Toro
Diamond Member
Fixed the link. Thanks.
No. I do not expect that sort of growth. Nevertheless, we will have the revenue needed to service the debt and major entitlements for the short term should we not raise the debt ceiling. The idea here is not to cover the entire budget year.
Look, it's unlikely, despite all the wrangling that the ceiling won't get raised before the 2nd, but if we don't (and I don't think we should), there will be enough revenue to pressure a more serious agreement, which includes real cuts and reforms, the sort that the Democrats have no intention of making. Not now, not ever! We should not raise taxes. Period. Spending is the problem, and that point needs to be driven home to the Democrats. The majority of the people, including 38% of Democrats, do not want the debt ceiling raised and they do not want an increase in taxes. The people are right. Washington had better listen.
Sure, we have enough cash to pay the interest as long as the cash coming in is enough to pay what we owe when it is due. THAT'S the issue. If we are to generate $2.6 trillion next fiscal year, we don't get $7.1 billion flowing into the Treasury smoothly each and every day. Some days we will get $20 billion and some days we will get $5 billion. On August 3, we will generate about half what we need to pay just SS alone, let alone everything else.
The other thing no one is talking about is what this will do to the economy. Every Macroeconomics 101 student has seen this equation.
GDP=C+I+G+NX.
G is government spending, and includes deficit spending. No more deficits means the government has to contract immediately. The deficit is about 10% of GDP. That means the economy will start contracting at about a 10% annualized rate. During the worst of the Financial Crisis, we contracted at a rate of 6.8%, at least over the quarter. That means we have to have somewhere else to pick up the slack? Consumption (C) is 70% of GDP, is it going to grow 10%? No. Is investment (I) - which is 15% of GDP - going to double next quarter to make up the difference? Of course not. Hey, maybe the dollar will absolutely collapse and we can quadruple our exports (NX)! We haven't had a 10% GDP growth since the 70s, and generally, the times when we have had double digit growth was bouncing hard after coming out of a deep recession. There isn't an economist on earth who thinks we can do that this year.
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