(OT) H.R.3293 Debt Limit Reform Act Proposes to Stop Counting Intragovernmental Debt

As if that reduces the actual amount of the national debt.

I thought it was a joke when I saw the headline at Zero Hedge, so I followed the link in the article. And there it was, the bill by Florida Congressman Alcee Hastings (who happens to be one of only eight federal officials in the US history to be impeached and removed from office - he was a Judge on the United States District Court for the Southern District of Florida).

From Govtrack.us:

HR 3293 IH
113th CONGRESS1st SessionH. R. 3293To reform the public debt limit.
IN THE HOUSE OF REPRESENTATIVES

October 15, 2013

Mr. HASTINGS of Florida introduced the following bill; which was referred to the Committee on Ways and Means

---

A BILLTo reform the public debt limit.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Debt Limit Reform Act’.

SEC. 2. REFORM OF THE PUBLIC DEBT LIMIT.

(a) Authority of President To Increase Public Debt Limit- Section 3101 of title 31, United States Code, is amended by adding at the end the following new subsection:

‘(d) The dollar amount in effect under subsection (b) shall be increased at such times and in such amounts as the President of the United States, or his designee, may provide.’.

(b) Government-Held Debt Not Taken Into Account for Purposes of the Public Debt Limit- Section 3101 of title 31, United States Code, as amended by subsection (a) is amended by adding at the end the following new subsection:

‘(e) Obligations held by the United States Government (including any obligation which is classified as an intragovernmental holding by the Secretary of the Treasury or which is held by any agency or instrumentality of the United States) shall not be taken into account for purposes of applying the limitation imposed under subsection (b).’.

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New Normal in US: Obama and Reid Attempt to Eliminate Congressional Checks on Debt Limit, Geithner Says "Absolutely" Yes to Going Over the Fiscal Cliff, Dean Says "Raise Tax Across the Board"

Dems gone wild.

Harry put it for voting, and Republicans in the Senate blocked the vote, for now. Barack and Harry's plan would have passed by a simple majority (51), which Democrats have in the Senate, to give Barack the executive power to unilaterally raise the debt limit.

Combine that with Ben's unilateral unlimited QE. (Move over, Abe.)

In the US Senate, there are 51 Democrats and 47 Republicans.

From Reuters (12/6/2012):

Senate Republican leader blocks debt limit vote

(Reuters) - Senate Republican leader Mitch McConnell on Thursday prevented a simple majority vote on a proposal to give Democratic President Barack Obama unilateral power to raise the debt limit.

Senate Majority Leader Harry Reid brought the measure to the floor for consideration at the request of McConnell. But McConnell refused to permit a vote after Reid said it could pass with 51 votes in the 100-member Senate. McConnell demanded 60 votes needed for passage.

The jockeying played out as Democrats and Republicans seek to end a stalemate on how to resolve spending and tax issues by year's end.

In the meantime, during his appearance in a TV show (CNBC), Treasury Secretary Timmy "Turbotax" Geithner said Obama would be "absolutely" willing to go over the fiscal cliff.

As Bruce Krasting at Zero Hedge says in his piece today (emphasis is mine),

Given that Geithner will be out of his job running Treasury soon, I’m sure that he went on TV with the blessings of Obama, and he had a scripted message from the President. There will be no negotiations on tax rates, the top rate is going to 40%, or we will be sailing off the cliff. What an idiotic bargaining position.

At this point, I don’t think there is any significant opposition to increasing tax revenue from America’s wealthiest folks; the question is how to achieve it. Raising marginal rates is one option; cutting deductions can accomplish exactly the same thing. Geithner and Obama will not consider adjusting deductions; the reasons are a mystery to me. It appears that the President wants to “punish” some folks rather than to find a compromise that achieves the desired results.

So I agree with Bartiromo, unless the President backs off, we are going cliff diving in 20 days.

I believe the President has started a war, No real bullets or sabers in this war, but there will be casualties none-the-less. The question is, “Who is going to get hurt?” The thinking by all of the pundits is that a fall of the cliff will fall squarely on the shoulders of Republicans. If they stand up to the Administration on tax rates, the Republicans will get slaughtered in the Congressional elections two years from now.

