Economics, Pethokoukis

Short and sweet: Why the debt ceiling must be raised, and prioritizing payments won’t work

U.S. Congress

Photo Credit: cliff1066tm (Flickr)

Tony Fratto was an assistant secretary in the US Treasury Department before moving to the White House in September 2006 as deputy assistant to president George W. Bush and principal deputy press secretary. Currently, he is a partner at Hamilton Place Strategies. (And he is a fellow CNBC contributor.) And on Twitter, he just explained why the debt ceiling must be raised and the idea of prioritizing payments really isn’t workable.

 

23 thoughts on “Short and sweet: Why the debt ceiling must be raised, and prioritizing payments won’t work

  1. LOL…Of course the GOP will cave again and increase the debt ceiling as it always has. Nothing will happen until the markets have had enough and the Fed can no longer buy the debt issued by the Treasury.

    • With 10-year yield at 1.8%, it looks like the market hasn’t had enough. And the Fed can always buy as much debt as it likes on the open market (can’t buy directly from Treasury). It just depends on how big it wants to blow up its balance sheet.

      But you already knew that.

  2. This is completely unconvincing. Everyone already knows the government’s bills are more than its revenue. That’s why expanded borrowing won’t solve anything. What the feds need to do is start defaulting and start dealing with reality. Prioritizing debt payments would at least preserve America’s credit. Prioritizing our welfare state over our lenders would not.

    Since Obama has an animus toward America’s most productive, why not at least channel this productively and stop entitlement payments to millionaires? Then these programs will at least return to their original purpose — that of a safety net for the most impoverished.

  3. Reasonable arguments but needs more explanation. Everyone has a good reason why their job has to be done the way they’ve always done it but let’s think out side the box shall we? Let’s say US law requires that congress pass a budget every year. Now let’s say they don’t because they don’t. No what? Well since there is no enforcement method to make them we keep having to borrow more money to pay for the illegitimate, if not illegal spending. So what are the enforcement mechanisms if Treasury fails to do address the above issues in the way its supposed too? California for example sent out what amounted to IOU’s to pay out tax refunds when it had an unresolved budget shortfall. I’m sure the smart folks at treasury can come up with some workarounds.

    • re: “enforcement mechanisms”.

      well it’s called Congressional Actions

      only Congress can appropriate money.

      it’s up to them to engage that process – no one else is allowed to do it Constitutionally.

      The POTUS and Treasury can play at the margins with bookkeeping and other techniques but at the end of the day, it’s Congress responsibility to NOT appropriate more spending than they have revenues for.

      The POTUS cannot do it.

      What the POTUS CAN DO if Congress appropriates more spending than they have revenues for and then later refuses to increase the debt ceiling – then they have turned over to the POTUS what cuts to make to spending.

      Again, this is the responsibility of Congress. When Congress cannot agree on a budget and then later, they vote to fully fund the CRs – they have, in fact, approved extending the prior budget – spending.

      All this blather about debt accumulating because of this POTUS “spending” is a bald-faced lie.

      BUt the problem is – once you start lying about something, you can to make up more lies to cover it up and that is what is going on right now with the debt ceiling kerfuffle.

      Congress is basically saying that they’ll not extend the debt ceiling – for spending – they have already approved.

      Mr. Obama is correct when he states that it’s dumb to not pay our debts that came from our spending.. it’s the truth.

      • I think they have to realize by ignoring the budget and debt ceiling they are in denial. Gov is to big and there are to many social safety nets. 50 % do not pay taxes still to many on food stamps cannot grow economy by compensating for low paying jobs. They have to solve problems not kick that can, they have kicked it far to long

        • at the end of the day, the power of the budget and spending lie with Congress.

          It’s up to them to generate a budget, make cuts to spending, etc.

          All the POTUS can do is sign it or veto it after they have sent him something.

