Wayzata 2010 Debt Ceiling

Lab Group

WILL PASS

DEBT CEILING WILL PASS, CONGRESS HAS NEVER FAILED TO INCREASE THE DEBT LIMIT
WHEN NECESSARY – EMPIRICS FLOW AFF

McClearn, Matthew, Canadian Business Fellow, “Dancing On The Debt Ceiling,” February 28, 2011,
CANADIAN BUSINESS, http://www.canadianbusiness.com/managing/strategy/article.jsp?
content=20110228_10007_10007 - 2/28/11
This might seem a historic moment, until one recognizes that many of his predecessors regularly wrote similar missives. The debt ceiling was introduced in 1917, at a
time when America was issuing copious amounts of debt to finance its entrance into the First World War. The convention was to rack up debt only in times of war or
serious economic crises, and to pay it down afterward. But after Second World War, repayment became exceedingly rare, necessitating frequent ceiling increases.
By the 1980s, votes were sometimes just months apart. As
Geithner wrote in his letter, "Never in our history has
Congress failed to increase the debt limit when necessary." Indeed, Congress raised the ceiling
well over 70 times in the past half century. Nobody seems particularly worried about the votes —
bond markets barely react.

Page 1 of 6
Wayzata 2010 Debt Ceiling
Lab Group

WON’T PASS

DEBT CEILING WON’T PASS – A REPUBLICAN CONGRESS MEANS PASSAGE WILL BE

HARDER THAN EVER AND THE BILL WON’T BE PASSED DOWN THE ROAD

McClearn, Matthew, Canadian Business Fellow, “Dancing On The Debt Ceiling,” February 28, 2011,
CANADIAN BUSINESS, http://www.canadianbusiness.com/managing/strategy/article.jsp?
content=20110228_10007_10007 - 2/28/11
But AliceRivlin, a former Congressional Budget Office director who now works at the non–profit
Brookings Institution in Washington, perceives a genuine risk that Geithner won't get more
credit this time. "We have new people in Congress who are very adamant about deficit
reduction," she says, "and not very sophisticated about the consequences of defaulting on the debt." And even if Congress does raise
the ceiling once again, these disputes will arrive more frequently — and likely prove harder
fought — as America's fiscal train accelerates out of control.

THE DEBT CEILING BILL WILL NOT PASS – EVEN WITH REPUBLICAN FISSURES, SENATE
DEMOCRATS WILL NOT ACCEPT ANYTHING BUT A CLEAN BILL

