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Lew rejects "prioritizing payments"

  • Following typical government boss script of promising assured destruction if he doesn't get his way, Treasury Secretary Jack Lew tells Congress prioritizing payments would be irresponsible and cause irrevocable damage.
  • Moody's has taken the lead in pointing out that default is a choice - not a mandate - should the debt ceiling not be hiked. The Treasury takes more than enough in to service its debt and would be allowed to issue new debt to replace anything maturing. The situation now is far less alarming than 2011 as the budget deficit is a good deal smaller today.
  • Stock index futures have given back some gains as Lew testifies, the S&P 500 now +0.8% vs +1% minutes ago.
  • S&P 500 ETFs: IVV, SPY, VOO, RWL, SFLA, SSO, UPRO, SDS, SPXU, SH, EPS, RSP, BXUB, BXUC, BXDB.
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Comments (24)
  • DeepValueLover
    , contributor
    Comments (8150) | Send Message
     
    Isn't the whole point of sticking to a budget the prioritization of spending?

     

    What am I missing here?
    10 Oct 2013, 08:46 AM Reply Like
  • chriff
    , contributor
    Comments (83) | Send Message
     
    So if Congress can't pass a budget, then what? Discretionary funding gets lowest priority?
    10 Oct 2013, 09:17 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8150) | Send Message
     
    Nothing can happen until the interest is paid.

     

    Current revenue is 10x the interest bills.

     

    Then comes the discretionary spending.
    10 Oct 2013, 10:08 AM Reply Like
  • chriff
    , contributor
    Comments (83) | Send Message
     
    Well I would think that mandatory spending, i.e. Social Security, Medicare, etc, comes first. Then discretionary. But even there, prioritize defense over non-defense? Who knows.
    10 Oct 2013, 10:16 AM Reply Like
  • minecanary
    , contributor
    Comments (411) | Send Message
     
    SS and Medicare aren't mandatory spending, just promises from blowhard politicians. Alas, everyone is going to find that out, in spades, over the next few years when the till really runs dry. The old and poor would be better off if the gov't battles shone a brighter light on those problems today when there is a chance of a smaller haircut then getting every penny they can today. The piper is going to be paid regardless of which party you favor.
    10 Oct 2013, 11:20 AM Reply Like
  • Dividend Math Guy
    , contributor
    Comments (315) | Send Message
     
    Allowing the president or the treasury to prioritize spending would amount to a line item veto over the budget, which is unconstitutional.

     

    Lew is also right that prioritizing payments would cause irrevocable damage. This is one of the few situations where the "government as household" analogy applies - guess what happens to your credit score if you only pay some of your bills?
    10 Oct 2013, 11:44 AM Reply Like
  • PendragonY
    , contributor
    Comments (5418) | Send Message
     
    <sigh>

     

    This is a scare tactic by the administration. And contrary to everything they have done in the past where they always interpret the power of the executive in the most expansive way possible. And again, since the Constitution requires them to service the debt, even if the debt ceiling is not raised, they can't default on the debt legally.
    10 Oct 2013, 12:28 PM Reply Like
  • Robert Mattei
    , contributor
    Comments (214) | Send Message
     
    Actually what you're missing is we are not at the purchase order stage we're at the invoice due stage. You don't budget after the bills come due you budget before you make the purchase. That they have failed at this is clear but Lew has nothing to do with the budget - he just is responsible for paying the invoices. I believe all that he is saying is that the software and processes are not in place to pay some bills and not others - which makes some sense as in our history there has never been a need to do that. When you're paying billions the software is a little more complicated then Quick Books.
    10 Oct 2013, 01:58 PM Reply Like
  • PendragonY
    , contributor
    Comments (5418) | Send Message
     
    "Actually what you're missing is we are not at the purchase order stage we're at the invoice due stage. "

     

    The budget or the CR is for spending authority, so you are in fact wrong.
    10 Oct 2013, 02:21 PM Reply Like
  • chriff
    , contributor
    Comments (83) | Send Message
     
    A budget (or CR), which they are discussing now, is a plan for what you intend to spend over a period of time. So you are in fact very wrong.
    10 Oct 2013, 02:55 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8150) | Send Message
     
    How many budgets has Pres. Obama signed?

     

    Isn't that the "purchase order" stage?
    10 Oct 2013, 02:55 PM Reply Like
  • Angel Martin
    , contributor
    Comments (1291) | Send Message
     
    following the logic of Lew and div turtle, for a household, apparently, if their income drops, not going to Ruth Chris is the same as not paying the mortgage !
    10 Oct 2013, 03:55 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Priorities are dictated not decided. That is the creditors hold the cards not the borrower. In the case of an entity with unknown number of creditors it ends up in court.

