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ARTICLES FOR RESEARCH PAPERGOVERNMENT SHUTDOWN & DEBT CEILING CRISISProf. John Ben Sutter  You are required to use at least nine (9) of the following articles in your paper. You must use the first three that are printed out on this list.  That means you’ll need to use six more articles from the list of article titles and citations. You are required to update your paper as to what is going on with regard to these two related major issues.  Add the information about the current situation up to the date of your submission of the paper.   You will need to find that information on your own. (You need not include a lot...just be sure to acknowledge from sources what has happened up to that point.)  Best readily available sources include The Washington Post (www.washingtonpost.com), or CNN (www.cnn.com).   Both sites are free access.  Can download what you want.  Many newspaper and news magazine sites today are limited access...can only download a few articles before required to purchase an online subscription (e.g, The New York Times, The Wall Street Journal).      Citation for the following article by Lowrey:Annie Lowrey, “How a Debt-Ceiling Crisis Could Because a Financial Crisis,” The New York Times, 3 September 2013, http://economix.blogs.nytimes.com/2013/09/30/how-a-debt-ceiling-crisis-could-become-a-financial-crisis/  left000 How a Debt-Ceiling Crisis Could Become a Financial CrisisSeptember 30, 2013, 11:29 am By ANNIE LOWREYCome mid-October, the United States will have only $30 billion of cash on hand. On any given day, its net payments can reach as high as $60 billion. That means that unless Congress raises the debt ceiling, allowing the Treasury to issue new debt, the United States may find itself unable to make all of its payments — stiffing government contractors, or state and local governments, or even its bondholders.Economists widely agree that such an unprecedented event would have profound effects for the markets, likely precipitating a stock-market sell-off and setting off a round of global financial turbulence. But it has always been a little unclear just how it may play out. The Treasury might announce it would be forced to delay some payments, promising to do what it could to make sure bondholders were made whole. But then what?The team at RBC Capital Markets has put together a terrifying play-by-play for the Alphaville blog of The Financial Times. It shows how a debt-ceiling breach would translate quickly into a credit crunch and financial crisis with some disconcerting similarities to 2008. Get ready for some scary reading:Let us be perfectly clear: crossing the debt ceiling would be catastrophic. The Treasury’s systems do not clearly mark what scheduled payments are for what reasons, so it is impractical to try to prioritize payments. And clearing systems like Fedwire do not allow defaulted securities to flow, so the system would seize. In order for the clearing systems to work, the Treasury would need to notify the market of a default almost a day before the default happened (to give everyone time to modify payments), and that is not going to happen because the Treasury will not want to declare default while Congress still has time to pass a bill. Also the Fed does not take defaulted securities as collateral at the discount window, even if those securities are still trading at par.It continues:While we think the probability of the debt ceiling causing a technical default in the Treasury market is near zero, nonetheless, there are likely to be market disruptions. The main issue is that the markets are not set up to trade or finance defaulted Treasuries. While many RP documents say that defaulted securities cannot be delivered as collateral, delivery systems are not set up to easily sort out which Treasuries have defaulted and which have not (there are no cross-defaults on Treasuries), so the RP markets can seize up as the debt ceiling drop-dead date approaches.That’s pretty technical, but it boils down to this: A debt-ceiling crisis could throw sand — a whole lot of sand — into the gears of the financial system, making it impossible for market participants to tell “good” collateral from “bad” collateral. As my colleague Binyamin Appelbaum points out, that’s essentially the definition of a modern financial crisis.What’s interesting — and disconcerting — to think about is how all the new tools the Treasury and Fed developed during and after the 2008 financial crisis will work in the event of a new crisis. The Treasury would be the source of the turbulence it would desperately be trying to stop, after all.   