WH economic advisor on debt ceiling: “Prioritization is default by another name”

posted at 5:21 pm on October 7, 2013 by Allahpundit

Via Politico, expect to hear a lot of this from The One and his team over the next week to counter Tom Coburn’s and Rand Paul’s message that hitting the debt ceiling will not trigger a default. The Treasury Department takes in roughly 10 times as much revenue each month as it pays out in interest to creditors, note Coburn and Paul; all Congress needs to do is pass a law ordering Treasury to pay creditors with available revenue before anyone else is paid — i.e. “prioritization” — and the threat of default goes poof. Okay, says Obama economic advisor Gene Sperling, but let’s be clear on one thing: Hitting the debt ceiling does amount to a technical default. Creditors may get paid via prioritization, which will mitigate the damage to the full faith and credit of the U.S., but many other people who are owed checks from Treasury won’t be. Former Bush administration econ wonk Keith Hennessey explained the difference between an actual default and a technical default earlier this year, after the big (and inevitable) fiscal cliff cave:

If the third deadlines (cash crunch after no debt limit increase) passes without legislative action, at some point Treasury will not have enough cash on hand to pay all of its obligations on time. The President must then choose whether to miss or delay debt payments to those holding Treasury debt, or instead to delay payments to others owed government funding, including Social Security beneficiaries, veterans, States owed payments for Medicaid and welfare and highways, and defense and other contractors for goods and services they provide to the federal government.

Missing or delaying a debt payment on Treasury debt is called default. Missing or delaying other government payments is sometimes called technical default or defaulting on our obligations. While default sounds like technical default, they’re quite different. The first directly threatens the full faith and credit of the U.S. government as a borrower and is a direct attack on our government’s credit rating and borrowing costs. The second is terribly irresponsible, and the government would be sued by whoever’s payments were delayed, but it’s a full step less egregious than defaulting on Treasuries.

Tony Fratto, another Bush economic advisor, said around the same time earlier this year, “Is the government really going to be in the position of withholding benefits, salaries, rent, contract payments etc., in order to pay off Treasury bondholders? That would be a political catastrophe.” That’s basically Sperling’s point here — technical default, while not quite the meteor strike that actual default would be, will nonetheless wreak some legal and economic havoc by choking off payment of Treasury’s obligations to non-creditors. Uncle Sam won’t be a deadbeat to holders of U.S. securities but he might be to Social Security recipients, which may or may not have some impact on the government’s full faith and credit (and will almost certainly trigger a new downturn in GDP). What you won’t hear Sperling say, of course, is that the extent of the damage from a technical default is a measure of just how heavily the feds depend upon borrowing to keep the country running. That’s the whole point of using the debt ceiling for leverage (or it was, before this became a fight over ObamaCare): The fact that Treasury trembles at the prospect of having to run the country for a few weeks without incurring new debt illustrates, perhaps, that we should cut spending to lighten our debt load. And that, of course, will be the Coburn/Paul countermessage to Sperling’s countermessage. Of course hitting the ceiling will do some damage, they’ll say. But what’s the White House’s plan to avoid hitting the real debt ceiling?

Anyhow. I maintain that Boehner will fold rather than risk even a technical default so all of this is academic. I think. Exit quotation from NRO’s Jonathan Strong:

Update: Another conservative, James Pethokoukis of AEI, warns that technical default would be a catastrophic “success”:

How many other GOPers are Yohovians? Hopefully not too many. Because to believe in Yohonomics, you have to believe that no matter how deep and quickly and haphazardly government spending is cut, the private sector would seamlessly and instantaneously pick up the slack. And there would be a lot of slack. Goldman estimates the revenues Treasury will receive in the month following the October 17 deadline would equal only about 65% of spending going out, “implying a far greater fiscal pullback than will occur as a result of the ongoing shutdown.”

Would private investment immediately replace all that lost consumption? Economist Alberto Alesina comes about as close to endorsing the idea of “expansionary austerity” as you find with this cautious statement: “A deficit-reduction program of carefully designed spending cuts can reduce debt without killing growth.”

But what Yoho is talking about isn’t carefully designed at all. And slower growth, don’t forget, also means less tax revenue. It is possible to shrink government without really improving the debt situation. Indeed, the collapse in eurozone nominal GDP is what’s been driving that region’s debt crisis.


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Good grief. Here come the wordsmiths.