     

    So what Lew is saying is that he would rather let a court decide it which means absolute chaos.

     

    And we pay these people?
    10 Oct 2013, 04:10 PM Reply Like
  • Dividend Math Guy
    , contributor
    Comments (315) | Send Message
     
    >>>The budget or the CR is for spending authority, so you are in fact wrong. <<<

     

    I think I see where the disagreements are coming from in this thread. There are two things going on right now. First there's the current purchase order stage, which is what the CR discussion is about. (Actually, that should have been hammered out 6 months ago, but that's irrelevant now.)

     

    Then there's the invoice due stage for purchases ordered in the past, which is what the debt ceiling is about. To be clear, this is what Lew and I were talking about. Lew's "prioritization of spending" statement was with regards to bills that will be due in the coming month. Apparently some people think that the government could just choose to continue paying interest on its bonds and then not pay some of the other bills coming in. It is not clear, Constitutionally, if that's really the case, and if it tried that then the consequences would be terrible.
    10 Oct 2013, 07:09 PM Reply Like
  • davidbdc
    , contributor
    Comments (3141) | Send Message
     
    In terms of spending - is it really the bills coming in.

     

    Or is it just spending going out???

     

    I don't know and am not trying to enflame anyone - just curious.
    10 Oct 2013, 08:58 PM Reply Like
  • PendragonY
    , contributor
    Comments (5418) | Send Message
     
    Wrong again. Both issues deal with spending. The CR deals with the authority to spend, and the debt ceiling deals with borrowing money to then spend. Neither has anything to directly do with paying bills for things, but rather with getting the resources to do the spending.
    11 Oct 2013, 07:06 AM Reply Like
  • Rope a Dope
    , contributor
    Comments (531) | Send Message
     
    This administration is doing everything to inject fear into the populace. They want everyone to believe we cannot survive without the Federal Government. The Federal Government is the problem, not the solution.
    10 Oct 2013, 09:26 AM Reply Like
  • tclark13
    , contributor
    Comments (133) | Send Message
     
    Comical our idiots in congress can't seem to understand they've already spent the money. If they want to balance the budget going forward have at it. I am all for it. But it won't change the fact they're already 17 trillion in debt and have made all kinds of budget commitments that can't be undone without turning our nation into deadbeats.
    10 Oct 2013, 09:39 AM Reply Like
  • Rope a Dope
    , contributor
    Comments (531) | Send Message
     
    tclark – there hasn’t been a budget passed since 2009 and that was the budget Bush presented as he was going out the door. We have had a series of Continuing Resolutions to fund the government. Also, I’m not sure when the last time the Senate passed an Appropriations Bill but I know that throughout all of 2012, Harry Reid refused to call any before the full Senate for a vote. These Appropriations Bills allocate funding for specific purposes.

     

    This administrations has shown zero fiscal restraint during the entire time Obama has been in office. Obama wants to spend whatever amount he wants to, and for whatever purpose he wants and does not want to be restrained at all.
    10 Oct 2013, 10:15 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (972) | Send Message
     
    Our government is dysfunctional for one reason only. QE. If the Fed would stop QE, then our elected representatives would have to stop playing around and get to work on getting our Nation's economy and society back on track. The UNELECTED Fed and it's evil QE are undermining our Nation's fundamental fabric and certainly are destroying the concept of elected officials being responsible for the Nation's fiscal well being.
    10 Oct 2013, 11:21 AM Reply Like
  • Angel Martin
    , contributor
    Comments (1291) | Send Message
     
    tclark, what are you talking about? hitting the debt ceiling is, by definition, a balanced budget, since you are on pay as you go, no spending financed by borrowing
    10 Oct 2013, 03:56 PM Reply Like
  • financeminister
    , contributor
    Comments (613) | Send Message
     
    Article from Thomas Sowell - senior fellow at Stanford University’s Hoover Institution

     

    -----------------

     

    Who shut down the federal government?

     

    Even when it comes to something as basic, and apparently as simple and straightforward, as the question of who shut down the federal government, there are diametrically opposite answers, depending on whether you talk to Democrats or to Republicans.

     

    There is really nothing complicated about the facts. The Republican-controlled House of Representatives voted all the money required to keep all government activities going — except for Obamacare. This is not a matter of opinion. You can check the Congressional Record.

     

    As for the House of Representatives’ right to grant or withhold money, that is not a matter of opinion either. You can check the Constitution of the United States. All spending bills must originate in the House of Representatives, which means that congressmen there have a right to decide whether or not they want to spend money on a particular government activity.