The facts force me to conclude that Obama is, in fact, using the cliff negotiations to bend Republicans over and force them into submission. The goal is to destroy the Republicans, and have the House, Senate and the White House all Democratically controlled in twenty-two months. Harry Reid would be in charge of the Senate, Nancy Pelosi would be running the House, and the President would have the last two years of his administration with the government controlled by “friendly” hands. A disaster in the making.

Mr. Krasting has said he voted for Mr. Obama in 2008. I don't know if he voted at all in 2012.

And if you think it will be only the so-called "rich" (household earning more than $250,000 a year), former Democratic National Committee chairman Howard Dean has a better idea. From Real Clear Politics (emphasis is mine):

The only problem is -- and this is initially going to seem like heresy from a progressive is -- the truth is everybody needs to pay more taxes, not just the rich. And it's a good start. But we're not going to get out of this deficit problem unless we raise taxes across the board, to go back to what Bill Clinton had and his taxes. And if we don't do that, the problem is the pressure is going to be on spending even more.

If Mr. Dean and his party are proposing the cutback of the Federal bureaucracy to the level last seen in the Clinton Era, that's one thing. Mr. Dean of course does not offer that, and instead threatens us with even more spending by the Obama administration. Which they will do anyway, as Obama's "cut" (for that matter, Republicans' "cut", with the exception of Ron Paul's) is nothing but decreasing the rate of debt increase. Instead of debt growing at 5% a year, for example, Obama would cut the growth rate to, say 3% a year, and call 2% a "cut".

Again, from Bruce Krasting (emphasis is mine):

I think the Republicans should call the President’s bluff. Lets take a walk over the cliff; see what happens when we get to the other side. It can’t be much worse than 50%+ tax rates in the most productive states in the Union. Will Republicans get hammered in the bi-elections as a result? Maybe. But one thing is sure, if the President gets his way on tax rates today, and we also have the Republicans lose the House in two years, it sets up the possibility for a return to a more conservative frame of mind for the country when the next Presidential election comes around. If Obama gets his way, the economy will pay the price. In the process, any legacy that Obama might have had will have been converted into something like Herbert Hoover’s. So who is bluffing whom?

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71% of Americans Oppose Raising Debt Limit

As the purely symbolic fight looms in Congress over whether or not to raise the debt limit (is that even a question?), the American public are dead set against raising, according to Reuters' poll:

The U.S. public overwhelmingly opposes raising the country's debt limit even though failure to do so could hurt America's international standing and push up borrowing costs, according to a Reuters/Ipsos poll released on Wednesday.

Some 71 percent of those surveyed oppose increasing the borrowing authority, the focus of a brewing political battle over federal spending. Only 18 percent support an increase.

The poll underscores the tough task ahead for U.S. lawmakers as the debt nears its current ceiling of $14.3 trillion. Treasury Secretary Timothy Geithner last week warned that a failure to raise the borrowing limit in the coming months could lead to "catastrophic economic consequences."

Brian Riedl, the lead budget analyst at the conservative Heritage Foundation, said the poll findings put "a lot more pressure on those who want to raise the debt limit to make a convincing argument to a very skeptical public."

I don't think they have any clear idea as to what would happen if the debt limit weren't raised, and that's precisely why Congress is in trouble.

So what could be a convincing argument by Congress to sell the debt limit raise to the skeptical public?

International standing? I don't think Americans care too much about that one at this point. Europe is in shambles, China is in a gigantic credit bubble, Japan's been dead for most of the past 20 years.

Social Security and Medicare benefits would be cut otherwise? Good luck with that line, as people simply do not buy that. They've been paying into these ponzi schemes without knowing they've been the ponzi, so they want their money's worth. It's not their problem that the government diverted the funds.

