Posted on 05/08/2002 12:26:04 PM PDT by survivalforum.com
05/08/2002 11:17 AM EDT
By JEANNINE AVERSA
WASHINGTON (AP) - Congress needs to extend the government's authority to borrow or risk an unprecedented default on the national debt, something that would cast a cloud over U.S. securities, Treasury Secretary Paul O'Neill warned Wednesday.
O'Neill made his latest pitch for swift congressional action on raising the debt ceiling in a speech to Republicans gathered at the Capitol Hill Club.
He has repeatedly asked Congress to boost the debt ceiling by $750 billion, but the request has become stuck in a political fight over the budget. The limit now stands at $5.95 trillion.
Treasury last week said it can shift some funds to avoid hitting the debt ceiling in mid-May. But those maneuvers won't be useful in late June, raising the prospect of a default on payments to bondholders.
"If we run into the ceiling that's really bad," O'Neill said in remarks to the Republican Main Street Partnership. "Because world capital markets will say they knew they needed to do it and they've know for six months that they needed to do it and they didn't do it and that casts a shadow on the good faith and credit of the United States."
If the government were to miss payments on debt coming due, it would be technically in default on the $5.95 trillion national debt, something that has never happened in the country's history. That would cast a cloud over U.S. securities, now considered the world's safest investment, and would mean the government would be forced to pay billions of dollars in higher interest payments on the national debt in future years.
Economists and other experts don't think that would happen because Congress is sure to eventually raise the debt ceiling.
O'Neill appeared to agree.
"It's not a question of whether we are going to do it or not. It's just a question of how close to the cliff we're going to run before we do what we know we need to do," he said.
The gross numbers are virtually incomprehensible for most people so I have always found this relative measure to be more useful. However, it doesn't account for incremented taxation. Luckily, those top 10% keep paying the vast majority of the taxes. :)
The Current Amount as of 05/07/2002 is------$5,973,527,635,269.29
The DEBT to the penny. At least what the treasury admits to on this set of books.
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Guys, As of the 7th 0f May, they are only $473,527,635,269.29 { that's 4 1/2 HUNDRED BILLION dollars +} over their "limit". They have been over the limit since February. Why bother raising a limit that's not observed anyway. Ticket em! It must not mean anything. What would be said about an outfit that had to borrow money to service and pay its debts? Maybe they would be called Argentina. But, "It don't mean nuthin!!" Just ask the scholarly "economists" and other "Arthur Anderson's"on FR.
Personally, I hope they keep the limit, and STOP THE UNNECESSARY SPENDING!!! Land grabs and education would be a good place to start. Peace and love, George.
Factor in corporations and you get an entirely different picture.
Additionally, personal income tax makes up only a fraction of the government revenue available to service or retire the debt, so it's terribly misleading to assess the national debt on a per capita basis.
Excellent analogy, Dog. If people don't like that particular formulation, then one can also say that the U.S. government has income of $2 trillion a year, so having a $6 trillion debt is like a family with a $60,000/yr. (after-tax!) income holding a combined debt of $180,000 on their house, car and student loanswell within the affordability range of even the most conservative financial planners, when you consider that the feds get an interest rate about two points lower than even the best private borrower ever could.
On top of that, most of that money is actually loaned to ourselves. In fact, $2.6 trillion is literally loaned to ourselvesit's money "loaned" from one part of the government to another. The genuine debt that compares to a mortgage is "only" $3.4 trillion. And of that, most is held by savings plans and the like. Eliminating the market's most secure savings tool would have a massive effect on our economy, and certainly in the short term would cost us much more than we pay in debt service.
Personally, I am working on making my second million--the first was too hard to make.
The exponential growth of entitlement programs is not sustainable without equal exponential growth in production or services. Unfortunately, current government policies ensure that growth will not occur. Where are the government cuts and real incentives to long-term capital investment?
The real question is whether it's at a manageable level or whether too much of the economy and productivity is tied up in debt instruments. Right now, it's not even close to that.
Suppose I borrow money from my 401(k) plan year after year. What happens when I retire? If I expect to live on my 401(k), I will have to pay the money back. Or, I will have to delay retirement, work part time, or reduce my standard of living to compensate for the money I "borrowed" from myself.
Now, apply that analogy to our routine borrowing from Social Security and you will see that it's not a good idea. We are spending our retirement funds on current expenses. We have to pay it back or we suffer the consequences.
That's true, if we continue to run deficits. Until 9-11 we were running a surplus and retiring the debt. Have a few more days like we had on Wall Street today and the deficit disappears, and the debt a few years thereafter.
I suggest you read The Creature from Jekyll Island by G.E. Griffin
That is a great question.
To Whom?
I have asked everybody from insurance actuaries, to truck drivers, bank executives, ect., and no one has been able to give me an answer.
The next question is, If and when is it payable?.
Flawed analogy #1: The SS "trust fund" is nothing like a 401(k). Money in the fund doesn't grow, work, produce or do anything else; it is economically dead, as if you had buried it in your backyard. In that sense, taking money out of that fund and spending it can actually be a positive good: Some percentage of government spending provides positive returns to society and our economy, whereas no percentage of money stuffed into the mattress of the fictitious SS "lockbox" contributes anything to keeping our country prosperous and secure.
"What happens when I retire?"
Flawed analogy #2: Human beings are mortal, with a finite end to their earning potential. Governments are immortal (or, to the extent that they are mortal, their debts die with themItaly doesn't have to pay off the Roman national debt). If you knew for an absolute fact that you would be alive a century from now, and that you would unquestionably be earning much more then than you do now, borrowing money would be a financially meaningless act. This is roughly the position corporations are in, and they too borrow money whenever their long-range needs exceed their short-term earnings. The way to judge corporate debt is by the drain debt service places on short-term profitability, and by that standard the federal government is doing just fine. Discretionary domestic spending needs to be controlled and, more importantly, the economy needs to be unshackled; but playing into Daschle's hands by carping about the national debt serves neither of those goals.
"Now, apply that analogy to our routine borrowing from Social Security and you will see that it's not a good idea."
Social Security as a whole is a separate issue. The SS Ponzi scheme must eventually collapse under the weight of its lies sooner or later. Stuffing cash into mattresses in the meantime at best delays the inevitable, and at worst carries water for the 'Rats.
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