Is there even any hope in this debt mess?

[DoraM]

I am really having a hard time convincing myself there is any long term chance of solving our US debt situation. I think our best hope is to kick the can down the road a few more years and hope for some technological breakthrough like warp drive to open up new frontiers. (only half kidding)

SS and medicare are unsustainable, even for the current beneficiaries much less those of us not reaching 62 for 20+ years. Everyone knows they are unsustainable in the current form but they can't be touched.

So now I think they pass something silly, like a 2 trillion dollar spending cut package, and in 10 years or so we come back to this problem only with a 30 trillion dollar deficit.


Feeling a little down. Nobody is willing to make any sacrifice. The poor, the middle class, the rich, the young, and the old. Everyone has perverted the saying into "Ask not what you can do for your country but what your country can do for you."


I don't have a solution...just depressed.

 

[LOL!]

Of course there is hope. It is spelled I-N-F-L-A-T-I-O-N. If I owe someone $14 trillion, but only have $1 trillion, then I can just revalue my $1 trillion so that it equals $14 trillion and pay off the loan instantly. Easy.

 

[grumpy]

It seems like Congress is unable to act because it is structurally designed to operate in a strict two party system. Now with the "Tea Party" impact we essentially have a third party that is preventing the House from arriving at a compromise.

 

[DoraM]

Of course there is hope. It is spelled I-N-F-L-A-T-I-O-N. If I owe someone $14 trillion, but only have $1 trillion, then I can just revalue my $1 trillion so that it equals $14 trillion and pay off the loan instantly. Easy.

I don't get how inflation will help when we have SS, medicare and even TIPs as part of the debt.

So you devalue the dollar such that it is worth $0.10. Now instead of sending out a $1800 SS check, you have to send out a $18,000 SS check because a loaf of bread now costs $20.

I could see that it shafts foreign bond holders and maybe the mortgage industry, but does it really fix our problems?

 

[winger]

It is depressing to see how divided this country has become.

 

[DoraM]

I just saw this commercial while watching the evening news. This sums up the problems faced trying to do anything to fix our mess:

‪What Were You Thinking - B v01small.7.8.mov‬‏ - YouTube

 

[samclem]

I could see that it shafts foreign bond holders and maybe the mortgage industry, but does it really fix our problems?

It depends what you mean by "our." Inflation hurts the economy a lot and it can be especially tough on retirees. Yes, as you note it will also hurt holders of fixed-interest debt. But, it allows the huge US debt to be paid off with cheaper dollars, and the printed money allows the government to cover the debt without raising taxes. Better still, the government can do it under the guise of "stimulating the economy." Of course, the inflation drives up the cost of future borrowing (buyers of new bonds want a much higher fixed rate when inflation roars), but that's primarily a problem for future politicians.

So, inflation helps present politicians avoid unpopular actions (raising taxes) while making the future problem worse and increasing the pain for most people. That's why I think we'll be getting a big dose of it.

 

[madbrain]

Nobody is willing to make any sacrifice. The poor, the middle class, the rich, the young, and the old. Everyone has perverted the saying into "Ask not what you can do for your country but what your country can do for you."

I don't think that's true, many people are willing to make sacrifices.
Unfortunately, that doesn't include many of our representatives in Congress, who have chosen to blackmail the American people for political gain, instead of doing their job all along. They should be ashamed.

 

[Alan]

I am really having a hard time convincing myself there is any long term chance of solving our US debt situation. I think our best hope is to kick the can down the road a few more years and hope for some technological breakthrough like warp drive to open up new frontiers. (only half kidding)

You have the same idea as The Telegraph cartoonist Matt.

 

[Ed_The_Gypsy]

No hope at all. The next ten years will be very difficult. Then it will get worse.

Does anyone remember Harry Dent's long range predictions?

 

[traineeinvestor]

No hope at all. The next ten years will be very difficult. Then it will get worse.

Does anyone remember Harry Dent's long range predictions?

Yep. He's made lots of long range predictions and, so far, has a consistently awful track record: http://www.fedderngroup.com/newsletters/Newsletter - 10-11-09 Harry Dent REBUFFED.pdf

At the risk of stating the obvious, the rather blunt reality is that (in real terms) many people will have to pay more, many will have to get less and there will be some erosion in real living standards.

 

[Ed_The_Gypsy]

A wile back, he predicted a depression.

How many recessions make a depression?

Let's look at this again in ten years.

 

[grumpy]

I am viewing the "impending crisis" as a buying opportunity. I just moved a large slug of cash that I have had sitting in a 1.25% Discover savings account to my brokerage account. I plan to add to my holdings of high dividend blue chip stocks at a discount when the opportunity comes.

 

[ls99]

Hope? Of course there is hope. Just remember, the price of hope is disappointment.

 

[chinaco]

... Now with the "Tea Party" impact we essentially have a third party that is preventing the House from arriving at a compromise.

