Thursday, October 10, 2013

Short: Debt Default 101 ... before it's moot

The talking point on the right is that US doesn't have to default on its bonds, or SS payments, or anything that could bring a shitstorm down on the GOP.

Is this true? How would we know, especially those of us who aren't zipperheads waiting for conservative commentators to tell us what to say?

I did what I always do, some online research. Here's a history of US federal government defaults. There was a brief, accidental default in 1979. The one before that was in 1934, when the US went to a fractional gold standard. These defaults tell us nothing about what would happen in the 21st century if the US was to default.

What does a non-zipperhead business reporter think will happen if we default? It depends how long the default lasts, but it's not good and gets worse from there.

Finally, what about prioritizing US government payments? No can do. No legal framework and no practical framework.

I hope you aren't too tired for one last question. Why aren't the Republicans asking these questions instead of speculating out their asses?

Default party confetti!!!! Bonds, of course

Extra. Here's the follow-up post with more details on why prioritizing payments isn't a workable idea.


Dangerous said...

Much of the GOP speculation on what a US default really means simply ignores basic accounting principles.

All of the obligations the US government incurs are debts; i.e. liabilities on the US government balance sheet. These include Social Security, Medicare, Veterans benefits and so forth. These also include accrued wages to employees, payments owed to contractors, utility bills, rents for leases, and the any interest payments for treasury obligations.

Sure, the US treasury could continue to pay just the last item from ongoing revenues without borrowing more. But, in effect, they just borrow the money from everyone else who doesn't get paid. So the result is still a default, but do solely to a stupid restriction called the "debt limit" which only prevents the treasury from issuing notes to borrow money from willing parties instead of borrowing it from unwilling parties who want cash instead. There's no actual reduction in debt, and because the US is not as good a credit risk, the interest rate the US treasury will have to pay will leap higher.

Nor is the US or it's treasury "bankrupt" as so many pundits and demagogues like to say. We have far more equity than debt. We simply don't raise enough cash from tax and other receipts to cover our annual cash expenditures. That's not great, but were hardly bankrupt. We've just spent too much lately on stupid stuff like wars without increasing taxes to pay for them.

rarely sincerely said...

The article you chose did not say that prioritized payments were a no can do, they said nobody knows. There is a big difference between those 2 ideas. I am not knit picking, I think you are not being intellectually honest

ModeratePoli said...

@rs, very strange. You admit in another comment that you don't like unions and you like the UAW. But that wasn't the initial argument you made when you complained about the auto bailout. And you accuse me of intellectual dishonesty? You have a long way to go before you reach my level of honesty--a very long way.

When I find myself putting my thumb on the scale for some big decision, I work very hard to stop doing it. I've come around to many positions I've never would have expected, including a fair tax, because I strive so hard to be honest. I've I can't get passed my biases, I admit it. You pretend otherwise.

So, I'm going to start asking you those hard questions about prior biases... when I return from work. But be on notice. Your biases get no free ride.

ModeratePoli said...
This comment has been removed by the author.
ModeratePoli said...

Too many typos in that last comment. Here's what it's supposed to say:

To rs, how interested are you in an honest answer? You obviously aren't interested in being personally honest, so I wonder if you value honesty from other people. And yes, you deserve to be insulted in that way.

I've had at least one conservative commenter here (truth > spin), but he was ready for the candor. Everything he wrote was written with honesty and in good faith. You aren't even close.

ModeratePoli said...

Another oops. I don't support a "fair tax," which is just a hype name. I support flat taxes.

Rarely Sincerely said...

explain how you get from the article that says "Here's the answer: Nobody knows" to your interpretation "no can do" when referring to the possibility of prioritized payments.Do you see a difference in those statements?

ModeratePoli said...

@rs, you aren't welcome on this website until you retract your opinion that I'm not intellectually honest. That is my bottom line, as I've said four times now. Say it or you're gone.

This should be an easy choice. If I'm dishonest, there's really no reason for you chase after me for more explanation. Why care about the opinions of someone who's lying?

Rarely Sincerely said...

So you would like me to take back what I said because you "say" that you are honest rather than have you simply explain how your link supports your conclusion? You have this backward. The main reasons I consider stopping a debate is because someone is uncivil or someone does not care to read my side of the argument or the related links. I am not saying what I have to say is special, but we are obviously incompatible if you don't think reading my replies are important to the conversation. I will read everything someone I am talking with writes or sends links for. Otherwise don't what is the point.

If I can detect the dishonestly then it is a non issue. I am interested in how people get to their conclusions, if spinning facts is a route they take, I can talk about that also. You say that you have worked hard to remove your bias as if you are done with the task, equipoise is a continuous process.
Also, what you think you detected as dishonestly from me was the beginning of a nuanced argument. You ask someone to be upfront but you skipped a reply I made laying out the exact items you said I was hiding. These are not simple concepts that fit in the little boxes that become apparent in round 2 of an argument.

I was originally curious about your views because you seemed to be informed but you still either talk to the fringe or make counter fringe arguments which is weird. I will continue to reply wherever I see fit. You may continue to make your bold statements about where I should or should not post, I will ignore them. You do not control the internet, sorry.

Last thing, going from Liberal to moderate Liberal is easy, it really is all you have to do is actually look at the math.

ModeratePoli said...


Why do you have such a problem retracting your hasty and erroneous statement that I'm intellectually dishonest? Do you think you're not wrong?

You seem to think I have to prove my honesty to your satisfaction, but I don't because this is my blog and my choice. You're in no position to make such a demand, and I have no intention of humoring you.

You don't bring anything special to a political discussion--no special inside knowledge, no insight, no especially clear ways of describing ideas. Yet you think you can demand things of me.

Other commenters have thought I'm here to endlessly refute lame arguments, but they were wrong. I booted them off because I don't suffer fools for too long. You may think I should be willing to answer your queries because they're more intelligent than most (which they are), but I'm not going to do it just to satisfy you. I don't do this for the sake of argument.

If this is to be an honest discussion of differing opinions, you have to respect and acknowledge this truth--I am being as honest as I can be in my political questioning. Why is that so hard for you to see?

I don't think I'll convince you, but I'm giving you the chance to have that kind of honest discussion if you are willing to acknowledge that's what is going on here. But I need to know that the playing field.

Rarely S said...

We can have that playing field.

"I don't do this for the sake of argument. "

That is fair, but why would you say you do it. (this is just a question)

I do comment for the sake of argument, debate and understanding. The only way that I know that i am thinking about something properly is to see if my ideas holds up against those that disagree with me. When I am wrong it is great because that is when you learn.

I think that people disagree over these complex issues for 2 reasons: they haven't reviewed the factual information available or there is a fundamental values difference.

This is why I have these discussions, sorting out these differences further my understanding and most of the time, it is hard to avoid a nuanced debate.

"Why do you have such a problem retracting your hasty and erroneous statement that I'm intellectually dishonest? Do you think you're not wrong? "

Of course I could be wrong, the only way for me to find out is to understand why you said what you said, so I asked for an explanation. Call it spin if you want, whatever, I just want to know how something goes from no body knows to no can do. This is actually a critical part of debt ceiling debate that the country is doomed to have again.

rs said...

changed that want to know to "wanted" to know how something...