Citation for the following article by Popper:Nathaniel Popper, “How a Debt Ceiling Crisis Could Do More Harm Than the Shutdown,” The New York Times, 3 October 2013, http://www.nytimes.com/2013/10/04/us/politics/how-debt-ceiling-could-do-more-harm-than-the-impasse-in-congress.html left000October 3, 2013How a Debt Ceiling Crisis Could Do More Harm Than the ShutdownBy NATHANIEL POPPERThe impasse in Congress this week has overshadowed the fact that the government is fast approaching its borrowing limit — or debt ceiling — later this month. Most economists and investors view the debt ceiling as a much more significant issue for the economy, with the potential to set off a global financial crisis. What is all the concern about? Here is an attempt to answer the basic questions.Q. What is the debt ceiling?A. Congress has long set an upper limit on the amount of money that the United States can borrow by selling Treasury bonds. That cap has been raised many times because the government regularly spends more than it brings in, forcing it to borrow more and more money to pay the bills. Most recently, in August 2011, Congress voted to raise the limit to $16.7 trillion.The government actually hit that threshold in May. But since then, the Treasury Department has used “extraordinary measures” to continue borrowing money while staying under the limit. Among other things, Treasury has not made new investments with money from the retirement funds it oversees for the Postal Service.Q. What happens on Oct. 17?A. Treasury Secretary Jacob J. Lew has said that on that day his department will run out of tricks to stay under the debt ceiling, making it impossible to borrow any more money. While new tax revenue will continue coming in, if the government cannot borrow, then it will not be able to pay all of the bills due that day. In a letter sent Tuesday to Representative John A. Boehner, the House speaker, Mr. Lew estimated that on Oct. 17 the government would have $30 billion on hand, indicating that its normal daily expenditures were about $60 billion.Q. Does the Treasury Department have any options to keep paying some or all of its bills at that point?A. The inspector general of the Treasury Department said in a 2012 report that when the department approached the debt ceiling in the past it considered multiple contingency plans, including selling the government’s gold or its portfolio of student loans and reducing payments across the board by a set amount. Both alternatives were deemed to be impossible.The report also said that Treasury officials determined that they could not choose to issue some checks while ignoring others. The only feasible option, according to the report, would be to delay payments until an entire day’s obligations could be paid at one time.Q. How quickly would big government bills come due?A. A payment for $12 billion in Social Security benefits is due on Oct. 23. On Oct. 31, the government is due to make $6 billion in interest payments on bonds it has already issued. If it missed any of its payments, the government would default on its obligations. If it missed an interest payment, it would default on its debt, which is considered particularly serious.Q. Why is there such concern about the interest payments on Treasury bonds?A. At the most basic level, if the government shows any hesitation in making scheduled interest payments on its outstanding bonds, investors will demand higher interest payments when the government borrows money in the future. That would add significantly to the federal budget.Treasury bonds are also used as a benchmark against which most other financial assets are priced. If the government was forced to pay higher interest rates, the borrowing costs for businesses and homeowners would rise as well. This would lead to less borrowing, which would put a brake on economic growth.Banks, meanwhile, already have large holdings of Treasury bonds. If the value of those bonds suddenly dropped, banks would have less money on hand and would be less likely to lend to one another, potentially causing a freeze in the credit markets like the one in 2008.More broadly, because investors have long believed that the United States government would always be able to pay its bills, Treasury bonds have become the bedrock of the global financial system and the dollar has become the most widely used currency in the world. If investors come to doubt the ability of the United States to pay its debt, the dollar could lose its special status and the basic plumbing of the financial system could become jammed.As