Hello, and welcome to another episode of The Odd Lots Podcast. I'm Joe Wisenthal.
And I'm Tracy Alloway.
Uh, Tracy, stupidest law in the world. The debt ceiling. We're still here.
I was gonna say, you'll have to narrow that one down, but I know exactly what you're talking about. Yeah, the debt ceiling. I am really struggling with this one. I'm struggling to get into it because I feel like we've been here before and we kind of know how it's going to play out. But of course the wild card this time around is just I guess the lengths to which a certain portion of a certain party is willing to go and using this as political leverage.
Yeah, well, you know, I think what you said sort of captures the spirit perfectly. We know how this plays out, and it probably will play out as you have in your head, except that the potential in the scenario where it doesn't play out like that is very bad. People think yes, and so you have this situation where like, oh, everything, you know, we all know how it works out. It's
all theater. They resolve it, and that's probably true, and yet the possibility that somehow it doesn't get worked out, it would be unprecedented and potentially very calamitous.
Well, the other thing that's happened this time around, and again I am sort of struggling to get excited about this particular debt ceiling episode. But the other thing that's happened is that the White House started out this whole thing saying that it wasn't going to negotiate on the debt ceiling, and yet here we are, we're recording this on May twenty third. It seems like they're negotiating.
They're absolutely negotiating. And it made sense for the White House to say that. And the reason I say that is because Biden was there in twenty eleven when Obama negotiated the dead ceiling deal with the House Republicans and sort of saw first hand how that sort of derailed Obama's presidency, and Biden had front or seats to that, and so you figure, like, from Biden's perspective, it's like, well,
I'm not going to go down that road again. I saw how this derailed the White House the last time I was in the White House, and yet here we are and they I would say, at a minimum, the White House has failed to a stick by that and failed to sort of avoid the same path that Obama went down.
What if saying you're not going to negotiate was in itself a negotiation tactic.
It may have been. It may have been, but it seems to have failed. And so right, like that's like that's sort of the thing. It's like, well, that was, no, here we are.
I don't think the intent was that in late May of this year we would be talking about the President potentially invoking the fourteenth Amendment to deal with this issue. That couldn't have been the game plan. And can I just say one more thing about this episode. I really resent having to turn this into a constitutional law podcast, Like I never wanted that for my career. And yet here we are.
And yet here we are exactly right, and you know, again you sort of said it like we the problem. You said, you know, the president, the White House might have to invoke the fourteenth Amendment or might except that, except that the White House has already said that's not a great option. It doesn't really want to do that option. And so if there are these various off ramps, like if there are these various alternatives to just sort of raising the dead ceiling via Congress, like it's been done
dozens of times in the past. The White House has like trashed every one of those operations.
This is the process with talking specifically about the off ramps is you kind of tell everyone what your least preferred option is, and all of them are bad options, it seems like for the White House. And so there's no like they have to really pointed to this is the thing that would be a massive win for us.
Right, they just point to the things that would be a loss for them. Should we get started? So how did the White House get into a position in which it expressly said it would not? How is the White House negotiating over the debt ceiling when it expressly said for months and months that there would be no negotiation. Today we are going to be speaking with two guests, Gonda Amernath, executive director and Employe America and Arnap Data,
senior counsel for employ America. So let's get started. Is the basic intro true skanda that the White House said it wasn't going to negotiate and is now negotiating.
Thanks for having me on a thank I think that descriptively checks out that they promised to not negotiate that they wanted a clean debt ceiling increase, right, and yet here we are where it very likely will not be a clean debt ceiling increase, and they are very clearly negotiating. I don't know how to take issue with that description.
Can I ask a really basic question just before we go any further, But I would be curious to get either of your opinions on this. But what is it about the debt ceiling that makes it such an attractive pressure point for this kind of political wrangling?