The federal government is going to have another $1.5 trillion deficit year. If the debt limit is reached and is not raised, the government cannot borrow additional funds to pay for stuff.
What stuff, you ask? Let's go find $1.5 trillion from the feds spending (2009):

Defense: $782 billion

Other discretionary (all the other departments and agencies in the executive branch): $437 billion

TARP: $151 billion

Interest: $187 billion

Total: $1.557 trillion

So if we stop the wars and pull out from around the world, abolish all the federal government departments and agencies in the executive branch including the White House and send Congress packing (unless they want to work as a volunteer), and tell the creditors (the largest being the Federal Reserve) that we're not going to pay them the interest, we instantly have a balanced budget.

It is a liberating thought, isn't it?

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US National Debt Tops $14 Trillion

The number was breached on the last day of 2010. The Treasury Department has "
The Debt to the Penny" page, and we find the following:

The National Debt on:

12/31/2010: 14,025,215,218,708.52 ($1.714 trillion in one year)

12/31/2009: 12,311,349,677,512.03 ($1.612 trillion in one year)

12/31/2008: 10,699,804,864,612.13 ($1.476 trillion in one year)

12/31/2007: 9,229,172,659,218.31 ($549 billion in one year)

12/29/2006: 8,680,224,380,086.18

In two years, the Obama administration racked up $3.326 trillion in new debt.

George the Lesser took slightly over 4 years to do the same. Before that, it took 17 years and three presidents (Bill, Papa George, Ron) to add that amount of debt. (See the chart from Sunday's post.)

At the growth rate of 6.3%, 2011's debt may be $1.822 trillion, bringing the total national debt to $15.847 trillion. The current debt limit is $14.294 trillion.

The US Treasury Department sells slightly under $200 billion notes and bonds per month.

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2011 - The Year of Catch 22

A guest post at Zero Hedge by Jim Quinn nicely summarizes the situation that the powers that be have created for us for the year 2011 - Catch 22:

The United States and its leaders are stuck in their own Catch 22. They need the economy to improve in order to generate jobs, but the economy can only improve if people have jobs. They need the economy to recover in order to improve our deficit situation, but if the economy really recovers long term interest rates will increase, further depressing the housing market and increasing the interest expense burden for the US, therefore increasing the deficit. A recovering economy would result in more production and consumption, which would result in more oil consumption driving the price above $100 per barrel, therefore depressing the economy. Americans must save for their retirements as 10,000 Baby Boomers turn 65 every day, but if the savings rate goes back to 10%, the economy will collapse due to lack of consumption. Consumer expenditures account for 71% of GDP and need to revert back to 65% for the US to have a balanced sustainable economy, but a reduction in consumer spending will push the US back into recession, reducing tax revenues and increasing deficits.

He has some interesting numbers for us to ponder:

On January 1, 2010 the National Debt of the United States rested at $12.3 trillion. On December 31, 2010 the National Debt checked in at $13.9 trillion, an increase of $1.6 trillion.

The Federal Reserve Balance Sheet totaled $2.28 trillion on January 1, 2010. Today, it stands at $2.46 trillion, an increase of $180 billion.

Over this same time frame, the Real GDP of the U.S. has increased approximately $350 billion, and is still below the level reached in the 4th Quarter of 2007. U.S. politicians and Ben Bernanke spent almost $1.8 trillion, or 13% of GDP, in one year to create a miniscule 2.7% increase in GDP. This is reported as a recovery by the mainstream corporate media mouthpieces. On September 18, 2008 the American financial system came within hours of a total meltdown, caused by Wall Street mega-banks and their bought off political cronies in Washington DC. The National Debt on that day stood at $9.7 trillion. The US Government has borrowed $4.2 since that date, a 43% increase in the National Debt in 27 months. The Federal Reserve balance sheet totaled $963 billion in September 2008 and Bernanke has expanded it by $1.5 trillion, a 155% increase in 27 months. Most of the increase was due to the purchase of toxic mortgage backed securities from their Wall Street masters.

Real GDP in the 3rd quarter of 2008 was $13.2 trillion. Real GDP in the 3rd quarter of 2010 was $13.3 trillion. Think about these facts for one minute. Your leaders have borrowed $5.7 trillion from future unborn generations and have increased GDP by $100 billion.

