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Debt limit reached, U.S. halts two pension investments
Treasury Secretary Timothy Geithner said Monday that he will immediately halt investments in two big government pension plans so the government can continue to borrow money.
Geithner informed Congress of his decision in a letter stating that the government had officially reached its $14.3 trillion borrowing limit. He repeated a warning that if lawmakers do not increase the borrowing limit by August 2, the government is at risk of an unprecedented default on its debt.
The debt limit is the amount of money the government can borrow to help finance its operations. The nation has reached its debt limit because the federal government has grown accustomed to borrowing massive amounts of money. The latest estimate is that it borrows 40 cents for every dollar it spends.
Bankers and business executives warn that a default would throw into question the value of U.S. Treasury securities, which are considered the world’s safest investments, according to The Wall Street Journal. Many loans and business deals are based on the value of those securities and defaulting could trigger a financial crisis.
Republicans have said they will not vote to raise the borrowing limit until Congress and the White House agree on a plan to reduce the deficit through spending cuts. House Speaker John Boehner said last week that those cuts should be larger than any increase in the debt ceiling.
The Congressional Budget Office projects that this year’s deficit will total $1.4 trillion. That’s would nearly match 2009’s record imbalance and mark the third straight year in which the federal deficit has exceeded $1 trillion.
Vice President Joe Biden is holding negotiations with lawmakers over the types of deficit-cutting measures that need to be approved to win congressional approval of a higher debt limit.
Even though the government has reached its official borrowing limit, Geithner said unexpected revenue and bookkeeping maneuvers will allow the Treasury to continue auctioning debt for another 11 weeks.
Geithner has suspended pension payments in the past when Congress has held off raising the debt limit. The money that the two pension funds will lose will be replaced when Congress votes to raise the borrowing limit.
The Associated Press contributed to this report.
back to top28 Comments to “Debt limit reached, U.S. halts two pension investments”
I posted this in today’s Whirled Views, but it would be better here:
For anyone interested in economic news, I think this article is a must read.
WSJ interviews “Stanley Druckenmiller, the legendary investor and onetime fund manager for George Soros.”
Druckenmiller says it would be much better to straighten our financial situation in the US, to let us default for a few days on interest payments and getting rid of out of control spending on entitlements, than to raise the debt ceiling to prevent a temporary default and do nothing about the spending.
One wonders why George Soros isn’t using his considerable influence to broadcast this sound advice? One wonders if he and his cronies realize exactly what they are doing by reducing the US to a nation of dependants.
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Here are a couple of excerpts from the article- and I love Boehner’s response. (There are some grown-ups in washington after all!)
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Then listen to what Druckenmiller says:
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.the government is at risk of an unprecedented default on its debt.”
Gasp! Then we should borrow more and more and more and more and more and more and more and more and more and more and more and more and more and more and more?
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The phrase “debt limit” is a falacious misnomer if we are not willing to let it limit us. But then, the entire US economy is built on misnomers.
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In regular English, hitting the limit means stopping there, right?
Right????????
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“The latest estimate is that it borrows 40 cents for every dollar it spends.”
Gee…too bad we can’t at least make 8 cents for ever dollar we spend…such a backwards group of boneheads in Washington.
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“Even though the government has reached its official borrowing limit, Geithner said unexpected revenue and bookkeeping maneuvers will allow the Treasury to continue auctioning debt for another 11 weeks.”
Book keeping maneuvers? BOOK KEEPING MANEUVERS!!!
E N R O N…
M A D O F F…
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I’ve maintained for quite some time that the majority of our economic problems have been created by dishonest bookkeeping. Nothing is quite what it seems any more because our lawmakers are not honest, and are the biggest reason behind the dishonest bookkeeping. It’s about staying in power and lining one’s pockets, not about representing the citizen.
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I hope the GOP stays the course this time… Stick to your guns boys and girls, or we’ll never vote for you again. I may not anyway, but sure won’t if you don’t grow a spine on this one.
