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Author Topic:   United States Debt Default
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


(1)
Message 49 of 211 (624591)
07-18-2011 10:48 PM
Reply to: Message 47 by Taq
07-18-2011 5:00 PM


Re: Possible
Someone is going to decide who gets laid off, who doesn't get their social security, etc.

There's a bit of a rub, there - the Executive branch doesn't have the constitutional authority to not pay someone whom Congress has authorized an expenditure for. When Congress passes a law that you should be paid, it's a violation of the separation of powers for the Executive branch to not pay you.

It's a bit of a constitutional oversight, but it stems fundamentally from the fact that Congress has passed mutually contradicting laws - they've authorized only X amount of debt, but have legislated K > X amount of spending. There's no constitutional guidance on what's supposed to happen when Congress does that because it never occurred to the Founding Fathers that Congress would ever be that stupid.

Regardless, SS recipients have a legal right to be paid, military contractors have a legal right to be paid, everybody who the government is supposed to pay has a legal right to be paid, because a law was passed to pay them. And the Executive branch simply isn't granted the constitutional authority to contradict Congress and say "sorry, not going to pay you" - not for any reason. There's already court precedent on this; when Congress passes a law that someone should be paid for something, they have to be paid.


This message is a reply to:
 Message 47 by Taq, posted 07-18-2011 5:00 PM Taq has not replied

Replies to this message:
 Message 50 by Jon, posted 07-19-2011 1:34 AM crashfrog has replied
 Message 51 by Malvern, posted 07-19-2011 10:14 AM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 53 of 211 (624682)
07-19-2011 11:53 AM
Reply to: Message 50 by Jon
07-19-2011 1:34 AM


Re: All Pot, No Stew
But what happens when the money just isn't there? What happens when the Social Security checks and military wage checks are returned NSF?

The government prints money, Jon. By definition they can't run out of it because they're the source of it. The Secretary of the Treasury is given statutory authority to strike coinage. So, he'll just strike some. Under Federal Law he can strike all the platinum coinage he sees fit.

What law creates something from nothing?

Well, in this case, it's US Code Sect 31.5112 (k).


This message is a reply to:
 Message 50 by Jon, posted 07-19-2011 1:34 AM Jon has replied

Replies to this message:
 Message 55 by Jon, posted 07-19-2011 1:33 PM crashfrog has replied
 Message 57 by AZPaul3, posted 07-19-2011 1:58 PM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 54 of 211 (624683)
07-19-2011 11:54 AM
Reply to: Message 51 by Malvern
07-19-2011 10:14 AM


Re: Possible
Speaking of constitutional oversite, can Congress REALLY kick the responsibility and authority of raising the debt ceiling over to the President without actually voting on it themselves?

Congress can't do anything except by voting on it, so by definition they'll have voted on the debt ceiling by authorizing the executive to raise the debt ceiling as he sees fit.


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 Message 51 by Malvern, posted 07-19-2011 10:14 AM Malvern has not replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 56 of 211 (624706)
07-19-2011 1:46 PM
Reply to: Message 55 by Jon
07-19-2011 1:33 PM


Re: All Pot, No Stew
But we're not dealing with printed money; we're dealing with electronic money, money in the bank.

Printed (or struck) money can be turned into electronic money in the bank.

Seriously, Jon. It's something banks do! You can take them a wad of cash and they'll take it from you and turn it into "electronic money." It's an inconvenience, but if House Republicans are determined to prolong their manufactured crisis, then it'll just be one more market-distorting inefficiency forced upon us by "free market" conservatives.

He is not required to do so.

As I said, he is required to do so - the executive branch has no constitutional unallotment power. Geithner has to pay everybody that Congress has decided to pay. That Congress has also declined to give him the money to do so, or to allow him to borrow the money in order to pay them, doesn't matter at all - a court would have no choice but to order the payment of legitimate classes of claimants because Congress has already legislated that they be paid. The result would be a line at the Treasury window, with each claimant possessed of a court order that they should be paid ahead of the other guys.