I think it's a ransom note of sorts, right, So it ends up being this catastrophic risk if people perceive that we don't raise the deat ceiling, then we're going to default or it's going to lead to chaos and how government pays for various things, and that chaos is
owned by the executive branch. And so if you are in Congress and you want to extract concessions, this is a kind of holdout problem where I can effectively force you into position of giving whatever I want in order to raise the debt ceiling as a matter of procedure. And it's all kind of operating in the shadow of what is a reasonable concession to extract, and that hold out problem is, yeah, a very real one that the White House is facing right now.
Add to that too, Yeah, add to that too, And thanks, thanks so much for having me that the uncertain timeline of it, I think really necessitates that hostage tanking mentality. This is not like the typical appropriation cycle where you have an X date from the beginning. You know, when this was first announced for four months ago, when Secretary Ellen said we're going to hit the dead ceiling. We have to start taking extraordinary measures. Even the date was
highly uncertain at that point. We're now a week before June first, which they say might be the X date, but we're still not sure. And so it creates this kind of uncertain environment that I think is really because you don't have the opportunity to make certain cuts or certain demands during that typical process of authorization or appropriations. It's kind of a convenient place to take hostage the global economy.
So what was the White House hoping for when it said months ago, we're not going to negotiate over the dead ceiling this time. What was sort of the original vision there?
So I think the hope in the gamble was that the extremist nature of the demands, or what was perceived to be extreme by the administration. It's called what's the I know it as the LSGA Limit Save and Save Growth Act or Limit Save and Grow Act would be seen as so dangerous and even just the process of getting to that piece of legislation would reveal so many extreme demands, all to raise the dead ceiling, that you'd have this confluence of political pressure, media driven pressure, and
a sort of maybe CEO driven pressure. There's a lot of reports of Secretary Yellen trying to get major CEOs to talk to Republicans persuade them of the importance of raising the dead ceiling, and that through this sort of these different pressures, the Republicans would see the light that they would feel like they had no other choice of the coalition would fracture and they would have to raise the debt ceiling cleanly.
I would just yeah, I.
Would agree with all of that and say, I think there was this particular question, that particular decision that just gond disappointed about CEOs, that these interests would be advocating lobbying with Congress. You guys have to do the right thing. Here because they're demanding a clean debt ceiling hike. And I think that was a real miscalculation because you know, Jamie Diamond doesn't have an interest in a clean debt ceiling hike on its own.
He just wants a debt ceiling hike.
And so I think that's really part of the miscalculation that happened here.
Wait, can you can you talk a little bit more about the distinction between a debt ceiling hike versus a clean debt ceiling hike and so what is the difference there? And then secondly, why does it seem like the Democrats more into the idea of a clean debt ceiling hike this time around?
Yeah, so, by clean debt ceiling hike, it just means raising the limit on the debt ceiling without any other changes in the law and no strings attached. And what's likely to happen now with a deal is you're going to have a hike in the debt ceiling, but it's going to come attached with paps on spending, potentially cuts to spending. And also there's all these other you know, items that make I would emphasize very very little, have very little impact on the budgetary outlook of the country.
But are things that a certain party is interested in, for example, like work requirements on certain welfare programs. That's those are kind of the concessions that the administration will have to give here without having a clean debt ceiling hike.
Okay, And so this is you know, again, we have this in twenty eleven where it went down virtually to the wire at the very last second. Oh, the Obama administration and the newly elected Tea Party majority led by John Bayner, they came up with this dead ceiling hike, and they had the sequester, and there was sort of a limit to growth of both discretionary and defense spending, and arguably it slowed the trajectory of the recovery coming out of the Great Financial Crisis. Talk to us about
the alternatives. So, okay, we saw what happened in twenty eleven, We saw how that potentially derailed the recovery. What could the White House theoretically have done differently, And we'll get it into details, but months ago, other than say please just give us a clean dead ceiling hike.
Yeah, I think the biggest thing I would emphasize here and I think perhaps the biggest miscalculation was not developing the operational readiness to undertake unilateral actions. So obviously there are a number of different avenues that they could take unilaterally that we can talk about more.
