debt limit

On May 9, 2013, The Republican House passed H.R. 807 the Full Faith and Credit Act. The Bill says in part:

(a) In General- In the event that the debt of the United States Government, as defined in section 3101 of title 31, United States Code, reaches the statutory limit, the Secretary of the Treasury shall, in addition to any other authority provided by law, issue obligations under chapter 31 of title 31, United States Code, to pay with legal tender, and solely for the purpose of paying, the principal and interest on obligations of the United States described in subsection (b) after the date of the enactment of this Act.
(b) Obligations Described- For purposes of this subsection, obligations described in this subsection are obligations which are--
(1) held by the public, or
(2) held by the Old-Age and Survivors Insurance Trust Fund and Disability Insurance Trust Fund.

So, in brief, the Bill provides for the Treasury, even when it is about to reach the debt ceiling, to issue additional debt to pay principal and interest on debt instruments issued to the public including foreign nations, and to pay principal and interest on Social Security (SS) “trust fund bonds” in the course of paying SS recipients. Read below the fold...

Well, that's over. The President had a chance to go “over the cliff,” bargain hard with the Republicans, get more of what he said he wanted at the price of perhaps some more days of crisis with extreme pressure building on the Republican caucus, and he blinked. I don't much care that he blinked on tax rates for the top 2% and on inheritance taxes, because tax rate increases for purposes of deficit reduction simply aren't needed for getting deficit spending needed to create jobs, as the rest of this post will show. Here's what I care about: Read below the fold...

I have a petition to President Obama up here. It's about minting that $60 T coin and ending austerity. The wording of the petition is:

”A 1996 law gives the Executive Authority to mint coins w/arbitrarily large face values and deposit them at the Fed. The President should immediately mint a $60 Trillion coin, and use the proceeds to pay off the national debt completely, cover all likely deficit spending by Congress over the next 15 years, and take the issue of spending cuts in programs that benefit the 99% off the table! Google "$60 Trillion coin" for background!”

The purpose is: Read below the fold...

Well, here we are again, House leaders have agreed on a compromise continuing spending resolution at the same level as before from October 2012 through January 2013. It's likely now that the President(s?) will probably try to make the money available for deficit spending as of today, last through the time period of the continuing resolution so that one deal including both the budget and raising the debt limit can be made by March of 2013. According to the July 31, Daily Treasury Statement, there's $499,424,000,000 left until the debt ceiling. That's an average of $62,428,000,000 deficit spending per month for the next 8 months, ending March 31, 2013.

For the past 10 months, average deficit spending was at $114,802.3 Billion per month, and that amount was not enough stimulus for a full recovery. So, the likely 46% reduction in average deficit spending over the next 8 months is unlikely to be any more effective in pulling us out of the extended employment recession we are experiencing, than the deficits in the preceding 10 months were. On the contrary, deficit spending over the next 8 months is unlikely even to allow us to maintain the unemployment levels we have now. So, what ought to be done?

The most important thing that can be done is to change the fiscal context of politics from one of apparent scarcity "justifying" austerity to one where spending capacity is so plentiful, that Congress will be hard-pressed to impose austerity, because its justification in the form of apparent limitations on spending capacity will just seem silly. In the summer of 2011 I proposed a solution to the debt ceiling crisis calling for the minting of a $30 T platinum coin to overcome the problem and also improve the fiscal context for progressive legislation. Now, I want to update that post and apply it to the present political situation, where based on the above events, the next serious fiscal crisis is likely to happen in February and/or March of 2013. So, here's the update. Read below the fold...

There's a distinction between Congressional appropriations, the mandate to spend particular amounts on particular goods and services, and the capability to spend those mandated amounts. The capability is the amount of electronic credits in the public purse, whether any of it has been appropriated for spending by the Congress or not. Congressional appropriations, not the size or contents of the purse, determines what will be spent and what will simply sit in the purse for use at a later time. So, there is a very important distinction between the USD level in the purse and whether any of it can be spent. Read below the fold...