But Geithner has both statutory and constitutional authority to ignore the debt ceiling altogether, since he's the one who prints the money. Making sure that new dollars are backed by revenue is Congress's job, not his, and House Republicans have decided to abdicate that responsibility.

Edited by crashfrog, : No reason given.


This message is a reply to:
 Message 55 by Jon, posted 07-19-2011 1:33 PM Jon has not replied

Replies to this message:
 Message 58 by AZPaul3, posted 07-19-2011 2:13 PM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 59 of 211 (624734)
07-19-2011 5:14 PM
Reply to: Message 58 by AZPaul3
07-19-2011 2:13 PM


Re: All Pot, No Stew
I think you're trying to take me out of context, here; the thing I'm asserting he's required to do is pay those claimants that Congress has legislated to be paid. The thing you're saying he's not able to do is print money to do so, but that's something totally different and that's not what I've asserted he's required to do.

No, Frog, he is not required to, authorized to or even permitted to.

Absolutely wrong. Treasury Secretary Geithner is absolutely required to allot payment to those claimants that Congress has legislated to be paid, contrary to your assertion.

The Treasury can only print/strike what the Fed orders.

Well, no. USC 31.5112(k) gives the Treasury Secretary discretion to strike platinum coinage as he sees fit.

quote:
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.

Do you see? Both mint and issue. 31.5112(k) gives the Treasury Secretary full authority to strike whatever coins in platinum he wants, to whatever end he wants, and issue them into circulation. The Fed isn't the only way that new dollars can enter the economy; Geithner can simply strike some very large $1,000,000 coins and roll them into a bank.

Thus the debt problem.

No, the debt ceiling problem is a result of Constitutional short-sightedness and a stop-gap measure enacted in WWII that results, uniquely among modern democracies, in Congress having to vote twice on the things they want to buy - once to allocate the funds to buy it, and once to actually get the funds.


This message is a reply to:
 Message 58 by AZPaul3, posted 07-19-2011 2:13 PM AZPaul3 has seen this message but not replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 60 of 211 (624735)
07-19-2011 5:26 PM
Reply to: Message 57 by AZPaul3
07-19-2011 1:58 PM


Re: All Pot, No Stew
As of Aug. 3 the executive cannot sell any more Treasury obligations until congress authorizes an increase in the ceiling.

Frankly, it's not at all clear that the executive is constrained by Congress's failure to raise the debt ceiling:

1) Since Congress has already established that these debts should be paid, and the Treasury has no Constitutional unallotment authority, claimants have a legal right to be paid. All of them. The Treasury is obligated to do so, there's no Constitutional authority for the Treasury to say "sorry, the money's not there." They have to pay everybody; they can't pick and choose. They have no authority to prioritize one payment over another, so any attempt to do so would be reversed by a judicial ruling.

2) The Fourteenth Amendment reads in part:

quote:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

This is understood as preventing the government from defaulting on government loans and as it is an amendment, it supersedes any legislation. Therefore the Executive branch's obligation to preserve the Federal government's trustworthiness and prevent default on the debt overrides the Congressional debt ceiling.

3) As stated the Treasury Secretary has unilateral authority to both mint and issue platinum coinage in any denomination and amount, as granted by Congress in US Code 31.5112(k).


This message is a reply to:
 Message 57 by AZPaul3, posted 07-19-2011 1:58 PM AZPaul3 has replied

Replies to this message:
 Message 61 by AZPaul3, posted 07-19-2011 7:50 PM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 62 of 211 (624761)
07-19-2011 8:38 PM
Reply to: Message 61 by AZPaul3
07-19-2011 7:50 PM


Re: All Pot, No Stew
The government is obligated to pay ... eventually. Nothing in our law requires when.

Well, no. When Congress stipulates an expenditure usually they stipulate a timeframe as well. When Congress makes contracts with private parties, those contracts specify when payments are to be made. Those are laws and they do require that claimants be paid at a certain time.

