Sorry Jon, but I think you’re wrong on this one. After the 2nd there is no more wiggle room, at all. We are already deep into the bag of tricks that the Treasury has to keep us going, we have been since the end of May.

I think what the WH is doing it giving Congress room to fuck up and not pass it, see the damage it will do by the markets being spooked but never have to actually default, which will occur on August 4th when a set of bonds mature.

Since that is my birthday, I should get what I want.

Dear Congress, please don’t violate the 14th Amendment to the US Constitution and plunge the globe into economic chaos just get secure *more* tax breaks for the uberrich top 1%ers. Thnx.

You can always delay the mailing of checks to all federal employees, contractors, etc… by two days to buy a little extra time.

How many physical checks do you really think get mailed anymore? My experience is that governments of all kinds would rather do direct deposit of money than cut a real check and put a stamp on it and mail it.

Besides, at this point, who is going to believe “the check is in the mail” when it is clear that the government is seriously considering default? There is no lee way after August 2nd unless is a locked down agreement that is about to get through Congress, like that day or next which includes language to make it retro active.

Obama like Jon Walker says is creating a phony CRISIS

this is straight out of the NEOCON play book, create the fake crisis, this gives congress the out they need, to say the CRISIS made us Fuck USA citizens.

Blame Republicans!!! Progressives please blame Republicans! Progressives, for destroying Medicare and Social Security. this is what Senate Dems will say

Senate Dems already know this is the game plan!

nothing new here just more Kabuki

come 2012 primary season progressives need to attack every Dem senator that votes for this Debt package by OBAMA

Keith Olbermann said it best the only reason there is a Debt Crisis is because of OBAMA!!!

Obama created the catfood commission

Horse crap. There is a crisis, that you don’t like it, that you don’t think that Republicans for the very first time in our nations history will not raise the debt ceiling does not mean that Jon or anyone else is manufacturing it.

I might think that he is wrong about being able to push the date past August 2nd but he is spot on in the rest of his coverage.

In his classic “You Can Negotiate Anything,” Herb Cohen says that if one side knows the other’s deadline, they have an advantage in their negotiation, as it’s axiomatic that people make concessions as their deadline approaches. By broadcasting his deadline, Obama has just painted himself into a corner and set himself up for his umpteen-gazillionth cave-in to the R’s.

Would somebody please remind me where the Democratic Party found this loser again?

I confess to being a little in the dark about this. I was thinking that they can issue new debt but they just cannot exceed the 14.3 trillion limit. So a one for one exchange does not increase the total??

I do agree with you Jon that they will push through an unpopular package with little time to “complain” about. But if it is truly draconian it will not go down well and it will certainly hurt his chances for reelection. In fact, “draconian” could be almost anything with SS and medicare.

Full disclosure: Not-a-politician, not-a-lawyer, not-an-economist. I heard an interesting theory advanced by a single liberal pundit yesterday, and no one has picked up the thread. The postulate was: the ‘day after’ the debt ceiling crisis (assuming we survive THAT apocalypse) the Executive decides how to expend the monies remaining in our coffers–for all intents and purposes he has been empowered with a presidential line-item veto. The example given (really bad for BigAg) was if he so chose, the President could reassure foreign creditors that THEIR bills would be paid; seniors that their SS checks would be in the mail; veterans and military that THEIR payments would arrive. OTOH, the USDA could be instructed to shut down meat inspection . . . and the big meat producers would see their lines grind to a halt since meat sans inspection stamps cannot (supposedly) enter the marketplace. How long before these BigAg producers would be twisting the arms of their purchased legislators to raise the debt ceiling?

I’ve heard that every executive (president, governors) absolutely drools for line-item veto authority . . . and I would think advertising that this is, in essence, what the GOP is granting the President on ‘the day after’ would be a very, very big stick. But then again, maybe I’m just too naive.

Can you say “shock doctrine”? This is a phony crisis generated out of nothing.

“I fear by setting this deadline the White House’s real goal is create a looming crisis hour they can point to so they can justifies rushing through an extremely unpopular package with little public debate or scrutiny.”

That’s about the standard formula. Create an imaginary crisis and then impose an authoritarian command decision without any meaningful public debate. Later, the Glorious Leaders can remind us of how once again they saved our asses from certain disaster while we return the favor through thoughtless worship of this paternalistic and dictatorial system and the worthy experts who run the show.