I think this is just the makeup of the GOP.. some are more moderate that others. If Boehner did not attach the balanced budget item to that bill, it would not have made it out of the house.


But... the democrats that the same issue with conservative Democrats (on spending)... ever hear of the blue dog democrats?


Each of those parties have moderate (more toward the center) and more extreme members (far to the right or left). Often on certain issues as individual members.... but the parties to to push all the members into a unified group to consolidate the power... It squashes any chance of a collaborative (best consensus) solution.... that is the part that is a little destructive (IMO).

Add to that the political positioning to try to make the other party look bad... and there is almost a complete breakdown of the system.

It seems the senate is a little more willing to compromise on this issue.

Some believe that bill that left the house will be changed and sent back to the house. It will have the balanced budget item taken off, some form of tax concession (probably closing some tax loopholes) and remove any language that requires another vote before the 2012 election cycle. That will provide enough cover for members of both parties in the house to get a bi-partisan vote through.


The hard core people on this issue (whichever side) will appear to have done their job (for their campaign pledge and constituents) and it will look like someone else fault. (whichever side of the political fence they are on or the issue.... either "I did my job and got it done" or "its not my fault"!).

It is completely dysfunctional... but that is likely how it will turn out.

 

[eytonxav]

Hope? Of course there is hope. Just remember, the price of hope is disappointment.

And I am hoping millions will show up this weekend with pitch forks in hand and surround the capital building to support some compromise to get this settled. Unfortunately, that probably will not happen.

 

[ls99]

+1

 

[GaryInCO]

Good heavens no, that won't happen. The Homeland Security Gestapo would label them all terrorists, and haul them off to a gulag somewhere.

(I wish I was joking)

 

[sheehs1]

Our politicians baffle me. On the one hand, the Dems and President say they want the debt ceiling raised. The House delivers. Granted ...it's not all of what the President wants so it gets rejected quickly by the Senate with the President saying all the while , "get it done", "compromise"...etc...etc..
Oh...I know....the Dems don't want to have to address the debt ceiling again before the 2012 elections. The GOP wants to use it as a "sticking point" in the 2012 elections. All politics. Nothing more.
At the end of the day....How can anyone....in any party..NOT agree with a balanced budget amendment. Secondly.. what does that say about their motivations and intentions? Without this amendment, Washington will just keep spending dollars it does not have. If we don't cut spending, cap the deficit...now....then when? This isn't going to get any less painful.
Depressing....

 

[Bestwifeever]

Doesn't it seem this situation has been played like a football game, where nothing gets resolved until after the two-minute warning, or like a basketball game where it doesn't matter what the score was for the first 90 percent of game time, it's those final two or three minutes that count? It all comes down to the wire anymore.

 

[HFWR]

A balanced budget amendment, with some escape clause for special circumstances, seems like a good idea. But in the short-term, it will required either a dramatic shrinking of government, or a dramatic increase in taxes, or some combination of the two. Did I mention "disruptive"? There'll be a lot of pain, something we don't seem good at any more.

Now a glide path, of say 10-20 years, would be somewhat less painful, but there are too many election cycles in that long of a period...

 

[DoraM]

I wonder if we should lock congress inside until they reach an agreement. Toss the president in there too. They could send up different colored smoke each day to let us know if they have compromised.

 

[sheehs1]

Doesn't it seem this situation has been played like a football game, where nothing gets resolved until after the two-minute warning, or like a basketball game where it doesn't matter what the score was for the first 90 percent of game time, it's those final two or three minutes that count? It all comes down to the wire anymore.

Yes it does Bestwifeever - good analogy! Only difference is the sports games make money, this drama is costing us precious tax dollars.

 

[sheehs1]

A balanced budget amendment, with some escape clause for special circumstances, seems like a good idea. But in the short-term, it will required either a dramatic shrinking of government, or a dramatic increase in taxes, or some combination of the two. Did I mention "disruptive"? There'll be a lot of pain, something we don't seem good at any more.

Now a glide path, of say 10-20 years, would be somewhat less painful, but there are too many election cycles in that long of a period...

I say...off to Washington you go HFWR. You've been elected .
Escape clause and glide paths are a good idea! Realize that a shrinking government will cost us jobs but again I say....if not now...when? Gradual is good.

 

[Hamlet]

A balanced budget amendment is one of the worst ideas bouncing around today.

When a recession hits, the absolute worst thing for the government to do is to try to balance the budget by raising taxes/cutting spending.

Think about this recession. How much worse would it have been without unemployment insurance, the stimulus (which prevented mass layoffs at the state government level, and provided large tax cuts for business), and with the large tax increases that would have been required to fund the government as revenues plummetted?

Any sensible balanced budget amendment would require so many loopholes that it would be almost useless.

At the end of the day....How can anyone....in any party..NOT agree with a balanced budget amendment.