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“Geithner has suspended pension payments in the past when Congress has held off raising the debt limit. The money that the two pension funds will lose will be replaced when Congress votes to raise the borrowing limit.”
Isn’t it usually that the loan shark comes to break your legs for not paying back on what is owed?
Here you have the government breaking people’s legs, for the money they borrowed from them…and then lost…and haven’t paid back… all with the promise that they’ll just borrow more from you later, to break your legs again, when they still can’t pay you.
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The Unites States borrows $58,000 per second. Geithner the tax cheat is trying to figure out ways to keep that going.
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I don’t buy the alarmists. Stand by the limit and then keep lowering it while cutting spending until we spend only what we take in. How’s that for radical extremism?
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9 — MIM
An interesting article in Business Week a few days back, put forth the idea that the 2008 crisis was due in part to a lack of factual information and reporting including misleading bookkeeping. In the past the gov’t acted as a clearing house of information and ensuring it was honest reporting of facts but due to deregulation wall street was left to its own devices and the information became less factual.
Until defense and taxes are on the table, there isn’t much you can do but raise the debt ceiling. No matter what else you cut you won’t balance the budget until the above two are considered.
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#14 HRW “In the past the gov’t acted as a clearing house of information and ensuring it was honest reporting of facts but due to deregulation wall street was left to its own devices and the information became less factual.”
Government is supposed to keep business honest, but that doesn’t happen when government itself gets involved in the market. Who will keep government honest, scoundrels and tax cheats like Geithner?
What does one do when the head of the banking oversight committee was having gay sex with the Fannie Mae executive who created the Title One loans that took down the economy? Barney Frank had a gay prostitute running a prostitution ring out of the Congressman’s house at the time. No one cares.
The end result is that this poster boy for corruption becomes a hero. He’s re-elected and is put in charge of solving the banking crisis. His answer is not to actually regulate Wall Street or Fannie Mae, but to regulate the people who buy insurance against certain economic failure.
It is beyond comprehension to continue to trot out the insane position that government is the cause for good in the world against evil corporations.
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#6 — You are one silly guy, Joel Mark!
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Xion, you sound disgusted. Well said.
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Here’s the article from Business Week
http://www.businessweek.com/magazine/content/11_19/b4227060634112.htm?chan=rss_topStories_ssi_5
I though it made a reasonable argument.
Of course, people in gov’t as well as business make mistakes or aren’t the right people for the job. However, casting aspersions on people in either sector does nothing for either argument.
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They are all crooks.
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#18 HRW Citing historical facts is not the casting of aspersions.
It is easy to see why you liked that article by Hernando de Soto. He is a self-defined international socialist and “Marxist-Environmentalist” and advocate of the Third Way (i.e. fascist) political movement. He is described by California professor Mike Davis as ‘the global guru of neo-liberal populism’ and is essentially promoting what the statist left in South America and India has always promoted – individual land titling.
It is no wonder that he has only praise for Barney Frank the most corrupt man in government today who not only helped destroy the economy, his bill with the corrupt Dodd did nothing to fix it. They are not regulating the banks themselves, but the buyers of derivatives who bet on the banks’ inevitable collapse.
The good news is that de Soto admits that communism in his own country doesn’t work. It forces the markets underground where they can’t be regulated. So his entire argument is to make all financial information known. This would be done through more regulation to build a huge central data base of economic facts controlled by the government. The purpose of this database is to make everything transparent and above board so that the government can control and tax it all more easily.
More information could be helpful, such as in the case where Goldman-Sachs was betting against their own products unbeknown to the buyers (though it was supposedly in the fine print).
But all of this ignores the entire cause of the financial crisis. Even the unbelievable conflict of interest with Barney Frank’s Title One loans wasn’t the ultimate cause. That pervert was merely a pawn in the hands of the banking cartel known as the Federal Reserve which set up a system that would need to be bailed out continually.
This system was built specifically to allow the biggest banks to take unlimited risks only to be bailed out by the taxpayers over and over through inflation and bailouts. Bailouts and the hidden tax of inflation are what the Treasury was specifically designed for. It is the lender of last resort, meaning the taxpayers always get screwed.
