Forum Post: What is the debt ceiling ? You’d better find out!
Posted 11 years ago on Jan. 3, 2013, 8:55 p.m. EST by bensdad
(8977)
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The debt ceiling has nothing to do with spending money - it has to do with the US government paying what it is legally obligated to pay because the House & Senate & President “contracted” to pay its bills.
With the national debt at its highest point in 50 years compared with the size of the U.S. economy, the debate about the ceiling has become entwined by th e Republicans in the larger issue about slashing the budget. The budget debate is shaping up around trying to balance two perhaps equally unpopular remedies: sharp cuts to popular government-funded programs and major tax increases.
Republican lawmakers say that if they raise the limit they need a commitment from the White House for more spending cuts. The Obama administration has resisted the idea of including spending caps or other budget-process reforms in legislation to raise the debit ceiling, arguing that ensuring the government’s solvency is too important to be held hostage to any other issues.
What happens if we don’t raise the debt ceiling but continue to pay interest on our bonds? This is an option known as “prioritization.” The Bipartisan Policy Center released a report attempting to think through how this would work in practice, as it has never been attempted before.
The raw numbers are chilling: In the August 2011 debt ceiling debate, the federal government would have to cut expenditures by about $134 billion, or 10 percent of the month’s GDP. If it chose, for instance, to fund ONLY Medicare, Medicaid, Social Security, supplies for the troops and interest on our bonds, it would have to stop funding every other part of the federal government. The drop in demand, when coupled with the turmoil in the markets and the general financial uncertainty, would undoubtedly throw the economy into a depression. Also keep in mind that we have to roll over $500 billion in debt , and if there was any uncertainty about how we were going to pay our bills, it is not clear we could find buyers for our debt at anything less than an exorbitant rate. In this way, “prioritization” could actually increase the deficit by billions.
What happens if we stop paying the interest on our debt? This is too scary to consider. Treasury securities sit at the base of the entire global financial system. They are considered so safe that the interest rate on Treasuries is called the “riskless rate of return,” as the market assumes there is no chance of default under any circumstances. Almost all other types of debt — mortgages, credit card, auto loans, business loans, hospital bonds, etc. — are yoked to Treasuries. Almost all major financial players hold substantial portfolios of Treasuries or Treasury-related debt in order to buffer themselves against financial shocks. Consider that the 2007 financial crisis was caused by the market realizing it had to reassess the risk of bonds based on ONLY subprime mortgages. If the market has to reassess the risk of US Treasuries, the resulting financial crisis will be beyond anything we’ve ever seen in this country or any other.
In 2012, the debt ceiling debate – that was raised at the last minute - caused our debt rating to be lowered – and interest rates we paid on our treasuries from 1.4% to 1.7% - an increase of 20%. If we actually do not raise the ceiling this rate we pay would be 5%+. Imagine what would happen to ALL variable rate loans!!!
In 1917, the debt ceiling was created during World War I. Over time, the debt ceiling has been raised every time the United States comes close to hitting the limit. By hitting the limit and missing an interest payment to bondholders, the United States would be in default, lowering its credit rating and increasing the cost of its debt.
WILL OBAMA HAVE THE COURAGE
TO USE THE 14TH AMENDMENT:
There has been controversy over whether the debt ceiling is constitutional. According to the 14th Amendment of the Constitution,
"The validity of the public debt of the United States,
authorized by law ... shall not be questioned."
Obama, could use this power to just raise the ceiling.
Our Revenue Problem | Tuesday, January 8, 2013
Reality can be defined as the 'norms' that your community agrees on.... Do you believe in witches and demons? How about 'trickle down economics'? Of course some 'realities' work better than others. The laws of nature tend to favor 'actual reality' over the ones that only exist in certain peoples' twisted world view, but over the short term utter nonsense can seem real, and even drive actual 'reality' to places we can't imagine.
We're in one of those places in time where 'reality' is being defined by consensus. We have a Federal budget in the $4 trillion range, a number that seems like magic to people who count only on their digits (fingers and toes). To be fair, it's not a number you can actually 'think' about. You have to use certain tricks of the mind to make it into a useful concept, or you can just use accounting....
We are creating about $1 trillion a year in new Federal debt, this freaks out the tea baggers. They didn't notice when Bush was creating debt at twice that rate, or when Reagan was doing it at twice that rate in today's dollars. You see it's all about 'creating' reality. Numbers are funny that way.
