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Next up: "The Debt Ceiling"


By Misty - Posted on 10 April 2011

Things you need to know...

A big hurdle for Congress is over raising the debt ceiling.

If Congress does not approve an increase to the limit, the federal government could default on its bonds for the first time in history, and Social Security and Medicare checks would likely see delays as a result of the government's inability to make payments to agencies.

"If we hit the debt ceiling, that's ... essentially defaulting on our obligations, which is totally unprecedented in American history," Goolsbee warned, in a January interview with ABC's "This Week." "The impact on the economy would be catastrophic."

How many times has the ceiling been raised? Since March 1962, the debt ceiling has been raised 74 times, according to the Congressional Research Service. Ten of those times have occurred since 2001.

According to projections by the Treasury, the U.S. government is expected to hit its $14.3 trillion debt ceiling no later than May 16. But, in a letter last week, Treasury Secretary Timothy F. Geithner told Congressional leaders... He outlined “extraordinary measures” — essentially moving money among federal accounts — that could buy time until July 8.

Based on policies in place, such as the $858 billion tax cut compromise passed in December, lawmakers have already committed to incurring the obligations that require them to raise the debt ceiling.

In that sense, much of the political rhetoric is misleading because the money has already been committed and lawmakers are arguing over whether to pay the bill, according to former Congressional Budget Office Director Rudolph Penner.

Will reaching the debt ceiling cause a government shutdown? Not necessarily. A government shutdown occurs if lawmakers fail to appropriate money for federal agencies and programs.

Reference:

http://www.cbsnews.com/stories/2011/04/10/ftn/main20052567.shtml

http://finance.yahoo.com/news/Debt-ceiling-What-you-need-to-cnnm-2395206289.html?x=0&.v=11

http://www.huffingtonpost.com/2011/04/10/government-shutdown-deal-relief-disgust_n_847111.html#262_our-cowardly-congress

"Of the nearly $14.2 trillion in debt, roughly $5 trillion is money the government has borrowed from other accounts, mostly from Social Security revenues, according to federal figures. Several major policies from the past decade when Republicans controlled the White House and Congress — tax cuts, a Medicare prescription-drug benefit and wars in Iraq and Afghanistan — account for more than $3.2 trillion. "  Link

You are right. Political wrangling over the nationwide debt and the debt ceiling is sending a message many Americans do not want to hear. Conventional wisdom states that China is the solution to the question of “Who owns The United States?”, and that default will place the United States too far behind. Yet as an enlightening report by Business Insider points out, conventional wisdom concerning who owns America is wrong. China has a major stake, but much like in Japan, most of United States debt is nationally held. I found this here: Your financial upside-down cake: China does not own America
 

Thanks for the link Lea... from the site:

A breakdown of the total amount and percentage of total U.S. debt clears up the question of who owns America. In short, Americans own America. Here’s the breakdown:

•  Hong Kong: $121.9 billion (0.9 percent)
•  Caribbean banks: $148.3 billion (1 percent)
•  Taiwan: $153.4 billion (1.1 percent)
•  Brazil: $211.4 billion (1.5 percent)
•  Oil exporting nations: $229.8 billion (1.6 percent)
•  Mutual funds: $300.5 billion (2 percent)
•  Commercial banks: $301.8 billion (2.1 percent)
•  State, local and federal retirement: $320.9 billion (2.2 percent)
•  Money market mutual funds: $337.7 billion (2.4 percent)
•  United Kingdom: $346.5 billion (2.4 percent)
•  Private pensions: $504.7 billion (3.5 percent)
•  State and local government: $506.1 billion (3.5 percent)
•  Japan: $912.4 billion (6.4 percent)
•  U.S. households: $959.4 billion (6.6 percent)
•  China: $1.16 trillion (8 percent)
•  The U.S. Treasury: $1.63 trillion (11.3 percent)
•  Social Security trust fund: $2.67 trillion (19 percent)

While the U.S. owes foreign powers $4.5 trillion, it owes U.S. households, the U.S. Treasury and Social Security and other categories more than double that amount at $9.8 trillion.

  We have been had, took, hoodwinked, bamboozled, led astray, and run amok by both Dems and the GOP.

Just the facts Jack ...

On the day President Bush took office, the national debt stood at $5.727 trillion. When he left office it stood at more than $9.849 trillion. That's a 71.9 percent increase on Mr. Bush's watch.

Bush bailout plan before leaving office in 2008 added hundreds of billions of dollars to the national debt. Buried deep in the hundred pages of bailout legislation is a provision that would raise the statutory ceiling on the national debt to $11.315 trillion. It'll be the 7th time the debt limit has been raised during this administration. In fact it was... on July 30, 2008 that [then] President Bush signed the Housing and Economic Recovery Act, which contained a provision raising the debt ceiling to $10.615 trillion. Link

Pres. Obama assumed office on January 20, 2009.

Link

P.S.: Based on policies in place, such as the $858 billion tax cut compromise passed in December, lawmakers have already committed to incurring the obligations that require them to raise the debt ceiling this year.

Link from TPM. I don't think the president should give at all on this. He does not have to. They would be pretty crazy to NOT raise the debt limit. If anything, the president should discuss raising taxes as a way to look at solving our debt issues and cutting the Pentagon budget. Put the ball in their court. This mafia-style negotiating must not be rewarded.

To paraphrase the late Sen. Moynihan, with familiarity deviant behavior loses its power to shock. It's now taken for granted that the White House must make major concessions if Reps. Boehner and Cantor are to allow a vote to raise the nation's debt ceiling. A few months ago, even Cantor was saying that at the end of the day, the vote would be held and the limit raised. But coming off his Friday deal, even Boehner is threatening to let the nation go into default on its debt unless the president offers a package of concessions with "something really, really big attached to it."

