Are we screwed?

There seems to be a scoff movement which is spreading the word that we'll be fine if August 2nd comes and goes without agreement. Are they right or wrong?

Per Bachmann:

“And don’t let them scare you by telling you that the country’s going to fall apart and that we’re going to default on our debt. The fact is we aren’t, because revenue continues to come into Washington, D.C.,” the Minnesota congresswoman said. “It’s a very small percentage that we have to end up paying on that interest so that we don’t fall into default.”

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http://caucuses.desmoinesregister.com/2011/07/09/bachmann-on-debt-ceiling-its-time-for-tough-love/

It will be a catastrophe if even one day goes by without the debt ceiling being raised...and a subsequent agreement will only partially mitigate it.

Kandahar said:

It will be a catastrophe if even one day goes by without the debt ceiling being raised...and a subsequent agreement will only partially mitigate it.

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So what about Mrs. Bachmann's quote?

For this and many other reasons, we are completely, irrevocably ****ed.

BDBoop said:

So what about Mrs. Bachmann's quote?

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I'm not sure if Bachmann is just using it as a negotiating tactic (to send a message to Obama that the GOP is perfectly willing to default on our debt), or if she's actually managed to convince herself that this is true. But either way she's completely wrong about this...as usual.

One of you two forgot to vote. That's 10 points off from Slytherin.

The Congresswoman is absolutely correct that going past Aug 2 would not mean a default on our debt. That doesn't mean there wouldn't be pain - immediate reductions in government spending in other areas would have to happen. But the interest on the debt is a small percentage of our spending, and can be more than easily handled with the revenues we have coming in. The Treasury Secretary is required by law and the government is required by the Constitution to make sure that our debt obligations get paid first. If the Park Services get shut down and the Cowboy Poetry Festival doesn't happen this year... well, worse things have happened. As time goes by, however, the cuts will start hitting harder - DOD spending will have to be reduced (probably just to operational necessities and personnel) and so on and so forth. In the meantime, there are alot of things the government can do to provide itself money in the short term.

Bachmann was wrong, however, to say she would never vote to raise the debt ceiling. I had been increasingly willing to consider her a candidate that might legitimately rate my vote - not any more. I'm all for a balanced budget, but we don't get there that way.

To be honest I put not sure, theres just too much about it I admittedly dont know...what I do know is that Michelle Bachman is not my source of accredidation that all will be fine.

cpwill said:

The Congresswoman is absolutely correct that going past Aug 2 would not mean a default on our debt. That doesn't mean there wouldn't be pain - immediate reductions in government spending in other areas would have to happen. But the interest on the debt is a small percentage of our spending, and can be more than easily handled with the revenues we have coming in.

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In terms of the impact on our nation's credit, if we fail to raise the debt ceiling it really doesn't matter whether or not we continue to pay the interest on our debt as opposed to paying something else. Creditors would view it exactly the same way: a failure to make good on our obligations.

The Treasury Secretary is required by law and the government is required by the Constitution to make sure that our debt obligations get paid first. If the Park Services get shut down and the Cowboy Poetry Festival doesn't happen this year... well, worse things have happened. As time goes by, however, the cuts will start hitting harder - DOD spending will have to be reduced (probably just to operational necessities and personnel) and so on and so forth. In the meantime, there are alot of things the government can do to provide itself money in the short term.

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The short-term consequences would be a lot more drastic than no Cowboy Poetry Festival...a LOT more. 43% of our budget would need to be suddenly eliminated. Even a "government shutdown" of all non-essential discretionary spending on par with what normally happens during budgetary standoffs would be grossly insufficient...that would only cover about half of the shortfall. To cover the rest of it, our options would be limited: Either we stop sending out social security checks, or we stop paying our soldiers, or we suddenly prohibit Medicare/Medicaid/VA patients from getting the treatment they were expecting. Any of those options are completely unacceptable.

Mathematically, there are no other ways to stay under the debt ceiling.

Kandahar said:

In terms of the impact on our nation's credit, if we fail to raise the debt ceiling it really doesn't matter whether or not we continue to pay the interest on our debt as opposed to paying something else. Creditors would view it exactly the same way: a failure to make good on our obligations.

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this is incorrect. if anything, investors would realize that the United States is fundamentally coming to terms with it's overspending and debt, and then would be reassured that the same administration that screwed over bondholders in the Auto Bailouts wasn't going to do it to them. again, the Treasury Secretary is required by law and the government is constitutionally required to honor those debts in full, and bondholders know this. they aren't going to get a haircut, and they won't miss an interest payment. under no circumstances do I see bondholders viewing the US shutting down portions of itself as tantamount to a credit default. we will probably see prices fall, but that's the result of the Fed getting out of the market.

The short-term consequences would be a lot more drastic than no Cowboy Poetry Festival...a LOT more. 43% of our budget would need to be suddenly eliminated.