That's the government for you, borrowing $5.7 trillion to create $100 billion growth. In other words, $1 increase in GDP was brought about by borrowing $57. Does that make sense to you? It apparently make tons of sense to those die-hard Keynesians who inhabit Congress, the White House, and the Fed.

I know their argument: GDP would have collapsed without $5.7 trillion infusion. We wouldn't know, would we? We didn't get the chance to see if the GDP number would collapse without any government stimulus, fiscal or monetary.

He has a scary chart of the US national debt since 1940. Note the phenomenal increase in the last two years, or ever since Obama became the president. (Oh I forgot. Let's blame Bush for that.)

And Obama's chief economic adviser is threatening a catastrophe if the debt limit is not raised. But a catastrophe is staring at us from this chart, and you don't need no stinkin' debt limit to see it.

And that, I think, how the Catch 22 situation will be resolved - by brute force, as the debt reaches the exosphere and finally comes tumbling down, crushing everything.

Are you ready to get the hell out, before the proverbial s--t hits the fan? I don't even want to know how the s--t hits the fan. Or will you be trusting CNBC and Goldman's Hatzius who say everything will be just dandy?

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Treasury: Debt Limit to Be Hit by End of February

Ah the danger of cash method accounting.

(UPDATE 12:40 PM PST)

The House passed the legislation that would raise the debt limit by $1.9 trillion. The vote was extremely close, at 217-212, with all Republicans voting against and more than 30 Democrats joining them.

Remember, the Treasury Department said the new limit of $14.3 trillion would be hit by the end of this month.

---------------------------------------------
The debt limit, which would be raised by $1.9 trillion to $14.3 trillion, will be hit by the end of February, the Treasury Department says. It is THIS FEBRUARY.

As this blog posted on January 28, the Senate already passed the measure by 60-39 (Scott Brown of Massachusetts was not not seated back then)

Now it's the House's turn to vote today, and the increased debt ceiling will carry them till the end of February. What a joke.

US debt to hit proposed ceiling by end-February: Treasury
(2/3/2010 AFP via Google)

"WASHINGTON — The US debt is on track to hit a congressionally proposed debt ceiling of 14.3 trillion dollars by the end of February, the Treasury said Wednesday, a day ahead of a key vote to raise it to that level.

""Based on current projections, Treasury expects to reach the debt ceiling as early as the end of February. However, the government's cash flows are volatile, making it difficult to forecast a precise date," the Treasury said in a statement.

"The current limit on the public debt of the United States is 12.374 trillion dollars.

"The US debt exceeded 12.349 trillion dollars on Monday, according to Treasury data.

"The US House of Representatives will vote Thursday on whether to raise the US debt limit to a historic 14.3 trillion dollars, allowing the United States to borrow another 1.9 trillion dollars." [The article continues.]

Here's the Treasury Department's "February 2010 Quarterly Refunding Statement" dated February 3, 2010. Aside from the debt limit, there are several interesting things in that statement:

• "Treasury believes that auction sizes are at levels that give us the ability to adequately address a broad range of potential financing needs, while allowing the average maturity of debt to gradually extend. As such, Treasury anticipates that nominal coupon auction sizes will stabilize at current levels. "
• Treasury is considering increased auction of TIPS, including a second reopening of 10-year TIPS. This would result in six 10-year TIPS in a year. In 2009, there were four 10-year TIPS auctions.

The amount of Treasury notes and bonds issued has been stable at $200 billion per month. (See the chart here.)

The Treasury Department keeps two sets of books - one done by cash method, and the other by accrual method like everyone else. It is disingenuous of the policymakers to wring hands and plead that they need additional $1.9 trillion to get by this year, when they should know, by accrual method, that they will have used all that up by the end of February. This February.

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Senate Passes $1.9 Trillion Debt Limit Increase

Strictly party-line vote successful because the new Massachusetts Senator Scott Brown hasn't been seated yet.

