Let me say first that I am not a lawyer. Nor am I a supporter of Donald Trump for the GOP presidential nomination. Yet, I am troubled by the New York Executive Law § 63(12) (the “Law”) under which Donald Trump and his associates have been found to have committed fraud, his business licenses cancelled and various of his business units ordered dissolved within 10 days – all before a trial in which New York State seeks a whopping $250 million from The Donald.
This Law strikes me as dangerous, certainly to anyone doing business in New York State. As the order by New York Supreme Court Justice Arthur Engoron (“the Order”) acknowledges, no victim of Trump’s activities “lodged a complaint” or “otherwise claimed damages.” Usually, a murder conviction requires that the victim’s body be found. In the Trump case, the body is alive and kicking.
Casey Jones might as well be at the throttle. Certainly, there’s nothing slow-motion about Uncle Sam’s financial train wreck. The crisis is broadly consequential. In the eleven months through August, net interest on the national debt has hit $630 billion, with $69 billion paid last month. It will end the full year at double the $351 billion paid just two years ago in fiscal 2021.
The environment may not persist, since debt throughout the economy is repricing at interest rates that are multiples higher than those prevailing in the easy-money decade of the 2010s. Businesses and consumers may buckle under the burden. That would bring recession and lower rates, despite current economic commentary to the contrary that sees, instead, a “soft landing” ahead.
The skyrocketing rise in interest costs has some of the fascination of a runaway freight train, transfixing observers. Yet, we should ignore the spectacle to focus instead upon the damage being wrought
After the downgrade of America’s debt by Fitch Ratings, a drumbeat of negative assessments has followed in respect of how deep in the hole our country has plunged. That’s a good thing, since net interest on the debt is escalating rapidly on a track to hit an unsustainable and crippling $1 trillion in fiscal 2025.
This fiscal year net interest is headed toward $700 billion, having already hit $561 billion in ten months, with $67 billion paid in July. Interest rates are at the highest levels in decades and likely to stay there, with the Federal Reserve saying it will hold rates “higher for longer.” Rates may climb further, as they have in recent days.
Most economic forecasters now see uninterrupted economic growth rather than a recession that might bring rates down. Monetary experts are considering whether current rates are a new normal and whether the neutral rate of interest and the real rate of return may be higher than previously thought.
The Supreme Court late-June decision striking down affirmative action in college admissions is a triumph for fairness and the quintessentially American belief that the best man or woman should win. Yet, it is largely an empty victory, and it misses the most consequential issue concerning diversity on college campuses today — political diversity.
July 3, 2023
Within a few hours of the court’s decision, Harvard announced its defiance, saying in Delphic words that the “principle” that Harvard follows “is as true and important today as it was yesterday.”
July 27, 2023
If Harvard thinks that its “principle” is diversity, then Harvard suffers from clinical self-unawareness. For it is anything but diverse. It is exceedingly liberal. The student newspaper, the Crimson, in its most recent annual survey found that “More Than 80 Percent of Surveyed Harvard Faculty Identify as Liberal.” Just 1.5 percent of the faculty identifies as “conservative.”
The Fiscal Responsibility Act that finally resolved the debt ceiling standoff might have solved a crisis in the short term — but it sets up a momentous challenge for whoever is elected president in 2024. The Act suspends the ceiling until January 2, 2025, at which time the new ceiling becomes whatever is the then-outstanding amount of national debt.
That means we will hit the new ceiling on the very day it is established. And whoever is elected president next year will start his term in the middle of a new debt crisis. Just two years after hitting the “old” ceiling last January, we will be right back into another standoff.
The only upside is that the new law could set the terms of debate in the 2024 presidential and congressional elections. It could force the presidential — and, for that matter, congressional — candidates to address what they will do on Inauguration Day in 2025, when the nation will be 18 days into a new suspension of borrowing.