          The debt limit has been raised more than 70 times including several times under Ronald Reagan.

          refusing to extend the debt does not do anything at all to cut spending and it’s totally hypocritical for the same folks who voted in favor of extending the CRs back in Sept – that essentially set in motion more increased spending and then 5 months later say they are not going to approve increase the debt limit – by spending they vote in favor of back in Sept.

          this is the POTUS fault?

          • Larry your argument makes my point. Congress must not appropriate any more money so that the law is followed. They passed a yearly budget, not an Obama blank check for as many years as he reigns. The spending was approved for 1 year 3 budget years ago. SO the accumulating debt being the result of the POTUS & corruptocrats is blather, how so? Nothing has changed with regard to our debt obligations since the last CR so when would/how would you propose this cycle be broken?
            Right pass a budget. The R’s have, repeatadly but nothing passed on the Senate side or was even proposed, and not a vote was placed for the POTUS proposed budget. Now here’s a news flash – spending is NOT debt. Got that, spending is n-o-t debt. There is no problem paying our current debt with the current revenue the treasury takes in. There may be an issue with paying it in they manner we’ve been doing it as noted in this article. My proposal is: so why not change it. Just like we’ve changed the spending process that you so acuratly noted has the force of law behind it.

          • re: ” Larry your argument makes my point. Congress must not appropriate any more money so that the law is followed. They passed a yearly budget, not an Obama blank check for as many years as he reigns. The spending was approved for 1 year 3 budget years ago.”

            Nope. Once the budget expires – the govt is funded by CRs – Continuing Resolutions that have to be voted on by Congress.

            See Here: http://beta.congress.gov/bill/112th-congress/house-joint-resolution/117

            look at the date… follow the House and Senate links and see who voted in favor and who opposed.

            “SO the accumulating debt being the result of the POTUS & corruptocrats is blather, how so? Nothing has changed with regard to our debt obligations since the last CR so when would/how would you propose this cycle be broken?”

            the accumulating debt is APPROVED by a majority vote of the CR – an appropriations to continue the spending.

            Notice especially on the Senate side how many voted
            against it. That would be a principled stand and the way to make a case to NOT continue spending at the deficit level but instead only agree to a CR that reduces spending levels.

            “Right pass a budget. The R’s have, repeatadly but nothing passed on the Senate side or was even proposed, and not a vote was placed for the POTUS proposed budget. ”

            that’s correct, but the GOP – DID VOTE IN FAVOR -
            of continuing spending at the deficit level in the last approved budget.

            thems the facts. See the link I provided and GOGGLE the subject.

            “Now here’s a news flash – spending is NOT debt. Got that, spending is n-o-t debt. ”

            huh? If you CONTINUE TO SPEND at a DEFICIT rate – you WILL ADD MORE DEBT!

            “There is no problem paying our current debt with the current revenue the treasury takes in. There may be an issue with paying it in they manner we’ve been doing it as noted in this article. My proposal is: so why not change it. Just like we’ve changed the spending process that you so acuratly noted has the force of law behind it.”

            When we are spending in deficit, we are not paying off debt – we are ADDING TO IT and That’s why the debt ceiling is reached.

            The POTUS has nothing to do with. He cannot spend a dime unless both houses of Congress approve it.

            read the link.. do some GOGGLING about CRs and especially the one in Sept 2012 and get back.

  4. the way you “prioritize” spending is first with a budget and then if you cannot agree on a new budget, then with CRs – continuing resolutions.

    BOTH of these mechanisms CAN and DO prioritize spending.

    there is nothing in the CR process that requires full funding of everything in the last budget unless that is what is chosen to do.

    but there is a big difference.

    if you choose to not pass a fully-funded CR, you cut spending – and when you do that- you push the date for extending the debt ceiling – downstream.

    In other words – you don’t have to use the debt ceiling as an excuse to cut spending and let the POTUS prioritize the cuts.

    What the GOP is doing is just plain bass ackwards… if they were truly concerned about :

    1. – cutting spending
    2. – them making the choices about what to priortize

    by voting in favor on the CRs and then taking a stand at the debt ceiling vote:

    1. – they’ve already approved the spending that caused
    the debt ceiling limit to be reached.

