Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

The Debt Limit Drama Heats Up

"The political drama over the Treasury debt limit is suddenly heating up. With April tax receipts coming in weaker than expected, at least so far, it appears that the X-date, when the Treasury will run out of the cash needed to pay the government’s bills on time, may hit as soon as early June. House Speaker Kevin McCarthy’s recent unveiling of proposed legislation to increase the limit is thus none too soon. In exchange for increasing the debt limit just enough so that it will not be a problem again until about this time next year, the Speaker wants to significantly cut discretionary spending over the next decade, impose stricter work requirements on healthcare, food and other assistance for low-income households, and roll back much of the Biden’s administration’s agenda on climate change and student lending. In this note, we assess the macroeconomic consequences of the Speaker’s debt limit legislation."

PDF


«1

Comments

  • beebee
    edited April 2023
    Thanks. Very interesting read.

    The McCarthy proposal has the word “save” in the title. Sounds positive, but then I saw “clawback and rescind” mentioned.

    Pop some popcorn and get ready for some political theater.
  • @Bee. “Some political theater.” I don’t know but theatre implies some kind of a script. I am certain that McCarthy has no script, no plan and really no hope. I would like to know how anyone can sense the possibility of a solution if you can’t find a half dozen rational house repugs to vote with the Dems.
  • For some folks the "theater" could cost them their lives if McCarthy et al have their way: https://newrepublic.com/post/172066/house-gops-debt-ceiling-plan-calls-medicaid-snap-work-requirements
    On Medicaid, Republicans want recipients to fulfill certain income and work thresholds. If they don’t, states could kick them off their health insurance plans. A Congressional Budget Office report estimated that Medicaid work requirements would cause two million people to lose health coverage.

    Republicans also want work requirements for the Supplemental Nutrition Assistance Program, or SNAP. Adults without children must fulfill work requirements up to the age of 56, overturning current law that has the threshold at age 49. Not only are such cuts punitive in nature, but they effectively leave people more vulnerable to precarity. The less we support people preemptively, the higher the costs will be if they fall through the cracks.
  • edited April 2023
    larryB said:

    I would like to know how anyone can sense the possibility of a solution if you can’t find a half dozen rational house repugs to vote with the Dems.

    Political posturing and pontification about fiscal responsibility will prevail during this saga.
    If the U.S. defaulted on incurred debt, there would be significant repurcussions.
    A solution for this manufactured crisis will be reached because there is no alternative.
    I know this may not be very reassuring when considering the current political landscape...
  • edited April 2023
    TNR: "Republicans also want work requirements for the Supplemental Nutrition Assistance Program, or SNAP. Adults without children must fulfill work requirements up to the age of 56, overturning current law that has the threshold at age 49. Not only are such cuts punitive in nature, but they effectively leave people more vulnerable to precarity."

    The objective and the results are pretty clear: throw more people off these programs. The estimate in the Moody's piece shows it would "save" $120 billion over the ten year time frame.

    Meanwhile the MSM continues to accept and parrot the GQP framing. None of the talking heads ever ask about rescinding the 2017 tax cuts for those who don't need them.
  • None of the talking heads ever ask about rescinding the 2017 tax cuts for those who don't need them.

    +1.
  • Here is a piece from VOX to follow up what @AndyJ posted above :
    they have proven unwilling to make major cuts to the three biggest components of the federal budget: Social Security, Medicare, and the military. And so their just-passed spending plan focuses heavily on what’s left: mostly, programs for the poor.
    https://vox.com/future-perfect/2023/4/29/23701153/medicaid-work-requirements-republicans-food-stamps-cash-welfare
  • Do they expect indigent nursing home Medicaid elderly to go out and get a job too?
  • Spending 1 Trillion more every year than they take in...we got all the monies to send to Ukraine and keep that war going instead of forcing a negotiated peace...freebie for kids to drink beer and study gender studies in expensive overpriced colleges...tax breaks for the wealthy to virtue signal in their electronic slot cars....illegal immigrants allowed to pour over the border....if only those lazy bums who are mentally and physically able to go get a job instead of smoking weed all day and get off the Demorats vote buying dole...we would have the monies available to those who are truly needy, down on their luck, incapacitated, elderly...

    Same BS every time. Scare the bee gee jus out of the public, squabble like little children and then pass a last minute debt ceiling raise after the stonk market takes a downdraft.

    And with the Obama disciple Susan Rice going away...who along with Ron Klain were truly calling the shots (you don't think the grifter with the title is really competent to make any of these decisions do you?) who is going to negotiate this all?

    Good Times!


