The Nation's Financial Condition

[seacoaster]

Second installment:

"Ezra Klein
So one of the frustrating parts of this debate, to me, is that inflation gets talked about all as this one thing. And to go back to what you’re saying, there is this question of the productive capacity of the economy.

So something we’ve been seeing in the inflation now is that we’re in trouble on cars because we just need more cars. And there was a supply shock during Covid to key components. But you don’t see a lot of discussion about what we want the economy to produce, and how to make it possible for it to produce that much. Instead, we really talk in these generalities about money supply and inflation and the economy itself.

And yet, when I talk to economists, they will tell me, of course, what we are ultimately talking about is the productive capacity of the economy. But it does seem to me that if you never talk about that in the specific, or rarely do, and instead use these aggregate metaphors, you’re going to end up with very different solutions and very different goals than you would otherwise.

Adam Tooze
Well, I think that’s right. And I think it’s one of the things that 2020 exposed, is that we have a set of conventional assumptions about what makes up the economy, what makes up prices, in general, and how they’ll respond to impulses in general, like an expansion in the money supply. And those assume a certain set of particular structural relationships, a particular set of industrial patterns, a particular pattern of production.

But when a shock like 2020 comes along, which is incredibly idiosyncratic, all of those assumptions are disrupted. And we’re forced to sit back and ask ourselves what we actually mean by something like inflation, what we actually mean by the economy. One of the huge surprises of 2020 was the highly selective way in which the shutdown operated and took out dentists’ surgeries and schools and the entire service sector, which aren’t normally part of the conventional story of a business cycle at all.

And on the flip side, on the recovery now, we’re trying to parse whether or not it really is inflation, if what’s happening is that the price of lumber and then the price of used cars and then anything that has chips in it surges, whereas other prices really aren’t moving, because the movement seems so wildly idiosyncratic.

And economists will say, generally speaking, OK, what we’re talking about is the average moving. But they don’t have elaborate means. It’s not taught. Undergraduate economists, graduate school economists are not sat down with an image of what makes up the U.S. economy or the world economy sector by sector. And they don’t learn lessons, then, separately about each one of those, because these are general sciences. If you want to know about agriculture, you go to ag school. If you want to know about chip supply, you presumably become an industrial engineer or an electronic engineer or somebody who specializes in supply-chain logistics. It’s really the knowledge of engineers, not the knowledge of economists.

And in some ways, the most radical demonstration of this was the vaccine story, that the entire macroeconomic outlook hinges on the development of a handful of products and their supply chain. It’s really not an exaggeration to say that the entire outlook hinged, through the summer and the early fall of 2020, on a handful of labs around the world running tests which, altogether, would generate an output maybe worth a couple of $10 billion, but trillions of dollars if the world’s economy hinged on it.

So we’re exposed to a, for want of a nail, that famous nursery rhyme. For want of a nail, the battle was lost. That kind of logic becomes absolutely dominant. Without those bottleneck things, without that vaccine, without those microchips — whatever it is — the whole, which we like to generalize about, simply doesn’t function.

It also then becomes a serious problem of valuation. What is a working vaccine worth? Do we decide that by what its cost of production is or what it would command in the market or what value it delivers in terms of stabilizing the economy? That’s been one of the disorientating effects of this shock.

[MUSIC PLAYING]

Ezra Klein
So I want to bring up something here that may not, at first blush, seem deeply connected to what we’ve been talking about. But I think it is, which is how the boundaries of acceptable thought are policed and defined within the economics profession. And I want to go back here to the line we began with, that “whatever we can do, we can afford.”

This is a line that I have talked about with some leading center-left economists. And they’ll tell you that, of course, they know that. They’ve always believed that. Modern monetary theorists love quoting this line. But they will say, oh, the modern monetary theorists have nothing new to say. That’s just an old Keynes line.

But I will say that, having covered economics for a long time in Washington, that was not a line that used to get quoted to me. And there’s a lot like that, it seems to me, in economics, where if you dig in deep, what you either find is an indeterminacy that could go in many different directions, is a principle that is actually quite radical, like whatever we can do, we can afford, or a lot of disagreement.

But then when the economists come into the political realm, they begin trying to add their theory of how the politics will interpret something into the way they talk. And then it gets much more narrow. And then they become much more nervous about the way they’ll be interpreted, heard, et cetera.

And that, to me, is where a lot of the reliance on things like headline inflation numbers, budget deficits, interest rates comes from. Those are signals that can be a problem or may not be a problem. But it’s been a useful shorthand to just say, we don’t want you getting out of control, and so we’re just going to watch this pretty closely. And if it gets over a certain line, we’re going to slow the whole thing down.

And that seems, to me, to be happening here. I think there’s a lot of fear that if it becomes known, if it becomes believed that whatever we can do, we can afford, that that will be used irresponsibly, and then in being used irresponsibly, will create a lot of real problems for people, like runaway inflation. The idea will be, well, of course we can just give everybody a universal basic income. And then it’ll turn out, that does create a bunch of inflation, and there will be problems. And yet, I don’t know that many economists who disagree with the line.

And so this seems, to me, to be a point of real tension right now. A bunch of different things from the pandemic to the way social media has evolved to just the way political discourse has evolved are blowing up people’s control over the conversation. And that is exposing some nostrums that weren’t really true.

And then the profession wants to say, no, we knew all this. But in fact, they haven’t really been saying it, because they’re a little bit afraid, in my view, of what people will do with these ideas if they get hold of them, if they’re not protected by the responsible economists placing boundaries on what is and isn’t sober-minded policy-making.

Adam Tooze
Yeah, irresponsible was the word that Larry Summers, I think, used repeatedly with regard to the various proposals coming out of the Biden administration. I think that’s absolutely right. And one can see the professional logic of this. One can see the concern of a profession of extraordinarily high status to police the boundaries of who gets to speak in their name.

But I think, also, one could offer a more sympathetic reading, which is that the situation is genuinely opaque. We are in a broken play here. We’re in a gray zone. There’s no longer one best way. There’s no longer a Washington consensus that you can easily subscribe to. There’s a sort of maneuvering. And it’s somewhere between one size fits all, which we’ve abandoned, or one policy fits every situation, which we’ve also abandoned, and anything goes. And figuring out that space is what we all have to do going forward from here, I think.

And it isn’t surprising, I think, that, as it were, the defenders of the authority of a discipline of the kind of potency of somebody like Larry Summers are allergic on these issues. Because they fear mischief. They fear people, frankly, who don’t really understand what they’re talking about, in their view, as it were, acquiring authority.

But I think, underlying that, is actually a situation of profound uncertainty about questions like, why are interest rates so persistently low? Why is inflation not taking off when the money supply has blown up? What is the best way for an emerging-market economy to handle the stresses of globalization? Once upon a time, perhaps people had a sense they actually knew the answer. That’s just, I don’t think, any longer the case.

Ezra Klein
I think that’s a really important way to put it. And I want to say this and recognize it’ll get me in a little bit of trouble. I am a lot more sympathetic to Larry Summers’s take on some of these issues than others I agree with are. But I’m not always sympathetic to how he presents it. Which is to say, I agree with what you just said, Adam, which is, at the core of a lot of these economic policy questions right now is profound uncertainty.

For instance, I would say the economics profession has just been devastatingly wrong about what effect different deficit levels would have over the past 20 years. I think you simply have to look at that, given the credentials of some of the people making these arguments, as, in aggregate, a record of a lot of failure. Not literally everybody has failed. Some people have gotten it right. But there was just a lot of warnings that now look completely ridiculous, a lot of worries about things that didn’t happen.

It’s pretty clear to me, at this point, that the two things that are a problem that could emerge from deficits, one being higher interest rates and the other being inflation, economists just don’t understand well enough to predict. But I don’t quite take that view where some of my friends on the left do, which I would say is in the direction of free for all.

The fact that there is uncertainty doesn’t mean bad things can happen. Bad things can happen. Inflation could begin to bite in a real way. It could move in a way we don’t expect. The Fed could become highly politicized very quickly. And then the markets react in a certain way to that.

And the thing that is frustrating to me is that I don’t see a lot of strong communication of real uncertainty from the economics profession. Because it’s one thing to say, I think we should be cautious because we are in territory that we don’t understand, and things can get out of control. And instead, what I see is very, very strong opinions from just different directions.

But nevertheless, these are hard questions. And I don’t know. I take this as actually quite a bit of the fight between the modern monetary theory types and the new Keynesian types, whereas I think the modern monetary theorists often say things that, at this point, are not that different than the new Keynesians. But the modern monetary theorists are more comfortable that they’ll be able to slam the brakes on if just creating a lot of money out of thin air gets out of control. And the new Keynesians are not comfortable with that.

And so, fundamentally, they have a disagreement over how they’re going to handle the risk of inflation that ends up sounding like a disagreement over whether or not money is an invention or not. But the truth is, neither side knows. And that’s also just a scary thing to know from the outside, right? You’d like to think that people have their hand on the wheel here and they’ve all got answers. But they, at least in my view, at this point, truly don’t.

Adam Tooze
And there is the additional dimension, I think, that it’s very important to not think money simply along the axis of, if you like, the state in the bond market, but to also figure on private finance. We mustn’t lose sight of the fact that the biggest shocks of the last 12 years were the banking crisis of 2008, in the North Atlantic system as a whole, and then this disruption in the Treasury market, which was intimately tied up with new forms of market finance.

And so beyond, as it were, the classic terrain of public finance — government decisions about spending and taxing and so on, and the debt that’s run up, and the question of whether that’s a burden — and the classic macroeconomic topics of employment, unemployment, inflation, there is also this looming, cliché elephant in the room of the flywheel of finance, of private finance, into which government debt, which is the hotly contested topic in those two other fields, really serves as the raw material.

The government debt serves as the key medium through which private speculation operates. It’s leveraged on government debt. And that’s actually the reason why the central bank stepped in in the spring of 2020. They weren’t doing it to monetize a Keynesian stimulus program. This wasn’t World War II.

It kind of looked like it, if you viewed it from a certain angle. But it really wasn’t, because the central bankers will go to their graves swearing, insisting, that no, they didn’t do this to support the efforts of national governments to fight off the crisis. They did it to prevent financial instability, by which they mean to preserve intact this structure of private finance that pyramids on top of that public debt.

And that’s another dimension which — it just wouldn’t be fair to say, at all, that economics has nothing to say about it. But it was blindsided by it by 2008 — is, in a sense, scrambling to catch up with the dynamic, the virtuosity, of that private financial engineering. Which, again, in 2020, we didn’t see the banking crisis. But we did see, in some senses, an even more fundamental disturbance in that Treasury market.

Ezra Klein
I will go to my grave defending TARP. You have to stop things that are too big to fail from failing. But it is a place where I get very populist, because we do seem, to me, to have one financial political system for banks and financial institutions, and another for people.

