So......what exactly happens if the US can't raise the debt ceiling?

[Kuroneko97]

As always, I have a video of Lewis Black making a point about this:
<youtube=CZGk_wVgq_0>

We wouldn't have this problem had we not had to go to war. The way my mother puts it, "Say what you want about Bill Clinton, but when he left office, we had a surplus." Then Bush left office. It's like when you leave a kid in a house, and they just smear shit on the walls. And you're supposed to clean that shit off, but every time you scrub some off, five more kids come in a smear more shit. And by the time you clean off one wall, the rest of the house is buried in shit, and by the time you realize how fucked you are, it's too late. In other words, our attempts to fix what Bush has done is not helped by the fact that others are still making it worse.

...I guess I could have used a better example, but that's what came to mind. But I agree with Lewis Black. Build a big fucking thing. Employ some people. Bring tourism. Hire some chefs to make food. This isn't hard, Mr. Government. Hire the taxes ever so slowly. Most people are dumb. Hire it a cent a week. By the time three months have passed and they realize what's happening, we probably won't be in as much shit as before. And keep it a Secret.(Shhhhh)

Plus, don't we have a bunch of, I don't know, RICH PEOPLE?! CAN'T WE HIRE TAXES FOR THEM INSTEAD OF KISSING THEIR ASSES BY LOWERING TAXES ESPECIALLY FOR THEM??? I'M SORRY, BUT THE TRICKLE-DOWN METHOD DOESN'T REALLY WORK!!!

I sometimes wonder of the IQ of everyone in the White House...*teh sighs*

 

[Jegsimmons]

The real question is: why did they get into so much debt in the first place?

better question...why the hell did WE need to borrow money?

 

[RDubayoo]

Eh Obama isn't making it better but he sure as hell isn't making it worse, honestly I feel sorry for ANYONE who had to take the presidency after bush because there is no way any of them could handle it.

That's just another variation of the old "It's not Obama's fault the country is flying apart" spin. We were told prior to his inauguration that Barack Obama was the greatest mind of our generation, the only one who could save America from plunging into the abyss of despair and restore justice and honor to our fair nation.

Nearly three years later the US is the laughing stock of the international community and everyone's panicking that we're going to default on our debt. And where is the genius plan Obama has to reverse our slide into destruction? Increase the debt even more? How is that a great idea? Hate to tell you this, but this isn't a case of "Bush screwed things up so badly NOT EVEN OBAMA CAN FIX IT" but rather that Barack Obama is completely inept at everything he tries to do and is making a bad situation worse.

I mean, really? What can we point to as a sign of Obama's competency? There's nothing but hype, just like it was before he became President!

 

[LittleChone]

Worst case scenario, (but highly unlikely) something very similar to the Fallout Universe.

<youtube=WkBNKa2KXZE>

Which would be AWESOME, because everyone whose's ever played a Fallout game would have a major advantage at survival.

 

[Velvo]

The real question is: why did they get into so much debt in the first place?

Actually, being in debt is a good thing for the country. It makes it possible for us to have, you know, credit to borrow on. America has paid its bills on time, like any other person might, for the last couple hundred years and has a "triple A" credit rating.

In fact, in the George HW Bush presidency, economists were worried that the US was paying off its debt too quickly and encouraged more government spending.

The US debt is at about 50% GDP. This may seem large at first, however, when we look at the UK debt, it's been over 100% GDP for the last century. The US is NOT in a debt crisis, despite what the media might try to make you believe.

The PROBLEM is this whacked out legal system that says that we have to vote to raise the debt ceiling every few years, making it possible for politicians to take the US economy ransom to get what they want accomplished.

The dialogue in the US right now is such that the Republicans can claim that they want lower taxes and lower spending across the board and they won't vote for a debt ceiling raise without those things. This is what happens when you vote a lot of crazy tea party people into office who don't have a clue about how government actually works.

Even threatening this bullcrap makes the world's economies less likely to lend to us, which can dramatically harm the economy. The tea party is so backwards that it HURTS.

When you are in an economic downturn, there are two ways out. Either the people spend a whole bunch of money (that they don't have), or the government spends a whole bunch of money it doesn't have (but can be lent in great quantities). Historically, it has been the government's spending projects that have gotten the US economy out of depression.