  • So @Baseball_Fan you rant about all the things that the democrats are screwing up as usual. What do you see as the solutions? Do you have any or do they belong in the vast wasteland of the republican absence of thoughts realm? Do you really think that the likes of trump, mcCarthy, mtg, bobbit, graham, desantis etc., etc are the answer? Sticking just to investing the history of the stock market has shown time, after time after time that they do better under a democratic administration but lets hope that there is more to life and a country than money.
  • ....tax breaks for the wealthy

    Ah ha! You hit the nail on the head baseball fan. Which party did that? None of the other stuff you mention matters if that doesn't happen.
  • edited May 2023
    Ah, the old "welfare queen" mythology. It never gets old for the GOP, does it? https://newrepublic.com/article/154404/myth-welfare-queen
    Only now the focus is on kids in gender studies classes ostensibly smoking weed with their meager amount of dole. What will happen I wonder to this "lazy bum" argument when AI and robots cause double digit unemployment even among white collar workers? Will the Puritans still insist everyone be working constantly or be deemed sinful in the eyes of God?
  • edited May 2023
    I think the other old timers here may be tired of my "I grew up in the Mississippi Delta" tales. I hope I haven't told this one before. It is about perspective. After living through and observing a concentrated society impacted by welfare money, I remained perplexed.

    My mother and father both worked. When we got home after school we arrived to a clean house and a "maid" that watched out for us until one of my parents got home from work. She was paid less than half the minimum wage and worked about 40 hours a week. The "maid" changed several times but was always someone my father demeaned for being on welfare. One day I suggested to my father that, perhaps, in a way, he was on welfare too since his ability to afford a maid was only because he was subsidized by the welfare the maid received. He claimed not to see my point, but he probably did.

    One of the consequences of the civil rights movement was that household workers became more educated about the advantage of having a job with legal wages and social security down the road. My father lost part of his elevation from the lower middle class. He was not happy.

    He went from disrespecting black people to hating them and increased his disdain for the government. Enlightenment of one layer of society led to loss of privilege of the other. The difference in income did not change my view. If one was a welfare queen so was the other.

    Most people of color in the South worked hard to get enough to subsidize welfare and provide a home and food for their children and elderly parents/extended family. Welfare was never enough back in the days that the welfare queen became popular. It seemed to me that their work was never good enough, even when perfect, and was always paid under-the-table.
  • Anna,,,, thank you for that.
  • edited May 2023
    @Anna +1 Your story is also relevant today and in general if one thinks about how companies are also being subsidized by welfare and Medicaid while paying starvation wages. Anyone who invests in Walmart or McDonald's--probably almost everyone on this board who owns a large-cap fund--is also being subsidized by these government programs for so-called lazy people, increasing these companies' profits. Meanwhile, 70% of SNAP and Medicaid recipients are working full time: https://salon.com/2020/12/12/government-study-shows-taxpayers-are-subsidizing-starvation-wages-at-mcdonalds-walmart/
    The Government Accountability Office, a nonpartisan congressional watchdog, released a study commissioned by Sen. Bernie Sanders, I-Vt., last month based on data provided by 11 states.

    The report found that, in every state studied, Walmart was one of the top four employers whose workers rely on food stamps and Medicaid. McDonald's is among the most subsidized employers in at least nine states.

    Walmart employs about 14,500 workers in Arkansas, Georgia, Indiana, Maine, Massachusetts, Nebraska, North Carolina, Tennessee and Washington who rely on Supplemental Nutrition Assistance Program (SNAP) benefits, the study showed, while McDonald's employs about 8,780 SNAP recipients in those states.

    More than 2% of the Walmart workforce in states like Georgia and Oklahoma have had to rely on Medicaid benefits, a number that rises to more than 3% in Arkansas, where the company is based.

    Other corporate giants who have a large number of workers relying on federal benefits included Amazon, Dollar Tree, Dollar General, Burger King, Wendy's, Taco Bell, Subway, Uber, FedEx, Target, Dunkin' Donuts, CVS, Home Depot, and Lowe's.

    The report cited data taken before the coronavirus pandemic hit, noting that the issues have likely grown worse.

    "The economic effects of the covid-19 pandemic have further exacerbated conditions for these workers, increasing the importance of federal and state safety net programs to help them meet their basic needs," the report said.

    Sanders said the report showed that America's largest companies are relying on "corporate welfare from the federal government by paying their workers starvation wages."

    "That is morally obscene," he said in a statement. "U.S. taxpayers should not be forced to subsidize some of the largest and most profitable corporations in America."

    Sanders noted that the companies have reaped "billions in profits and giving their CEOs tens of millions of dollars a year" while failing to pay workers a "living wage."

    Walmart reported more than $5 billion in net income in the last quarter while McDonald's reported more than $1.7 billion during that time frame....The GAO report shows that 70% of the 21 million SNAP or Medicaid recipients work full time.
  • @ LB. Thousands of US military are enrolled in SNAP too.
  • U.S. must raise debt limit by as early as June 1 to avoid default, Treasury says

    Following are excerpts from a current report in The Washington Post:
    The U.S. government could default “as early as June 1” unless Congress raises or suspends the debt ceiling, according to the Treasury Department, which implored lawmakers again on Monday to act swiftly to avert a fiscal crisis.

