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Moody's offers different view on debt limit

Erod

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Live updates: The shutdown

President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.
Not so, Moody’s says in the memo dated Oct. 7.

” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.

The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”

The Moody’s memo goes on to argue that the situation is actually much less serious than in 2011, when the nation last faced a pitched battle over the debt limit.

Just like the empty threat to discontinue paying social security, it looks like Obama's default scare tactics are bogus, too.

And this is the WaPo reporting this, of all sources, which is perhaps the real story here.
 
The Feds are still raking in tax dollars by the boatload. They got enough money for awhile.
 
Exhibit A in why the tea party will drive the US into default and cause the second GOP economic meltdown in 5 years.
 
Live updates: The shutdown



Just like the empty threat to discontinue paying social security, it looks like Obama's default scare tactics are bogus, too.

And this is the WaPo reporting this, of all sources, which is perhaps the real story here.

Dude. The US govt can continue to pay the interest that it already got, sure, but it won't be able to pay the money the govt owns to either public services or private companies that took on a contract for the govt. Thus, a lot of businesses will lose a lot of money they more deserve due to the fact that they honored their contract.
 
Exhibit A in why the tea party will drive the US into default and cause the second GOP economic meltdown in 5 years.

Like the Fed and the Treasury haven't been printing money anyway for four years. Under Obamas guidance.
 
Dude. The US govt can continue to pay the interest that it already got, sure, but it won't be able to pay the money the govt owns to either public services or private companies that took on a contract for the govt. Thus, a lot of businesses will lose a lot of money they more deserve due to the fact that they honored their contract.

Here's another way to look at things -

The majority of the public debt is held by the people of the USA. If the government fails to pay that debt then we get to foreclose.
 
Here's another way to look at things -

The majority of the public debt is held by the people of the USA. If the government fails to pay that debt then we get to foreclose.

By the people you mean... the federal reserve? because that's true, they are the largest debt owners of US debt but it still means that businesses that completed a contract with the govt and have to receive payment will not get it... and also the same about public services.
 
Janet Yellen supports deregulation so the "doves" in her own Democratic party are uneasy.
Janet Yellen is a woman so those in the Republican party are uneasy.
 
By the people you mean... the federal reserve? because that's true, they are the largest debt owners of US debt but it still means that businesses that completed a contract with the govt and have to receive payment will not get it... and also the same about public services.

Baloney, pure rubbish, Sir. Moody's is correct and as I've been saying to anyone that has an ounce of grey matter; the USA will NOT, and I repeat for the umpteenth time, will NOT default. All it means is that the USA cannot borrow anymore money. It can pay it's debts with interest, and all that needs to be done is to prioritize how that money gets spent, period. Think of it like a budget. This is how much we make, this is how much we owe each month, so honey, looks like no cable tv, and cell phones this month. No eating out at Denny's, or McDonalds, and certainly not getting that massage at the spa. If we cut back, we'll be ok..

Obama, and anyone in the world that believes his lie about default is a moron!


Tim-
 
Dude. The US govt can continue to pay the interest that it already got, sure, but it won't be able to pay the money the govt owns to either public services or private companies that took on a contract for the govt. Thus, a lot of businesses will lose a lot of money they more deserve due to the fact that they honored their contract.

So the govt underestimates how much money it needs every year by 40% and has to borrow money at the end of the year to pay for it, even after a huge tax hike?
 
Moody's also believed that subprime mortgages would be unlikely to default. Color me not willing to bet the nations economy on their word, again.
 
Here's another way to look at things -

The majority of the public debt is held by the people of the USA. If the government fails to pay that debt then we get to foreclose.

Exactly! We'd foreclose on ourselves. That means we still live in the same house, but it would be worth much less.
 
Exactly! We'd foreclose on ourselves. That means we still live in the same house, but it would be worth much less.

Not exactly.

The interest on the domestically held portion of the public debt is roughly $200b (a little more than that actually). When we "foreclose" we do so by eliminating that amount from federal expenditures. For example:
1. We make EITC and Additional Child Tax Credit non-refundable which will cover about $80B
2. We chop federal education funding in half (a lot of this can be accomplished by simply eliminating desegregation payments) and make the states responsible for managing and funding their education systems. That would cut another $40B.
3. We cut unemployment benefits in half because paying people not to work is simply subsidizing stupid. That will get us another $40B
4. We can chop disaster relief funding in half (again, put this responsibility back on the states) which will save about $20B
5. The other $20B or so can be cut out of the other thousands of programs we don't necessarily need to be involved in.

