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Republican mainstream flirts with brief default

donsutherland1

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From Reuters:

An increasing number of Republicans do not believe the Obama administration's dire predictions of economic "catastrophe" if the debt limit is not increased. They argue a period of technical default can be managed without plunging markets into chaos.

http://www.reuters.c...E75700720110608

IMO, this would be a reckless move. First, the amount of spending reductions necessary to immediately balance the budget would wipe out economic growth, therefore, if sustained they would produce a significant self-inflicted national recession. Second, in theory, the Republicans might gain from a short default-large fiscal consolidation deal, but such a deal would not be very likely. A long default would cut against the Republicans. Raising the debt ceiling with little meaningful fiscal consolidation would be perilous, as Republicans would have to defend their fiscal credibility, but that would be a fight they could wage without inflicting harm on the nation. A short default followed by significant fiscal consolidation is not likely, precisely because the Republicans backing such a notion have repeatedly and widely displayed their cards. Hence, the Democrats know that there is a limit to how long they would hold out. As a result, they would not capitulate, and then the Republicans would be faced by a bad choice and an awful one: yield and receive blame for inflicting lasting damage on U.S. credit or persist and receive blame for damaging U.S. credit and engineering a steep recession, possibly of global magnitude.

To push the U.S. acros a line it has never before crossed will, despite the Druckenmiller hypothesis (which is not widely shared), damage U.S. credit. Once a red line is crossed, few would have reason to believe that political leaders might, when things become even more difficult, cross additional red lines. In effect, the psychological barriers that were assumed to exist and preclude U.S. default would be shattered as far as the markets are concerned. Those responsible for the reckless move will bear full accountability for its consequences. Their electoral prospects would very likely be severely damaged. Perceptions of their fitness to govern would be greatly undermined. They would be viewed as the persons who deliberately damaged American credit. All of those consequences would be deserved.

In the end, I do expect an agreement to raise the debt ceiling, because no responsible political leader would be willing to take the default course. I do worry that the deal will come with fiscal consolidation that is on the weak side. That will be a fair battle for the 2012 campaign. It will be far more responsible than pushing the U.S. across a red line into technical default on some of its obligations, even if debt payments are made on time.
 
If they don't raise the debt ceiling, it will literally be the stupidest (economic) thing that our Congress has done in 222 years. And that's not an exaggeration.
 
If they don't raise the debt ceiling, it will literally be the stupidest (economic) thing that our Congress has done in 222 years. And that's not an exaggeration.

Not much to add there?? That pretty much says it all..
 
If they don't raise the debt ceiling, it will literally be the stupidest (economic) thing that our Congress has done in 222 years. And that's not an exaggeration.

Then let's bring on the stupid... the more the better.
 
So the answer is to print more money and apply for a Discover card to make the payment on the maxed-out AMEX card, which makes the payment on the maxed-out Visa card, which can then make the payment on the maxed-out Mastercard?

What's the world gonna do? Nothing. We own their asses militarily and otherwise. We go under, they do, too.

Stop giving these buffoons more money, and maybe somehow, someway they'll start using it more wisely.
 
Damn right, this would be the SMARTEST thing they could do. Force the damn gov't to live within it's own means. What a very CONSERVATIVE idea!

So it's stupid to make our gov't live within it's means? I think you, Don, are part of the problem, not the solution.

Tell me, why SHOULD anyone trust the US Gov't? What have they done to show they are trustworthy? They are spending our grandkids money, giving it away by the hundreds of billions, and worse yet, are trying to borrow more.

Think about it, Don. If you had a neighbor who kept asking you for money, and for years spent more than he took in by borrowing it from you, wouldn't you, at some point, say NO? Well, the republicans have finally hit that point.
 
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Damn right, this would be the SMARTEST thing they could do. Force the damn gov't to live within it's own means. What a very CONSERVATIVE idea!

So it's stupid to make our gov't live within it's means? I think you, Don, are part of the problem, not the solution.

I really don't think so...

I think Don gets the bigger picture, something he's quite good with I think, I think people too far one way or the other are the problem... Keep spending a **** load, or let the US default and collapse your economy and quite possibly the world economy...