I'm sorry, Paul, but you're just 100% wrong here - the Executive branch isn't given unallotment authority. Woe betide us if it did! The next Republican president could just opt out of Federal funding of the NEA, Planned Parenthood, and so on. But Constitutionally the Secretary of the Treasury is obligated to pay those parties whom Congress has legislated must be paid. The fact that Congress also hasn't yet authorized the revenue necessary to make those payments is legally irrelevant; the Constitution doesn't make any provision for Congress being stupid enough to pass two mutually contradicting laws.

It does not keep the government from defaulting on timely payment per expectations.

By its plain reading it pretty clearly does. I'm not a lawyer - as neither, I suspect, are you - but the meaning is pretty clear.

Note in the section you described the provision that such platinum coins are "legal tender" is missing but is specifically stated in the other coinage sections.

You're pretty clearly mistaken about that. If the Treasury mints it and issues it in a denomination of (for instance) ten dollars then it's worth ten dollars. Obviously. If you think there's some part of the law that prevents Tim Geithner from minting platinum coins in enormous denominations to pay debts, then present it. Otherwise what could "issue" possibly mean?

Regardless the Constitution is pretty clear, here - Geithner can't pay some claimants and decide not to pay others. The situation outlined where bondholders get their payments but pensioners don't is a legal impossibility - Geithner doesn't have unallotment authority under the Constitution. The Executive branch can't decide not to pay those who Congress has legislated payments.


This message is a reply to:
 Message 61 by AZPaul3, posted 07-19-2011 7:50 PM AZPaul3 has replied

Replies to this message:
 Message 63 by AZPaul3, posted 07-19-2011 9:43 PM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 64 of 211 (624770)
07-19-2011 10:28 PM
Reply to: Message 63 by AZPaul3
07-19-2011 9:43 PM


Re: Let's not find out.
I did.

No, you just alluded to it. I'm asking you to present the relevant statute.

The problem is not "not to pay" but deferred payment.

Geithner doesn't have the authority to defer payment, is the problem.

I am right about this stance

Oh, well, if you say so!


This message is a reply to:
 Message 63 by AZPaul3, posted 07-19-2011 9:43 PM AZPaul3 has replied

Replies to this message:
 Message 65 by AZPaul3, posted 07-19-2011 10:54 PM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 67 of 211 (625198)
07-21-2011 7:09 PM
Reply to: Message 65 by AZPaul3
07-19-2011 10:54 PM


Re: From the Horses Mouth
Great, I guess, except that's not the statutory limitations I asked you to provide, and Geithner's letter doesn't support your contention in any way.

You're in over your head, clearly. Isn't it about time you declared victory and retreated?


This message is a reply to:
 Message 65 by AZPaul3, posted 07-19-2011 10:54 PM AZPaul3 has replied

Replies to this message:
 Message 68 by AZPaul3, posted 07-21-2011 8:00 PM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 69 of 211 (625210)
07-21-2011 8:25 PM
Reply to: Message 68 by AZPaul3
07-21-2011 8:00 PM


Re: From the Horse's Ass
As I already stated, I did provide the statute.

No, there's no statute referred to by you in message 61 or in any other. You referred to a court case (Perry) but surely I don't have to explain the difference?

I see you're taking a page from Buzzsaw's book and referring to evidence "you've already presented" except that you never presented it. Maybe you even believe you presented something - maybe it's like that Jesus thread where people swore up and down that they were presenting evidence for the historical Jesus but were writing in nothing but underscores - and in that case, here's your second chance: pretend that I have no access to message 61 or any previous message or to the rest of the internet, and therefore can't accept links to other messages or allusions to statute as evidence. With that in mind, please present the evidence that supports your legal argument. By which I mean - present it, don't just refer or allude to it. Copy, paste, and put it in a post.

if the Treasury does not have the cash in the accounts the Secretary has to delay payments regardless of your errant reading of the Constitution.

The Secretary can only delay payment until the Treasury does have the cash in the accounts. In a situation where the Treasury will never have the cash, which is what we're potentially talking about here, Geithner has no authority to "indefinitely delay" - that is, not ever pay - claimants who Congress has designated must be paid.

