All Articles Tagged "debt ceiling"
House Speaker John Boehner has invited President Obama to deliver the first State of the Union address of his second term on February 12, which also happens to be President Lincoln’s birthday.
The invitation came with a short note saying, in part, “Our nation continues to face immense challenges, and the American people expect us to work together in the new year to find meaningful solutions… For that reason, the Congress and the Nation would welcome an opportunity to hear your plan and specific solutions for addressing America’s great challenges.”
As Marketwatch reporter Polya Lesova notes, the address will be delivered amid continued fiscal cliff discussion about entitlements and spending. Though the fiscal cliff fight was only resolved a couple of weeks ago, there are still lots to disagree about, and we’ll be touching the debt ceiling again in a few short weeks.
The inauguration is happening on January 21. Beyonce, Usher, Stevie Wonder, and John Legend are among those scheduled to perform.
So have you heard this bit of craziness?
There are those suggesting that President Obama bypass any economic default from the looming debt ceiling fiasco (and make no mistake, the Congressional discussion will turn into a fiasco) by whipping up a few trillion-dollar coins. In so doing, President Obama will bypass Republicans who promise to cause a problem.
Among those saying he should do this Princeton professor, author, and New York Times columnist Paul Krugman, who dedicated his article yesterday to this idea. Apparently, there’s a legal loophole that would allow the Treasury to make any denomination of coin in platinum. According to Krugman, this would allow the President to make this $1 trillion coin request, deposit it into the Federal Reserve, and avoid the debt ceiling discussion without any terrible financial repercussions. LOL… This is genius.
Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious.
According to Bloomberg Businessweek, this isn’t anything that has come from the White House directly, but could be a point of dicussion if some clever member of the press asks the question. And Forbes suggests that instead of one huge trillion-dollar coin, a few coins of lower denomination would be preferable. Maybe $25 billion a pop? All of it would be perfectly fine according to the guy who wrote the law, former Mint director Philip Diehl.
To pre-empt this (and ruin all of our fun), Rep. Greg Walden (R-OR) has said that he’s prepared to introduce a bill that would make minting platinum coins for the purpose of paying down government debt illegal. “This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution,” CBS News quotes from a statement issued by Rep. Walden. It’s like trying to kill a fly with a blowtorch as it’s highly unlikely that the President will actually propose this.
Oh well, it was a thought. After the jump, Stephen Colbert breaks it down. Comically.
(Los Angeles Times) — If you take mortgage interest tax deductions, the next 100 days could have significant financial implications for you because of Congress’ new federal debt ceiling plan. Although the compromise legislation itself involved no new taxes, it created an unusual mechanism — an evenly split, 12-member bipartisan super-committee that could call for major cutbacks on real estate write-offs by Thanksgiving. All it will take is a single vote by a lone senator or House member who breaks with his or her party to put the mortgage interest deduction into serious play. Here is what’s about to unfold and how it could affect you: The legislation signed by the president Aug. 2 calls for a two-step increase in the federal debt ceiling plus spending cuts of about $917 billion. It also created the Joint Select Committee on Deficit Reduction with the goal of slashing an additional $1.5 trillion from the deficit during the coming decade.
When President Obama struck a deal with Republicans agreeing to $3 trillion in federal budget cuts, few anticipated how these savings might impact college students. Education is usually considered an investment, in not only an individual, but also in a nation’s future. It is not a wasteful government program for the chopping block. Regardless of the lack of wisdom in undercutting our future work force, reductions agreed to in the debt deal will strike deeply into the financial assistance the government usually provides to students. CNN Money has recently reported that college costs are pricing out the middle class, so budget cuts targeting education could not have come at a worse time. Here are the top six ways the debt deal might crush many college dreams by making it prohibitively expensive.
1. Subsidized Loans: Reduced in Availability and Scope
As part of the debt deal, graduate and professional students will no longer be able to apply for subsidized loans. The federal government will continue to assist college students with subsidized loans, meaning that it will foot the bill for interest payments on the loans while the undergraduate is studying. But graduate and professional students will be out of luck, now being fully responsible for all interest payments for the term of the loan. Finaid.org believes this might drive up the cost of post-collegiate education by up to 16%. Undergraduates might retain the ability to apply for subsidized loans, but as Congress looks to cut an additional $1.2 trillion by Thanksgiving as part of the deal, it is unclear that any social programs are safe.
Let’s first understand that a downgrade on ourselves is not atypical. Someone asked me the other day, “Why would we downgrade ourselves?” I explained, “S&P not only trade for domestic investors but it also trades funds used by foreign investors.” It’s no different than you being honest on your resume. You don’t want to lie and come across less credible if the truth is found out. S&P does this to protect its index and image. Now, I am not saying the S&P is accurate or inaccurate. What I am saying is it is not out of the ordinary. My main concern about their move is, why now?!?!