Now that a debt ceiling deal has ended the immediate crisis, the attention being given to the President's options, in case there was no deal on the debt, will fade into the background, and most of the options offered to get past the debt ceiling won't be discussed again, until the next time there's a “debt ceiling crisis.” In highlighting, in previous posts, the President's option of using Proof Platinum Coin Seigniorage (PPCS) to pay back part or all of the national debt, other bloggers and myself writing about PPCS, have raised broader questions of whether the President should use it to:

-- 1) pay back the national debt entirely, Read below the fold...

By

Scott Fullwiler

(X-posted with permission of the author and New Economic Perspectives)

(Editor's note:I think this is the definitive post on how proof platinum coin seigniorage relates to inflation. So, I've now stickied it!) Read below the fold...

Today the MSM question of the morning for Congressional Progressive Caucus members is a variant of this:

“Which is worse, voting for a debt ceiling increase bill that doesn't raise any revenue and that will lead to major cuts in discretionary programs, and in entitlements including Social Security, Medicare, and Medicaid, or voting to defeat a bill that does that and causing the United States to go into a default.”

So, there it is: a false choice again, being used to make progressives look bad if they say they will vote against anything but a clean debt ceiling deal. Read below the fold...

(Thanks to DailyKos commenter 2laneIA for suggesting this post and the title)

It's only a few days now until August 2nd. Perhaps a compromise on lifting the debt ceiling will be reached before then. Perhaps none will be reached. Perhaps the President will veto a compromise if it doesn't extend the ceiling sufficiently to support deficit spending until after the 2012 elections. If a debt ceiling extension is voted down, or if the President vetos an unacceptably small extension, then what is to be done? I've now run into six primary options the President can select among to avoid default. The six are:

-- Challenging the debt ceiling based on the 14th Amendment Section 4
-- Selective default
-- Proof Platinum Coin Seigniorage (PPCS)
-- Running an overdraft at the Fed Read below the fold...

[Welcome, Naked Capitalism readers! --lambert] Read below the fold...

Dear Dems and Mr. President,

I've been a lifelong Democrat. But now, I don't know anymore. I'm still registered alright; but when I look at your behavior, I think I'm a freely floating voter resource now, and I'd probably respond to a poll as one in that amorphous blob of independents that stands for “the two parties suck; but we don't agree on much else.” I'm sorry about that. I really had high hopes after the 2008 election, that a new period of Democratic resurgence had come, and that the Reagan era had ended. Read below the fold...

Congress provided the authority, in legislation passed in 1996, for the US Mint to create platinum bullion or proof platinum coins with arbitrary fiat face value having no relationship to the value of the platinum used in these coins. These coins are legal tender. So, when the Mint deposits them in its Public Enterprise Fund account at the Fed, the Fed must credit that account with the face value of these coins. Read below the fold...

[Cross-posted under a different title at Naked Capitalism -- lambert]

(Author's Note; Many thanks to lambert strether, beowulf, and Yves Smith for their reviews of this post) Read below the fold...

I've written a lot about jumbo coin seigniorage as a way of getting around the debt ceiling problem over the past 7 months, and others here, Read below the fold...

By

Scott Fullwiler

(Editor's Note: This post is being re-published with the permission of the author, Scott Fullwiler)

Cullen Roche’s excellent post at Pragmatic Capitalism explains—via comments from frequent MMT commentator Beowulf and several previous posts by fellow MMT blogger Joe Firestone (see the links at the end of Cullen’s post and also here)—that the debt ceiling debate could be ended right now given that the US Constitution bestows upon the US Treasury the authority to mint coins. Further, this simple change would lift the veil on how current monetary operations work and thereby demonstrate clearly that a currency-issuing government under flexible exchange rates cannot be forced into default against its will and is not beholden to “vigilante” bond markets. As Beowulf explains in a later comment, “The anomaly it addresses is that the US Govt has a debt limit yet an agency of the US Govt (the Federal Reserve) does not have a debt limit. Clearly this is a structural defect.”

The following is a description of how the process would work and the implications for monetary operations: Read below the fold...