US debt default

[Rostere]

I'm surprised there isn't a thread for this yet.

 

So, what do you think could happen?

 

Is a debt default even possible constitutionally?

 

Are there senators who believe a default might be a good thing? After all, if nobody is willing to borrow money to the US, it would be impossible to maintain a big government and military, so that's another way of cutting the budget.

 

Who will suffer from the eventual effects (it would seem the Republicans already do)? A bit down on this page, there's an interesting S&P 500 scenario analysis.

 

While I think most people agree that a delay in interest payments would be catastrophic, is the entire debate making a hen out of a feather since the US will pay it's debts regardless of the impending debt ceiling (instead delaying other payments)?

 

Anyway, with every day this continues, the likelyhood of increased interest rates gets higher. The US will likely get to pay more to borrow in the future, as will almost everybody else, even if the effect will be concentrated on the US.

 

Personally, I think it's unlikely that anything dramatic will happen, and a last-minute agreement will take place in the next few days. The most likely effect will be just another drain on the economy among many others.

[Guard Dog]

There is more than enough revenue to service the debt. This whole thing is just political theatre. Just look at it like a big monkey feces fight. The only way anything will actually happen if if the president chooses to let it happen

[Rostere]

I've no doubt there's enough revenue to pay the debt. But without borrowing more, something else will not get paid. So in the unlikely event of discussions still being frozen in a few days, which payments do you think the government will postpone?

 

Or alternatively - at which (dis)approval rating will the GOP fold? A Gallup poll quoted in one of the articles above gives them only 28%.

[PK htiw klaw eriF]

I would predict that the GOP caves on this. The government shutdown is hurting the GOP's image badly enough, and perusing a course of action only very popular to a certain segment of voters will not endear them to many non-conservatives. Ted Cruz, Rand Paul, and others will likely put on a public showing of defiance, but they aren't worried about losing a general election and seem to be gearing towards a presidential run.

[Gorth]

You guys could always ask Putin if he wants to buy Alaska back... might improve liquidity (and possibly cash flow) for a bit to keep the rest running for a while

 

Is what's her name Palin still a governor there? If so, you might want to change that to improve the selling price.

[PK htiw klaw eriF]

You guys could always ask Putin if he wants to buy Alaska back... might improve liquidity (and possibly cash flow) for a bit to keep the rest running for a while

 

Is what's her name Palin still a governor there? If so, you might want to change that to improve the selling price.

If we do that, how will we get rid of her?

[ShadySands]

Nope, I don't think she even finished her first term

[Guard Dog]

I would predict that the GOP caves on this. The government shutdown is hurting the GOP's image badly enough, and perusing a course of action only very popular to a certain segment of voters will not endear them to many non-conservatives. Ted Cruz, Rand Paul, and others will likely put on a public showing of defiance, but they aren't worried about losing a general election and seem to be gearing towards a presidential run.

Either of them would get my vote. The GOP picked the wrong cause for the right fight. If this was over the reckless spending levels of the last thirteen years I'm all for it. The US cannot outspend it's revenue in perpetuity. Sooner or later the total collapse will come. Why do you guys think real assets are so overpriced right now? But they staked out this fight over defunding Obamacare. And while I wish that could happen this was not the way to go about it. Obamacare is and will be an unmitigated disaster that everyone will hate before it is all done. But it was legally passed and lawfully upheld. Just get out of it's way and let if be the disaster it can't help but be. The only thing I think they should have insisted on is a provision that forces Congress and it's staff to participate in it without subsidy. After all if it's so ****ing great why did they exempt themselves from it. Where's my exemption?

 

The way the government has been operating for the five years Obama has been in office is nothing short of disgraceful. There has not been a budget in his entire presidency. Instead they have funded the government through continuing resolutions that hold no one to account for where money is spent or how much. and when they run out they just raise the debt ceiling and pass another CR. This will only end one way. I'd prefer to get on with it so it will be over quicker. But that won't happen. The GOP will cave in, give the left everything it wants in return for a few unenforceable promises of future cuts, or more accurately reductions in the rate of growth. none of that will happen either and we will speed on along towards the inevitable.

