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Donald S. Bernsteinfallout of allocating the burden of a restructuring of the finances ofthe United States. There is, as a result, every political incentive notto make the hard choices, but instead to kick the can down the road.The hard choices are, however, unavoidable, and they eventually willhave to be made.243Many years ago, I represented a storied Milwaukee-based industrialcompany -- Allis-Chalmers Corporation. Allis-Chalmers had twoprincipal businesses: they made extremely durable (in fact all toodurable) farm equipment and enormous hydro-turbines, like thoseused by the Tennessee Valley Authority and in the “Big Allis” powergeneration facility that to this day supplies much of New York City’selectric power. During the 1980s, the company was forced to sell itsfarm equipment business, and, after the sale closed, the chief financialofficer made a presentation to the company’s lenders showingthe company’s income statement after the divestiture. A cost itemthat had seemed small when the company was larger loomed largeon the pro forma income statement. It was the cost of healthcareand pension payments to retired employees. As the company wasgetting smaller, these legacy costs were continuing to grow, and thepayments still had to be made. As the CFO looked up at the figures,he said to the audience, “As the water in the river has gone down,the rocks have begun to show.” Ultimately, the company’s growingpayment obligations were not sustainable, and Allis-Chalmers hadto be liquidated. The company’s creditors and retirees received onlya tiny fraction of what they were owed -- far less than they wouldhave received had the hard choices been made sooner, permitting thecompany to survive.The lesson for the United States is at once blindingly obvious and onethat none of us wants to hear. Either revenue (taxes) must continueto grow or the cost of government services and benefits, and othernational financial commitments, must be reduced. While it is nice totalk about restructuring treasury obligations, in the long run, fiscalsustainability will depend on our willingness to make even harderchoices about our nation’s other financial commitments and how toshare the pain of restructuring them. Finding clever ways to addressthe nation’s existing public debt simply will not solve the problem.
244 A Comment on Professor Mooney’s Thought Experiment: Can U.S. Debt Be Restructured?Perhaps in this light it may not be such a bad thing that the publicdebt of the United States is difficult to repudiate. Rather than kickingthe can down the road, we will have to grapple with and solvethe real, far larger, issues; and, as with most restructurings, puttingoff the day of reckoning will only make the inevitable choices morepainful and difficult. We can only “retreat into fantasy” for so long ifwe want to avoid the abyss.
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ivPublished by FIC Press2405 Ste
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viContents8 Thoughts on Debt Sustai
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viiiContents
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The Contributors Anna GelpernAme
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The Contributors Howell E. Jacks
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The Contributors School, as well
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The Contributors Zoltan PozsarIn
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The Contributors Richard SyllaNe
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xxiAcknowledgmentsWe would like
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xxiiiPREFACEThe Law School and t
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PREFACE academic circles. A sove
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Richard Sylla 11U.S. Government Deb
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Richard Syllasigned from office in
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Richard Syllalike the United States
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Richard SyllaAfter 1815, a generall
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Richard Syllapurchase to back their
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Richard Syllational debt and reduce
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William W. Bratton 132A World Witho
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William W. Brattonwould go from a c
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William W. Brattonthe system, than
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ConclusionWilliam W. Bratton19At th
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Richard J. Herring 213Default and t
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Richard J. Herringpay is seldom in
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Richard J. HerringFigure 2: Archety
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Richard J. Herring27Figure 4: The R
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Richard J. Herring29Figure 6: Deman
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Richard J. HerringGovernment bonds
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Richard J. HerringDuring August 201
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Zoltan Pozsar 354A Macro View of Sh
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Zoltan Pozsartions, forming an inte
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Zoltan Pozsarfunding for safe, shor
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Zoltan Pozsarfor the reduction in t
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Zoltan PozsarWhile increased rollov
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Michael W. McConnell 455Origins of
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Michael W. McConnellAlthough the Co
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Michael W. McConnellvene? Who would
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Michael W. McConnell(Social Securit
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ConclusionMichael W. McConnell53Whe
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Howell E. Jackson 556The 2011 Debt
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Howell E. Jacksonloss in liquidity.
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Howell E. Jacksonand provides resou
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Howell E. JacksonWhile assertions o
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Howell E. Jacksonof those payments.