The Republicans are trying to create the 'reality' where where we simply default on the debt they created. If they can really make this 'happen', then civilization as we know it will end. You see the 'debt ceiling' crisis isn't about paying the 'bills', it's about paying the interest on Ronald Reagan's debt. He ran it up from less than a trillion dollars to 4 trillion while he was President. That would be 12 trillion in today's dollars. Yeah..... when the right makes a big deal about Obama having a $16 trillion dollar debt, it's really Ronald Reagan's debt that they are talking about. That 'welfare' state that they obsess about? The interest on Reagan's debt comes in at twice what that costs every year, has been for 30 years.
Obama has cut the operating deficit to the point that if the economy were to recover we would be pretty close to running a surplus. The question is whether the economy will be allowed to recover. A default on Ronald Reagan's debt would make that unlikely, that's why the billionaires are trying to make that a 'reality'.
The good news is that Democrats in Washington seem to be catching onto 'reality'. Nancy Pelosi is talking about the 14th amendment, Barack Obama has said that Congress cannot refuse to pay for the spending they've authorized. This is 'reality' talk.
If you haven't heard about the 14th amendment, one of things in it says is that the debt of the United States cannot be questioned no matter how it was incurred. Basically, if Congress says that the Executive Branch should spend the money, they can't refuse to pay the bills later. That amendment was written to cover the debts of the Civil War, but has no limitation. The debts run up for every war since are similarly covered, The Spanish American War, WWI, WWII, Korea, Vietnam, Grenada, Panama, Iraq, Afghanistan, Iraq again, it includes every real, and every phony war that we've ever been involved in. That would also include the war against the middle class by the rich.
We've always paid our debts, going all the way back to the debts run up by the Continental Congress to pay for the exploits of George Washington. If you haven't heard of him, his likeness is on the dollar and the quarter. He was a liberal, that's something else you aren't supposed to know in this 'reality'.
That 'reality' is that we don't have a 'debt problem', we have a revenue problem. Corporations are hoarding 5 trillion in cash, rich people are hoarding more trillions in offshore accounts.
In another area where reality is being redefined, the the average temperature in the US for 2012 was one degree above the previous all time record, and three degrees above the average year in the 20th century. In Australia, scientists have had to add a new range of colors to the weather maps, shades of purple now define temperatures above 130 degrees. Back in the US, Kansas had the distinction of experiencing summer temperatures higher than the normal temperatures of Death Valley. Not in the 'purple' range yet, but the century is young.
In the end we will have the 'reality' that we choose as a community. Have you decided? www.prairie2.com
The banks are robbing 85 billion a month, untouched. Would you consider that the new normality?
Didja read this? Some progressive logic might help you understand this issue.
http://www.nationofchange.org/tarp-over-bailouts-will-continue-until-big-banks-are-broken-and-washington-knows-it-1357748717
SS and medicare/aid are self funded. Show me my contract to pay for bombs in Africa.
That has nothing to do with the debt ceiling.
However, if we don't raise the debt ceiling, the world economy will collapse -
So if your only issue is bombs for Africa, and you dont care if YOUR interest rates go up 25% & half of your friends and family lose their jobs and you dont want to fund the EPA & NRC & SEC & FDA - this is one way to achieve your one goal Medicaid is NOT self funded I do not think Medicare is either
Do you know how much they are underfunded by?
do your own homework
you lied that medicaid was self funded I dont work for liars
Well, we get taxed on it in our paychecks. I've said that raising the 1.45% to something a bit higher is probably needed. Its not 100% funded, but there are taxes going into it, so we need to figure out what that 1.45% is total, subtract it from total medicare costs, and then divide it by the 144m people who are working by 52 weeks to figure out how much everyone would have to pay to make it an even steven.
Cut that tax for low incomeworkers increase it 3x on highest income earners, add a 2% tax to cap gains/div for Medi(care, caid, ACA, SS)
That'll do it.
Please include your math with this, and some finite number.
Why? You disagree? You didn't provide anything of the kind when you suggested paying for it by taxing everyone regressively equal.
I say apply good old American progressive concepts.
Make the wealthy pay MORE! Goddamn it! Put that in your calculator!
Oh! And we WILL have to means test providing benefits to those wealthy so. Sorry.
So no numbers? So its just more rambling, nothing that can be used for an actual plan? Thats your plan. Now organize it. Then implement it. Then create the timetables and benchmarks. Basic levels of political organizing.
You've been on here for an entire year. Its about time you move past the first level.
I just gave you actual numbers. (3x current rate for upper income, new 2% on cap gains/div)
Your ignorance, and/or pretense notwithstanding. This forum is one level it is true. Beyond that level is outside the forum of which once again you are ignorant of my activities.
As I prefer. I can't pass legislation in any event.
But I support agitating all pols for tax fairness that includes moving the tax burden from working cvlass to the wealthy whenevr possible.