[Wrath of Dagon]

Plenty of money to pay the interest, but the rest of government would have to be cut by something like 25%, more than the entire defense spending! They could cut Social Security and Medicare payments by 50%, then a zombie-like horde of old people would descend on Washington and eat Congress alive, which would be pretty cool I guess. And the Republican demands are really a joke, they want to stop subsidizing Congressional health insurance premiums, which probably isn't even worth 1 point of the stock market, and they want to repeal the medical device tax, which would only add to the deficit. And over trivial crap like that they want to wreck the entire economy and national security! So yeah, Republicans have finally completely flipped out and really are a bunch of crazed deluded yahoos just like the Democrats were claiming all along.

[Hurlshort]

The Republican party needs to put some gigantic distance between itself and the Tea Party movement.  They can't win big elections with those people at the helm.  It'd be like the Democrats putting PETA and Greenpeace in charge of their campaigns.  

[BruceVC]

The Republican party needs to put some gigantic distance between itself and the Tea Party movement.  They can't win big elections with those people at the helm.  It'd be like the Democrats putting PETA and Greenpeace in charge of their campaigns.  

 

Well said and very relevant. I have made this prediction before but I'll say it again, the Republicans will never win an election again if they follow the ideological views of Tea Party members or rather let Tea Party politicians make public statements around there political views claiming to represent the Republican base.

 

Back to the debt ceiling, I see that moderate Republicans through Boehner  are prepared to agree to raise the debt ceiling, at last. Holding the USA, and the worlds financial markets,  to ransom because you don't like Obamacare was a silly and reckless strategy. There are other battles to fight and I don't see this as one that was worth causing serious harm to USA economy

 

EDIT: I was incorrect an agreement to raise the debt ceiling hasn't been reached

Edited October 16, 2013 by BruceVC

[BruceVC]

Plenty of money to pay the interest, but the rest of government would have to be cut by something like 25%, more than the entire defense spending! They could cut Social Security and Medicare payments by 50%, then a zombie-like horde of old people would descend on Washington and eat Congress alive, which would be pretty cool I guess. And the Republican demands are really a joke, they want to stop subsidizing Congressional health insurance premiums, which probably isn't even worth 1 point of the stock market, and they want to repeal the medical device tax, which would only add to the deficit. And over trivial crap like that they want to wreck the entire economy and national security! So yeah, Republicans have finally completely flipped out and really are a bunch of crazed deluded yahoos just like the Democrats were claiming all along.

 

" zombie-like horde of old people would descend on Washington and eat Congress alive"

 

funny

[BruceVC]

 

I would predict that the GOP caves on this. The government shutdown is hurting the GOP's image badly enough, and perusing a course of action only very popular to a certain segment of voters will not endear them to many non-conservatives. Ted Cruz, Rand Paul, and others will likely put on a public showing of defiance, but they aren't worried about losing a general election and seem to be gearing towards a presidential run.

Either of them would get my vote. The GOP picked the wrong cause for the right fight. If this was over the reckless spending levels of the last thirteen years I'm all for it. The US cannot outspend it's revenue in perpetuity. Sooner or later the total collapse will come. Why do you guys think real assets are so overpriced right now? But they staked out this fight over defunding Obamacare. And while I wish that could happen this was not the way to go about it. Obamacare is and will be an unmitigated disaster that everyone will hate before it is all done. But it was legally passed and lawfully upheld. Just get out of it's way and let if be the disaster it can't help but be. The only thing I think they should have insisted on is a provision that forces Congress and it's staff to participate in it without subsidy. After all if it's so ****ing great why did they exempt themselves from it. Where's my exemption?

