Posted on 07/26/2011 8:12:58 AM PDT by Mozilla
Barack Obama has spent the last several weeks warning that a failure to raise the debt ceiling by the “drop-dead date” of August 2nd would cause a ruinous downgrade of Treasury bonds and an economic disaster for the US. However, the downgrade may come sooner than that, because the debt ceiling is actually a secondary condition to the ratings agencies. The problem, as they see it, is not that America can’t pay its debts next month, but that America has grown its debt to such a degree that we can’t pay them in the long run without serious restructuring of the federal government — and this administration refuses to consider it.
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So it’s not the debt ceiling that’s triggering a potential ratings change — it’s the trajectory of debt generated by the federal government. This explains why the White House abandoned its “clean debt-ceiling increase” demand so early in the process. It wouldn’t have done anything to avoid a downgrade anyway.
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Addendum: Jake Tapper picks up on the fact that the “drop-dead date” might have dropped out a little further: It does not appear that date any longer will be the day will be the one when the U.S. officially no longer has the ability to pay its bills. On Aug. 3, the federal government will have $32 billion in payments to make. Will the U.S. government have the money to make those payments? Previously analyses said no. Now, however, analysts at Barclays Capital Research say incoming revenues to the U.S. Treasury have been a little stronger than projections — on the order of $14 billion. So Barclays now says the government will have enough funds to pay its bills until Aug. 10.
(Excerpt) Read more at hotair.com ...
People, left, right or in the muddy middle, inherently know that when you are deep in debt, you apply for another credit card to max out. You cannot solve your debt problem by creating more debt. You have to cut your spending on frivolous items, entertainment and get down to the bare necessities. Obamugabe is making a huge mistake and everybody knows it...........even the dems...................
I'd say that the blame falls on the guy sitting in the White House (you know, "the buck stops here")
I'd say that Obama and Timmy have known this for a while, and were just "crying wolf" to increase taxes. Just for the sake of increasing taxes...
Spending cuts have to be made now. Some tax subsidies, the ethanol subsidy comes to mind, have to be ended. Raise the limit 200 Billion, cut subsidies and spending 200 Billion. Rinse and repeat in 2 months.
ATTENTION:
The dirty little secret in all plans put forth is that they use CBO baseline projections FOR REVENUES.
Those presume GDP growth that is vibrant with low to no inflation.
If we uncork a 1% GDP number in Q3 or Q4 of this year, and more 1% growth quarters early 2012 ALL THESE PLANS DISINTEGRATE. The deficit will re-explode.
And no, the answer is not to chop more spending off FY2012, nor is it to raise taxes then. Both are fiscally contractive.
Conclusion: It’s too late. There is no fiscal policy answer beyond default, which itself means no one will lend the US Treasury any more money and deficits have to go to zero instantly via shock — which would further contract GDP.
Who elected the Ratings Agencies as our economic leaders?
This is all scare tactics anyway. THere is plenty of money to pay off interest and roll-over Gov’t bonds
Are you going to tell me that a serious attempt to balance the US budget will somehow be viewed as negative anyway?
Fiat justitia ruat caelum
That's been my thinking on it. NONE of this is BINDING. It can ALL be changed by the next congress and the next president. The dems have done PLENTY of "Hey...sign here and we will screw you...I mean...work it out later."
So...my thoughts have been why don't they GIVE him what he wants? It is OBVIOUS that a downgrade is coming. It is FREAKING OBVIOUS a downgrade is NOT tied to the debt ceiling and will come with any deal less than 4 Trillion in cuts. So...give him what he wants...but make it PERFECTLY CLEAR TO THE WORLD: WE ARE AGAINST THIS...THIS IS WHAT WE THINK IT WILL DO...WE ARE ON RECORD. But for the sake of UNITY...and COMPROMISE...we are doing this.
With FULL knoweldge it will screw us...and HIM (and let's face it...we are screwed ANYWAY) because what he wants will lead to a downgrade...and it will PROVE that we were right.
Then...they lose next year and we undo all that they DID with our super-majority in both chambers and the presidency. We undo Obama-care...etc.
How hard is that?
See....I think Obama and the dems KNOW this...and that is why they want the GOP's fingerprints all over it. We are falling into a trap.
And so what if our ability to borrow is lessened? I see this as a positive development!! We shouldn’t be borrowing in the first place dammit!!!
Timmy taxcheat has laready borrowed 500 billion beyond the debt ceiling, but the media whores will not report it, accepting instead the lies the administration tells them to circulate.
Timmy taxcheat has already borrowed 500 billion beyond the debt ceiling, but the media whores will not report it, accepting instead the lies the administration tells them to circulate.
Now here's the deal! I. Told. You. So!!!!! =)
I’m sorry, I can’t hear you for that GIANT SUCKING SOUND!...................
A big part of this show has been “who gets blamed for the downgrade?” Which they all knew was coming.
Short term tbills are getting hammered today, buyers demanding double the yield (may be Fed shenanigans, inflation cares- who knows). Long tbills doing fine.
"What happened to all the money we gave them on April 15th, just three months ago?" - Jay Leno
great points !
...and most of these plans don’t consider the interest costs of the 2 trillion the cap will be raised by.
(especially after the rating is downgraded, which it will be...)
Well, Ross you could have stuck around to tinker under the hood a little but you pussed out when things got tough. So go pound sand. I voted for you twice I think, and never again. Did enjoy your rants though!!
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