Government Shut Down

[Happy Monkey]

The debt only goes down if there's a surplus. So, by one measure, it happened under Clinton. But, apparently, by another measure, it didn't. And if it didn't happen under Clinton, then it probably hasn't.

[Lamplighter]

The good news today is that both the Treasury and Moody's
have stated that the US will be be able to fully pay for it's debt, even if the debt ceiling is not raised.

THAT is very good news!

Hooray Adak.
But someone forgot to tell the WSJ and the Treasury Dept yesterday
that the debt ceiling hasn't even been voted on yet, and the US has
not yet defaulted on anything. It's still "Full Faith and Credit of the USA"

Wall Street Journal
10/8/13
Default Worry Hammers Short-Term U.S. Debt
...T-bill Yields Climb to Highest Since October 2008

Short-term U.S. debt prices tumbled again Tuesday amid rising investor concern
about the prospect of a government-debt default, sending the yield
on one-month U.S. Treasury bills to its highest level since the financial crisis.

With little sign that Republicans and Democrats will hammer out
a compromise on the partial government shutdown, many in the
financial markets are starting to worry about the prospect of a default.

Treasury bills maturing on Oct. 31
—a date many market participants predict for the Treasury to run out of cash to pay its bills—
sold off sharply Tuesday, driving their yields up to 0.35%, the highest level since October 2008.

One-Month Treasury Bill Yield



Concern about the stalemate in Washington was also evident in Tuesday's auction of new bills.
The Treasury Department sold $30 billion worth of four-week bills maturing on Nov. 7
at a rate of 0.350%, the highest rate the government paid on such short-dated debt in five years.

Money-market funds and banks are typically the biggest buyers of Treasury bills,
where they park their idle cash for a short time. But they shied away from the auction Tuesday.
The bid-to-cover ratio, a gauge of investor demand, was 2.76,
the lowest since July 2009 for four-week bills, according to Nomura Securities.

That's very GOOD news for investors ... Right, Adak ?
Of course, if you have a loan pegged to the T-Bill rate, not so much.

[tw]

Originally Posted by Lamplighter

But someone forgot to tell the WSJ and the Treasury Dept yesterday that the debt ceiling hasn't even been voted on yet, and the US has not yet defaulted on anything.

Government is down to its last $30billion. Once that goes, then government must decide which creditors to not pay. Once payments are not made, then a vicious circle of liquidity freezing takes hold. Similar to what happened in 2007 and in 1998. In those previous events, Fed funds averted a crisis. No such solution exists if extremists get a "We want American to fail" that they want.

They want to increase current debts by quashing the debt ceiling. That will only make existing debts increase for various reasons including those cited by Lamplighter.

[Griff]

According to Gallup, favorability ratings for both parties are down. The GOP is down to 28% and the Dems are down to 43%. It kind of reminds me of the "purity" drive under the last Pope. Those 28% will always vote and give $ so the real question is will the 43% vote because Dem support is always softer in the polls. Neither party is winning friends right now so which will keep enough base and can either get an independent voter?

[Lamplighter]

The best headline about the shutdown, so far...

CNBC
10/10/13
Baah! Gov't goats laid off in shutdown, no kidding

The federal government shutdown is really getting Larry Cihanek's goats—about 65 of them.<snip>

Because of the shutdown, only three of Cihanek's goats are working,
grazing at a locally run park in Easton, Pa., not for the Feds.

The rest have been furloughed because national parks are closed during the impasse in Washington.
They're now munching in the fields at Cihanek's farm in Rhinebeck, N.Y.

[Adak]

Originally Posted by Griff

According to Gallup, favorability ratings for both parties are down. The GOP is down to 28% and the Dems are down to 43%. It kind of reminds me of the "purity" drive under the last Pope. Those 28% will always vote and give $ so the real question is will the 43% vote because Dem support is always softer in the polls. Neither party is winning friends right now so which will keep enough base and can either get an independent voter?

Our parties need to do what's RIGHT for our country, and find agreement. Find ways to come to a compromise with each other. Both parties get something, and both give up something. This "my way or the highway", "glad to negotiate AFTER I get everything I want" stuff, is old, tired, and just plain dumb, before it even starts.

Likewise, the over the top rhetoric where one party bashes the other. I suppose some of that is necessary to appease the base of their constituents, but over the top name calling and closing the open air war memorials and cemeteries, does not reflect well on any political party, or any political leader.

[Adak]

Originally Posted by tw

Government is down to its last $30billion. Once that goes, then government must decide which creditors to not pay. Once payments are not made, then a vicious circle of liquidity freezing takes hold. Similar to what happened in 2007 and in 1998. In those previous events, Fed funds averted a crisis. No such solution exists if extremists get a "We want American to fail" that they want.

