
By Robert Willmann
A technique used in Congress will cause a proposed law to be filed at the last minute and scheduled to be voted on right away. This prevents many — or most — members from reading it and the public has no idea what is in it or that it will be voted on. That method was used on 19 December 2024, with a bill that was to fund the federal government and prevent a government shutdown. However, its last section — 5106 — extended the “suspension” of the federal debt limit from 2 January 2025 until 2027! Here is the language that was slipped in at the end of the bill, which was called House Resolution 10515—
“Sec. 5106. Temporary extension of public debt limit.
“Section 401 of the Fiscal Responsibility Act of 2023
(Public Law 118–5) is amended—
“(1) by striking ‘January 1, 2025’ in subsection
(a) and inserting ‘January 29, 2027’, and
“(2) by striking ‘January 2, 2025’ each place
it appears in subsections (b) and (c) and inserting
‘January 30, 2027’.”
See how that slick little trick was set up? It referred back to the law passed in June 2023 that we have discussed and which suspended the debt limit until 2 January 2025. An older existing law would be amended that would then allow the federal government to take on an unlimited and unrestricted amount of debt for two more years.
Fortunately, the bill did not even get a majority vote in the House of Representatives, much less the two-thirds vote it needed under a “suspension of the rules”. It was 174 for, 235 against, 1 voting present, and 20 not voting.
The public can only find out about these shenanigans the next day, at the earliest, when the Congressional Record is published. This document is an excellent source, because it is supposed to be like a court reporter’s transcript of what happens in a court hearing, with a record of what everybody said and what is considered, and the text of each bill or amendment or resolution that is voted on, and the result of the vote, and if a recorded vote is taken, how each member of the House or Senate voted.
I have pulled an excerpt of seven pages from the Congressional Record containing the discussion of that proposed bill before the vote on 19 December. They are pages H7379 to H7385. The entire bill was shown before the remarks begin, and you can see in the left column at the end of the text the section 5106 that would have done the dirty deed. There are statements by members for and against suspending the debt limit. The vote and its result are at the end of the discussion. You can also see how members are allowed to change their vote after the initial vote and before voting is closed [1]—
After H.R.10515 failed on 19 December, the next day a new bill was presented with the same name, but with a different number, H.R.10545. The graphic at the top of this article shows the two bills in the website of Congress. The last day to appropriate money to avoid the beginning of a government shutdown was 20 December, and the second bill passed the House that day, and the Senate then passed it and Biden signed it on 21 December 2024. I did not try to grind through a word-for-word comparison of the two bills, but the second one did not include the suspension of the debt limit.
The June 2023 law that suspended the debt limit said that a new limit would come into existence on 2 January 2025, and would be whatever the amount of the total debt “subject to the limit” happened to be on that day. On New Year’s Eve, the situation was discussed here, including a letter Treasury Secretary Janet Yellen sent to Congress on 27 December 2024 about the problem. At that time Congress had not created a new debt limit [2].
Nothing has been done since then. The Daily Treasury Statement for 31 December 2024 showed the total public debt to be $36,218,605,000,000. The debt subject to a limit (if there was one) would be $36,103,971,000,000. The numbers are different because there can be other debt, including unamortized discount and the Federal Financing Bank, that is excluded from the total public debt amount [3]. The Daily Treasury Statement for 2 January 2025 included the new debt limit, as $36,103,996,000,000 [4]. Congress, Joe Biden, Donald Trump, and JD Vance have remained silent since then. As Treasury Secretary Janet Yellen fiddled with the books, the debt has been creeping higher after the start of the year. She sent a followup letter to Congress on Friday, 17 January 2025, saying that “extraordinary measures” were going to start since new debt is not authorized. Money will not be invested in certain Civil Service and Postal Service employee and retirement funds, and that money will obviously be burned up elsewhere. Yellen says that the funds will be replenished later, “once the debt limit has been increased or suspended”. This admission lays bare for all to see that the federal government is stuck in the mud and cannot move without borrowing more and more and more. Here is her letter—
Since Janet Yellen is heading out the door, Scott Bessent, Trump’s nominee to be the new Treasury Secretary, can start writing letters to Congress, and put on some tap dancing shoes.