The Great Depression was solved primarily by the government spending many billions on WWII, which was a great turn of luck as it was a bi-partisan method of spending LOTS of money. Not everyone wants to spend many billions to solve global climate change yet (though if they did it would solve a lot of problems) but I imagine that as the weather gets more and more extreme over the coming years, people will see the emerging crisis and act. I see it as a way out of this current economic downturn.

People respond well when a crisis is clear and present and dangerous.

Please excuse my scatterbrained comments.

 

[GrizzlerBorno]

...Why am I starting college in the US again? Well my classes start on the 22nd of august so if the US economy collapses, at least I'll know not to get on the sodding plane.

 

[Ilyak1986]

What I'm wondering is this: why don't we tax assets? We have property taxes, and we have sales taxes...how about taxing all of the investment holdings of the rich guys? EG someone gets paid $20 million in stock...okay don't just tax that once...treat it as though he got a new mansion. KEEP taxing it. Tax treasury bills, treasury notes...really just about any place you can hoard a store of value.

At least beyond a certain point. I mean yes, we all need to save money. But as Bill Gates said...at some point, you can only make a sandwich that tastes so good.

Because put it this way: the lower class and the middle class will have to spend money to keep their standards of living. But the rich either A) hoard it, whether in investment holdings B) buy a crapton of luxury items. I suppose the C) is they give it to charity. Great. That's already tax-deductible.

But IMO the problem is that you have all of these mega-wealthy people who can just hoard wealth. If that wealth is stuck in shares of a stock of the company they work at, or is floating around in the form of a yacht, it isn't getting re-spent and re-circulated.

I mean here's the reason we want circulation of cash.

You have $100.
I make you a nice meal which costs you $100.
Then I pay a tutor $100 for some programming lessons (let's just say...I can learn programming on my own).
Then my tutor pays the piano teacher of his children $100 for lessons.
Then that piano teacher buys a $100 necklace from the local jeweler.
That jeweler then pays you $100 for a very nice piece of software.

So, we've come full circle. You have your original $100. Everyone else's wealth hasn't changed. They got $100, they spent $100.

However, that $100 circulated six times, and improved the standards of living of six people by $100, despite no change in wealth.

Now...what happens when money is locked up in stores of value such as financial instruments, homes larger than are necessary, luxury yachts, etc...?

Well, that money goes nowhere. It just sits there. So imagine you didn't spend that $100. Not only does it affect you, but it also affects five other people.

So where do we go to force that money to circulate? From those that hoard it and don't make it circulate--the wealthy. Clearly, the government spends money. In fact, it spends too much. The lower class are the lower class because they spend more than they make, and can't ever get anything going. The middle class are where they are because they spend about as much as they take in. The rich are rich because they take in more than they spend. So where does all that extra wealth go? Into job creation, as republicans so love to trumpet? Bullcrap.

Know what creates jobs? Demand. Demand for products, demand for services, and demand in the form of people having discretionary income to purchase those goods and services with. The government can print and stimulate all it wants--if people are going to say "this economy is rough, I should hold onto this rather than spend it", then you have no circulation.

Locking up wealth in stores of value is the worst possible thing you can do with it in order to grow the economy. If we want the economy to prosper, we have to discourage excessive hoarding.

 

[Ilyak1986]

The real question is: why did they get into so much debt in the first place?

Actually, being in debt is a good thing for the country. It makes it possible for us to have, you know, credit to borrow on. America has paid its bills on time, like any other person might, for the last couple hundred years and has a "triple A" credit rating.

In fact, in the George HW Bush presidency, economists were worried that the US was paying off its debt too quickly and encouraged more government spending.

The US debt is at about 50% GDP. This may seem large at first, however, when we look at the UK debt, it's been over 100% GDP for the last century. The US is NOT in a debt crisis, despite what the media might try to make you believe.

The PROBLEM is this whacked out legal system that says that we have to vote to raise the debt ceiling every few years, making it possible for politicians to take the US economy ransom to get what they want accomplished.

The dialogue in the US right now is such that the Republicans can claim that they want lower taxes and lower spending across the board and they won't vote for a debt ceiling raise without those things. This is what happens when you vote a lot of crazy tea party people into office who don't have a clue about how government actually works.

Even threatening this bullcrap makes the world's economies less likely to lend to us, which can dramatically harm the economy. The tea party is so backwards that it HURTS.