     

    Whether Obamacare is good, bad or indifferent is a matter of opinion. But it is a matter of fact that members of the House of Representatives have a right to make spending decisions based on their opinion.

     

    Obamacare is indeed “the law of the land,” as its supporters keep saying, and the Supreme Court has upheld its constitutionality. But the whole point of having a division of powers within the federal government is that each branch can decide independently what it wants to do or not do, regardless of what the other branches do, when exercising the powers specifically granted to that branch by the Constitution.

     

    The hundreds of thousands of government workers who have been laid off are not idle because the House of Representatives did not vote enough money to pay their salaries or the other expenses of their agencies — unless they are in an agency that would administer Obamacare.

     

    Since we cannot read minds, we cannot say who — if anybody — “wants to shut down the government.” But we do know who had the option to keep the government running and chose not to.

     

    The money voted by the House of Representatives covered everything that the government does, except for Obamacare. The Senate chose not to vote to authorize that money to be spent, because it did not include money for Obamacare.

     

    Senate Majority Leader Harry Reid says that he wants a “clean” bill from the House of Representatives, and some in the media keep repeating the word “clean” like a mantra. But what is unclean about not giving Reid everything he wants?

     

    If Reid and President Barack Obama refuse to accept the money required to run the government, because it leaves out the money they want to run Obamacare, that is their right. But that is also their responsibility. You cannot blame other people for not giving you everything you want. And it is a fraud to blame them when you refuse to use the money they did vote, even when it is ample to pay for everything else in the government.

     

    When Obama keeps claiming that it is some new outrage for those who control the money to try to change government policy by granting or withholding money, that is simply a baldfaced lie. You can check the history of other examples of “legislation by appropriation,” as it used to be called.

     

    Whether legislation by appropriation is a good idea or a bad idea is a matter of opinion. But whether it is both legal and not unprecedented is a matter of fact.

     

    Perhaps the biggest of the big lies is that the government will not be able to pay what it owes on the national debt, creating a danger of default. Tax money keeps coming into the treasury during the shutdown, and it vastly exceeds the interest that has to be paid on the national debt.

     

    Even if the debt ceiling is not lifted, that only means that government is not allowed to run up new debt. But that does not mean that it is unable to pay the interest on existing debt.

     

    None of this is rocket science. But unless the Republicans get their side of the story out — and articulation has never been their strong suit — the lies will win. More important, the whole country will lose.
    10 Oct 2013, 11:05 AM Reply Like
  • davidbdc
    , contributor
    Comments (3141) | Send Message
     
    Unfortunately, the whole country has been losing for several years now.

     

    We've gone from a president that picked some truly moronic people to be around him - and let them do basically whatever they wanted (think Iraq post invasion or Katrina response), to a president that thinks he's so smart that things like established processes and even laws don't apply.

     

    By not passing and signing into law a budget during every year of his presidency, Obama has set the table for this type of action. Usually, during the budgeting process of reconciliation the opposition (or those in the minority) is given small concessions in exchange for votes. That's the way its worked. That helps to ensure that people don't feel totally isolated or shut out.

     

    What happened with Obamacare? It passed on a strictly party line vote in both Houses of Congress. Then Republicans were voted into the majority in the House of Representatives. Now one might expect that there would be some changes made to the law to accommodate the new majority. But by never passing a budget, Reid and Obama avoid any and all negotiations to change or modify the law. And to make it worse the President is arbitrarily change the law as time goes by - in a few cases changes prohibited by the law!! The free money to Congress is the most striking example of that.

     

    To the original article - if Jack Lew can't prioritize the bills being paid then he's incompetent and I'd like him to submit his resignation and announce he'll never work for the federal government again (because then the Wall Street firms won't be so eager to pay him $2 million a year to sit on his ass while they wait for him to go back into the federal bureaucracy).
    10 Oct 2013, 12:38 PM Reply Like
  • keu4bike
    , contributor
    Comments (199) | Send Message
     
    I think a lot of the debate depends on where one's financial interest lies. I work for a government contractor. Very little of my investment is in U.S. Treasury securities. Obviously, I want the government to pay my employer first, the government contractors in which I am invested second, and treasuries third. That is where my financial interest lies. Those who are heavily exposed to treasuries obviously have an interest in treasuries getting paid first.

     

    What is best for the country? Obviously, a deliberate budget rather than continuing resolution with congress figuring out how to pay for all the spending they have mandated/authorized.
    12 Oct 2013, 02:38 PM Reply Like
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