And I am not making the argument you will sometimes see on Twitter where it’s like, we gave banks however many trillions of dollars, and all the people got was a $1,200 stimulus check. That’s not true, as a matter of policy. But it is true that when the Fed wants to, it can simply open the spigot in the most profound of ways for the banking system. And there is not that same ability to say, there is an emergency for households, there is an emergency for people, because Congress is a much harder-to-move institution.

And it is just weird that we have an institution of checks and balances and filibusters and committees and divided government that operates when you need to ask, should people get help in their everyday lives? And then an institution functionally just run by Chairman Powell and the Fed board that operates around the question of, well, do we just need to begin buying up all the debt anybody wants to sell us? And even if it is better they do that than not, there’s just no doubt that it is a profoundly unfair way to run the system.

Adam Tooze
And it compounds itself, right? The added twist in that tale is the paralysis of fiscal policy because of the complexity of politics. And I think we should be frank about it, right? The obdurate objections from the right to measures which folks like us, on the progressive side of things, think are just essential — that paralysis means that, for a long time, for much of the time, the only game in town, in terms of active economic policy, is the Fed.

And the Fed’s interventions have the effect of not just underwriting speculation to date, if you like, but further accelerating and exacerbating and forcing the process of financial accumulation and growth and profit-taking. So it’s really a very difficult and deeply entrenched structural bias.

No one actually has to necessarily want any of the effects it produces. You don’t have to have a conspiracy of people determined to hand trillions of dollars of capital gains to the top 1 percent of wealth holders. But that, in an emergency, often turns out to be the only thing you can do. And then you expect some sort of massive trickle-down effect to operate from there. And the only way out of that impasse is some sort of structural reform, which is, of course, profoundly unlikely for all of the reasons that much more modest measures of reform are difficult to get through.

Ezra Klein
Well, it also creates different kinds of pressures. So this is an argument I’ve been making forever. I wrote a Newsweek piece about it more than a decade ago. But something I’ve always tried to say is that an issue with gridlock — gridlock in the way we think about it in Congress — is that it’s actually a very good metaphor. As somebody who grew up outside of Los Angeles, when there is gridlock on the freeway, people take side streets.

And one of the things gridlock does is it begins to put pressure on the institutions that are less gridlocked, even if they are less effective, as a way to get to a policy goal, to act. So you have more pressure on the executive to use executive orders for things that maybe one would not have thought executive orders could be used for before. That you saw very clearly in the Obama administration. You saw it in the Trump administration.

There’s pressure on the Supreme Court to do, through decision-making, what the various coalitions cannot do through legislating. You see that on abortion politics. You see that on marriage equality. You see it on gun issues, all kinds of different things.

But you also don’t see it increasingly in the Fed. And this is something I’d like us to talk about, because Jerome Powell, despite being a Trump appointee, has been, I would say, backing up 10 years in the conversation, just an exemplary Fed chair, from a progressive standpoint. If you go back to where progressives were on the Fed 10 years ago, they would feel great about Powell. Not worried about inflation, really. Very committed to full employment. Seems to be pretty committed to a hotter economy where there’s worker power.

But there’s now pressure from the left to not reappoint him, because they want, on the one hand, more done on financial regulation, which we could talk about. But I think the real issue is, they want the Fed to act as a big player on climate change.

And part of the reason they’re desperate to have the Fed step in on climate change, treating it as a systemic risk which it now needs to begin evaluating banks and other players on, is because they are worried, correctly so, that Congress will not act on climate change, certainly not with the power they need to. And so that makes the Fed a much more important game in town, if you could get them off of the sidelines on this.

I’m curious how you see that demand. Do you think it would be a good idea for the Fed, under Powell, to say, yeah, climate change is a huge problem, and we’re going to begin to build it into our financial regulations the way we backstop markets, whatever?

Adam Tooze
So I’ve been of two minds about this. I was one of the people early in the field arguing that central bankers needed to take climate change more seriously. And what we’ve seen in Europe is the wholesale adoption of the green agenda by the ECB against, of course, a radically different political backdrop on the climate issue, specifically.

Broadly speaking, on social and macroeconomic policy in general, I agree that Powell has been an extraordinary surprise. But it’s also undeniably the case that he has been slow to act on climate. But I think you have to ask why.

I’m reliably informed it isn’t because Jerome Powell doesn’t care about the environment. I think he does. But I think he’s acutely conscious of a variety of different constraints operating on the Fed in a way, perhaps, that they don’t operate on the ECB. And the first is that the Fed’s mandate is, in some ways, not quite as capacious as that of the ECB, which is really setting — I’m invoking that because they’re setting the pace, really, on this issue globally.

Ezra Klein
ECB, just quickly, being European Central Bank.

Adam Tooze
European Central Bank. And the central bankers are a truly cosmopolitan network. They benchmark themselves against each other all the time. The Fed has a full employment and an inflation mandate and a financial stability — it’s understood that’s its mandate, too. But it’s not obvious, really, how you shoehorn environment into that. You could maybe do it through a community’s mandate. You could maybe do it through full employment. But it’s a bit of a reach.

They also, of course, know that there is profound political opposition to doing this. They know that they will take a beating in Congress if they make moves in this direction from the usual suspects, from the GOP. And they’ve already been quite vocal demanding that the Fed cease and desist politically explosive research on climate issues which they believe is contentious and risks politicizing the Fed. Their words, not mine.

Then there is the issue of what instruments the Fed would actually use. And for a central bank to be really dynamically active in climate policy, you want it to be doing what the European Central Bank does or the Bank of England or the Bank of Japan, which is actually buying lots of private debt, because that then gives you the leverage of saying, look, we’ll disqualify this as collateral if it’s dirty, if it comes from fossil-fuel pollution.

And the Fed, during the crisis in 2020, indicated it might, but de facto has not bought a substantial portfolio of private debt. So it’s not immediately obvious, beyond financial regulation, where the Fed would go.

And then finally, and nontrivially, the Fed is enmeshed in a financial system with big beasts in it. And America’s big financial players are the largest global backers, outside the oil states themselves, of fossil-fuel investment. So if you push in this direction, you’re going up against the likes of JP Morgan, which is, hands down, globally, the largest fossil-fuel investor.

And I think, for all of these reasons, it’s a little unsurprising that the Fed, under Powell, is leery of moving rapidly on this. That should make one impatient. It’s frustrating. If climate is your central preoccupation, then you want all hands on deck to be moving. But then think about the broader political constellation in the U.S. and consider, do you really want to pick a fight on the Fed over this?

And it seems to me that you could quite reasonably argue the case that you were implying, I guess, which is that, on so many issues, Powell has proven to be highly effective. If we replace him with Lael Brainard or somebody of that type who is more likely to come around to the green side, we make the Fed into a huge political issue, politically, for the GOP in the midterm season. They will be able to say that we’ve politicized the institution. They can come after us on that side.

And the main thrust, given the limitations of what the Fed can actually do in climate policy in the U.S., cannot lie with the Fed. It has, ultimately, to lie with infrastructure spending and regulation. And so it’s critical, presumably, if that’s the way, as it were, we’re going to use policy, not to pick a fight over the Fed that we don’t need.

So for this rather complicated reason, I’ve ended up coming down on a much more — eventually I would agree with you. I think it would be a mistake not to reconfirm Powell, not because he is the champion of green policy — and he hasn’t been, and for all the reasons, it’s unlikely he will be — but because we have to decide, tactically speaking, what the most likely route for success actually is. And I don’t think it’s this way.

Ezra Klein
Let me try to make a stronger argument for the people who want the Fed to play in this more aggressively, and then make my argument for why I’m a little skeptical. If you force me to choose right now, I would say reappoint Powell. That is a fight you don’t need. And you could create more problems than solutions if you win. But let me start at the beginning. The view is, the Fed is a regulator, among other things, of systemic risk. And it is ridiculous, on some level, to not say that climate change is a systemic risk.

There’s a great paper that came out a while ago, from a central-bank consortium, called “Green Swans,” which people can look up — and I used it in a column a while back — all about this. It is a profound kind of risk that could lead to all kinds of assets needing to be repriced that could undermine not just companies, but even countries. It is a profound risk to prices in the future. Of course. Of course it is. So then what could the Fed do? Well, they could begin to say, well, as a bank, if you are not divesting from things that expose you to climate risk, we are going to judge you as highly risky and begin to regulate you in that way. Or, you’ve made the point, Adam, that maybe they can say, well, the Fed does a lot of purchasing of government-backed, mortgage-backed securities. And so maybe they should begin only purchasing these mortgage-backed securities if the mortgages are for houses that are up to a green building code, or for buildings up to a green building code.

There are things you can imagine doing. But, when you begin to think about the Fed acting at that level, really going all in in a way that might make a difference — because I don’t think just giving some speeches on how climate change is a risk will make a difference — then you’re talking about something really different.

Lael Brainard is not going to do that. I have covered Lael Brainard in Washington for years. I’m not saying I know her super well, but she is a cautious economic policymaker. She always has been. She might be, on the margin, a little more green than Powell. But she’s not going to turn the Fed into an instrument of climate policy in this way.

But also, one of the things that has really saved the political system for some years now is that a Republican Party that has been irresponsible in functionally every other respect keeps making pretty responsible Federal Reserve appointments — Ben Bernanke under George W. Bush, Jay Powell, shockingly, under Donald Trump. There’s no reason for Trump to kick Yellen out. But if he was going to, Powell was a great replacement.

And central-banking policy has simply — it has been a rare space that is not that polarized. And if you polarize it by bringing in other issues that are much more polarized, then the right is going to begin judging candidates across this other issue set. And you’re going to begin to find more doctrinaire candidates.

If it becomes very important that whoever is running the Fed also doesn’t believe climate change is a big deal, then people like Ben Bernanke and Jay Powell in the future will not be plausible candidates, because they are not that kind of conservative. They are not that kind of Republican.

And so that’s my worry: that you’re not going to get in somebody who’s going to do all that much on climate change, but in adding that to the vetting process, you’ll begin to create a situation where, on the right, you get much crazier candidates for the Fed because you have to fit the broader set of right-wing concerns. And if we had some of these much crazier candidates in during the 2008, 2009 crisis, the 2020 pandemic crisis, I think what could have happened becomes really scary.

Adam Tooze
I completely agree with you. Let there be no misunderstanding. I’ve literally been called out by the head of the German Bundesbank as a green hawk on central-bank policy [in an] exchange that we had in the fall of 2019. So I fully believe that central banks need to play their part in the green-energy transition, and clearly that the high road to doing that, given their existing portfolio and brief, is by way of regulation.