We created this monstrosity that is the American political cesspool and it's our responsibility to fix it. If our elected officials either can't fix it or will not fix it then it's our responsibility to do it without them.
 
Live updates: The shutdown



Just like the empty threat to discontinue paying social security, it looks like Obama's default scare tactics are bogus, too.

And this is the WaPo reporting this, of all sources, which is perhaps the real story here.

You can't make the debt payments and social security payments and operate our military on existing revenue streams. Well, maybe you can squeeze in those three items but basically nothing else. Air traffic control? TSA? FBI? Highway funding? Which do you think we should just stop?
 
Numbers:

2013 total revenue was 2700 billion

Interest: 246
Social Security: 882
Medicare: 940
DOD: 672

Total: 2740B

This means total elimination of the following:

Department of Education
Department of Veterans Affairs
Department of Housing and Urban Development
Department of State and Other International Programs
Department of Homeland Security
Department of Energy
Department of Justice
Department of Agriculture
National Aeronautics and Space Administration
National Intelligence Program
Department of Transportation
Department of the Treasury
Department of the Interior
Department of Labor
Department of Commerce
Army Corps of Engineers Civil Works
Environmental Protection Agency
National Science Foundation
Small Business Administration
Corporation for National and Community Service
Disaster costs
Other spending

Tell me how this ****ing works, right-wingers.
 
Numbers:

2013 total revenue was 2700 billion

Interest: 246
Social Security: 882
Medicare: 940
DOD: 672

Total: 2740B

This means total elimination of the following:

Department of Education
Department of Veterans Affairs
Department of Housing and Urban Development
Department of State and Other International Programs
Department of Homeland Security
Department of Energy
Department of Justice
Department of Agriculture
National Aeronautics and Space Administration
National Intelligence Program
Department of Transportation
Department of the Treasury
Department of the Interior
Department of Labor
Department of Commerce
Army Corps of Engineers Civil Works
Environmental Protection Agency
National Science Foundation
Small Business Administration
Corporation for National and Community Service
Disaster costs
Other spending

Tell me how this ****ing works, right-wingers.

So borrowing even more and increasing the debt even more helps us how leftist? Try what the government does with your own credit card and see how long it takes you to go bust. And the only answer Obama can come up with is give him a blank check, he will take care of it and then we can talk about cuts? He's already managed to double the cost of Obamadon'tcare and it hasn't really taken effect yet. Nobody in their right mind would trust him alone with their personal check book and they shouldn't with taxpayer money either.
 
Not exactly.

The interest on the domestically held portion of the public debt is roughly $200b (a little more than that actually). When we "foreclose" we do so by eliminating that amount from federal expenditures. For example:
1. We make EITC and Additional Child Tax Credit non-refundable which will cover about $80B
2. We chop federal education funding in half (a lot of this can be accomplished by simply eliminating desegregation payments) and make the states responsible for managing and funding their education systems. That would cut another $40B.
3. We cut unemployment benefits in half because paying people not to work is simply subsidizing stupid. That will get us another $40B
4. We can chop disaster relief funding in half (again, put this responsibility back on the states) which will save about $20B
5. The other $20B or so can be cut out of the other thousands of programs we don't necessarily need to be involved in.

We created this monstrosity that is the American political cesspool and it's our responsibility to fix it. If our elected officials either can't fix it or will not fix it then it's our responsibility to do it without them.

Lets back up.

The US finances it's private debt through TNotes, TBonds, TBills etc... Some of those come due every month. That means that we need to sell some percentage of our old debt every month in addition to any new debt. Now, the Treasury paid off 7.5Trillion in maturing debt in 2013, and was forced to issue 8.3 trillion in new debt.

Roll Over Plan: Treasury Needed to Pay Off Record $7.5T in Maturing Debt in FY 2013, Issued $8.3T New Debt; Increased Net Debt $777B | CNS News
(from a right wing news source even)

And here's the interest
Government - Interest Expense on the Debt Outstanding

We're in a situation now, where half of the debt is being serviced every year. This currently costs us 400 Billion per year or 7% of the US budget. Failing to raise the debt limit will increase the price of TNotes, TBills, and TBonds. This will immediately increase the cost to finance about half of the debt. Thus instead of 400 Billion per year, we're looking at 600-800 Billion per year to finance our debt. This is money effectively taken out of the US economy which would take an additional 2% or so out of the GDP.