The inauguration of president-elect Donald Trump is on Monday, 20 January 2025, and will be held inside the Capitol building. Also in attendance will be Mr. Federal Debt. Like a Mafia loan shark, he will be smiling to himself, because he knows that the self-important people in and around the pomp and circumstance will be coming to him begging. Real soon.
[1] Congressional Record, December 19, 2024.
https://www.congress.gov/118/crec/2024/12/19/170/189/CREC-2024-12-19.pdf
[3] Daily Treasury Statement, December 31, 2024.
[4] Daily Treasury Statement, January 2, 2025.
The more far out MMT’ers explain, using arguments I always find more ingenious than convincing, that that debt mentioned in the article is an asset of the American people. The more the merrier, they say. In which case, I always think, let the debt rise to a hundred trillion, more if you like, and spend spend spend on infrastructure. The American people will be super-rich and some bridges might get repaired.
Doesn’t seem to work like that. Not in real life. Certainly didn’t work out like that in the States during the last few Presidencies. In any case that approach doesn’t address one of the fundamentals. Only one but it’s key. Trade deficits.
No amount of pretending can get over the fact that if a country consistently imports more in the way of goods and services than it exports it’s in trouble. Plenty of other ways of getting the economy into trouble, as my own country keeps finding out, but that balance of payments deficit is one of the best.
That balance of payments deficit is usually talked about in terms of how to cover it. Found this article that shows that way of thinking:-
https://think.ing.com/articles/us-bop-debt-complacency-needs-to-be-watched/
“… getting enough foreign bond portfolio inflows in to finance the balance of payments deficit poses a vulnerability for the US dollar, too.”
But what if the approach is not to finance the deficit but to rectify it? Stop scrounging around for investment inflows and focus on industrial policy? “Neanderthal thinking”, say the economists, “Go away and learn some basic theory like we had to. And find out about Ricardo while you’re at it.” But Ricardo’s dead. His world no longer exists.
In contrast to his recent predecessors Donald Trump gets it. Rectify that balance of payments deficit and that’s a useful start to recovery, which is one of the reasons “bringing industry back home” is such a thoroughly good idea. In the meantime, keep Yellen’s smoke and mirrors fiscal sham going and pray it doesn’t all collapse before Trump’s brought the United States back to economic health.
That’s the programme, far as I can see. Hope it all works out for you.
Two days ago BenAris tweeted: US has $36trn of debt. Russia has c$400bn.
Seeing this in print scared the hell out of me, to be honest. I’ve seen what happens to countries that are next to countries that default. It ain’t pretty.
I should calm down – the big problem for both Argentina and Thailand was their debt was not denominated in their own currency. That makes all the difference.
Janet Yellen’s gift to America. And the bankers of the City of London. Did you see that there is a proposal for an entity to clear U.S. treasury futures at the London clearing house which is overseen by the Bank of England? WTF would we want LIBOR styling rigging of our treasuries by the BOE? Screw those people.
Trump added $8.4 trillion to our national debt during his previous four years Fred. That’s 23% of the total.
https://www.crfb.org/blogs/how-much-did-president-trump-add-debt
But go ahead and blame Yellen if it makes you feel better.
Leith,
You haven’t paid attention to what Yellen was doing? Or which Federal Reserve Bank she was head of before becoming Secretary of the Treasury? My my. Less partisanship and a bit more analysis might be useful
Fred “less partianship”…pot calling the kettle black, for sure!