And obviously, they should be insisting on systematically stress-testing all major financial institutions against some sort of Paris-conforming scenario. In other words, what happens to your portfolio of investments if we are on a path to decarbonization that gets us to net zero by 2050? I take that as read.

And furthermore, I think, whether with Lael Brainard or Powell at the helm, I think the Fed is moving in that direction, right? That inside the Fed, it’s quite clear that they’ve already got several committees working on this problem. It’s such a no-brainer. It’s easy to do. It sits within what they already do. And to reiterate — and we both agree on this — there’s not much else that the United States central bank is going to do in this direction.

So then the question is purely tactical. The question really is, as it were, how do you create a space in which the Fed can, A, not become a problem, B, go on doing the good thing it’s currently doing, and C, under the radar, which is where this is probably going to have to happen because the GOP watches this stuff — they literally read the research papers that come out of the San Francisco Fed, for instance, one of the more liberal branches of the Fed. Some of this is going to have to be, to a degree, surreptitious. It’s going to have to be infrastructural political change, to use that unfortunate phrase. It’s going to have to happen within the deep state in the same way as, for instance, the Pentagon went on working on climate-change issues under Trump.

So the only question in debate here, the way that you framed it in this conversation, is, Powell or not, on green criteria or not? And my view would be, well, Powell is certainly a reasonable option. And to reject him on green criteria would be to shoot ourselves in the foot."

[youthathletics]

Friedrich A. Hayek

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account.”

[Farfromgeneva]

Friedrich A. Hayek

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account.”

Are you a fan of emergent forces theory? I’m not an acolyte but a fan of the guy.

[Farfromgeneva]

Friedrich A. Hayek

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account.”

I basically rage about this all the time. The implicit biases and benefit skew/transfer of any government decisions.

[seacoaster]

Funny article, presented as if this is some revelation:

https://www.nytimes.com/2021/09/19/busi ... nment.html

“For six years, Audrey Ellis and Adam Feuerstein worked together at PwC, the giant accounting firm, helping the world’s biggest companies avoid taxes.

In mid-2018, one of Mr. Feuerstein’s clients, an influential association of real estate companies, was trying to persuade government officials that its members should qualify for a new federal tax break. Mr. Feuerstein knew just the person to turn to for help. Ms. Ellis had recently joined the Treasury Department, and she was drafting the rules for this very deduction.

That summer, Ms. Ellis met with Mr. Feuerstein and his client’s lobbyists. The next week, the Treasury granted their wish — a decision potentially worth billions of dollars to PwC’s clients.

About a year later, Ms. Ellis returned to PwC, where she was immediately promoted to partner. She and Mr. Feuerstein now work together advising large companies on how to exploit wrinkles in the tax regulations that Ms. Ellis helped write.

Ms. Ellis’s case — detailed in public records and by people with direct knowledge of her work at the Treasury and at PwC — is no outlier.

The largest U.S. accounting firms have perfected a remarkably effective behind-the-scenes system to promote their interests in Washington. Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers. The firms welcome them back with loftier titles and higher pay, according to public records reviewed by The New York Times and interviews with current and former government and industry officials.

From their government posts, many of the industry veterans approved loopholes long exploited by their former firms, gave tax breaks to former clients and rolled back efforts to rein in tax shelters — with enormous impact.

After lobbying by PwC, a former PwC partner in the Trump Treasury Department helped write regulations that allowed large multinational companies to avoid tens of billions of dollars in taxes; he then returned to PwC. A senior executive at another major accounting firm, RSM, took a top job at Treasury, where his office expanded a tax break in ways sought by RSM; he then returned to the firm.”

There’s more, but you get/got/had the gist.

[FannOLax]

Funny article, presented as if this is some revelation:

https://www.nytimes.com/2021/09/19/busi ... nment.html

I've long found that the NYT often seems naïve when writing about business and/or finance, as if it's big news that capitalism entails a ruthless pursuit of money.

[Farfromgeneva]

Funny article, presented as if this is some revelation:

https://www.nytimes.com/2021/09/19/busi ... nment.html

I've long found that the NYT often seems naïve when writing about business and/or finance, as if it's big news that capitalism entails a ruthless pursuit of money.

Spot on - though ruthless seems to out a value on the participants as if it’s not the inertia of the system which is unfair IMO and not precise.

They did this to Hobart tying a random one off where they didn’t even respond when I know the administration and board attempted to provide primary source information and it was rejected/ignored so they could tie it to allegations around Jameis Winston and Baylor as if all football players are rapists and murdered rather than taking the Neal Brennan approach. (https://www.dailymotion.com/video/x71ai83)

[Farfromgeneva]

Funny article, presented as if this is some revelation:

https://www.nytimes.com/2021/09/19/busi ... nment.html

“For six years, Audrey Ellis and Adam Feuerstein worked together at PwC, the giant accounting firm, helping the world’s biggest companies avoid taxes.

In mid-2018, one of Mr. Feuerstein’s clients, an influential association of real estate companies, was trying to persuade government officials that its members should qualify for a new federal tax break. Mr. Feuerstein knew just the person to turn to for help. Ms. Ellis had recently joined the Treasury Department, and she was drafting the rules for this very deduction.

That summer, Ms. Ellis met with Mr. Feuerstein and his client’s lobbyists. The next week, the Treasury granted their wish — a decision potentially worth billions of dollars to PwC’s clients.

About a year later, Ms. Ellis returned to PwC, where she was immediately promoted to partner. She and Mr. Feuerstein now work together advising large companies on how to exploit wrinkles in the tax regulations that Ms. Ellis helped write.

Ms. Ellis’s case — detailed in public records and by people with direct knowledge of her work at the Treasury and at PwC — is no outlier.

The largest U.S. accounting firms have perfected a remarkably effective behind-the-scenes system to promote their interests in Washington. Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers. The firms welcome them back with loftier titles and higher pay, according to public records reviewed by The New York Times and interviews with current and former government and industry officials.

From their government posts, many of the industry veterans approved loopholes long exploited by their former firms, gave tax breaks to former clients and rolled back efforts to rein in tax shelters — with enormous impact.

After lobbying by PwC, a former PwC partner in the Trump Treasury Department helped write regulations that allowed large multinational companies to avoid tens of billions of dollars in taxes; he then returned to PwC. A senior executive at another major accounting firm, RSM, took a top job at Treasury, where his office expanded a tax break in ways sought by RSM; he then returned to the firm.”

There’s more, but you get/got/had the gist.

Bigger haul for McGladrey than PWC.

But yes silly must be slow news cycle.

Have a buddy who worked for Treasury during Tarp, left Citi, went to Morlis afterwards working with Eric Cantor who had no reason to be working at a white shoe boutique advisory investment bank other than his contacts.

[Farfromgeneva]

Finally! Hopefully next up is excess spread present value fee kickbacks to mortgage brokers. That’s probably more gross than 5-6% fixed in thai world. Reality is it’s not technology but the bulk buyer Single Family rental industry and general financialization of single family home real estate that’s driving this. And once 3D printing gets real with respect to housing we probably will start seeing bulk ground leases and bifurcation of land and improvement in the residential world like they did with Manhattan real estate by wealth families 50yrs ago.

Realtors Face Federal Scrutiny of Broker Commissions
Justice Department probe, civil lawsuits pose challenge to real-estate industry practices

Real-estate agents earn commissions for the sale of a home, typically around 5% to 6% of the sale price.
PHOTO: MICAH GREEN/BLOOMBERG NEWS
By John D. McKinnon
Sept. 20, 2021 7:00 am ET

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WASHINGTON—The residential real-estate industry is bracing for a challenge to the commissions charged by its sales agents, one that could put downward pressure on the fees paid by home buyers and sellers.

The Justice Department is investigating home sale commissions, and in a wide-ranging executive order President Biden asked the Federal Trade Commission to adopt rules to address unfair or exclusionary practices in the real-estate industry.

Several civil lawsuits challenging industry rules and practices around commissions have survived initial procedural challenges and drawn support from the Justice Department, putting added pressure on traditional broker fees.


The politically powerful real-estate industry has survived past challenges to its commission structure, but consumer advocates say rising home prices have exacerbated concerns about excessive fees.

“The litigation and the government attention that the industry is getting now is unprecedented,” said Stephen Brobeck, a senior fellow at the Consumer Federation of America and a longtime critic of the industry.

At issue are the commissions real-estate agents earn for the sale of a home, typically around 5% to 6% of the sale price. For a home sale at the recent national median price of about $375,000, a 5% commission would be $18,750—or for a $1 million home, it would be $50,000.

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Does the commission structure of the real-estate industry need to be revamped? If so, how? Join the conversation below.

Very high-end properties tend to have somewhat lower commission rates.

Home buyers end up contributing to these commissions as part of the purchase price, but often have little room to negotiate since it is the home sellers who generally set the commissions for agents on both sides of the deal.

Consumer advocates say this contributes to excessive commissions and point to the National Association of Realtors’ rules as the biggest roadblock to change. Those rules require sellers to offer commissions to would-be buyers’ brokers, which consumer groups say encourages sellers to offer high rates for buyer agents as a way to attract more potential buyers.

Industry critics also say that the fees are opaque to most buyers, and say the advent of online home search engines has diminished the traditional role buyers’ agents play in connecting buyers and sellers.

The National Association of Realtors says a tight sales market and rising prices have made real-estate agents more important than ever, and it says that commissions are fully negotiable and declining. The average national commission rate is currently in the range of 4.9% to 4.94%, according to industry news and research site RealTrends, down from 5.40% in 2012.

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The NAR says that the current commission structure also encourages more competition by giving all participants in local multiple-listing services equal access to information on available properties. It also helps make homes more affordable to first-time and lower-income buyers, the trade group says, because they don’t have to pay their own agents up front.

“NAR remains committed to advancing and defending independent, local broker organizations that provide for greater economic opportunity and equity for small businesses and consumers, including first-time, low- and middle-income home buyers,” said NAR general counsel Katie Johnson.


News Corp, owner of The Wall Street Journal, operates Realtor.com under license from the National Association of Realtors.

Under the Trump administration, the Justice Department and the National Association of Realtors reached a deal to provide more disclosure on broker fees and make them more competitive. But this summer, the Justice Department under President Biden said it was withdrawing from the settlement so that it could pursue a broader investigation into broker commissions.

The Justice Department said that Americans paid more than $85 billion in home sale commissions last year, and that industry practices “may harm home sellers and home buyers.” Last week, the NAR challenged the department’s withdrawal, saying it would fight a Justice Department civil subpoena.

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The civil subpoena issued by the Justice Department in July largely focuses on NAR and industry policies that could be shaping the commission structure, according to court records. For example, the subpoena requires NAR to “submit all documents relating to any policy, guideline, rule, or practice: a. requiring listing brokers to make an offer of compensation to buyer brokers to list a home” on a multiple-listing service.