Apparently so is Geithner and his entire staff of economists, researchers and lawyers (both contract and constitutional law) since the thought of minting some $billion platinum coins and rolling them down to the bank hadn't dawned on them.

Well, maybe it hasn't! Had you ever heard of USC 31.5112(k) until I showed it to you? The USC is hundreds of thousands of pages long. Obviously Geithner isn't aware of every single Federal statute - according to the OMB, keeping abreast of Federal law costs the private sector $600 billion annually. It's hardly surprising that Geithner wouldn't be aware of his every legal option when his options are buried deep in United States Code. And it's hardly unreasonable for him - even if he did know about it - to try to work with Congress to resolve the situation instead of simply going over their heads; Geithner may simply be reluctant to buck the traditional authority of Congress in this regard.

Doesn't mean he couldn't or shouldn't, though.

The country would be greatful.

Indeed, and they might even be grateful too.


This message is a reply to:
 Message 68 by AZPaul3, posted 07-21-2011 8:00 PM AZPaul3 has replied

Replies to this message:
 Message 70 by AZPaul3, posted 07-21-2011 9:13 PM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 81 of 211 (625252)
07-21-2011 11:37 PM
Reply to: Message 70 by AZPaul3
07-21-2011 9:13 PM


Re: From the Horse's Ass
Or are you just conveniently overlooking the reference?

What reference? Neither this message nor message 61 have any "reference." And again, I've not asked you to provide a reference, I've asked you to quote the statute to which you're referring. You haven't given me any basis by which I can look it up myself, so I can only rely on you to quote the statutory language to which you refer.

Will you please do so? This isn't a trick, Paul, it's not a gotcha. I'm completely confused about what you think you're referring to so I'm asking you to quote it.

To what section in the US Code could I be referring?

Yes! What section of the US Code are you referring? Better yet - instead of referring to it, why don't you quote it?

Good god, Frog, what the hell are you arguing about.

I'm arguing that Geithner can't "prioritize payments"; the Executive branch doesn't have the authority to decide who to pay and who not to pay, or to contravene Congress when they pass a law that says "X shall be paid Y on Z date."

How did you lose track? I thought the axis of disagreement is pretty clear, here. Geithner doesn't have the constitutional authority to rob Peter to pay Paul.

That is what staff is for and he has thousands of them.

Well, actually, he doesn't. The Senate has held dozens of Treasury appointments. A lot of his advisor and associate positions are currently unfilled.


This message is a reply to:
 Message 70 by AZPaul3, posted 07-21-2011 9:13 PM AZPaul3 has replied

Replies to this message:
 Message 86 by AZPaul3, posted 07-22-2011 12:19 AM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 83 of 211 (625255)
07-21-2011 11:45 PM
Reply to: Message 71 by Taz
07-21-2011 9:18 PM


What the hell are you two arguing about?

I thought I laid it out pretty simply in 62:

quote:
the Executive branch isn't given unallotment authority. Woe betide us if it did! The next Republican president could just opt out of Federal funding of the NEA, Planned Parenthood, and so on. But Constitutionally the Secretary of the Treasury is obligated to pay those parties whom Congress has legislated must be paid. The fact that Congress also hasn't yet authorized the revenue necessary to make those payments is legally irrelevant; the Constitution doesn't make any provision for Congress being stupid enough to pass two mutually contradicting laws.

Geithner has to pay everybody whom Congress has appropriated funds to, and the fact that the Treasury cash drawer may be empty has no relevance to that obligation. There's no "Treasury is empty" escape clause in the Constitution because Congress is supposed to keep the books balanced.

As it happens, though, USC 31.5112(k) gives the Secretary of the Treasury unlimited latitude to both strike and issue platinum coinage in any denomination he chooses. AZPaul disagrees but he's yet to present any relevant statute. He thinks the Federal Reserve Act somehow prevents it, but the FRA applies only to the issue of notes, not coinage. AZPaul doesn't seem to understand the difference between a coin and a bill, I guess.