the Treasury Department put it in a report released Thursday, “a default would be unprecedented and has the potential to be catastrophic.”Q. Is it possible the United States would truly default?A. Some investors and legal scholars believe that the president would be required to make interest payments on its bonds even if Congress failed to lift the debt ceiling because of the 14th Amendment, which says that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”President Obama has said he does not think the Constitution grants him that authority. At the very least, many investors think that the Treasury Department would make debt payments the top priority, potentially buying time before the government actually defaulted on its debt.Q. Have we reached this point before?A. In the summer of 2011, Republicans hesitated to lift the debt ceiling until the last minute but ultimately relented. In 1979, there was a similar standoff, and it went so close to the wire that the Treasury Department accidentally failed to make one interest payment. But the government has never knowingly failed to fulfill its financial obligations.Q. Is Wall Street betting that the country will actually default?A. When investors believe a default is likely, the stock market will almost certainly plunge. So far, the markets have suggested that Congress will ultimately come to an agreement, but the mood is growing darker. On Thursday, the Standard & Poor’s 500-stock index had its worst day in more than a month.Another barometer is the price of insurance that investors can buy against losses on Treasury bonds, known as credit default swaps, which rises as the possibility of a default rises. The price of such insurance has been climbing over the last three weeks and jumped sharply on Thursday. But it is still far below the level it reached in the summer of 2011.Q. Will there be damage if Congress waits to solve the problem until the last minute, as it did in 2011?A. Much of the worst damage in the financial markets in 2011 came after Congress reached its agreement. In the days that followed, Standard & Poor’s downgraded the United States’ credit rating to AA-plus from AAA. The broad stock market dropped more than 10 percent.This time around, Fitch Ratings, one of the other main credit ratings agencies, said that it would consider lowering its AAA rating on the United States if the debt ceiling is not raised in a “timely manner prior to when the Treasury will have exhausted extraordinary measures.” If two of the three main agencies rate the United States below AAA, many investors would no longer be allowed to hold the bonds.     Citation for the following article by Liptak:Adam Liptak, “Experts See Potential Ways Out for Obama in Debt Ceiling Maze,” The New York Times, 3 October 2013,http://www.nytimes.com/2013/10/04/us/politics/experts-see-potential-ways-out-for-obama-in-debt-ceiling-maze.html?src=un&feedurl=http%3A%2F%2Fjson8.nytimes.com%2Fpages%2Fpolitics%2Findex.jsonp  left000 October 3, 2013Experts See Potential Ways Out for Obama in Debt Ceiling MazeBy ADAM LIPTAKWASHINGTON — Even as President Obama insists that he would be powerless to save the economy from catastrophe should Congress fail to raise the nation’s debt ceiling, some law professors say he does have options. They may be politically unattractive, unpalatable to the financial markets and subject to legal challenges, these experts say, but these choices are better than failing to live up to the nation’s financial commitments.The view that Mr. Obama could continue borrowing without Congressional authorization is based on three arguments.One is grounded in an aggressive understanding of presidential power, the second in an interpretation of an obscure provision of the 14th Amendment and the third on a choice among three irreconcilable constitutional obligations.A senior administration official was dismissive of all three options, calling them “unicorn theories,” reflecting the White House’s position that only Congress can solve a problem of its own creation.“The Constitution gives Congress — not the president — the authority to borrow money, and only Congress can increase the debt ceiling,” Jay Carney, the White House press secretary, said on Thursday, adding that Congress must “authorize the Treasury to pay the bills that Congress racked up.”But Eric Posner, a law professor at the University of Chicago, said that the meaning if not the words of the Constitution left Mr. Obama with room to act.