Senate Lifts Federal Debt Ceiling By $1.9 Trillion (1/28/2010 Fox News)

"The Democratic-controlled Senate has muscled through a plan to allow the government to go a whopping $1.9 trillion deeper in debt.

"The party-line 60-40 vote was successful only because Republican Sen.-elect Scott Brown has yet to be seated. Sixty votes were required to approve the increase. The measure would lift the debt ceiling to $14.3 trillion. That's about $45,000 for every American.

"Democrats had to scramble to approve the plan, which means they won't have to vote on another increase until after the midterm elections this fall. To win the votes of moderate Democrats, President Obama promised to appoint a special task force to come up with a plan to reduce the deficit. The House must still vote on the measure before it's sent to Obama for his signature."

Now the debt limit will be $14 trillion, up 15% from $12.104 trillion current limit. However, as I wrote in my December 10, 2009 post, this $1.9 trillion could be gone faster than the Congressional Democrats are hoping. There are a few large spending bills that are yet to actually be spent:

• $636.4 billion Pentagon appropriations bill
• $446.8 billion year-end package covering more than a dozen Cabinet departments and agencies and representing a healthy 9 percent to 10 percent increase over current spending for the same accounts
• bulk of $787 billion stimulus bill from February 2009 (as of 1/15/2010, less than 25% of the amount is paid out, mostly as tax benefits and entitlements - see Recovery.gov)

If we assume much of the stimulus money is to be paid out this year, say 50% to be conservative, that's about $400 billion. Between these three spendings, nearly $1.5 trillion will be gone.

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Obama Endorses Deficit Task Force While Racking Up Record Deficit

This guy is getting incoherent by the day.

Obama endorses deficit task force (1/23/2010 AP via Yahoo Finance)

"WASHINGTON (AP) -- President Barack Obama Saturday endorsed a bipartisan plan to name a special task force charged with coming up with a plan to curb the spiraling budget deficit, though the idea has lots of opposition from both his allies and rivals on Capitol Hill.

"The bipartisan 18-member panel backed by Obama would study the issue for much of the year and, if 14 members agree, report a deficit reduction blueprint after the November elections that would be voted on before the new Congress convenes next year. The 14 would have to include at least half of the panel's Republicans -- a big obstacle.

""These deficits did not happen overnight, and they won't be solved overnight," Obama said in a statement. "The only way to solve our long-term fiscal challenge is to solve it together -- Democrats and Republicans."

"The deficit spiked to an extraordinary $1.4 trillion last year and could top that figure this year as the struggling economy puts a big dent in tax revenues. Even worse from the perspective of economists and deficit hawks, the medium-term deficit picture is for deficits hitting around $1 trillion a year for the foreseeable future." [Emphasis is mine. The article continues.]

Not only that, the debt limit is set to be raised by $1.9 trillion dollars (which, by the way, will require all of 60 votes in the Senate to pass). Who is he kidding?

Himself?

This is not the first time and definitely will not be the last time for me to remind the readers that when politicians don't want to solve anything and don't want to find out about anything, they form a committee, or a task force or whatever they want to call it. I'm looking for that particular episode of BBC's "Yes Prime Minister" where Cabinet Secretary Sir Humphrey tells his novice boss exactly that. It could have been "Yes Minister".

The president must have watched the episode. (Or his handlers did.)

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Congressional Dems to Raise Debt Limit by $1.8 Trillion

Why even bother setting a limit?

Currently, the debt limit is at $12,104 billion. The Congressional Democrats want to raise it by $1,800 billion (or if you prefer, $1.8 trillion) to $$13,904 billion, a 15% increase over the current limit.

(Source: "The Debt Limit: History and Recent Increases" April 7, 2009, Congressional Research Service)

According to Politico's article, "Dems to lift debt ceiling by $1.8 trillion, fear 2010 backlash" (12/9/09) (Politico, by the way, is the latest target of dissing campaign by the thin-skinned White House), of that $1.8 trillion, over 60% of that will be appropriated in the very near future, like within this year:

• $636.4 billion Pentagon appropriations bill
• $446.8 billion year-end package covering more than a dozen Cabinet departments and agencies and representing a healthy 9 percent to 10 percent increase over current spending for the same accounts.

