Debt Ceiling and the threat of The U.S. Defaulting

[colourwheel]

With a new congress in session this year even though a few seats were gained by the Democratic party the makeup as a whole hasn't change that much. Congress has the same majority and minority leader.

 

The Debt Ceiling issue is back. If you don't know what happened in 2011 The republican majority in the house threaten to default on the national debt as bargaining power to try to stop any legislative agenda Obama might or might not have had. Since Obama has won the Election and finally the fiscal cliff issue has been solved The Congressional Republican party has already started their campaign threatening to use the Debt Ceiling as leverage/bargaining chip against Obamas 2nd term.

 

A little bit of knowledge to know....

 

I think it's an obligation of public service to make people a aware of a few facts...

 

http://www.youtube.com/watch?v=fouu_uSG1iU&feature=player_embedded

fouu_uSG1iU

 

If the debt ceiling is not raised, The U.S. would still be fine... only takes about $200 billion a year to service our debt, and total revenue to the federal government about $2.2 trillion. So the U.S. can service the debt with $2 trillion left over. I don't really see the real threat here...

 

Republicans are already telling everybody that we must raise the debt ceiling because we cannot let the U.S. go into default. I think that's just their cover story to justify kicking the can down the alley.

 

It's pretty much known or thought the Democrates can not balance our budget seriously. Yet the Republicans can not blame Obama about over spending since the president has no authority to approperiate money or spend it, It's congress with the power of the purse.

 

The reality is that the debt ceiling cannot be raised without Republican complicity since it's the Republicans in control of the house.

 

The U.S. is running out of time to get the financial house in order before it fall into an abyss of economic irresponsibility that could be impossible to climb out of. In reality the Debt Ceiling is more of a cliff than the The fiscal cliff was.

 

This is how I see things but would be interesting to see how others feel. Let the Debate begin....

Edited January 4, 2013 by colourwheel

[JimboUK]

That $200 billion is like making the minimum monthly payment on your credit card and nothing else, it's not solving anything, it's throwing money away. The U.S has the same problem as the E.U, like the E.U it's run by incompetent clowns who haven't got a clue what they're doing. I don't know what the answer is now, it's gone too far, economies need stimulating but there's nothing left to stimulate them with. Action should have been taken 10 or more years ago, now all we can do is try and inflate it away by printing money and hope the markets put up with it, the sad thing is it's the poorest who get hit the hardest by inflation.

[colourwheel]

That $200 billion is like making the minimum monthly payment on your credit card and nothing else, it's not solving anything, it's throwing money away. The U.S has the same problem as the E.U, like the E.U it's run by incompetent clowns who haven't got a clue what they're doing. I don't know what the answer is now, it's gone too far, economies need stimulating but there's nothing left to stimulate them with. Action should have been taken 10 or more years ago, now all we can do is try and inflate it away by printing money and hope the markets put up with it, the sad thing is it's the poorest who get hit the hardest by inflation.

 

Which political party is ultimately to blame for this? Republican policies and the Bush administration. Bush and the republicans deciding to paying for two wars on a credit card as well as deciding to give tax cuts and breaks for everyone and tanking the economy at the same time. Not to mention after Bush left office the stock market almost collapsed in result of the damage of republican policies Bush left behind. Then people wonder why the national debt has become so high.... :rolleyes: geeze... it must be all Obama's all fault because thats what Republicans want you to believe because before Bush took office we had a surplus....

Edited January 4, 2013 by colourwheel

[bben46]

Both parties are to blame. Each wants to spend on their own agenda while claiming they want to cut. Neither wants to accept any blame for the mess. - It's always the other guy's fault.

 

Politicians have huge egos - that is one of the reasons they are in politics - that ego prevents any real compromise - again I am right and you are wrong.

 

I am not a dove by any means. But the military budget is insane. No politician wants any military funding for his state cut and will fight any suggestion. and so will the politicians for every other state. Those defense dollars are creating jobs in defense industries. And allowing any jobs to be cut will cost them votes.This means there is a tacit agreement among the politicians - I won't cut defense spending in your state if you don't cut it in mine. Meanwhile the big defense companies have no real competition and are over charging by huge amounts - then moving profits offshore to avoid taxes. Again with the tacit approval of congress. Many of whom either own stock in those defense industries or are getting bribes, kickbacks and promises of lucrative jobs as lobbyists if they do lose their seat in congress.

 

Example of the insanity - there are about 32 Aircraft carriers in the WORLD. 20 are US,11 of the US carriers are super carriers - No one else has a super carrier. 9 are amphibious (LHD LHA) class - each bigger than all but a few of the rest of the world's 12 carriers. We have 1 more supercarrier under construction, and 2 more in planning. Plus another LHD class Aircraft carrier being constructed.

 

Would cutting back some of this kind of massive defense industry cripple the US military? No, but it would cost some congressmen their seats from the backlash. But the cost savings would fund at least some of the shortfall.

[colourwheel]

Politicians do have huge egos I can agree with that.

