Here's what won't happen if the debt ceiling is not increased next week

MarketWatch Article:
blogs.marketwatch.com...

Despite all the rhetoric and posturing we see in the media and in Washington D.C., it is safe to say categorically that the U.S. Treasury will not default on its debt after August 2nd, even if the debt ceiling is not raised. Not only will the Treasury be able to pay interest on U.S. debt obligations, but there is money for other essential programs as well. However, there will be some serious cutting that has to happen because spending clearly exceeds revenues.

...

Q: What is a default?

A: In this case, a default would be the failure by the U.S. Treasury to make payments of principal or interest on its debt in a timely manner.

Q: In a given month how much does the Treasury owe as interest on its debt?

A: Roughly about $15–20 billion (more on this in a moment).

Q: How much revenue does the Treasury take in on average in a month?

A: Roughly about $200 billion.

Q: Are you saying the Treasury could pay interest on its debt 10 times over (or more) from monthly income?

A: Yes. Therefore the likelihood of not paying interest on its debt is zero.

...

Q: Why then do Treasury Secretary Geithner and others in government make such apocalyptic statement about the horrors of default.

A: I’m afraid Secretary Geithner and others in government are doing the moral equivalent of yelling “Fire!” in a crowded theater and they are doing so for political reasons rather than financial reasons. They simply do not want any interruptions in the bloated spending underway in Washington and they want to scare Americans into thinking the end of the world is nigh unless the gravy train keeps chugging along.

Math is hard for politicians

...More at link.

Raising the debt ceiling will not reduce risk of default, rather it will increase the risk of default. A higher debt ceiling brings the federal government closer to the point where debt cannot be paid off.

On CNBC last week, Warren Buffett had a very good comment:

I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.

I agreed with most of the article when I read it last night on Marketwatch. My only disagreement stems from the "some people screaming" comment the author made. If federal expenditures were reduced 80% overnight, there would be a lot more than "screaming" taking place, Not that I think that would be a bad thing, mind you. Spending MUST be controlled at all costs, including royally teeing off the recipients of much of the spending.

reply to post by burdman30ott6
True.

The article did quote a study which pointed to a 44% overnight cut in spending if the debt limit is hit.

“It’s a 44 percent overnight cut in federal spending” if Congress hits the debt limit, [BPC's Jay] Powell said. The BPC study projects there will be $172 billion in federal revenues in August and $307 billion in authorized expenditures. That means there’s enough money to pay for, say, interest on the debt ($29 billion), Social Security ($49.2 billion), Medicare and Medicaid ($50 billion), active duty troop pay ($2.9 billion), veterans affairs programs ($2.9 billion).

That leaves you with about $39 billion to fund (or not fund) the following:

Defense vendors ($31.7 billion)

IRS refunds ($3.9 billion)

Food stamps and welfare ($9.3 billion)

Unemployment insurance benefits ($12.8 billion)

Department of Education ($20.2 billion)

Housing and Urban Development ($6.7 billion)

Other spending, such as Departments of Justice, Labor, Commerce, EPA, HHS ($73.6 billion)

The decision to prioritize payments would fall on the Treasury department, and Powell points out it would be chaotic picking and choosing who gets paid (in full or partially) and who doesn’t…

In most companies, you don't have a chance to spend beyond your set budget. Spending way beyond a well known budget reflects an inability to manage, and should result in termination of those who spent the money and those who managed the budget.

With hundreds of Federal bureaus and agencies, many redundant within the Federal government and many that are redundant to state agencies, this is a good opportunity to dissolve at least half the bureaucracies that exist and consolidate.

reply to post by Dbriefed


The Dept of Education gets $20 billion a month?


That's just one more reason to get rid of that bloated agency of indoctrination. Besides, in the middle of summer when all the kids have off, who's gonna miss that money?

I hope they can't come to any compromise and force the government to live within its means for once. Let them see how the rest of the world lives.

question how do you let go of all that power? the prestige of being in govt the bloated ego of look what I accomplished even though those in power feel in there hearts they are helping there people and helping themselves to the profit. how do you back down in the face of another economic crisis how many more bailouts of companies and govt that cannot control there spending. they are like fat kids in a unattended candy store hungry and out of control. I think that describes our previous and current govts

Its a catch 22, raising the debt ceiling kicks the can down the road and will make things even harder later or you hold the line and have to lay off 800,000 people over night. Throwing us into a economic depression. Eather way we are screwed

Originally posted by FortAnthem
reply to post by Dbriefed

 

The Dept of Education gets $20 billion a month?

That's just one more reason to get rid of that bloated agency of indoctrination. Besides, in the middle of summer when all the kids have off, who's gonna miss that money?...

Good point. Better for the money to stay in the states, all states already have their own Departments of Education. So, if there are no federal schools, what the heck does the Dept. of Education do? Are we just burning off tax money on bureaucrats, lawyers and unions?

just a quick thought here. I was under the assumption that Congress, through the house, controlled the purse strings. would it not fall to them to decide which programs would get paid and by how much. The Treasury's purpose is to pay them according to the wishes of the congress.