 

The way the government has been operating for the five years Obama has been in office is nothing short of disgraceful. There has not been a budget in his entire presidency. Instead they have funded the government through continuing resolutions that hold no one to account for where money is spent or how much. and when they run out they just raise the debt ceiling and pass another CR. This will only end one way. I'd prefer to get on with it so it will be over quicker. But that won't happen. The GOP will cave in, give the left everything it wants in return for a few unenforceable promises of future cuts, or more accurately reductions in the rate of growth. none of that will happen either and we will speed on along towards the inevitable.

 

 

 

Plenty of money to pay the interest, but the rest of government would have to be cut by something like 25%, more than the entire defense spending! They could cut Social Security and Medicare payments by 50%, then a zombie-like horde of old people would descend on Washington and eat Congress alive, which would be pretty cool I guess. And the Republican demands are really a joke, they want to stop subsidizing Congressional health insurance premiums, which probably isn't even worth 1 point of the stock market, and they want to repeal the medical device tax, which would only add to the deficit. And over trivial crap like that they want to wreck the entire economy and national security! So yeah, Republicans have finally completely flipped out and really are a bunch of crazed deluded yahoos just like the Democrats were claiming all along.

 

Holy Smoke !!! When GB and Wrath of Dragon criticize what the Republicans are doing then you REALLY know this time the GOP have made a political  miscalculation 

[PK htiw klaw eriF]

The Republican party needs to put some gigantic distance between itself and the Tea Party movement.  They can't win big elections with those people at the helm.  It'd be like the Democrats putting PETA and Greenpeace in charge of their campaigns.

I'll admit, that would be something to see.

[Rostere]

The growth of government spending during his first term has been the slowest since before 1982. I'm not necessarily attributing this to him, I'm just saying that even if things are bad now, they're heading in the right direction. Here and here are useful diagrams, by the way. Some of the politics baffle me, like how the deficit in the 2012 enacted budget was larger than both the deficit in the Democratic and Republican plan (but still on the right track compared to 2009).

 

Obamacare or whatever you'd like to call it seems insane to me, a kind of "cargo cult universal healthcare" which will really help to bring out the worst in the current American healthcare system. I guess Obama has good intent but I don't think Obamacare will achieve what he is aiming for. In discussions, people seem to subconsciously believe that Obamacare is "like UHS" in some way, and that it will bring Americans something similar to UHS which will have some cross-party support, but this couldn't be further from the truth since none of the cost efficiencies associated with UHS are inherent in Obamacare. Things will get more expensive for everyone as far as I can see.

[Zoraptor]

like how the deficit in the 2012 enacted budget was larger than both the deficit in the Democratic and Republican plan (but still on the right track compared to 2009).

That's generally due to the art of compromise.

 

For example, say that a husband and wife win $100k on the lottery. One wants to put half towards the mortgage and buy a new car with the rest. The other wants to put half towards the mortgage and buy a new boat. Compromise position might be buying a smaller boat and car, and paying less off the mortgage- so leaving more debt than either separate plan would have.

[kgambit]

I've no doubt there's enough revenue to pay the debt. But without borrowing more, something else will not get paid. So in the unlikely event of discussions still being frozen in a few days, which payments do you think the government will postpone?

 

 

You are not going to be able to reduce the federal budget deficit, let alone the national debt, without some very very deep budget cuts over several years. 

 

FY 2013 budget spending   -  3803.4 billion

FY 2013 deficit - 901.4 billion

 

Federal debt - 17547.9 billion

 

http://www.usgovernmentspending.com/federal_budget_detail_fy13

 

The growth of government spending during his first term has been the slowest since before 1982.

 

 

Cesca's analysis requires some extreme sleight of hand by back dating programs that Obama approved in his first budget into Bush's last budget, That analysis has been refuted multiple times and people still don't see thru the nonsense.   But let's look at what he's done overall shall we?

 

From the White house budget office

 

 

And here's how Obama deficit spending compares to the previous presidents dating back to 1990 with forecasted deficits thru the end of Obama's second term. 

 

 

 

According to Forbes.