You know, if I choose to pay my debt obligations by not going out to dinner or a movie, have I defaulted on the dinner/movie?

There is no way to default on discretionary spending. None.

BobMbx on October 7, 2013 at 5:26 PM

I’ve been defaulting all of my adult life then and still have a 790.

I always thought prioritizing was what economic planning was. Silly me.

jukin3 on October 7, 2013 at 5:26 PM

Default, I don’t think that word means what you think it means.

jukin3 on October 7, 2013 at 5:30 PM

This is a hilariously inane comment from Sperling, as Hennessey adroitly explains, but it might just be good politics. The political optics don’t affect Republicans though, only Democrats, and this might be aimed at preparing the lefty faithful for having to swallow a deal with the Anarcho-Republicans somewhere down the road.

MTF on October 7, 2013 at 5:33 PM

There are two federal departments who do nothing except spend money.

1. Department of Education
2. Department of Energy

You could close every one of their facilities, pay the employee salaries, and still save billions. No loans, no grants, nothing.

BobMbx on October 7, 2013 at 5:33 PM

The best, and probably only way realistically, to cut spending is to take away the government’s ability to incur more debt. The LIVs don’t see the debt and they do see the spending cuts, primarily because this is what the State Media focuses their attention on.

At this point the Republic’s best bet (the country, not the party) is for the House to go home and ask Obama when he is ready to submit a budget that doesn’t spend more then it takes in.

18-1 on October 7, 2013 at 5:35 PM

I’ve said it a million times:

To balance your budget and live within your means (whether a household, company or country) you need an accountant that prioritizes spending versus income.

To live way the fark beyond your means and create the illusion you’re really smart (by essentially just robbing Peter to pay Paul)hire an “economist”.

Economist do nothing more than figure out ways to invent fake assets and fake money.

Tim Zank on October 7, 2013 at 5:36 PM

There is no way to default on discretionary spending. None.

A large portion of the political establishment is afraid of real change…such as having the government live within its means…

18-1 on October 7, 2013 at 5:36 PM

Wow, someone finally mentioned, albeit in passing, that putting the budget into balance overnight, even if we can make our interest and principle payments on debt, may not be too good for the ecnomy. How helpful.

Talk about burying the lede.

Mr. Arkadin on October 7, 2013 at 5:36 PM

I’ve been defaulting all of my adult life then and still have a 790.

My wife is a total deadbeat, she keeps such a rein on the purse we have a 806 and no debt. Sometimes there’s dealing with that kind of person so I rebuild old cars on the side for fun and profit.

DanMan on October 7, 2013 at 5:36 PM

Let’s break this into an analogy.

Your house is about to be foreclosed on and your credit cards are maxed out. Your earnings are down because the Obamaconomy has devastated your income.

Your spouse comes to you with a handful of credit card applications saying this is the only way you can still afford to go out to eat every night and still go on that vacation to Obamacare Tahiti as promised.

You refuse to sign up for the new cards and instead demand that you cut all unnecessary spending now before you lose everything.

Your spouse responds by calling you a terrorist, a hostage taker, and an extremist. Your spouse locks you out of the house, and spends money hiring people to wall off not only your driveway, but everyone in the neighborhood.

Who is the reckless individual in this case?

18-1 on October 7, 2013 at 5:41 PM

Wow, someone finally mentioned, albeit in passing, that putting the budget into balance overnight, even if we can make our interest and principle payments on debt, may not be too good for the ecnomy. How helpful.

The LIVs don’t want to know that Helicopter Ben has built a Potemkin economy.

18-1 on October 7, 2013 at 5:42 PM

E N O U G H ! ! !

Go over to HuffPo, AP. You will be right at home.

Conservatives DO NOT share the liberals premises or “principles”.

The U.S.A. UNFUNDED liabilities and unrestrained defecit spending equate to this country being BANKRUPT.

If you resumed the GAAP practice of “mark to market” EVERY single one of the Too Big Too Jail banks would be bankrupt and turned over to the FDIC.

Every time you perpetuate the LIE that we are not already bankrupt and “the Republicans are risking everything” you act as another willing member of the Kneepad Media willing to sell yourself and this country for another day in the limelight.

PolAgnostic on October 7, 2013 at 5:42 PM

There is no way to default on discretionary spending. None.

Famous words last said by the ruling class in Greece.

Anyhoo, the overwhelming majority of Americans want strings attached to an increase in the debt ceiling.

