The Debt Ceiling Debate

Discussion in 'Politics' started by Wiseacre, Jun 4, 2011.

  1. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    In about 2 months, (sometime in August) we run out of accounting tricks and reach the point where something has to give. We won't have enough revenue coming in to pay out the social security checks, pay our soldiers, pay the health care bills and the interest on the debt. There's only 3 possible outcomes IMHO:

    1. A small extension, say 60-90 days

    2. They reach a longer term agreement for raising the debt ceiling around 2 trillion or so

    3. No agreement - default.


    I would assume nobody wants option #3, I doubt if any politician wants to risk the voter's wrath if this happened. The consequences are said to be very severe; nobody knows for sure, but it could approach catastrophe with world wide repercussions. I'm not seeing this as much of a possibility.

    The 2nd option would be the ideal outcome, more likely than a default but not by much. Why? Cuz we have a definite gridlock in DC, the GOP will not raise taxes and the Dems wil not cut spending without a tax increase. We can argue the pros and cons of raising taxes until we're all blue in the face, but right or wrong every republican knows the TPers will get him/her in the primaries if he/she agrees to raising taxes. To do so would be tantamount to political suicide.

    The democrats on the other hand need a tax hike to offset whatever spending cuts they agree to even if it's not a 1 to 1 ratio. Cuz if they don't do that then they're essentially admitting their Keynesian demand side spending is/was the wrong approach and that the GOP is/was right. A democrat who supports significant spending cuts without accompanying tax hikes would be in political purgatory with his own party.

    So --- to me the most likely outcome are some short term deals that raise the debt limit by a few hundred billion to a half trillion or so and then go through the same ordeal in 2-3 months. Not sure who wins or loses, probably depends on the details; who gets hurt by the cuts. Tricky stuff, cuz if the pain is not spread around surely one side will use it to bash the other in the upcoming election cycle.

    But here's the downside to this option, it makes clear to the rest of the world and the bond markets that the US Gov't is dysfunctional and is incapable of getting it's financial house in order. There could be a very real chance of a downgrade in our credit rating before the end of the year, which means higher interest payments on our debt. Plus, the uncertainty that right now is depressing our economy would continue or perhaps worsen. It is my personal opinion that until our gov'ts at every level agree to a workable plan to resolve the debt/deficits, there will be no economic recovery. There are other things that also need to be done, but until our own citizens feel like we've got a plan to get out of this mess, nothing is going to work.
     
    Last edited: Jun 4, 2011
  2. Wonky Pundit
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    Wonky Pundit USMB's Silent Snowden

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    Most TPers will not care about corporate taxes, or about any tax that affects only the 1 percenters. Make their own income taxes come down and they'll be happy regardless of who else gets soaked.
     
  3. Charles_Main
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    Charles_Main AR15 Owner

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    I look at it this way. I think the last warnings about our Credit Rating were clear.

    Defaulting would be bad, But simply extending the limit and doing nothing to cut spending at the same time. Will be just as bad as default. They basically told us. Do something about your spending, or you will lose your AAA rating. This is do or die time. If we can send the signal that we get it, and are going to take serious steps to right our fiscal Situation. We may hold on to the AAA rating. If we Default, or Simply raise the limit and keep on spending. We will lose it.

    And if you think the rating is meaningless. I suggest you take a look at the track record of other countries that had a AAA rating and lost it. Believe me, it would not be a good thing for our economy.
     
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    Last edited: Jun 4, 2011
  4. C_Clayton_Jones
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    C_Clayton_Jones Diamond Member

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    Agreed.

    The only question is will the GOP be responsible or reckless.

    The best outcome is to extend the ceiling and work to develop a debt elimination plan that’s comprehensive and responsible, that includes both program cuts and tax increases.
     
  5. Trajan
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    Trajan conscientia mille testes

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    that moodys would have the balls to float this says a lot.

    and......don't take it from me....

    What If the U.S. Treasury Defaults?
    'People aren't going to wonder whether 20 years ago we delayed an interest payment for six days. They're going to wonder whether we got our house in order.'


    snip-

    Now suppose, Mr. Druckenmiller adds, that he's wrong. If the market implodes on day two of the technical default, Mr. Obama and Congress would be motivated to finally come to agreement. But he doesn't expect such market chaos. "My guess is that the bond market would rally as long as it believed the ultimate outcome was going to be genuine entitlement reform—that we wouldn't even have to find out about a meltdown because it wouldn't happen. And I have some history on my side here."

    The Weekend Interview with Stanley Druckenmiller: What If the U.S. Treasury Defaults? - WSJ.com



    Druckenmiller, was an investor and onetime fund manager for George Soros, so that ought to give him immediate cache amongst the left.....go for it;)
     
  6. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    I read the interview, it's a good one that everyone should read. But he's talking about a technical default that doesn't last too long. What if it does? At some point there has to be a reckoning, how long could we go without any agreement of any kind?
     
  7. georgephillip
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    georgephillip Gold Member Supporting Member

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    Any potential debt ceiling deal will have to accommodate rookie Republicans who feel they were hoodwinked in the government shutdown debate. Some are not only new to Washington, they are new to politics.

    "Now, when it comes to the debt ceiling, they’re not playing around. 'The CR was a great practice round,' said freshman Rep. James Lankford, who was running a Christian youth camp at this time last year and believes the federal debt must be eliminated because 'Proverbs is pretty clear, a righteous man leaves an inheritance to his children’s children.'”

    A Rambunctious Right Wing, A Silent President, and the Debt Ceiling Deal | Common Dreams
     
  8. Epsilon Delta
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    Epsilon Delta Jedi Master

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    Tough to see any real way out of this. You do make a good point that uncertainty and investor jitters won't really subside until the "financial house" is in order. But then again, the virtual "austerity package" of spending cuts and higher taxes that would be required to "restore confidence" is also going to choke the recovery and hurt job creation - thereby keeping uncertainty in place. This is the debate that's going on in Europe's peripheral economies too, and the sort of issue that has until recently been the purview of cash-strapped developing economies. Is the medicine worse than the illness?

    I guess this is a TINA (there is no alternative) kind of situation. No use crying over spilled milk, but it would've been a huge help to have put in place contractionary policies during the boom years and not engaged in multiple military commitments across the globe, using that money instead to stimulate the economy, instead of running up a huge debt before there was even any crisis going on. It seems truer every day that this really might be the beginning of a "new normal" - low growth, high unemployment, etc - the economy might never recover even if a deal is reached.

    It's funny to see all the parallels with Argentina's case in the late 1990s and early 2000s, the background being money wasted on the ridiculous Falklands War, taking up private debts, unfinished infrastructure projects to nowhere, and then failed austerity packages to deal with it. Things only got better after the country defaulted and the currency totally devalued, allowing Argentina to sort of export its way out of it. Could the US do the same? Probably not, considering it's a blue whale in relation to Argentina's salmon. It could really be catastrophic. But hey, at least we all got two months of easy living before the fire and brimstone begins.
     
  9. Too Tall
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    Too Tall Senior Member

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    The federal government collects at least $100 Billion a month in taxes. That will easily pay the interest on the national debt with a lot left over. All raising the debt limit does is allow the government to SPEND it and borrow even more.

    I say put off raising the debt limit and make the Administration sweat. After all, this is what Senator Obama said when he voted against raising the debt limit during the Bush Administration.

    "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."--- Barack Obama
     
  10. Charles_Main
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    Charles_Main AR15 Owner

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    You are clearly a racists piece of shit. How dare you Quote Obama's own words and make him look like the hippocritical, Double talking, Liar he is.

    Shame on you!!! :cool::cool:
     

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