The subpoena also probes practices that could restrict marketing of non-MLS listings—another subject of recent private lawsuits.

In a further sign of the mounting risks to the industry, the Justice Department has taken sides against NAR and other industry defendants, filing statements in several civil lawsuits. The Justice Department statements generally dispute the NAR’s contention that a 2008 settlement with the department gave the government’s blessing to the current commission structure.


Mr. Biden also has pushed the Federal Trade Commission to launch its own review. The president said in a recent executive order targeting competition problems that the FTC should consider rules to curb “unfair tying practices or exclusionary practices in the brokerage or listing of real estate.”

The FTC didn’t respond to a request for comment.

The Justice Department investigation could lead to an antitrust suit and eventual sanctions on the industry. The prospect of FTC action is more distant, given the procedural hurdles that the agency faces in adopting new rules.

The current Justice Department investigation began earlier this year. After the change in administrations, the department was eager to pursue a broader look at the industry and unilaterally withdrew from the settlement pact with NAR.

The department is concerned that an array of practices creates a closed marketplace for the buying and selling of homes, locking in higher fees and preventing maverick firms and agents from successfully offering lower-cost models.

These concerns are especially true at a time of potentially disruptive change in the industry, accelerated by the Covid-19 pandemic, which for example saw a boom in virtual models for touring homes and navigating the real-estate market.

Several civil suits against the industry seeking class-action status have been filed by private law firms, including one by Cohen Milstein and Susman Godfrey filed in U.S. District Court in Chicago that survived initial procedural challenges but hasn’t yet been granted class-action status.

The lawsuit contends NAR rules stifle competition, which Ms. Johnson disputes. Realtors “already are competing on commission, from offering varied commission models to flat fees,” she said.

U.S. District Judge Andrea Wood in Illinois sided with the plaintiff home sellers in denying the defendants’ motion to dismiss the case.


“Plaintiffs’ allegations plausibly show that the Buyer-Broker Commission Rules prevent effective negotiation over commission rates and cause an artificial inflation of buyer-broker commission rates,” the judge wrote last year. “But-for Defendants’ conspiracy, each Plaintiff would have paid ‘substantially lower commissions.’”

—Brent Kendall contributed to this article.

Write to John D. McKinnon at [email protected]

[Farfromgeneva]

Pretty Big Banking deal announed this am - Union Bank in Cali owned by Mitsubishi Financial Group sold to US Bank. Knew there was a book out but didn't expect anyone to pay the price. Not too long ago the Asian banks were spending money and hiring like crazy so it's interesting to see them start to unwind positions and wonder if it's a signal of something bigger. USB is pretty responsible on expense mgt but that 20% IRR has got to be highly aspirational. Also a contintuation of the trend of consolidation in the US. Pulled the most recent FDIC quarterly banking profile and we have 4,951 banks down from 5,066 in Q2 2020. (1.08% non current loans/assets, up from 1.01% in prior year same period with lower reserve coverage currently which flows through net income when reserves are released, really just a form of excess capital for banks and a net charge off rate of 0.27% vs. 0.57% so banks lowered their loss reserves over the year while non-current paid loans increased and net charge offs declined, a small but notable decline in credit quality while banks have less "coverage" for losses which is not the same as defaults).

(still a lot but the vast majority are below $250MM in assets which is no more than 5-6 branches and more likely 1-3 branches for a $200-$250MM bank, the axiom is you are breakeven anywhere near a significant MSA at $30MM in deposits, which is a liability and seem counterintuitive but it's becuase that leverage is a lot cheaper and "stickier", modeled to have average lives of 5-15yrs based on history vs. CD funding which is shorter in duration and can lead to a modeled ALM mistmatch)

U.S. Bancorp to Buy MUFG Union Bank for About $8 Billion
Deal boosts U.S. Bank’s presence in California and other parts of the West Coast

MUFG will hold a minority stake of about 2.9% in U.S. Bancorp after the transaction’s close, which is expected in the first half of 2022.
PHOTO: TORU HANAI/REUTERSf
By Dave Sebastian
Sept. 21, 2021 7:06 am ET

U.S. Bancorp USB -2.33% has agreed to buy MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group MUFG -2.23% for about $8 billion in cash and stock, a deal that would boost U.S. Bank’s presence in California and other parts of the West Coast.

The purchase price includes $5.5 billion in cash and about 44 million shares of U.S. Bancorp common stock, the companies said Tuesday. MUFG will hold a minority stake of about 2.9% in U.S. Bancorp after the transaction is expected to close in the first half of 2022, they added.

The companies said they would have a combined presence in California, Washington and Oregon. Through the deal, U.S. Bank will gain more than a million consumer customers and about 190,000 small-business customers on the West Coast, in addition to about $58 billion in loans and $90 billion in deposits based on MUFG Union Bank’s June 30 balance sheet.

U.S. Bancorp, which is the parent of U.S. Bank National Association, said it expects the transaction to add about 6% to per-share earnings in 2023. The deal has an estimated internal rate of return of more than 20%, it said.

The company expects about $900 million in pretax cost savings equal to 40% of estimated non-interest expenses through a combination of real-estate consolidation, technology and systems conversion and other back-office efficiencies. U.S. Bancorp said it expects to book $1.2 billion in merger charges.

MUFG Union Bank on Sept. 20 entered into a consent order with the Office of the Comptroller of the Currency, the companies said. U.S. Bancorp said it has incorporated regulatory concerns into all aspects of the deal process. It said it expects to remediate issues applicable to MUFG Union Bank, and that the order won’t restrict U.S. Bancorp’s ability to operate and grow its business.

U.S. Bank said it commits to retaining all MUFG Union Bank’s front-line branch employees.

Write to Dave Sebastian at [email protected]

[seacoaster]

HCR. The GOP is willing to risk the nation's security and financial health for a midterm win. This is who they are:

"Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.
There are two financial deadlines looming. One is the need for Congress to fund the government. In late December 2020, Congress passed a huge bill that, among other things, funded the government through September 30. The new fiscal year starts on October 1, and if the government is not funded, it will have to shut down, ending all federal activities that are not considered imperative. This year, such activities would include a wide range of programs enacted to combat the economic crisis sparked by the coronavirus pandemic.

The second deadline is lifting the debt ceiling. That’s the amount of money Congress authorizes the government to borrow. Beginning in 1939, rather than approving individual issues of debt, Congress gave the government more flexibility in borrowing by simply agreeing to an upper limit that included all the different financial instruments the government uses. The debt ceiling is not connected directly to any individual bill, and it is not an appropriation for any specific program. It enables the government to borrow money to pay for programs in bills already passed. If the debt ceiling is not raised when necessary, the government will default on its debts, creating a financial catastrophe.

There is a long history behind our national funding systems. Until now, the U.S. has always protected its debt. After the Civil War, Democrats were determined to destroy the strong federal government the Republicans had built to fight the Confederacy. They tried to change the terms under which people had invested in wartime national bonds. Horrified at what would undermine confidence in the survival of the Union, the Republicans protected the debt in the Fourteenth Amendment.

The fourth section of that amendment reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
Former Confederates challenged the nation through financing once again, in 1879. In that year, in control of Congress for the first time since the Civil War, Democrats refused to pass appropriations bills unless those bills included their own policy priorities, especially the removal of the federal troops still in the South to protect black voting (it is a myth that federal troops left the South in 1877).

Republican leader and Union veteran James A. Garfield had fought the Confederates on the battlefields and recognized that destroying the government by starving it was no different from destroying it through arms. He urged President Rutherford B. Hayes to veto the Democrats’ appropriations bills, and Hayes did, five times. Democrats backed down, but not before voters turned against them. The next year, voters put Garfield into the White House.

In the modern era, shutdowns emerged as a policy tool after the 1974 Congressional Budget and Impoundment Control Act moved control over budgeting from the executive branch to Congress. Disagreements over funding in President Jimmy Carter’s term had little effect on the country, since government systems continued during them under the assumption that funding would eventually materialize. That changed in the early 1980s, when legal opinions said it was illegal to spend money that hadn’t been appropriated.

Beginning in the 1980s, government shutdowns became a tool of Republicans determined to cut taxes and dismantle the active government in place since 1933. In November 1981, President Ronald Reagan furloughed more than 240,000 federal workers in a fight with Congress over budget cuts, but full-fledged government shutdowns began in earnest after Republicans took control of the House of Representatives in 1995 for the first time since 1954.

Demanding steep budget cuts in Medicare, public health, the environment, and education, House Speaker Newt Gingrich refused to compromise with Democratic president Bill Clinton, who opposed the cuts. Without funding, the federal government shut down all non-essential activity for a total of 28 days between November 1995 and January 1996: National parks shut down, government contracts ceased to operate, applications for visas and passports went unanswered. The crisis pushed Clinton’s poll numbers higher than they had been since his election.

In 2013, the government shut down again from October 1 to October 17 as Republicans tried to defund the Affordable Care Act. It shut down yet again for its longest stretch in 2019, after then-president Donald Trump demanded $5.7 billion in funding for a border wall from a Congress controlled by his own party.

To avoid shutdowns, Congress can pass a funding bill or a continuing resolution to give themselves more time to pass such a funding bill. That is part of what is in the bill the House passed this evening: funding until December 3.

The other part of the House bill is a suspension of the debt ceiling until December 2022, after the midterm elections. Congress has raised the debt ceiling more than 100 times since it first went into effect: 18 times under Reagan, and most recently in 2019 under former president Trump, when Democrats joined Republicans in suspending the limit until 2021. In that time, Republicans added about $6.5 trillion to the debt through coronavirus spending and tax cuts.

Now, though, Republicans are refusing to support an increase in the debt ceiling, trying to force Democrats to separate the continuing resolution that funds the government from the higher debt ceiling.

What is at stake is the nature of the American government. Republican lawmakers begrudgingly passed social welfare legislation to address the pandemic in the months before the 2020 election, but they are still keen on dismantling a government that regulates business, provides a social safety net, and promotes infrastructure. Creating debt to cut taxes on corporations and the wealthiest Americans fits their belief that the economy and society are most efficient when successful men are able to run them as they see fit.

Biden and the Democrats are trying to counter that worldview with their own belief that the country will work best when the government guarantees everyone equal access to resources and equality before the law. After forty years of the Republicans’ austerity, achieving that equality, including rebuilding crumbling infrastructure, will cost money. At the same time, Democrats do not want to assume full responsibility for increasing the debt ceiling when much of the debt it covers was created by Republicans during the Trump administration.

Right now, neither side is indicating it will back down. Senate Minority Leader Mitch McConnell (R-KY), who has voted to raise or suspend the debt ceiling 32 times in his career, including 3 times under Trump (who contributed about $7.8 trillion to today’s $28 trillion national debt), says he will not vote to suspend the debt ceiling and will try to hold his caucus against it. He says it’s the Democrats’ problem.

