http://www.politico.com/story/2012/12/fiscal-cliff-deal-increasingly-unlikely-85511.html
http://www.zerohedge.com/news/2012-12-26/geithner-us-hit-debt-ceiling-december-31
Submitted by Tyler Durden on 12/26/2012 16:23 -0500
and......
http://www.zerohedge.com/news/2012-12-26/gop-issues-latest-statement-fiscal-cliff
Submitted by Tyler Durden on 12/26/2012 16:09 -0500
and.....
http://www.zerohedge.com/news/2012-12-26/guest-post-structural-endgame-fiscal-cliff
Submitted by Tyler Durden on 12/26/2012 15:02 -0500
http://www.businessinsider.com/merry-christmas-chinese-credit-ratings-agency-dagong-puts-the-us-on-negative-watch-2012-12
In summary, Dagong views that as the negative effects from key factors affecting the U.S. federal government solvency such as the debt repayment environment, wealth creation capability, debt repayment sources have been increasing, emergencies such as fiscal cliff and debt limit will further increase the vulnerability in the government solvency. Therefore, Dagong has put the U.S. federal government credit ratings on the negative watch list. Dagong will adjust the credit ratings according to the real circumstance to reflect the soundness of the U.S. federal government debt.
Fiscal cliff deal increasingly unlikely
Nearly all the major players in the fiscal cliff negotiations are starting to agree on one thing: A deal is virtually impossible before the New Year.
Unlike the bank bailout in 2008, the tax deal in 2010 and the debt ceiling in 2011, the Senate almost certainly won’t swoop in and help sidestep a potential economic calamity, senior officials in both parties predicted on Wednesday.
With the country teetering on this fiscal cliff of deep spending cuts and sharp tax hikes, the philosophical differences, the shortened timetable and the political dynamics appear to be insurmountable hurdles for a bipartisan deal by New Year’s Day.
Hopes of a grand-bargain — to shave trillions of dollars off the deficit by cutting entitlement programs and raising revenue — are shattered. House Republicans already failed to pass their “Plan B” proposal. And now aides and senators say the White House’s smaller, fall-back plan floated last week is a non-starter among Republicans in Senate — much less the House.
On top of that, the Treasury Department announced Wednesday that the nation would hit the debt limit on Dec. 31, and would then have to take “extraordinary measures” to avoid exhausting the government’s borrowing limit in the New Year.
Senate Democrats are drafting a fallback bill to resolve the crisis, but they have little optimism that Republicans will accept their proposals. The White House, a senior administration official said, is in close coordination with Senate Democrats. Late Wednesday, Reid’s office pushed Republicans to pass a bill to extend tax rates for income below $250,000.
The House sidestepped a decision Wednesday to bring the chamber back into session, putting the burden squarely on the Senate, where the stars will need to align for swift action in the next few days. Speaker John Boehner’s leadership team said bluntly: the “Senate first must act” before the House will consider additional legislation to avoid the cliff. So that they’re all on the same page, House Republicans will have a members only conference call Thursday.
For Senate Majority Leader Harry Reid to bring up a new bill, he’ll need assurances from Senate Minority Leader Mitch McConnell not to filibuster it — and not to pressure his members to block it. And Reid will need Boehner’s word that any Senate-passed bill would be scheduled for a vote and could pass with support largely from Democrats, even if it lacks a majority of Republican support.
That scenario seems unlikely right now.
From McConnell’s perspective, the White House will have to pare back its demands for tax increases if Republicans will concede the fight and risk the wrath from the right. And then President Barack Obama will need to give far more on cuts to entitlement programs like Medicare and Social Security in order to get some GOP cooperation on tax rate hikes, Republican officials say.
McConnell almost certainly won’t try to jam Boehner by allowing a bill to pass the Senate that doesn’t have support among House and Senate Republicans, sources say. And Democrats believe that Boehner will have more leeway to cut a deal in the new year once he’s reelected speaker, though the Ohio Republican has said he’s not concerned his perch atop the House has been threatened by his handling of the fiscal talks.
Democrats also have good political reasons to hold out until after the New Year, when the new Congress convenes Jan. 3.
Democrats are slated to increase seats in both chambers in the next Congress -- with a robust 10-seat majority in the Senate, and the White House believes it has little incentive to cave to GOP demands ahead of the fiscal cliff.