And what kind of revenue would that generate?
Actually of the four main parts the only part that cannot be done on here is leading. The other three, this is a great place to be discussed and hashed out.
Do some math. Be an intelligent asset. Not only does Occupy need that, the entire country does. You clearly have the time to do the research and calculations.
Its up to people to propose intelligent solutions to the public. Aggitating pols will get us where we are.
"What kind of revenue"? LOL
MORE! Almost 50% MORE!!!! The govt health/retirement pgms for the 99% would be set for 80 years.
Is that simple enough for you.? Increase the contribution of the wealthiest by 3 times, add 2% tax on all passive income (cap gains/div/royalties/rents... etc)
Done. Proposed. Easy fuckin Peezy!
NEXT!!
Is Nathan free?
Actual numbers.
Not just yelling "More" from the podium.
I've provided more than your dishonest ass!
You just don't support transfering the tax burden/costs of pgms for the 99% to the people with the money. The 1% corp oligarchs!
We most correct the massive destructive concentration of wealth amongst the 1%. This proposal will begin that process.
But because you support the 1% over the 99% you want to distract with ignorant minutia.
So you can propose another generic line of bullshit, but refuse to dive deeper into to show how it could be done?
How very typical. You should run for congress too.
Don't bother. I would never trust a word that dripps from your ignorant right wing lying mouth.
Is Nathan free?
Fuck you.
1/2% for income up to $30K 1% for income up to %40K, 1.50% up to $75k,
$250k 5%
Alright, now we are on the right path...
I will get back to you in a few days.
I've gone deeper than your lyin ass!
You distract with ignorant minutia because you are anti 99%! You don't support increasing taxes on the 1%. You don't support crrecting the destructive concentration of wealth.
You are a phony, lying right wing piece of shit!!
I'll figure it out for you, ok.
Give me a few days. I'll get back to you. I just need to know the income requirements in your head for "low income earners" vs "high income earners" Wheres the cutoff points?
In the meantime, you could practice your juggling? haha.
Why tax the rich: http://www.youtube.com/watch?feature=player_embedded&v=S6ZsXrzF8Cc#!
[Removed]
"dont want to fund the EPA & NRC & SEC & FDA "
Add to that the DOE,NEA, and Obamascare and all of Obama's and the Democrats more than 5,500 new regulatory proposals just released right before Xmas.
Fuck raising the debt ceiling and no new taxes. Income isn't the problem,Government spending is!!!
Obama is a rich elitist who spends our tax money on his and Moochele's own selfish pleasures.
Obama issued an EO on the hush to give all Fed Emp's pay raise's,...he's a POS!! But I'm sure you'd vote for him again if you could.
Hey Mr. 'Tumor,
What's wrong with taxing the rich? They have made record profits with all the Bush-Cheney Laissez Faire governing policies, give-aways and tax cuts, isn't it only right that they contribute tax revenue to the country that made it possible? Especially in this time of need?
Everybody's taxes are going up thanks to your buddy Obama.
You can tax the rich and play class warfare all you want but confiscating 100% of all their money will not put a dent in the $23+trillion dollar debt nightmare that your buddy Obama is in the process of creating.
You think small when our problems are already too big for these ridiculous pseudo solutions.
Yeah, heard Rush and Hannity regurgitate those very words, not so truthy.
What about the unknown $trillions Bush-Cheney blew?
And what about the unknown $trillions stashed off shore in tax havens?
http://www.zerohedge.com/contributed/dojs-latest-beat-down-swiss-banks
How about you dealing with reality and not fantasy?
You should really be more concerned what the present day Robber-in-Chief is doing instead of living in the past.
Bush-Cheney got us in this mess, not easy to forget.
Tell your RW Cult crazies to get out of the way so we can fix the mess you Righties got us into.
So you don't care about the mess that Obama is creating?
What mess that wasn't already there?
You skipped over the record stonewalling by the folks that actually created it.
He's trying to fix the mess Cons left, Cons are sabotaging because they hate democracy and America. Where is the outrage!?
MSDNC and the DailyKos don't count as an education,try again.
ALEC, Drudge, Limbaugh and Fox Lies does "count as an education"?
Do you Righties understand and acknowledge that there was a government and an economy before January 2009?
You could fill a 3.5 floppy disk with everything you know and still have room to back up your DOS boot disk. kb's for brains.
Sounds like a "NO."
Drop the delusions, embrace reality!!
Drop the Utopian illusions,you're out of your league. Grow up and grow a pair. You'll need'em if you think you'll survive the rest of your life in one piece being as naive and ignorant as you are.
I knew I heard that senseless diatribe style before, you're that fat crazy fuck, Alex Jones! You really need to get back to your FEMA camp!!
