Friday, October 11, 2013

Starbucks awkwardly takes sides in the #shutdown

I woke up this morning and found this email in my inbox from Starbucks, asking me to sign the "Come Together" petition:

(Click image to enlarge)

Clever references to Beatles lyrics aside, it seems that Starbucks is making an attempt to be bipartisan here, e.g., the third item on their petition, "Pass a bipartisan and comprehensive long-term budget deal by the end of the year," but they don't completely succeed, especially regarding the second item, "Pay our debts on time to avoid another financial crisis."

Despite Obama's fear-mongering earlier this week claiming that hitting the debt ceiling would trigger a default and an "economic crisis," Moody's Investors Service directly contradicted the president in a memo earlier this week:
Washington Post | Moody's offers different view on debt limit
"We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact," the memo says. "The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury's extraordinary measures to raise funds) and a default"...
"The budget deficit was considerably larger in 2011 than it is currently, so the magnitude of the necessary spending cuts needed after 17 October is lower now than it was then," the memo says.
Starbucks is playing a risky game wading into such hotly debated political issues, and by parroting Obama's talking point that the debt ceiling deadline poses an economic threat to America, they've failed in their attempt to be bipartisan. What do you think?

UPDATE: Thanks to NakedDC and The Quinton Report for linking this post.


  1. The Starbucks brainrust sat around trying to figure out how to lose the most customers the quickest. They came up with this, offensive to both sides. Mission accomplished!
    Now EVERYONE can boycott them!

  2. Hi Sarah,
    I think Starbucks (and by extension, the President) have a legitimate interpretation of the repercussions of a failure to raise the debt ceiling. Ignoring the ambiguity on exactly what constitutes a "financial crisis", and even setting aside the extent of any speculative financial impacts of a failure to raise the debt ceiling (e.g. stunted economic growth, decrease in investor confidence, injury to U.S. Credit and increased interest rates, etc.), let's focus solely on the issue of default.

    Moody's relies on statutory silence (the same silence relied on by the GAO in the relevant 1985 opinion) that because there is no prioritization scheme for determining what debts can be paid when, the determination of such prioritization is left to the discretion of the Treasury Department. In this world, the Treasury can (generally) liquidate obligations as they come due, and thereby pay interest / third party creditors and avoid default. Note that this world *also* relies on interpreting a "default" only if the government fails to pay interest on debt obligations held by *third parties*.

    In the other world, (subscribed to by the Treasury Department and the President, among others) the Treasury Department cannot prioritize debts as they come due because no one gave them that power to do so: the statue is silent, and the lack of Congressional direction poses a legal barrier to action, and the Treasury must make payments on obligations as they come due. Note that this world (generally) relies on "default" applying to a government failure to pay third party debt holders and to meet any obligation authorized by law (funding federal programs, paying salaries, federal contracts, etc.).

    For what its worth, no general statutory definition of default exists, but the American legal definition simply defines it as: “the failure to make a payment when due," without distinction between the types of Govt. obligations.

    To me, this is how the debate breaks down. So the "fear-mongering" you feel is abated by the Moody Memo means that by extension you believe lack of Congressional direction on debt prioritization as empowering the Department of Treasury to prioritize the payment of its debts, and default to mean failure to pay debts owed to third parties.

    What do you think?

  3. I think that the fact that it takes intelligent people on all sides of the issue multiple paragraphs to explain the potential consequences of failing to resolve the debt ceiling proves that it's far too complex and divisive to be summed up in one sentence on a coffee cup.


Creative Commons License

Creative Commons License
Permissions beyond the scope of this license are available here.