There you go. 60.2% of the debt ceiling increase is gone with just these two bills to pay for the ever-expanding government.

Add to that the unused portion (majority) of the February stimulus bill, which so far has preserved about 600,000 jobs including 3 in Hillary Clinton-related PR firms that received nearly $6 million. The government's official accounting method is cash accounting, even though they do keep books using accrual method. Cash accounting doesn't account for money unless it is actually spent. When that bulk of stimulus money hit Main Street, as is planned right now for 2010, you can pretty much kiss the new debt ceiling goodbye much sooner than Congressional Democrats are hoping.

According to Politico, House Majority Leader Steny Hoyer told Politico "We’ve incurred this debt. We have to pay our bills."

Who are "we"? I have a feeling that "we" in his first sentence is different from the "we" in his second sentence. The correct sentences would be: We the Congress and the Government have incurred this debt. We the taxpayers of the United States have to pay Congress's bills.

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Debt Limit Is Fast Approaching

as the U.S. dollar continues to decline and the 30-year bond auction meets tepid result today.

The debt limit is currently set at $12,104 billion.

The tiny widget on the left top corner of this blog is ticking away, and it is now at $11,949 billion.

Mere $155 billion, and the limit will be reached. That's less than one-month issue of Treasury notes and bonds these days, which averages around $180 billion for the last 3 months.

The stock market gave up a chunk of gains for the day (still positive) on the announcement of the 30-year bond auction result.

But what caught my eyes was the sale of $10 billion 16-day Cash Management Bill (CMB). It matures on October 29, and pays the same interest as 4-week bill. That's where the Primary Dealers put their money today, not 30-year bond. (For details of today's auction, please go to my site on Treasury auctions, here.)

CMB is usually used to fill temporary shortfalls in the government budget so that the government can continue to operate (=to spend more). 16 days to tide them over until Congress approves yet another debt limit increase, as Treasury Secretary Timmy Geithner requested back in August.

The U.S. government has temporary short falls in the budget permanently.

The debt limit was raised twice in the 2009 fiscal year. The second one was when the so-called stimulus bill was passed in February. Now that the Senate passed the defense bill that will cost $636 billion, the debt limit increase is a foregone conclusion.

Sea of debt, as far as eyes can see. Lovely.

The U.S. dollar index went down to 75.76 intraday, lowest in 14 months. Long-term (20-year) support at 80 has been long gone. There is a slight support around 75, a better support at 72. Below that, it's an uncharted territory. Literally.

Take a look at my post from May. Back then, the dollar index was still at the support, at 80. And that seemed dangerously low back then.

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Geithner Asks Congress for Higher Debt Limit

Of course. We have to buy those Gulfstream jets for Congress.

Geithner asks Congress for higher US debt limit (8/7/09 Reuters)

"WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

""It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters."

Hmmm... So, raising the debt limit to borrow more is supposed to somehow impart confidence in the investors around the world that the U.S. will always meet its obligations. By issuing more debt. That must be comforting. It's called "Borrowing from Peter to Pay Paul", or "ponzi scheme". Japanese call it 自転車操業 - a bicycle operation (if you stop pedaling, you and the bicycle will fall down). It could also be called "musical chairs" - you don't want to be the last one standing, holding the bag.

The debt limit has already been twice raised this fiscal year. The first was October 3, 2008, and the debt limit was raised to $11,315 billion. The second was February this year, after the stimulus bill passed Congress and was signed into law; the debt limit was raised to the current $12,104 billion.

Here're the recent debt limit numbers from Congressional Research Service "The Debt Limit: History and Recent Increases" (April 7, 2009):


The debt limit increased 78% in 10 years from 1998 to 2008. The U.S. GDP grew 29% (from $10,508 billion in Oct 1998 to $13,142 billion in Oct 2008, in 2005 dollars; data: St. Louis Fed) during the period, and the U.S. population grew 10% (data: St. Louis Fed).

We are not going to pay this back, are we?

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