 

The Iraq and Afghanistan wars make up a huge amount of the debt. It's really the decision of how to pay for them without negatively effect on the U.S. economy. Because unlike any previous wars in U.S. history, these were paid for entirely by debt at the same time the Bush administration cut taxes for everyone. While entitlements and other mandatory spending make up a majority of annual federal budgets and contribute heavily to deficits and debt, the Iraq War also contributed significantly. The Center for Budget and Policy Priorities has estimated that the wars in Iraq and Afghanistan, together with the Bush tax cuts, will account for almost half of the projected $20 trillion debt in 2019. Military funding will have to be cut even if politicians don't want to face it as well as some entitlement programs. It's a loose-loose situation, Cut programs that americans rely on everyday or cut defense spending? Either way is a chance to loose their seats in the house. Even if all entitlement programs were severely cut it wouldn't even add up to the amount needed to help our country out of such debt.

 

But this give no excuse for the republicans to hold the country yet again hostage threatening to default and miss-informing their constituencies just because they want to stop any agenda Obama might or might not have. Do people honestly believe Obama just wants to run the country into the ground?

Edited January 4, 2013 by colourwheel

[sukeban]

I am not a dove by any means. But the military budget is insane. No politician wants any military funding for his state cut and will fight any suggestion. and so will the politicians for every other state. Those defense dollars are creating jobs in defense industries. And allowing any jobs to be cut will cost them votes.This means there is a tacit agreement among the politicians - I won't cut defense spending in your state if you don't cut it in mine. Meanwhile the big defense companies have no real competition and are over charging by huge amounts - then moving profits offshore to avoid taxes. Again with the tacit approval of congress. Many of whom either own stock in those defense industries or are getting bribes, kickbacks and promises of lucrative jobs as lobbyists if they do lose their seat in congress.

 

This is some real talk. One has to chuckle inwardly (and then probably want to cry) when they see the Department of Defense specify places where they can save money/cut useless programs and then have CONGRESS veto their suggestions and spend the money anyway! At that point, they aren't really protecting the military or "our troops"--they're just protecting defense jobs (and if they aren't needed, what are they other than pork or welfare by another name?) in their districts and the defense giants that donate to their election campaigns. The ROI on buying members of Congress is truly insane; I remember reading (and believe posted at the time) that it was ranked by The Economist as the HIGHEST of any expenditure a company can make, something like a 50:1 return.

 

The Debt Ceiling is a bogus construct in any case, as Congress has already spent/apportioned the money. The Ceiling should go up automatically when new debt is incurred via spending from Congress; the two-step process is needlessly redundant, though, to be fair, it has historically never been abused like it has been over the last two years.

 

Playing "chicken" with the nation's credit rating and the stock market is _REALLY_ an exercise in jaw-dropping stupidity. While I agree in principal that the Debt is something that we should be trying hard to reduce as quickly as possible, messing around with our nation's credit rating is not at all a good way to go about doing it. Neither is voting against relief for Sandy victims because you demands offsets for the spending, as ~70 Republican House members have done. As colourwheel queries, where was this fiscal fundamentalism when Bush II was busy running up the credit card? Or REAGAN for that matter (check out the size of the debt before/after he took office). Seems to only strike when Republicans are out of the White House.

 

Anyway, I agree with bben in principal that both parties bear blame for this state of affairs, but I would say that both sides do NOT bear equal blame. Democrats are at least up-front about their desire to spend--as well as the need to levy adequate taxes to pay for it. Republicans like to spend just as much (or more!) but lie about their desire to do so AND, what's worse, they peddle the lie that tax cuts will pay for it all. So we 2X the debt rather than one. I want a balanced approach to reducing the debt--with higher taxes (TBH, I disagreed with continuing any of the Bush tax cuts) and cuts to spending. Reason also states that this is the only tenable approach. Most voters seem to realize this--why doesn't the GOP?

[colourwheel]

@sukeban

 

I honestly agree with you on a balanced approach but if you look at who has benefited the most since the bush tax cuts were introduced it was obviously the rich. I would agree if this was a decade ago I think everyone should have their taxes retoactively placed the way Clinton had taxes but times have changed as well as the world economy. If the country doesn't allow the bush tax cuts to extend for atleast 99% of all americans the hope of america to ever grow a healthy middle class back up would be no where in sight. Having the bush tax cuts completely expire for 100% of the nation would basically keep 99% of america economically repressed and the rich no matter how high their taxes would be would still be getting richer. A Country needs a healthy middle class for any capitalistic nation to thrive.

Edited January 5, 2013 by colourwheel

[sukeban]

@sukeban

 

I honestly agree with you on a balanced approach but if you look at who has benefited the most since the bush tax cuts were introduced it was obviously the rich. I would agree if this was a decade ago I think everyone should have their taxes retoactively placed the way Clinton had taxes but times have changed as well as the world economy. If the country doesn't allow the bush tax cuts to extend for atleast 99% of all americans the hope of america to ever grow a healthy middle class back up would be no where in sight. Having the bush tax cuts completely expire for 100% of the nation would basically keep 99% of america economically repressed and the rich no matter how high their taxes would be would still be getting richer. America needs a healthy middle class for any capitalistic nation to thrive.

