming from a reduction in spending appropriated by Congress (about $900bn from caps on "discretionary" spending, and $1.2 trillion from "sequestration"). While hardly non-controversial, these cuts did not affect specific programs but instead capped overall spending, thus reducing political opposition. The fiscal agreement Congress just passed increases revenues by about $600bn over 10 years (compared with a full extension of expiring income tax cuts), and while this second round of savings was much more controversial than the first, a majority of the public supported the tax increase, which was targeted on high incomes.

If lawmakers continue to target a stabilization of the debt to GDP ratio over the next several years, they would need to go further than the two packages enacted since 2011. Most of the high-profile fiscal reform proposals offered over the last couple of years target around $4 trillion in savings over 10 years, or a bit more than $1 trillion beyond what has been agreed to already. A one-year extension of the debt limit would also require an increase of around $1 trillion, making this an obvious target for the next round of deficit reduction talks. However, this would be a difficult goal to reach, for several reasons:

  • Both parties have proposed some additional spending cuts, but neither has specified this magnitude of cuts: Republican leaders have said they want structural entitlement reforms as part of a deficit reduction package, but have not been very specific in their proposals. The President has been more specific in his budget, but proposes a smaller amount of entitlement-related cuts, and most of them relate more to payment rates for health services and products rather than changes to benefits or eligibility. It is simply politically more difficult for either party to propose, let alone agree on, significant cuts to entitlement programs than it is to make just about any other change to fiscal policy. However, this is the only major area of the budget that hasn’t been addressed in the fiscal reforms to date.
  • The President says he will not negotiate on spending cuts as part of a debt limit increase. President Obama has indicated he will not negotiate with Republicans on spending cuts for the next debt limit increase. Since a prolonged failure to raise the debt limit is politically unsustainable, the White House may simply decide congressional Republicans will eventually vote to raise it.
  • Tax increases would become part of the debate if entitlement reforms are considered. Although the President has indicated he will not negotiate on the debt limit, he has also indicated that whenever entitlement reforms are considered, he expects those to be balanced with additional tax reforms (i.e., spending cuts must be balanced with tax increases).

These factors imply that the next debt limit increase will be at least as difficult to enact as the last one was, and that there is a clear possibility of breaching the limit and causing more significant disruptions to government financing. [ZH: Adding further angst, in the summer of 2011 politicians had started the debate some three months prior to the real deadline. This time it appears that nothing serious will happen until the 11th hour as usual, meaning far more last minute volatility.]

...

One potentially greater source of uncertainty than in 2013 is the possibility of negative credit ratings actions. Standard & Poor's, Moody's, and Fitch have all indicated that their ratings are contingent on US policymakers agreeing to additional fiscal reforms in 2013 that would stabilize the ratio of public debt to GDP over the medium term. Fitch in particular has also raised the prospect of a downgrade if the debt limit is not raised "in a timely manner." So while we expect that market participants might have become less sensitive to political gyrations in Washington, the possibility of rating agency action could add a new twist to what has started to become an old routine.

 

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Thu, 01/03/2013 - 10:14 | 3118365 becky quick and...
becky quick and her beautiful mouth's picture

you know, they could just pass a budget. remember those?

Thu, 01/03/2013 - 10:22 | 3118389 fonzannoon
fonzannoon's picture

The debt ceiling pillow fight will be nowhere near as nasty as 2011. It will get passed relatively easlily with very few spending cuts and tax hikes along side it, if any. The US will be put on warning with the possibility of a downgrade in 2065 if they don't start taking care of their long term fiscal situation.

Thu, 01/03/2013 - 10:28 | 3118403 Zer0head
Zer0head's picture

fonz you are absolutely correct ,unless Boner is tossed.  If he keeps his speakership not only will this be a pillow fight but it will be the precursor to a super majority for Obama in the final two years of his term.

Thu, 01/03/2013 - 10:29 | 3118416 fonzannoon
fonzannoon's picture

I will go one step further in this dystopian nightmare. If boner is tossed and the repubs play hardball, O makes an announcement that he is hiking he ceiling by executive order. He will make the announcement on the daily show and the crowd will carry him around like a king while Jon stewart tries to jump up and lick his asshole

Thu, 01/03/2013 - 10:43 | 3118472 pods
pods's picture

Thanks for that early morning visual Fonz!