A default on the nation’s financial obligations has never happened before and would create an economic crisis echoing the destruction of the nation Garfield talked about in 1879. Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

That Republicans are willing to risk yet another step that will make America look like a failed state is stunning.

But even if that’s not their ultimate goal, posturing and negotiations over finances are running out the congressional clock while the Democrats’ very popular signature issues—infrastructure and voting rights—languish."

[Farfromgeneva]

HCR. The GOP is willing to risk the nation's security and financial health for a midterm win. This is who they are:

"Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.
There are two financial deadlines looming. One is the need for Congress to fund the government. In late December 2020, Congress passed a huge bill that, among other things, funded the government through September 30. The new fiscal year starts on October 1, and if the government is not funded, it will have to shut down, ending all federal activities that are not considered imperative. This year, such activities would include a wide range of programs enacted to combat the economic crisis sparked by the coronavirus pandemic.

The second deadline is lifting the debt ceiling. That’s the amount of money Congress authorizes the government to borrow. Beginning in 1939, rather than approving individual issues of debt, Congress gave the government more flexibility in borrowing by simply agreeing to an upper limit that included all the different financial instruments the government uses. The debt ceiling is not connected directly to any individual bill, and it is not an appropriation for any specific program. It enables the government to borrow money to pay for programs in bills already passed. If the debt ceiling is not raised when necessary, the government will default on its debts, creating a financial catastrophe.

There is a long history behind our national funding systems. Until now, the U.S. has always protected its debt. After the Civil War, Democrats were determined to destroy the strong federal government the Republicans had built to fight the Confederacy. They tried to change the terms under which people had invested in wartime national bonds. Horrified at what would undermine confidence in the survival of the Union, the Republicans protected the debt in the Fourteenth Amendment.

The fourth section of that amendment reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
Former Confederates challenged the nation through financing once again, in 1879. In that year, in control of Congress for the first time since the Civil War, Democrats refused to pass appropriations bills unless those bills included their own policy priorities, especially the removal of the federal troops still in the South to protect black voting (it is a myth that federal troops left the South in 1877).

Republican leader and Union veteran James A. Garfield had fought the Confederates on the battlefields and recognized that destroying the government by starving it was no different from destroying it through arms. He urged President Rutherford B. Hayes to veto the Democrats’ appropriations bills, and Hayes did, five times. Democrats backed down, but not before voters turned against them. The next year, voters put Garfield into the White House.

In the modern era, shutdowns emerged as a policy tool after the 1974 Congressional Budget and Impoundment Control Act moved control over budgeting from the executive branch to Congress. Disagreements over funding in President Jimmy Carter’s term had little effect on the country, since government systems continued during them under the assumption that funding would eventually materialize. That changed in the early 1980s, when legal opinions said it was illegal to spend money that hadn’t been appropriated.

Beginning in the 1980s, government shutdowns became a tool of Republicans determined to cut taxes and dismantle the active government in place since 1933. In November 1981, President Ronald Reagan furloughed more than 240,000 federal workers in a fight with Congress over budget cuts, but full-fledged government shutdowns began in earnest after Republicans took control of the House of Representatives in 1995 for the first time since 1954.

Demanding steep budget cuts in Medicare, public health, the environment, and education, House Speaker Newt Gingrich refused to compromise with Democratic president Bill Clinton, who opposed the cuts. Without funding, the federal government shut down all non-essential activity for a total of 28 days between November 1995 and January 1996: National parks shut down, government contracts ceased to operate, applications for visas and passports went unanswered. The crisis pushed Clinton’s poll numbers higher than they had been since his election.

In 2013, the government shut down again from October 1 to October 17 as Republicans tried to defund the Affordable Care Act. It shut down yet again for its longest stretch in 2019, after then-president Donald Trump demanded $5.7 billion in funding for a border wall from a Congress controlled by his own party.

To avoid shutdowns, Congress can pass a funding bill or a continuing resolution to give themselves more time to pass such a funding bill. That is part of what is in the bill the House passed this evening: funding until December 3.

The other part of the House bill is a suspension of the debt ceiling until December 2022, after the midterm elections. Congress has raised the debt ceiling more than 100 times since it first went into effect: 18 times under Reagan, and most recently in 2019 under former president Trump, when Democrats joined Republicans in suspending the limit until 2021. In that time, Republicans added about $6.5 trillion to the debt through coronavirus spending and tax cuts.

Now, though, Republicans are refusing to support an increase in the debt ceiling, trying to force Democrats to separate the continuing resolution that funds the government from the higher debt ceiling.

What is at stake is the nature of the American government. Republican lawmakers begrudgingly passed social welfare legislation to address the pandemic in the months before the 2020 election, but they are still keen on dismantling a government that regulates business, provides a social safety net, and promotes infrastructure. Creating debt to cut taxes on corporations and the wealthiest Americans fits their belief that the economy and society are most efficient when successful men are able to run them as they see fit.

Biden and the Democrats are trying to counter that worldview with their own belief that the country will work best when the government guarantees everyone equal access to resources and equality before the law. After forty years of the Republicans’ austerity, achieving that equality, including rebuilding crumbling infrastructure, will cost money. At the same time, Democrats do not want to assume full responsibility for increasing the debt ceiling when much of the debt it covers was created by Republicans during the Trump administration.

Right now, neither side is indicating it will back down. Senate Minority Leader Mitch McConnell (R-KY), who has voted to raise or suspend the debt ceiling 32 times in his career, including 3 times under Trump (who contributed about $7.8 trillion to today’s $28 trillion national debt), says he will not vote to suspend the debt ceiling and will try to hold his caucus against it. He says it’s the Democrats’ problem.

A default on the nation’s financial obligations has never happened before and would create an economic crisis echoing the destruction of the nation Garfield talked about in 1879. Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

That Republicans are willing to risk yet another step that will make America look like a failed state is stunning.

But even if that’s not their ultimate goal, posturing and negotiations over finances are running out the congressional clock while the Democrats’ very popular signature issues—infrastructure and voting rights—languish."

I don’t have any cradle issue w HCR but she is seemingly the only one you read. It’s a large periodical, I promise, if you turn a few more pages or check a few more sections of digital version.

I mean she’s saying republicans are hypocrites. Ok, so are Dems, they’re not the moral authority this and some other sources would make them out to be. They’re just a bit better and focused on people other than themselves at the moment but let’s not elevate them to ghandi and mlk. They’re not.

And the default issue is ridiculous. Here’s a term for doc to get outraged about: it’s a Mexican shootout, everyone owns our bonds. A default would hurt the world such that no one can take action. The risk is to our reserve currency status but that’s a more nuanced discussion than “the debt ceiling” which is really just a heuristic until there’s a true competing paradigm and/or store of value and I look around the globe and don’t see any.

[CU88]

September 21, 2021
Sep 22

Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.

There are two financial deadlines looming. One is the need for Congress to fund the government. In late December 2020, Congress passed a huge bill that, among other things, funded the government through September 30. The new fiscal year starts on October 1, and if the government is not funded, it will have to shut down, ending all federal activities that are not considered imperative. This year, such activities would include a wide range of programs enacted to combat the economic crisis sparked by the coronavirus pandemic.

The second deadline is lifting the debt ceiling. That’s the amount of money Congress authorizes the government to borrow. Beginning in 1939, rather than approving individual issues of debt, Congress gave the government more flexibility in borrowing by simply agreeing to an upper limit that included all the different financial instruments the government uses. The debt ceiling is not connected directly to any individual bill, and it is not an appropriation for any specific program. It enables the government to borrow money to pay for programs in bills already passed. If the debt ceiling is not raised when necessary, the government will default on its debts, creating a financial catastrophe.

There is a long history behind our national funding systems. Until now, the U.S. has always protected its debt. After the Civil War, Democrats were determined to destroy the strong federal government the Republicans had built to fight the Confederacy. They tried to change the terms under which people had invested in wartime national bonds. Horrified at what would undermine confidence in the survival of the Union, the Republicans protected the debt in the Fourteenth Amendment.

The fourth section of that amendment reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Former Confederates challenged the nation through financing once again, in 1879. In that year, in control of Congress for the first time since the Civil War, Democrats refused to pass appropriations bills unless those bills included their own policy priorities, especially the removal of the federal troops still in the South to protect black voting (it is a myth that federal troops left the South in 1877).

Republican leader and Union veteran James A. Garfield had fought the Confederates on the battlefields and recognized that destroying the government by starving it was no different from destroying it through arms. He urged President Rutherford B. Hayes to veto the Democrats’ appropriations bills, and Hayes did, five times. Democrats backed down, but not before voters turned against them. The next year, voters put Garfield into the White House.

In the modern era, shutdowns emerged as a policy tool after the 1974 Congressional Budget and Impoundment Control Act moved control over budgeting from the executive branch to Congress. Disagreements over funding in President Jimmy Carter’s term had little effect on the country, since government systems continued during them under the assumption that funding would eventually materialize. That changed in the early 1980s, when legal opinions said it was illegal to spend money that hadn’t been appropriated.

Beginning in the 1980s, government shutdowns became a tool of Republicans determined to cut taxes and dismantle the active government in place since 1933. In November 1981, President Ronald Reagan furloughed more than 240,000 federal workers in a fight with Congress over budget cuts, but full-fledged government shutdowns began in earnest after Republicans took control of the House of Representatives in 1995 for the first time since 1954.

Demanding steep budget cuts in Medicare, public health, the environment, and education, House Speaker Newt Gingrich refused to compromise with Democratic president Bill Clinton, who opposed the cuts. Without funding, the federal government shut down all non-essential activity for a total of 28 days between November 1995 and January 1996: National parks shut down, government contracts ceased to operate, applications for visas and passports went unanswered. The crisis pushed Clinton’s poll numbers higher than they had been since his election.

In 2013, the government shut down again from October 1 to October 17 as Republicans tried to defund the Affordable Care Act. It shut down yet again for its longest stretch in 2019, after then-president Donald Trump demanded $5.7 billion in funding for a border wall from a Congress controlled by his own party.

To avoid shutdowns, Congress can pass a funding bill or a continuing resolution to give themselves more time to pass such a funding bill. That is part of what is in the bill the House passed this evening: funding until December 3.

The other part of the House bill is a suspension of the debt ceiling until December 2022, after the midterm elections. Congress has raised the debt ceiling more than 100 times since it first went into effect: 18 times under Reagan, and most recently in 2019 under former president Trump, when Democrats joined Republicans in suspending the limit until 2021. In that time, Republicans added about $6.5 trillion to the debt through coronavirus spending and tax cuts.

Now, though, Republicans are refusing to support an increase in the debt ceiling, trying to force Democrats to separate the continuing resolution that funds the government from the higher debt ceiling.

