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Old 01-17-2011, 10:33 PM   #41
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Just curious... When we reach the debt ceiling, and the next round of interest payments on Treasury notes are due, there are no cash reserves left to pay the interest, and perhaps some of the notes have matured and are payable, what do you call that?
Answer: A Government ponzi scheme. Only we don't get the chance to say no...you can't have more money.
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Old 01-18-2011, 07:07 AM   #42
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Answer: A Government ponzi scheme. Only we don't get the chance to say no...you can't have more money.
It is a Ponzi scheme that everyone understands and is stable. But because Congress has separated the actions of obligating and authorizing a refusal of Congress to deal with this rationally could (would?) destabilize the scheme and cause a crisis. To the extent that the impacts Geithner outlined are accurate, it seems to me that Congress owes it to the American people, and the world for that matter, to raise the cap whether or not they can immediately forge a long term solution to the debt. To intentionally catapult the world into recession round 2 in a fit of partisan peak and frustration with their own incompetence actually would fit the term Glen Beck so lightly bandies about -- traitorous.
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Old 01-18-2011, 08:02 AM   #43
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To the extent that the impacts Geithner outlined are accurate, it seems to me that Congress owes it to the American people, and the world for that matter, to raise the cap whether or not they can immediately forge a long term solution to the debt.
If they don't come up with a long term solution now, they certainly won't do it once the cap is raised. Right back to the far back burner.


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To intentionally catapult the world into recession... (ERD50 NOTE: intentionality removing partisan comments here) -- traitorous.
One could say the same (and I do) about not dealing with the root problem also.

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Old 01-18-2011, 09:08 AM   #44
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If they don't come up with a long term solution now, they certainly won't do it once the cap is raised. Right back to the far back burner.




One could say the same (and I do) about not dealing with the root problem also.

-ERD50
I agree with your second statement. But I don't think they can come up with a passable solution by March. Maybe a plan to start attacking it but not a real solution.
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Old 01-18-2011, 09:20 AM   #45
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I agree with your second statement. But I don't think they can come up with a passable solution by March. Maybe a plan to start attacking it but not a real solution.
Didn't the president's own commission just release a report that gave a good outline about how to attack the problem? Oh, that's right, that plan had serious options that would cut just about every program we have and cause everyone to share the pain so obviously that won't fly.
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Old 01-18-2011, 09:44 AM   #46
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Didn't the president's own commission just release a report that gave a good outline about how to attack the problem? Oh, that's right, that plan had serious options that would cut just about every program we have and cause everyone to share the pain so obviously that won't fly.
I don't think they will be able to agree on a package of recommendations from the Commission but who knows. Maybe they can reconstitute a/the Commission with some pointers and agree to treat the final recommendation like they do base closure recommendations. They couldn't agree on that sort of mechanism during the last go around, but the people are angry - maybe now is the time.
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Old 01-18-2011, 10:02 AM   #47
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I don't think they will be able to agree on a package of recommendations from the Commission but who knows. Maybe they can reconstitute a/the Commission with some pointers and agree to treat the final recommendation like they do base closure recommendations. They couldn't agree on that sort of mechanism during the last go around, but the people are angry - maybe now is the time.
I hope so too but I think most of the pols are still thinking they can get the economy growing at a fast enough clip to pay most of the debt off relatively painlessly. I just don't think the fundamentals are there for that to work this go round though. I can see modest growth but nothing fast enough in the relatively near future to alleviate our debt problems without also making serious cuts in spending levels
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Old 01-18-2011, 10:13 AM   #48
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My response about it being a Ponzi Scheme was a bit "tongue in cheek". That said...like all Americans I remain disappointed in our leaders willingness to spend money we do not have. To not raise the debt ceiling would cause great disruption in world markets and otherwise.
I saw an interview over the week-end with the President of the government pension funds (can't remember his name - guess that is my age - LOL). His position is to fight and argue against federal workers taking any hits to their pensions and benefits. I ask you: Why is any interest group immune from the current situation? Everyone will have to share it the solution. But only if our leaders drive it to the point of obtaining a solution..(which unfortunately I doubt will happen).
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Old 01-18-2011, 10:43 AM   #49
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I hope so too but I think most of the pols are still thinking they can get the economy growing at a fast enough clip to pay most of the debt off relatively painlessly. I just don't think the fundamentals are there for that to work this go round though. I can see modest growth but nothing fast enough in the relatively near future to alleviate our debt problems without also making serious cuts in spending levels

Since the spending of gvmt has been going up faster than inflation for many many years... and faster than the growth of GDP.... more 'volume' growth will just make it worse...