If we are operating under the ‘Majority Rule,’ as the Left claims, then they just need to shut up already.

Resist We Much on October 7, 2013 at 5:42 PM

$250B a month intake.
$211B a month for the “important” stuff.
$39B slush fund.

barry doesn’t want to talk. Close the House until January.

Do not raise the ceiling $1 !

crash72 on October 7, 2013 at 5:43 PM

Exit question for every day.

How many people signed up for Obamacare today? Since Oct 1?

The administration has still not revealed any numbers.

WisRich on October 7, 2013 at 5:48 PM

There are two federal departments who do nothing except spend money.

1. Department of Education
2. Department of Energy

BobMbx on October 7, 2013 at 5:33 PM

Actually, there are some substantial things that Energy does (providing security for nuclear weapons, power plants, and wast disposal facilities), but those functions could easily be transferred to other departments (DoD for weapons, obviously). Education, not so much.

Athanasius on October 7, 2013 at 5:48 PM

Under Obamanomics we’ve been getting, what, 2% growth a year?

So we’ve been borrowing ~$1T a year to grow the economy by ~$.3T

What a return on investment!

Of course if you factor in the real inflation rate of roughly 10% we are actually losing about $1.2T a year in return for that additional $1T in debt.

The Obama years have easily been the greatest plundering of a country that had occured in human history.

18-1 on October 7, 2013 at 5:48 PM

Here’s the dirty secret – a “technical default” is inevitable sometime in the next 15 years. There is neither enough money in the world to support $22 trillion (nominal dollars) in publicly-held federal debt (not even in 15 years) nor enough money in the American economy to allow taxes to be high enough to avoid having to have $22 trillion in publicly-held federal debt.

Steve Eggleston on October 7, 2013 at 5:48 PM

This is a good sign–it means they’re admitting that the “we’ll default (on our bonds)” is a lie.

Mohonri on October 7, 2013 at 5:49 PM

$250B a month intake.
$211B a month for the “important” stuff.
$39B slush fund.

barry doesn’t want to talk. Close the House until January.

Do not raise the ceiling $1 !

crash72 on October 7, 2013 at 5:43 PM

The bad news – October’s total federal intake is going to be maybe $190 billion and November’s maybe $160 billion.

Of course, that is far more than enough to service the interest on the debt.

Steve Eggleston on October 7, 2013 at 5:50 PM

Prioritization is such a hard word for government…

d1carter on October 7, 2013 at 5:51 PM

A really good article by Daniel Horowitz at RedState destroys the default meme:

Daniel Horowitz: The Debt Ceiling is the Law of the Land

We are going to hear this erroneous talking point propagated by both parties over the next few weeks, so let’s put the myth to rest. The only way we default on the debt is if we fail to pay the interest on the public debt. According to the updated budget projection from the CBO, interest on the debt will be roughly $237 billion for 2014. Thanks to the short-term revenue benefits of the fiscal cliff and Obamacare tax hikes, the federal government is expected to rake in a record $3.042 trillion from the private economy this year.

Let’s engage in a simple math exercise. $3.042 trillion – $237 billion = $2.805 trillion. As long as the Treasury pays the first $237 billion in revenue to the shareholders of our debt, there will be no default, and we will have $2.805 trillion left to spend. Again, default is taken off the table. Discussion over.

What do you do with the remaining funds? You start funding core functions of government and those programs that people are already dependent on.

Social Security (retirement and disability) – $848 billion

Medicare – $505 billion

Medicaid – $298 billion

Defense – $582 billion

Veterans – $83 billion

Those expenditures account for roughly $2.3 trillion. The remaining half trillion can be prioritized as needed for other functions related to homeland security, national parks, or any other limited function. Hence, the debt ceiling is a built-in balanced budget mechanism. If Democrats want to fund other functions of government, they need to commit to a balanced budget. If they want to fund the HHS and the IRS, they need to get rid of Obamacare. If they want to fund the EPA, they need to get rid of the war on coal.

TheRightMan on October 7, 2013 at 5:52 PM

WH economic advisor on debt ceiling: “Prioritization is default by another name”

LOL. “Prioritization is a steamboat by another name, too. And a turtle. And a chair …

Greece cut lenders’ PRINCIPAL by over 60% and that was ruled to not be a default!! Of course, we can all agree that that was highway robbery (claiming that it was definitely not a tax default so that CDSs didn’t get tripped) but this is the same on the other side. These America-hating vermin infesting the White House are going to call anything a default (though, true to Benedict Roberts’ scheme, it will only be a “default” for the purposes of Spite House propaganda and not a default at all other times) and then make some 2nd grade, offensively stupid linguistic argument.