What is at stake is the nature of the American government. Republican lawmakers begrudgingly passed social welfare legislation to address the pandemic in the months before the 2020 election, but they are still keen on dismantling a government that regulates business, provides a social safety net, and promotes infrastructure. Creating debt to cut taxes on corporations and the wealthiest Americans fits their belief that the economy and society are most efficient when successful men are able to run them as they see fit.

Biden and the Democrats are trying to counter that worldview with their own belief that the country will work best when the government guarantees everyone equal access to resources and equality before the law. After forty years of the Republicans’ austerity, achieving that equality, including rebuilding crumbling infrastructure, will cost money. At the same time, Democrats do not want to assume full responsibility for increasing the debt ceiling when much of the debt it covers was created by Republicans during the Trump administration.

Right now, neither side is indicating it will back down. Senate Minority Leader Mitch McConnell (R-KY), who has voted to raise or suspend the debt ceiling 32 times in his career, including 3 times under Trump (who contributed about $7.8 trillion to today’s $28 trillion national debt), says he will not vote to suspend the debt ceiling and will try to hold his caucus against it. He says it’s the Democrats’ problem.

A default on the nation’s financial obligations has never happened before and would create an economic crisis echoing the destruction of the nation Garfield talked about in 1879. Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

That Republicans are willing to risk yet another step that will make America look like a failed state is stunning.

But even if that’s not their ultimate goal, posturing and negotiations over finances are running out the congressional clock while the Democrats’ very popular signature issues—infrastructure and voting rights—languish.

[Farfromgeneva]

September 21, 2021
Sep 22

Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.

There are two financial deadlines looming. One is the need for Congress to fund the government. In late December 2020, Congress passed a huge bill that, among other things, funded the government through September 30. The new fiscal year starts on October 1, and if the government is not funded, it will have to shut down, ending all federal activities that are not considered imperative. This year, such activities would include a wide range of programs enacted to combat the economic crisis sparked by the coronavirus pandemic.

The second deadline is lifting the debt ceiling. That’s the amount of money Congress authorizes the government to borrow. Beginning in 1939, rather than approving individual issues of debt, Congress gave the government more flexibility in borrowing by simply agreeing to an upper limit that included all the different financial instruments the government uses. The debt ceiling is not connected directly to any individual bill, and it is not an appropriation for any specific program. It enables the government to borrow money to pay for programs in bills already passed. If the debt ceiling is not raised when necessary, the government will default on its debts, creating a financial catastrophe.

There is a long history behind our national funding systems. Until now, the U.S. has always protected its debt. After the Civil War, Democrats were determined to destroy the strong federal government the Republicans had built to fight the Confederacy. They tried to change the terms under which people had invested in wartime national bonds. Horrified at what would undermine confidence in the survival of the Union, the Republicans protected the debt in the Fourteenth Amendment.

The fourth section of that amendment reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Former Confederates challenged the nation through financing once again, in 1879. In that year, in control of Congress for the first time since the Civil War, Democrats refused to pass appropriations bills unless those bills included their own policy priorities, especially the removal of the federal troops still in the South to protect black voting (it is a myth that federal troops left the South in 1877).

Republican leader and Union veteran James A. Garfield had fought the Confederates on the battlefields and recognized that destroying the government by starving it was no different from destroying it through arms. He urged President Rutherford B. Hayes to veto the Democrats’ appropriations bills, and Hayes did, five times. Democrats backed down, but not before voters turned against them. The next year, voters put Garfield into the White House.

In the modern era, shutdowns emerged as a policy tool after the 1974 Congressional Budget and Impoundment Control Act moved control over budgeting from the executive branch to Congress. Disagreements over funding in President Jimmy Carter’s term had little effect on the country, since government systems continued during them under the assumption that funding would eventually materialize. That changed in the early 1980s, when legal opinions said it was illegal to spend money that hadn’t been appropriated.

Beginning in the 1980s, government shutdowns became a tool of Republicans determined to cut taxes and dismantle the active government in place since 1933. In November 1981, President Ronald Reagan furloughed more than 240,000 federal workers in a fight with Congress over budget cuts, but full-fledged government shutdowns began in earnest after Republicans took control of the House of Representatives in 1995 for the first time since 1954.

Demanding steep budget cuts in Medicare, public health, the environment, and education, House Speaker Newt Gingrich refused to compromise with Democratic president Bill Clinton, who opposed the cuts. Without funding, the federal government shut down all non-essential activity for a total of 28 days between November 1995 and January 1996: National parks shut down, government contracts ceased to operate, applications for visas and passports went unanswered. The crisis pushed Clinton’s poll numbers higher than they had been since his election.

In 2013, the government shut down again from October 1 to October 17 as Republicans tried to defund the Affordable Care Act. It shut down yet again for its longest stretch in 2019, after then-president Donald Trump demanded $5.7 billion in funding for a border wall from a Congress controlled by his own party.

To avoid shutdowns, Congress can pass a funding bill or a continuing resolution to give themselves more time to pass such a funding bill. That is part of what is in the bill the House passed this evening: funding until December 3.

The other part of the House bill is a suspension of the debt ceiling until December 2022, after the midterm elections. Congress has raised the debt ceiling more than 100 times since it first went into effect: 18 times under Reagan, and most recently in 2019 under former president Trump, when Democrats joined Republicans in suspending the limit until 2021. In that time, Republicans added about $6.5 trillion to the debt through coronavirus spending and tax cuts.

Now, though, Republicans are refusing to support an increase in the debt ceiling, trying to force Democrats to separate the continuing resolution that funds the government from the higher debt ceiling.

What is at stake is the nature of the American government. Republican lawmakers begrudgingly passed social welfare legislation to address the pandemic in the months before the 2020 election, but they are still keen on dismantling a government that regulates business, provides a social safety net, and promotes infrastructure. Creating debt to cut taxes on corporations and the wealthiest Americans fits their belief that the economy and society are most efficient when successful men are able to run them as they see fit.

Biden and the Democrats are trying to counter that worldview with their own belief that the country will work best when the government guarantees everyone equal access to resources and equality before the law. After forty years of the Republicans’ austerity, achieving that equality, including rebuilding crumbling infrastructure, will cost money. At the same time, Democrats do not want to assume full responsibility for increasing the debt ceiling when much of the debt it covers was created by Republicans during the Trump administration.

Right now, neither side is indicating it will back down. Senate Minority Leader Mitch McConnell (R-KY), who has voted to raise or suspend the debt ceiling 32 times in his career, including 3 times under Trump (who contributed about $7.8 trillion to today’s $28 trillion national debt), says he will not vote to suspend the debt ceiling and will try to hold his caucus against it. He says it’s the Democrats’ problem.

A default on the nation’s financial obligations has never happened before and would create an economic crisis echoing the destruction of the nation Garfield talked about in 1879. Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

That Republicans are willing to risk yet another step that will make America look like a failed state is stunning.

But even if that’s not their ultimate goal, posturing and negotiations over finances are running out the congressional clock while the Democrats’ very popular signature issues—infrastructure and voting rights—languish.

So this morning (every morning in the far from household) my wife’s screaming at my son over getting his sneakers on but the slip-on ones he wanted to wear was wet from being left outside and she’s saying he’s acting like a baby and eventually he gives up and doesn’t want to go to school and that she hates him. I get him out the door while trying to deal with an outraged and out of control kid while being pissed at my wife and barely had my first cup of coffee. I managed today and yesterday but eventually you end up on a retreat and shutting down life for a while…

Point being the middle has to keep managing and containing the fringes on both sides and not quit or abrogate that responsibility. Pointing to “Bernie wanted $50 gazillion so shut up we compromised but still threw some garbage in” while knowing your dealing with children because the dad is in rehab (Mitt Romney/even Paul Ryan) or given up (George Will) tells me you can’t just scream at the other side and expect to get things done. And I don’t consider myself much of a father or husband these days and even I get that.

[RedFromMI]

Apparently, according to my sources on Twitter (some of whom actually know what they are talking about) - there can be a third reconciliation bill dealing directly with the debt limit...

Whether the Ds have the stones to do it is a big question. I think for their own political purposes they don't really want to override the debt limit...

Alternatively, there is a provision for the administration to issue platinum coins in any denomination they desire - and so you could issue a number of say trillion dollar coins and use them to make the debt limit argument moot...

[seacoaster]

September 21, 2021
Sep 22

Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.

There are two financial deadlines looming. One is the need for Congress to fund the government. In late December 2020, Congress passed a huge bill that, among other things, funded the government through September 30. The new fiscal year starts on October 1, and if the government is not funded, it will have to shut down, ending all federal activities that are not considered imperative. This year, such activities would include a wide range of programs enacted to combat the economic crisis sparked by the coronavirus pandemic.

The second deadline is lifting the debt ceiling. That’s the amount of money Congress authorizes the government to borrow. Beginning in 1939, rather than approving individual issues of debt, Congress gave the government more flexibility in borrowing by simply agreeing to an upper limit that included all the different financial instruments the government uses. The debt ceiling is not connected directly to any individual bill, and it is not an appropriation for any specific program. It enables the government to borrow money to pay for programs in bills already passed. If the debt ceiling is not raised when necessary, the government will default on its debts, creating a financial catastrophe.

There is a long history behind our national funding systems. Until now, the U.S. has always protected its debt. After the Civil War, Democrats were determined to destroy the strong federal government the Republicans had built to fight the Confederacy. They tried to change the terms under which people had invested in wartime national bonds. Horrified at what would undermine confidence in the survival of the Union, the Republicans protected the debt in the Fourteenth Amendment.

The fourth section of that amendment reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Former Confederates challenged the nation through financing once again, in 1879. In that year, in control of Congress for the first time since the Civil War, Democrats refused to pass appropriations bills unless those bills included their own policy priorities, especially the removal of the federal troops still in the South to protect black voting (it is a myth that federal troops left the South in 1877).

Republican leader and Union veteran James A. Garfield had fought the Confederates on the battlefields and recognized that destroying the government by starving it was no different from destroying it through arms. He urged President Rutherford B. Hayes to veto the Democrats’ appropriations bills, and Hayes did, five times. Democrats backed down, but not before voters turned against them. The next year, voters put Garfield into the White House.

In the modern era, shutdowns emerged as a policy tool after the 1974 Congressional Budget and Impoundment Control Act moved control over budgeting from the executive branch to Congress. Disagreements over funding in President Jimmy Carter’s term had little effect on the country, since government systems continued during them under the assumption that funding would eventually materialize. That changed in the early 1980s, when legal opinions said it was illegal to spend money that hadn’t been appropriated.