There is no way we can grow out of the problem... even if growth was 10% a year...
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Old 01-18-2011, 10:55 AM   #50
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"...raising the debt limit is necessary to allow the Treasury to meet obligations of the United States that have been established, authorized, and appropriated by the Congress. It is important to emphasize that changing the debt limit does not alter or increase the obligations we have as a nation; it simply permits the Treasury to fund those obligations Congress has already established."
FUnny coming from a guy who was issues paying his own taxes............
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Old 01-18-2011, 03:46 PM   #51
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Since the spending of gvmt has been going up faster than inflation for many many years... and faster than the growth of GDP.... more 'volume' growth will just make it worse...

There is no way we can grow out of the problem... even if growth was 10% a year...
Not sure I follow.

To restate what I meant, if GDP were growing at a much faster clip then tax receipts would grow dramatically and thereby make the job of the politicians much easier.
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Old 01-18-2011, 03:59 PM   #52
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Not sure I follow.

To restate what I meant, if GDP were growing at a much faster clip then tax receipts would grow dramatically and thereby make the job of the politicians much easier.

OK.. let me rephrase....


Politicians have historically increased spending at a greater clip than inflation... if the economy started growing at a nice clip and tax receipts started to grow dramatically... then spending would start to grow also... you would probably also cause inflation... and since a lot of our budget gets increase for inflation... more spending... and then you have to fund the new programs that will be passed... hence, they would spend the increased taxes...

IOW, we are currently borrowing 40 cents of every dollar spent... it will take a LOT of growth to grow our way out of our current problem... and that is if we do not increase spending...

Sure... more receipts will make it easier for the politicians... but that still does not fix the problems...
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Old 01-18-2011, 07:59 PM   #53
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Columnist Kevin Hassett, a former advisor to the McCain campaign and currently doing time at the American Enterprise Institute, likes the cards the R's have in the house. He predicts a dragged-out affair where the House holds out for $100B of cuts in return for a vote to raise the cap by June.

Boehner Will Win This Game of Default Chicken: Kevin Hassett - Bloomberg

I think his theory is plausible, but unlikely in the details.

He seems to be assuming the president and the D's will be rather passive and predictable, coasting along as the rhetoric - and the stakes for us all - escalate. Statements like "While Democrats may have an articulate president pressing all sorts of alarm bells, Republicans will enjoy something more potent: an actual mandate". This suggests he thinks the D's will be saying little more than "Mr. Boehner, bad things are right around the corner. Pretty puleeese, pass a debt cap raise" (my words, not the author's - with tongue in cheek).

The events of the lame duck session suggest Obama will have a more strategic approach. I hope so, but not because I'm rooting strongly for either side to gain political points. It's because I agree with the author that the ultimate outcome includes some yet-to-be negotiated, relatively modest "steps" toward deficit reduction passing simultaneously with a debt cap raise.

So, Mr. Boehner and Mr. Obama and Mr. Reid, please get on with it.

Which brings me to a strong criticism of Mr. Hassett and his ilk (political think tankers coming from either side). Hassett mentions in his piece that "House Republicans, whom I addressed last week at their strategy meeting in Baltimore, hold all the cards." Re-reading the piece with this in mind leads me to conclude that he is not just predicting a dangerous game of chicken. While working behind the scenes he is advocating it. Shame on him.
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Old 01-19-2011, 04:43 PM   #54
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OK.. let me rephrase....


Politicians have historically increased spending at a greater clip than inflation... if the economy started growing at a nice clip and tax receipts started to grow dramatically... then spending would start to grow also... you would probably also cause inflation... and since a lot of our budget gets increase for inflation... more spending... and then you have to fund the new programs that will be passed... hence, they would spend the increased taxes...

IOW, we are currently borrowing 40 cents of every dollar spent... it will take a LOT of growth to grow our way out of our current problem... and that is if we do not increase spending...