“The president has inherent emergency powers,” he said. “It has long been understood that the president should act to protect the country.”That is the broadest option for Mr. Obama. The second is based on the actual text of the Constitution, though there is a dispute about what the words in question mean. Section 4 of the 14th Amendment says: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”The provision, adopted in 1868, was meant to ensure the payment of Union debts after the Civil War. But it was written in more general terms, as the Supreme Court once noted in passing. “While this provision was undoubtedly inspired by the desire to put beyond question the obligations of the government issued during the Civil War,” Chief Justice Charles Evans Hughes wrote in 1935, “its language indicates a broader connotation.”On Thursday, Mr. Carney dismissed the argument, popular in some legal circles, that the amendment authorized the president to raise the debt ceiling.“We do not believe that the 14th Amendment provides that authority to the president,” he said. He added that the meaning of the provision had divided constitutional scholars. That alone, Mr. Carney said, “means that it would not be a credible alternative.”Laurence H. Tribe, a law professor at Harvard, is one of the skeptics who agrees with the White House. “The president should hold firm,” he said, “and not permit Congress to insist on holding its breath rather than doing its job of authorizing payment of the debts it has already incurred unless and until the president blinks on one of his signature initiatives.”The third alternative, the subject of a 2012 article in The Columbia Law Review, focuses on what the article’s authors call the irreconcilable instructions Congress will have provided to Mr. Obama if it fails to act. Having been told to spend, but not to raise taxes or issue debt, “the president has to decide which of Congress’s orders to follow,” said Neil H. Buchanan, a law professor at George Washington University, who wrote the article with Michael C. Dorf, a law professor at Cornell. The president must, in the article’s words, “choose the least unconstitutional option.”That option, the authors concluded, is issuing more debt.“Anything you do that’s remotely realistic is going to be unconstitutional,” Professor Dorf said. “But the president should still try to minimize the constitutional violation.”Professor Posner countered that the article was unrealistic. It would be political suicide, he said, for Mr. Obama to announce that he was violating the Constitution.Professor Tribe also rejected the idea, saying it was proposed by “otherwise very sensible law scholars” who in this case had concocted “a prescription for a free-for-all that abandons the rule of law.”“We have no metric for comparative lawlessness,” he said.Mr. Obama will still have choices if Congress fails to act, Professor Tribe added, but they involve spending priorities. “Congressional spending directives to the president contain an implicit condition that, if the money just isn’t there to be spent, the president must make tough choices — prioritizing repayment of bondholders who have lent money to our country over those who have been promised payment under various sorts of entitlements, politically painful though that would be.”However one interprets the Constitution, there remains the practical question of whether the nation’s creditors would continue to lend to the United States if the president did take unilateral action.“I don’t think anyone in their right minds would buy those bonds,” Michael W. McConnell, a law professor at Stanford, said of debt issued without Congressional authorization.Were Mr. Obama to act, court challenges would inevitably follow. But most legal experts said they expected judges to stay out of the fray, either by ruling that the particular challengers had not suffered the sort of direct injury that gave them standing to sue or by ducking the issue by calling it a “political question” not fit for judicial resolution.In any event, Professor Dorf said, courts could not move quickly enough. “Even when courts move very fast, they don’t move as fast as markets,” he said.There is at least one reason, Professor Posner said, to hope for a court challenge that would reach and be decided by the Supreme Court: “It would be the most interesting case in decades.”      