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Let's play a game, you and I In some quarters of the American political system, there are people -- predominantly of the Tea Party Republican persuasion -- who believe that Congress doesn't need to raise the debt ceiling. If the U.S. government isn't allowed to borrow any more money to pay its bills, runs their line of thinking, that's fine and dandy. Finally, we'd be forced to tighten our belts and "live within our means!" Ignore the fear-mongers predicting disaster -- they're just trying to scare markets and voters. Well, OK, what would happen? Let's start with the basic numbers. The U.S. Treasury will have about $172.4 billion in revenue in August that can be applied to $306.7 billion in outstanding bills. If the U.S. Treasury is forbidden from borrowing any additional funds, it will therefore have to cut total August spending by about $134 billion, or 44 percent. What does that mean, exactly? Well, here's a fun game everyone can play. Decide for yourself who gets paid and who doesn't if Congress fails to raise the debt ceiling. First on the list: $29 billion in interest payments on Treasury securities. Even most Republicans believe it would be a horrible idea to default on government debt. It's the kind of thing that would almost assuredly destabilize global financial markets -- perhaps as badly as the credit crunch problems of 2008, or maybe even worse. U.S. Treasury securities are considered the world's safest haven for parking cash in uncertain times. If the world's biggest economy can no longer stand behind its debt obligations, we could witness a financial panic that dwarfs the disruptions caused by the bankruptcy of Lehman Brothers. OK, let's not do that. Next up, let's decide that we absolutely, positively must pay for Social Security benefits ($49.2 billion), Medicare ($28.6 billion), Medicaid ($21.4 billion). To do otherwise would invite immediate political annihilation. Republicans area already freaking out at hearing Obama say he couldn't guarantee Social Security checks would go out on time. What if the GOP was blamed for that?! Oh, and then there are the troops! Can't mess with the national defense! Let's add defense vendor payments ($31. 7 billion), military active duty pay ($2.9 billion) and Veteran's Affairs ($2.9 billion). Hmm, what else. Oh, how about unemployment benefits ($12.8 billion)? Whoops! We just hit $178 billion -- we're $4 billion over the limit. Let's see, who can we stiff? The unemployed? Defense contractors? The elderly poor? Chinese bondholders? And what have we left out? How about all federal salaries, food stamps, the Justice Department, Homeland Security, air traffic control, the Centers for Disease Control, NASA, the EPA, and highway funding, for starters. And there's much, much more. But no matter how you slice it, you're subtracting about $132 billion of government spending from the economy. Figuring out exactly what kind of economic impact that kind of cut would have is far from an exact science, but the Center for American Progress' Michael Ettlinger and Michael Linden calculated that if the U.S. government cut its spending at that rate for both August and September, GDP growth would drop by 2.3 percent from the previous quarter. To put that kind of drop in perspective, consider that the biggest quarter-to-quarter drop in nominal GDP since 1947, when official statistics began, was 2 percent from the third to fourth quarter of 2008 -- the middle of the Great Recession, when we lost nearly 2 million jobs. If the economy was humming along, cutting spending by such a huge amount in a short period of time would still be a major blow to overcome. When the economy is sick and barely growing, we're talking a Chinese high-speed rail ticket back to recession. Choose your poison: global market chaos, savage cuts to the social welfare safety net or recession. Or, heck, all of the above. And that's not all. Slower economic growth means less tax revenue, which would force even more budget cuts. Laying off hundreds of thousands of federal employees would further boost the unemployment rate. And if the U.S. government ever did end up authorized to borrow money again, the yield it would likely have to offer to attract buyers for its damaged goods would undoubtedly skyrocket -- putting further pressure on government finances. Credit rating services are already putting the U.S. on notice that a failure to raise the debt limit will result in a credit downgrade -- a development that would raise borrowing costs and increase government deficits in the long run, regardless of what the government ended up choosing to pay for. If tempers are flaring in Washington, there's a good reason. Our political leaders have committed countless blunders over the decades, but sabotaging government finances, ruining our credit, and precipitating a recession, on purpose, would immediately rank at the very top of the list. Just because you have silenced a man does not mean you have changed his mind. |
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7/16/2011 3:02 pm |
Excellent blog. It has been my observation that the Tea Party faction within the Republican party is causing the problem. Most of these people, both in and out of government, are rank amateurs. They refuse to or are incapable of thinking for themselves. They continue to confuse opinion and talking points with facts. That can be observed each and every day on this site. The TeaBaggers really created a monster for themselves when the tied deficit reduction to debt ceiling increase. These are two distinctly different things but for most TeaBaggers they somehow have become one and the same. You can never go broke betting on the stupidity of some of the TeaBaggers.