That'd be grand :)
 
From Reuters:



http://www.reuters.c...E75700720110608

IMO, this would be a reckless move. First, the amount of spending reductions necessary to immediately balance the budget would wipe out economic growth, therefore, if sustained they would produce a significant self-inflicted national recession. Second, in theory, the Republicans might gain from a short default-large fiscal consolidation deal, but such a deal would not be very likely. A long default would cut against the Republicans. Raising the debt ceiling with little meaningful fiscal consolidation would be perilous, as Republicans would have to defend their fiscal credibility, but that would be a fight they could wage without inflicting harm on the nation. A short default followed by significant fiscal consolidation is not likely, precisely because the Republicans backing such a notion have repeatedly and widely displayed their cards. Hence, the Democrats know that there is a limit to how long they would hold out. As a result, they would not capitulate, and then the Republicans would be faced by a bad choice and an awful one: yield and receive blame for inflicting lasting damage on U.S. credit or persist and receive blame for damaging U.S. credit and engineering a steep recession, possibly of global magnitude.

To push the U.S. acros a line it has never before crossed will, despite the Druckenmiller hypothesis (which is not widely shared), damage U.S. credit. Once a red line is crossed, few would have reason to believe that political leaders might, when things become even more difficult, cross additional red lines. In effect, the psychological barriers that were assumed to exist and preclude U.S. default would be shattered as far as the markets are concerned. Those responsible for the reckless move will bear full accountability for its consequences. Their electoral prospects would very likely be severely damaged. Perceptions of their fitness to govern would be greatly undermined. They would be viewed as the persons who deliberately damaged American credit. All of those consequences would be deserved.

In the end, I do expect an agreement to raise the debt ceiling, because no responsible political leader would be willing to take the default course. I do worry that the deal will come with fiscal consolidation that is on the weak side. That will be a fair battle for the 2012 campaign. It will be far more responsible than pushing the U.S. across a red line into technical default on some of its obligations, even if debt payments are made on time.

I also think that it will be raised, however, I don't think that it is a guaranteed thing. There are those in Congress who are doing a political cost/benefit analysis on how it would affect the upcoming election. We know that the base of the right-wing is positively giddy about the idea of the US defaulting and the potential economic ramifications that it would have. For some reason, the American right has become infatuated with the idea of returning the US to the 1800s when the US was globally considered to be a second or even third rate economic/military power - the errant child of the faltering British Empire still under its patronizing protection.
 
I really don't think so...

I think Don gets the bigger picture, something he's quite good with I think, I think people too far one way or the other are the problem... Keep spending a **** load, or let the US default and collapse your economy and quite possibly the world economy...

That'd be grand :)

Bull****. The problem is Don CAN'T see the bigger picture. He fails to see that eventually our debtors will no longer buy our debt. Then we are screwed.

Since when is spending within your means a bad idea? I'd love to hear mr other explain that one.
 
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Bull****. The problem is Don CAN'T see the bigger picture. He fails to see that eventually our debtors will no longer by our debt. Then we are screwed.

Since when is spending within your means a bad idea? I'd love to hear mr independent explain that one.

Look, Dons a smart guy, read his post, instead of just looking at it, and his logic is sound.

I can only go off of what i see the people who know about this stuff, are saying, and what theyre saying is, not raising the debt ceiling would be disastrous.

I don't just come up with these positions out of thin air, ive looked at it, and logic would suggest that, that assertion is correct. i mean hell, do you think of republicans could get away with doing it, they wouldn't? If they thought it was a good idea, then why aren't they just sitting back and saying "we're just not going to raise it"?

Now, the other side of the coin, is this has never been done before by a country with an economy your size...

But i say, **** it.

Let's put you in charge el presidente, do it, and let's see what the outcome is :fueltofir:

Do
 
Look, Dons a smart guy, read his post, instead of just looking at it, and his logic is sound.

I can only go off of what i see the people who know about this stuff, are saying, and what theyre saying is, not raising the debt ceiling would be disastrous.

