• The Treasury Department can use a bond yield trick to raise money without increasing the face value of the debt, which would help them get around the debt ceiling issue.
• This involves offering a bond with a high interest rate and seeing how much money people will give them for it.
• This would slow the pace at which the face value of debt accumulates and even start to reduce the face value of the debt over time.
• This would be done by swapping out old bonds with high face values and low interest rates for equivalent-yielding bonds with low face values and high interest rates.
• The Treasury Department has proposed issuing high-yield bonds to avoid a debt ceiling fight with Republicans.
• This would be a way to avoid doing something flagrantly illegal, as the executive branch has an obligation to pay what it owes according to the laws that exist.
• The biggest practical problem is that troublemakers only need to find one insane district court judge somewhere in the country to order a national injunction and create at least a temporary crisis.
• Joe Biden and his cabinet secretaries do not have the legal authority to blow off the law and not spend what Congress has told them to spend.
• The importance of shooting the hostage is to take the debt ceiling issue off the table and separate the debate over the debt ceiling from the debate over fiscal policy.
• Biden should do a big speech calling for a bipartisan commission on deficit reduction and have the Treasury start working on some high-yield bonds.
Published January 11, 2023. Visit Slow Boring to read Matthew Yglesias’s original post.
