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Tue Jan 15, 2013, 08:49 PM

Debt ceiling crisis: why "prioritization" of Federal payments is NOT feasible,

according to two responsible Republicans, even though others are pushing to pay bondholders first.

http://www.chicagotribune.com/news/politics/sns-rt-us-usa-fiscal-debtlimitbre90f029-20130115,0,4688497.story

WASHINGTON (Reuters) - Republican lawmakers are preparing to introduce legislation to direct the U.S. Treasury to make interest payments on U.S. bonds first and then prioritize other government outlays in case Congress does not raise the debt ceiling.

SNIP

"Prioritization is impossible," said Tony Fratto, who was Deputy Press Secretary for Bush and a spokesman on economic policy who fought through approximately seven debt limit increases with Congress.

"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," Fratto said.

INCREASED CREDIT RISK

Keith Hennessey, Bush's National Economic Council director, said prioritization was a bad idea that could increase credit risk and said it would be irresponsible.

"Payment prioritization doesn't stop payments, it just delays them. Then the aggrieved party sues the government, and probably wins, and it turns into a bloody mess," Hennessey, now an economist at Stanford, said in a blog post this week.

SNIP

4 replies, 808 views

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Reply Debt ceiling crisis: why "prioritization" of Federal payments is NOT feasible, (Original post)
pnwmom Jan 2013 OP
bdublu Jan 2013 #1
pnwmom Jan 2013 #2
bdublu Jan 2013 #3
pnwmom Jan 2013 #4

Response to pnwmom (Original post)

Wed Jan 16, 2013, 01:26 AM

1. I'll just leave this

 

Right here...

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. ... I therefore intend to oppose the effort to increase America’s debt limit.”

— Then-Sen. Barack Obama, floor speech in the Senate, March 16, 2006

My question is, why does this administration threaten to withhold or "postpone" benefit payments when it's not the beneficiary's fault for this mess? Why not postpone paying ALL members of Congress their salaries for failing to do their jobs? While this may not solve any debt issues, it sure may make the punks on both sides of the aisle get things done.

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Response to bdublu (Reply #1)

Wed Jan 16, 2013, 01:41 AM

2. Not paying members of Congress wouldn't come anywhere close to solving our issues.

And it's not legal anyway.

Obama could say what he said in 2006 because he knew the debt ceiling was going to be raised, no matter how he voted. That's no longer the case.

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Response to pnwmom (Reply #2)


Response to bdublu (Reply #3)

Wed Jan 16, 2013, 02:42 AM

4. No, he couldn't make it legal through executive order.

Executive orders are legal in only some limited circumstances and this isn't one of them.

As I said before, in 2006 there was no danger that the debt ceiling would not be lifted, so politicians from both parties could cast their votes knowing that the ceiling would be lifted in time to avoid economy-threatening circumstances.

That is no longer the case.

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