Full Faith and Credit


#1

I must vehemently concur with President Obama (D-IL) and Governor Engler (R-MI) regarding intolerable brinkmanship with the full faith and credit of the US. The debt limit does not restrain Congress’ ability to spend but the Treasury’s ability to pay obligations already incurred. If Congress does not want to borrow more, then Congress should not enact the appropriations necessitating it. Of course, that would entail draconian discretionary spending cuts and caps (e.g. Budget Control Act of 2011) because mandatory spending (Social Security, Medicare and Medicaid) has already been enacted.

Let me make one last point and then I’ll start taking questions. There had been reports – and these are not necessarily confirmed, and maybe some of you have more insight than I do on this – that perhaps the Republicans go ahead and let the middle-class tax cuts get extended, the upper-income tax cuts go up, otherwise we don’t get a deal, and next year we come back and the thinking is Republicans will have more leverage because there will be another vote on the debt ceiling and we will try to extract more concessions with a stronger hand on the debt ceiling.

I have to just tell you that is a bad strategy for America. It is a bad strategy for our businesses. And it is not a game that I will play.

Most of you were involved in discussions and watched the catastrophe that happened in August of 2011. Everybody here is concerned about uncertainty; there’s no uncertainty like the prospect that the United States of America, the largest economy that holds the world’s reserve currency potentially defaults on its debts; that we give up the basic notion that the United States stands behind its obligations.

And we can’t afford to go there again. And this isn’t just my opinion; it’s the opinion of most of the folks in this room. So when I hear some on the other side suggesting that to resolve the possibility of a perpetual or a quarterly debt ceiling crisis that there is a price to pay – well, the price is paid by the American people and your businesses and the economic environment worldwide. And we should not accept going through that.

John Engler, who is, I think – he and I philosophically don’t agree on much – (laughter) – no, I’m just being honest about John, and he’s a great politician but he – he originally comes from the other party – but John is exactly right when he says the only thing that the debt ceiling is good for as a weapon is just to destroy your credit rating.

So I want to send a very clear message to people here: We are not going to play that game next year. If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation – which, by the way, we had never done in our history until we did it last year – I will not play that game. Because we’ve got to break that habit before it starts.

Opening Remarks by the President to the Business Roundtable | The White House

cf. Letter on Debt Limit to Congressional Leadership | Business Roundtable
U.S. GAO - Debt Limit: Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market
U.S. GAO - Debt Limit: Analysis of 2011-2012 Actions Taken and Effect of Delayed Increase on Borrowing Costs


#2

The “Full faith and credit” fantasy is ridiculous.

If the U.S. Treasury running out of money then forces the Congress to cut dramatically to become solvent again and some creditors have to wait awhile for their money the result would be a short term dip in confidence followed by a huge increase in confidence as our budgets started to reflect our incoming revenue.

If we don’t let the Treasury run dry by simply printing money to perpetuate our spending of twice as much as we take in every year a much bigger loss in confidence toward the United States will occur and it will last indefinitely.

If any home budget was spending twice what it took in year after year by borrowing on credit cards I doubt anyone would offer the advice “continue on, you don’t want to hurt your credit”, but that is the exact recommendation that is being made in the “Full faith and credit” argument for the status quo.

There is no possible way that we could be this stupid for this long and not incur some negative consequences, the only question is whether the negative consequences will destroy our currency for good or just be a good spanking for a few years while we learn how to act, spend and vote like adults.

This is not a game, too bad Boehner and the rest of the Establishment GOP cannot figure that out.


#3

Ever once think we should do something about the mandatory spending or are you going to just keep concurring with those that want to spend more than we take in?


#4

[quote=“tperkins, post:3, topic:37441”]
Ever once think we should do something about the mandatory spending or are you going to just keep concurring with those that want to spend more than we take in?
[/quote]And concur with everything Bernanke says…


#5

“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.” – Article 1, Section 9, Clause 7

And as I said earlier this week, one thing I will not compromise over is whether or not Congress should pay the tab for a bill they’ve already racked up. If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic. The last time Congress threatened this course of action, our entire economy suffered for it. Our families and our businesses cannot afford that dangerous game again.

Weekly Address: Working Together in the New Year to Grow Our Economy and Shrink Our Deficits | The White House

Congress, pay the obligations incurred by your appropriations and stop the brinkmanship with the credit of the US!!!


#6

You know, Norman, I think you’re right. I think the spending sequester is where the GOP needs to apply its leverage, not the debt ceiling. There’s a simple logic here- you don’t leave others in the lurch because of your own disagreements. Honor your debts to others, which were lawfully incurred. How does RET morally justify the material harm and dishonor his little ideological war-fantasy would bring about?


#7

The credit rating of US government debt was downgraded before any “brinksmanship with the US debt” occurred. The credit rating will be further downgraded based upon our not only continued borrowing, but our increased borrowing in service of paying the day to day expenses government has incurred along with its obligations. Failure to raise the debt limit is not a direct threat to the nation’s credit rating, unless the nation’s government chooses to default versus cutting spending or raising taxes sufficient to the current debt load. RET has enough sense to observe that each raising of the debt limit inspires not fiscal responsibility, but a new wave of spending…as just occurred in the “fiscal cliff” avoidance maneuver. Or did you mistt the algae subsidies within that bill?

Sequestration is not the answer because it only addresses discretionary spending, which is increasing the slowest among budget item categories. There can be no balanced budget, paying down of the debt, nor can there be tax increases sufficient to ever balance the budget until non-discretionary spending is addressed. If you don’t know the difference between discretionary spending and non-discretionary spending, you have no business commenting within a thread such as this.


#8

NEWT GINGRICH: “They’ve got to find, in the House, a totally new strategy. For example, everybody’s now talking about okay now comes the debt ceiling. I think that’s, frankly, now a dead loser because in the end, you know what’s going to happen. The whole national financial system is going to come into Washington, by television, and say, ‘Oh my God, this would be a gigantic heart attack. The entire economy of the world will collapse. You guys can’t be responsible.’ And they’ll cave.”

Newt Gingrich: GOP Will “Cave” On Debt Ceiling | RealClearPolitics

House Republicans ought to heed Speaker Gingrich’s (R-GA) advice to find a new strategy for cutting spending and reducing deficits.


#9

There’s nothing else thay can do, Norman, absent an election. Personally, I advocated for their abdicating office. Let the Dem’s have it and, maybe, we’ll be around in a few years to say, I told you so. As a practical matter, Republicans go nowhere until they start saying what they think should specifically be cut. Of course, to do so is political suicide.