jueves, 10 de enero de 2013

Now, the debt ceiling...

Politicians sent the US went over the fiscal cliff, then quickly reversed direction. The fiscal cliff won't drive the US economy into recession this year. However, the deal on taxes  doesn't give us a respite from the bitter disagreement about how to address the US government's deficit. We're told that in February the US Government will have exhausted the cash flow management techniques that are permitting it to pay its bills even though the debt ceiling hasn't been raised. In short, if an agreement isn't reached or a way to keep paying bills without an agreement isn't found, the US Government will default on its bills.

Voting to raise the debt ceiling used to be routine. After all, Congress already voted to approve the expenditures that won't be paid if the debt ceiling isn't raised. Raising the debt ceiling isn't routine anymore. It's become incredibly acrimonious: the late summer 2011 iteration caused the US Government to lose its AAA bond rating. Why has a formerly routine vote become so difficult? House Republicans use the occasion to push for the spending cuts they believe are necessary to cut the deficit.

The approach of February has triggered creative ideas for avoiding default. One is for the Treasury to print script. Another is the minting of a trillion dollar coin. Links to articles discussing each idea are posted below. Default would NOT benefit the country.

script: http://www.nytimes.com/2013/01/10/opinion/an-escape-hatch-for-the-debt-ceiling.html?ref=opinion&_r=0

trillion dollar coin: http://www.theatlantic.com/business/archive/2013/01/everything-you-need-to-know-about-the-crazy-plan-to-save-the-economy-with-a-trillion-dollar-coin/266839/

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