mnottertail
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quote:
MN - Since about 2.76 trillion is owed to social security, how will payments be made out of current revenues?
Those payments are not contractual. They are but promises. SS can go to zero and there would be no violation of government duty to pay.
That is foolishness on a grand scale. You know how its owed? Treasury bills. Treasury notes. Treasury bonds. And that is pretty much how all our actual debt is owed, treasury securities, and it is bigger than Social Security.
You can certainly fuck off on the intragovernmental debt, but when those puppies are due, they are due. If the secretary of the treasury does not have the authority to borrow from peter to pay paul on these (because 1934 SS law which is pretty much what we are under, has rules about borrowing to reserves ratios and so on. ) How will they be renewed instead of dued?
These securities are certainly contracts, what the fuck do you think is being defaulted?
Bruce Bartlett (a Reagan administration senior economic policy guy, Bush Treasury guy, staffer Ron Paul (house banking committee) and Jack Kemp (tax issues):
It is common to hear Republicans pooh-pooh the danger of default by saying that the Treasury has much more cash coming in from tax withholding on a monthly basis than it owes bondholders. It can simply prioritize payments, they say. (But Republicans have also passed the Full Faith and Credit Act, giving the president authority to prioritize payments, which strongly suggests he can’t now do so.)
Those who say this are either ignorant or mendacious. There are two problems with this theory, legal and practical.
The legal argument has been made by such scholars as Neil Buchanan of the George Washington University, Michael Dorf of Cornell and Jack Balkin of Yale, among others.
They make the point that the debt limit is a public law, not a part of the Constitution with higher standing over other public laws. Appropriations are also public laws, as are entitlement programs like Social Security and Medicare. And of course those who sell goods and services to the federal government, as well as those who bought its bonds, have contractual rights to be paid. Moreover, there is a law called the Prompt Payment Act, which requires the government to pay its obligations when they come due.
Therefore, if the Treasury lacks the cash on hand to pay the bills that are due, which it says will happen on Oct. 17, something has to give; one law or another must be broken on that day. On Day 1, it probably won’t be the bondholders who will suffer. That is because the first big Treasury interest payment isn’t due until Oct. 31, according to the Congressional Budget Office. But on Oct. 17, there will be somebody who would otherwise be paid that day who won’t because there will not be enough cash to pay everyone.
http://economix.blogs.nytimes.com/2013/10/08/when-the-treasury-runs-out-of-cash/?_r=0
< Message edited by mnottertail -- 10/11/2013 7:06:35 AM >
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