Over the truncated Christmas recess, neither side reported any headway to resolve the impasse — McConnell’s staff didn’t hear from the White House before Wednesday afternoon. And even if all sides were to suddenly agree to a deal, the Senate could need several days to jump through a series of procedural hurdles, plus the House would have to scramble back to Washington and vote on it — even though there are just a handful of days until 2013.
“What Obama has outlined as minimally acceptable to him doesn’t come within a country mile of passing either the House or the Senate,” said one senior GOP aide. “No negotiation can change the fundamentals.”
Added a Democratic aide: “Unless Boehner and McConnell are willing to buck their tea party members, then I see nothing happening.”
Senators, too, sense the inevitability of ending 2012 with no deal — and Republicans argue Boehner shouldn’t simply accept Obama’s demands as Jan. 1 rapidly approaches.
“I’m not sure why he would have to accept that – the president’s attitude, his stated message was, ‘Accept what I’ve given you or we’ll go off the cliff,’” said Sen. Richard Burr (R-N.C.), the chief deputy whip. “Why is it not OK for John [Boehner] to say, ‘I tried what I thought was doable – and it’s not. So we’ll go off together.’”
House Republican leaders spoke on a conference call Wednesday afternoon, but no decisions were made on a new strategy, according to sources. House Republicans believe Senate Democrats need to pass a bill to avert tax increases before the House acts. If the nation careens off the cliff, they’re trying to make sure Reid shares in the blame.
The hurdles of the deal before the nation reaches the fiscal cliff aren’t just limited by policy differences, but also logistics. House Republican leaders vowed to give lawmakers 48 hours before they need to come back to Washington. As of late Wednesday afternoon, that had not happened.
If members of Congress are told Thursday to come back to Washington by Saturday, they’d face a 70 percent likelihood of snow in the D.C. area, according to current weather forecasts which could snarl airport traffic.
Continue Reading
To add to that, there’s an open question what could even pass the House. A bill to extend rates below $1 million didn’t even make it to the floor. Democrats say they’d use the $250,000 threshold. Some Republicans are floating the idea that the Senate should pass a bill that extends rates for income below $500,000, but that idea doesn’t seem to be going anywhere in the Senate.
Since Election Day, both Boehner and Obama have exchanged a series of deficit-cutting offers to avert the $500 billion in tax hikes and automatic spending cuts set to take place in the new year if Washington doesn’t act. But the sticking point remains over raising tax rates on the top 2 percent of wage earners, with Obama pushing to raise taxes on families who earn more than $250,000. The two men narrowed their differences when Obama said he’d increase that threshold to $400,000 and Boehner said he would agree to higher taxes on millionaires.
But Democrats and conservative Republicans rebelled at the speaker’s so-called Plan B approach last week, leaving the speaker weakened and the ball in the Senate’s court. With Obama returning from Hawaii and Senate returning to session Thursday, Democrats hope that Republicans, with their backs against the wall, will pressure McConnell into accepting a bill even if it could jam Boehner.
Indeed, some conservative Republicans candidly acknowledge how tough it would be to vote against a bill to prevent tax hikes on most Americans.
“We are in a topsy-turvy world because everything is going to expire,” said Sen. Rand Paul (R-Ky.), saying it would be “difficult” to vote against a fall-back plan like Boehner’s to prevent most taxes from going up. “If I had to take affirmative action, I would never vote to raise taxes on anyone. Because it takes affirmative action to prevent taxes from going up, things are kind of flipped.”
Still, it appears unlikely McConnell would try to strike a deal that couldn’t win the backing a large number of Republicans in both chambers. If he did, it would isolate Boehner and risk a conservative backlash against McConnell, who wants to avoid trouble from the GOP base back home as he prepares for a 2014 re-election campaign.
To some, last week’s debacle in the House looked a lot like several of the near-misses from year’s past; most notably in 2008 when the Dow Jones Industrial Average dropped 778 points after the House rejected the initial version of the Troubled Asset Relief Program before the Senate ended up cutting a bipartisan deal to right the country’s finances.
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Though others say today’s situation is far different.
