STOCK MARKET WATCH -- Friday, 13 September 2013

[Demeter]

7. We could breach the debt ceiling as soon as Oct. 18. Here’s what happens next.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/10/we-could-breach-the-debt-ceiling-as-soon-as-oct-18-heres-what-happens-next/

We finally have a date for the debt-ceiling showdown. Doomsday is expected to arrive this year between Oct. 18 and Nov. 5. That’s according to a new analysis from the Bipartisan Policy Center. At some point in those two weeks, the Treasury Department will have exhausted all its options and will no longer have enough money to meet its financial obligations. Either Congress lifts the debt ceiling or the federal government will have to default on some of its bills. The BPC calls this the “X Date”:



What happens on the ‘X date’?

Technically, the United States hit its $16.699 trillion debt limit* way back on May 19. Since then, the Treasury Department has been taking a slew of “extraordinary measures”—such as tapping exchange-rate funds — to make sure the government has money to meet all of its obligations, from paying bondholders to sending out Social Security checks. Those extraordinary measures run out on the “X Date.” If that day falls on Oct. 18, then the federal government will only have enough tax revenue to pay about 68 percent of its bills for the rest of the month — and it won’t be able to borrow or scrounge up more money to make up the difference.

Note that this is all assuming Congress strikes a deal to keep funding the government’s discretionary programs past Sept. 30. If Congress fails to pass another continuing resolution and the government shuts down, that might scramble the dates a bit.

Why Obama probably can’t pick and choose which bills to pay

So who gets paid if we hit the “X Date”? It’s unclear. During the last debt ceiling fight, some Republicans suggested that the United States should keep funding the crucial stuff and let the rest of the government shut down. “We should pass a bill out of the House,” said Sen. Pat Toomey (R-Pa.), “saying there will be certain priorities attached to certain things, namely payment of debt services and payment of our military.” This option is known as “prioritization.” It’s the idea that the government can selectively pay some of its bills so that the nation doesn’t default on, say, its payments to bondholders — a scary scenario that could roil the world’s financial markets. This may sound appealing. But there’s also good reason to think prioritization wouldn’t work. Consider how the U.S. government actually pays its bills. Each and every day, computers at the Treasury Department receive more than 2 million invoices from various agencies. The Department of Labor might say, for example, that it owes a contractor $3 million to fix up a building in Denver. The Treasury computers make sure the figures are correct and then authorize the payment. This is all done automatically, dozens of times per second. The authors of the Bipartisan Policy Center report, Shai Akabas and Brian Collins, argue that prioritization is infeasible. “It would involve sorting and choosing from nearly 100 million monthly payments,” they write. There’s no good way to stop paying the Education Department while making sure soldiers get paid. It’s not clear that the Treasury Department even has the technical capacity to do this, let alone the legal authority.

The Obama administration, for its part, has consistently maintained that it can not prioritize payments. In 2011, Treasury Secretary Tim Geithner told Congress that prioritization was “a radical and deeply irresponsible departure from the commitments by presidents of both parties, throughout American history, to honor all of the commitments our nation has made.”

Other (unlikely) options for the debt ceiling SEE LINK!

I'LL BETCHA THE NSA COULD FIGURE OUT HOW TO DO IT. OF COURSE, IF THEY SHUT THAT WASTE OF TAXES DOWN, THE PROBLEM WOULD GO AWAY....