The only solution is to call all the Spite House vermin “criminals” and put them in orange jumpsuits at hard labor. A little law would be nice around this time. We’ve spent so many years, now, without it … in the Rule of Empathy and Idiocy.

ThePrimordialOrderedPair on October 7, 2013 at 5:52 PM

If we had any brains at all, we would have been spending the last several years pushing for the Cut, Cap and Balance Amendments and be ready to raise the debt limit if the Amendments get into the hands of the Many States and the We the People for ratification.

astonerii on October 7, 2013 at 5:53 PM

Resist We Much on October 7, 2013 at 5:42 PM

Excellent points, well stated.

thatsafactjack on October 7, 2013 at 5:54 PM

Uncle Sam won’t be a deadbeat to holders of U.S. securities but he might be to Social Security recipients, which may or may not have some impact on the government’s full faith and credit (and will almost certainly trigger a new downturn in GDP).

I defy anyone to head down to a bank and ask for a loan whose purpose is to make a payment on another loan.

I don’t know what kind of finance class this guy attended, but you can’t claim the injection of borrowed money into an economy as “GDP”.

BobMbx on October 7, 2013 at 5:58 PM

As for the “oh, we can never alter federal promises”, I seem to recall an entire class of entitlees being kicked off SocSecurity in 1983.

Steve Eggleston on October 7, 2013 at 6:00 PM

18-1 on October 7, 2013 at 5:41 PM

Be George, I think you nailed it.

Comment of the Day Shutdown™

Steve Eggleston on October 7, 2013 at 6:02 PM

Exit question for every day.

How many people signed up for Obamacare today? Since Oct 1?

The administration has still not revealed any numbers.

WisRich on October 7, 2013 at 5:48 PM

Like they can be trusted with ANY numbers they reveal. They’ve been cooking the books on unemployment since day 1 of this joke of an administration.

ANY numbers they reveal will be complete fiction anyway. Just rest assured in knowing that the LESS the Regime and the State-Run media are willing to say about how ObamaCare is going, the MORE it is living up to the train wreck, or worse, we all knew it would be.

Meople on October 7, 2013 at 6:02 PM

Actually. It’s not. And if that’s what you think, you should be fired because you are an imbecile who doesn’t understand simple vocabulary.

besser tot als rot on October 7, 2013 at 6:05 PM

I told my credit card company that if they didn’t raise my credit ceiling I was in danger of default.

They said “Pay up, you deadbeat!

myiq2xu on October 7, 2013 at 6:05 PM

Barack Hussein Obama: The World’s Most Prolific 419 Scammer.

BobMbx on October 7, 2013 at 6:07 PM

Bull . . . default is only default when the interest on the debt is not paid. These slimy liberals and leftists would wordsmith the devil and insist that black was white.

rplat on October 7, 2013 at 6:07 PM

I told my credit card company that if they didn’t raise my credit ceiling I was in danger of default.

They said “Pay up, you deadbeat!”

myiq2xu on October 7, 2013 at 6:05 PM

There’s an old saying: Owe the bank a $1,000? You’re in trouble. Owe the bank a $1,000,000? The bank is in trouble.

BobMbx on October 7, 2013 at 6:09 PM

“political catastrophe” – Ah only for congressman in districts with large numbers of federal employees.

Wigglesworth on October 7, 2013 at 6:10 PM

Would private investment immediately replace all that lost consumption? Economist Alberto Alesina comes about as close to endorsing the idea of “expansionary austerity” as you find with this cautious statement: “A deficit-reduction program of carefully designed spending cuts can reduce debt without killing growth.”

Well, the problem would be that there would be no predictability in any of it – e.g., What would be cut? How long? Etc. What we can be assured of is that the most essential programs would be cut.

Here’s what Thomas Sowell has said:

Imagine a government agency with only two tasks: (1) building statues of Benedict Arnold and (2) providing life-saving medications to children. If this agency’s budget were cut, what would it do?

The answer, of course, is that it would cut back on the medications for children. Why? Because that would be what was most likely to get the budget cuts restored. If they cut back on building statues of Benedict Arnold, people might ask why they were building statues of Benedict Arnold in the first place.