I don't just come up with these positions out of thin air, ive looked at it, and logic would suggest that, that assertion is correct. i mean hell, do you think of republicans could get away with doing it, they wouldn't? If they thought it was a good idea, then why aren't they just sitting back and saying "we're just not going to raise it"?

Now, the other side of the coin, is this has never been done before by a country with an economy your size...

But i say, **** it.

Let's put you in charge el presidente, do it, and let's see what the outcome is :fueltofir:

Do

That's funny, because I've heard experts say not raising our debt would not be disastrous at all and we could still pay our debts because the gov't still has income. I did read his post, it's bull****, just like all the others I've read.

Let me ask you this boogiedude, what is the POINT of a debt ceiling if it's constantly raised when met? I mean, why not just lift it completely?
 
That's funny, because I've heard experts say not raising our debt would not be disastrous at all and we could still pay our debts because the gov't still has income. I did read his post, it's bull****, just like all the others I've read.

Let me ask you this boogiedude, what is the POINT of a debt ceiling if it's constantly raised when met? I mean, why not just lift it completely?

A: what experts do you have, im sure you have some links and names for me.

B: his post is not bull****.

C: to answer your questions, if its that simple, then why aren't republicans just sitting back and saying we won't raise it? Do you think perhaps it's because perhaps they know something you don't ;)
 
I really don't think so...

I think Don gets the bigger picture, something he's quite good with I think, I think people too far one way or the other are the problem... Keep spending a **** load, or let the US default and collapse your economy and quite possibly the world economy...

That'd be grand :)

Nothing's going to collapse. It's already collapsing. Just not on paper as long as we keep fudging the numbers.
 
Dontworrybehappy,

I'm trying to understand your side's position here. I understand the concept of living within your means - don't spend more than you earn. Despite my political lean, my family has lived this way for years. However, you said that "eventually our debtors will no longer buy our debt. Then we are screwed."

If that's the case, please explain how foreign investors purchasing our nation's debt fits into the debt ceiling debate and how not purchasing them can have such a devastating effect? Seems to be your argument against raising the debt ceiling relates more to "borrowing and spending" rather than "selling off assets and liabilities". How are the two different and how does each affect our national economy?
 
Dontworrybehappy,

I'm trying to understand your side's position here. I understand the concept of living within your means - don't spend more than you earn. Despite my political lean, my family has lived this way for years. However, you said that "eventually our debtors will no longer buy our debt. Then we are screwed."

If that's the case, please explain how foreign investors purchasing our nation's debt fits into the debt ceiling debate and how not purchasing them can have such a devastating effect? Seems to be your argument against raising the debt ceiling relates more to "borrowing and spending" rather than "selling off assets and liabilities". How are the two different and how does each affect our national economy?

You can't borrow money unless someone is willing to put up the collateral. When our debtors say "no more" we will NO LONGER HAVE MONEY TO BORROW FROM. It's simple.

The liberal scare tactic used is they love to muddy up the waters so you're left scratching your head saying, "I don't know what the hell they're talking about, but since they use bigger words than I do, they must be right." It's bull****. It's simple. I'd rather default on 14 trillion in debt than 50 trillion.

If your spending is out of control and bankruptcy is the only way out, what would you recommend doing? Continuing to borrow and get yourself deeper in debt?
 
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Damn right, this would be the SMARTEST thing they could do. Force the damn gov't to live within it's own means. What a very CONSERVATIVE idea!

So it's stupid to make our gov't live within it's means?

Swell...but that's not what failing to raise the debt ceiling does. Although I dislike equating the government's finances to personal finances, let's try an analogy: Suppose your family has a lot of bills each month, and you're finding it tough to make your payments. I think everyone would agree that you need to work on living within your means, but what is a better way to accomplish that?

A) Cut back on some of your expenses so that your bills are smaller in the future.
B) Stop paying the bills.

There are sensible ways to get spending under control, and irresponsible ways to get spending under control. The debt ceiling circus is a classic example of the latter.
 