President Biden and Treasury Secretary Yellen seem to be playing a reckless game of chicken on the debt ceiling. Yellen has repeatedly said June 1 is the X date, while also saying she is not making other plans in case a deal is not reached. Yet, Uncle Sam has already reached the functional X Date - an unworkably low cash balance.
Wednesday, there was just $49 billion in the Treasury General Account (TGA), after $25 billion came out to pay regular weekly Social Security benefits, as it does every Wednesday. A year ago, there was $817 billion in the TGA.
President Biden and House Speaker McCarthy delayed their meeting on the debt ceiling from Friday to Tuesday. Maybe there’s progress as aides “negotiate.” Yet, the debt ceiling crisis is but a symptom of a much more consequential debt crisis in the U.S.
It is not too much of an exaggeration to say that Biden’s massive spending imperils the nation, risking an eventual fatal default, not simply a temporary immediately-curable default. The debt ceiling has served a valuable function in forcing the nation to confront its unsustainable spending habit and its mountain of accumulated debt.
The debt ceiling standoff between President Biden and House Republicans has reached a moment of truth. Yesterday, suddenly and belatedly, Treasury Secretary Yellen warned that June 1 could be the “X date.”
That’s the date on which our Treasury can no longer employ “extraordinary measures” to keep the nation’s debt below the current ceiling and avoid default. Why is the deadline so much sooner than expected?
April tax receipts came in far below expectations, and Uncle Sam has been spending more and more money every month.
President Biden and Speaker McCarthy are running out of time. That’s what the numbers are telling us in the months since January, when the Treasury said it could employ “extraordinary measures” to remain under the ceiling for five months.
The most important “measure” is income tax collections. They look likely to fall significantly short of Washington’s expectations this filing season, dragged down by plunging receipts from capital gains taxes.
Capital gains taxes are likely to come in below the Congressional Budget Office projection of $315 billion for the full fiscal year of 2023. CBO’s forecast is down only $63 billion, or 17%, from last fiscal year’s record high of $378 billion that was produced by the eye-popping rise in stocks of 27 percent in 2021, as measured by the S&P Index .
Such a modest decline seems unlikely given that the stock market in 2022 had a dramatic reversal of fortune and plunged almost 20%. That’s a greater annual decline than in any year since 2008, when the S&P plunged 38% and capital gains taxes fell about 50% the next fiscal year, according to CBO.
Washington is now consumed by the question of whether to raise the ceiling on the national debt. That ceiling currently stands at $31.38 trillion, barely above the $31.34 trillion of outstanding debt subject to the ceiling, according to the latest Daily Treasury Statement.
January 20, 2023
The so-called responsible faction in the impending debt debate says that the ceiling should be raised without any risk of default. The nation’s creditworthiness, they argue, shouldn’t be held hostage by conditions of fiscal discipline. The White House falls into this faction, insisting on a higher ceiling without any strings attached.
A group of about 20 House Republicans—many of whom originally opposed Kevin McCarthy’s speakership—announced their opposition to raising the ceiling without spending cuts. On Bloomberg TV on Wednesday, Representative Andy Ogles of Tennessee said he was “unwilling to give Biden a blank check.” His emerging faction is being called irresponsible and worse.
But who’s really irresponsible? This small group of Republicans who want to reintroduce fiscal discipline or the Biden administration and congressional Democrats, who have been borrowing and spending like drunken sailors for two years. Since President Biden’s inauguration alone, the national debt has soared by over $3.6 trillion.
Was this spending responsible after $4.4 trillion that had already been borrowed and spent between February 2020 and January 2021 as part of a necessary and sufficient response to the pandemic and the ensuing economic shutdown? Many economists warned that Mr. Biden’s first spending initiative, the $1.9 trillion American Rescue Plan, was unnecessary and would unleash inflation—and it clearly has.
It’s hardly irresponsible to suggest that we return to fiscal sanity. Indeed, any increase in the debt ceiling should be matched by an equal reduction in this slew of post-pandemic domestic spending.
Yet the Biden administration’s irresponsibility in its domestic spending isn’t the primary reason it should be reversed.
