Why The US Might Default Even with Enough Tax Revenues

[Toro]

This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.

Default may occur because of a technical issue I hadn't known about.

If no legislation is passed, the payments problem will be immediately intense in early August. In very rough numbers, federal spending is $300 billion per month while taxes are $180 billion per month. Since the U.S. is on a cash-basis accounting system, however, the debt limit has to absorb a long pipeline of past expenditures plus high-priority current payments like interest on the national debt. While tax receipts are coming in daily, some of it -- social security and Medicare taxes in excess of the expenditures on those programs -- can’t be spent because of the way the trust fund balances increase the statutory debt. The result is a rapidly broadening set of highly disruptive non-payments which the White House can extrapolate and communicate.

I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.

 

[jillian]

This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.

Default may occur because of a technical issue I hadn't known about.

If no legislation is passed, the payments problem will be immediately intense in early August. In very rough numbers, federal spending is $300 billion per month while taxes are $180 billion per month. Since the U.S. is on a cash-basis accounting system, however, the debt limit has to absorb a long pipeline of past expenditures plus high-priority current payments like interest on the national debt. While tax receipts are coming in daily, some of it -- social security and Medicare taxes in excess of the expenditures on those programs -- can’t be spent because of the way the trust fund balances increase the statutory debt. The result is a rapidly broadening set of highly disruptive non-payments which the White House can extrapolate and communicate.

I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.

thank you for that. i think people wear partisan blinders that don't allow them to assess this situation rationally.

 

[Leweman]

Time to start all over again.

 

[Quantum Windbag]

This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.

Default may occur because of a technical issue I hadn't known about.

If no legislation is passed, the payments problem will be immediately intense in early August. In very rough numbers, federal spending is $300 billion per month while taxes are $180 billion per month. Since the U.S. is on a cash-basis accounting system, however, the debt limit has to absorb a long pipeline of past expenditures plus high-priority current payments like interest on the national debt. While tax receipts are coming in daily, some of it -- social security and Medicare taxes in excess of the expenditures on those programs -- can’t be spent because of the way the trust fund balances increase the statutory debt. The result is a rapidly broadening set of highly disruptive non-payments which the White House can extrapolate and communicate.

I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.

If default is actually a real risk why won't Obama accept a short term deal to raise the debt ceiling in order avoid default?

 

[Dr.House]

This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.

Default may occur because of a technical issue I hadn't known about.

If no legislation is passed, the payments problem will be immediately intense in early August. In very rough numbers, federal spending is $300 billion per month while taxes are $180 billion per month. Since the U.S. is on a cash-basis accounting system, however, the debt limit has to absorb a long pipeline of past expenditures plus high-priority current payments like interest on the national debt. While tax receipts are coming in daily, some of it -- social security and Medicare taxes in excess of the expenditures on those programs -- can’t be spent because of the way the trust fund balances increase the statutory debt. The result is a rapidly broadening set of highly disruptive non-payments which the White House can extrapolate and communicate.

I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.

If default is actually a real risk why won't Obama accept a short term deal to raise the debt ceiling in order avoid default?

A: Politics...

 

[jillian]

This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.

Default may occur because of a technical issue I hadn't known about.

If no legislation is passed, the payments problem will be immediately intense in early August. In very rough numbers, federal spending is $300 billion per month while taxes are $180 billion per month. Since the U.S. is on a cash-basis accounting system, however, the debt limit has to absorb a long pipeline of past expenditures plus high-priority current payments like interest on the national debt. While tax receipts are coming in daily, some of it -- social security and Medicare taxes in excess of the expenditures on those programs -- can’t be spent because of the way the trust fund balances increase the statutory debt. The result is a rapidly broadening set of highly disruptive non-payments which the White House can extrapolate and communicate.

I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.

If default is actually a real risk why won't Obama accept a short term deal to raise the debt ceiling in order avoid default?

because any deal that only cuts and doesn't raise revenues isn't a deal.

so you might want to talk to eric cantor about that one.

 

[Quantum Windbag]

This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.

Default may occur because of a technical issue I hadn't known about.

If no legislation is passed, the payments problem will be immediately intense in early August. In very rough numbers, federal spending is $300 billion per month while taxes are $180 billion per month. Since the U.S. is on a cash-basis accounting system, however, the debt limit has to absorb a long pipeline of past expenditures plus high-priority current payments like interest on the national debt. While tax receipts are coming in daily, some of it -- social security and Medicare taxes in excess of the expenditures on those programs -- can’t be spent because of the way the trust fund balances increase the statutory debt. The result is a rapidly broadening set of highly disruptive non-payments which the White House can extrapolate and communicate.

I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.

thank you for that. i think people wear partisan blinders that don't allow them to assess this situation rationally.

You sound a bit like Obama. do you always call others on what you do?

 

[Quantum Windbag]

This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.

Default may occur because of a technical issue I hadn't known about.

I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.

If default is actually a real risk why won't Obama accept a short term deal to raise the debt ceiling in order avoid default?

because any deal that only cuts and doesn't raise revenues isn't a deal.

so you might want to talk to eric cantor about that one.

That wasn't even an answer to my question.

Let me rephrase it for you. if default is actually such a danger why is Obama willing to see the nation go into default rather than accept a short term deal to raise the debt ceiling in order to work on a real deal without the threat of a complete economic meltdown if we do not reach a deal?

 

[zzzz]

It would seem like foreign countries may try throw a monkey wrench (where did that term come from?) into the whole default scenario by cashing in treasury notes early before the first of the month thereby causing a liquidity problem for the government. The Chinese hold a lot of US paper and yes the ploy would cost but the effect could be cause the government to default before the first of the month..

 

[FuelRod]

What do you mean I can't pay off my visa with my mastercard?