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Failure to reign in the debt has the Chicken Little effect Geithner and others in the Obama Administration are complaining about. We have money to service our debt without raising the debt ceiling amount yet again. As was pointed out, the first thing one has to do to stop making the hole deeper is to stop digging. (E.g., stop continual debt spending without a way to curb that debt spending). No one is going to stop paying the bills. That nonsense is a scare tactic. I'm sure the Congress will do something, however I would hope that "something" is a guaranteed spending CUT or, better yet, a Constitutional Amendment to have a Balanced Budget. Yes, I know - the latter is a Conservatives wet dream - hope and change is ever present.

RealClearPolitics - The Truth About the Debt Ceiling and Default

The bottom line is nothing will change in spending ourselves into oblivion unless someone digs in their heels and says NO. Rolling over this issue without serious changes to our spending will be much worse than any fictional default being crowed about by the Obama Administration. Want to call it russian roulette? Fine - spin the cylinder and let's get down to it; something drastic has to happen for the cycle of insane spending to be curbed.
 
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Swell...but that's not what failing to raise the debt ceiling does. Although I dislike equating the government's finances to personal finances, let's try an analogy: Suppose your family has a lot of bills each month, and you're finding it tough to make your payments. I think everyone would agree that you need to work on living within your means, but what is a better way to accomplish that?

A) Cut back on some of your expenses so that your bills are smaller in the future.
B) Stop paying the bills.

There are sensible ways to get spending under control, and irresponsible ways to get spending under control. The debt ceiling circus is a classic example of the latter.

You forgot options C, D, and E, which is what our government does constantly:

C) Open up new credit accounts
D) Ask for credit increases on existing credit accounts
E) Force your children (taxpayers) to pay rent and work for free around the house (raise taxes)
 
Aren't there a couple of things that everyone on both sides of the debate are missing here?

1. We are now, and have been for some time buying our own damned debt by printing, or "digitizing" money out of thin air.

That must stop right NOW!

2. We have a population where 47% are non liability voters, voting themselves money from the treasury, and giving NOTHING!

3. The fed reserve is corrupt!

These things need to be addressed IMHO before ANY real discussion of anything else can take place.

j-mac
 
If they don't raise the debt ceiling, it will literally be the stupidest (economic) thing that our Congress has done in 222 years. And that's not an exaggeration.


Because all the spending that got us here was well reasoned and intelligent.
 
Aren't there a couple of things that everyone on both sides of the debate are missing here?

1. We are now, and have been for some time buying our own damned debt by printing, or "digitizing" money out of thin air.

That must stop right NOW!

2. We have a population where 47% are non liability voters, voting themselves money from the treasury, and giving NOTHING!
3. The fed reserve is corrupt!

These things need to be addressed IMHO before ANY real discussion of anything else can take place.

j-mac

Obama is screwed because he knows the only way out of this is to stick it to his constituents. When half your population doesn't pay taxes because of liberal entitlements.........
 
This ain't rocket science libs. Obama and the Democrats spent too much money, and then obligated even more still. Social Security and Medicare are not only approaching an insolvency date, but it has been moved up near a decade from where it was assumed to be just a year ago.

The deal on the table is $1 in debt increase for every $1 in cuts to current spending obligations.

We can do this the easy way, or we can do it the hard way. "Enough already" is the message. No more OPM for you ;)
 
Look peeps....we're not necessarily going to default.

Debt payments are an executive priority and tax receipts are more than sufficient for interest payments. The government can continue to make payments to bondholders. It just means shutting down other parts of the government to offset those payments.

In fact, if there is technical default, US bonds might become a true safe haven investment. For the first time, America will take a step to indicate that it believes the relentless abuse of its fiscal situation is unsustainable.
 
It's better to have a recovering economy that has to increase it's debt then to have no economy at all. Raise the limit, it's the only smart move.
 
It's better to have a recovering economy that has to increase it's debt then to have no economy at all. Raise the limit, it's the only smart move.


Just wondering Star. When you sit around the Kitchen table with your family, and discuss the household budget, and realize that you are paying out enough in debt at the moment, if that were to change, and your debt was out of control, would your answer be to increase it?

j-mac
 
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