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Howell E. Jacksonwhich payments to
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Concluding ThoughtsHowell E. Jackso
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Richard Squire 697A Market for End-
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Richard SquireSo far, there is litt
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Richard Squirethat the reference en
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Richard SquireIn fact, the gross no
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Richard Squireto only 22.6%. Thus i
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Richard Squirewill default. An econ
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Richard Squireannounced that in liq
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Richard SquireCDS on USA and Correl
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Richard Squiremean, however, that t
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Peter R. Fisher 878Thoughts on Debt
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Peter R. Fishernot really an insura
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Peter R. FisherU.K. prospered great
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Peter R. FisherSources of income be
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Peter R. Fisherlead to greater comp
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Peter R. FisherCentral bank mytholo
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Peter R. Fisherboth sides of their
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Deborah Lucas 1019The Federal Debt:
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Deborah LucasProjected Size of Defi
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Deborah Lucasrevenues. In fact, man
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Deborah Lucasly from the global des
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Deborah Lucas109Figure 2: Primary S
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Deborah Lucas111Figure 4: Medicare
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James R. Hines Jr 11310The Tax Reve
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James R. Hines Jrrevenue rely on ex
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James R. Hines JrStates is the lone
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James R. Hines Jr119Table 3: Social
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James R. Hines Jrtapped federal tax
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James R. Hines Jrer economic costs
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James R. Hines Jrtries, and consequ
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James R. Hines Jrtries from 1999 to
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James Kwak 12911Can the United Stat
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James Kwakone hundred years. 6 At t
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James Kwakthe Royal Navy had over o
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James Kwak135Figure 1: National Deb
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James Kwaka real growth rate of 2.2
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James Kwakkeep the national debt at
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James KwakRepublicans have seized o
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James Kwakreduction package. 45 Fur
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James KwakThe bottom line is that f
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James Kwakprovisions, including hea
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James KwakDespite these political c
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Jim Millstein 15112Burning the Furn
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Jim Millsteinits spending and tax c
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Jim MillsteinWhile safe-haven flows
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Jim Millsteinon reserve balances wi
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Jim Millsteinfull list of options i
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Jim Millsteinfundamental disagreeme
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Jim MillsteinHowever, other things
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Jim Millsteinwould likely command a
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Jim MillsteinThere will inevitably
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Charles W. Mooney, Jr 16913United S
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Charles W. Mooney, JrSecond, would
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Charles W. Mooney, Jrticipants, did
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Charles W. Mooney, JrThe extent and
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Charles W. Mooney, Jr“Treasury Di
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Charles W. Mooney, Jrin subpart B i
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Charles W. Mooney, Jrcount holders
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Charles W. Mooney, Jrdefault. If an
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Charles W. Mooney, Jrcould be achie
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Charles W. Mooney, Jrconsider adopt
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Charles W. Mooney, Jror gold coin.
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Charles W. Mooney, Jrpre-1933 legis
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Page 240 and 241: Charles W. Mooney, JrThere would be
Page 242 and 243: Charles W. Mooney, JrBut that concl
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Page 246 and 247: Charles W. Mooney, Jrtem. 135 This
Page 248 and 249: Charles W. Mooney, Jr. b. The Race
Page 250 and 251: Charles W. Mooney, JrBut, of course
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Page 258 and 259: Charles W. Mooney, JrIf the U.S. co
Page 260 and 261: Charles W. Mooney, Jrpursue massive
Page 262 and 263: Charles W. Mooney, Jrof multination
Page 264 and 265: Donald S. Bernstein 23714A Comment
Page 266 and 267: Donald S. Bernsteinis what most ban
Page 268 and 269: Donald S. BernsteinAmendment, simpl
Page 272 and 273: Steven L. Schwarcz 24515Direct and
Page 274 and 275: Steven L. Schwarczin Perry held tha
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Page 278 and 279: Steven L. Schwarczunder Section 13(
Page 280 and 281: Steven L. SchwarczD. Assessing the
Page 282 and 283: 255AppendixThe 2011 Debt Limit Impa
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Jeremy Kreisberg & Kelley O’Mara
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