“It’s not like TARP because TARP was a very real crisis of immense proportions,” said former Sen. Judd Gregg (R-N.H.), who helped cut the TARP deal. “The fiscal cliff is a self-inflicted wound, which would be really inexcusable to commit on ourselves. It would have nowhere near the impact of what would have happened if we hadn’t done TARP.”
Even though economists warn that a double-dose of spending cuts and tax hikes could send the U.S. back to recession, many lawmakers believe the economy won’t feel the impact right away, giving them added time next year to get a deal. But even then, it won’t be easy to get a deal.
“I think if you can’t do it now, how difficult is it going to be Jan. 1?” retiring Sen. Olympia Snowe (R-Maine) said. “You’re dealing with a new Congress, newly elected senators, new members. It’s a whole new equation. It’s not going to be that easy to put the genie back in the bottle here.”
To that end, the White House last Friday floated a plan it considered “scaled-back” from its original proposal, seeking to extend the Bush-era rates only for those who earn less than $250,000, to extend expiring unemployment benefits and delay automatic spending cuts known as sequestration. There’s also talk of limiting the impact of the alternative minimum tax on the middle-class, though that would only drive up the package’s price tag.
Republicans scoffed at that plan. And McConnell aides say they have yet to see any details, making it impossible for them to assess whether Republicans — or even conservative Democrats — would allow for such a proposal to pass with 51 votes, rather than 60.
Republicans say Obama must take the long view with no deal in sight.
“Remember who the speaker of the House was during the Hoover administration?” Arizona Sen. Jon Kyl, the No. 2 in the Senate GOP hierarchy, said last week. “It was the Hoover Recession. I would think the president and his people would be thinking a little longer range than how the polls would look like this weekend.”
and....
http://www.zerohedge.com/news/2012-12-26/geithner-us-hit-debt-ceiling-december-31
Geithner - US To Hit Debt Ceiling On December 31
Just because the Fiscal Cliff was not enough...
- GEITHNER SAYS U.S. WILL REACH STATUTORY DEBT LIMIT ON DEC. 31
- GEITHNER: WILL USE `EXTRAORDINARY MEASURES' TO AVOID DEBT LIMIT
- TREASURY: SPECIAL MEASURES TO MAKE $200 BLN ROOM UNDER LIMIT
- GEITHNER: $200 BLN TO LAST TWO MONTHS IN `NORMAL CIRCUMSTANCES'
- GEITHNER: TAX, SPENDING `UNCERTAINTY' MAKES DURATION NOT CLEAR
- GEITHNER SAYS ALL MEASURES HAVE BEEN USED IN PRIOR IMPASSES
- GEITHNER OUTLINES PLANS IN LETTER TO SENATE MAJORITY LEADER
So since America's dysfunctional congress failed to "rise above" the Fiscal Cliff, it at least succeeded to "rise above" the debt ceiling. One out of two is not too bad...To summarize: debt ceiling hit December 31, just in time for the no deal on the Fiscal Cliff, and then the Treasury will proceed to defund various Government retirement accounts for the next two and a half months, when sometime in March the true deadline to getting a joint solution on both the Cliff and the Debt Ceiling will becoming unextendable as the alternative is truly unthinkable: living within its means!In other words, as we have said all along, thereal deadline for a Fiscal Cliff is not December 31, but that day in March when all further debt ceiling extension avenues are exhausted.
The question therefore is - will the 2 months of America living under self-made austerity be enough to push it into recession.And now cue flashbacks to August 2011* * *Full tiny tim letter:- GEITHNER SAYS ALL MEASURES HAVE BEEN USED IN PRIOR IMPASSES
and......
http://www.zerohedge.com/news/2012-12-26/gop-issues-latest-statement-fiscal-cliff
GOP Issues Latest Statement On Fiscal Cliff
Spoiler alert: no compromise here. But at least there are 3 more trading days left... including December 31.
From the website of the Speaker.
