Obama offering 4 trillion in cuts in 10 years & asking to raise our debt by 2.5 trillion this year kind of remind you of cartoon "Popeye", where the character Wimpy would frequently utter this phrase:
""I'LL GLADLY PAY YOU TUESDAY FOR A HAMBURGER TODAY""
He was a glutton, and would consume burgers at a ferocious rate but could rarely pay for his habit.
To: My bad
The Obama administration, as well as few of his predecessors, much of the media and many economists, tend to equate failure to raise the debt limit with default.
That's not precisely true.
The Treasury Department estimates that the federal government will collect a bit more than 3 billion in taxes during August — roughly billion just in the first three days. But, during August, the federal government is expected to spend 7 billion. That is why we have a problem.
If the government is not able to borrow more money after Aug. 2, spending will have to be reduced to the amount of revenue that the government has. That would require roughly a 44 percent cut in federal spending.
This will almost certainly hurt. But it's not the same as default.
To: My bad
The Obama administration, as well as few of his predecessors, much of the media and few economists, tend to equate failure to raise the debt limit with default.
That's not precisely true.
The Treasury Department estimates that the federal government will collect a bit more than 3 billion in taxes during August — roughly billion just in the first three days. But, during August, the federal government is expected to spend 7 billion. That is why we have a problem.
If the government is not able to borrow more money after Aug. 2, spending will have to be reduced to the amount of revenue that the government has. That would require roughly a 44 percent cut in federal spending.
This will almost certainly hurt. But it's not the same as default.
To: Dr. Killpatient
During August, interest payments on the federal debt will total roughly billion, meaning that there will be sufficient revenue to meet our obligations to creditors.
In addition, some 7 billion in government bonds is expected to come due during August, and will have to be rolled over. Though this rollover requires Treasury to enter the debt markets to purchase new securities, it is not technically "new" debt, and so does not run afoul of the debt limit.
The concern is that the U.S. would end up having to pay higher interest rates on this rolled over debt. That's not a trivial concern: A 1 percent increase in interest rates could cost taxpayers more than 0 billion per year.
Still, we should keep that in perspective — it's less than the amount that the government expects to borrow this month. And that is sort of worst case scenario. In 1979, the federal government actually did briefly default on its debt as the result of a debt ceiling impasse (as well a
as technical problems). That resulted in just a 60-basis-point increase in interest rates.
If we are really worried about a hike in interest rates, what about the hike we can expect if we fail to get federal borrowing under control? Both our deficit and total liabilities are already higher as a percentage of gross domestic product than Greece — or any of the other failing welfare states of Europe.
TO: tonalc2
Maybe YOU SHOULD DO A LITTLE MORE READING.
H.R. 1954 would increase the current statutory debt limit by .406 TRILLION DOLLARS, from .294 trillion to .7 trillion. The 16.8 percent increase or
http://www.govtrack.us/congress/bill.xpd?bill=h112-1954