<shudder>

pods

Thu, 01/03/2013 - 11:09 | 3118576 old naughty
old naughty's picture

Let's close the Congress. Let the States run their own. Save the pay-outs. And it will not get any worse than 2012.

Thu, 01/03/2013 - 10:45 | 3118483 Chief KnocAHoma
Chief KnocAHoma's picture

OBAMA - (Laughing as he reads the Drudge Report.) That fat bitch Hillary can't stay on her feet. 

PELOSI - (Mumbles from under the desk.) 

OBAMA - (Taps her on the head.) What did you say bitch?

PELOSI - (Looking up with slober running down her face.) That isn't very respectful of women Mr. President. 

OBAMA - Bitch did I ask you to speak? Now act like you are Chris Mathews and suck harder.

Thu, 01/03/2013 - 13:09 | 3118999 rfaze
rfaze's picture

Clip from O's Harvard days......

 

http://www.youtube.com/watch?v=_Ki4YXMpSSY

Thu, 01/03/2013 - 13:29 | 3119082 SilverRhino
SilverRhino's picture

That was a completely disgusting (but funny visual).  Still had to downcheck that for obscenity (pelosi doing the deed ... evil!!!) though.  

 

Thu, 01/03/2013 - 10:50 | 3118501 Room 101
Room 101's picture

Boner? Tossed?  LOL!

The GOPussies wouldn't know what to do without him.  

Thu, 01/03/2013 - 11:46 | 3118688 ElvisDog
ElvisDog's picture

it will be the precursor to a super majority for Obama in the final two years of his term.

Unless Obama gets everything he wants and the U.S. goes into a currency crisis before the 2014 elections (a non-negligible possibility). In that case, the Dems get slaughtered in the 2014 elections. What you wrote will happen only if the ponzi keeps going for two more years. It might, but I wouldn't bet money on that happening.

Thu, 01/03/2013 - 12:20 | 3118832 Joe moneybags
Joe moneybags's picture

" only if the ponzi keeps going for two more years."

Growing budget deficits have been a way of life in the U.S. for more than 130 years.  What difference will 2 or 3 more years make?  That "Day of Reckoning", game-over, reset, won't come.  It hasn't in Japan in 22 years, and it won't happen here: things will morph and evolve, and the debt will just be a large number in a computer.

Thu, 01/03/2013 - 14:30 | 3119357 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

You are missing many things from your thoughts:  Japan is out, can't buy tbills, and will likely become a net seller out of necessity (1 trillion there).  China is sick & tired; the Chinese are getting richer and their middle class would benefit enormously if the yuan went up 40% or more.  That would mean wall-mart changes from "everyday low prices" to "premium imported chinese goods" overnight.  Oil scarcity will continue to unravel, and prices will rise.  Finally, during your 130 years, we've never been, even once, at ZIRP NIRP + moneyprinting $120,000,000 per hour.

 

Welcome to the endgame

Thu, 01/03/2013 - 23:29 | 3121043 smiler03
smiler03's picture

+1 Succinct

Thu, 01/03/2013 - 11:09 | 3118577 NoDebt
NoDebt's picture

Agreed.  Neither side wants spending cuts.  That would mean somewhere, sombody's consituency starts to feel pain.

The GOP bluster will prove again that it is just that- bluster.  They will fold like a cheap suit, but on the 11th hour, just to make it look like they tried really hard.

The system is running them now, not the other way around.  Rudder is locked in position, all levers have been pushed up into the "run until failure" position. 

Thu, 01/03/2013 - 11:43 | 3118674 ElvisDog
ElvisDog's picture

US will be put on warning with the possibility of a downgrade in 2065

A credit downgrade means nothing in a world where the Fed buys 60-70% of all new treasury issuance. Does the Fed care about what the credit rating of the U.S. is when deciding whether to buy Treasuries or MBS? Not at all. Plus, every other major country or bloc on Earth is as bad or worse when it comes to financial fraud, ponzi deficit spending, etc. as the U.S.

