Add defense spending to that list and I agree with McConnell completely.
Give a man a fish, or he will destroy the only existing vial of antidote.
I could see reforming Social Security by raising the retirement age by six months or so, making it taxable over a smaller amount than it is as present and having that revenue go into the SS fund, removing fraud from the system in terms of SS disability (plenty there) and in terms of survivorship benefits, (Got stories there, too.) removing the "you can earn all you want after your full retirement age" deduction in our personal income tax and putting that revenue into the SS fund. I'm sure I could think of more.
Believe me, when the average senior reads "benefit cuts to Social Security," he's thinkin' his check's gunna get smaller. And that will never happen.
Thank you, Quazi!
If democrats would follow their own laws like pay go we wouldn't have such a big problem
Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom.
Alexis de Tocqueville
Spending more does not necessarily mean getting more.
FYI, if the debt limit is not increased, that does not mean that the U.S. would automatically default on its debt. The U.S. would need to cease borrowing funds in excess of its debt limit, meaning in effect that it would have to completely eliminate its budget deficits so long as the debt limit is not increased. As there is tax revenue coming in, the federal government would need to make some wrenching choices: continuing meeting its debt obligations or partially default to allow for more money to be used for current expenditures. The latter course would be very dangerous, as it damage the U.S. credit rating and lead to a long-term risk re-adjustment, meaning higher future borrowing costs. The former could be very unpopular depending on what programs/activities are suspended and potentially painful, too (aggregate demand would contract and that would adversely impact GDP; reductions in social welfare benefits could also adversely impact recipients of those benefits, etc.). The tradeoffs considered, the former course would be the better one, if such a political crisis unfolds.
Of course, such a crisis is completely avoidable. Given the stakes involved, I believe both the White House and Congress should, in fact, avoid such a stand-off. Instead, they should commit themselves to credible long-term fiscal consolidation. To be credible, at least some of the recommendations made by the two fiscal commissions late last year, should be incorporated in fiscal consolidation legislation that would follow agreement to increase the debt ceiling. As a downpayment toward credible fiscal consolidation, if the President and Congress want to demonstrate through actions that they are truly serious about addressing the nation's long-term fiscal imbalances, perhaps an increase in the Social Security eligibility age could be tied to legislation to increase the debt limit.
projected tax receipts for FY 2011 are around $2.2 trillion and for FY 2012 they are around $2.6 trillion. Projected expenditures for those years are about $3.8 trillion and $3.7 trillion respectively. Net interest payments are estimated at $205 billion and $240 billion respectively.
So, if one takes an average of the two fiscal year's figures to estimate monthly figures for the next few months (tax revenue should be rising as the economy continues to grow), the monthly averages would be:
Revenue: $200 billion
Expenses: $312.5 billion
Net Interest Payments: $18.5 billion
Under such a scenario, no default would occur if the federal government paid its $18.5 billion monthly interest expense and then spent no more than $181.5 billion per month on all its other activities. Clearly, that would be extremely painful. For example, if the federal government chose to pay Medicare, Medicaid, Social Security, and all the other mandatory spending programs, it would have less than $2.5 billion per month for everything else. This is just an idea to illustrate the point that technically a debt default need not occur. The numbers are not precise and there would be fluctuations, e.g., a disproportionate share of revenue would become available in April. On the current fiscal path, were such a situation to occur even a few years in the future, there might then be no way to avoid a partial debt default.
Politically, the above would not be a sustainable course, but a partial debt default would have long-term adverse implications. The bottom line is that both the President and Congress should avoid such a situation, as it would not be sustainable for more than a very short period of time. Given the nation's long-term fiscal imbalances and the incremental risks associated with pursuing yet another status quo budget, the effort to lay out a credible path to fiscal consolidation should begin in earnest. Some spending reductions should begin immediately now that the economy has been growing for almost two years. Such an approach would be compatible with the nation's long-term interests and it is feasible in the context of a growing economy.
Last edited by donsutherland1; 03-11-11 at 10:06 PM.