Obama U-turn: Will accept "short-term extension" of debt limit. Ummm... what's that?

[Little-Acorn]

I'm scratching my head over this one. What, exactly, is a "short-term extension of the debt ceiling"?

Short-term extension are usually things that end after, well, a short term. Here they are talking maybe as few as a couple of days.

But I'm baffled about how this would work. The article didn't explain it. Can somebody help me out here?

Suppose they reach agreement and sign a "short-term extension" of the Debt Ceiling. One that takes effect, say, on Monday, August 1, and then expires a week later, on Monday, August 8. (fill in your own dates here, I'm just using these as an example).

So on August 1, the Debt Ceiling limit is raised from $14.3 trillion to, say, $15.0 trillion. I assume that Congress would immediately borrow some or all of the extra $700 billion this new extension allows, and spends it pretty much instantly.

Then, on August 8, the extension expires. Doesn't this mean that the Debt Limit goes back down to $14.3 trillion? But Congress is now in hock for $15.0 trillion. The law expiring, doesn't mean that this $15.0 trillion debt simply drops back down. It remains, of course, at $15.0 trillion. And Congress is now in violation of the law, which says (once again) that they can't borrow more than $14.3 trillion. The only way to stay within the law, is to IMMEDIATELY pay back the extra $700 billion they just borrowed over the past week.

But... they spent the extra $700B. They can't pay it back. They are broke. (again.) And now they are in clear violation of the law, with NO WAY to get back into compliance.

Can someone explain to me, just what a "short-term extension of the debt limit" is supposed to accomplish?

Right now, the government is a group which, if they do nothing, are still in compliance with the debt-limit law (however broke they may be). This "short-term debt limit extension" is something that will convert them into a group which, if they do nothing, VIOLATES the law in one week (in the example given).

What's the advantage? What have I missed here?

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http://www.dailymail.co.uk/news/article-2017070/Obama-U-turn-accepts-extension-debt-limit-days-broader-deal-place.html

Obama U-turn as he accepts extension of debt limit for a few days if a broader deal is in place

by Daily Mail Reporter
Last updated at 12:07 AM on 21st July 2011

President Barack Obama called Democratic and Republican leaders back to the White House on Wednesday for bottom-line negotiations on how to prevent a disastrous government default - and cut staggering federal deficits as well.

The White House said for the first time that Mr Obama would accept a short-term extension of the debt limit, but only if a broader deal was already in place and required more time - perhaps a few days - to get through Congress.
The President had previously threatened to veto any stop-gap measure.

[Kathianne]

From my readings today, seems he 'will agree to this' if there is a 'big deal' agreed upon there just isn't enough time to get it written, scored, passed in one house, then the other-if no reconciliation is needed, then signed by the president.

IMO it will just end up dragging this whole mess on. From all signs, the Republicans aren't going to give in on tax hikes, without real, 'can't be undone' tax cuts. Moody's has really made it quite clear, even if done by 8/2, unless there are real cuts of $4T or more over 10 years max, they are lowering the US rating.

[Thunderknuckles]

It's all accounting tricks that people with rational minds don't understand.

[Kathianne]

I'm unsure if I posted this earlier, but if 'the Grand Plan' is based on Gang of 6, there could be mighty big problems:

http://keithhennessey.com/2011/07/21/oppose-the-gang-of-six/


...First I’ll flag a few things I like in the plan.

* I support making a technical correction to CPI, even though it would result in higher revenues.
* Repeal of the CLASS Act is great.
* It’s good they included medical malpractice reform.
...

Here are 17 reasons why I oppose the Gang of Six plan.

1. It provides no discretionary spending totals.

Discretionary spending is 37% of the budget next year. The Gang of Six plan does not specify discretionary spending totals. How can I support (or even evaluate) a budget plan that promises to cap 37% of spending but doesn’t tell me at what level, next year or for nine years thereafter?

2. It cuts defense spending while hiding the ball on nondefense spending.

The only discretionary spending number provided is $866 B in defense (security) discretionary savings over the next 10 years. I care about the discretionary spending total and about the balance between defense and nondefense. I am open to defense spending cuts, but not if I’m not told what the plan does to nondefense spending as well. How can I support or evaluate $866 B of defense appropriations cuts when I am not told whether the plan cuts, holds harmless, or even increases nondefense appropriations?

3. The promised deficit reduction is both overstated and less than is needed.

Their $3.7 trillion of claimed deficit reduction is bogus. It includes an unspecified amount of savings from a future legislative fast-track process that would require further Congressional and Presidential action if health spending growth exceeds a certain target.

The Gang’s plan also uses at least three different baselines in different parts of the document. Combine that with the absence of discretionary spending totals and I have no confidence in their $3.7 trillion deficit reduction number. It is easy to solve this problem – I guarantee Chairman Conrad has a table of numbers that shows these calculations. All he has to do is release that table.

Even if I did believe it, this amount of savings won’t cover CBO’s projected $5.4 trillion of net interest costs over the same timeframe. In fairness, other plans face this same problem. We need much more deficit reduction (through spending cuts).

4. It is a huge net tax increase.

The Gang of Six plan would increase taxes by $2.3 trillion over the next 10 years relative to current policy. That’s roughly a 6.5 percent increase in total taxation.

Put another way, the Gang of Six plan raises taxes $830 B more than would President Obama’s February budget.

To those who like the promise of low statutory tax rates – the benefits of low marginal rates are far outweighed by the increase in average effective rates. This is a massive hidden tax increase.

5. It’s a far worse trade than Bowles-Simpson.

The fundamental trade of the Bowles-Simpson group was higher net taxation in exchange for (huge long-term spending reduction, especially in entitlements + fundamental structural entitlement reform + pro-growth tax reform).

The Gang of Six plan drops the first two elements of that trade, the huge long-term spending reductions and the structural entitlement reforms. It instead purports to offer pro-growth tax reform in exchange for much higher net tax levels. It offers trivial spending cuts, no flattening of long-term entitlement spending trends, and no structural reform to the Big 3 entitlements. That is a terrible trade, and far worse than Senators Durbin and Conrad agreed to in Bowles-Simpson. Why did the Republicans in the Gang take a deal far worse than Bowles-Simpson?

6. It trades a permanent tax increase for only a temporary respite on spending....

Only 11 more to go...

[Gaffer]

Gang of six means libs and rinos getting together to give libs what they want. We've seen this movie before.

[logroller]

Is "never" a short term?