Posted on 05/03/2011 12:31:10 PM PDT by Kaslin
Yesterday Tim Geithner sent another letter to Congressional leadership urging them to cleanly pass the debt ceiling fast.
The Treasury's special accounting tricks will only last until August, he says, at which point he'll lose his borrowing authority.
The nut paragraph in his letter is this one: "As I have written previously, default by the United States on its obligations would have a catastrophic economic impact that would be felt by every American. A broad range of government payments would have to be stopped, limited or delayed, including military salaries, Social Security and Medicare payments, interest on debt, unemployment benefits and tax refunds. A default on the Nation’s legal obligations would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover."
He added "Failure to increase the debt limit in a timely manner would threaten this position and compromise America’s creditworthiness in the eyes of the world. Every Secretary of the Treasury in the modern era, regardless of party, has strongly held this view. Given the gravity of the challenges facing the U.S. and world economies, the world’s confidence in our creditworthiness is even more critical today."
But is the connection between failing to lift the debt ceiling and default really so clear?
Geithner says so, obviously. And for the most part, the media has taken this line, as reporters ask Republicans whether they're willing to risk default in this debt ceiling debate.
On the other hand, the US takes a lot more in in revenue than it does in interest payments, as this chart demonstrates.
(Excerpt) Read more at businessinsider.com ...
Who believes the US will really default?
“Who believes the US will really default?”
Let it. Then we can get back to silver and gold as hard moeny instead of this crap that’s literally worth less than Monopoly money or Confederate currency.
To say the GOP has NOTHING to do with this is absurd.
Both parties have been spending like there is no tomorrow. Keep in mind if this passes.... It will be the 10th time. This is not the first time the U.S. is trying to raise it’s credit limit.
Compound that with all the spending and no real cuts in departments. Sorry folks but cutting the amount of an increase in spending are NOT cuts. For instance, to go from a 100% increase in spending to 95% increase in spending is NOT a cut. ONLY in Washington DC accounting is this a cut. For the rest of the world it’s not.
it wouldn’t be the first time Geithner defaulted on an obligation.
Geithner is a tax cheat. That said, should anyone believe his threats?
Tax cheat head of the IRS ‘TurboTax’ Timmy....say it ain’t so..... =.=
The problem with the analysis in the article is that at best the totality of what the Treasury can do on it’s own (prioritize what it pays), without any law or consent asked of Congress, may be substantial in scope, but can only be a temporary solution.
Yes, Federal revenue, measured against the interest payment obligations on Federal debt, is sufficient for SOME adjustment in what the Treasury pays, to insure that the interest payment obligations on U.S. debts are paid, while payments on some other obligations are temporarily delayed or suspended. That sort of thing can only last for a limited period time.
Eventually the body of withheld payments (mostly in domestic budget obligations) will become another source of demands for even more debt, if the payment on enough of them cannot be made before a real cure for the problem is produced.
That cure is not an increase in the debt ceiling. That cure is a reduction in the annual deficit between revenue and spending; or, in plain language - “budget cuts”, deep budget cuts.
Everything else is what will be done for political demands and political expediency; and moving the problem down the road; not to actually resolve the problem.
The article is 100% correct.
The obama administration will default and it will be their decision. The interest payments are a tiny fraction of total spending.
BUT ... the Obama administration will have to stiff SOMEONE, if they dont find a bunch of assets to sell off.
The obama administration could make a DIFFERENT decision, that would get the debt ceiling raised in about 3 days: Stop all Social Security payments.
The flood of calls and letters would be so great, the Congress would have to act.
The GOP Congress *should* raise the debt ceiling and they *must* do it in a way that includes budget reforms and spending cuts and spending caps.
Bump
Sounds like an Obama Presidency!
He just had to throw in "military salaries" there, didn't he?
Timmy the Tax Cheat and the Demoncrats did the same thing during the final stages of the FY11 Budget Bill. Hold the military hostage.
Let me help Timmy buy a vowel. We don't have to stop paying military salaries, FBI agent salaries, DoD civilian salaries, or even retired salaries.
Congress can stop SSI payments to illegals, welfare moochers, people who have been on "unemployment" for almost 2 years, and a host of other nonsense.
The US will NOT default as the income from tax revenues is more than enough to retire bonds and pay off the accrued interest. However, we will fall desperately short when it comes to other programs. They MUST be cut back. There is no other choice.
We can start with suspending payments to Pakistan. And withdraw from Afghanistan, Iraq and Libya.
Timmy will just blame Turbo Tax.
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