GOP Leaders on Fiscal Cliff: Senate First Must ActHouse Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), Majority Whip Kevin McCarthy (R-CA), and Republican Conference Chair Cathy McMorris Rodgers (R-WA) today issued the following joint statement regarding the fiscal cliff:
"The House has acted on two bills which collectively would avert the entire fiscal cliff if enacted. Those bills await action by the Senate. If the Senate will not approve and send them to the president to be signed into law in their current form, they must be amended and returned to the House. Once this has occurred, the House will then consider whether to accept the bills as amended, or to send them back to the Senate with additional amendments. The House will take this action on whatever the Senate can pass, but the Senate first must act. The lines of communication remain open, and we will continue to work with our colleagues to avert the largest tax hike in American history, and to address the underlying problem, which is spending."
and.....
http://www.zerohedge.com/news/2012-12-26/guest-post-structural-endgame-fiscal-cliff
Guest Post: The Structural Endgame Of The Fiscal Cliff
- Deficit Spending
- Demographics
- ETC
- Federal Tax
- Gross Domestic Product
- Guest Post
- Medicare
- National Debt
- national security
- Tax Revenue
- Wall Street Journal
Submitted by Charles Hugh-Smith via Peak Prosperity,
To understand this endgame, we need to start with the financial and political basics of wealth and power in the U.S.
1. Wealth and thus political power are highly concentrated. The dynamics of rising wealth disparity and the increasing concentration of wealth are debatable; the disparity is not. Roughly 70% of all financial wealth is held by the top 5%; within this top layer of ownership, the top ½ of 1% hold an outsized share.
2. This preponderance of wealth in the hands of a few translates into an equivalent preponderance of political power, as there are no real limits on the purchase of political influence, favors and power.
3. The U.S. income tax is highly progressive; most Federal taxes are paid by a minority of the citizenry. The top 1% of taxpayers reported almost 17% of all taxable income and paid 37% of all income taxes. The top 5% reported 32% of all income and paid 59% of the taxes, and the top 10% earned 43% of the income and paid 70% of the taxes.
The top 25% (those earning more than $66,193) paid 87% of the taxes. The bottom 50% of taxpayers, roughly 70 million people, earned 13% of the income and paid 2% of the income taxes collected.
4. There are roughly 127 million people who receive government transfers or benefits. Sixty-one million recipients of Social Security and Medicare and 66 million people receiving welfare (SNAP food stamps, housing credits, Medicaid, etc.) Since there are about 115 million full-time jobs in the U.S., this means there are 1.1 government dependents for every full-time worker in the U.S. (For context, there are 315 million Americans and roughly 142 million jobs. About 38 million of these jobs are part-time that pay less than $10,000 annually. Fifty million wage earners earn less than $15,000 a year, and 61 million earn less than $20,000 annually.)
The Federal government counts a person who is self-employed and earns $100 a year as "employed" and a person who works one hour a week as "employed." As a result, the only meaningful metric is full-time employment.
The top 25% who pay most of the taxes, roughly 30 million people, are a political minority compared to the 127 million people drawing direct payments/benefits from the Federal government and the 65+ million who pay essentially no income taxes (though they do pay the 7.65% Social Security/Medicare payroll tax).
5. This progressive tax structure is based largely on earned income; i.e., wages and self-employed income. Unearned income (rents, dividends, stock options, hedge fund management fees, etc.) is treated much differently than earned income. Unearned (rentier) income is governed by highly complex tax codes that lend themselves to politically controlled loopholes, subsidies, and exclusions. As a result, some profitable corporations not only pay no tax but actually receive subsidy payments from the government. In other cases, politically powerful enterprises have tax laws written specifically to limit or erase their tax burden.
The tax code treats unearned income quite differently from earned income in many other ways. For example, all unearned income is excluded from the Social Security/Medicare payroll taxes. A self-employed person pays 15.3% of their earnings in Social Security/Medicare payroll taxes; a person receiving the equivalent sum in rents and dividends pays zero Social Security/Medicare payroll taxes.
6. The assets that generate unearned income are highly concentrated, and as a result so is the unearned income. The top 1% owns twice as much stock-market wealth as the bottom 90%. This income-producing wealth enables the top 1% to act as a financial aristocracy, buying influence and favors from equivalently concentrated political Elites.
This preponderance of ownership of income-producing assets is reflected in the income stream flowing to the top 5%:
7. Those without meaningful unearned income have seen their real incomes drop substantially. Real household income has declined almost 10% since 2000:
Net worth has also declined as serial bubbles in stocks and housing popped: American Households Hit 43-Year Low In Net Worth
Here is another look at the data. Note that the drop in all household income is less than the decline in working-age households. This is the result of Federal transfer payments to retirees, those on disability, aid to low-income households, etc., paid for with unprecedented deficit spending ($1.3 trillion annually).