Platinum Coin is I think a favorite of some people, perhaps some people on this podcasts.
Yeah, perhaps there's also this this idea that's been floating around for console bonds, these perpetual bonds. All of these things take some operational readiness to be executed, and the President, I think, just a couple of days ago, said even if we wanted to take unilateral action, we couldn't do
so in a number of weeks. And I think that perhaps that lack of operational readiness is maybe the biggest fault that you can put on the Treasury Department, which which is when they're, for example, issuing a new security, a new debt instrument, it takes a lot of work. I'm not a debt expert, and I don't understand their
programs internally, but it takes a lot of coding. There's a lot of different things with auction design and that they need to do to get these securities ready, and they could have taken steps four months ago when they knew they were coming to the debt ceiling to be able to do that if we came to a default moment.
And I think there's a broader principle to abstract here, which is, when you are dealing with a environment of high uncertainty, the most important course you could take, I would argue, is to maintain as much optionality as possible,
and part of that is developing that operational readiness. And so yes, let's say six months ago, if Treasury had done an operational test to deposit a coin to mint a new coin and depositive for ten thousand dollars, or if it had started taking the steps to issue console bonds, certainly that would have gotten noticed. These aren't you know, it's not the Fed, the Treasury. Good agencies do a number of tests and pilots. They don't always get a
lot of attention. This probably would, but I think in the broader context of the uncertainty they were dealing with. Both with divided government, we saw a very protracted speaker fight, which just is another indicator of the volatility within Congress that you have to manage. Not developing that operational readiness, to me, is a really, really big mistake.
I'm just thinking back to the interview with Terry Duffy. He was sort of talking about whether or not he would leave Chicago, and he threw out there that they had renegotiated all their leases to make them more flexible. They didn't actually own any property. That seems like laying the groundwork for a.
Possibility executive leadership.
Okay, can we talk about the fourteenth Amendment, because all I know about it is that it says something along the lines of the validity of the public debt of the US shall not be questioned, something like that. What is this option? Where did it come from? And why does it seem to be a very big deal about whether or not President Biden will actually invoke it.
I'm going to toss this over to my senior council.
Yeah, so basically, I mean, you got you got the text right this thing.
I am reading it from the screen to be fair.
But yeah, okay, So basically, this is a post Civil War amendment that was passed, and there are a number of reasons.
Why it was passed.
There's they wanted to be able to They wanted to make sure that bonds that were issued to pay for the Civil War were not renegged on. But basically the text of that that a lot of constant scholars who are you know, I would say highly respective, believe is that it is unconstitutional for the US to default.
Everything needs to be done to avoid a default.
And I think, just to take this into a broader context here, there's because I think sometimes a bit of a challenge, a bit of a mistake in how people understand the fourteenth Amendment in this context. And basically, what I would say is the fourteenth Amendment is not a verb. You can't fourteenth Amendment something. This isn't something that is like as as our mutual friend Carlos Muchra says, this
is not a sword. And so I think sometimes people think that you can just like invoke the fourteenth Amendment like you're Michael Scott in the office declaring bankruptcy.
And somebody woke the fourteenth exactly, and that's not really how it works.
What the fourteenth Amendment does is it places a obligation a duty the executive branch to avoid default. That places a duty on the executive branch to find every lawful avenue to avoid a default. And that's where you start to get into the different tools that are available at the executive branch's discretion. But that's what I would really emphasize about the fourteenth Amendment.
So it's more a frame of mind rather than like an actual set of things that you could start doing, right like Biden.
Biden took an oath to protect the constitution. In the Constitution is the fourteenth Amendment, And therefore the argument would be that in order to sort of uphold his oath to defend the Constitution, he has to find a way to pay the debt regardless of what the law says.
SCN.
I want to go to you because we sort of glossed over something important. You and Arna were talking about a console bond bond. How if the government is running up against the debt ceiling, is there an argument that there is a type of bond that would allow the government to keep borrowing and not violate that What is a console first of all? And why would that not violate the debt sealing law?
