Debt Ceiling

[stebo0728]

Ok thought I'd start some discussion up on this, since we are about to have this fight displayed before us again.

Should we increase the debt ceiling?

[heliochrome85]

its not a matter of should we.
http://fivethirtyeight.blogs.nytimes.co ... ksmanship/

this is a poison pill for the US Government and unfortunately, the ill informed teabaggers/GOP want to use it for their own agenda. the reality is that if we dont, we will default on our debt for the first time in history. that is sure to increase foreign investment in our country

[stebo0728]

I appreciate that article, and political ramifications are certainly part of the discussion, but more than that, I'm interested in discussing the first thing you said, "its not a matter of if".

In my mind, it still is a matter of if. Or in reality I think the matter of "if" for me is really the next impending debt limit hike. This one we are facing now may be inevitable and necessary, but afterwards, what steps can we take to ensure that we dont have to hike it again.

I think its important to note what the article you linked points out, that the debt ceiling in a control placed on debt payment, not debt procurement. In other words, it only tells the Treasury what debt it can PAY, but does not control what debt is sought after. I think thats completely backwards. Thats like me deciding I cant afford my housenote AFTER I sign the loan agreement. Debt should be limited and controlled at procurement, not at payment. Once we procure it, we HAVE to pay it, under pain of deminished international relations, and perhaps even sanctions from the loaners.

Before the debt ceiling came about, EVERY DEBT had to be passed by Congress. But going into debt became more and more common as we became more and more progressive and social in nature, and Congress decided to set a limit that was ok, instead of voting each time. I think, in hindsight, which is always 20/20 of course, that this was a mistake. The economy was not in jeopardy at that point, now it is, and perhaps we need to go back to sanctioning every debt before taking it on.

[IBCoupe]

It's not a matter of "if" unless you actually consider that seeking to hurt American consumers is a distinct possibility.

We should definitely address the budget and we should definitely raise the debt ceiling. Fact is that we will raise the debt ceiling, and the only "if" is if we cut more spending/raise more revenue while we do it or if we cut more spending/raise more revenue separately.

What is a political football to Congress could end up flattening the economy and hurting consumers by lowering the nation's pristine credit rating and sending interest rates sharply higher.

http://www.msnbc.msn.com/id/42536397/ns ... e_economy/

[stebo0728]

Are you implying that anyone against raising the ceiling, is against it for nefarious reasons?

[stebo0728]

And you may very well be right, that "if" is off the table, for this hike. But should that keep us from asking the question?

And we need to be talking about how to make sure we dont have to hike it again down the road.

And as far as:

lowering the nation's pristine credit rating

Can you really consider our "credit rating" pristine? If it were pristine we wouldnt be having this discussion. If you were to try and rate our nation anywhere similarly to the way we rate individuals, not even loan sharks would touch us now.

[IBCoupe]

We haven't been downgraded yet, to my knowledge, and failing to raise the debt limit would lead very quickly to it. We still have a pristine rating, as precarious as it might be. We won't without the ceiling raise.

And, yes, I will go out on a limb. Anybody who understands the situation and refuses to raise the limit is either crazy as a loon, or is not doing it out of a sense of fiscal responsibility. I reserve my right to further narrow this declaration to apply only to elected officials in Washington.

[szh]

For me, this is one of those "SIgh ..." moments. I don't like the idea of increasing the debt ceiling at all, but it is one of the consequences of our out of control increase in Federal spending in recent times.

I just wish there was a better way to solve this problem - I seriously, seriously wonder what kind of problems a financially broke government will create ... that my son will encounter when he grows up.

Damn it!

Z

[stebo0728]

For me, this is one of those "SIgh ..." moments. I don't like the idea of increasing the debt ceiling at all, but it is one of the consequences of our out of control increase in Federal spending in recent times.

I just wish there was a better way to solve this problem - I seriously, seriously wonder what kind of problems a financially broke government will create ... that my son will encounter when he grows up.

Damn it!

Z

Ran across this earlier, whatcha think?

http://townhall.com/columnists/johnhawk ... page/full/

EDIT -

Here Ill save you the click and give you the 5 bullets:

1) Your life savings could be reduced to nothing almost overnight. Inflation is a fact of life. As Thomas Sowell has noted, "As of 1998, a $100 bill would not buy as much as a $20 bill would buy in the 1960's." That's under normal circumstances.

However, the thing governments have traditionally done when they simply can't pay their debts is print more money. The problem with this is the further you expand the money supply, the less the money you already have on hand is worth. This can wipe out the savings of a lifetime in a relatively short period. Imagine spending billions of dollars just to buy a loaf of bread. Sound far-fetched? Well, guess what? That has happened in the Weimar Republic, which was crushed under debts from WWI and decided to pay it off by printing more money. It could happen here, too, and all the money you've scrimped and saved could become worthless in a short order.

2) Your taxes will skyrocket. We've been conned into thinking that we can fund a massive government on the backs of the rich. This is simply not so. It's not working today and it's not going to happen in the future. We cannot tax the rich enough to pay off our debt or even enough to keep the government going long-term. Even if we could, the rich have the resources to flee the country for greener pastures if they're being taxed into oblivion. The middle class? Not so much.

What that means is the more desperate the government gets, the more the average American is going to be hammered with new taxes. How much more of your income can you afford to send overseas to pay China for the money they've loaned us to keep PBS, Planned Parenthood, and the National Endowment of the Arts going? What about if the country goes bankrupt and your income tax rate shoots up fifty percent? How are you going to pay your mortgage? How are you going to feed your kids? When the government runs out of cash and it can't borrow any more money, then it will start leveling massive taxes on the American people.