Leith it is true that Pres Trump added 8.4 T to the federal deficit. I think a part of the deficit was for Covid Stimulus. Biden came to office with Covid being eliminated and he / Janet Yellen added another 8T to the deficit. Unfortunately there is no talk about the deficit reduction in the current Trump administration but talk about Ministry of External Tax collections (I have no idea what is the need for this since he wants to Tarif the imports which can be collected at the Pier!!) No matter how we see it I think this is nothing but smoke and mirrors. I certainly hope I am wrong
Muralidhar Rao,
Yellen didn’t add anything to the national debt. The President and Congress do that. Trump’s administration did add a lot due to Covid expenditures. A lot also was added by Biden. 2021 was a worse year for Covid infections than 2020. It was not eliminated in 2020. The difference was the vaccine was available in 2021.
I still don’t know if Trump grasps how tariffs work. The importer pays, not the exporter. I think the whole idea of of his “external revenue service” is part of his con to convince the public that foreigners pay tariffs.
Fred’s original comment had nothing to do with the federal deficit. It was about fiscal policy, something that Yellen did have a big part in.
TTG,
Trump wasn’t in office in 202o-2024. It does, however, look like Michelle Obama was the only smart Democrat as she stayed home in Hawaii yesterday where there was “better weather and less humiliation” per a lifelong reporter.
Fred,
Trump didn’t leave office until 20 Jan 2021. He owns the Covid response until then. Yesterday was MLK day of service.Michelle Obama claimed she’d rather spend it doing day of service activities. May have been just a convenient coincidence, but it’s a far better excuse than Trump skipping the 2021 inauguration festivities.
Fred and TTG,
I didn’t even know that Janet Yellen has been Secretary of the Treasury since 2021 until I went to do the research to prove you both wrong and found out that, yeah, I was the one who was in the dark. In my head she was Chairman of the Fed.
Regardless of which side of political spectrum we belong we as a nation we are screwed. Here is a comment by David Goodman in Asia Times “As rates rise, moreover, the US Treasury deficit – already above 6% of GDP – will increase. Interest payments on the federal debt rose to US$1 trillion from $400 billion in 2021, adding to the blowout federal borrowing requirement of $1.8 trillion.”
TTG – I don’t think Trump and his team have explained tariffs very well – if at all. That could well come back to bite him as prices rise, as they inevitably must under protectionism.
The silver lining is that much of the cost to the consumer of any article is incurred internally. Distribution costs and mark-ups after import add greatly to the final price, sometimes by many times, so what looks like a crushing tariff can sometimes have a relatively insignificant effect on that final price.
I saw an example given a long time ago by a buyer in the shirt trade. It was an account of how the last bulk shirt maker in the UK went under. I’m not able to check the figures given and it’s an extreme example but the account at least illustrates how deindustrialisation occurs.
The account started off with the buyer stating he’d never buy a quality shirt from an up-market shop again. That was because the price in the shop was around £150 and from his time in the trade he knew that same shirt left the English factory gate, all packaged up and ready to be sold, for around £8.
The difference explained by distribution costs and markup and selling costs, which are crazy high in the luxury sector of the market.
The English factory closed not long after. The buyers had found an Asian supplier who could provide exactly the same quality shirt, and cover the increased transport costs, for literally a few pence less. A 10p tariff would have added little to the final cost of the shirt and would have kept the jobs in England.
The maths would be quite different for Walmart but the principle remains the same.
The Walmart buyers, and the owners, are not deliberately wrecking American industry by outsourcing. They have no choice but to buy in as cheaply as possible because if they don’t, some other firm will and Walmart goes out of business. As things are, a country with first world labour costs cannot compete with a country using cheap labour. That’s leaving out of account environmental and working condition regulations. Also leaving out of account concealed subsidies and currency manipulation.
Plus the cost of living in, say, Bangladesh is lower than in the States so on a wage that does at least allow the Bangladeshi worker to live, the American worker would get the choice between starving or freezing to death.
Only two solutions. Force American wages down and if that can’t be done put the American workers out of work, or tariffs. The American rust belt, and ours which is rather more extensive proportionately, is the inevitable result of failing to adopt the second solution.