After the NIH/kids with cancer funding snafu, is there any doubt that Sowell is right?

besser tot als rot on October 7, 2013 at 6:11 PM

In other words, Sperling is saying that all of our spending is essential. There is nothing we can cut back on.

Wigglesworth on October 7, 2013 at 6:12 PM

By this guys logic, the SEQUESTER would also be classified as a ‘default’ as well.

Remember, the sequester was Obama’s idea, pushed by Lew, and passed by Reid, McConnell, Pelosi, Boehner, and most everyone else OUTSIDE of the TEA PARTY.

Freddy on October 7, 2013 at 6:13 PM

“political catastrophe” – Ah only for congressman in districts with large numbers of federal employees.

Wigglesworth on October 7, 2013 at 6:10 PM

I wish. The vast majority of federal employees in the districts of Jim Moran and Gerry Connally in northern Virginia have drunk so much Kool-Aid that they slosh when they walk.

Athanasius on October 7, 2013 at 6:19 PM

I wish. The vast majority of federal employees in the districts of Jim Moran and Gerry Connally in northern Virginia have drunk so much Kool-Aid that they slosh when they walk.

Athanasius on October 7, 2013 at 6:19 PM

Now, if we could only figure out how to get Jim Jones into the kitchen when they’re brewin’ up a fresh batch……..

BobMbx on October 7, 2013 at 6:21 PM

Gene Sperling. This scumbag would sell his children if it gave him the edge. One of the slime contributors in Obama’s scourge.

RdLake on October 7, 2013 at 6:22 PM

Well, ‘default’ is responsible spending by another name then, I guess.

PersonFromPorlock on October 7, 2013 at 6:30 PM

Uncle Sam won’t be a deadbeat to holders of U.S. securities but he might be to Social Security recipients,

It would be to SS recipients if there were insufficient funds in the SS “lockbox.” Those funds, which as coming in as we speak and will continue even if the debt limit isn’t raised, are permanently earmarked to pay SS, right? The only question is whether they sufficient to make the payments. If not then what of the IOU’s FICA exchanged with the general fund. Are those of a kind equivalent to the Treasury notes and higher than rents and payroll?

Dusty on October 7, 2013 at 6:31 PM

Wow, someone finally mentioned, albeit in passing, that putting the budget into balance overnight, even if we can make our interest and principle payments on debt, may not be too good for the ecnomy. How helpful.

Talk about burying the lede.

Mr. Arkadin on October 7, 2013 at 5:36 PM

because no one in their right mind thinks anyone in dc now would even come close to doing it; esp the GOP we have now. of course the dems will need to have the bloody bodies dragged over that finish line. kind of like in the astronomers interview he casually mentioned that the asteroid out there we’re taking pictures of might hit the earth, a .0000000002% chance. yeah.

t8stlikchkn on October 7, 2013 at 6:36 PM

There’s an old saying: Owe the bank a $1,000? You’re in trouble. Owe the bank a $1,000,000? The bank is in trouble.

BobMbx on October 7, 2013 at 6:09 PM

and when you owe the world 17 thousand billion………our kids are toast.

t8stlikchkn on October 7, 2013 at 6:38 PM

Bill Clinton: it depends on what the defition of ‘is’ is…

burserker on October 7, 2013 at 6:38 PM

It would be to SS recipients if there were insufficient funds in the SS “lockbox.” Those funds, which as coming in as we speak and will continue even if the debt limit isn’t raised, are permanently earmarked to pay SS, right? The only question is whether they sufficient to make the payments. If not then what of the IOU’s FICA exchanged with the general fund. Are those of a kind equivalent to the Treasury notes and higher than rents and payroll?

Dusty on October 7, 2013 at 6:31 PM

There are no funds in a “lockbox”. There are only special treasury bonds. The cash is gone the day it hits the Treasury.

There ain’t no cash. When SSA comes over to the Treasury and redeems one of those bonds, where will the cash come from?

The answer is:

1. Your paycheck in the form of higher federal income taxes or higher SSA taxes, or both,

OR

2. China.

OR

3. All three of the above.

Either way, you (we) will be forced through taxation to repay a loan that was used as collateral for the use of our own cash by the Treasury for unchecked spending.

Its a scheme that is so brilliant, so bold, even the MOB bows to its audacity.

“Wait a fuggin minute….so….you take cash from these guys, then you loan it out to some guy who uses it to buy votes, and then make them same guys pay off the loan with interest?”