What I had to look at is, is there a comparable case that yielded a different result; you know, like in law. Attorneys often look at the outcome of similar previous cases to use as a defense in court. This is what we should do. Now, understand that the debt ceiling is simply raising the amount of debt we are legally able to take on. There are limits placed on how much debt can be held by foreign investors and foreign nations, and there is a limit of how much debt the nation can carry overall. It doesn’t measure our resilience, innovation, gross domestic product output or our potential. Remember, as cocky and confident as he may be, even Donald Trump had credit problems in his career, leading to him filing bankruptcy twice!
So why would the country take on debt? As the government grew to a size beyond the true percentage of the private sectors’ output that it taxes it, it must stimulate spending in the economy until those deficits recover. They do this so they aren’t always laying off government workers or consolidating facilities every time there are deficits or recessions. This happens when the government overforecasts the revenues it expects to collect. The government takes risks by spending to help stimulate the economy so it can retrieve those tax revenues. So, it sometimes creates an intentional self-inflicted deficit, hoping to recoup the monies spent in taxes during economic growth. This is called an economic injection.
Now that we know why the government borrows in the first place, let’s look at what this means. We all have our opinions of President Obama. Quite frankly, we seem to have stronger opinions on this presidency (whether good or bad) than we have had on any other. We can call it desperate times, racism, increased poverty levels, or whatever. Our opinions have been strongly against or in support of the president. This heightened intensity has caused much scrutiny and criticism. However, let’s simply look at our past to get a better idea of this so-called downgrade.
According to the Congressional Research Service, since 1962 alone, the debt ceiling has been raised 74 times; 10 times alone in 2001 under President Bush’s watch. This shows that the debt ceiling was raised under 8 previous presidents! Is our recent downgrade targeted at the president or because of the bickering within our political system? The fact is, our country was in economic constraints before Obama took office and can very likely persist past his presidency. What we are seeing is economic residue from President Bush’s presidency. Now, I would be totally dogmatic if I were to say that Bush deliberately ran our country into financial trouble. In fact, his desperation to return us to Clinton Administration surplus was part of his motivation for such knee jerk reactions, i.e. The War on Iraq.
Historically, wars have strengthened the U.S. economy, but he failed to realize that we now operate as a service economy. We are not a country that manufactures as much as we did during previous wars, where we were the ones providing the widgets and gadgets to the military and to the nations we blew up. In essence, Bush attempted to inject into the economy but those funds leaked out of our economy into foreign (manufacturing) nations, simply because we were no longer in position to capitalize on infrastructural needs of the destroyed nations and our military. So my question remains, why now? Why with the debt ceiling constantly being raised historically, numerous recessions over the past 30 years, assassination of Kennedy, scandal from Nixon, and deepening debt brought by the 2nd Bush, why downgrade now? We’ve heard the stories of banks charging higher interest rates on loans and denying them altogether for Blacks. I wonder, why now?
Now, our new AA+ rating is actually a great rating but it simply shows that America is no longer at its credit- worthy best. China’s AA- credit rating is two steps beneath America’s, however there remains strong praise for China’s progress. High standards are set for us. Countries like Canada have grown and thrived despite having a mediocre credit rating, so is this a political attack or the true economic outlook of the country?
The credit position of the nation is important, but living on credit isn’t always the best option. Businesses can be started, vehicles can be purchased and education can be attained without loans. Though the government may be seen as less credit worthy, it has no bearing overall if “we the people” are worthy or not.
Devin Robinson is a business and economics professor and author of “Rebuilding in the Black Infrastructure: Making America a Colorless Nation” and “Blacks: From the Plantation to the Prison.” Contact him at firstname.lastname@example.org.
Untouched in the horrific debt-ceiling impasse was the private sector with little talk – if any – of what role businesses can play in offsetting the impact of a running deficit. The private sector was effectively absolved of its role in exacerbating the current economic climate due to lack of hiring. As Washington politicians wrangled and strangled over what to do about reining in a $14.3 trillion deficit that has left the globe spooked about U.S. economic direction, the issue of jobs was an afterthought.
While Capitol Hill was embroiled in a mess over the debt ceiling, little was being said about the 66,000 big company layoffs in July and what to do. On the same note, lawmakers – White House included – may have missed an opportunity to lay thick into companies that are hoarding $2 trillion worth of cash and other resources. All fingers point to lack of confidence and abundance of caution as opposed to willingness to spend on hiring. Lost in the debate was any creative thinking or a simple recipe whereby companies hiring or pledging to hire could have actually changed the debt dynamic.
After all, more hiring means more jobs. More jobs = more payroll = more tax revenue and, oh yeah, more spending. Spending leads to more profits for companies. And the economic wheel goes round and round, round and round.