8. Federal spending has followed an exponential trajectory.
Social Security costs over $800 billion, Medicare and Medicaid costs total about $800 billion annually, and the Pentagon/National Security budget is around $800 billion. These three consume all Federal tax revenues. Add in interest on the ballooning national debt ($220 billion to owners of so-called external Treasury debt) and the nation is running a $200 billion deficit even if the rest of the $1.1 trillion Federal spending were to magically vanish.
Federal expenditures have skyrocketed in the past 12 years, far exceeding inflation: http://globaleconomicanalysis.blogspot.com/2012/12/congressional-spending-problem-in-easy.html
9. Tax receipts topped out at $2.4 trillion, leaving a structural gap of $1.3 trillion.
Put these structural dynamics together and the endgame becomes clearly visible: Politically, a Tyranny of the Majority comprised of those who draw direct transfers/benefits from the Federal government, is ruled by the top ½ of 1% financial aristocracy who own the majority of income-generating assets. The minority, who pay most of the taxes (the 24.5% between the majority and aristocracy), will see their taxes rise as the aristocracy buys loopholes and exclusions while the bottom 50% pay no income tax.
Financially, the Federal government’s spending has outrun the tax revenues being collected. Structurally, Federal expenditures for entitlements (Medicare, Medicaid, Social Security, Veterans Administration, etc.) will rise as Baby Boomers retire en masse over the next 15 years, while tax revenues will stagnate along with earned income.
There is no way to square these circles.
The political foundation of America is starkly unjust. An entrenched financial Aristocracy buys the complicity of the bottom 50% and retirees with Federal transfers – a Tyranny of the Majority. The 24.5% below the Aristocracy who pay most of the Federal taxes are dominated by this alliance. This may be legal, but is it just? Even more critically, is it sustainable?
The Status Quo rests on this Grand Political Bargain:
We in the Aristocracy will pay significant taxes as long as we control the levers of financial and political power. We in the top 24% will pay the rest of the income taxes as long as we and our children can continue to live well and accumulate wealth. We in the "middle class" will continue to work hard as long as we have hope of bettering our lifestyle and the lives of our children. We in the bottom 50% and retirees agree not to threaten the top 0.5%'s power as long as we continue to get our government transfers and benefits.
This Grand Bargain is coming apart as the promises made to everyone cannot possibly be met. Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. Meanwhile, the upper middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their housing-based net worth.
According to former Congress members Chris Cox and Bill Archer, writing in the Wall Street Journal:
Why $16 Trillion Only Hints at the True U.S. Debt
The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion.
That is roughly double the entire annual Federal budget.
They go on to note that “to collect enough tax revenue to avoid going deeper into debt would require over $8 trillion in tax collections annually.” Expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.
Clearly, the promises that have been made to 315 million Americans cannot be met, and the current strategies of financial repression (zero-interest rate policy, etc.) and massive fiscal deficits that subsidize favored cartels in defense, housing, education, and healthcare are unsustainable. The politically expedient “fixes” to the Fiscal Cliff (a slight increase in the tax rate on earned income above $250,000, etc.) will not fill the $86 trillion gap between what has been promised and what can be collected in taxes.
What few dare admit, much less state publicly, is that the Constitutional limits on the financial Aristocracy and the Tyranny of the Majority have failed. This guarantees a future Constitutional crisis as each political class – the financial Aristocracy, the top 24% who pay most of the taxes, the dwindling middle class and the bottom 50% who depend on Federal transfers – will battle for control as the Status Quo collapses under the weight of its unsustainable promises.
In Part II: What Will Happen When We Hit the Fiscal Cliff, we explore the repercussions that will result from this crisis. Looking at the three most probable outcomes that will impact U.S. households, 2013 looks like it is shaping up to be a year where there will be little shelter available to financial assets.
http://www.businessinsider.com/merry-christmas-chinese-credit-ratings-agency-dagong-puts-the-us-on-negative-watch-2012-12
MERRY CHRISTMAS: Chinese Credit Ratings Agency Dagong Puts The US On Negative Watch
Not that it affects anything at all, but Chinese credit rating agency Dagong used Christmas to put the US on negative watch.
