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An ex-US Treasury assistant secretary (let’s keep in mind there are lots of these guys at any given time and they rotate in/out the Cathedral revolving-door, so just from randomness one might expect to find ‘ex-assistant secretaries’ with all sorts of opinions) tweeted a series of tweets that would seem to be another nail in the coffin of my much-lauded** (**by me), Nobel-Prize-
winning -eligible Split The Difference solution to the debt crisis.
If I’m reading his tweets correctly, essentially his point seems to be that US Treasury processes and systems are so incompetent that they will not be able to ‘prioritize’, i.e. make some payments but not make other payments, in a way that ensures that the ‘some payments’ they do make include all owed principal & interest payments on actual debt. Hence, a debt-ceiling crunch, contra-moi, would indeed probably mean a default, if only just by accident – some interest payments would be missed in the resulting fog of bureaucratic panic.
Oh well. I mean, far be it for me to dispute an insider’s account of the incompetence of the systems and processes of a large institution such as this.
But thinking about it, I’m not sure how what he’s saying can be true. Assume for the sake of argument the US Treasury indeed cannot differentiate between ‘payments they should settle’ and ‘payments they shouldn’t settle/should hold up’. Okay. But let me ask this: what if there were a ”DEAL”? A ”DEAL” that (I know, this is a huge hypothetical) involved Congress actually reducing prior authorized payments on some things? What would the US Treasury have to do in response to such a ”DEAL”? Why, I reckon they’d have to examine the legislation in question or work with Congress or otherwise somehow figure out which spending has now been cut, so as to not approve payment requests associated with those things (but still approve payment requests associated with still-valid spending).
In other words, they’d have to…you know…prioritize between spending they’re supposed to make, and spending they’re not, and not do the latter, but still do the former. The only difference with a ‘prioritization’ scenario is that there’s a guy (Obama, or whoever), instead of a Congressional bill, making the decisions re: what to pay and what not. But big deal, either way surely the ‘what should we pay?’ part of the equation has to go through some human(s’) brains. Really, this function is just a thing that naively you’d think they’re supposed to be doing all the time. It’s practically the definition of a ‘Treasury’.
And he’s saying they can’t do it.
The only way I can really picture this being true is if the US Treasury simply rubber-stamps and mindlessly-approves all invoices that get sent to them. Random invoice comes in: “You owe us 980 million dollars. Please pay up by the 7th.” Treasury computer system: “Okey-dokey!” And that’s what the US Treasury does. (?)
Can that be how it works? Honestly, if it is, don’t answer that. I’m not sure I want to know.
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