Thu, 01/03/2013 - 10:34 | 3118415 Muddy1
Muddy1's picture

HUH???? WHAT???? Novel approach you're suggesting.  Unfortunately passing a budget doesn't guarantee fiscal responsibility, national debt reduction, or and end to malfeasance.

PIIGS PIIGSA

Thu, 01/03/2013 - 12:00 | 3118754 Tombstone
Tombstone's picture

Sure, they could pass a budget.  But would they have the guts to stick to it?  No way they are going to handcuff themselves when it comes to spending on an ever increasing size of government babysitters.

Thu, 01/03/2013 - 10:14 | 3118368 SheepDog-One
SheepDog-One's picture

Yea well....just as likely the only effect from the dreaded debt ceiling will be +3% on stawks again.

Thu, 01/03/2013 - 10:15 | 3118369 HelluvaEngineer
HelluvaEngineer's picture

Please jump in and short this pig market so that we can get the S&P back up to 1500 again, at which point we will crush it and steal everyone's 401k. 

Thu, 01/03/2013 - 12:02 | 3118762 SamAdams
SamAdams's picture

Sorry, went long 7.62 & .223 over a year ago. The return is far greater than gold, and i continue to hold.

Thu, 01/03/2013 - 10:18 | 3118377 Racer
Racer's picture

Mentioning 'rating agencies' and 'active' in the same sentence?

ROFLMAO

Thu, 01/03/2013 - 10:19 | 3118380 Pharming
Pharming's picture

The reality is that America is yet to wake up to the full extent of its fiscal nightmare.

 

http://www.businessinsider.com/roubini-america-fiscal-nightmare-2013-1

 

I think Roubini was talking about my wife.  Wake up woman!  (She won't be reading this)

Thu, 01/03/2013 - 10:24 | 3118397 falak pema
falak pema's picture

this should wake her up : 

In short, the “mini deal” on the fiscal cliff dodged all the important questions. By not including spending cuts in the deal, the Democrats have emboldened Republicans who are determined to slash taxes but lack a plan to pay for it. It is again up to Washington’s policy makers to fix the problem before the market does it for them. Tuesday’s deal suggests this will not happen with any ease."

Read more: http://www.businessinsider.com/roubini-america-fiscal-nightmare-2013-1#ixzz2GvFdrGGi

No more trips to the 5* beach hotel in the caymans on those perks. The only thing sleeping beauty really understands. 

Thu, 01/03/2013 - 10:58 | 3118537 AynRandFan
AynRandFan's picture

Roubini should be introduced as the "Welfare State Economist".  He favors higher taxes for everyone because, as he says, a welfare state is necessary in the modern world of globalization.  Excuse me if I disagree.

Thu, 01/03/2013 - 11:12 | 3118590 cxl9
cxl9's picture

Yes, the good professor holds that it's "right and necessary" that everyone try to live off the labor of others, with government acting as intermediary and collecting the rake. Perhaps Mr. Roubini should simply pay his neighbor's bills and leave the rest of us out of it.

Thu, 01/03/2013 - 12:53 | 3118939 Pharming
Pharming's picture

Perhaps he should go back to Italy and tell everyone that the days of early retirement, tolerable poverty, and sucking off the wealthy will soon be over.  It can't go on forever...

Thu, 01/03/2013 - 12:50 | 3118933 Pharming
Pharming's picture

Honestly, I only agree with the statement that the majority of Americans need to wake up.  To me, Roubini is just another of those economists that likes to hear himself splattered all over the news.  I suppose I gave him a little bit of credit by posting his link.  I apologize.

Thu, 01/03/2013 - 10:19 | 3118382 TotalCarp
TotalCarp's picture

Seriously.. beyond all the rhetoric does anyone still think they will do anything but a last minute "save"? I mean who in that rotten town has any testicular prowess to point out the obvious and take a stand, now that good ol' Ron Paul went home?

Folks, mkt will drop 3% & scare Boehner, there will be a lot of speaches about "american people" and then the can will get kicked down the road. Keep moving, nothing to see here.