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Dagong Global Credit Rating Co., Ltd. (hereinafter referred to as “Dagong”) releases a credit rating report on December 25th, 2012, putting the United States of America (hereinafter referred to as “U.S.”) on Negative Watch List. Dagong downgraded the local and foreign currency sovereign credit ratings of the U.S. from A+ to A, and each with a negative outlook on August 2, 2011. According to the changes in the situation during the surveillance period, Dagong has decided to put the sovereign credit ratings of the U.S. on Negative Watch List. The main reasons are as follows:
1. The political conflict and the defect in national debt management have pushed the creditworthiness of the federal government to the cliff again. After the U.S. federal government debt limit crisis caused by the partisan quarrels in August 2011, it has evolved into the current fiscal cliff and debt limit crisis due to the same reason. It once again highlights that the decline of the U.S. federal government’s capacity in interest integration and decision-making is the political reason of the weakened solvency. On the problem of how to tackle the national debt crisis, each political party insists on the proposition favorable for its own interest. Therefore, it is difficult to form a long-term consensus on solving the debt problem ultimately, which leads to the unceasingly fiscal deterioration of the government.
2. With no fundamental plan and measures of ameliorating the solvency in place, the U.S. government is lacking the willingness of debt repayment, and the depreciation of debt outstanding through debt monetization has already indicated a trend of implicit default. Increasing fiscal revenue, cutting fiscal expenditure and reducing the scale of debt are the ultimate ways to improve the government indebtedness, but the U.S. government, instead of adopting effective measures to improve its indebtedness, came out with two consecutive rounds of Quantitative Easing over the year in order to realize internal circulation of government debt and sustain its solvency through monetization. The continuous credit expansion to maintain its consumption through borrowing by taking advantage of the status of the U.S. dollar without touching on the ultimate issue on solvency manifests the lack of willingness to repay. The creditors have been suffering real losses from the consequent persistent devaluation in the debt outstanding, and the U.S. government has shown a trend of implicit default on its debt.
3. The deterioration in the main factors impacting on the federal government solvency has further widened the degree of deviation between the debt repayment sources and the real wealth creation capability. The wealth creation capability is the ultimate source of debt repayment and the greater the debt repayment sources deviate from the wealth creation capability the larger the risks. The debt burden of the federal government increased 9.1% and 11.7% on year-on-year basis in 2011 and 2012 respectively, far exceeding the nominal GDP growth rate of 3.9% and 3.4% as well as fiscal revenue growth rate of 4.9% and 6.2% over the same period. The debt outstanding of the federal government has risen by 60.7% since the credit crisis in 2008, while the nominal GDP has increased by only 9.2% and fiscal revenue increased by 7.4% over the same period. By the end of 2012, its debt outstanding is expected to rise to 104.8% of GDP and 608.7% of fiscal revenue. The situation exacerbates the reliance of the debt repayment sources on debt income, and the debt repayment sources are diverging increasingly further from the wealth creation capability, indicating that the solvency of the federal government is on a descending trend.
4. As a result of the pending fiscal cliff, the U.S. economy will probably fall into recession in 2013, and stay weak in the long term, which will further weaken the material basis for the government to repay debt. The U.S. is facing an unprecedented crisis of excessive credit. The inevitability and chronicity in the credit bubble burst will directly lead to the continued slump in total social consumption, triggering a chain reaction of long-term economic downturn, and the economy may go into a slight recession in 2013 due to the emergence of fiscal cliff. Consequently the federal government revenue base will fluctuate, expanding the degree of deviation between debt repayment sources and wealth creation capability.
5. Debt limit lifting and debt monetization are becoming the long-term policy of the U.S., and the real solvency of the government will continue declining. In order to avoid suffering an economic recession resulted from the abated virtual social consumption capacity established by the long-standing and excessive credit expansion, the U.S. government has adopted even greater unconventional credit expansion, which drags the country into a cycle of continuously lifting the debt limit to stimulate the economy while sustaining government solvency by excessive issuance of dollar. As the resulting risks of dollar depreciation keep accumulating, the decline in the government real solvency will become persistent, and the vulnerable credit relationships will bear increasing risk of breaking due to the frequent occurrence of emergencies such as the debt limit.
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