Beginning in the 1980s, government shutdowns became a tool of Republicans determined to cut taxes and dismantle the active government in place since 1933. In November 1981, President Ronald Reagan furloughed more than 240,000 federal workers in a fight with Congress over budget cuts, but full-fledged government shutdowns began in earnest after Republicans took control of the House of Representatives in 1995 for the first time since 1954.

Demanding steep budget cuts in Medicare, public health, the environment, and education, House Speaker Newt Gingrich refused to compromise with Democratic president Bill Clinton, who opposed the cuts. Without funding, the federal government shut down all non-essential activity for a total of 28 days between November 1995 and January 1996: National parks shut down, government contracts ceased to operate, applications for visas and passports went unanswered. The crisis pushed Clinton’s poll numbers higher than they had been since his election.

In 2013, the government shut down again from October 1 to October 17 as Republicans tried to defund the Affordable Care Act. It shut down yet again for its longest stretch in 2019, after then-president Donald Trump demanded $5.7 billion in funding for a border wall from a Congress controlled by his own party.

To avoid shutdowns, Congress can pass a funding bill or a continuing resolution to give themselves more time to pass such a funding bill. That is part of what is in the bill the House passed this evening: funding until December 3.

The other part of the House bill is a suspension of the debt ceiling until December 2022, after the midterm elections. Congress has raised the debt ceiling more than 100 times since it first went into effect: 18 times under Reagan, and most recently in 2019 under former president Trump, when Democrats joined Republicans in suspending the limit until 2021. In that time, Republicans added about $6.5 trillion to the debt through coronavirus spending and tax cuts.

Now, though, Republicans are refusing to support an increase in the debt ceiling, trying to force Democrats to separate the continuing resolution that funds the government from the higher debt ceiling.

What is at stake is the nature of the American government. Republican lawmakers begrudgingly passed social welfare legislation to address the pandemic in the months before the 2020 election, but they are still keen on dismantling a government that regulates business, provides a social safety net, and promotes infrastructure. Creating debt to cut taxes on corporations and the wealthiest Americans fits their belief that the economy and society are most efficient when successful men are able to run them as they see fit.

Biden and the Democrats are trying to counter that worldview with their own belief that the country will work best when the government guarantees everyone equal access to resources and equality before the law. After forty years of the Republicans’ austerity, achieving that equality, including rebuilding crumbling infrastructure, will cost money. At the same time, Democrats do not want to assume full responsibility for increasing the debt ceiling when much of the debt it covers was created by Republicans during the Trump administration.

Right now, neither side is indicating it will back down. Senate Minority Leader Mitch McConnell (R-KY), who has voted to raise or suspend the debt ceiling 32 times in his career, including 3 times under Trump (who contributed about $7.8 trillion to today’s $28 trillion national debt), says he will not vote to suspend the debt ceiling and will try to hold his caucus against it. He says it’s the Democrats’ problem.

A default on the nation’s financial obligations has never happened before and would create an economic crisis echoing the destruction of the nation Garfield talked about in 1879. Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

That Republicans are willing to risk yet another step that will make America look like a failed state is stunning.

But even if that’s not their ultimate goal, posturing and negotiations over finances are running out the congressional clock while the Democrats’ very popular signature issues—infrastructure and voting rights—languish.

So this morning (every morning in the far from household) my wife’s screaming at my son over getting his sneakers on but the slip on pit he wanted to wear was wet from being left outside and she’s saying he’s acting like a baby and eventually he gives up and doesn’t want to go to school and that she hates him. I get him out the door while trying to deal with an outraged and out of control kid while being ticked at my wife and barely had my first cup of coffee. I managed today and yesterday but eventually you end up on a retreat and shutting down life for a while…

Point being the middle has to keep managing and containing the fringes on both sides and not quit or abrogate that responsibility. Pointing to “Bernie wanted $50 gazillion so shut up we compromised but still threw some garbage in” while knowing your dealing with children because the dad is in rehab (Mitt Romney/even Paul Ryan) or given up (George Will) tells me you can’t just scream at the other side and expect to get things done. And I don’t consider myself much of a father or husband these days and even I get that.

I confess…I’m having trouble understanding the connection or relationship between the debt ceiling and this amazingly ordinary tale of parenting a kid of that age.

[Farfromgeneva]

September 21, 2021
Sep 22

Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.

There are two financial deadlines looming. One is the need for Congress to fund the government. In late December 2020, Congress passed a huge bill that, among other things, funded the government through September 30. The new fiscal year starts on October 1, and if the government is not funded, it will have to shut down, ending all federal activities that are not considered imperative. This year, such activities would include a wide range of programs enacted to combat the economic crisis sparked by the coronavirus pandemic.

The second deadline is lifting the debt ceiling. That’s the amount of money Congress authorizes the government to borrow. Beginning in 1939, rather than approving individual issues of debt, Congress gave the government more flexibility in borrowing by simply agreeing to an upper limit that included all the different financial instruments the government uses. The debt ceiling is not connected directly to any individual bill, and it is not an appropriation for any specific program. It enables the government to borrow money to pay for programs in bills already passed. If the debt ceiling is not raised when necessary, the government will default on its debts, creating a financial catastrophe.

There is a long history behind our national funding systems. Until now, the U.S. has always protected its debt. After the Civil War, Democrats were determined to destroy the strong federal government the Republicans had built to fight the Confederacy. They tried to change the terms under which people had invested in wartime national bonds. Horrified at what would undermine confidence in the survival of the Union, the Republicans protected the debt in the Fourteenth Amendment.

The fourth section of that amendment reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Former Confederates challenged the nation through financing once again, in 1879. In that year, in control of Congress for the first time since the Civil War, Democrats refused to pass appropriations bills unless those bills included their own policy priorities, especially the removal of the federal troops still in the South to protect black voting (it is a myth that federal troops left the South in 1877).

Republican leader and Union veteran James A. Garfield had fought the Confederates on the battlefields and recognized that destroying the government by starving it was no different from destroying it through arms. He urged President Rutherford B. Hayes to veto the Democrats’ appropriations bills, and Hayes did, five times. Democrats backed down, but not before voters turned against them. The next year, voters put Garfield into the White House.

In the modern era, shutdowns emerged as a policy tool after the 1974 Congressional Budget and Impoundment Control Act moved control over budgeting from the executive branch to Congress. Disagreements over funding in President Jimmy Carter’s term had little effect on the country, since government systems continued during them under the assumption that funding would eventually materialize. That changed in the early 1980s, when legal opinions said it was illegal to spend money that hadn’t been appropriated.

Beginning in the 1980s, government shutdowns became a tool of Republicans determined to cut taxes and dismantle the active government in place since 1933. In November 1981, President Ronald Reagan furloughed more than 240,000 federal workers in a fight with Congress over budget cuts, but full-fledged government shutdowns began in earnest after Republicans took control of the House of Representatives in 1995 for the first time since 1954.

Demanding steep budget cuts in Medicare, public health, the environment, and education, House Speaker Newt Gingrich refused to compromise with Democratic president Bill Clinton, who opposed the cuts. Without funding, the federal government shut down all non-essential activity for a total of 28 days between November 1995 and January 1996: National parks shut down, government contracts ceased to operate, applications for visas and passports went unanswered. The crisis pushed Clinton’s poll numbers higher than they had been since his election.

In 2013, the government shut down again from October 1 to October 17 as Republicans tried to defund the Affordable Care Act. It shut down yet again for its longest stretch in 2019, after then-president Donald Trump demanded $5.7 billion in funding for a border wall from a Congress controlled by his own party.

To avoid shutdowns, Congress can pass a funding bill or a continuing resolution to give themselves more time to pass such a funding bill. That is part of what is in the bill the House passed this evening: funding until December 3.

The other part of the House bill is a suspension of the debt ceiling until December 2022, after the midterm elections. Congress has raised the debt ceiling more than 100 times since it first went into effect: 18 times under Reagan, and most recently in 2019 under former president Trump, when Democrats joined Republicans in suspending the limit until 2021. In that time, Republicans added about $6.5 trillion to the debt through coronavirus spending and tax cuts.

Now, though, Republicans are refusing to support an increase in the debt ceiling, trying to force Democrats to separate the continuing resolution that funds the government from the higher debt ceiling.

What is at stake is the nature of the American government. Republican lawmakers begrudgingly passed social welfare legislation to address the pandemic in the months before the 2020 election, but they are still keen on dismantling a government that regulates business, provides a social safety net, and promotes infrastructure. Creating debt to cut taxes on corporations and the wealthiest Americans fits their belief that the economy and society are most efficient when successful men are able to run them as they see fit.

Biden and the Democrats are trying to counter that worldview with their own belief that the country will work best when the government guarantees everyone equal access to resources and equality before the law. After forty years of the Republicans’ austerity, achieving that equality, including rebuilding crumbling infrastructure, will cost money. At the same time, Democrats do not want to assume full responsibility for increasing the debt ceiling when much of the debt it covers was created by Republicans during the Trump administration.

Right now, neither side is indicating it will back down. Senate Minority Leader Mitch McConnell (R-KY), who has voted to raise or suspend the debt ceiling 32 times in his career, including 3 times under Trump (who contributed about $7.8 trillion to today’s $28 trillion national debt), says he will not vote to suspend the debt ceiling and will try to hold his caucus against it. He says it’s the Democrats’ problem.

A default on the nation’s financial obligations has never happened before and would create an economic crisis echoing the destruction of the nation Garfield talked about in 1879. Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

That Republicans are willing to risk yet another step that will make America look like a failed state is stunning.

But even if that’s not their ultimate goal, posturing and negotiations over finances are running out the congressional clock while the Democrats’ very popular signature issues—infrastructure and voting rights—languish.

So this morning (every morning in the far from household) my wife’s screaming at my son over getting his sneakers on but the slip on pit he wanted to wear was wet from being left outside and she’s saying he’s acting like a baby and eventually he gives up and doesn’t want to go to school and that she hates him. I get him out the door while trying to deal with an outraged and out of control kid while being ticked at my wife and barely had my first cup of coffee. I managed today and yesterday but eventually you end up on a retreat and shutting down life for a while…

Point being the middle has to keep managing and containing the fringes on both sides and not quit or abrogate that responsibility. Pointing to “Bernie wanted $50 gazillion so shut up we compromised but still threw some garbage in” while knowing your dealing with children because the dad is in rehab (Mitt Romney/even Paul Ryan) or given up (George Will) tells me you can’t just scream at the other side and expect to get things done. And I don’t consider myself much of a father or husband these days and even I get that.

I confess…I’m having trouble understanding the connection or relationship between the debt ceiling and this amazingly ordinary tale of parenting a kid of that age.