Automation is sometimes regarded as an alternative solution. A paint shop that used to employ 300 on the factory floor now employs maybe 10, so why does it matter so much what labour and associated costs are?
That assumes that other countries are unable to automate too, which was a valid assumption in the days of Ricardo but isn’t now. And supply chains and design teams tend to cluster around existing centres of production so losing our own centres of production means it’s more difficult to pull back from de-industrialisation.
OK, say the resolute “Free Trade” fanatics. Let the foreigners do the bread and butter work and we’ll win out on High Tech and IT, where we still have an advantage.
But that again harks back to the days of Ricardo, when for a brief period in England we had an industrial culture and industrial facilities that were irreproducible anywhere else in the world. So we had a comparative advantage when it came to factory produced goods that was unassailable. Forget about Empire and all that nonsense, that head start in the Industrial Revolution gave our industry an advantage that we lived off for the succeeding century and a half! Ricardo was our friend then. He’s our enemy now because that head start has long since run out of steam, not just for us but for the West. Other countries are, with the exception of one or two bastions that still remain, as good as us at High Tech or better.
And the “Free Trade” fanatics are selling us a pup anyway because there is not and never has been such a thing as “Free Trade”. The lobbyists in Washington and Brussels work day and night to ensure that the big corporations have regulatory advantages that ensure they have the edge on existing or potential competitors. The English EU expert, Dr Richard North, wrote a brilliant series of articles explaining how that operates in practice and any lobbyist could confirm that from real life experience. The apostles of “Free Trade” are selling us a world that has never existed and will never exist.
So returning to Trump’s beloved tariff’s, what Trump’s really telling us is that there’s no such thing as a free lunch. We can pay more for our imported goods by tariffing them. Or we can get them dirt cheap – and pay indirectly the increased costs resulting from the unemployment, reduction of living standards and social disruption that deindustrialisation inevitably brings in its train.
Meh. Congress always finds a way around the Debt Limit when it wants to, because it has to. They only slow walk it when a GOP Congress wants to burn a Dem President. Dems try that sometimes with a GOP President, but Dems represent more voters who need and/or want the US Government to actually Do Things, whereas lotsa GOP donors have been actively trying to “drown it in a bathtub” for the last few decades.
In this case, the GOP Congress will quickly support whatever new Tax Cuts For The Rich that Trump proposes, regardless of how much it adds to the Federal Debt. They will pretend to balance that out with cuts to some (Democratic) pork-barrel projects, and maybe even blow up Biden’s attempt to rebuild our transportation and energy infrastructure. The Techbro Cabinet would love to kill off Social Security and Medicare, but I doubt Trump will go along with that.
This isn’t to say that I think the Federal Debt isn’t a problem; I just don’t believe that any Republican President – especially Trump – will do anything about it. Keynes was right: the Government really can heat up the economy by borrowing and spending, and the GOP – especially Trump – wants to continue to pretend that they are the ones who really know how to make The Economy better.
In 2017, Trump inherited an economy which was finally recovering from the 2008 crash [caused by GWB’s tax cuts and lax Bank Regulation], and proceeded to overheat it with more Tax Cuts. Usually, it takes 7 years of GOP rule before the bubble gets big enough to pop (see 1987, 2007); in this case, Covid popped that bubble early. Like Obama, Biden inherited an economy on life-support; like Obama, he did a decent job of reviving it (but without addressing the long-term problems which are now becoming short-term problems, like high RE costs, Regulatory Capture, concentration of capital etc).
Trump again inherits an economy which is *technically* – according to all the Big Numbers – in pretty good shape. The Stock Market is very happy; it will continue to go up, until it doesn’t. More Tax Cuts will overheat the economy again. But I don’t see anything to indicate that a new Trump Admin would even attempt to reverse the dangerous undercurrents which will (1) hasten the next Crash and (2) make it even harder to recover from that.
Well, now… have a nice day!