This might add more information or at least a different perspective.

http://my.firedoglake.com/gimlet/

Well said – our black Reagan never let’s a pretend crisis go by without “solving” it by screwing the sick and aged – because he gets his kicks being the “liberal” that kicks the left into the gutter every time he can.

Yo…See my # 20 here.

This debt ceiling crisis is manufactured, though. The country is not broke. There is plenty of money to spend on whatever pet war the R’s want to wage. Republicans are deliberately creating a crisis to force austerity on us. *That* is a Shock Doctrine play.

OT– The bold is my emphasis:

British government officials approached nuclear companies to draw up a co-ordinated public relations strategy to play down the Fukushima nuclear accident just two days after the earthquake and tsunami in Japan and before the extent of the radiation leak was known.

Internal emails seen by the Guardian show how the business and energy departments worked closely behind the scenes with the multinational companies EDF Energy, Areva and Westinghouse to try to ensure the accident did not derail their plans for a new generation of nuclear stations in the UK.

(excerpt from “Revealed: British government’s plan to play down Fukushima” Guardian.Co.Uk, June 30, 2011)

As long as the checks keep going to Obamabots like you…

Will Obama be forced to use the ‘Constitution Option’?

“Republicans’ Plan to Wreck US Credit Unconstitutional; But Don’t Count on Right-Wing Judges to Stop Them”

Democrats have begun floating the idea that even if Republican obstructionists try to ram our ship of state into a fiscal iceberg like the corporate pirates they are, they might merely crumple the bow rather than send the whole economy careening to the ocean floor. That’s because, even if the Republican Congress fails to raise the debt ceiling in their stab at creating yet another right-wing disaster they can blame on President Obama, their attempt to force the United States into default is not permissible under the Fourteenth Amendment to the US Constitution …

Article:
Republicans’ Plan to Wreck US Credit Unconstitutional

A law professor makes his ruling.

Bill Egnor

the intelligent left can not afford to have the IQ of Sarah Palin

explain to all of us, why Obama fought so hard for the Bush Tax cuts if there was a Debt Crisis looming, FACT “all Obama and the Dems had to do in 2010 was let the Bush Tax Cuts expire, Debt Crisis over”

Did Obama ideas help the economy in 2010? that would be NO!
“Obama did hurt Social Security with his payroll tax cut”

Also explain to all of us? How the debt problem always disappears when it is time to bomb a 3rd world nation for their resources ie LIBYA

Will Debt crisis keeps us from bombing IRAN? if the opportunity presented itself?

Obama is using the Shock Doctrine here! this is nothing new
7-22-2011 the world ends? because OBAMA says SO

You consider Obama to be a DEM?
Obama is about to adjust Social Security cost of living ratio, which will result in SENIORS getting less MONEY.

welcome to the INTELLIGENT LEFT

Do U think OBAMA is trying to get re-elected or lose in 2012?

How many blacks are there in the USA senate? 0

Do U think OBAMA ” A BLACK MAN” can win the WH in 2012 without Hippy votes?

Obama really doesn’t care about being “re-elected.” He’s got plenty of lifetime job opportunities at a much higher rate of pay with all his corporate masters more than happy to reward him for “services rendered.”

Even if the debt ceiling crisis is faux, there is bipartisan resolve among the political leaders to cut the deficit and debt ala Bernanke’s comment way back when, The Catfood Commission rigged by Obama and the usual GOP desire to shred social programs.

Absolutely correct.

Happy (anticipated) Birthday, yellowsnapdragon!!!

;~DW

Thank you, sir.

excellent summary

One point – the line on your blog “(first) there’s a hole in general revenue which the (SS)surplus was filling and second funds must come from general revenue to pay back the borrowed funds(from SS).” seems a little confusing since paying back funds re those borrowed from Social Security is no different than paying back funds borrowed from China and has no effect on the national debt level other than to reduce the debt level.

Any pay back to anyone requires either tax revenue or money newly borrowed (which maintains the current debt level) to repay old borrowings (bonds being redeemed).

The Bush tax cuts for the rich were funded by borrowings from Social Security and the whole point of this crisis is to avoid having the rich pay back the loan as that requires higher tax rates on the rich.