 

No disagreement whatsoever with you on this. I mean, if I had my druthers, the topmost tax bracket would be 50% at least with estate taxes (on estates over five million) of 75%. I would also tax capital gains as earned income, with exceptions for seniors living on their investments. The data doesn't lie when it comes to "who has made the money" as you say, with middle class incomes stagnating for the last twenty years (and poor folks' incomes declining relative to inflation!) whilst the top 10% has increased its wealth by orders of magnitude. I don't want to squeeze the middle class more, but I don't know that 5% more in marginal rates is really going to break its back. Probably easy for me to say without kids, nor an owned home, and such, but paying an extra ~grand in taxes would seem like a patriotic action to pay off the debt.

 

But no disagreement whatsoever that it has been the middle class and poor who have been doing all of the sacrificing since the 2000s and before. And unlike the Romneys of the world, the middle class and poor are unable to shift their assets (meager as they are) offshore and/or create shell companies and/or exploit every tax loophole and gimmick of the known world. And we make our money by actually working (taxed as ordinary income + paying Payroll Taxes) rather than chillin' back and collecting the dividend check (with extra points if you already came from money and didn't even work for your stake capital), getting taxed at 15% (theoretical rate) and avoiding paying anything for Social Security and Medicare.

 

Truly, the brass of the right-wing to insist that there is no "Class Warfare" going on is truly stunning. There is, but not in the way that they would lead you to believe.

Edited January 5, 2013 by sukeban

[JimboUK]

That $200 billion is like making the minimum monthly payment on your credit card and nothing else, it's not solving anything, it's throwing money away. The U.S has the same problem as the E.U, like the E.U it's run by incompetent clowns who haven't got a clue what they're doing. I don't know what the answer is now, it's gone too far, economies need stimulating but there's nothing left to stimulate them with. Action should have been taken 10 or more years ago, now all we can do is try and inflate it away by printing money and hope the markets put up with it, the sad thing is it's the poorest who get hit the hardest by inflation.

 

Which political party is ultimately to blame for this? Republican policies and the Bush administration. Bush and the republicans deciding to paying for two wars on a credit card as well as deciding to give tax cuts and breaks for everyone and tanking the economy at the same time. Not to mention after Bush left office the stock market almost collapsed in result of the damage of republican policies Bush left behind. Then people wonder why the national debt has become so high.... :rolleyes: geeze... it must be all Obama's all fault because thats what Republicans want you to believe because before Bush took office we had a surplus....

 

The political class are to blame as are the people who keep buying what they're selling, it's not a partisan issue. Democracy has a rather nasty flaw, when people realise they can vote themselves more money or services they don't pay fully for then that's exactly what they do, that money has to come from somewhere so it's borrowed or printed. Who benefits the most from all the borrowing? the 1% do, it's their money and they take the interest. Politicians also represent their own self interest rather than that of their constituents, they serve those who line their pockets and only notice the electorate when it's time to vote, they'll never side with the people against the money men. Anyway the west has been living beyond its means for decades, it can't go on indefinitely, sooner or later something has to give.

[HeyYou]

That $200 billion is like making the minimum monthly payment on your credit card and nothing else, it's not solving anything, it's throwing money away. The U.S has the same problem as the E.U, like the E.U it's run by incompetent clowns who haven't got a clue what they're doing. I don't know what the answer is now, it's gone too far, economies need stimulating but there's nothing left to stimulate them with. Action should have been taken 10 or more years ago, now all we can do is try and inflate it away by printing money and hope the markets put up with it, the sad thing is it's the poorest who get hit the hardest by inflation.

 

Which political party is ultimately to blame for this? Republican policies and the Bush administration. Bush and the republicans deciding to paying for two wars on a credit card as well as deciding to give tax cuts and breaks for everyone and tanking the economy at the same time. Not to mention after Bush left office the stock market almost collapsed in result of the damage of republican policies Bush left behind. Then people wonder why the national debt has become so high.... :rolleyes: geeze... it must be all Obama's all fault because thats what Republicans want you to believe because before Bush took office we had a surplus....

 

The political class are to blame as are the people who keep buying what they're selling, it's not a partisan issue. Democracy has a rather nasty flaw, when people realise they can vote themselves more money or services they don't pay fully for then that's exactly what they do, that money has to come from somewhere so it's borrowed or printed. Who benefits the most from all the borrowing? the 1% do, it's their money and they take the interest. Politicians also represent their own self interest rather than that of their constituents, they serve those who line their pockets and only notice the electorate when it's time to vote, they'll never side with the people against the money men. Anyway the west has been living beyond its means for decades, it can't go on indefinitely, sooner or later something has to give.

 

Exactly, and it's coming within the next decade. The US is going to look a lot like Greece, for exactly the same reasons. We will see the US debt continue to grow, until various foreign countries get fed up with it, and stop loaning us money... at which point, our economy will collapse, and suck the rest of the world down the drain with it. It's going to suck. Badly. The politicians KNOW it is coming, yet do nothing. For them, it's "whatever puts the most money in my pocket right NOW, to hell with tomorrow." (or even the next five minutes....)

 

We are in deep dark trouble, and Washington won't lift a finger to even make an attempt to avoid it.

 

Should be fun huh?