When you are in an economic downturn, there are two ways out. Either the people spend a whole bunch of money (that they don't have), or the government spends a whole bunch of money it doesn't have (but can be lent in great quantities). Historically, it has been the government's spending projects that have gotten the US economy out of depression.

The Great Depression was solved primarily by the government spending many billions on WWII, which was a great turn of luck as it was a bi-partisan method of spending LOTS of money. Not everyone wants to spend many billions to solve global climate change yet (though if they did it would solve a lot of problems) but I imagine that as the weather gets more and more extreme over the coming years, people will see the emerging crisis and act.

People respond well when a crisis is clear and present and dangerous.

Please excuse my scatterbrained comments.

First of all, the US GDP is around 15 trillion. And our national debt is about that also, give or take on both values.

Also...most of this spending is on A) interest on the national debt B) defense spending C) entitlement spending. D) everything else

When the silly conservatives say "we have to go after waste and inefficiency and all that", that's just D. What we need to do is A) bring our troops home B) cut entitlements. Yes, I said it. I think it's ridiculous that the 1) old and 2) poor are such disproportionate targets of handouts.

And frankly, IMO, I am really wondering...FPSs are all the rage in the US. We have advanced robotics. We are already capable of piloting predator drones in Pakistan.

Why the hell aren't we deploying ground-based robots capable of holding small arms, and send legions of the little guys to crush, kill, destroy everything in our path, instead of flesh and blood soldiers? One robot goes down, you don't suddenly have a grieving family. One robot gets its camera blown out, you don't suddenly have a blind veteran who needs care for the rest of his life.

Seriously. Legions of automatons with weaponry operated by kids that spent too much time playing FPSs. Imagine that instead of playing Call of Duty, you are instead "drafted" into the army to operate a REAL LIVE gun/camera combination to kill REAL LIVE enemies.

 

[r0kle0nZ]

Like someone else stated earlier on the Thread, the US could probably fall back into a state of isolationism for a period of 5-15 Years. This isolationist approach would let the government set some rules down about debt, and fix problems on the home front rather than worrying about the affairs of other countries.
I would say, I do have little to none political policies knowledge just saying, pull the troops out of countries we don't need them in. The US isn't in any "world-ending" wars, and revolutions will most likely destroy itself consistently, like in the French Revolution. Foreign affairs will deal with themselves, while we go back to post depression reconstruction.
Private businesses could still work internationally under this isolation, letting income flow into the US form somewhere besides there own government. Also, if these businesses still pay their workers, wouldn't that promote spending in cities, helping fix the economy disaster?

Can't believe I just wrote that, as someone who usually keeps his views to himself. That's just my .02 Dollars, also I'm not a support of McCarthyism or Communism. Take it as you will.

 

[CM156_v1legacy]

-Holy wall of text, Batman-

Let me get this straight: You think we should tax the money people save rather then spend?

That's just... wow

That's a no-win situation, you do know that, right?

You take from people when they earn, and then take from them when they decide to save?

treat it as though he got a new mansion. KEEP taxing it.

They already do that. Property taxes. You ever heard of them?

We have taxes on most everything we do. Hell, even DYING has a tax attached to it. Are you honestly going to say "Yeh, we need to start punishing people for saving up large amounts of money. That'll show 'em!"? Really. Just... wow.

You know what we should put a tax on? Class envy. When I see a man who has more than I do, I don't demonize them for it. I think "Wow, that guy did a job someone was willing to pay a great deal for. Good for him!"

EDIT: To answer your question as to why we don't: Because most economistst worth their salt will tell you that's a stupid idea.

 

[redeemer09]

Read and understand...

It?s Delightful, It?s Delicious, It?s Default
Posted By Stephen Green On June 28, 2011 @ 2:37 pm In Uncategorized | 128 Comments

The chatter today has been all about Lawrence Lindsey?s WSJ column about our dire fiscal situation. Excuse me ? the meaningful chatter. The meaningless chatter has been about Michele Bachmann, and whether she?s the Gaffe-O-Matic or merely gaffetastic. After watching her embarrassing campaign launch yesterday, I can?t say I much care. Honestly, it was the worst GOP presidential announcement since the last one. Bachmann and Jon Huntsman might turn out to be the Dueling Flame-outs, bookending the left and right of the party.