That is why the GOP mantra is “there is no revenue crisis” – they are just protecting the rich from the taxes needed to “repay Social Security” and reduce the debt incurred in giving them the tax cuts (new taxes on the rich work via providing FIT funds equal to the shortfall for current SS benefits so that when SS is redeeming its bonds we do not need new borrowings from China replace the borrowings from SS).

Thanks for reading it and commenting on it.

The “revenue hole” is the one previously filled by the trust fund surpluses used as general revenue each year.

Paying back the borrowed funds adds a strain on the “public” debt instead of the internal one.

The upcoming numbers for Medicare are magnitudes higher than SS.

Exactly what checks would those be Dave?

By the way, it is nice to see such reasoned objections to my points, calling me an Obamabot. Golly with a wit like that you must really sway some people to your opinions. Way to go fella.

But saying crap like that does not in any way detract from the point I was making. Maybe you’d like to back up and try again?

Tell you what Jed, you retype that so it actually is read in English and I’ll be willing to answer some of what I assume are questions.

That schedule assumes that the legislation will not be a clean debt limit bill–which has already been drafted and rejected by the House.

According the Harvard Negotiation Project’s “Getting to Yes” paradigm, a deadline has power when it’s backed-up by a credible BATNA – Best Alternative To a Negotiated Agreement.

IOW, “if you don’t act by X, we will do the following” is the formulation.

This means that, for instance, tomorrow Obama could declare something like:

“If the GOP doesn’t recognize the severity of our collective situation, and come to the table to responsibly offer substantive revenue-side concessions by the 22nd, then I’ll do the following -

- Keep selling Bonds in accordance with the Constitution
- Let the Bush Tax Cuts expire
- Remove the Salary cap on SS Deductions
- Make massive recess appointments, including the Bench, Treasury, CFPB and OLC
- Initiate a series of Direct Government Jobs Programs by Emergency Decree, if necessary, in the spirit of WPA and CCC
- Completely investigate “Who Bet Against US by Betting on the Default”
- Institute a Prosecutorial Regime on Wall Street the likes of which has never been seen before
- Declare Off-shore Tax Havens ‘economic enemy combatants’ and pre-emptively vacuum-up their assets into a Money-Gitmo
- Chop the Banks up into Tiny Pieces
- Open Investigations into Lobbyist Influence Peddling
- Re-visit the Estate Tax, Capital Gains Tax and Max Deduction Rules
- etc, etc

And, if you try to Impeach me in the House, we’ll block you in the Senate, and then I’ll Void the “Don’t Look Back at BushCo” agreement to investigate and prosecute the last ten years to the fullest extent of the Rule of Law.”

Or something like that…

The point being that a credible BATNA – and I don’t know what that would actually look like in this situation – can be so powerful that it gives the other side no choice but to negotiate in good faith – or feel real pain.

So, a deadline can be both ‘good’ and ‘bad’ depending on how it’s used. In this case, imvho, it can used to put a spotlight on the utter irrationality of the GOP’s obstinate refusal to be reasonable in the face of potential disaster – which could have the effect of increasing the pressure on them everyday to act like Patriotic Citizens and not Suicidal My-Way-or-the-Highway Ideologues.

Why is Obama so willingly sabotaging his presidency?

Bernie Sanders petition for shared sacrifice.

He’s VERY concerned. if Bernie is concerned, I’m terrified

We had a fairly big “drop dead day” a couple of weeks ago when the Libyan war went over its deadline on the War Powers Act, and Mr Obama and the congress had no problem in just ignoring it. We have a drop dead day on getting out of Iraq, and Mr Gates is doing all he can to abrogate that too. There are all kinds of deadlines for reports on various issues which are routinely pushed back without comment.

Why has Mr Obama become so concerned with this one, even though many important lawyers, scholars and economists have said that he doesn’t need to be fretting over it? Does he think he does not have the power? He over-ruled his own three top legal advisers to make his decision to keep the bombers over Libya.

He can sign a paper ordering a team of assassins to drop into a neutral country anywhere in the world and kill any person he deems a threat. Is this a man with no power who must be obedient to a two-bit politician like John Boehner? What the hell is going on here? Whose side is he on in this?