So my suggestion is this. All you congressmen sit your ass down, start working on what is going to get paid and by how much and simple refuse to raise the limit. and stop all this damn hot potato crap about who is going to get blamed for it.

Bunch of damn children playing games while the nation goes under.

reply to post by Phedreus
Bravo!

The executive branch is a bunch of kids screaming for their allowance. The legislative branch is the parents, the people who are supposed to control the government. They can scream all they want, they can't direct congress to raise the debt limit.

So what if some of the government doesn't get paid? The bastards will take it out on the people though, everyone up to Obama is threatening to pay government and not social security to the people.

So finally the MSM stops lying uh? Good.

Time for Fox, CNN, MSNBC and CNBC to starts saying the truth too.

America won't default if the debt ceiling ain't raised.

Not on foreign creditors anyway... but it will default on the American people.

Originally posted by camaro68ss
Its a catch 22, raising the debt ceiling kicks the can down the road and will make things even harder later or you hold the line and have to lay off 800,000 people over night. Throwing us into a economic depression. Eather way we are screwed

Sort of feels that way, huh? Try talking about it with your friends, family. Good luck with all that! Most don't see beyond today, let alone tomorrow.

i might take this more seriously if Marketwatch had a record of being right about anything, but for the past few years they've been telling us the recession is over, job creation is robust (except for the"soft patch" we're in), and the economy is rebounding (or wil next quarter, or the one after).

Take whatever they say with a huge truckload, no make that a shipload, of salt.Marketwatch has been drinking hallucinogenic Kool-Aid for quite some time now. They have about as much of a clue about the economy as my friend's 3-year old does.

But feel free to live in fantasyland for a few weeks, but when reality smacks you between the eyes, don't complain. You liked the Kool-Aid, remember?

reply to post by Dbriefed

I'll bet Obama and Co. would still hold social security checks, food for bunnies, and slap homeless children; then blame it on the GOP if it isn't raised.

I read an article some days back, about the Dems taking one week off and the Repubs taking the next week off, and so nothing was happening ... did not check the attendance records, but when they pull out the phone book to read for anything less than a big, big vote when someone is not there .. I become slightly paranoid about their level of maturity .. at least some of them.


So .. I was thinking ... if a regular guy misses too much work, what happens? .. he gets a notice, he gets a one on one, he gets a final notice and he is out the door. .... So much for "the regular guy".


Well, we cannot so reprimand our Reps, at least not in any timely fashion. So I propose we dock their pay!

They are not going to pass such a bill, it likely would have to come from grass roots, and work its way upward.


Lets say for every day they are not there without good reason (They hold some of the jobs in the country which demand the most maturity and responsibility!) .... they are docked at double their income for the time missed.

I know they are not hourly, but we have computers to figure, and blackberries to sign in and out of meetings off the clock (even if the check / catering / bar bill / etc is picked up by the budget).

This way .. if they chose to go to the Riviera for a week, instead of to meetings, etc .. they pay double. And we can say "it goes to the budget fund"!!

..... and who knows, they may choose to do just that ... if their other income sources are fat enough.
.... But they will not do it without a sting.

You know if we start to rein them in and demand (LOTS) more transparency (and if our press could manage to bring this transparency to the people --they seem to need more to do I think ...); ... we might begin to put some bandages on DC .. if it is not completely pulped by now.

We may not even resemble a democracy much longer, if some one does not begin something like this!!

There is the problem of dealing with a growing debt that was largely inherited by current members of congress. Still, there can be no doubt it is at the very least a moral imperative to reign in spending. Why in the world don't they address the fluff, pomp, and circumstance (wasteful programs, pork, unnecessary expenditures, etc.)? We are all being asked to make sacrifices, and although it may be somewhat slanted and stack the deck in favor of some and against others this common sense route is still viable. Also, as an example once all is said and done, wouldn't a congressman or woman stand some chance of becoming a folk hero returning to their districts after cutting back on pork spending rather than robbing Medicare recipients of their lifelong investments? Everyone has an opinion and we all qualify as armchair quarterbacks, but my final two cents worth is simply that as long as the rooster gets to guard the hen house (even one he inherited), things will not get any better.

Originally posted by beezzer
reply to post by Dbriefed

 

I'll bet Obama and Co. would still hold social security checks, food for bunnies, and slap homeless children; then blame it on the GOP if it isn't raised.

Not withold food for bunnies! Never the bunnies!

No, I don't think O would withhold social security checks and such from those in need. He's making a "pay attention to me" threat. Not a nice threat, but one directed at the Republicans. IMHO.

reply to post by Dbriefed


well we can cut 39 billion out real fast, I understand that defense is important and advances in technology needs to happen, but why are we investing huge amounts of money into a defense budget for new aircraft, and ships when we are fighting a war against people that have neither. Also, you want to save money, shut down foreign bases of operations. that would save billions if not trillions a year. maybe we could start with that.

What would be worse than cutting social security would be to cut the food stamps.

That would really screw things up.