Calmes, Jackie, “Both Sides Are Braced for Debt-Limit Debate,” February 11, 2011, NYTIMES,
http://www.nytimes.com/2011/02/12/us/politics/12debt.html?src=twrhp
WASHINGTON — With a showdown approaching over the need to raise the federal debt limit, White House
officials feel they have the upper hand over Congressional Republicans who want to use the debate on the
measure to force deep spending cuts, people familiar with the administration’s thinking say. While Republican leaders say they hope to avoid a market-shaking
crisis, many conservatives
in the party are insisting on using the issue as leverage to extract big if
unspecified concessions from President Obama, leaving Wall Street concerned and even some Democrats wondering if the White House
is in for a more dangerous fight than it anticipates. If Congress does not act to increase the Treasury Department’s legal borrowing limit, which could be
reached as soon as the first week of April, the government would face problems refinancing its debt and raising money for its operations, and, at worst, would risk
default. Some Democrats say the White House’s hopes of getting Congress to approve a “clean” increase in the government’s
borrowing authority — without any additional measures to cut the budget deficit — are unrealistic with the House in
Republican hands. Republican leaders’ ability to rein in their members, however, is in question after the past week, which saw turmoil
within the party over issues like a Tea Party-backed demand for deeper spending cuts this year. Further complicating the
outlook, a small group of senators from both parties is mobilizing to step into any impasse to try to
compel two-party talks for a long-term deficit reduction plan like the one recommended in
December by a bipartisan majority of Mr. Obama’s fiscal commission. “The crux of the issue is whether there will or won’t be a clean debt-limit bill, and that’s
going to be difficult,” said Roger Altman, an investment banker and former Treasury deputy in the Clinton administration. Soon, Mr. Altman added, “this will be the
central focus in Washington, and that of course may spill over into the business community and the financial community.” Given the fiscal, financial and political
stakes in a still-weak economy, the coming confrontation is more widely anticipated than the release on Monday of Mr. Obama’s budget for the 2012 fiscal year,
which begins Oct. 1, 2011. Treasury Secretary Timothy F. Geithner has notified Congress that sometime from April 5 to May 31, the government will exceed
what it can now legally borrow to cover obligations ranging from Social Security benefits and war expenses to interest payments for Chinese creditors. Treasury
can extend the deadline several weeks through “extraordinary measures,” he wrote Congressional leaders, but even a short-term default “would have catastrophic
economic consequences.” In Washington on Wednesday, Mr. Geithner sounded optimistic, saying markets should understand that “Congress
will act as
it always has to make sure we meet those obligations.” “There’s always a little political theater around this,” he added. The situation
presents a particular challenge to Speaker John A. Boehner, who has to navigate between the insistent demands of his Tea Party-backed members and the
responsibility that comes with power. Although partisan brinkmanship over the issue has occurred in the past, Congresses under the control of both parties have
always agreed to debt-limit increases to avoid undercutting the creditworthiness of the United States government and thereby igniting a crisis in the global markets. “I
hope they aren’t sleeping at night, because we really are playing with fire,” said Robert D. Reischauer, president of the Urban Institute, a Washington-based
research group, and a former director of the Congressional Budget Office, speaking of both parties. The administration has left it to Congress to decide how
much to raise the limit. The level will determine how soon the ceiling would need to be lifted again. There is much speculation that Republicans could force a series of
short-term extensions to keep pressure on the White House to give ground. Exactly what House Republicans want is unclear. They are split over
how much and specifically what to cut from so-called discretionary spending for nonsecurity
programs, which make up just over one-tenth of the federal budget. (Most of the rest covers the military, Medicare, Medicaid, Social Security and
interest on the debt.) “We want to bank real spending cuts and spending controls going forward,” said Representative Paul D. Ryan, Republican of Wisconsin,
chairman of the House Budget Committee. “Exactly how you do that — and there’s a lot of different ways of doing that — is going to be in the details of negotiations.”
Yet any compromise is likely to upset many Tea Party activists and the scores of Republican lawmakers they helped elect in November. “We’re telling them not to
raise the debt limit,” said Mark Meckler, the co-founder and national coordinator for the Tea Party Patriots. “When your credit card is maxed out, you don’t go to the
credit-card company and say, ‘Hey, if you would just give us more debt, it would be O.K.’ ” Further constricting House leaders’ room to maneuver are calls from
Republican presidential aspirants not to raise the debt limit, or to force the Treasury Department to delay until Mr. Obama concedes to Republican demands —
admonitions that harden conservative lawmakers’ opposition. Democrats say the
White House believes it is well positioned for the
debate, at least initially, because of the Republican fissures, polls suggesting the unpopularity of
domestic cuts that would be required, and, not least, the House Republicans’ shared responsibility for
governing. But polls also show that Americans have a dim view of Mr. Obama’s overall handling of the deficit and the economy. The White House will try to

Page 2 of 6
Wayzata 2010 Debt Ceiling
Lab Group

enlist Republican luminaries to echo its call for a clean bill given the economic dangers of political brinkmanship, officials say. Unbidden, the Federal
Reserve
chairman, Ben S. Bernanke, implored Congress in a recent speech not to use the debt limit as a “bargaining chip.” Such pleas are expected to go unheeded. By
all accounts, Mr. Boehner could not pass a clean bill if he wanted to. Yetanything he adds to secure Republican votes is
expected to cost support from Democrats, already eager to vote no to force Republicans to take
responsibility for passing a bill. Whatever the House does attach to a debt limit is expected to hit
a wall in the Senate, where Democrats retain a narrow majority. But Senate Democrats are also split on how to handle a debt- limit
bill; their differences were aired at a party retreat this week. Most, including the majority leader, Harry Reid of Nevada,
favor a clean measure. But a faction of mostly moderate Democrats wants some bipartisan
commitment to negotiate a multiyear deficit reduction plan, and has been meeting with a few Senate Republicans to plan
their strategy.