3) Your life could be in danger. If the government goes bankrupt, you'll have an extremely angry, confused, and frustrated populace that has little faith in its leaders -- combined with a horrific economy and a reduced ability of the government to keep order. Under those circumstances, widespread rioting and violent crime seem entirely plausible.

When Argentina had its crisis, violence went up 142% and "young men began looting supermarkets."

Here's some of what happened during the German hyperinflation of the currency in Weimar Republic after it started printing money night and day,

The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug.

4) Your payments from the government will dramatically decrease or stop altogether. Contrary to what some people believe, Medicare and Social Security are paid out of the same fund that pays for everything else. In other words, if the government goes bankrupt, there is no money set aside to pay for these programs. So, if you're receiving Social Security, Medicare, welfare, food stamps, or any other similar programs, those checks could stop or be slashed down to nothing. That seems unthinkable to people, but if the government doesn't have any money, then it can't pay it out to people. As they say, "You can't get blood out of a turnip."

5) You will have a dramatically reduced standard of living. If taxes and inflation escalate dramatically, both of which are very likely if we go bankrupt, economic activity will slow to a crawl and we'll go into a depression. We're not talking about a "This is the worst economy since the Depression" situation that we hear every time there's a mild downturn in the economy; we're talking about a REAL depression. Businesses will close left and right, the stock market will tank, unemployment will soar to heights not seen since the thirties, and the government won't be in a position to help very much.

If that happens in a country like America, where people have been so prosperous for so long, it's going to produce utter misery. It's not a lot of fun to be poor under the best of circumstances, but it's much worse to go from having a comfortable life with a bright future to growing vegetables to eat in the backyard and wondering how you're going to keep warm in the winter.

[IBCoupe]

I don't see any indication that we'd "print more money" to pay off our debt. That's not why we've been printing money so far.

Seems a bit overblown. There's a whole lot of "if" in his projections.

[themadscientist]

We have already done the print more money trick. That card is played. We are left holding a pair of Jokers.

I detest the spendthrift irresponsible government that has put us in this predicament, but the idea of not raising the debt ceiling is ill-considered and just a political stunt. If we do not we will default and that is not an acceptable alternative. That is like choosing not to steer an out of control car into the bushes and opting instead for the steel light pole.

[stebo0728]

Well once you clarify WHAT the debt ceiling actually is, it becomes more clear that you are correct, that it must be raised. However, a new type of ceiling needs to be implemented, and NEVER moved again unless ABSOLUTELY necessary. Let me explain.

The current debt ceiling we are debating, is the top limit that the Treasury is authorized to PAY. That means its debt we've already committed to, so we have to pay it, or we default, as you indicated.

As far as the new ceiling, rather than capping what can be paid, isnt it more intuitive to cap debt we sign for? I mean right now we debate over whether we can pay debt we've already undertaken. Doesnt it make more sense to debate whether we should undertake debt to begin with?

[IBCoupe]

That's called a balanced budget amendment.

[IBCoupe]

Holy crap, Eric Cantor is either functionally retarded or a lying piece of s***.

http://tpmdc.talkingpointsmemo.com/2011 ... hp?ref=fpa

Reacting to the news that rating agency Standard & Poors is downgrading its outlook for the U.S. economy based on political gridlock over cutting the deficit, House Majority Leader Eric Cantor (R-VA) claimed vindication for the GOP. According to Cantor, the report strengthens the Republicans' argument for holding out on a debt limit increase unless they can get major cuts as part of the deal.

So, S&P says they're worried we're not going to be able to pay our bills, adjusts our future forecast accordingly (but doesn't downgrade our rating - important to note) and Eric Cantor says, "See? I told you we should stop paying our bills."

[stebo0728]

The only opposition I am considering supporting for blocking the ceiling hike, is opposition that demands a Balanced Budge Bill in exchange for the hike. Technically thats not really opposition. But I starting to feel that having a balanced budget to ensure a reversal of our "spend baby spend" days is just as important is raising the ceiling. I dont like Obamas push for a "clean bill", I mean he's free to request it, but otherwise, work with what you get.

Secondly, we need to be sure we stop thinking along the lines of "authorize what to pay" instead of "authorize what to charge". I know technically a Balanced Budget Plan is the embodiment of that notion, but still we need to be sure we adjust our thinking to match. Personally I think we should do away with the debt ceiling figure once and for all, and go back to forcing Congress to approve EVERY debt.

[heliochrome85]

The only opposition I am considering supporting for blocking the ceiling hike, is opposition that demands a Balanced Budge Bill in exchange for the hike. Technically thats not really opposition. But I starting to feel that having a balanced budget to ensure a reversal of our "spend baby spend" days is just as important is raising the ceiling. I dont like Obamas push for a "clean bill", I mean he's free to request it, but otherwise, work with what you get.

Secondly, we need to be sure we stop thinking along the lines of "authorize what to pay" instead of "authorize what to charge". I know technically a Balanced Budget Plan is the embodiment of that notion, but still we need to be sure we adjust our thinking to match. Personally I think we should do away with the debt ceiling figure once and for all, and go back to forcing Congress to approve EVERY debt.

kinda like you having to have your parents approve everything you buy, after a while you realize the back and forth takes up so much time that you can hardly get anything done.