 

http://www.forbes.com/sites/realspin/2012/09/03/yep-obamas-a-big-spender-just-like-his-predecessors/

 

The first year of the Obama presidency, 2009, is the largest year in decades, with federal outlays totaling a whopping 25.2 percent of GDP.  Since then, federal outlays relative to GDP have fallen, but they are still incredibly large. In fact, you have to go back to 1946 to find a year when federal outlays were as large as they have been every year of the Obama presidency.

 

 

Look at the following chart and in particular look at fiscal years 2010, 2011 and 2012.  Even if Cesca's analysis of 2009 is right (and it isn't), Obama still nearly matches that deficit in each of the next three years. 

 

 

 

This chart is startling. It shows that President Obama walked into a massive budget deficit and he made the situation worse. Prior to President Obama’s inauguration, and in the absence of any of his policies, the CBO estimated that the FY2009 budget deficit would be an incredible 8.3 percent of GDP. George W. Bush again bears a lot of the responsibility, and as with spending, President Obama turned bad into worse.

Each of Mr. Obama’s annual deficits has been larger than any since the 1940s.

 

 

This next comment I totally agree with.

 

Obamacare or whatever you'd like to call it seems insane to me  

 

 

Simply on the basis that will add at least 1.4 trillion dollars to the public debt over the next ten years.  We have simply got to start realizing that we can spend like this indefinitely.  It's madness.   And Obama's health care act isn't going to provide Universal health care anyway. 

 

Edited October 16, 2013 by kgambit

[Cultist]

that totally proves the beneficial nature of blowjobs

[Elerond]

It should be noted that G.W. Bush was president on during economic boom, when budget deficit should be in minimun levels and target is surplus budget. Of course there was economical downfall just before Bush time which impacted his first term and 9/11 terrorist strike and USA's countermeasures caused big increase in pending and there was also Hurricane Katrina wasn't helpful in start of his second term. And pile of other things give at least some explanation why budgets during Bush were so heavily deficient.

 

And Obamas presidency started under deep depression, when high budget defecits are normal occurance as goverment helps (at least tries to) it economy to recover from depression. And such recovery activities usually cause budget to be deficient quite long time as heavy budget cuts after depression usually cause great risk to fall back in depression, which is reason why budget is usually balanced periodically during several years (which those ditto charts show that is happening or at least was happening before current crisis). 

[Hiro Protagonist]

Just need to print more money.

 

http://www.youtube.com/watch?v=q6vi528gseA

[kgambit]

Just need to print more money.

 

http://www.youtube.com/watch?v=q6vi528gseA

 

LOL

 

 

 

Edited October 16, 2013 by kgambit

[Guard Dog]

Just to point out, almost the entire 8 years of Clinton's Presidency he had to deal with a congress where both houses were controlled by the other party. I keep telling you guys, we are the best off when the white house and congress are controlled by different parties. When democrats held all the cards they went hog wild, spent a ton of money and gave us Obamacare. When the republicans held all the cards they went hog wild, spent a ton of money and gave us the Patriot Act. when one party is running the show it's a BAD thing!

[Gorgon]

When you look at the numbers for the different presidents it becomes obvious just how little policy matters in comparison to world economic fluctuations, and by inference how little credit or blame any president can take for those numbers. 

 

With the exception of the lack of market oversight and legislation which led to the crisis, although I doubt any president would have been savy enough to predict it, de-regulation and privatization trends clearly played a part. 

[BruceVC]

Just to point out, almost the entire 8 years of Clinton's Presidency he had to deal with a congress where both houses were controlled by the other party. I keep telling you guys, we are the best off when the white house and congress are controlled by different parties. When democrats held all the cards they went hog wild, spent a ton of money and gave us Obamacare. When the republicans held all the cards they went hog wild, spent a ton of money and gave us the Patriot Act. when one party is running the show it's a BAD thing!

 

GD wouldn't another solution be to arrest every politician for sedition that is associated with the Tea Party? Then there would be less political conflict? Problem solved...  

 

[Guard Dog]

You are partially correct Gorgon. However spending and it's effect on currency valuation and interest rates is the one thing the government CAN control.