THE DEBT CEILING BILL WILL NOT PASS – THE AMERICAN PUBLIC, CONSERVATIVE
DEMOCRATS, REPUBLICANS, AND THE TEA PARTY HAVE ENOUGH POWER TO PREVENT
PASSAGE

WORLD DAILY, “Tea Party Joins Opposition To Raising Debt Limit,” February 15, 2011, Tea party joins
opposition to raising debt limit http://www.wnd.com/?pageId=263933#ixzz1EGTOSwI9
WASHINGTON – The largest tea party group in America has come out forcefully in opposition to raising the debt limit, adding more pressure to House Republicans
who can kill plans to permit continued borrowing by the federal government and thus mandate the most dramatic government cuts in spending in decades. Mark
Meckler and Jenny Beth Martin, co-founders of the Tea Party Patriots, said in a statement, "Republican credibility as fiscally responsible managers of public
Congress will vote on whether to raise the nation's
resources is on the line" with the issue of the debt limit. "In a matter of weeks,
debt ceiling," they wrote. "The American people are united in saying 'no,' with recent polls indicating almost 70 percent of the American people opposed to
this reckless action. Once again, congressional Republicans will have the opportunity to demonstrate to the American people that they are serious about bringing
fiscal responsibility to Washington. Tea Party Patriots will be watching." The tea party leaders said their group applied immense pressure
to see that Republicans lived up to their pledge to cut an initial $100 billion from the budget. They called that "a good
start" and a "first step." "Now it is time to do the right thing by not raising the debt limit," they said. "The whole nation is watching." Shock the
Washington establishment by participating in the "No More Red Ink" campaign and shut down all new plans for bailouts, "stimulus" spending and even the funding for
Obamacare. More and more House Republicans are recognizing the biggest vote they will cast this year is on the question of whether to raise the debt limit because
the new majority in the lower house can, by inaction alone, force the most dramatic spending cuts in American history. Rep. Reid Ribble, R-Wis., confronted Federal
Reserve Chairman Ben Bernanke in a budget committee hearing last Wednesday on an earlier statement Bernanke made that it would be "reckless" for Congress
not to approve an increase in the $14.3 trillion debt limit. "Is it not also reckless to have the level of uncontrolled spending that the American people have been
witnessing over the last 20 years or so?" Ribble asked. "Absolutely," Bernanke replied, "and I don't mean to imply you shouldn't address that. I just think they should
be done separately ." What is emboldening Republicans – even to the point of bucking their own leadership? The organizer of a campaign to persuade House
Republicans to hold the line on any more borrowing says the grass-roots effort is working. "I'm seeing more and more Republicans recognizing what we've been
saying in the 'No More Red Ink' campaign," says Joseph Farah of WND, who has spearheaded the mailing of 250,000 letters to 242 House Republicans in an effort to
block the raising of the debt limit. "This campaign is working. But we need the public to pour it on now because time is running out." While the latest poll shows 70
percent of Americans opposed to raising the debt limit, House Speaker John Boehner has signaled his intent to push for it – surrendering, Farah says, the only
weapon Republicans have that can force cuts beyond those that will be accepted by the Democrat-dominated Senate and Barack Obama. Rep. Michael Burgess, R-
Texas, is another member to publicly oppose the move. "Voting to expand the limit is a bad idea," he told WND. "I must be convinced we have wrung every nickel of
Burgess
spending out of this. Even then you are correct, this is the one tool available to us, and unilateral disarmament leads to financial Armageddon."
joins Reps. Michelle Bachmann, R-Minn., Ron Paul, R-Texas, Anthony Weiner, D-N.Y., and others who publicly oppose
raising the debt limit. It takes only 218 votes in the House to block the move, and Republicans control
242 votes. Two weeks ago, Farah was not so optimistic victory in the long-shot campaign to freeze the federal government's debt limit, thus creating the
biggest political earthquake to hit the nation's Capitol since Ronald Reagan's election as president. Today, he's jubilant about what he sees as a political "tidal shift"
within the House Republican majority. The difference? The "No More Red Ink" campaign is working, he says. "The latest poll from Investors Business Daily shows
70 percent of Americans opposed to raising the debt limit," says Farah, editor and chief executive officer of WND.
"Among Republicans, it's 86 percent opposed. Among Democrats, it's 55 percent." And that's just the beginning,
says Farah. His campaign has managed to ship 250,000 messages to House Republicans who wield the power to accomplish this mission without any
help from Democrats or the consent of the Senate or Barack Obama. That's during a two-week period in which there was virtually no media coverage of the
campaign or even a hint that House Republicans were taking the protest seriously. That has all changed, he says. "This campaign is now getting help from tea party
activists across the country," he said. "We're getting lots of support from Republicans
in the House who don't approve of their
leadership's concession on this issue. This is about to explode on the nation as the most
important vote Congress will hold this year or any year – one that can completely break the
chain of business as usual in Washington." The "No More Red Ink" campaign demands House Republicans stop all deficit
spending this year by freezing the debt limit at $14.3 trillion and forcing major cuts in so-called "entitlements" and all non-essential spending. All it takes is a simple
"no" vote when the debt limit bill comes to the House. Republicans control 242 votes. It takes 218 to stop it. The growing controversy within the House Republican
majority about the debt limit is being called Boehner's defining moment as speaker. And with 70 percent public opposition to "his go-along-to-get-along notion," Farah
says Americans have a real chance of ending business as usual in Washington. "I honestly feel like we
are winning the biggest congressional battle of the
decade – bigger even than health care, because freezing
the debt limit will deprive Obama of the funds he needs to
implement his socialist nightmare on the country," says Farah.