 

Thu, 01/03/2013 - 10:33 | 3118428 youngman
youngman's picture

I agree all show and no go......just like Europe....lots of speeches..meetings ..behind closed doors for some reason..but nothing big...we need a dictator to make a real change here...again i have changed my view ....I no longer look at what WE DO.....I am looking to see what other country are doing because of us.......I think we will be the ugly kid in High School that noone wants to play with ...or even associate with...

Thu, 01/03/2013 - 10:53 | 3118514 TotalCarp
TotalCarp's picture

US has 2 pillars of strength - military might and (the debased, the raped but yet accepted just about everywhere) US dollar. Those 2 are very closely interconnected. This is why the Military Industrial Complex that i hate wholeheartedly and that has been sucking US dry is out of reach of politicians.

Until one (and the the other) of these 2 crumbles the others will have to associate with the US.. begrudgingly as it may be..  

Thu, 01/03/2013 - 11:02 | 3118551 RiverRoad
RiverRoad's picture

It's the guns that keep the butter "flowing" fer sure.  We just keep making 'em an offer they can't refuse.

Thu, 01/03/2013 - 11:03 | 3118555 Spastica Rex
Spastica Rex's picture

Precisely.

Nothing else really matters at this point. It'll be easy to see when things are really changing.

Thu, 01/03/2013 - 11:36 | 3118651 DosZap
DosZap's picture

Boehner

Will be losing his chair very soon.

Thu, 01/03/2013 - 10:21 | 3118385 max2205
max2205's picture

Spy +45% since 10/11

Thu, 01/03/2013 - 10:23 | 3118392 BlueCollaredOne
BlueCollaredOne's picture

Spying (on us) up 675% since 9/11.  

 

Thu, 01/03/2013 - 10:52 | 3118510 francis_sawyer
francis_sawyer's picture

but it's for "THE CHILDREN"... remember?

Thu, 01/03/2013 - 10:22 | 3118387 Cursive
Cursive's picture

IF Republicans were serious (and we all know that they are not), they would do nothing.  This whole situation is akin to how dead bodies are treated in Nigeria.  Touch it, and it's your responsibility.  So, the smart thing to do would be to let the sequester run it's course and let Obama make the cuts.  It would also have helped if Republicans would simply explain that Obama effectively increases our national mortgage until we can afford nothing, just like ordinary Americans are feeling price shocks at the grocery store.  Of course, again, this assumes Republicans are serious and/or not complete and utter dumbasses.

Thu, 01/03/2013 - 23:32 | 3121047 smiler03
smiler03's picture

Thank you, now I understand why I've been offered $20 million to handle a funeral in Lagos.

Thu, 01/03/2013 - 10:28 | 3118411 Room 101
Room 101's picture

"Unfortunately, the upcoming increase may be more difficult to enact than the increase in 2011."

Bullshit. 

Since when has jacking up the so-called debt ceiling been all that difficult?  And think about this for a moment: the executive branch has already been floating the idea that the President can unilaterally raise the ceiling anyway.  We all know the repugnicans don't have the balls to call him on it if he did so, so why all the angst?

Here is how it'll play out: Obama will play it out and threaten and cajole and get pretty much all that he wants.  If he doesn't, he just plays the unilateral ceiling raise card at the last minute and gets all he wants anyway.

This is much ado about nothing. 

 

Thu, 01/03/2013 - 10:34 | 3118432 Tsar Pointless
Tsar Pointless's picture

Yep. Democrats cried about the "Bush" tax cuts. Now, those same Democrats vote to permanently keep those same "Bush" tax cuts.

Democrats cried about massive defense spending and intrusive spying under Bush. Yet, now, we have the continuation and expansion of both.

Republicans cry about profligate spending and debt increases by Democrats. Yet, when they have the chance to actually reduce one or both, they don't. They keep increasing them, if only at a "slower" pace.

Two heads, one coin. Just what our Founding Fathers wanted. (Sarcasm. Yes, sarcasm.)

Thu, 01/03/2013 - 11:02 | 3118552 GMadScientist
GMadScientist's picture

Because those two contexts (10 years, 1 depression, and $3T apart) are otherwise completely comparable?

LOL

 

Thu, 01/03/2013 - 10:35 | 3118438 youngman
youngman's picture

I give the Obama Nuclear Option a 50% chance right now......I think he wants to do it...he thinks he is king....and he wants to rule as one...

