Hacker News Reader

Comment by dragonwriter | Hacker News Reader

> Well, on the pro-side, at least we don't have to worry about the government defaulting on their interest payments anymore.

The fact that the most recent sale of bills was at 0% doesn't actually mean that there is no risk of the government defaulting on existing debt. Because the cost of borrowing is so low, one might think it should mean that, but the nature of the legal rules -- particularly, the debt ceiling -- means that a politically-driven default with no need is still a real possibility.

View on HN

The fed will conduct as many permanent open market operations ,i.e, electronically printing money, as necessary to keep a default from happening. The risk of a default is purely theoretical. The only serious risk is that the dollar exchange rate will start to rapidly deteriorate.

The fed has no control over the debt ceiling. A voluntary political default will always be a possibility as long as tea partiers are at the helm.

Preventing the government from going into additional debt is approximately the opposite of a default.

Government needs to borrow money every week or so to avoid default. That's how the current system works, and anyone who doesn't understand this basic issue needs to stay out of the credit ceiling debate.

I'm willing to listen to anyone who thinks they have a solution for getting us out of this "rolling debt" system, but unless you can solve both problems simultaneously, it will be better to just raise the debt ceiling and then start fixing the issue.

The problem is that they're going to raise the debt ceiling, and then not start fixing the issue.

At that point masterleep's comment is not quite so far out as you claim it is. On the surface, it's wrong, and yet in terms of the long-term dynamics that never actually get addressed, there's a definite point there.

> The problem is that they're going to raise the debt ceiling, and then not start fixing the issue.

Republicans have had control of the House since 2012, and a majority of the Senate since 2014. They haven't even passed a real budget (not this Continuing Resolution crap).

"Starve The Beast" has already been tried: https://en.wikipedia.org/wiki/Starve_the_beast

All that happens, is that more debt gets borrowed. How about actually passing a budget and telling the American people what services get cut? How about raising taxes for once? The US got out of its last major debt (ie: World War 2) by raising taxes on the highest bracket to 91%, and holding it there from 1940s through 1964.

http://taxfoundation.org/sites/taxfoundation.org/files/docs/...

If you don't got the courage to cut programs, then raise taxes. If you don't got the courage to do anything, then GTFO out Congress so that real decision makers can get in and actually try and solve the issue.

How do you solve the budget issue? You do it by cutting spending, or raising revenue. Or a combination of both. Period. There's no way around it.

The Debt Ceiling itself doesn't do jack diddly. And it has lost its effectiveness as a bargaining point in this new do-nothing Congress. Its time we get rid of the Debt Ceiling and just focus our debates on actually making the first actual budget for the Federal Government since 2012.

Look, I understand how the House and Senate being split from 2012 through 2014 caused the continuing resolutions of 2013 and 2014 to happen. However, with an entire year with BOTH houses under control of the Repubs, you'd expect them to actually get a budget to Obama by now.

Yeah. I mean, I blame the Democrats for not even holding a vote on a budget while they had the Senate. "Failure to fulfill their most basic legislative duty" was a phrase I read. It's just depressing that the Republicans aren't even pretending to pass one either.

>...How about raising taxes for once? The US got out of its last major debt (ie: World War 2) by raising taxes on the highest bracket to 91%, and holding it there from 1940s through 1964.

This is misleading. The effective tax rates were roughly the same then as now - very, very few people paid those high rates. Instead a lot of effort went into hiding income, getting tax deductions made into law, getting compensation in forms other than taxable income, etc . (For example, this is why employer paid for health insurance came about.) There were people who weren't able to avoid the high rates, but it was a tiny percentage of revenue. These high rates distorted economic activity (and surely stopped some economic activity that would have happened).

The reason the US got out of WW II debt is that federal spending dropped dramatically after WW II and the US had the advantage of being the major industrialized country that wasn't attacked in WW II.

An intro to the topic: http://www.manhattan-institute.org/html/ib_19.htm#.VhShIIShb...

The only long-term dynamic that never gets addressed is the trade deficit. Weakening the dollar would fix that, but lenders love a strong dollar.

> Preventing the government from going into additional debt is approximately the opposite of a default.

Preventing the government from increasing its total quantity of debt when such is necessary in the short-term to meet debt service payments is, absolutely, creating default.

It may be motivated by desire to avoid a speculative potential future default on a larger debt, but its still a default now.

If it was necessary in the short term to meet debt service payments, then I would agree with you, but it is not.

That's not what we're talking about here. We're talking about the debt ceiling. Which is borrowing to pay bills we've already racked up. If you wanted to prevent the government from going into additional debt, that money shouldn't have been spent.

While they can call for the default to happen there were plenty of signs the last time it nearly happened that the executive branch was simply going to ignore it in some convoluted way.

Obama doesn't want to print the Trillion dollar coin. But if its the only way to avoid default, he might be forced to.

In any case, it'd be yet another time that the Republican-led Congress ceded power voluntarily to the President. If Congress wants to lead this country, they better start leading. (IE: Writing laws and getting us out of these self-made problems)

It's not clear that congress can force a default through the Debt ceiling making it a meaningless political football.

It could actively decide to default, but hitting the debt cap would likely just force a government shutdown due to cash flow issues unless the cash flow problems got insanely bad.

That, and this was only one auction at one maturity rate. Other maturities will trade and eventually auction at similarly low levels, but probably not at or below zero, meaning that overall debt will still grow slowly.

Reply on news.ycombinator.com