So the debt sealing statute is very short, very easy to read. You don't have to be a lawyer to understand this. I am not a lawyer. I have a lot agree so I'm in this sort of in between space. But you can read the statute and you can see how it is written in terms of face value of the bond. Ah And so there are bonds that have no face value, specifically perpetual bonds, and you can issue
perpetual bonds with obviously they existing perpetuity. You can put call options on them so that you can take them out of circulation later. But these bonds also have precedent in US treasury history. You issued them as part of financing the Panama Canal. These were things that existed before the debt ceiling Statute was passed and general bond authorities were passed. So if there are bonds that exist that don't have a face without face value, and you can't
issue them under the bond authority. Again, there's also something unique about issuing bonds. There doesn't have to be that's for the statute. There doesn't have to be a time limitation where principle must be repaid. This is in contrast to treasury notes and treasury bills. Again, these are things that are pretty plain to see in the statutes. You don't have to make exotic interpretations, you don't have to make any sort of particularly strained interpretation of the law
to figure out that these things are possible. These things have been done. They were pretty well understood by Congress when they passed the debt ceiling. And if this is possible, if we all can agree that perpetual bonds are possible, then what the implication of fourteenth Amendment, at least under certain interpretations. I'm not here to tell you there's only one.
But if you think that that is a constraint, if you think avoiding default is a really important thing for both economic and constitutional reasons, you have actually every obligation to find a solution to this problem and to try and reconcile all of the laws of the United States. That's the part that I think is sort of being glossed over by the Treasury, which is to say, oh, we don't have we have a bad situation where if the dead ceiling binds, we have no choices. Therefore we
may have to talk about the fourteenth Amendment. But it's like, no, you do have other options. Some are probably better than others, but I will you do have a suite of solutions on the table you could consider. One of them could be the coin. There are pros and cons to it from a legal perspective, but it's not, at least in
terms of literal interpretation. That's pretty strong. There are console bonds, perpetual bonds that are stuff you can just read in the I say, the bond authority is the statute right after the dead cealing. So you have plenty of room to identify alternative solutions. And if you identify alternative solutions, I guess simple negotiation theory, simple game theory would say that more alternatives, more viable alternatives, strengthens your negotiating position,
strengthens the likelihood of a clean debt sealing increase. And if you play down those alternatives, if you think those alternatives are less viable, and you telegraph that to the world, that'll actually reduce your bargaining position.
Tracy, I have a question for you. No, No, it's a serious question. It's a serious question. Actually, does the idea of issuing perpetual console bonds offend you less than the coin?
Yes?
Okay, I kind of feeling this is like this is me and Tracy. It's like coin consopts, Like both of them are like these sort of accounting legal workarounds, and they sort of like appeal and disappeal to different parts of us.
I find comfort in using like the traditional language and structure of the existing financial system in solving a looming problem, rather than trying to do something completely out of the box. Let's just put it that way.
That's a good uh.
But actually, could I since we're on the topic of like more reasonable solutions versus large novelty coins, can I ask about like another basic solution that I have seen? You know, people talk about a little bit, But couldn't couldn't you just have like a vote on the debt ceiling and just like maybe create a situation where some more moderate Republicans could switch sides and make it happen.
You can pass the debt ceiling increase. You could. The challenge with doing this through Congress when it's center divide government is the legislative procedure, where again they're certainly better experts and more thoughtful people than myself. But a discharge tradition in which you can actually get something through government, even while the Speaker of the House very intently wants to have the debt ceiling increase be attached to other
policy itself. That takes a long time. That takes a long time, and it's not something that's very easy to execute on. And I think these are things that get to talk to about a lot in maybe sort of more kind of wish casting of like, oh, there will be a clean debt's the only increase because there'll be
a discharge petition that will undercut Kevin McCarthy. And these things have always been kind of a hope's wishes, dreams as opposed to the realities of how long it takes to get some of those things through, and it may even take longer than trying to identify alternative lawful solutions on the part of Treasury.