Thu, 01/03/2013 - 10:46 | 3118490 Tsar Pointless
Tsar Pointless's picture

Every president since Nixon (other than Carter) has wanted to be king, or at the very least thought he was or was treated as such by his party.

Think of this: Carter may very well be the least-harmful president we've had in over 40 years.

Thu, 01/03/2013 - 11:04 | 3118556 GMadScientist
GMadScientist's picture

Perhaps you merely fail to understand that Af-Pak was blowback from Carter and Zbig?

 

Thu, 01/03/2013 - 10:57 | 3118533 Room 101
Room 101's picture

It all depends on who the GOPussies select as their "speaker" later today.  If it's BooHoo Boner, it's about a 10% chance of using the unilateral decree.  There is no need: Obama will get all he wants and then some.  If by some miracle the GOPussies show some spine that we have yet to see, then the chances of the unilateral decree option go up to well over 50%. 

Thu, 01/03/2013 - 10:40 | 3118452 Pharming
Pharming's picture

I have to agree with you.  The congress is a full of Eunuchs.  Our representatives...

Thu, 01/03/2013 - 10:46 | 3118487 pods
pods's picture

If I want to watch hockey I will put in the Slapshot DVD.

pods

Thu, 01/03/2013 - 11:04 | 3118558 GMadScientist
GMadScientist's picture

Just overlay a goal and penalty box over some old Ali v Frazier footage.

Thu, 01/03/2013 - 10:30 | 3118420 tradewithdave
tradewithdave's picture

You fail to acknowledge the platinum easy button as endorsed by Krugman, Pete Peterson and Sacajawea.  

 

http://tradewithdave.com/?p=14624

Thu, 01/03/2013 - 10:35 | 3118436 Jack of All Trades
Jack of All Trades's picture

The media will of course need to come up with some catch phrase to replace "fiscal cliff" to ratchet up fear so our "leaders" can then swoop in and save the day (by kicking the can again).  You've got some possibilities:

-Debt Ceiling Debacle

-Sequester Showdown

 

 

 

Thu, 01/03/2013 - 10:41 | 3118458 adr
adr's picture

Circle Jerk Money Toss

Thu, 01/03/2013 - 10:36 | 3118441 TerminalDebt
TerminalDebt's picture

They'll just vote to have a future fiscal cliff in return for a debt ceiling increase.

Then when time comes they'll vote to cancel the fiscal cliff, problem solved, carry on.

Thu, 01/03/2013 - 10:39 | 3118449 adr
adr's picture

As per government calculations, nothing is a drag on GDP anymore. That final Q3 calculation should have been negative, but every subtractor was switched to an addition.

The Politburo has nothing on these clowns today. To say that the propoganda released on the citizens of the USSR had more truth behind it than the reports issued by the US Government today, is not a lie anymore.

By the way, I have it on pretty good authority that Walmart and other major retailers sold less than 50% of the holiday specialty merchandise. You know those large cardboard displays that go in the aisles. That product isn't put on clearance. It gets shipped back after the selling period expired. Some of the displays sold less than 10% of the inventory. Also more than 50% of the seasonal merchandise that could go on clearance only moved once the stuff got a 50%+ off tag.

Against whatever propoganda the Market puts out, the real story is devastation at retail.

Thu, 01/03/2013 - 10:40 | 3118453 vote_libertaria...
vote_libertarian_party's picture

So just to be clear, Fitch is saying unless the gvt CONTINUES with the $1,xT in deficits uninterrupted they will downgrade?

 

(last paragraph)

Thu, 01/03/2013 - 10:45 | 3118486 busted by the b...
busted by the bailout's picture

I'm not sure the spending cutters have much leverage at this point.  The only negotiating hammer appears to be the debt ceiling.  But what if the Administration ignores it and challenges the constitutionality of that law? 

The legal argument could be that Congress cannot order, by statute, the Executive Branch to spend money on certain things, while also making the tax laws that determine the government’s revenue, and then limit the Administration’s ability to borrow the money needed to pay for spending required/authorized by statute.

