Debt Ceiling and Default

Discussion in 'Economics' started by joneog, Jul 14, 2011.

  1. Just so no one forgets, spending on soc Sec, medicare, and medicaid is mandated by law. So these WILL be paid first if the ceiling is not raised. Then comes interest payments. Any remaining money will be split for defense and other discretionary spending. In numbers for 2010:
    total tax receipts ~$2.2T.
    Total spending for Soc Sec medicare medicaid ~$1.5T
    total spending on interest ~ ~$0.2T

    So, after spending on Soc sec, medicare, medicaid, and interest, there would be ~$500B left over for the rest of gov't. I actually feel this is enough for the remainder of gov't. In my opinion, it's probably best to just pay the three entitlement programs (since a tax is collected for two of them), pay the interest so there is no technical default, and divide the remaining $500B for the rest of gov't. This way, all mandatory obligations are met, so the ratings agencies can't say we defaulted on our obligations, and we have a balanced budget to boot, going forward.
     
    #11     Jul 15, 2011
  2. RobtF

    RobtF

    Because it's the banks who would suffer and they are running the game.
     
    #12     Jul 15, 2011
  3. Larson

    Larson Guest


    There is probably some truth to this. Having a QE to infinity(Jim Sinclair's appropriate term) Fed Chairman does not help. He could stop this crap in it's tracks by reversing policy, but will not do it, as he is in on the scam and wants to keep his title. Somehow, I don't think Volcker would be getting pushed around like Ben, if he were Fed chairman today. I do agree that Bernanke is a smart, capable fellow, just misdguided and headed in the wrong direction with Nero and the senate of Rome howling at his heels.
     
    #13     Jul 15, 2011
  4. dewton

    dewton

    Are people dumb? The debt debate is stupid. The constitution had already granted Congress the power to print money. THE US GOVT DOES NOT NEED TO GO INTO DEBT TO FUND ITSELF. It can create the money it needs. It seems really idiotic for the govt to instead choose to go into debt to the big banks and China.

    It's like having credit card debt, and paying it off with more credit card debt when you have a LEGIT printing press sitting right beside you.

    The founders intended on the govt to print money in the first place. It's not a radical idea. It's in the constitution.

    Enough with the debt & republicans vs. democrats vain debates. You're just playing the elite's stupid game.
     
    #14     Jul 15, 2011
  5. How can US repay its ~$14 T external debt & ~$7.5 T trade deficit, if dollar ceases to be world's reserve currency?:confused:
     
    #15     Jul 15, 2011
  6. ammo

    ammo

    thats the problem that we have the power to shrink,just does dc have the balls or are the all bought up ,owned
     
    #16     Jul 15, 2011
  7. Bob111

    Bob111

    #17     Jul 15, 2011
  8. joneog

    joneog

    Not sure if default is the right word. It's more like forced austerity.

    I agree that, in a perfect world, the debt ceiling should be raised and the budget shoud be cut slowly.

    What I'd like to see:

    1) Move the upper tax bracket to 1 mil+ . As anyone who lives in New York, Conneticut, New Jersey, California etc knows, a family that makes 300k is not wealthy considering state, property, excise, sales taxes and the cost of living. At 1 mil+ in income you can do a 35%-40% federal tax and then do something of a flat (or gradually progressive) rate for everyone under that. Simplify the tax code.

    2) Close tax loopholes on corporations and the super-rich(100 mil+). Although the nominal corporate rate is high the effective rate is pretty low. Don't let people create a tax-exempt foundation that they can use as their piggy-bank.

    3) End all corporate subsidies. Stop giving free money to the big agriculture, energy etc.

    4) Scale back the empire. Stop spending $1 Trillion a year to keep troops in germany, japan etc.; creating new military bases; throwing money at the defense establishment; bestriding the world looking for dragons to slay(Iraq, Libya, Yemen etc.) Why exactly do we have 10's of thousands of troups in Germany anyway? Are we worried Hitler is going to resurect himself?

    5) Come up with some type of plan to scale back entitlements considering the demographic trends. If you can convince the market there's a plan for dealing with the unfunded liabilities you can afford to not drastically cut the deficit in the short-term, so as not to repeat the mistakes of 1937.

    Of course they will do none of that.

    Well, as we all know the government is not bound by the law. But I generally agree, if the government can pay entitlements and the interest payments there will be no default, just forced austerity in the defense and discretionary budgets.
     
    #18     Jul 15, 2011
  9. Are you serious? Do you know what happens when governments just up and print money?

     
    #19     Jul 15, 2011
  10. dewton

    dewton

    Would it be any different than what's happening now? somehow being indebted to China, being at the mercy of credit rating agencies, and allowing a private entity- the Federal Reserve to give out trillions in loans to their cronies is a better option?

    But hey, tell the founders of this country that allowing a country to print money is a BAD idea. Better instead to let money be printed at private agencies and be indebted to them!
     
    #20     Jul 15, 2011