BobMbx on October 7, 2013 at 6:41 PM

Do not believe the lies of OBOZO and the corrupt socialist media about any US default. Fact is, the US has defaulted MANY times in the past, and if the debt limited is breached in 2013, there will be a negligible consequence, as clearly explained by John S. Chamberlain in his brilliant article in Mises Daily: Friday, July 15, 2011.

The FIVE PREVIOUS US GOVERNMENT DEFAULTS detailed by Chamberlain are:

-The Continental Currency Default of 1779
-The Default on Continental Domestic Loans in 1782
-The Greenback Default of 1862
-The Liberty Bond Default of 1934
-The Momentary Default of 1979

Chamberlain also clearly explains what would happen in now if the debt limit is reached:

“In extremis, what will happen is that all the losses will be foisted onto the Federal Reserve. The Fed holds something on the order of $1.6 trillion in debt issued by the Treasury of the United States. By having the Federal Reserve purchase blocks of Treasury debt and defaulting on these non-investor-held securities, the United States can postpone a default against real investors essentially forever.”

The hysterical leftist BS about “default” is in the same category as their hysterical BS about the irrelevant SEQUESTER and the meaningless SHUTDOWN.

TeaPartyNation on October 7, 2013 at 6:41 PM

The Treasury Department takes in roughly 10 times as much revenue each month as it pays out in interest to creditors, note Coburn and Paul; all Congress needs to do is pass a law ordering Treasury to pay creditors with available revenue before anyone else is paid — i.e. “prioritization” — and the threat of default goes poof.

That’s how is should work. That is how it would work if things were done normally, as they have been done in the past by any entitiy that borrows money and pays it back.

However, socialists play by a different set of rules. Their own. And they make them up as they go.

Want an example? Comrade O made up his own bankruptcy rules to save Government Motors for the unions. He tossed aside centuries of bankruptcy law, put his favored groups in the front of the line, and screwed bond holders who should be first in line. And he did it using taxpayer money.

He is perfectly capable of doing whatever he thinks is in his political interest, the nation as we know/knew it be damned. He wants to change it anyway.

farsighted on October 7, 2013 at 6:41 PM

That’s how is it should work.

farsighted on October 7, 2013 at 6:43 PM

‘If my Republican friends believe that increasing our debt by almost $800 billion today and more than $3 trillion over the last five years is the right thing to do, they should be upfront about it. They should explain why they think more debt is good for the economy.

How can the Republican majority in this Congress explain to their constituents that trillions of dollars in new debt is good for our economy? How can they explain that they think it’s fair to force our children, our grandchildren, our great grandchildren to finance this debt through higher taxes. That’s what it will have to be. Why is it right to increase our nation’s dependence on foreign creditors?

They should explain this. Maybe they can convince the public they’re right. I doubt it. Because most Americans know that increasing debt is the last thing we should be doing. After all, I repeat, the Baby Boomers are about to retire. Under the circumstances, any credible economist would tell you we should be reducing debt, not increasing it.Democrats won’t be making argument to supper this legalization, which will weaken our country. Weaken our county.’

- Senator Harry Reid, 2006

Resist We Much on October 7, 2013 at 6:50 PM

Daniel Horowitz: The Debt Ceiling is the Law of the Land

[TheRightMan on October 7, 2013 at 5:52 PM]

Thanks for that link.

I agree that the default meme is overrated and think that his Horowitz’ macro approach is great for evaluating Hennessey’s concern over technical default issues. $550B certainly isn’t sufficient to get us through the the crash diet but that could be addressed with contract terminations and the negotiating of termination fees, if necessary, and I would guess that a five or ten percent bump on amounts owed in exchange for delayed payments of bills outstanding would go a long way to eliminating the issue of technical default.

As for payroll, the government will just have to start laying people off.

Dusty on October 7, 2013 at 6:59 PM

Want an example? Comrade O made up his own bankruptcy rules to save Government Motors for the unions. He tossed aside centuries of bankruptcy law, put his favored groups in the front of the line, and screwed bond holders who should be first in line. And he did it using taxpayer money.

He is perfectly capable of doing whatever he thinks is in his political interest, the nation as we know/knew it be damned. He wants to change it anyway.

farsighted on October 7, 2013 at 6:41 PM

It’s been far too long since I ran the numbers, but the entirety of the Treasury’s loss on Government Motors went straight into the UAW’s pockets above and beyond what they would have received in a normal bankruptcy.