In that scenario, the administration could ignore the debt ceiling, keep on borrowing and paying bills, and Congress has no lever to force them to negotiate.

I don’t think we will see any cuts in FY13 spending, and only immaterial amounts in FY14.

 

Thu, 01/03/2013 - 10:48 | 3118495 AynRandFan
AynRandFan's picture

Nancy Pelosi went on record this morning supporting that very position under the 14th Amendment.

Thu, 01/03/2013 - 11:18 | 3118604 busted by the b...
busted by the bailout's picture

Thanks, I'll look for that news.  I figured something was up when O said he wasn't going to negotiate on the debt ceiling again.  They have a plan to circumvent it. 

If so, I think the Republicans are screwed.  They can't let the sequester kick in because they don't want the DoD cuts.  So the sequester will most likely be punted again, or perhaps repealed altogether and replaced with a new plan with different cuts starting in FY14.  When we get to FY14, it will then probably be changed again.

Thu, 01/03/2013 - 12:37 | 3118895 Joe moneybags
Joe moneybags's picture

Buster, you have really hit upon a very important forthcoming change in governmental policy: the elimination of the debt ceiling.  Clearly, it is an arbitrary number, and policy, designed by the Congress, and not specified by the Constitution in anything but an interpretive way.  It's elimination will be heralded as a great positive.

Thu, 01/03/2013 - 11:09 | 3118574 GMadScientist
GMadScientist's picture

Gonna be pretty fucking hard to get past specific text enumerating congressional power to borrow money on the credit of the US.

Thu, 01/03/2013 - 11:31 | 3118615 busted by the b...
busted by the bailout's picture

Yeah, but I thought Obamacare was hard to justify under the Constitution too, yet John Roberts did it anyway.

That would be the purpose of challenging the Constitutionality of it: There is a conflict that must be resolved.  If Congress has the power of the purse and authorizes both spending and tax revenues, how can they then also restrict the Executive Branch's ability to comply with those laws made by Congress?  in order to resolve the conflicting laws, Congress will have to yield to increasing the debt ceiling, or abolish it so that the existing spending laws / appropriations can be honored, IMO.

Thu, 01/03/2013 - 10:46 | 3118488 AynRandFan
AynRandFan's picture

It's really strange that the Dems are ok with painting themselves in a corner as the "Party party", with no interest in fiscal prudence of any kind.

Thu, 01/03/2013 - 10:48 | 3118496 Tsar Pointless
Tsar Pointless's picture

It's not strange at all. Not when you consider that the first and only priority of a party is to gain and retain political power.

Thu, 01/03/2013 - 11:01 | 3118547 AynRandFan
AynRandFan's picture

Well, that doesn't say much for American voters, but I guess you're right.

Thu, 01/03/2013 - 11:23 | 3118619 Spastica Rex
Spastica Rex's picture

American voters want more stuff. All of them.

More food stamps.

More take home pay.

More iPhones.

More one-ton pickups.

More BMWs.

More trips to Aspen.

Thu, 01/03/2013 - 11:31 | 3118639 RiverRoad
RiverRoad's picture

With thanks to those Harvard BS marketing graduates.

Thu, 01/03/2013 - 11:11 | 3118581 GMadScientist
GMadScientist's picture

You assume the legion of elderlies collecting checks and boner pills from Uncle Sam don't have the same laissez-faire attitude about fiscal responsibility.

"Fuck you, whippersnappers! I'll be long gone..." - Gran-pops

 

Thu, 01/03/2013 - 10:56 | 3118525 Salon
Salon's picture

Please spread this link far and wide if you want to know the game plan for the new American Revolution. Assymetric warfare can succeed and does not require centralized command.

Here are your orders from the resistance.

 Our rulers want to disarm us peasants. We cant be trusted.

http://www.bob-owens.com/2012/12/what-youll-see-in-the-rebellion/comment...

Thu, 01/03/2013 - 10:56 | 3118527 RiverRoad
RiverRoad's picture

The 1% of the world have three unhappy  choices:  They can busy themselves in a futile attempt to shove austerity and their bill for the party down the throats of jobless sheeple OR they can provide jobs for the sheeple to pay those bills with OR they can pay the damn tax/bills themselves. 