    The new estimate followed less than a week after House Republicans delivered on their pledge to try to leverage the looming deadline to secure spending cuts, defying President Biden and officially touching off a political stalemate that could tip the fragile economy into another recession.

    In a letter to lawmakers, Treasury Secretary Janet L. Yellen said the agency may be “unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1." But she also cautioned that the projection is imprecise, given the variability of federal tax revenues, which have come in lower than anticipated in recent months.

    Still, Yellen stressed with greater certitude that the economic consequences of inaction could be vast: She said a default could cause “severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”

    “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” Yellen said.

    Since January, the Biden administration has taken a series of increasingly aggressive budgetary maneuvers to avoid breaching the debt ceiling, the statutory limit on how much the U.S. government may borrow to pay its existing bills. Only Congress can lift or pause the legal cap, which currently is set at roughly $31 trillion.

    Repeatedly, Republicans raised the debt ceiling under President Donald Trump without including fiscal reforms, yet party lawmakers — now in control of the House in a time of divided government — have refused to afford the same support to Biden. Instead, House Speaker Kevin McCarthy (R-Calif.) has conditioned GOP support on their ability to achieve a lengthy list of policy demands.

  • Democrats will need to come to the table and negotiate. McCarthy would rather keep his job and have the US default vs. negotiating with the MAGAts.

    Nothing is off limits now in this new world, I expect a default before a compromise is arrived at.
  • stayCalm said:

    Democrats will need to come to the table and negotiate. McCarthy would rather keep his job and have the US default vs. negotiating with the MAGAts.

    Nothing is off limits now in this new world, I expect a default before a compromise is arrived at.

    There's a part of me that's inclined to trim my equity holdings in advance of the chaos. But the other part of me is thinking they'll find some last-minute last-ditch compromise and just ignore it since I hold good stuff on reinvestment.

    ... but then another part of me thinks this time (really) is different* because there's a decent chunk of elected disruptors in DC that has no problem crashing the US/global economy just to get onto primetime opinion shows and 'troll the libs' even if it impacts them as well. Because, we're MAGA!

    * aka 'the four most dangerous words in investing'

    It's disgusting any way you look at it.
  • The Democrat stance of no negotiation because there was none during prior debt limit raises under Trump is untenable. Past is water under the bridge, the Democrats will have to negotiate. Till then it is a game of who blinks first.

    MAGAts like Gaetz, Green, etc. have no issues whatsoever pushing US into default.
  • @rforno. As far as I am concerned you nailed it. They have no problem crashing,,,,,, I trimmed our equity allocation today and I did no such thing in 2008 or 2020. Today there are bad people with power who don’t care what happens to the global economy.
  • larryB said:

    @ LB. Thousands of US military are enrolled in SNAP too.

    That is a horrible state of affairs. Serve in uniform, but still need food assistance? Completely outrageous. Beyond words. Atrocious. SHAMELESS.

  • edited May 2023
    “Nothing is off limits now in this new world, I expect a default before a compromise is arrived at.”

    Brings to mind a verse from Camelot - “What Do The Simple Folks Do?

    What happens to the millions of elderly moms and pops subsiding hand-to-mouth on Social Security? And already stressed by the escalating cost of living?

  • hank said:

    “Nothing is off limits now in this new world, I expect a default before a compromise is arrived at.”

    Brings to mind a verse from Camelot - “What Do The Simple Folks Do?

    What happens to the millions of elderly moms and pops subsiding hand-to-mouth on Social Security? And already stressed by the escalating cost of living?

    Richard Burton and Christine Ebersole did that so wonderfully on Broadway back in the early '80s revival. So glad I saw them that summer as a kid.

    (I had something else typed up about the debt topic but deleted it to not delve too deeply into politics this evening.)
  • edited May 2023
    Wow. That would have been really special. At Lincoln Center now. Planning to see …

    “to not delve too deeply into politics this evening” - Fair enough.
  • Anna said:

    Do they expect indigent nursing home Medicaid elderly to go out and get a job too?

    They're trusting private equity firms to take care of that after they come up with suitable hooks, like:

    "Empowering seniors!"

  • Living plus
  • WABAC said:

    Anna said:

    Do they expect indigent nursing home Medicaid elderly to go out and get a job too?

    They're trusting private equity firms to take care of that after they come up with suitable hooks, like:

    "Empowering seniors!"

    It's all described in the prospectus for the new Strategic Enhanced-Plus Alternative Option Senior Living Experience And Sustinance Retirement Opportunities Fund that's set to launch in Q3 of this year......
  • @rforno:-) Alright that was funny.
  • @Anna et al
    We may all learn from the story tellers. Our society becomes enriched from the story tellers; and the tales don't need to be 700 pages.
    Thank you. And an 'off topic' area for more so inclined about learning from story telling.
    Remain curious,
    Catch
Sign In or Register to comment.