In an interview with Thom Hartman, Bernie Sanders strongly implied that Obama is going to cave to the Republicans. He pointed out in Obama’s “news” conference he talked about the possibility of losing the National Weather service without mentioning the potential loss of Medicare or Social Security He said he’s not a psychologist and can’t explain his reluctance to confront the Republicans. You don’t need to be a psychologist to understand a traitor to the people and a champion of the corporations.

a good read

http://www.washingtonpost.com/how-grover-norquist-hypnotized-the-gop/2011/06/30/AGYOUlsH_story.html

I just heard that too. It seems he is trying to get ahead of the cave by talking tough and taking punches from cracker senators from texas.
This is like his ‘fat cat’ crack on 60 minutes.
This is a kabuki to appear to be ‘fighting’. I also wonder how eric cantor can get away with shorting the treasury while negotiations are in play or why darrell issa can buy shares in goldman sachs while conducting hearings and none of the villagers are doing any reporting.
It also seems the president is going to give the republicans everything they want to ‘save’ what is left of a depressed economy.

That is a very good read. Grover Norquist and Karl Rove are cancers on the body politic and until that cancer is removed the country and it’s people are in grave peril.

The major block to putting on deadline pressure is that Wall Street does not believe that the GOP will really deny a debt ceiling increase. They anticipate an Obama cave on their pet issues or a GOP walking back from their position on the debt ceiling. Nonetheless, there are credit default swaps being sold as a hedge against a possible government default. Wonder how many of them are “naked” credit default swaps?

The problem for watching this is that you cannot tell from public pronouncement or leaks what is really going on. And no one outside the room has a clue.

there’s no doubt the debt crisis is artificial in that we are not about to go bankrupt. But both parties have their own agenda and this could be very serious if they cannot get past that. Obama caved on Bush tax cuts at year end thinking it was better to get the unemployment and payroll tax relief than to go for a tax increase. Many economists would agree with that as any tax increase is usually not helpful in a recession. In hindsight, he may not have done that. I hope he does not cave this time. I now think the republicans are like terrorists (strong word I know). I would rather fight them right now since this obstruction to everything, including nominations, will not end until we do, and we win or lose.

The fact everyone believes the dems and O will cave makes this all the more troublesome. The republicans and Wall Street believe the dems and O have no backbone and so they can obsruct everything. That is one reason to grow the backbone and say NO/ There will be a price to pay, no doubt but do the Wall Street crowd really want this fight?

you make some good points but on the tax cuts there were a few reasons not to raise them not the least of which was it would have increased taxes on the lower and middle class, as well, and that would surely have hurt the economy.

His sponsors have demanded entitlement reform, and he promised it to them.

Obama Pledges Reform of Social Security, Medicare Programs

By Michael D. Shear
Washington Post Staff Writer
Friday, January 16, 2009

President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare “bargain” with the American people, saying that the nation’s long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.

[...]

The Dems have two options that I know of for circumventing the debt limit:
* The 14th ammendment option, which has gotten a lot of attention this week.
* The jumbo-coin option, which I’ve outlined in this diary.

Their bargaining position would become stronger (if that’s what they want), if they would make these options known and announce their intention to use them if necessary to save Medicare and Social Security of the the death-of-a-thousand-cuts that the GOP have in mind.

You must live in an alternate universe where Democrat actually isn’t a synonym for Republican.

Yep that’s what it is. Shock Doctrine 101 and it has been going on for a long long time.

“We are already deep into the bag of tricks that the Treasury has to keep us going, we have been since the end of May.”

Really? Can’t quite grasp why the whole “debt limit” scare isn’t just a bunch of bs. Even without the 14th amendment, why can’t Timmy just wave his magic wand and create whatever $$ are needed to pay the bills? There may be some consequence to doing that at some point but in the short run I don’t see what prevents that. What happens if the GOP holds their breath on tax increases until their faces turn blue and the debt just gets monetized?

The Neocons are actually a consortium of:

- Severely Compromised GOP Politicians who literally can’t ‘do the right thing’ without getting ruined by their Wall Street minders
- Insolvent Banks drowning in their own self-made toxic stew
- Heartless Ideologue Corporations like Koch Industries and Fox
- AIPAC-connected Lobbyists

They’re all bad actors – it’s a Den of Thieves – organized around Money and Ideology – which they consider a ‘higher calling’ than the Principled Freedom of their American citizenship.

Imvho, what we need is another ABSCAM – or more specifically a Lobbyist-Politician Influence Peddling Sting that puts crooked Politicians and their Bribers/Extorters in Prison – which could very well wipe-out the Republican Party by itself…and bring us an independent Palestinian State inside the ’67 borders, too.