Wow, these process take time. Legislative You know, I worked in the Senate, so I don't have a good sense of House procedures. But these things take a lot of time, and there's a lot of maneuvering that can happen even with the discharge petition, And so you know, you're you're kind of in that place where if you had tried some of that stuff a couple of months ago, maybe the urgency wouldn't be there for the moderate Republicans that Tracy may mentioned, And so you're always trying to balance
those issues. And I think it's it's really hard to do this stuff legislatively.
So this is one of those instances where a technocratic solution that would be i mean hopefully done fairly quickly, it might be the more viable option.
Yes, yeah, yeah, So I want to actually talk about the operational aspect of some of these workarounds.
So one where you know, the coin and theoretically could be minted tomorrow and according to Philip Deal who he had on the podcast, it'd be a few days. What is you mentioned arna the coding, So it's like, let's say Janet Yellen woke up Tomorrow's like, all right, you know what, We're going to issue consoles. We're going to issue these perpetual bonds because it'll allow us to keep borrowing money without adding to the face value of the debt.
What do we know about the you talked about operational preparedness, which the Treasury could have been working on six months ago. What do we know about what it would take to even like launch console auctions the way we'd have for like thirty year and ten year and five year bonds, et cetera.
Yeah, So there's there's a number of things that happen when I should clarify this is not my area of expertise. I'm kind of just going off with small other smart folks have told me so apologies if I get something slightly wrong. But basically what it is is when Treasury issues and new security, they go through a number of tests and a number of calculations, and they test kind of how this is going to be priced by the market,
whether they're actually going to sell. So there's all of that prep work first that has to go into it, and then there's the coding challenge itself of they've never priced a perpetual bond before, at least on their new auction system, so I think the.
Highest they've gone is thirty years.
Maybe they've done fifty, but they've never really tried to price a perpetual bond, and so there's time that once you've kind of once you've put that into the coding into the computer mechanism, you then also have to go through all that analysis and Treasury just doesn't have I think the muscle memory. There was a new security that was issued sometime during the Obama administration and it took about six seven months for it to get off the ground, and I don't think.
You can, you know.
Unfortunately, I mean we saw this in a different context during the COVID recovery, during the pandemic, when they passed the Cares Act and had unemployment this great, these great additions to unemployment, insurance and state agencies couldn't change their Cobel programmed systems to actually give out money in time. And so I think there's like, you know, Treasuries I think probably better equipped and probably has better software systems, but these things still take a lot of time.
If I could just give a quicker more recent example, obviously, the Undersecretary reneution they launched the twenty year bond, right so, and that took a long time to sort of plan out. Ideally, this is going to be an emergency. And look, I think arm is probably selling some of his knowledge a little short in terms of we've talked to a few people who've worked into Treasury and gave us some insight into the time it takes to execute this. It's not it would not be easy to do it super quickly,
but it certainly would be. It could still be done if you give it enough time. The question really is, is the treasure you've been thinking and working about on this in the background. Is there something that's like they've been trying to keep their cards closer to the vest. They're trying to indicate that they're not looking at alternatives,
but they really are. I don't know why they would trash alternatives while still working on them, but it's possible they are, And if they are, that would be good to know because that would obviously create the kind of pathway to avoid default and avoid a lot of the chaos that's tied to the debt ceiling itself.
There's no opportunity like a crisis, and I think there's obviously this process that they go through with issuing these bonds. But I hope that someone at Treasury is thinking, Okay, let's say we can't do it through our existing process. We can't do it like that twenty year issuance that Secretary Mnuchin did.
Is there another way?
Is there some you know, we obviously we did bond issuances and new bond issuances before all the software is created.
So can I hope that.
Someone there is going through and trying to find an avenue to do this quickly if possible. But that also doesn't take away from the fact that they should have been doing the operational readiness exercises six months ago.