Really, the question is this - if the TresSec minted an enormous $1 million platinum coin, would a bank consider it backed by the full faith and credit of the United States? I see no reason to believe that they wouldn't, especially if no other payment was likely to be forthcoming.


This message is a reply to:
 Message 71 by Taz, posted 07-21-2011 9:18 PM Taz has not replied

Replies to this message:
 Message 90 by Jon, posted 07-22-2011 1:56 AM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 84 of 211 (625256)
07-21-2011 11:56 PM
Reply to: Message 82 by AZPaul3
07-21-2011 11:41 PM


Re: minutiae
You say you are an economist. Do you think a debt of 102.63% of GDP is optimum for this nation?

How is that different than someone holding a mortgage larger than his yearly income? That's a pretty common situation and nobody thinks twice about it; or consider a student taking loans to finance his college, he's got a debt of thousands and an income of nothing. Nobody bats an eye. Having debt in excess of your annual income isn't unsustainable; it's when the debt service becomes too large a portion of the annual income. Right now the interest on the national debt is less than 2% of annual GDP.

Of course, if the Federal government loses AAA ratings, then the interest rate explodes, and that could be a big deal. Of course, the best way out is to grow the GDP, not shrink spending.

Edited by crashfrog, : No reason given.


This message is a reply to:
 Message 82 by AZPaul3, posted 07-21-2011 11:41 PM AZPaul3 has seen this message but not replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 85 of 211 (625257)
07-22-2011 12:01 AM
Reply to: Message 82 by AZPaul3
07-21-2011 11:41 PM


Re: minutiae
What would be an optimum debt level?

For what it's worth, Japan has a debt level of 220% of GDP, according to the CIA factbook. Germany, who everybody seems to think is the current financial rockstar, has a higher ratio of public debt to GDP than the United States.


This message is a reply to:
 Message 82 by AZPaul3, posted 07-21-2011 11:41 PM AZPaul3 has replied

Replies to this message:
 Message 87 by AZPaul3, posted 07-22-2011 12:29 AM crashfrog has replied

  
crashfrog
Member (Idle past 783 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 88 of 211 (625268)
07-22-2011 1:40 AM
Reply to: Message 86 by AZPaul3
07-22-2011 12:19 AM


Re: By the Nose
Are you really this dense?

Are you? The statue says mint and issue, directly contradicting your position that Geithner can't issue coinage. I mean I don't know how much clearer it has to be, or how much clearer the Federal Reserve Act says when it gives the authority to issue notes over to the Federal Reserve Bank system.

But I'm not talking about notes. I'm talking about coins.

And in Giethner's Letter to Congress he does just that, doesn't he.

So what? His letter to Congress hardly supersedes the Constitution. Geithner can write a letter claiming he has the authority to start a war but it doesn't make it so; it just makes it a really stupid letter. And the fact that he doesn't mention minting enormous platinum coins to pay claimants doesn't mean that he can't - it just means that he didn't see fit to threaten Republicans with it.

And before you get your panties in a wad, nothing in his priorities listing says those obligation will not be paid as funds become available.

But here's the problem, as I've outlined twice for you - Geithner has no authority to determine who gets to be at the front of the line and who gets to be at the back. He doesn't have the Constitutional authority to prioritize payments. People whom Congress has determined shall be paid at a certain time have the legal right to be so paid, and Geithner can't overturn an act of Congress just because the till will run empty if he tries to pay everybody.

It's a double bind. Every single claimant who cares to will win a court case saying they have to be paid ahead of everyone else, and then pretty soon everybody has a court order saying they have to be paid ahead of everybody else. How are you not getting this? Geithner doesn't have the authority to prioritize payments. You think he does? Show me the statute that gives him that authority. I've only asked you four times, now.


This message is a reply to:
 Message 86 by AZPaul3, posted 07-22-2011 12:19 AM AZPaul3 has seen this message but not replied

  
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