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It is my own opinion that any cutting and economizing should start with the very people who created this unholy mess in the first place. Who are they? Well we all know who they are don't we? They are the politicians themselves. If anyone has to make sacrifices and have their income cut or reduced, start with Congress and the Senate and then work your way down the State and local politicians.
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7/16/2011 5:46 pm |
WTG Alfie......BooRadley...Odd that you and Skippy are blaming the Tea pary when they have nothing to do with the mess the Democrats and in a smaller part Republicans created. I say pay the interest and cut everyone and everything else. I would rather bite the bullet than have no Country for my Grandchildren to grow up in......God bless America and the Tea party patriots who are Americas last best HOPE. Its time to start reading the Bible, It will scare the Hell out of you...
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7/16/2011 5:52 pm |
It is my own opinion that any cutting and economizing should start with the very people who created this unholy mess in the first place. Who are they? Well we all know who they are don't we? They are the politicians themselves. If anyone has to make sacrifices and have their income cut or reduced, start with Congress and the Senate and then work your way down the State and local politicians. Just because you have silenced a man does not mean you have changed his mind.
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7/16/2011 5:53 pm |
I'd go one step further...and suspend their pay...and benefits...until they got this hammered out! That's what I did with my kids when they got petulant and didn't do their chores...withheld their allowance.! Just because you have silenced a man does not mean you have changed his mind.
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7/16/2011 9:48 pm |
It appears that you are the person that continues a mythical existence...this from Fact Check and sourced from the CBO: "Clinton’s large budget surpluses also owe much to the Social Security tax on payrolls. Social Security taxes now bring in more than the cost of current benefits, and the "Social Security surplus" makes the total deficit or surplus figures look better than they would if Social Security wasn’t counted. But even if we remove Social Security from the equation, there was a surplus of $1.9 billion in fiscal 1999 and $86.4 billion in fiscal 2000. So any way you count it, the federal budget was balanced and the deficit was erased, if only for a while." Of course we know by now that Bush light took care of the Clinton surplus by extending two tax cuts for the wealthy.
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7/16/2011 9:53 pm |
To try and extricate the money from politicians that has been stolen for the wealthy by politicians misses the mark by miles. The money is in the hands of banks, oil companies and corporations...it is no longer in the hands of politicians. But then we know by now that we have a House of Representatives that will not agree to stopping the ongoing theft.
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7/16/2011 10:30 pm |
I believe there are some well intentioned people on the right who realize it cannot be done by cuts alone and are willing to at least discuss taxes...if nothing else letting the horrendous tax cuts expire. At the same time, I believe there are many in the House...tea baggers...and morons like Bachmann...who really DO believe that going into default is no big deal. While TECHNICALLY they may be right, the reality in this world...and in the world's financial markets are rarely based on technicalities, and more often on emotional perception. Allowing the default to occur will be a death knell for the GOP, and I think they're beginning to realize that. They, too, see the same polls from Gallup and Quinniac that say upwards of 75 to 80% of the voters in this country...on both sides of the aisle, believe that raising taxes MUST be part of the equation. To ignore those numbers is to cut your nose off to spite your face. I do agree with you that even the most ignorant like Cantor, will capitulate at the last minute, but only when they feel they can go back to the voters and shrug and say, "(Sigh, martyr on) I tried my best but couldn't stop THOSE liberals." I just hope the voters don't forget this lunacy in the next election. Just because you have silenced a man does not mean you have changed his mind.
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7/16/2011 10:34 pm |
WTG Alfie......BooRadley...Odd that you and Skippy are blaming the Tea pary when they have nothing to do with the mess the Democrats and in a smaller part Republicans created. I say pay the interest and cut everyone and everything else. I would rather bite the bullet than have no Country for my Grandchildren to grow up in......God bless America and the Tea party patriots who are Americas last best HOPE. And no amount of finger pointing and nay-saying will change the fact that Trickle Down economics was and remains an absolute train wreck. Jethro was hamstrung and literally did not have a clue what to do after the collapse started his last six months in office...so he did NOTHING...well...except demand from Congress a blank check for $700 billion dollars. Just because you have silenced a man does not mean you have changed his mind.