They want to increase current debts by quashing the debt ceiling. That will only make existing debts increase for various reasons including those cited by Lamplighter.

Wrong. Both the Treasury dept and Moody's have stated that there will be NO default of any US debt.

Some programs will be cut back, but NOBODY will be defaulted on.

[richlevy]

Originally Posted by Adak

Wrong. Both the Treasury dept and Moody's have stated that there will be NO default of any US debt.

Some programs will be cut back, but NOBODY will be defaulted on.

From Jack Lew's testimony, if the funds cannot cover it, someone doesn't get paid. There is no 'cut back' on existing debt. This would be akin to telling the electric company that you will be paying them 90 cents on the dollar because you refuse to take out a loan. In reality, even that is not an option since there is no precedent. The Treasury would just pay all of the bills in no particular order until the money ran out.

It's really that simple. The Treasury has no authority to cut back funding on any programs. Their entire job is to pay all authorized bills, manage money, and secure funding where authorized. What part of 'full faith and credit' do you not understand?


From Jack Lew's (Treasury Secretary) testimony on default.(Washington Post).

In addition to the economic costs of the shutdown, the uncertainty around raising the debt limit is beginning to stress financial markets. At our auction of four-week Treasury bills on Tuesday, the interest rate nearly tripled relative to the prior week’s auction, and it reached the highest level since October 2008.

Treasury continues to project that the extraordinary measures will be exhausted no later than October 17, 2013, at which point the federal government will have run out of borrowing authority. At that point, we will be left to meet our country’s commitments with only the cash on hand and any incoming revenues, placing our economy in a dangerous position.
If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations, including Social Security and Medicare benefits, payments to our military and veterans and contracts with private suppliers for the first time in our history.

Full Faith and Credit

Article IV, Section 1:
Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.[5]

The short answer is that anywhere you go in the US, bills incurred by any state, or the US government, will be paid.

[Undertoad]

I'd expect FDR to be the all-time winner on this one

[glatt]

This is in percent of GDP, not in real dollars, but it's something.

[Spexxvet]

Originally Posted by glatt

This is in percent of GDP, not in real dollars, but it's something.

Attachment 45654

Deficit and debt are not the same thing

[glatt]

Originally Posted by Spexxvet

Deficit and debt are not the same thing

Yeah, well, the debt graph is boring. It just keeps going up exponentially. The deficit graph is where the real data is, because you can see how government policy and economic factors work together to increase the debt slightly or rapidly.

One interesting thing is that the debt was much worse in the 80s because interest rates were higher then, so a bigger slice of the federal budget pie had to be spent paying interest back then than it does now. So we have a much bigger debt now, but it doesn't matter as much as it did during the Reagan years.

The real risk from government debt is the burden of interest payments. Experts say that when interest payments reach about 12% of GDP then a government will likely default on its debt. Chart 4.05 shows that the US is a long way from that risk. The peak period for government interest payments, including federal, state, and local governments, was in the 1980s, when interest rates were still high after the inflationary 1970s. Of course, the numbers don’t show the burden of interest payments from Government Sponsored Enterprises like Fannie Mae and Freddie Mac.

Look at the green in this chart. That's what the federal government has to pay in interest.


edit: Actually, I misspoke. That's the interest the federal government has to pay, expressed as a percentage of GDP.

[Griff]

Originally Posted by glatt

That's the interest the federal government has to pay, expressed as a percentage of GDP.

I like that graph. It really cuts to the bones of the spending vs revenue problem. It shows that we maybe were dead wrong in the eighties and should check out some pie charts from that time vs now for comparison. Big defense is big government...

[tw]

Originally Posted by glatt

This is in percent of GDP, not in real dollars, but it's something.

Cheney said (and wacko extremists therefore believed) that Reagan proved deficits don't matter. We now suffer pain from that Cheney lie.

It did not matter to him because he prospered by spending money then. We are now stuck with the resulting bills.

Notice what happened when Reagan/Bush ran the debt up big time. In the Cellar, so many in 1990/2 were complaining about how bad things had become. Then Clinton addressed the problem. As a result, the economy prospered and deficit dropped to zero. What did Clinton do? He raised taxes. That (in part) caused the economy to prosper.

Extremist do not want to admit something. Obama is successfully curing the destruction of the American economy created (in part) by tax cuts, welfare to the rich, and other fiscal mismanagement - including Mission Accomplished.

[orthodoc]

They're supposed to be 'occupying' the Beltway. Fortunately I was on said highway very very early this morning and didn't encounter them. However - if they're opposing the government shutdown and government corruption, why inconvenience people who are already severely inconvenienced by the stupid Republican shutdown?

I'd think they would want to occupy the National Mall from end to end and blow their air horns continuously, to send a message to the House to get their asses back to work and do their f***ing jobs.