Posted on 01/15/2011 9:07:59 PM PST by chickadee
There is so much misinformation and grossly misleading talk about what will happen if the federal debt ceiling isn’t increased that, before any more unnecessary bloodcurdling language is used that increases everyone’s anxiety, it’s worth taking a few steps back from the edge.
First, not raising the current federal debt limit absolutely will not immediately shut down the federal government. In fact, the federal debt ceiling has virtually nothing to do with whether federal departments and agencies continue to operate. Borrowing is just one of the ways the federal government finances its activities, and not increasing the debt ceiling only eliminates one of them. The talk about the government being shut down if there’s no increase in the debt ceiling when the current level is reached in the next few months is either a gross misunderstanding of how the federal budget world works or a scare tactic. The first is merely unfortunate; the second is absolutely infuriating.
(Excerpt) Read more at capitalgainsandgames.com ...
Much of what being said about what happens if the federal debt ceiling isn’t raised immediately when the current borrowing limits is reached is just wrong. My column in this week’s Roll Call tries to correct the misinformation, misunderstanding, and...well...lies. ~Stan Collender
This is from Stan's blog as Roll Call requires a sign up.
Shutting down the government would be bad because???
By devaluing our currency are we not under cutting China's manipulation of their currency and thus returning our economy back to a manufacturing export economy away from an artificial Service/Financial economy based on smoke?
Thus, in a war of economics is not a cheap dollar better when considering the debt held by China as well as the fact that they manipulate world markets?
Therefore, it comes to pass that this will probably occur and thus, although a dangerous game, all bets should turn to manufacturing?
Whoa, those questions are way above my pay grade:)
I just thought this was good to know in case we needed to contact our Repub reps in the House and Senate over the vote to increase the debt ceiling to help stiffen their spines.
Aliens could cross our borders without being checked or forced into immigration.
Drug Lords would move into border towns on the US side and set up camp.
Foreign national companies would be off our coasts, drilling our oil.
The budget would go to hell.
There would be high unemployment.
Food and Fuel costs would start rising.
You know... all those things the 'government' promises they will solve (up until they win the election).
YIKES! We’d better keep it from shutting down then!
"Third, if a standoff on raising the debt ceiling lasts for a significant amount of time, the alternatives to borrowing eventually may not be enough to provide the government with the cash it needs to meet its obligations. Even at that point, however, a default wouldn’t be automatic because payments to existing bondholders could be made the priority while payments to others could be delayed for months. There’s no way to know, however, what “eventually” means because the government has never had to resort to such extreme cash management practices. It could be months."
First let's get "not paying the debt" out of the way right away. It costs $467B to service the debt. If interest rates go up it will cost proportionally more. A mark up of 5% would be conservative. That would raise interest rates from 2.5% to 7.5%, tripling our cost to service the debt and requiring the elimination of two out of the next three, Defense, SS or Medicare/Medicaid, to balance the budget. It is absolutely wrong to seriously suggest it. Instead he should be explaining what to do about it.
On to cash flow. There is enough cash flow in February to service the national debt and pay for defense. That's it. In five of the other eleven months there is only enough money to pay for Social Security too.
Also, everyone is assuming that Obama wants to avoid a default. What if he doesn’t?
Would a default serve his interests?
The best thing we could do for exports is cut the value of the dollar by 25% tomorrow.
Does anyone really believe the US Taxpayer is going to repay $14+trillion dollars and meet the cost of nearly $100Tril in unfunded entitlement obligations and GSE obligations?
It's not going to happen. It's time to stop pretending it will.
That’s my thought. We’ve got one very bad shot at it with this congress. I’m cashing out some of my 401k before March and putting it into metals.
The Tea Party came two years too late.
Unfunded?
Liabilities?
None of them want to deal with that.
If it effects the credit rating it may make it harder for the DNC to buy votes.
:)
Only if you don’t give a damn about what happens to those on a fixed income. But then, having not considered that, you don’t care about their not eating, just speeds up the death panels process.
What did he say that would relieve fear??? Sounds pretty damn scary to me! Does this guy think not paying or delaying payment to vendors and bondholders is without consequence? A decrease in our bond rating would mean a huge dollar amount difference from the higher interest rates we will have to pay...these are serious considerations.
Because if libs do it, they will shut down essential services rather than perform meaningful cuts. Any action will be driven by political decisions, not those that are actually favorable to resolving a crisis.
I remember the '95 shutdown clearly. It was a pathetic political maneuver that blew up in the GOP's face.
They better do a much better job this time or it will go the same way.
I hope Boenher's up to the task, he'll need to be ready to bring in the big guns when negotiating the cutbacks or it will go badly for the Republicans.
Even Stan misses the point of the people’s frustration...
IOU’s? Scrip? Delay payments to vendors and contractors?
Hey, Stan! How about we cut spending so that we don’t have to issue IOU’s and scrip, or delay payments to vendor and contractors?
Sell off some assets... Say, how about some more oil drilling leases in coastal areas, and ANWR? Good suggestions, but that doesn’t touch spending.
And, what say we return the feds within the constraints of the enumerated powers as outlined in the Constitution? That alone would cut a big chunk off the spending...no more medicare, dept of ag, dept of education, NPR, NEA, department of energy, etc.
It ain’t rocket science...
The decreased value of the dollar would have an immediate negative effect on our ability to buy oil. When the dollar is worth less, the Arabs want more of them per barrel.
That's just one example.
You might try leaving Economic fundamentals up to the experts. Your "solution" would not only be a total disaster for most everyone living in this country, but it would drive more business overseas and cause a mass conversion on the World Currency Market. The Dollar would certainly be dropped as the World Reserve Currency. Which would then triple our costs on everything here in the USA. Inflation would go through the roof immediately. We would then be forced to buy the new "Reserve" currency from those markets first, with our worthless Dollars before we could buy the manufactured goods that now are imported. Also, for the oil we refine. Gas prices would go up to $6 or $7 per gallon. The wheat and corn we produce and sell to other markets would go up also, which would drive food/Clothing/commodity costs here through the roof. The price of Gold would shoot over $2,000 an ounce overnight.
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