Sure... more receipts will make it easier for the politicians... but that still does not fix the problems...
Okay, now we're on the same page. I agree with what you say. I was just saying that many politicians don't seem to have any sense of urgency regarding our debt problem and think growth will take of the problem but that just isn't in the cards, especially if they don't reduce spending.
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Old 01-19-2011, 06:07 PM   #55
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Okay, now we're on the same page. I agree with what you say. I was just saying that many politicians don't seem to have any sense of urgency regarding our debt problem and think growth will take of the problem but that just isn't in the cards, especially if they don't reduce spending.
Our very own Government Accounting Office did a study on this published back in January 2008, when the economy looked all bright and shiny. Here's the PowerPoint presentation. (If it's on a PowerPoint slide it must be real!)

http://www.gao.gov/cghome/d08446cg.pdf

From Slide 27:
Current Fiscal Policy Is Unsustainable
• The “Status Quo” Is Not an Option
• We face large and growing structural deficits largely due to
known demographic trends and rising health care costs
• GAO’s simulations show that balancing the budget in 2040 could require actions as large as
• Cutting total federal spending by 60 percent or
• Raising federal taxes to two times today's level

• Faster Economic Growth Can Help, but It Cannot Solve the Problem
• Closing the current long-term fiscal gap based on reasonable assumptions would require real average annual economic growth in the double-digit range every year for the next 75 years
• During the 1990s, the economy grew at an average 3.2 percent per year
• As a result, we cannot simply grow our way out of this problem. Tough choices will be required
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Old 01-19-2011, 07:13 PM   #56
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It is a Ponzi scheme that everyone understands and is stable. But because Congress has separated the actions of obligating and authorizing a refusal of Congress to deal with this rationally could (would?) destabilize the scheme and cause a crisis. To the extent that the impacts Geithner outlined are accurate, it seems to me that Congress owes it to the American people, and the world for that matter, to raise the cap whether or not they can immediately forge a long term solution to the debt. To intentionally catapult the world into recession round 2 in a fit of partisan peak and frustration with their own incompetence actually would fit the term Glen Beck so lightly bandies about -- traitorous.
Well, if you want to describe it as 'traitorous', maybe you would be interested in this:

Boehner Should Win This Round of Default Chicken: Kevin Hassett - Bloomberg

Quote:
Obama is no stranger to this game, having played his part dutifully when President George W. Bush sought a debt ceiling increase in 2006. In a close and largely partisan vote, Obama and 43 of his Democratic colleagues in the U.S. Senate opposed the measure.
-ERD50
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Old 01-19-2011, 10:53 PM   #57
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The fed can continue making payments on interest and debt and can even issue new debt when the old debt matures. Texas Proud wrote this on page 1 -- the revenue greatly exceeds the debt payments.

Geithner's letter is about a choice. We can default OR cut spending elsewhere. A default would make 2008 look like a pebble in the road. It simply won't happen.

Unless instructed otherwise, Geithner has some discretion in what gets paid. I'd guess that delaying the tax refunds will be the first thing we'll see. We'll eventually see federal employee furloughs, followed by Medicare, federal pension (their debt will be called), and Social Security cuts, if nothing gets done by September.

In effect, this isn't really a game of chicken because the debt is manageable. It's the disctionary spending cuts that will kill a career or 50.
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Old 01-20-2011, 01:38 PM   #58
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Well this should shake things up and start some interesting conversations.

House GOP Lists $2.5 Trillion in Spending Cuts - US News and World Report
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Old 01-20-2011, 01:56 PM   #59
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Well this should shake things up and start some interesting conversations.

House GOP Lists $2.5 Trillion in Spending Cuts - US News and World Report

This is an important change if it every got passed. Automatic inflation increases means you spend more money, but it does not count...

"Discretionary Spending Limit, FY 2012-2021: Eliminate automatic increases for inflation from CBO baseline projections for future discretionary appropriations. Further, impose discretionary spending limits through 2021 at 2006 levels on the non-defense portion of the discretionary budget. $2.29 trillion savings over ten years."


One thing that I noticed in all that cutting... very very little cut in the farm subsidy... and ethanol.... cutting these should save a few billion...
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Old 01-20-2011, 03:03 PM   #60
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Well this should shake things up and start some interesting conversations.

House GOP Lists $2.5 Trillion in Spending Cuts - US News and World Report
I see some sacred cows weren't touched.


"Exchange Programs for Alaska, Natives Native Hawaiians, and Their Historical Trading Partners in Massachusetts." Boondoggle alert!
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