What Wigwam said. There’s no reason for a constitutional crisis when the Coinage Act provides an escape hatch.

Geithner could sidestep the debt ceiling this afternoon by ordering the West Point Mint to coin a 1 oz. $ 1 trillion coin. Tsy can then present the jumbo coins at the NY Fed to buy back $1 trillion in Fed-held debt (the Fed has to accept it, a creditor can’t refuse legal tender paid in to settle a debt).

“(h) The coins issued under this title shall be legal tender… (k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”
http://www.law.cornell.edu/uscode/31/usc_sec_31_00005112—-000-.html

(the Fed has to accept it, a creditor can’t refuse legal tender paid in to settle a debt).

Thanks. That’s an important point that I will immediately edit into my latest draft of this plan, which I want to be definitive.

Well to be definitive– suggest the Secretary put the Gipper on the face, the Mint has an old inauguration medal design they can recycle.
http://galleryplus.ebayimg.com/ws/web/300540292628_1_0_1.jpg

:o)

That would be too cruel.

BTW, I just hear of yet another option: the Fed could sell the $2T Treasury bonds they now own and somehow use the proceeds to finance government operations.

That would be good. But, if the jumbo coin seigniorage option can really be implemented then the constitutional option doesn’t exist because there’s no conflict between the 14th amendment and the debt ceiling legislation, since the Treasury doesn’t need to issue any more debt to pay all its bills. See here: http://www.dailykos.com/story/2011/06/30/990018/-The-Debt-Ceiling-Is-Not-Unconstitutional,-Right-Now!

Interesting stuff; thanks for the food for thought. As for:

a deadline can be both ‘good’ and ‘bad’ depending on how it’s used. In this case, imvho, it can used to put a spotlight on the utter irrationality of the GOP’s obstinate refusal to be reasonable in the face of potential disaster – which could have the effect of increasing the pressure on them everyday to act like Patriotic Citizens

…the “can” part of this equation presupposes that Obama is an effective negotiator who knows how to turn up the heat on his opponents. I’ve seen none of this in two years; maybe he’s just w-a-i-t-i-n-g to show us his negotiating chops, but I won’t hold my breath.

Timmy can’t create money by just deficit spending. Congress mandates that all deficit spending must be preceded by debt issuance. That’s why the existence of the national debt is Congress’s fault: http://www.dailykos.com/story/2011/03/23/959474/-Once-Again,-the-National-Debt-Is-Congresss-Fault?via=history

The Fed can create money at will, however, it can’t spend it except to buy-up privately owned bonds and other financial assets, That’s a swap. It doesn’t add to net financial assets in the private sector. On the other hand, when Treasury spends it does add net financial assets to the private sector.

While Geithner can’t print money, he can use jumbo coin seigniorage to end the crisis. That’s discussed here: http://www.dailykos.com/story/2011/06/30/990018/-The-Debt-Ceiling-Is-Not-Unconstitutional,-Right-Now!?via=history

That’s interesting. They refund interest income from Fed-held Treasuries (they started doing only because Congressman Wright Patman had started asking too many questions), I suppose they could refund the proceeds from T-bond sales as well.

You know, its really odd that Fed-held debt is even counted against the debt ceiling precisely because Tsy receives the interest income from these Fed-owned assets. Under both state trust law and federal tax law, Tsy would hold equitable title to Fed’s T-bond assets as beneficial owner of an implied trust.

BTW, I just hear of yet another option: the Fed could sell the $2T Treasury bonds they now own and somehow use the proceeds to finance government operations.
I’m curious if you have a link for this suggestion. The way to frame it as to think of the Federal Reserve as the trustee managing assets (Fed-held T-bonds) of the beneficial owner (Tsy). As trustee, its has been distributing interest income as it accrues to principal (or “corpus”). When the trustee sells an asset, the income stream has ceased but the trustee can usually (assuming it doesn’t conflict with another beneficiary’s interest) distribute the corpus instead.

Does the accounting balances hold up if Tsy buys (a la QE2) $600 billion in Treasuries in exchange for creating reserve balances at seller’s account and then turns around and sells this corpus at market to drain reserve balances from buyer’s account and then forwards all its “capital gains” (marking purchase basis at 0 presumably) to Tsy as a corpus distribution? Makes my head hurt to think about, easier to just drop a coin in the meter. :o)