Is there any indication why they wouldn't have done that? Is, do we just think they sort of dropped the ball and thought that this issue would be resolved, even though there's quite a lot of evidence out there that there is a sort of more extremist element of the Republican Party who is maybe willing more willing to take this down to the wire.
No.
Look, I think I mean, I tend to give I think it's good to give a lot of these people the benefit of the doubt.
They're good faith actors.
I think that what they would probably tell you is that if we take these steps, people are going to notice, and then it's going to become oh, you're doing an operational test for the coin, Biden is thinking about minting the core, and it becomes a story, and I think they view some risk in that. To me, that just comes down to a different risk calculation. I think that that would be a if there is risk to those stories coming out, I think that's a risk worth taking.
And I think, if any if it also would strengthen your hand in negotiation. In negotiations, knowing that you're taking the steps to do this, and if Congress wants to take away that authority, they can go ahead and do it. But until then, we're going to make sure we have the operational readiness to do what we need to do.
I would just like to say that Treasury has an open invitation to come on this show and reveal that they have in fact been working on either premium bonds or the coin. Just throwing that out there.
That's the invite. Twenty four to seven. You want to schedule something, get two and in the morning we'll wake Kerman up and say, hey, we're talking to the Treasury about consoles and the coin. We're recording in fifteen minutes,
let's do it. I want to talk about one more option that we haven't talked about, and I think there's two dimensions to it, which is the idea of we hit the debt ceiling and then the Treasury theoretically prioritizes interest payments and so it preserves the incoming revenue from taxation so that it can meet its constitutional obligations to honor the debt. And I feel like there's two dimensions
to this question. Maybe is this possible software wise? Do we know if the Treasury has the software capabilities to set aside certain payments as going ahead while other payments don't go through. And then b is that legal in the sense that can the executive branch just decide, Hey, these are the payments we're not going to make, even though the Congress is authorized X and Y, welfare and defense and all this stuff, We're just gonna not make them.
Can we talk about both the software and legal prioritization.
I'll leave the legal aspect of this question to aren't. But at least terms of feasibility, there was a lot of reporting about Secretary Geithner taking the steps to make sure that prioritization became a possibility of feasibility. So I think at least there was reporting that effect either.
From a software perspective, at least it could theoretically be.
Done that this kind of prioritization would become more feasible. I would be curious at the standpoint of the law, what artifs take is here?
Yeah, so I do not believe that would be lawful.
This is basically I think there's the Fourteenth Amendment constitutional challenges that you run into that we've already talked about.
But then there's this separation.
Of powers issue that you would run into with prioritization, and i'll I can go a bit more into detail on that, which is, the executive branch does not have the authority to prioritize mandatory payments. So there's different you know, the government, the federal government spends trillions of dollars on a number of different things. Some of that spending is
discretionary and some of it is mandatory. And mandatory spending includes things like Social Security, Medicare, certain veterans programs, certain student loan programs.
And a couple of other small things.
And regardless of who is in power, what the president's ideological persuasions are, even if we're in government shutdown, those payments continue to be made because their Congress has simply given no discretion to the president to do so. Congress, in the Constitution, is afforded the authority to control the strings. And so what you would end up in here is you would end up in the situation where let's say the President decides we're going to stop making certain student
loan payments and not to keep making interest payments. That act in of itself the first time that that payment is not made or the first time that a Social Security payment is not made for a political decision is a constitutional crisis. Congress is not allowed to delegate that authority to the president, and they where they do delegate spending discretion, they have to provide what's called an intelligible principle to guide the president's decision making, and they haven't
done that here. The debt limit Statute has nothing to say about if we run into the limit, what.
Payments should be prioritized or what shouldn't.
And if Congress were to do that, maybe this would be a constitutional law. But until they do that, they can't delegate that to the president. Congress can't advocate that authority.
If I can just like add on to that part, it's let's think about it. If any president, whether it's Biden or Trump or Bush or Obama, that they have to prioritize payments, some will have different ecological persuasions about what's important to keep spending on and what's important what's worth cutting. Let's say there's a president that wanted to cut the entire Department of Defense until uh, the deat ceiling was lifted. Like that's a lot of discretion.