Page 3 of 6
Wayzata 2010 Debt Ceiling
Lab Group

DEBT CEILING GOOD

UNEXTENDED DEBT CEILING WILL LEAD TO ECONOMIC COLLAPSE IN SPRING – GEITHNER

PROVES

McClearn, Matthew, Canadian Business Fellow, “Dancing On The Debt Ceiling,” February 28, 2011,
CANADIAN BUSINESS, http://www.canadianbusiness.com/managing/strategy/article.jsp?
content=20110228_10007_10007 - 2/28/11
Could the United States default? Treasury Secretary Timothy Geithner says it could happen as early as
this spring. In January, he warned the U.S. Senate in writing that unless Congress acts swiftly, American soldiers
deployed worldwide might stop receiving paycheques. Interest payments on U.S. Treasury
bonds could cease, as might unemployment and Medicaid benefits to states. The fallout would
make the collapse of Lehman Bros. seem like the closure of a corner pizzeria by comparison.
"Even a very short–term or limited default would have catastrophic economic consequences that
would last for decades," Geithner wrote. Geithner's problem is that he's nearly maxed out his line of credit. For almost a century, Congress,
which has absolute power over all fiscal matters by virtue of the U.S. Constitution, has for nearly a century imposed a hard cap (also called the "debt ceiling") on the
amount of debt the Treasury can have outstanding. This statutory debt limit now stands at US$14.3 trillion — a level Geithner predicts will be reached sometime
between April 5 and May 31. At that point he will be unable to issue bonds to meet America's obligations. Geithner wants more headroom. Unfortunately for him
though, Republicans won a majority in the U.S. House of Representatives in November's mid–term elections, and many — particularly those endorsed by the Tea
Party movement — are spoiling to rein in government spending, and they see the debt ceiling as the fulcrum. In early January, Republican Sen. Jim DeMint called on
fellow conservatives to just say no. "We need to have a showdown that we're not going to raisfgfeour debt ceiling anymore," he told Human Events, a conservative
Impossible, Geithner retorts. Although in years
magazine, in an interview. "We are going to cut things necessary to stay within the current levels."
past the Treasury used extraordinary measures to forestall default while Congress bickered, this
time such tactics would buy a few weeks at most, he claims. Even draconian cuts to federal spending wouldn't do the trick. Indeed,
recently the Congressional Budget Office declared that if current laws remain unchanged, the U.S.
will rack up a staggering US$1.5 trillion deficit this year.

Page 4 of 6
Wayzata 2010 Debt Ceiling
Lab Group

NO IMPACT

NO IMPACT TO BREAKING THE DEBT CEILING – SALE AND LEASEBACK, SUBPRIME DEBT,
AND QUANTITATIVE EASING TECHNIQUES CHECKBACK ECONOMIC CONSEQUENCES

Hutchinson, Martin, Contributing Editor Money Morning, “Washington’s Debt-Ceiling Debate – A Political
Sham,” February 15, 2011, MONEY MORNING, http://moneymorning.com/2011/02/15/washingtons-debt-
ceiling-debate-a-political-sham/
Washington's Debt-Ceiling Debate – A Political Sham By Martin Hutchinson, Contributing Editor, Money Morning I have to tell you that - as a former international
merchant banker - I want to laugh out loud when I hear the dire predictions of how the United States will have to default if Congress doesn't raise the nation's debt
ceiling. With a little Wall Street-style creative financing - even
when the government's outstanding debt level reaches
the official limit of $14.3 trillion sometime around the end of March - there's no reason why the country can't go
on borrowing as if nothing has changed. The debt-ceiling debate is something you're going to hear a lot about in the days and weeks to
come. The Obama administration just yesterday (Monday) introduced its fiscal 2012 budget proposal - a spending plan that's certain to ignite a firestorm of debate
between Democrats and Republicans. And those arguments about next year's spending plan will absolutely feed into a heated showdown over the federal debt
ceiling. But the two sides are arguing about the wrong thing: It's the
country's debt load - not the debt ceiling - that has to be
addressed. And I can prove it to you. Like a consumer who's in over his head, Uncle Sam has several alternatives available
before his creditors arrive to repossess his vehicles and cut up his credit card. By highlighting some of the
"debt dodges" that are available, I will show you that the dire near-term predictions aren't anything to fear. Long-term, however, this country really does need to slash
its debt-load. But that requires a real commitment, not political maneuvering. False Alarm? U.S. President Barack Obama yesterday introduced his $3.7 trillion
budget plan for fiscal 2012, in which he aims to cut the federal deficit to $1.1 trillion next year. The spending plan will jump-start a debt-ceiling debate that's been
underway since late last year. Back in
January, U.S. Treasury Secretary Timothy Geithner urged lawmakers to raise the
$14.29 trillion debt limit - or risk a government default that would spark "catastrophic economic
consequences that would last for decades." In an appearance on Friday, Geithner said it's "essential" for Congress to raise the debt ceiling if the United
States is to maintain investor confidence. Republicans have been calling for deep - and specific - spending cuts in exchange for raising the debt limit. But Geithner
said the debt ceiling should not be used as a bargaining chip. Get ready to watch a major political battle. But the debt-ceiling debate is just so unnecessary. In the
long run, the American taxpayer would be better served by having the Inside-the-Beltway crowd make a real attempt to slash the federal debt load. In fact, should
anyone down in Washington wish to ring me up, I could demonstrate three easy ways to sidestep the debt ceiling - freezing the debt-ceiling debate in its tracks by
Let's look at each of my three debt-ceiling "solutions."
proving that this looming confrontation is nothing but additional political theater.
Debt-Ceiling Debate Breakers Sale and Leaseback: This well-known technique is used by retail chains all over the world. So why not put it into effect on
a much grander scale? After all, the United States has some pretty fancy assets, and can raise money by selling
them. Naturally, it would not want to lose the use of, say, the White House, or the Smithsonian Institution (with contents), so it would lease the assets back,
probably for a very long term. When the lease runs out - say, in 2061 - America's Chinese creditors would have the right to take over the White House. But, hey,
that's business. Needless to say, for such prestigious assets, the U.S. government could extract a premium price.
The White House, after all, isn't just another 10,000-square-foot McMansion with a helipad: It has a fantastic view of the Washington Monument and the Lincoln
Memorial Reflecting Pool, worth a premium to any self-respecting billionaire buyer. The only pity is that the United States can't play the ultimate trick with out-of-town
buyers by selling them the Brooklyn Bridge - the New York City Department of Transportation owns that. Subprime Debt: Once the U.S. government has