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7/17/2011 9:25 am |
What Fact Check fails to mention,however, is that while Social Security is the only off budget trust fund, it's not the only trust fund. According to table 6 schedule D of the Treasury Department Monthly Treasury Statement for Sept 2000 which lists all trust funds that contributed to the "surplus" due to there excess funds. Social Security $152.3 billion Civil Service Retirement Fund $30.9 billion Federal Supplemental Medical Insurance Trust Fund $18.5 billion Federal Hospital Insurance Trust $15.0 Billion Unemployment Trust Fund $9.0 billion Military Retirement Fund $8.2 billion Transportation Trust Fund $3.8 billion Employee Life Insurance and Retirement $1.8 billion Other $7.0 billion Total $246.5 billion There was no surplus. A real surplus would have caused the National Debt to go down instead it went up every single year Mr Clinton was in office. In his best year it only went up $17.9 billion. The most accurate way to calculate a surplus is to look at the net change in the National Debt. Since the National Debt went up every year under Mr Clinton, there never was a surplus. That dog won't hunt with me. I choose to believe what the CBO states over your opinion and knowledge of accounting. A hint for you, you are doing the same thing when you confuse budget deficits with the national debt in Clinton's administration. They are two distinctly different things. That, by the way, is the same thing that you Tea Baggers are doing still today. You really would benefit from cutting down on your steady diet of tea.
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7/17/2011 10:54 am |
It seems to me that you guys are going to have to bite the bullet at some point, and work on decreasing the national debt. China and the rest of the world aren't going to cut you economic slack forever. At this point, it's not out of control as a percentage of GDP compared to other nations. The US is in the middle of the pack, according to an article in The Economist I saw recently. Canada had the same problem, and finally faced up to it in the early 90's. The Liberals, led by Jean Chretien with Paul Martin as Minister Of Finance, began to fix the state of the nation's finances. Martin ran consecutive budget surpluses for years. He would forecast of surpluses of five billion, and have outcomes of seven billion. My fellow lefties derided Martin for this tactic at the time, but I thought it was a case of short term pain for long term gain. The Conservatives under Stephen Harper have not been nearly as watchful. For starters, they dropped the GST from 7% to 5%, against the advice of all tax experts. This was obvious pandering for votes. As in the US with the Democrats, one can forgive the Conservatives here for increased spending resulting from the recent financial shenanigans in the US. But at some point this excuse will not suffice, and the Conservatives' feet will be held to the fire if they don't get back to debt reduction.
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WTG Alfie......BooRadley...Odd that you and Skippy are blaming the Tea pary when they have nothing to do with the mess the Democrats and in a smaller part Republicans created. I say pay the interest and cut everyone and everything else. I would rather bite the bullet than have no Country for my Grandchildren to grow up in......God bless America and the Tea party patriots who are Americas last best HOPE. So if you can explain to me exactly why you think people like me should get less. Then lets hear it. And yes I am a conservative.
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7/17/2011 7:40 pm |
I most certainly would NOT want you to balance my checkbook if you believe that there are more one way to keep books. I believe that you add receipts to your balance and subtract debits.If you earn $30,000.00 in a given year and a friend LOANS you $5,000.00 and you only spend $32,000.00, is that a surplus. I suppose you make the argument that "I had $35,000.00 and only spent $32,000.00, thus I have a surplus". That's a pretty weak argument as you know that $2,000.00 of what you spent was borrowed and has to be repaid later along with fact that your "surplus" is still borrowed money also. All of the business owners that I know would not be in business if they kept books like the Federal Government. They would all be broke. You yourself claim to have been a small business owner, did you keep books like the Federal Government. If so, no wonder you are out of business. As I said apples and oranges are different and your dog won't hunt!
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7/17/2011 7:42 pm |
How much do you think people like me can stand to be able to be cut. I make less than $700 a month on disability. Try making it on that and see then what you think should be cut. Do you think I should get less?? Considering the fact that I can't work. Or I would be. After spending most of my life in the roofing business I know what hard work is. But I am no longer able to do it. So if you can explain to me exactly why you think people like me should get less. Then lets hear it. And yes I am a conservative. Interesting question. It sounds, to me, as if your alliance is with the wrong political party. Thank God that you aren't living in Arizona...you would die more quickly here. Thanks to our Republican Governor Jan Brewer.
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7/17/2011 7:52 pm |
How much do you think people like me can stand to be able to be cut. I make less than $700 a month on disability. Try making it on that and see then what you think should be cut. Do you think I should get less?? Considering the fact that I can't work. Or I would be. After spending most of my life in the roofing business I know what hard work is. But I am no longer able to do it. So if you can explain to me exactly why you think people like me should get less. Then lets hear it. And yes I am a conservative. Just because you have silenced a man does not mean you have changed his mind.
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