Someone listeners somewhere.
I'm sure I go with the program that would scare every single listener here, And that discretion scares this almost surely uh scare of the Supreme Court. It would scare a lot of legal scholars with a lot of different persuasions about the notion that there's so much unchecked power and discretion that would arise from the situation. And I
think that's like actually something worth reckoning with. When people say, oh, we'll just like prioritize payments and keep like making sure we pay bondholders, like this is not actually a very lead goal solution either, And.
It would set a really poor precedent.
Right if if the dead ceiling allows the president to limit certain types of mandatory spending, what other situations do. Where is that extraordinary power coming from? And could a future president abuse it? I think that's like a real real constitutional problem that not enough folks are wrestling with.
Right.
I guess the situation that arises is what if a president one could imagine, let's just say a future Republican president and Democratic House, the House votes to raise the dead ceiling, the president doesn't agree to the dead ceiling hike, and just to say do you know what I'm going to prioritize instead? Because the dead ceiling has been hit.
So I guess there's all kinds of permutations there where if you sort of like give the executive branch that discretion to prioritize, who knows where you go anyway, Tracy say no, I was going to say.
That makes a lot of sense to me, and has been also, ironically one of my criticism of the trillion dollar coin, which is like, Okay, maybe you agree with using it in this one instance, but what happens in the next presidency. Maybe it's someone you don't agree with and they decide to use it to fund something outrageous.
I don't know.
But anyway, getting back to the current situation, what's your base case for how this plays out? I know I joked in the intro that you know, we've kind of been here before, we've seen it all before, but there are some elements that are different this time. So where do you think we go from here?
It seems like the direction of travel is towards what Republicans are seeking and what they can get away with from at least some faction of centrist Democrats I would call it. So It probably will be a some kind of bipartisan increase in the debt ceiling and some kind of government spending deal that will involve spending caps and cuts of a few different kinds. There will be some debate about how much composition that should shift towards non
defense over defense. I think it's going to be an open question about how much work requirements sort of see their find their way in to this type of deal.
But that's something that's been talked about. The one place of bipartisan interest that may actually serve some administrator in some of the interests of the administration or on permitting reform, but that actually will take time to kind of craft well and craft correctly, and I'm not sure that can be done so quickly on a dime, even though there is actually a lot of mutual interest across party lines there.
That's something that's been talked about. I wouldn't want to hype that up too much in terms of this deal, even though it seems like it's a point of mutual agreement that could possibly come about. But those are the kinds of things that we're hearing, and it does seem to me that for all to talk about clean debt ceiling increase, We're going to get a dirty debt ceiling increase, and the incentives to do more ransom taking hostage taking
are going to increase. This worked, That's what it seems like to me.
One thing I am not certain about a lot of things in this environment. One thing I am certain about is that whatever happens, it's not going to change the long term budgetary trajectory of the federal government. And I think that's something really worth emphasizing because the debt ceiling. You know, a lot of people say the coin is a gimmick, or consoles are a gimmick.
The debt ceiling is the real gimmick.
It allows people to feign seriousness about the debt picture of the United States without actually doing anything to make a difference.
Work requirements on welfare programs are not going to change the budget picture. This is really something that is not a serious thing.
No other country has it, and it won't impact the debt picture at all.
And I think if you believe I'm.
Not one of the people who believes we're on an unsustainable debt path, but if you believe that, then what's going to come out of this is probably not something that is actually going to seriously address your concerns.
Arnabn Sconda, thank you so much for coming on.
Oddlins, Thanks for having me, Thanks for having me.
Tracy, I thought that was I liked your line about the Constitution. Sorry, the fourteenth Amendment is more like, rather than a tool, is a frame of mind like the Obligator. The frame of mind to that would.
Make a good T shirt. Don't you think the fourteenth Amendment is a frame of mind?
Like like there's like teristy T shirts like the Bahamas. It's a frame of mind. I love that.
