Debt ceiling dictionary

We will hit the ceiling tomorrow.

[T]here's a reason they keep coming up every time we have a debt limit conversation: because defaulting could be extraordinarily, catastrophically bad, leading people to try to think up ways around it.

  NPR

Extraordinarily, catastrophically bad because...

Interest rates would soar.

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The value of the U.S. dollar would take a beating. Not only that, but the U.S. dollar would lose its place in the list of global world currencies. Meanwhile, investors would hop on other world currencies like the euro or yen.

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U.S. import prices would rise through the roof, which would make it extremely expensive to live in the country. Inflation would hit hard and fast.

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U.S. credit rating downgrades can tank stock markets. [...] American wealth and stability in many forms would be in turmoil.

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Any government employee would be out of luck for their paychecks. Also, any citizen receiving or set to receive Social Security, Medicare, and Medicaid benefits would lose those programs entirely. Payments on student loans, tax returns, and government facilities would shut down. Unlike a government shutdown that impacts only non-essential programs, the impacts of a U.S. debt default would be far-reaching.

  Market Realist

And for all those reasons, Congress is not going to allow the government to default. I don't even know why at this point we have a debt ceiling. Just for the GOP to have something to scare people with and campaign around?

You know, of course on the bottom line, the US doesn't HAVE to default on its debts under any circumstances, because the US prints the money in which debts can be paid. 

Anyway....back to the NPR article on ways to avoid default...

A discharge petition is a House procedure that essentially forces a bill out of committee and to a vote. If a bill — say, a measure to raise the debt ceiling — is sitting in committee, not going anywhere, 218 House members can sign onto a petition pushing the bill through for a vote, even if leadership hasn't scheduled a vote.

  NPR

Before the current talk about the debt ceiling (seems like we go through this every year now), I was unaware of a discharge petition. Apparently, it has rarely ever been used. Perhaps because neither party recently has ever had 218 members in concert, and definitely not any cooperation across parties. But, in this case, the Dems just might be able to find enough sane Republicans to do it.

But before any vote, there are several steps: the bill must be in committee for 30 legislative days, as the Congressional Research Service laid out in a detailed 2019 report on the discharge petition process. Note that that's 30 legislative days, not calendar days.

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Once it gets 218, seven more legislative days must pass before debate and a vote can happen.

So, unless it's already there, this could be a problem with Republicans in charge of the House. I'm assuming by hitting the ceiling tomorrow, we're just in for a shutdown until October when the ceiling has to be raised, or we default.

House Republicans are preparing a plan instructing the Treasury to prioritize its payments. The Treasury takes in less money than it spends, so under such a plan, it would pay some bills but not others.

Sure, and what do they prioritize? Also, they're dead set against making the ultra wealthy pay taxes, which would cure the problem of taking in less than spending.

It's likely [...] that the government would pay bondholders first — that is, people who already loaned the government money would get payments owed to them. And therefore, the U.S. wouldn't default on its debt.

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But still [...] some bills would not get paid on time — and the decision to stop spending on any given program could hurt any number of people, economically or otherwise.

Whichever people don't have enough representation or enough campaign contribution power for the GOP to care about them are the ones who'll be hurt.

In addition, there is some question as to whether prioritization is even possible, given the Treasury's automated system for paying its bills — a question that was raised during the 2013 debt ceiling showdown.

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When the U.S. came close to defaulting in 2011, it sent stocks tumbling and led to a U.S. credit downgrade — long story short, that means higher borrowing costs, which can mean an economic slowdown.

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[S]uch a plan would have to pass the Democratic-led Senate. That could be exceedingly unlikely.

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The #MintTheCoin plan leans on a decades-old law allowing the Treasury to mint commemorative platinum coins of any denomination. So while the intent was never anything to do with a debt ceiling, the idea is that the law nevertheless allows the government to literally print money — in this case, a coin worth, say, a trillion dollars. The Treasury would deposit the coin at the Fed, and that would mean money for the government to continue to pay its bills.

As well as Hollywood movies about theft of the trillion dollar coin. So obvious as to be boring.

[I]n 2021, both Yellen and the Biden White House rejected the idea, with Yellen dismissing it as a "gimmick."

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Section 4 of the 14th Amendment [...] says: "The validity of the public debt of the United States ... shall not be questioned."

So the idea here is that the country simply has to keep paying on its debt obligations, because not to do so would be unconstitutional.

"Shall not be questioned" means you can't default? I see a Supreme Court decision coming up on that one.

...but hey, do what you want...you will anyway.

UPDATE: