Wednesday, May 4, 2011

Geithner cuts Congress slack by sticking it to cities and states

Treasury Secretary Timothy Geithner announced that the Treasury would take managed steps to extend the time before default into the summer, giving Congress more time for kabuki.

These managed steps begin with curtailing the amount of state and local debt that the federal government will support.

William Alden of the The Huffington Post cautions:

When the "extraordinary measures" begin Friday, the first casualty will be a category of non-marketable bonds known as State and Local Government Series securities, or SLGS (pronounced "slugs"). These securities are tailor-made for state and local governments, designed to help them pay for their debt. (source)

The result is that state and municipalities that are already reeling from reduced tax revenues will be hit first by the kabuki dance in Congress, even though both parties have already assured that the debt limit will be raised. This is dereliction of duty.


mike norman said...

Sticking it to states and pensioners for starters. Perhaps shareholders, too, if they decide to wholesale dump assets. On the other hand, I would LOVE to see the Treasury sell all the government's gold and wipe out these gold bugs once and for all!

Letsgetitdone said...

It is dereliction of duty. But it's also dereliction of duty for the Executive Branch to make the debt ceiling a non-issue by using coin seigniorage.