Friday, January 18, 2013

House GOP considers temporary extension of debt ceiling, challenging Obama's ultimatum

Rosalind S. Helderman and Ed O’Keefe have a story in the Washington Post Friday morning (Jan. 18) indicating that some House Republicans are considering a temporary extension of the debt ceiling, maybe until May or June, to give the Democrats (especially the Senate) more time to come up with the “required” spending cuts.

The link is here

Charles Krauthammer, conservative columnist with the Washington Post, made a similar suggestion today.
The suggestion would test President’s pledge not to negotiate about the debt ceiling.  If he signed a temporary extension, he would be implicitly “negotiating”.

Republicans are saying that, were the debt ceiling not extended, the Treasury can prioritize payments to bond holders, and that would include the Social Security Trust Fund, protecting beneficiaries for now.  The Treasury says that its computer system process payments only on a FIFO basis, but it would seem as if it could be forced to pay bond issues (including Social Security) first.  If it cannot, the immediate consequences are even more grave (including for Social Security recipients, as I have explained before).

For what it’s worth, you can read Michael Tanner’s analysis at the Cato Institute, “The Overrated Debt Ceiling”, link here. Is there a distinction between principal and interest, and is only interest breach  that constitutes default?   Is there such a thing as a “technical default” where we delay paying non-debt-servicing costs?

CNN's Ali Velshi always reminds us that raising the debt ceiling doesn't authorize any new spending. True.  The critical element is paying the bills already due.  But a portion of it probably does allow new spending already authorized, which is what some in the GOP want to focus on; they think (incorrectly) that is all that stops. 

I think high school government teachers should ask test questions on the debt ceiling.  The subject lends itself to tricky multiple choice, doesn't it.  In fact, ask about it on Millionaire!

Update: Saturday, Jan. 19

The New York Times reports that the House GOP hardliners have "reversed themselves" and offered to extend the debt ceiling for several months, giving time to work out a long term budget, link here

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