Corporations in the U.S. don’t see it that way based on recent data – or maybe they do. Observers quietly whisper of the “double standard” or company caution really being part of a shrewd political strategy to insert “business friendly” interests. The possibility that in the quest for diminished government regulations, a corporate lobby is willing to sacrifice the greater job growing good. Once a new face (no racial pun or hint intended) is in the White House, the hiring spree begins and global markets can breathe a little easier that brand-obsessed, obese and SUV-driving Americans are back at their game of buying bubbles, chewing up everything from overpriced homes to the latest electronic gadgets.
Many wonder why no one on the Hill wanted to talk about that. In the ideological revolution for “smaller government” fiscal conservatives talk of lowering taxes to spur private sector hiring – but, no talk of how cash-hoarding companies won’t even do that.
In the meantime, the unemployment rate remains stubbornly high and the current White House occupant faces a history where no President gets a new term if the jobless rate is above 7%. Barring anything Rooseveltonian on his part (which he shows no stomach for doing) or a dramatic economic miracle, it’s not looking good. Congress shows no appetite for any talk about job growth, either out of exhaustion from the debt-ceiling impasse or simply because they’re more concerned about taking a needed August recess so they can go back to their districts and fundraise.
Even Congressional Black Caucus members spearheading a 90-company 10,000-hire target jobs tour are really using the initiative as a way to boost polling numbers before unexpected primary challenges or redistricting woes show up in 2012. Will there really be any hiring at these job fairs?
What’s not happening here is a slap of creative license. The biggest lift Congress can come up with is avoiding a government shutdown in the spring and averting a debt crisis of their own making in the summer. That’s it. But, when it comes to job growth, the only real way to get an economy that is three-quarters dependent on consumer spending back on track, Capitol Hill goes mum.
What should be done defies political convention and orthodox. Fundamental alterations in how employers are hiring also needs changing – from doing something about companies discriminating against the unemployed by not hiring them to singling out folks battered by bad credit. Reps. Hank Johnson (D-GA) and Steve Cohen (D-TN) have, to no avail, pushed bills against those issues, respectively.
But, a larger push that discusses how to unravel the debt and bring in revenue within the context of more hiring is missing. There should have been provisions in the so-called “Budget Control Act” that somehow forced companies (and banks fattening on rising fees) to unleash the hoarded $2 trillion on hiring.
At this point, jobless folks (especially jobless black folks) want to see that someone actually cares.
Charles D. Ellison is Chief Political Correspondent for The Philadelphia Tribune, author of the critically-acclaimed urban political thriller TANTRUM and a nationally recognized, frequently featured expert on politics.
(News One) — While the full details of the recent debt ceiling deal signed by President Obama have yet to be released to the public, many pundits and political experts are claiming that the hardest hit groups will be the poor and minorities. Since the deal was signed, President Obama has been criticized by the Congressional Black Caucus and Rev. Jesse Jackson amongst others, for the concessions many believe he made in these talks that could cut the amount of funding many programs important to poor communities receive.
Salon.com has analyzed the make up of the Tea Party Caucus in the House and discovered that it is overwhelmingly Southern and white. Even though the media focuses on Midwesterners like Michele Bachmann, or high-profile blacks like Herman Cain when portraying Tea Party members, most of the officials elected from this group represent a thin slice of radical Southern politics. The Tea Party is not a spontaneous outgrowth of current economic frustrations that spans a cross-section of political sources.
When looking closely at the caucus members, where they are from, and their tactics, it becomes easy to recognize the same right Southern extremists that have been on the scene for decades — if not centuries. They just have a new brand, with the same outlook.
Under the “new” guise of the Tea Party, radical Christian conservatives today are using the obstructionist ploys first used by their predecessors — such as starting the Civil War to resist the end of slavery. More recently, they have crippled the country over the debt ceiling by threatening to cause a world economic collapse. The resulting bill was just signed by Obama into law is rife with the cuts to entitlements, while preserving defense spending — exactly what radical Southern extremists constantly cry for.
This faction was willing to risk destroying the credit of the United States to get its way. Apparently, this is part of a very old pattern at work. Salon.com breaks down their cunning:
Contradicting the mainstream media narrative that the Tea Party is a new populist movement that formed spontaneously in reaction to government bailouts or the Obama administration, the facts show that the Tea Party in Congress is merely the familiar old neo-Confederate Southern right under a new label. The threat of Southern Tea Party representatives and their sidekicks from the Midwest and elsewhere to destroy America’s credit rating unless the federal government agrees to enact Dixie’s economic agenda of preserving defense spending while slashing entitlements is simply the latest act of aggression by the Solid South. [...]
From the earliest years of the American republic, white Southern conservatives when they have lost elections and found themselves in the political minority have sought to extort concession from national majorities by paralyzing or threatening to destroy the United States.
The Kentucky and Virginia Resolutions of 1798 and 1799 asserted the alleged right of states to “nullify” any federal law that state lawmakers considered unconstitutional. This obstructionist mentality led to the Nullification Crisis of 1832, when South Carolina refused to enforce federal tariffs. Civil War was averted only when President Andrew Jackson, a Southerner himself, forced the nullifiers to back down.
Through this example, and unveiling the details of the Civil War they eventually did cause, Salon makes a very good case for the idea that the Tea Party is really a relaunched band of Southern radicals. Steeped in Confederate nostalgia, this group is fueled by religion and willing to hurt the general population to get what it wants for their brethren.
Sounds like terrorism.
I wrote yesterday that the GOP was holding America’s credit rating hostage to get what it wanted. Today, I realize that perhaps not the entire GOP is to blame. Tea Party members specifically took the U.S. to the brink of financial collapse to attain the harsh spending cuts that will disproportionately effect the poor. This is very similar to a lone bomber destroying himself on a crowded city bus to make an abstract point. While the cause of the violence is unrelated to them, the victims will suffer horribly all the same.
It’s unclear how senior citizens struggling to pay their medical bills will help our flat economy. But the slashing of federal spending has become such a dogmatic point of rhetoric for Tea Party members, it is dubious that they know either. The only thing that is clear is that they have won this battle through fear, intimidation, and the threat of destruction even if that destruction had been absolute.
The Tea Party might as well announce its Jihad on political fairness and economic equality in this country. Will Obama ever be able to pass sound fiscal policies with these domestic terrorists in the House? It is hard to act with intelligence when facing an opponent willing to commit social suicide.
(USA Today) — A federal subsidy that aids graduate students would be eliminated to boost funding for Pell grants that help low-income undergraduates, under the compromise debt-ceiling bill moving through Congress. That trade-off is one of the few program changes specified in the bill.
The maximum Pell grant of $5,550 would be preserved for an estimated 9 million undergraduates, according to the White House.
On Sunday President Obama took a decided step to the right in an effort to reach a deal on the debt ceiling. By agreeing to $3 trillion in spending cuts, with no tax increases, many Democrats are furious at what seems to be the White House’s capitulation to Republican demands.
Congressional Black Caucus Chairman Rep. Emanuel Cleaver is particularly angry, and isn’t mincing words. He is making national headlines today for calling this last-ditch debt deal “a sugar-coated Satan sandwich” — further elaborating in colorful slang to call the bill “shady.”
Does Rep. Cleaver’s version of “shady” refer to hip-hop, drag queen, or cool OG shade? The world may never know, but Cleaver did take to the airwaves on Sunday to clarify his “Satan sandwich” pronouncement. His explanation on MSNBC further underscored that the huge spending cuts in the bill are inhumane:
“You have been quoted, coming out of your caucus as calling this agreement a ‘sugar-coated Satan sandwich,” MSNBC’s Chris Jansing noted Sunday. “Was that indeed your quote? Is that how you feel about this deal?”
“Very accurate quote,” Cleaver admitted. “What you see is antithetical to everything the religions of the world teach: take care of the poor, take care of the aged. Look at the phone calls I’ve gotten. They are seven-to-one in favor of a balanced deal, and also preserving Medicaid, Medicare, Social Security. And I’m concerned about this because we don’t know the details. And until we see the details, we are going to be extremely non-committed.”
President Obama’s camp assures the left that his agreement to slash spending now will be augmented later in the year by a budget-balancing bill including tax increases on the rich. The compromise bill includes plans to create a joint committee dedicated to creating bills for consideration by November. This committee will have the power to send bills directly to the floor of the House and Senate for voting, bypassing the messy process we have witnessed so far.
There are also “triggers” in the bill set to go off if the committee fails to voluntarily make the additional cuts scheduled by the $3 trillion agreement. These automatic cuts in defense and Medicaid are intended to keep both Republicans and Democrats moving forward purposefully. Many believe that senior citizens will suffer needlessly through this penalty if both sides continue to work in calamity.
Experts have also pointed out that there is no guarantee that Republicans will agree to tax increases on the wealthy under any circumstances. Thus, Obama might be gambling on a future bill that includes these revenue increases, using entitlements as a poker chip.
Liberals in Congress are very unhappy at this, but many see passing this debt ceiling compromise as the only alternative to a U.S. default on our debts. This would harm America’s credit rating and potentially cause an international economic catastrophe.
As President Obama works to secure the votes necessary to pass this GOP-inspired bill, he faces a hard sell. Few Democratic lawmakers approve of the provision, but passing it is the lesser of two evils. Usually when one makes a deal with the devil, there is an immediately pleasurable payout, with the pain due in the far future. Obama has agreed to a deal that doles out great pain now, and more pain in the near future.
We should be mad at him, but the GOP is holding America’s credit rating hostage. If not for this fact, the president and other responsible law makers would create fiscal policy that is win-win, not lose-lose.