I'm gonna I'm gonna make it. Yeah, No, but I actually really agree. Well, two things stood out for me there. So One the point about like you would expect the business base of the Republican Party to maybe make more noise about this issue and force their hand at some point. That doesn't seem to have happened this time around. That's kind of interesting. Where is everyone? Why is in everyone on issuing you know, big warnings about this. I know
some people are, but there could be more. Maybe we're just so used to it at this point it's hard to get worked up about it. And then secondly, Arnub's last point about the debt ceiling kind of has never mattered that much, Like it just gets raised and raised and raised, and the public debt continues building and not to go full on MMT, but you know that can become a problem at certain points with inflation, but not always.
And so I would my personal preference would be for the debt ceiling to remain as meaningless as it has throughout all of history and for us to not even be recording this episode as interesting as it has been.
Uh, do you regret during the episode or do you just want to do you want to live in a future in which we never have.
To do it again.
I want to live in a world where we don't have to talk about this at all, because you know, it happens automatically. You know, maybe well we.
Did it, did you know? For years? So this was so I think like at one point and we you know, there's a lot of history. I think like throughout much of the eighties, Congress had a rule which is when they approved a new budget, I think it was called the gap heart rule, which is when they approved a new budget, they just increased the dead ceiling automatically, which is what obviously what they should do. And then I
think nude Ingridge ended that. But it is really silly that you know we're not going to That's the thing like, because I think it was Tisconda's last point, because there is most likely going to be a quote dirty increase. The message to future congresses is this is your chance to extract the concession right, and so we're going to have to do more in twenty twenty five.
Every time this happens, the less attention is going to be paid to it, because it's sort of like a Boy who Cried Wolf kind of thing where everyone just becomes very a nerd to it.
And then what happened with the boy who cried Wolf? I can't remember, No, I think it was, and then eventually something bad happened. I think, yeah, I just think that's why we tell That's why we tell our kids this story.
I just want to clarify though I do not regret recording this episode.
I do.
I really resent having to look up section four of the fourteenth Amendment and learn about it on what is, you know, ostensibly a finance and economics and markets podcast.
You know what I thought is really interesting too. People say like, oh, just invoke the fourteenth Amendment. And I really appreciated arno argument about why that really is inherently problematic that no matter who it is, no matter what the president, what you're basically saying is, let's create a condition in which the president can start picking and choosing
which appropriations to make. So you might have one president who is like a big pacifist piece, and they say, Okay, the Defense Department doesn't get any money, and then another one say okay, the EPA and Social Security and Medicaid recipients don't get any money. If you think it through what prioritization entails, it is pretty problematic.
I thought that was a really interesting and important point because you do see a lot of people talking about, oh, this might not be such a big tale because they can just prioritize payments. But actually that opens up a whole other count of wars and a potential, i guess, overturning of political and social norms. So interesting stuff all round.
We'll see what happens.
Shall we leave it there?
Let's leave it there.
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy alloway.
Oh I meant to say, cobol came up again. Oh yeah, it's always, It's always coming back.
You can't escape Coball.
I'm Jill wisanth All. You can follow me on Twitter at The Stalwart, follow Scanda at Irving Swisher, and follow Arnab at Arnab Data three two one. Follow our producer Carman Rodriguez at Carmen Arman and dash Old Bennett at Dashbot. Follow all of the Bloomberg podcasts under the handle at podcasts, and for more odd Lots content, go to Bloomberg dot com slash odd Lots, where we post transcripts. We have a blog and a newsletter that comes out every Friday.
And check out our discord discord dot gg slash odd logs, where listeners are talking about all these topics. Twenty four seven thirty been tons of debt ceiling talk. So if you want to wake up at two in the morning and talk debt ceiling, there's almost certainly in there someone who will talk about the intricacies of the fourteenth Amendment and Section three one two one K and the coin and all there. Go there and check it out. It's really fun. I hang out in there a lot thanks for listening,