Thu, 01/03/2013 - 11:40 | 3118663 ElvisDog
ElvisDog's picture

or (D) they can continuously debase all of the world's currencies while making sure that their own personal wealth extraction activities stay ahead of said currency debasement. They maintain or expand their positions of wealth while the costs are pushed on to the other 99.9%.

Hmmm, what will they do? I'm guessing choice (D).....

Thu, 01/03/2013 - 12:12 | 3118789 RiverRoad
RiverRoad's picture

Which is really the ultimately futile choice #1 (and I like your expanded take on that) since   people with no jobs have no taxes to pay....

Thu, 01/03/2013 - 12:53 | 3118940 maximin thrax
maximin thrax's picture

I think you are confusing the 1% with the 0.01%. Not everyone in the top 1% of income is a bankster.

Thu, 01/03/2013 - 10:58 | 3118535 unplugged
unplugged's picture

Absolutely meaningless under Central Planning / Central Printing / Marxism.

Did you ever hear the old USSR squabble about such trivial matters ?

 

Thu, 01/03/2013 - 11:03 | 3118554 moneybots
moneybots's picture

Number of times debt ceiling has not been raised.  ZERO.

Thu, 01/03/2013 - 11:28 | 3118634 SmoothCoolSmoke
SmoothCoolSmoke's picture

I terms of the Markets, I just do not see it being as bad. If I recall the SP dropped about 150 pts last time around the DC block.  A replay of that would just be too easy for the shorts, for whom nothing has been easy.

Thu, 01/03/2013 - 11:34 | 3118647 ElvisDog
ElvisDog's picture

This article is silly. Have the authors been paying attention at all the past couple of months. The Republicans have absolutely no leverage in part because the Dems have absolute control over the MSM and therefore the message that gets out to Joe and Jane SixPack. If the Republicans try to hold the line on spending cuts they will be portrayed as the ones starving Granny or keeping medical care from getting to disabled children. The Republicans will roll over again, there will be no spending cuts, Obama will get two more years (at least) of debt limit room, and full steam ahead.

Thu, 01/03/2013 - 13:09 | 3118997 maximin thrax
maximin thrax's picture

If so, then the Repubs need a fallback position. That would be the states - the other constitutional entities.

How about all Republican governors tender the resignation of all Republican congresscritters, then appoint Democrats as replacements? That puts it all on one party, the Democrats, to fix the fiscal mess. A scheme, of course, to weaken the central government in hopes that the states can step in and do what's best for their citizens.

The States need to get a little rebellion going. To wit, each state should collect every dime of taxation normally collected by the IRS from its citizens and businesses, to be remitted in one check from the state to the IRS. That's just fifty tax returns (plus territories) instead of millions.

Let the feds know that that check might be slow in coming, or not at all, if the federal government continues to impinge upon the freedom and prosperity of their citizens, whom they are bound to protect.

A citizen cannot stand up to the IRS, and to the misuse of his taxes and the abuse of his Dollar by the central government. A state can, especially in concert with other states, and should.

Thu, 01/03/2013 - 12:56 | 3118951 SKY85hawk
SKY85hawk's picture

Perhaps the NEW CONgress will consider Wasteful spending.  Here's a few items to start with:

-The Congressional Budget Office published a "Budget Options" series identifying more than

$100 billion in potential spending cuts;

http://www.heritage.org/research/reports/2009/10/50-examples-of-governme...

 Waste Book 2012:  Rep. Tom Coburn wants changes, too!

 

www.heritage.org/research/reports/2009/10/50-examples-of-government-wast...

 

Wasteful Govt Spending – Source: Unconventional Wealth newsletter pitch

National Institute of Health (NIH) funded studies include:

$386,000 to study massaging rabbits: a study to determine proper massage duration time on rabbits;

$453,000 to study breathing during meditation: a study to determine how important breathing is during meditation;

$1,158,000 to study how to lose weight through meditation: a study to find out if meditation encourages weight loss;

$458,000 to study yoga & meditation therapy: a study to see if meditating and doing yoga helps you lose weight;

$438,625 to study behavioral effects of meditation: a study to see if meditation relaxes people when stressed out;

-General Services Administration spent $800,000 at a party hosted in Las Vegas with the goal of finding ways to streamline the administrative duties of government workers;

-They spent $350,000 to figure out if golfers needed bigger golf holes;

-Our government spent almost $1 million studying the sexual attraction of fruit flies;

spends about $1.5 billion a year on advertising.  a third of the time, agencies spending this money don't get competitive bids;

The unfortunate truth is that our financial future is in the hands of the very people who've let our debt mushroom to over $16 trillion.