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To put the point more succinctly HRW, I am not opposed to having better financial information. My point is that De Soto is totally ignoring root causes.
He recognizes, as Milton Friedman explains so well, that communism doesn’t eliminate the free market; it forces it underground. But he completely ignores that communism is the problem, not the lack of information.
Likewise the banking crisis was not caused by a lack of information it was caused by a system that encourages (and even mandates in the case of government loans) risky lending practices.
And lastly, when a communist says he wants to set up a Ministry of Information it is never a good thing.
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Another great last paragraph.
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“In the past the gov’t acted as a clearing house of information and ensuring it was honest reporting of facts but due to deregulation wall street was left to its own devices and the information became less factual.”
In the past “government” has always gravitated towards corruption unless the populace kept it in line. Politicians are mostly interessted in themselves, and in this case it’s no different. The politicians are the ones who are behind the skewed numbers such as the GDP, PPI, CPI and unemployment rates…
“Until defense and taxes are on the table, there isn’t much you can do but raise the debt ceiling. No matter what else you cut you won’t balance the budget until the above two are considered.”
Oh for crying out loud. I know you’re smarter than that. Defense spending and taxes are just piddly issues compared to the overspending of $14 trillion dollars our congress has foisted off on the taxpayers. And most of that is in entitlements.
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You heard it here, folks. <20% of the federal budget is piddly!
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“An interesting article in Business Week a few days back, put forth the idea that the 2008 crisis was due in part to a lack of factual information and reporting including misleading bookkeeping. In the past the gov’t acted as a clearing house of information and ensuring it was honest reporting of facts but due to deregulation wall street was left to its own devices and the information became less factual.”
Please explain to me how you “regulate” misleading book keeping? Eh? The whole point of it being “misleading” is to avoid sound principles, factual information, and regulation in the first place.
It’s not a deregulation of wall street. Everything they did was under the regulated watchful eye of the US government, who took the time to bail them out like a partner in crime.
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Xion — you have a bad habit of using personal lives and labels as part of your arguments, they don’t increase the validity of your statements. In this case, it makes you look slightly ridiculous — calling deSoto a Marxist, Fascist, and neo-Liberal all of which are completely different ideologies. Neo-liberal is not the same as an American liberal in fact it refers to support for classical economic thought — free enterprise, markets, etc. Sometimes when you call someone every name in the book it doesn’t work.
Individual land titling for example is a neo-liberal idea — giving squatters in the fringe of third world cities title to their home increases responsibility and care for their community. Margaret Thatcher had a similar idea when she transformed many of the housing projects in England into condos. She gave the tenants title to the property in some cases it was given outright or they received below market prices with interest free loans. Her point was to make the residents responsible for their housing. Eastern Europe has followed this example — they are selling off the entire stock of gov’t housing to the long term tenants at discounted rates
I did not read his article as advocating a Ministry of Information but rather enough gov’t pressure to ensure transparency and open information. Without this, modern capitalism won’t survive and instead become anarchistic capitalism subject to boom and bust and frequent fraud.
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defence isn’t piddling spending nor is the issue of additional revenue a piddling. Current tax rates are the lowest since WWII (for corporations and the wealthy). All through the 50’s and 60’s the economy was relatively stable and unemployment low, and the tax rates were much higher — there is room to increase the top tax rates. In the 50s it was over 50%.
Thorn — you misread — you don’t regulate bad bookkeeping you ensure it doesn’t exist.
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“Thorn — you misread — you don’t regulate bad bookkeeping you ensure it doesn’t exist.”
How? If you can’t regulate bad book keeping, then “deregulation” has no effect either.
“there is room to increase the top tax rates. In the 50s it was over 50%.”
Until a Congress can show wisdom in how they spend money, they have no privilege to raise taxes. If you can not be fruitful with what you are currently given, why should they ever get more?
The tax rate, is not the problem. Spending more than you take in, is the problem. You can not build a nation on debt/credit.
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