The US Won’t Default on Interest Payments
Let’s start with my base case: The US will not default on interest payments.
The extreme case is the US defers payments on some obligations.
Janet Yellen on Meet the Press
Biden Hits Back on Budget Impasse
Calling the Republican’s offer “unacceptable”, Biden Hits Back on Budget Impasse
“It’s time for Republicans to accept that there is no bipartisan deal to be made solely—solely—on their partisan terms,” Biden said Sunday evening in a news conference in Hiroshima before boarding Air Force One for the return trip to Washington. “They have to move as well.”
How did the Democrats Move?
Biden said that he is frustrated that Republicans want to close the deficit solely via cuts in spending and aren’t entertaining any new revenue sources such as rolling back the tax cuts approved under former President Donald Trump.
The only movement I can see from Biden is willingness to cut the deficit by raising taxes.
“I do not think it’s extreme that we simply say we should spend less than we spent this year,” McCarthy said on Fox News’ “Sunday Morning Futures.”
“Unless the president engages, I do not believe a deal is possible,” said Rep. Dusty Johnson (R., S.D.), the chair of the Main Street Caucus, a group of about 100 Republicans.
Moody’s Predictions
Moody’s Analytics predicts that a default would cost more than seven million jobs and cause the unemployment rate to move above over 8%. The ratings company also predicts that the stock market would lose a fifth of its value.
8 Million Jobs Lost!? Poof Just Like That?
I did not see Moody’s analysis but I consider that position nonsensical.
Are businesses going to shut down or do mass layoffs if there is a one-day default? One week?
Besides, there will not be a default. Interest on debt will be paid. There might be some delays in paying obligations, but 8 million jobs lost? Really?
X-Date Revision
Other Views on the X-Date
The Real Risk
That is one of the few sensible statements I have seen, In practice, the Treasury would minimize the nightmare with as few accounts or countries as possible.
But again, it will not come to that because there will not be a default.
John Comiskey revised his X-Date as noted in the Tweet above. But it’s important to note that the X-Date is the date at which bills cannot be paid, not a drop dead date on default.
S-Date, R-Date, D-Date
I think we need an S-Date which I define as the date when Social Security payments cease. A D-Date is the critical default date at which interest on bonds would no longer be paid.
The latter may be as late as August or even October, as discussed in Debt Ceiling Talks Stall, Little Chance of Congressional Deal by June 1
With quarterly tax payments coming in on June 15, even if Social Security checks are delayed by a week or so, the checks would resume on or before the 15th of June.
This gives us an R-Date of perhaps something like June 10th or 12th in which Social Security check distribution would resume even if the checks are temporarily paused.
My base position remains: There will not be a default because there is too much wiggle room for other obligations to not be paid.
An uproar over missed SS payments would get Congress to do something.
This post originated at MishTalk.Com
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Republicans raised the ceiling 3 times without spending cuts when Trump was president.