But I digress, and we have serious business to cover. What Lindsey says about our spending problem comes down to: We are so screwed.

Some facts and figures for you:

The president?s budget of February 2011 projects economic growth of 4% in 2012, 4.5% in 2013, and 4.2% in 2014. That budget also estimates that the 10-year budget cost of missing the growth estimate by just one point for one year is $750 billion. So, if we just grow at trend those three years, we will miss the president?s forecast by a cumulative 5.2 percentage points and?using the numbers provided in his budget?incur additional debt of $4 trillion. That is the equivalent of all of the 10-year savings in Congressman Paul Ryan?s budget, passed by the House in April, or in the Bowles-Simpson budget plan.

Here?s what I got out of that: If the Ryan or Bowles-Simpson budgets were to become law, our economy would quickly right itself ? and the resulting increase in interest rates would eradicate all the savings.

Did you get that? Without seriously drastic cuts ? cuts that would make Paul Ryan blanch ? we can?t fix this economy without wrecking the government. Or maybe it?s the other way around.

Can we tax our way out? Back to Lindsey:

The tax-the-rich proposals of the Obama administration raise about $700 billion, less than a fifth of the budgetary consequences of the excess economic growth projected in their forecast. The whole $700 billion collected over 10 years would not even cover the difference in interest costs in any one year at the end of the decade between current rates and the average cost of Treasury borrowing over the last 20 years.

Clinton-era tax rates won?t even begin to cover the spending problem. Not even close.

That leaves us with three possible outs: Cut the budget to the bone, hyperinflate away our debts, or default.

The most serious budget-cutter we have, Congressman Paul Ryan, is not nearly serious enough about the disaster we face. Or if he is serious, he doesn?t have enough of his party backing him up. And even if he had that, Ryan still would face a public too uninformed to understand or tolerate what must be done.

Option One, in other words, is off the table. Ain?t. Gonna. Happen.

So how about Option Two, Hyperinflation?

Inflation only as high as eight or ten percent is harmful to a nation?s economy, its savings, and even its social fabric. Hyperinflation destroys all of those things. It?s no remedy; it?s a cure worse than the disease.

That leaves us with Option Three: Default. Simply put, the government of the United States simply refuses to honor its debt obligations. It?s called ?sovereign default? because you can?t take the government to its own courts to make it pay up.

Default would be terrible. The dollar would cease to act as the world?s reserve currency and that inflation we?ve spent the last forty years exporting to the rest of the world, would come flooding back to our shores all at once. Can you imagine how expensive a barrel of oil would be, if we had to scrounge up enough euro or yuan from our meager reserves, to pay for one?

And what about our budget? It would still be seriously out-of-whack ? but Washington would lose the ability to borrow from overseas to cover the shortfall. Washington would either have to balance the budget ? and right then, buster! ? or start rolling the printing presses again. Call it ?The Mother of All Quantitative Easings.?

Or just call it Option Two. We?re back to hyperinflation.

The way I see it right now, default still might be our least-bad option. Because default doesn?t necessarily lead to hyperinflation. Not if three things happen. We?ll call it the VodkaPundit Plan for Putting Washington Through Chapter 11. It goes like this:

1. Immediate cuts to spending.

2. A long-term plan to keep spending in line is enacted. (A glide-down path, along with maybe a balanced budget amendment.)

3. Hike interest rates. (To protect the dollar and give the middle class a reason again to save and investors a reason to invest. And also because ?free? money makes people stupid.)

The first item is going to happen no matter what; we?re simply out of money. The second item is a necessary step to reassuring jilted creditors that maybe someday they can trust us again. And we are so deep in the hole that the third item might be possible only after we?ve defaulted. Lindsey never made that point in his piece, but it seems perfectly clear: Since we can?t even afford to pay what we already owe, default is looking like our least-bad option.

Not that I?m advocating default. I still think it would probably lead to hyperinflation. A government too paralyzed by cowardice to step out of the way of a moving train, probably doesn?t have the balls to make the hard choices my plan would entail.

If anyone can think of another way out, I?m all ears.

Article printed from Vodkapundit: http://pajamasmedia.com/vodkapundit

URL to article: http://pajamasmedia.com/vodkapundit/2011/06/28/its-delightful-its-delicious-its-default/

um what noob here but what does defoulting and what would that do?