Yglesias calls this "hostage taking," which is a decent word for it. But strip away the titles and suits and as one of our readers put it last night, these are the words of a gangster or a street hoodlum. Your money or your life. Make me an offer or I'll kill your kid.

Sound over dramatic? It's not.

The nation has a large national debt. We're also currently running a large annual deficit -- for some reasons that are structural and others which are tied to the consequences of the economic crisis of 2008/09. No one of either party has any real plan to take the country out of debt financing this summer. No one. No one even claims to have one. Everybody agrees the debt ceiling has to be raised and will be raised. The consequences of not doing so would be catastrophic, as we'll note in a moment. The question is simply how much Boehner and Cantor will demand for doing what is essential.

Take a moment to consider what is involved in the whole question of national indebtedness. Those who are pressing the issue the hardest argue that at some date in the not-to-distant future, the country will no longer be able to manage the scale of its debt. The costs of financing it will go through the roof as foreign lenders lose faith in our ability to pay it off and/or we'll enter into some mammoth debt crisis. Well, nothing could be more obvious than the fact that an arbitrary decision to stop paying our debts is the only way to trigger the sort of catastrophe these folks claim they are worried about.

Indeed, it's the only realistic way you get the country close to what remains pure fantasy in anything like the near term. Even if you set aside the more apocalyptic scenarios, welching on the national debt is very likely to provide a severe shock to the still fragile economic recovery and woud likely raise the cost of borrowing into the indefinite future -- something that really would make our financial predicament significantly worse than it is.

The whole thing is crazy. It's holding a gun to the head of the country and saying, "Give me what I want or else." Accepting it as a given about how this year is going to be conducted is even crazier. The president needs to start saying now that Boehner and Cantor need to pass a clean no-conditions bill to raise the debt ceiling. You can't negotiate with hostage takers -- not at the local bank heist, not in the Middle East, not at the other end of Pennsylvania Avenue.

 

Interesting article from The Hill which basically says that the GOP would need to raise the debt ceiling to allow their own budget proposal to be implemented. Those tax cuts they want are not cheap.

Republicans say they are tired of raising the debt limit — but they’ll have to do it again. Their own budget proposals demand it.

While Republicans have blasted President Obama’s fiscal 2012 budget for failing to get the deficit under control, a pair of GOP plans released this week made clear more debt will be coming no matter which approach is adopted.

The budget proposal unveiled Tuesday by House Budget Committee Chairman Paul Ryan (R-Wis.) would not balance the budget until 2040, and the even-more-conservative option offered Thursday by the Republican Study Committee would not balance it until 2020.

Now someone please help me here. The GOP is demanding a balanced budget amendment, but creating a system in which they would need a 2/3 majority for any tax increases. That is a formula for failure and greater debts/deficits but THEY DON'T REALLY CARE ABOUT OUR DEBT/DEFICIT. Can they make it any more obvious?

...In the other, Republicans are saying they won’t approve a debt ceiling increase unless their demands on balanced budget amendments, spending caps and other permanent changes to the way the government spends money are met.

In the Senate, every Republican member has signed on to a balanced- budget amendment that would cap federal spending at 18 percent of the nation’s gross domestic product and require a two-thirds vote in Congress to increase taxes.



 

Boehner is screwed on this debt ceiling vote and knows it. He is secretly reaching out to Wall Street wondering how far he can take this until he caves (I'm sure hoping to look tough to the Tea Party folks.)

Fascinating nugget in POLITICO's Morning Money today.

Apparently John Boehner has been reaching out to Wall Street, trying to get a sense of when financial markets will get spooked by GOP hesitance in raising the debt ceiling.

“They don’t seem to understand that you can't put everything back in the box. Once that fear of default is in the markets, it doesn't just go away. We'll be paying the price for years in higher rates,” said one executive.

The maneuvering on this subject are going to be fascinating and huge over the next few weeks.


An interesting tid bit to share with your Anti-Obama friends:

However, there is one factor in the deficit that will only grow bigger with time. The Bush era tax cuts will soon be the biggest single factor in the decit, and within a few years they will dominate all other factors.

Some commentators blame recent legislation — the stimulus bill and the financial rescues — for today’s record deficits. Yet those costs pale next to other policies enacted since 2001 that have swollen the deficit. ... Just two policies dating from the Bush Administration — tax cuts and the wars in Iraq and Afghanistan — accounted for over $500 billion of the deficit in 2009 and will account for almost $7 trillion in deficits in 2009 through 2019.
Link

 

I just hope that when it is finally over, this whole fiasco doesn't bring about as huge a calamity that some have been saying.  

"Sometimes you're the windshield, sometimes you're the bug." -- Mark Knopfler

Under US law, an assistance can invest only if it has enough resources to pay for it. These resources can come either from tax records or from credit score worthiness by the U. s. Reviews Work environment of the Treasury. The legislature has set a charges perseverance, beyond which Treasury cannot convenience. In the inadequate enough income, a collision to develop the charges perseverance would result in the assistance being not able to be successful all the spending which it is necessary to do by before functions of The legislature. SEO Directory

The White House plans to ask Congress by the end of the week for an increase in the government's debt ceiling to allow the United States to pay its bills on time...

The approval is expected to go through without a challenge, given that Congress is in recess until January 17... the request is in line with an agreement to keep the U.S. government funded into 2013.

Raise The Debt Ceiling


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