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yes and no - there are alot of ways the government can shift costs and bring in extra money and reduce immediate expenditures. but those measures are mostly temporary, and we would approach actual cutting-to-former-borrowing equivalency over time (though how much probably no one can say).

Even a "government shutdown" of all non-essential discretionary spending on par with what normally happens during budgetary standoffs would be grossly insufficient...that would only cover about half of the shortfall. To cover the rest of it, our options would be limited: Either we stop sending out social security checks, or we stop paying our soldiers, or we suddenly prohibit Medicare/Medicaid/VA patients from getting the treatment they were expecting. Any of those options are completely unacceptable.

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It's worth noting here that DOD spending =/= soldier paychecks. Boeing will take an IOU from us with an agreement to back-pay, and there is no necessity to fund ops other than wartime or humanitarian assistance for the week or month or so that it takes to get a deal struck. there will be disruptions absolutely - but it won't be the end of the world if the Marine Corps spends another 45 days shooting the SAW rather than the IAR. There are alot of (agreeably, only very temporary) cuts that can be made from DOD in a post-Aug-2 environment.




none of which means that we will default on the debt.

cpwill said:

yes and no - there are alot of ways the government can shift costs and bring in extra money and reduce immediate expenditures. but those measures are mostly temporary, and we would approach actual cutting-to-former-borrowing equivalency over time (though how much probably no one can say).

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If they continue as they (and Minnesota) are - how will that happen? If they can't agree on anything "now", how will they handle the shifting of "then?"

I have been optimistic about a deal being struck. Boehner bowing out of the talks for a larger deal have me significantly less optimistic.

At some point, the US will default on its loans which will throw this country and many others into a Great Depression which will also include hyper inflation. Will this happen on August 2? I sure as hell hope not. My family and I are still desperately trying to prepare but we need another two years at least-or we're screwed.

All of it sounds like speculation to me. Spending less seems to imply just as much danger as spending more depending on who you ask and each person can tell you the method for restoration. I might as well flip a coin.

We are, but not just by the debt ceiling, but by the political cluster-f*** that goes on in Washington DC every single day. The debt ceiling is just a symptom of the problem.

Question. Could they just raise the ceiling under the condition that a balanced budget be passed in the next 90 days, or something along those lines?

BDBoop said:

Question. Could they just raise the ceiling under the condition that a balanced budget be passed in the next 90 days, or something along those lines?

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We're never going to have a balanced budget, not so long as Congress sees spending as a means of buying the next election. The reality is, we have to learn to live within our means. We cannot spend a penny that we don't have in the coffers. It doesn't matter what the program is or whose pork barrel it falls into, no money = no spending. The problem is, Congress will never do that because we, the taxpayers, don't insist on it. It's a self-perpetuating problem. We put idiots into office with the expectation they're going to take care of us and give us freebies.

Cephus said:

We're never going to have a balanced budget, not so long as Congress sees spending as a means of buying the next election. The reality is, we have to learn to live within our means. We cannot spend a penny that we don't have in the coffers. It doesn't matter what the program is or whose pork barrel it falls into, no money = no spending. The problem is, Congress will never do that because we, the taxpayers, don't insist on it. It's a self-perpetuating problem. We put idiots into office with the expectation they're going to take care of us and give us freebies.

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Understood. However? You didn't actually answer the question you quoted.

BDBoop said:

Understood. However? You didn't actually answer the question you quoted.

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Sure I did. Could they say they were going to do that? Sure. Would they actually do it? Of course not. There's no way in hell Congress will ever pass a balanced budget with no borrowing. Ain't going to happen, let's not pretend otherwise.

agreed with Cephus: it doesn't matter what Democrats promise to do as far as budget cuts - they have famously promised to cut spending by large amounts several times in the past. all that matters is what is put on paper. promises are worthless. Balancing the Budget would require about a 40% cut to federal spending. There is no way that would happen in 90 days.

I voted Other, Because regardless of what these idiots do either way we are screwed. The only fix is a complete and utter collapse and start over. kinda like a reset ram clear on your computer. The economy is saturated with toxic paper and Unfunded liabilities. It will not recover without a bottoming out and reset. Just sayin!

Aug. 2nd is an artificial deadline, so we're not totally screwed, and in fact I think it's best that we don't meet our obligations and let the rest of the world understand what utter ****-nobs we have running our government. We'll still pay our debts even if no agreement is passed, it just a matter of what will suffer for it.

BDBoop said:

There seems to be a scoff movement which is spreading the word that we'll be fine if August 2nd comes and goes without agreement. Are they right or wrong?

Per Bachmann:



http://caucuses.desmoinesregister.com/2011/07/09/bachmann-on-debt-ceiling-its-time-for-tough-love/

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I don't know, BDBoop.

What would literally happen August 2nd?