"senseless diatribe style"
That actually is quite a good description of your post's,seems you got that style all locked up.
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You may be paid to post but obviously not to think.
You are paid to post.
I wish. Could use the extra cash.
You say that as if posting Glenn Beck shit means you think for yourself.
LOL
Sorry. That's not the way it works.
What part of FLAKESnews creates flakes are you having a problem understanding.
Perhaps I can help you out.
I think you are the non thinker.
Oh,you think? I was under the impression you just spam propaganda.
That's because you are anti 99% and have not master thinking for yourself well enough to break the grip of brainwashing that the1% corp oligarchs have imposed on you.
You can do it. Just think of your own family. Put them above the needs of the 1%.
He's a classic example of the loyal unquestioning Nazi, which was also a RW Cult just like today's RepubliCon Cult. But let's not ban him, he offers the political newbies, who I have heard sometimes visit here, an abundance of deranged RW zombie beliefs and talking points. Test him with a question that require critical analysis, he attacks!
In other words liberals here say..."Keep spending more money...who cares if we are broke" Well done asshole. That's why we are 16 trillion in debt
Is this really what you do with your free time? Just join forums, create accounts, and attempt to insult people with ignorant comments?
We're 16 trillion in debt because the government is run by Wall Street and Corporate political hacks sucking out cash and keeping us in a DEBT based monetary system and wasting TRILLIONS on wars.
We are in debt because bush-cheney-koch-alec wanted our money
Don't forget all the other people that voted for those wars and have continued to keep us in them. Still in Afghanistan. Still wasting money on defense. Still have a Wall Street government.
Still no reform on the debt based monetary policy creating trillions from nothing and giving it to Wall Street.
How does America GIVE money to Wall Street ?
How much money did America GIVE to corporations - other than banks?
Why aren't we directly lending people money at .01 percent interest instead of just the banks? Why do we continue to support a monetary system that gives unlimited resources to the banks and even fraudulent banks yet nothing for the people?
The Federal Reserve creates money out of nothing... gives it to the banks... the banks keep it on deposit... gain interest... pays huge CEO bonuses... fat cat city... all while the rest of America falls apart.
It's time for a change in monetary policy. We need a system that works for the 99% and not just the 1% that allow the banks to decide our economic destiny.
Kucinich in an awesome video - just one example of many - http://www.youtube.com/watch?v=oUpXDZFtEHw
Permanent bailout state - Matt Taibbi explains - http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104
Trillions to corporations, just via wars alone, and trillions to banks.
Another question that you cant answer ???
"Why aren't we directly lending people money at .01 percent interest instead of just the banks?" IS THAT LEGAL?
Another question that you cant answer ???
"The Federal Reserve creates money out of nothing... gives it to the banks"
GIVES OR LENDS???
What question did I not answer?
"Is that legal?" - reforming monetary policy to adapt to this new system would be legal.
The system is set up to GIVE wall street profits. The profits are made out of money. So yes the Fed gives Wall Street money. Where did they get the trillions from? The new trillions they have did not exist in 1900.
If you think the Federal Reserve's relationship with Wall Street is legit, you should try reading about it. Our monetary policy has been turned into a scam setup and manipulated by Wall Street for Wall Street's profits. And as Dennis Kucinich said "all while the rest of America falls apart. It's time for a fundamental change in monetary policy. We shouldn't be stuck in this debt based economic system for Wall Street."
What I am getting at - if the system is doing legal things, and you don't like it - vote for people who will change it - like Kucinich.
But many here rant about what the fed does - is there anything the fed does that is ILLEGAL ?
If not - tell people to VOTE to change things.
I am an avid Kucinich supporter. I post his press releases on this forum all the time, as an example.
Currently there is no one else supporting real reform in monetary policy. Everyone else, except a few, are fine with the current system giving trillions of dollars to Wall Street.
I think CORRUPTION should be illegal. It used to be legal to own slaves. Sometimes if it's legal - doesn't mean it's not corrupt nor does it mean it should be legal.
Wall Street getting trillions of dollars from monetary policy while the rest of America falls apart - should be illegal
Yea...Bush, Cheny and Koch took all the money. They are hiding under their mattresses. I forgot. Thank you for clearing that up.
You fucking dumb-asses.
they're more likely hiding it overseas in tax havens like Luxemberg or the Caymans.
I didn't see you greedy selfish conservatives complaining when you created the $16T debt w/ $3T in wealthy tax cuts $2T in war spending without paying for it.
It's only when we need money to help the 99% that all of a sudden the deficit/debt is a problem.
So STFU and stop lyin