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GOP Trying to Look Tough

So John Boehner tried to put on a show this weekend for the tea party…

  • He tried to say that the President and Senate has to come to the table to discuss… Well something to let the GOP save face.  Now it’s entitlement reform…
  • He says that there is not the votes to pass a clean CR.  *cough* Bullsh*t *cough*

Look let’s play politics, last point first…

1) If there is not the votes for a clean CR, then he should just allow the vote and watch it fail. If Boehner is right, the vote will fail and his position to bargain with Obama would be strengthened.

The fact that this is not happening shows Boehner is just trying to BS the voters.

2) By shifting the talks to entitlement reform (or anything outside of Obamacare), Boehner is just trying to find anything to dig his party out of the hole they dug themselves.

My $.02, is Obama can’t let that happen. We have to get the tea party to stop doing this BS. If they want to change Obamacare (or anything else), here’s an idea: Go win elections at the national level.

Personally, if I was President would let this go for about another week and then do one of these solutions and defuse this bomb once and for all. Personally I like the 3rd option:

3. Premium Treasury Bonds: While the previous two strategies for obviating the debt ceiling were prevalent during the last debt-ceiling showdown, the idea of issuing so-called “premium” Treasury bonds is newer. The idea was first raised earlier this year by Matthew Levine at Dealbreaker. Understanding the idea requires knowing a little bit about how bonds are sold. Bear with:

Bonds have both a “par” value and often times a different price at which a bond is actually sold to the public. Normally this is because interest rates can change pretty quickly: Say I want to issue a bond for $100 at a 4% interest rate, but a few weeks later, when I actually get around to issuing the bond, interest rate rises to 6%. To sell my 4% bond will require selling the bond at a discount to par–somewhat less than $100. The opposite would happen if interest rates falls to 2%. If I’m selling a 4% bond in a 2% environment, I’ll be able to garner more than $100 in that environment.

So how does this apply to the debt ceiling? The debt ceiling law only applies to the face value of bonds issued, rather than the actual value of the money raised. So when past Treasury debt expires, the Treasury Department could simply roll it over into bonds with much lower face values but that bring in higher revenues and pay out higher interest rates, allowing the total debt of the U.S. to continue to rise while still staying within the debt-limit law.

And as Levine points out, this is something that, unlike the platinum coin scheme, governments around the world have resorted to strategies like this before. It was a somewhat similar scheme involving derivatives that allowed the Greek government to hide the true value of its debt from EU officials until its debt crisis a few years ago. In our imagined scenario, however, Treasury wouldn’t be trying to hide the debt from the public. It would simply be looking for a way to skirt a law that doesn’t make a lot sense to begin with.

The brilliance of the premium bond scheme is that unlike the 14th amendment or platinum coin scenario, there isn’t an obvious way that opponents of it could challenge it in court.

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