The following articles are organized in order by publication date:  Graeme Wearden, “US shutdown: a guide for non-Americans,” The Guardian, 30 September 2013,http://www.theguardian.com/world/2013/sep/30/us-shutdown-explainer-non-americans   James Surowiecki, “After the Shutdown: The Debt Ceiling,” The New Yorker,  1 October 2013,http://www.newyorker.com/online/blogs/comment/2013/10/the-real-fight-the-debt-ceiling.html   “Shutdown Spectacle: ‘America Is Already Politically Bankrupt’,” Spiegel, 2 October 2013,http://www.spiegel.de/international/germany/german-press-review-on-us-government-shutdown-a-925768.html   “Debt and disaster worried overshadow US shutdown,” Euronews, 3 October 2013,http://www.euronews.com/2013/10/03/debt-and-disaster-worries-overshadow-us-shutdown/   “US Debt Ceiling Fight Poses Treat to Global Economy,” Dow Jones Business News, 3 October 2013,http://www.nasdaq.com/article/us-debt-ceiling-fight-poses-threat-to-global-economy-20131003-00691   “Failure to raise U.S. debt ceiling will affect global economy: IMF chief,” Xinhuanet, 4 October 2013,http://news.xinhuanet.com/english/world/2013-10/04/c_132771090.htm   Jonathan Masters, “U.S. Debt Ceiling: Costs and Consequences,” Council on Foreign Relations, 4 October 2013,http://www.cfr.org/budget-debt-and-deficits/us-debt-ceiling-costs-consequences/p24751   Irwin M. Stelzer, “The Shutdown, the Debt Ceiling, and Our Credit Rating,” The Weekly Standard, 5 October 2013,http://www.weeklystandard.com/blogs/shutdown-debt-ceiling-and-our-credit-rating_759239.html   Tim Alberta and Michael Catalini, “Republicans Downplay ‘Default, Dismiss Debt Deadline,” National Journal, 6 October 2013,http://www.nationaljournal.com/daily/republicans-downplay-default-dismiss-debt-deadline-20131006?mrefid=LeadStoryTiles_medium   Jillian Berman, “We Accidentally Breached the Debt Ceiling In 1979> It Wasn’t Pretty,” The Huffington Post, 7 October 2013,http://www.huffingtonpost.com/2013/10/07/debt-ceiling-breach-1979_n_4058492.html?ref=topbar   Jonathan Chait, Ross Douthat, “Debt-Ceiling Extortion Isn’t So Bad, Really,” New York Magazine, 7 October 2013,http://nymag.com/daily/intelligencer/2013/10/douthat-debt-ceiling-extortion-isnt-so-bad.html   Jonathan Chait, “How Republicans Failed to Understand the Democrats’ Debt-Ceiling Logic,” New York Magazine, 7 October 2013,http://nymag.com/daily/intelligencer/2013/10/debt-ceiling-and-the-conservative-bubble.html   Jonathan Weisman, “With Reid Statement, Relationship With Boehner Grows More Acid,” The New York Times, 7 October 2013,http://www.nytimes.com/news/fiscal-crisis/2013/10/07/with-reid-statement-relationship-with-boehner-grows-more-acid/   Matt Berman, “Americans Don’t Get How Bad Hitting the Debt Ceiling Would Be,” National Journal, 7 October 2013, http://www.nationaljournal.com/domesticpolicy/americans-don-t-get-how-bad-hitting-the-debt-ceiling-would-be-20131007?mrefid=LeadStoryTiles_medium   Rana Foroohar, “Debt Ceiling Crisis Is Threatening Your Quality of Life “ Time, 7 Oct 2013,http://business.time.com/2013/10/07/foroohar-the-debt-ceiling-crisis-is-threatening-your-quality-of-life/   “Warren Buffet Compares Debt Ceiling Politics to Nuclear Bomb,”  The Huffington Post, 7 October 2013,http://www.huffingtonpost.com/2013/10/07/buffett-debt-ceiling-bomb_n_4056861.html?icid=maing-grid7|maing7|dl8|sec3_lnk1%26pLid%3D387589   Yalman Onaran, “A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall,” Bloomberg,  7 October 2013,http://www.bloomberg.com/news/2013-10-07/a-u-s-default-seen-as-catastrophe-dwarfing-lehman-s-fall.html   Margaret Talbot, “Washington Dramas,” The New Yorker, 14 October 23013,http://www.newyorker.com/talk/comment/2013/10/14/131014taco_talk_talbot    Jese Eisinger, “Complacency on Wall Street Could Be Worse Than a Panic,” The New York Times, 9 October 2013,http://dealbook.nytimes.com/2013/10/09/complacency-on-wall-street-could-be-worse-than-a-panic/?src=dlbksb   Karen Tumulty and Tom Hamburger, “Key Republicans signal willingness to back down on effort to defund health-care law,” The Washington Post, 9 October 2013,http://www.washingtonpost.com/politics/key-republicans-signal-willingness-to-back-down-on-effort-to-defund-health-care-law/2013/10/09/865b9284-30f6-11e3-89ae-16e186e117d8_story.html?hpid=z1   Zachary A. Goldfarb and Lori Montgomery, “Treasury’s Lew to warn lawmakers: No payments guaranteed if debt ceiling breached,” The Washington Post, 9 October 2012,http://www.washingtonpost.com/business/economy/treasurys-lew-to-warn-lawmakers-no-payments-guaranteed-if-debt-ceiling-breached/2013/10/09/e4b8b4bc-311c-11e3-8627-c5d7de0a046b_story.html      
Gov2306 Paper research

Gov2306 Paper research

Question # 00002312 Posted By: sunflower Updated on: 10/14/2013 07:14 PM Due on: 10/18/2013
Subject English Topic General English Tutorials:
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Paper research for Gov 2306.



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