sold and leased back all the assets for which it can find a convenient market, it can roll out a second Wall Street financing technique - the subprime mortgage.
Since Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCKO) are technically not part of the government,
mortgages guaranteed by Fannie and Freddie don't count as public debt. Hence if the Department of
Defense (DoD) wants to buy a new bomber, it sets up a Special Purpose Vehicle (yes, another Wall Street dodge) to own the bomber, then finances it
through a mortgage guaranteed by Fannie or Freddie. You may ask: Why subprime? Surely, the Department of Defense, as an
agency of the U.S. government, can be trusted to pay its debts? True, but there's a small problem: Fannie and Freddie are only supposed to lend against housing.
No worries - Wall Street has a solution to this, too: It's called the "no-docs (no-documents ) loan." (It also has another name: the "liar loan.") Back in 2006, a borrower
using a no-docs loan to a $700,000 house did not have to note that he was doing so without a job. Similarly, this time around, the DoD won't have to declare that the
asset being financed is a stealth bomber, not a house. To add verisimilitude, instead of naming the bomber "Enola Gay" or "Memphis Belle" or something equally
authentic, the DoD can name the aircraft "31 Acacia Avenue" - and perhaps paint its nose a tasteful shade of pastel green. That way, the subprime mortgage that
finances it will have just as much reality as the typical subprime loan of 2006 - and a rather better chance of getting repaid, if the Department of Defense comes into
some money somewhere along the way. Quantitative Easing: If Wall Street techniques prove themselves
insufficient, the government can still sidestep the debt-ceiling debate by employing some
"Bernanke-esque" tactics. Under the second round of quantitative easing, aptly referred to as "QE2," the U.S. Federal Reserve
and Chairman Ben S. Bernanke are creating $75 billion each month and using it to buy $75 billion of
medium- and long-term U.S. Treasury bonds. That, in itself, does not get around the debt-ceiling limits - the government still has to
create the Treasury bonds to sell them to Bernanke. However, the actual existence of the Treasury bonds is
essentially superfluous. Bernanke can achieve exactly the same monetary effect, without the
annoying necessity of creating Treasury bonds and blowing through the debt ceiling, by printing
$75 billion worth of $100 bills each month - and then driving them ‘round to the U.S. Treasury building in a truck, where "Turbo Tim"
Geithner can unload them and use them to pay bills. It would be quite a trucking job, mind you: $1 million in $100 bills weighs 22 pounds, so $75 billion would weigh
750 tons - roughly 20 full truckloads. That's not an impossible quantity: The deliveries could be made daily, though the times would have to be staggered to foil
hijackers. In any case, this operation, while cumbersome, would represent absolutely no change in monetary policy from what the federal government is currently
doing now. The Uncle Sam Sham It might
be argued that the Wall Street and Bernanke-financing techniques
described herein are thoroughly unsound, and are bound to lead to ruin. But so are the
monetary and fiscal policies that the government is right now pursuing. And anyone who wants proof can just
look at the fact that the next big Capitol Hill fracas - after the one focusing on President Obama's budget plan for the new fiscal year - will be a debt-ceiling debate.
Instead of all this wheel-spinning and political grandstanding, what the administration and both parties in Congress should be focusing on is the serious long-term
budget adjustments and spending cuts that need to be made if this country is to regain its former strength and position of leadership in the global marketplace. The
debt-ceiling debate is shaping up to be Washington's Waterloo moment: It's the debt load - not the debt ceiling - that matters and that must be addressed. Given how
easily a massive debt load can crush the finances (and future) of the person, company or government that has to endure it, it's clear to me that the time to attack and
slash those trillions in federal debt is now - not later. Indeed, this may well be our last chance to do so.

Page 5 of 6
Wayzata 2010 Debt Ceiling
Lab Group

DID NOT HAVE TIME TO CUT BEST ARTICLE:

http://www.heritage.org/research/reports/2011/01/congress-has-time-and-options-on-debt-limit

Page 6 of 6