So now it's 2014. We have a bunch of problems. The US economy is now in a steep recession meaning revenues are say 400Billion lower than 2013. Furthermore, the debt costs another 300Billion more to finance. That's like taking 700 Billion out of our current budget. At this point, the drag of government debt will make it impossible to ever grow or cut our way to a balanced budget.

At this point we'll have to inflate our way out of our debt, basically giving all of us a huge haircut. We will have effectively foreclosed on ourselves.
 
Here's another way to look at things -

The majority of the public debt is held by the people of the USA. If the government fails to pay that debt then we get to foreclose.

I want the reflecting pool. Think I'll raise fish. :mrgreen:
 
So borrowing even more and increasing the debt even more helps us how leftist? Try what the government does with your own credit card and see how long it takes you to go bust. And the only answer Obama can come up with is give him a blank check, he will take care of it and then we can talk about cuts? He's already managed to double the cost of Obamadon'tcare and it hasn't really taken effect yet. Nobody in their right mind would trust him alone with their personal check book and they shouldn't with taxpayer money either.

US Federal debt and my credit card are comparable in which ways, exactly?
 
US Federal debt and my credit card are comparable in which ways, exactly?

They both have limits. One is set by law the other is set by a private entity...
 
Numbers:

2013 total revenue was 2700 billion

Interest: 246
Social Security: 882
Medicare: 940
DOD: 672

Total: 2740B

This means total elimination of the following:

Department of Education
Department of Veterans Affairs
Department of Housing and Urban Development
Department of State and Other International Programs
Department of Homeland Security
Department of Energy
Department of Justice
Department of Agriculture
National Aeronautics and Space Administration
National Intelligence Program
Department of Transportation
Department of the Treasury
Department of the Interior
Department of Labor
Department of Commerce
Army Corps of Engineers Civil Works
Environmental Protection Agency
National Science Foundation
Small Business Administration
Corporation for National and Community Service
Disaster costs
Other spending

Tell me how this ****ing works, right-wingers.

baby steps.

First, admit in no uncertain terms that this default bull**** is bull****. Once you do that, we can proceed in discussing as adults what to do with the income we do have
 
Lets back up.

The US finances it's private debt through TNotes, TBonds, TBills etc... Some of those come due every month. That means that we need to sell some percentage of our old debt every month in addition to any new debt. Now, the Treasury paid off 7.5Trillion in maturing debt in 2013, and was forced to issue 8.3 trillion in new debt.

Roll Over Plan: Treasury Needed to Pay Off Record $7.5T in Maturing Debt in FY 2013, Issued $8.3T New Debt; Increased Net Debt $777B | CNS News
(from a right wing news source even)

And here's the interest
Government - Interest Expense on the Debt Outstanding

We're in a situation now, where half of the debt is being serviced every year. This currently costs us 400 Billion per year or 7% of the US budget. Failing to raise the debt limit will increase the price of TNotes, TBills, and TBonds. This will immediately increase the cost to finance about half of the debt. Thus instead of 400 Billion per year, we're looking at 600-800 Billion per year to finance our debt. This is money effectively taken out of the US economy which would take an additional 2% or so out of the GDP.

So now it's 2014. We have a bunch of problems. The US economy is now in a steep recession meaning revenues are say 400Billion lower than 2013. Furthermore, the debt costs another 300Billion more to finance. That's like taking 700 Billion out of our current budget. At this point, the drag of government debt will make it impossible to ever grow or cut our way to a balanced budget.

At this point we'll have to inflate our way out of our debt, basically giving all of us a huge haircut. We will have effectively foreclosed on ourselves.

Right. We are paying existing debt with new debt because we have failed to stop spending on "stuff". If we cut back on the "stuff" we are spending on then we can get start making headway on servicing the existing debt. That's what the "foreclosure" is all about. If I chop $200B out of base spending then I don't have to accumulate as much new debt. A process like this would take a while (because the amount of existing debt is immense) but once it gets rolling and people figure out that they won't die just because they have to be personally responsible for a few things we can actually manage to get back to a position of solvency.
 
Right. We are paying existing debt with new debt because we have failed to stop spending on "stuff". If we cut back on the "stuff" we are spending on then we can get start making headway on servicing the existing debt. That's what the "foreclosure" is all about. If I chop $200B out of base spending then I don't have to accumulate as much new debt. A process like this would take a while (because the amount of existing debt is immense) but once it gets rolling and people figure out that they won't die just because they have to be personally responsible for a few things we can actually manage to get back to a position of solvency.

Sure! That's a completely legitimate position. When we set government spending levels you can advocate for those cuts.

But that's completely different from defaulting on our obligations.
 
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