We've had only one comment on the debt-ceiling and that was an early-warning on markets after a resolution.*
From the Wall Street Journal, May 22:
The Treasury made a plan to pay bondholders in 2011. It could do the same with Social Security.
With the U.S. Treasury predicted to run out of cash (the “X date”) as early as June 1, Treasury Secretary Janet Yellen has started warning of an “economic calamity” if Congress doesn’t raise the statutory debt limit. According to Ms. Yellen, “whether it’s defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, we would simply not have enough cash to meet all of our obligations.” These claims are dangerously misleading.
Hitting the X date won’t cause a default on the national debt. Debt-service payments have a feature that most other government payments lack: When the government pays off maturing debt, the amount of debt subject to the statutory limit declines. This means that the government can “roll over” such obligations—that is, issue new debt to pay off old debt—without violating the debt limit.
A plan to roll over debt after the X date—and thereby ensure that the debt is honored—is more than theoretical. It is a matter of public record that the Treasury made such a plan during a 2011 showdown over the debt limit, when one official explained that “the principal on Treasury securities that are maturing would be funded by having auctions that would roll over those maturing securities into new issues, so the new issues would be able to fund the redemption of the maturing securities.”
For a similar reason, hitting the X date need not stop Social Security and other payments that come from federal trust funds. The payroll taxes that are used to fund such benefits are invested in special Treasury securities that count toward the debt limit. The Treasury has the authority to redeem these securities to pay benefits; when it does so, debt subject to the statutory limit declines. Thus paying Social Security benefits—like paying maturing principal on the public debt—can create headroom under the limit, making rollover strategies possible. In both 1985 and 1996, following similar debt-limit conflicts, the comptroller general concluded that such strategies would be lawful because they wouldn’t “increase the total amount of outstanding debt subject to the statutory limit,” and thus wouldn’t “usurp the congressional power under the Constitution to borrow.”
Paying Social Security benefits and servicing the national debt are not only lawful; they are legally obligatory. Because the Biden administration can continue making such payments regardless of the statutory debt limit, and because such payments wouldn’t come at the cost of any other federal payments, it must do so. Otherwise, the administration would fail its constitutional duty to execute those statutes faithfully—an argument that would apply even without the support of the 14th Amendment’s Public Debt Clause....
If there is a relief rally after the budget gets worked out that should mark the intermediate-term top, before the reality of the U.S. Treasury having to refill their Treasury General Account begins to sink into the market's collective consciousness.
Here's the TGA via the St. Louis Federal Reserve Bank's FRED database. The Treasury has been drawing down their balance which adds liquidity to the rest of the system. After they can start increasing the debt again they will build the balance back up, reducing liquidity...."Nobel economist Paul Krugman says minting a $1 trillion coin to prevent a debt ceiling crisis wouldn't be inflationary"
I'm bid $1 trillion once,is there a $1 quadrillion in the room? A non-inflationary $1 quadrillion?