You can’t yell at a child (current Republican movement away from reality) and call them names, poke them in the eye (fluff in package and citing the extreme wishlist as “look we compromised from that position” and then be mad because you didn’t get what you want without being an jerk who is ineffective yourself. (Not you but yourself in the Royal sense of the Democrats) This isn’t the same as to say coddling or giving in, but any margins in, pouting and stomping (Dems not in the middle m, many of whom have abrogated their leadership in order to ensure they win by coddling their extremes) isn’t leadership either.

The point is you have to keep trying to do things the right way. Not just look for shortcuts, excuses and blame. That’s not leadership.

[Farfromgeneva]

September 21, 2021
Sep 22

Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.

There are two financial deadlines looming. One is the need for Congress to fund the government. In late December 2020, Congress passed a huge bill that, among other things, funded the government through September 30. The new fiscal year starts on October 1, and if the government is not funded, it will have to shut down, ending all federal activities that are not considered imperative. This year, such activities would include a wide range of programs enacted to combat the economic crisis sparked by the coronavirus pandemic.

The second deadline is lifting the debt ceiling. That’s the amount of money Congress authorizes the government to borrow. Beginning in 1939, rather than approving individual issues of debt, Congress gave the government more flexibility in borrowing by simply agreeing to an upper limit that included all the different financial instruments the government uses. The debt ceiling is not connected directly to any individual bill, and it is not an appropriation for any specific program. It enables the government to borrow money to pay for programs in bills already passed. If the debt ceiling is not raised when necessary, the government will default on its debts, creating a financial catastrophe.

There is a long history behind our national funding systems. Until now, the U.S. has always protected its debt. After the Civil War, Democrats were determined to destroy the strong federal government the Republicans had built to fight the Confederacy. They tried to change the terms under which people had invested in wartime national bonds. Horrified at what would undermine confidence in the survival of the Union, the Republicans protected the debt in the Fourteenth Amendment.

The fourth section of that amendment reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Former Confederates challenged the nation through financing once again, in 1879. In that year, in control of Congress for the first time since the Civil War, Democrats refused to pass appropriations bills unless those bills included their own policy priorities, especially the removal of the federal troops still in the South to protect black voting (it is a myth that federal troops left the South in 1877).

Republican leader and Union veteran James A. Garfield had fought the Confederates on the battlefields and recognized that destroying the government by starving it was no different from destroying it through arms. He urged President Rutherford B. Hayes to veto the Democrats’ appropriations bills, and Hayes did, five times. Democrats backed down, but not before voters turned against them. The next year, voters put Garfield into the White House.

In the modern era, shutdowns emerged as a policy tool after the 1974 Congressional Budget and Impoundment Control Act moved control over budgeting from the executive branch to Congress. Disagreements over funding in President Jimmy Carter’s term had little effect on the country, since government systems continued during them under the assumption that funding would eventually materialize. That changed in the early 1980s, when legal opinions said it was illegal to spend money that hadn’t been appropriated.

Beginning in the 1980s, government shutdowns became a tool of Republicans determined to cut taxes and dismantle the active government in place since 1933. In November 1981, President Ronald Reagan furloughed more than 240,000 federal workers in a fight with Congress over budget cuts, but full-fledged government shutdowns began in earnest after Republicans took control of the House of Representatives in 1995 for the first time since 1954.

Demanding steep budget cuts in Medicare, public health, the environment, and education, House Speaker Newt Gingrich refused to compromise with Democratic president Bill Clinton, who opposed the cuts. Without funding, the federal government shut down all non-essential activity for a total of 28 days between November 1995 and January 1996: National parks shut down, government contracts ceased to operate, applications for visas and passports went unanswered. The crisis pushed Clinton’s poll numbers higher than they had been since his election.

In 2013, the government shut down again from October 1 to October 17 as Republicans tried to defund the Affordable Care Act. It shut down yet again for its longest stretch in 2019, after then-president Donald Trump demanded $5.7 billion in funding for a border wall from a Congress controlled by his own party.

To avoid shutdowns, Congress can pass a funding bill or a continuing resolution to give themselves more time to pass such a funding bill. That is part of what is in the bill the House passed this evening: funding until December 3.

The other part of the House bill is a suspension of the debt ceiling until December 2022, after the midterm elections. Congress has raised the debt ceiling more than 100 times since it first went into effect: 18 times under Reagan, and most recently in 2019 under former president Trump, when Democrats joined Republicans in suspending the limit until 2021. In that time, Republicans added about $6.5 trillion to the debt through coronavirus spending and tax cuts.

Now, though, Republicans are refusing to support an increase in the debt ceiling, trying to force Democrats to separate the continuing resolution that funds the government from the higher debt ceiling.

What is at stake is the nature of the American government. Republican lawmakers begrudgingly passed social welfare legislation to address the pandemic in the months before the 2020 election, but they are still keen on dismantling a government that regulates business, provides a social safety net, and promotes infrastructure. Creating debt to cut taxes on corporations and the wealthiest Americans fits their belief that the economy and society are most efficient when successful men are able to run them as they see fit.

Biden and the Democrats are trying to counter that worldview with their own belief that the country will work best when the government guarantees everyone equal access to resources and equality before the law. After forty years of the Republicans’ austerity, achieving that equality, including rebuilding crumbling infrastructure, will cost money. At the same time, Democrats do not want to assume full responsibility for increasing the debt ceiling when much of the debt it covers was created by Republicans during the Trump administration.

Right now, neither side is indicating it will back down. Senate Minority Leader Mitch McConnell (R-KY), who has voted to raise or suspend the debt ceiling 32 times in his career, including 3 times under Trump (who contributed about $7.8 trillion to today’s $28 trillion national debt), says he will not vote to suspend the debt ceiling and will try to hold his caucus against it. He says it’s the Democrats’ problem.

A default on the nation’s financial obligations has never happened before and would create an economic crisis echoing the destruction of the nation Garfield talked about in 1879. Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

That Republicans are willing to risk yet another step that will make America look like a failed state is stunning.

But even if that’s not their ultimate goal, posturing and negotiations over finances are running out the congressional clock while the Democrats’ very popular signature issues—infrastructure and voting rights—languish.

So this morning (every morning in the far from household) my wife’s screaming at my son over getting his sneakers on but the slip on pit he wanted to wear was wet from being left outside and she’s saying he’s acting like a baby and eventually he gives up and doesn’t want to go to school and that she hates him. I get him out the door while trying to deal with an outraged and out of control kid while being ticked at my wife and barely had my first cup of coffee. I managed today and yesterday but eventually you end up on a retreat and shutting down life for a while…

Point being the middle has to keep managing and containing the fringes on both sides and not quit or abrogate that responsibility. Pointing to “Bernie wanted $50 gazillion so shut up we compromised but still threw some garbage in” while knowing your dealing with children because the dad is in rehab (Mitt Romney/even Paul Ryan) or given up (George Will) tells me you can’t just scream at the other side and expect to get things done. And I don’t consider myself much of a father or husband these days and even I get that.

I confess…I’m having trouble understanding the connection or relationship between the debt ceiling and this amazingly ordinary tale of parenting a kid of that age.

And I can’t believe kids say their parents hate them to their faces or their other parent and seem to believe it as much as I do but maybe that’s a dialectic problem of mine. You’re telling me other parents will say “yeah I hate you too” to 5-9yr old kids on the reg like my wife does? I struggle to believe that.

[Farfromgeneva]

Apparently, according to my sources on Twitter (some of whom actually know what they are talking about) - there can be a third reconciliation bill dealing directly with the debt limit...

Whether the Ds have the stones to do it is a big question. I think for their own political purposes they don't really want to override the debt limit...

Alternatively, there is a provision for the administration to issue platinum coins in any denomination they desire - and so you could issue a number of say trillion dollar coins and use them to make the debt limit argument moot...

That last option is a default on debts. No different than what Russia did in devaluing the ruble in 1998. That’s how the world would view it.

[Farfromgeneva]

Not a great pick

ITICS
Biden Expected to Nominate Wall Street Critic as Top Banking Regulator
Cornell law professor Saule Omarova will be named Comptroller of the Currency, say people familiar with the matter

Saule Omarova
PHOTO: SENATE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
By Andrew Ackerman
Updated Sept. 22, 2021 9:47 pm ET

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WASHINGTON—President Biden plans to nominate a law professor who has criticized Wall Street banks to oversee some of the largest U.S. lenders, people familiar with the matter said.

Mr. Biden is expected to tap Saule Omarova, a Cornell University law professor, to become the Comptroller of the Currency, which oversees national banks including JPMorgan Chase & Co. and Bank of America.

A formal announcement could come this week, the people said.


A White House spokeswoman declined to comment. Ms. Omarova didn’t respond to a request for comment.

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Bloomberg News reported earlier on the expected nomination.

The OCC is an independent bureau of the Treasury Department. It oversees about 1,200 banks with total assets of $14 trillion, some two-thirds of the total in the U.S. banking system, making it one of the most powerful regulators alongside the Fed and the Federal Deposit Insurance Corp.

The powerful Comptroller of the Currency has a seat on the board of the FDIC as well as on the Financial Stability Oversight Council, a panel of senior regulators charged with detecting risks to the financial system. The bulk of the job revolves around supervising the day-to-day operations of the world’s largest banks.

A native of Kazakhstan, if confirmed Ms. Omarova would be the first woman to serve as the full-time comptroller to run the 3,500-strong agency since Abraham Lincoln signed it into law in 1863.

She would likely work to help fulfill Mr. Biden’s campaign push to expand access to banking services in underserved communities. As part of that effort, she would help lead a planned overhaul of the rules for the Community Reinvestment Act, a decades-old law governing hundreds of billions of dollars in lending and investment in low-income areas.


On Twitter, Ms. Omarova criticized this summer’s end to temporary restrictions on big bank share buybacks and dividends after the banks performed well in annual stress tests.

In a separate tweet, she criticized a news report on acquisitions by JPMorgan. “Does the world need JPMorgan to grow bigger or more powerful? Just wondering,” she wrote.

In academic writing, Ms. Omarova has called for a shift of consumer banking deposits from private firms to the Federal Reserve and called to “effectively end banking as we know it.”

The same 2020 paper endorsed steps to “radically redefine the role of a central bank as the ultimate public platform for generating, modulating, and allocating financial resources in a democratic economy—the People’s Ledger.”

The pick is expected to be cheered by progressive Democrats who support her criticism of banking and is likely to meet opposition from Republicans and industry groups.

A Republican Senate aide said GOP lawmakers are concerned that her views are “far to the left of anyone we’ve seen in the regulatory space.”

The Biden administration has struggled to find a comptroller nominee who would be embraced by its Democratic allies on Capitol Hill. Earlier this year, the White House abandoned a former Obama-era Treasury official it had eyed for the post after he drew opposition from progressive Democrats. Several other people were considered for the role but never nominated.

Michael Hsu, a former Fed staffer, has been serving as acting comptroller since May.

Write to Andrew Ackerman at [email protected]