 

[Velvo]

First of all, the US GDP is around 15 trillion. And our national debt is about that also, give or take on both values.

Also...most of this spending is on A) interest on the national debt B) defense spending C) entitlement spending. D) everything else

When the silly conservatives say "we have to go after waste and inefficiency and all that", that's just D. What we need to do is A) bring our troops home B) cut entitlements. Yes, I said it. I think it's ridiculous that the 1) old and 2) poor are such disproportionate targets of handouts.

And frankly, IMO, I am really wondering...FPSs are all the rage in the US. We have advanced robotics. We are already capable of piloting predator drones in Pakistan.

Why the hell aren't we deploying ground-based robots capable of holding small arms, and send legions of the little guys to crush, kill, destroy everything in our path, instead of flesh and blood soldiers? One robot goes down, you don't suddenly have a grieving family. One robot gets its camera blown out, you don't suddenly have a blind veteran who needs care for the rest of his life.

Seriously. Legions of automatons with weaponry operated by kids that spent too much time playing FPSs. Imagine that instead of playing Call of Duty, you are instead "drafted" into the army to operate a REAL LIVE gun/camera combination to kill REAL LIVE enemies.

Okay, for one, I got my stats on the US debt to GDP values from an economist on NPR who has advised US leaders for the last 20 years, and while I'm not proof positive on that, I trust the source.

Second, while yes, defense spending could be seriously reeled in, I don't think it would be wise to destabilize areas that are so strategically important in terms of resources and simple political geography. Yes, it is in the US's interests and it's greedy and all that, but it does help civilians improve their lives and it does increase government spending, which, as I previously stated, can improve the economy by creating jobs in the defense market.

Mind you, I'd rather that money be made elsewhere, like in renewable energy, anti-pollution projects and food/water security, but you take what is politically feasible.

As far as the general populace playing war games that become reality... have you considered the ethical implications of that? Also the logistical cost of that? Also the terror it would strike into the native populace? Also that entrusting these players to not shoot civilians would be... problematic considering the average maturity level of Call of Duty fans? Or gamers in general? Or untrained PEOPLE in general?

I see many problems with this line of thinking. Maybe once the technology is cheap enough and reliable enough, we'll see more ground based drones, but they are scary to people in a big way. There would have to be a big shift in people's perception of drones for that to work in a world where people feel fear.

I think trained soldiers are going to be fighting all the wars for a long time coming and its a pipe dream to think otherwise.

Besides, like I said, spending is spending and as long as it goes into people's pockets, it improves the economy. What we need is a big, bi-partisan, government spending project that everyone thinks is awesome and necessary and gladly puts time and effort into. Also, average people need to be able to work on it. Like a world war with a big old nasty bad guy like Hitler, or a global climate crisis (mother nature is working on it, just wait) that requires our immediate attention and ingenuity and moneys.

In other words, something that requires a lot of WOOOOOORK. Yay work.

Oh, and we need to increase taxes on the richest people. Lowest levels in 70 years and all that. Just a money hole all over, and all the research suggests that they just get lazy and keep the money for themselves. Trickle down my butt! Wait... I mean trickle down economics is fundamentally flawed. Necessity is the mother of invention, not being filthy rich and greedy.

 

[Spade Lead]

The real question is: why did they get into so much debt in the first place?

better question...why the hell did WE need to borrow money?

The ORIGINAL National Debt was from asking France for help defeating the British. So, yeah, this nation wouldn't EXIST without having had a national debt...

 

[GraveeKing]

Either way, I get a cheap laugh. Sure us Brits ain't doing the best either but at least I can put up my feet on my wads of cash.

 

[Korolev]

Don't worry. It will be raised, just before the deadline, as it always has been. The Republicans are holding out to put political pressure on the President, and the President is trying to resist this pressure because he knows that the debt ceiling WILL be raised. The Republicans aren't stupid - they know that if they don't raise the ceiling and hurt the economy that they will cop the blame. It's all politics. The ceiling WILL be raised.

If it isn't raised, the US can't borrow any more money and will have to drastically cut its budget, which might trash the economy. It wouldn't destroy the US (nothing except a direct nuclear war can do that at the moment), but it would plunge the US economy (and the economy of almost every nation on Earth) back into recession.

 

[unicron44]

John Cena will start to sell punches!

That made me laugh. Thank you.