    2. – they’re threatening to do something that will actually harm the country’s credit rating

    3. – they’re threatening to do something that will actually increase the deficit

    4. – they’re ‘threatening” to give to the POTUS the authority to prioritize the cuts.

    If you were actually going to design the worst strategy possible to deal with spending… and the deficit.. this would be it.

    What the GOP has for “leadership” these days has oatmeal for gray matter.

    When people like Newt Gingrich and Collin Powell are both telling them this at the same time – you know there is a problem.

  5. I have long supported the GOP push for a federal balanced budget amendment. Now, we have the opportunity to self-impose a balanced budget by holding firm and not raising the debt ceiling limit. This would force the federal government to limit spending to the amount of it’s receipts ($2.5 trillion!), without the hassle of pursuing a balanced budget amendment. We essentially have the mechanism in place already! Why aren’t GOP leaders, and conservative commentators pushing for and celebrating this opportunity?

    • re: ” Why aren’t GOP leaders, and conservative commentators pushing for and celebrating this opportunity?”

      because you cannot balance it right away without draconian cuts and if Congress can’t agree with the POTUS, then the sequestration will take effect which will automatically cut 100 billion a year for the next 10 years and which the GOP itself has said would be “devastating”.

      • Maybe. I just don’t see how limiting spending to roughly the same spending levels we had in 2006 would be all that devastating. Some tough choices would have to be made, for sure, but I would rather make them now before the problem becomes exponentially worse. This just seems like the perfect time to show some courage, and for the GOP to seize the opportunity to impose the discipline of a balanced budget. We’ve lobbied for this for decades; now’s our chance!

        • re: ” Maybe. I just don’t see how limiting spending to roughly the same spending levels we had in 2006 would be all that devastating.”

          I totally agree.

          and to re-emphasize this point

          when the Senate and the House voted their CR – continuing resolutions in Sept 2012, they could have done this.

          they could have set the spending levels for each agency to be what they were in 2006 and let the agencies do the prioritization necessary to get back to that level.

          It’s kind of hard to vote for full-funding of the CRs when you KNOW the RATE of SPENDING overall will CONTINUE a trillion dollar deficit … you approve that…

          then 6 months later – you say you’re not going to raise the debt level to be consistent with what you voted for back in 9/2012.

          that’s why I say this is Kabuki Theater.

          • It feels weird saying this, but I agree with you Larry.

            *Sees a foot of snow outside*

            I think Hell just froze over.

  6. Re #1 & #2: I get paid once a month, on the 10th. Rent, my largest single expense, is due on the 5th. “Prioritizing” my spending is the ONLY way I can do that. Yes, sometimes that means I want to spend but I don’t. That’s not a bad thing.

    • re: ” Yes, sometimes that means I want to spend but I don’t. That’s not a bad thing.”

      harder to carry out such self-control when they are 535 of you and the consequences of screwing up are not owned by you.

      • Yeah, those consequences being:

        1) poorer retired people with no income don’t get the benefits they may have worked all their lives for, so they don’t heat their houses in the dead of winter, and dead becomes the operative word.

        2) the government workers that do something productive don’t get paid (that won’t affect the decision makers on the Hill), mortgages are not paid, and we have to bail out Wall St again.

        3) food stamps go away (boo-hoo hinted somebody above) and the enormous mass of poverty stricken people in this country end up less well nourished than the population in countries that we supply aid (and arms) to

        Reality bites. We are a civilized nation and do not let our fellow citizens suffer or die from malnutrition, the winter cold, or having to live on the street because we suddenly decided we didn’t want to pay them.

        Working up to this in a sensible, progressive manner is the only way to do it. But actually doing so is essential.

        • Phil, you have a responsibility to help your friends and family members in need. That is civilized. You do not have the authority to elect a pack of criminals to rob other people to help those in need to salve your conscience. That is barbarity. You are an accomplice to their theft.

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