Worst of 2012 – Source: By David Zeiler, Associate Editor, Money Morning

-NASA spends $1 million a year on developing recipes for foods which astronauts could prepare while visiting Mars

More:

-The U.S. Navy bought 450,000 gallons of biofuels for $12 million—or almost $27 per gallon;

-Pentagon recently spent $998,798 shipping two 19-cent washers from South Carolina to Texas and $293,451 sending an 89-cent washer from South Carolina to Florida;

-A GAO audit classified nearly half of all purchases on government credit cards as improper, fraudulent, or embezzled;

 

 

Thu, 01/03/2013 - 13:29 | 3119083 maximin thrax
maximin thrax's picture

Ah, but you see... there IS NO waste. Just an increase in velocity of money, which is just what Dr. Keynes ordered. Houses get bought, as do cars and cable packages, with that money. And if that money comes off the Fed's press, to be spent into the economy to buoy asset prices and keep the Lexus dealers' doors open, so much the better. If we DON'T borrow huge amounts of money and spend it, according to our broken-window-fallacy-believing overlords, that's when we'll be in really big trouble. Whatever it takes to make a trillion-dollar deficit, Washington's on board with.

Thu, 01/03/2013 - 13:53 | 3119181 SKY85hawk
SKY85hawk's picture

Sad but True  .    .      .

Thu, 01/03/2013 - 12:57 | 3118955 skydrake
skydrake's picture

Wellcome in Europe

Thu, 01/03/2013 - 19:50 | 3120450 polak potrafi
polak potrafi's picture

to watch how they play the Texas hold'em

 

So far the situation at the green table doesn't look too good for the Barak crowd. George DoubleU cuts extended for all who do not care to join Gerard F. Depardieu at the Tey Partey on Cayman Islands in exchange for ... 24 dubious billion as the price for starting the 1.2 trillion secastration in March already OMG!!! (gasp). True. The evil eye watchers claiming that US is a three hundreds year experiment that will go bust in case of any major internal problem due to the selfishness of the participants can be wrong... and only few sarcos shall defect to diminish the projected 0.6 trillion in tax revenues (over the 10 year horizon). The truth is that we can only come to you (the rich folks) with tears in our wet brown eyes and cry... please do not leave us... please do not leave US. 

 

On the other hand one can believe that folks making over .5 million a year can go deep to a desert ranch with any girl/guy they want, take some peyotl or watever they want and listen to the answer blowin' in the wind.

 

The outcome of the New Years deal is puzzling everybody. 0.6 trillion in revenues plus 1.2 trillion in spending cuts (over the next 10 years) is much more than we have hoped for. Is the March deal going to be as simple as that? Everything for nothing. 1 trillion for nada. Raising the debt ceiling for implementing 1.2 trillion in spending cuts. Barak people going down the cliff and GOPsies flying above. Even Moody's does not believe in that.

 

BACKDOOR agreement: Who knows what has been cooked up already behind the closed doors of the White House. Maybe some crazy scenario of castrating the sequestration altogether. Naa...h, political deals are made "now or never". Nobody trusts in supporting something in the future in exchange to pass another thing right now. Barak bleeds in the corner unless...

 

... Dick is already cleaning his shotgun pondering which one of his fellow lawmakers should be invited for the next wild goose hunting to provide some hedging for Lockheed in those difficult times.

 

Seriously. You can rest assured that we all here in EU and other NATO alied states have wetted our panties hearing that the "zupa" 1.2 trillion in spending cuts that are going to kick in in two months include about 0.5 trillion of defense cuts (in the mid-term horizon). Maybe at least some reserve? For a worry, or a global co-op? Whatever? We sure do not want to see another lame duck session changing into a sitting duck cook up.

 

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