Steve Eggleston on October 7, 2013 at 7:00 PM

“Prioritization is default by another name”

Then, by all means – let’s go for default.

dentarthurdent on October 7, 2013 at 7:25 PM

Who is the reckless individual in this case?

18-1 on October 7, 2013 at 5:41 PM

Ok, I confess, it was me – cuz I went and rented a big@zz bulldozer, on a new credit card, and ran over every flukin one of them – my own house included – with my idiot wife in it.
Ahhhh – now I feel better.

Actually – my wife isn’t that bad. She’s been working at paying off HER guns that are currently on our credit card so she can quit the libtard run library she currently works for….

Actually I must be a libtard Dem (but I repeat) at heart cuz I just want to go get a bunch of new credit cards and spend like crazy – cuz when the SHTF, credit debt won’t mean sh!ite – brass, lead and steel will be the new currency – and I’ve got / will have lots of that…..

dentarthurdent on October 7, 2013 at 7:34 PM

Resist We Much on October 7, 2013 at 6:50 PM

Rhetorical question – Why aren’t Republicans repeating these exact speeches on the floor of Congress?
It would be fun to watch the Dems twist their heads, like a dog trying to understand English, and going “that speech sounds oddly familiar” – just before their heads explode.

dentarthurdent on October 7, 2013 at 7:38 PM

Flemming v. Nestor (1960)

Held:

1. Although this action drew into question the constitutionality of § 202(n), it did not involve an injunction or otherwise interdict the operation of the statutory scheme; 28 U.S.C. § 2282, forbidding the issuance of an injunction restraining the enforcement, operation or execution of an Act of Congress for repugnance to the Constitution, except by a three-judge District Court, was not applicable; and jurisdiction over the action was properly exercised by the single-judge District Court. Pp. 363 U. S. 606-608.

2. A person covered by the Social Security Act has not such a right in old-age benefit payments as would make every defeasance of “accrued” interests violative of the Due Process Clause of the Fifth Amendment. Pp. 363 U. S. 608-611.

(a) The noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits are based on his contractual premium payments. Pp. 363 U. S. 608-610.

(b) To engraft upon the Social Security System a concept of “accrued property rights” would deprive it of the flexibility and

Page 363 U. S. 604

boldness in adjustment to ever-changing conditions which it demands and which Congress probably had in mind when it expressly reserved the right to alter, amend or repeal any provision of the Act. Pp. 363 U. S. 610-611.

3. Section 202(n) of the Act cannot be condemned as so lacking in rational justification as to offend due process. Pp. 363 U. S. 611-612.

4. Termination of appellee’s benefits under § 202(n) does not amount to punishing him without a trial, in violation of Art. III, §2, Ch 3, of the Constitution or the Sixth Amendment; nor is § 202(n) a bill of attainder or ex post facto law, since its purpose is not punitive. Pp. 363 U. S. 612-621.

You do not have a right to SSA.

You have no actual assets in the federal government.

What you pay into SSA is a tax, as seen in Helvering v. Davis (1937).

Thus you are taxed and the money is spent that year.

You have no asset in the federal government.

Congress decides to pay out funds. If funds are not available they are not paid out. You are not entitled to any funds as they are just a promise via legislation.

Debt payments are mandatory in the US Constitution.

Thus creditors get paid first.

I’m sorry if people believed lies given to them from politicians for decades about SSA. You have no ‘account’: what you get are nice pieces of paper to show what you have paid in and what Congress might decide to allocate in the future if it so wishes and if funds allow. Not getting paid is not a penalty. It is not a ‘default’. It is not paying out on a promise and, believe it or not, that is written into every promise to pay out via contract in the US government. Paying our debts is mandatory. Supporting the direct functions mentioned in the Constitution is mandatory. All else is discretionary if Congress and funds allow.

Welcome to the Gods of the Copybook Headings.

ajacksonian on October 7, 2013 at 7:39 PM

Technical default? Isn’t that what the DNC is doing right now? So Democrats aren’t completely opposed to the concept.

azkag on October 7, 2013 at 7:56 PM

To live way the fark beyond your means and create the illusion you’re really smart (by essentially just robbing Peter King to pay Paul Krugman) hire an “economist”.

Tim Zank on October 7, 2013 at 5:36 PM

Expanded for your edification.

The Schaef on October 8, 2013 at 12:01 PM