Is debt limit ceiling a game of chicken or chicken liitle saying the sky is falling

[Roosveltrepub]

Bachmann: 'Scare tactics' in debt ceiling issue



By DOUGLASS K. DANIEL


The Associated Press

1:31 p.m. Sunday, June 26, 2011

WASHINGTON — On the eve of her entry into the 2012 GOP presidential race, Rep. Michele Bachmann said "scare tactics" are being used by those warning of an economic calamity unless Congress raises the government's borrowing limit by an August deadline.

The three-term congresswoman from Minnesota said the U.S. could avoid a default by paying only the interest on U.S. obligations while lawmakers work on a deal to cut spending dramatically as part of a new debt ceiling.

Such an approach has been derided as unworkable by Treasury Secretary Timothy Geithner.

Bachmann, a tea party favorite, planned to kick off her campaign Monday in her Waterloo, Iowa, her birthplace. The Iowa Poll released Saturday night by The Des Moines Register showed her in a statistical tie with Republican rival Mitt Romney among likely caucus-goers.

In an appearance Sunday on CBS' "Face the Nation," Bachmann said she found the poll gratifying but noted that the race for the nomination was just beginning.

The poll showed Romney with 23 percent support and Bachmann with 22 percent among those who said they were likely to vote in the nation's first Republican nomination contest.

The top five included former House Speaker Newt Gingrich and Rep. Ron Paul of Texas with 7 percent each and former Minnesota Gov. Tim Pawlenty with 6 percent.

President Barack Obama planned separate meetings Monday with Senate leaders as negotiations on trimming spending and raising the debt ceiling moved into a new stage. Talks among lawmakers of both parties ended last week when Democrats and Republicans reached an impasse over whether there should be any role for additional revenue in reducing the deficit.

Officials say the nation's borrowing will exceed its $14.3 trillion limit on Aug. 2 and that economic shockwaves around the world would result from the first financial default in U.S. history.

"It isn't true that the government would default on its debt," Bachmann said on CBS. She later added, "It is scare tactics."

Geithner, she said, "can very simply pay the interest on the debt first, then we're not in default."

Geithner has dismissed the idea that the U.S. could avoid a default by just paying the interest on the national debt and picking which bills to pay, contending that even trying to do so would roil financial markets and make it more expensive to finance what the government does owe.

"There is no responsible path that avoids default, avoids catastrophe to the economy, that has us decide as a country, we're going to stop paying all our obligations so we can pay interest," Geithner told the House Small Business Committee last week. "It doesn't work. It's not workable. And it will not relieve Congress of the obligation of raising the limit."

Bachmann said she wasn't willing to allow the government to keep borrowing money and putting the country into a worse state.

"One year from now, we'll be back, having this same conversation," she said. "That cycle has to stop."

Although she once suggested that ending the minimum wage would be a boon to employment, Bachmann declined to say she would advocate that position as president and instead would ask a group of economists to consider the idea.

"I think everything needs to be on the table right now, every part of government," she said.

___

June 26, 2011 01:31 PM EDT

Copyright 2011, The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

I am not a finance expert but if the interest on the debt alone is 20 percent of our expense and we paid that first would that be enough to prevent future debt from costing far more? I would think it unlikely we would be able to borrow at the rates we do now and it would be far more likely the extra interest payments going forward would erase all savings It's not like we are going to redesign entitlements over the summer so beneciaries recieve far less is it? I also think refusing to even close tax loopholes in the name of not raising taxes is BS. Why should any one group of individuals or a highly profitable industry get special tax breaks when we are saying we want to be serious on debt?
If we do default will that mean our armed forces won't get paid or recieve new equipment? Tax revenue won't pay the interest, pay the military, pay suppliers, pay social security checks, pay anyone working for the goverment, and pay for medicare.
Even if all we paid was military, entitlements and interest, homeland security, border security, any disaster/flood relief and shut everything else down wouldn't we be short?

I think Congresswoman Bachmann as a former tax attorney has to know enough about finance to know what she is saying isn't true.

Seems to me it is really a game of chicken and if congress wants to save money don't they pass a budget? It seems wrong to pass a budget then refuse to pay for it.

[gunnut]

I am not a finance expert but if the interest on the debt alone is 20 percent of our expense and we paid that first would that be enough to prevent future debt from costing far more? I would think it unlikely we would be able to borrow at the rates we do now and it would be far more likely the extra interest payments going forward would erase all savings It's not like we are going to redesign entitlements over the summer so beneciaries recieve far less is it? I also think refusing to even close tax loopholes in the name of not raising taxes is BS. Why should any one group of individuals or a highly profitable industry get special tax breaks when we are saying we want to be serious on debt?

I agree whole-heartly. Flat tax for all. Remove tax breaks and subsidies for businesses large and small. End ethanol subsidies. End green energy subsidies. And what is it with the waiver on Obamacare?

If we do default will that mean our armed forces won't get paid or recieve new equipment? Tax revenue won't pay the interest, pay the military, pay suppliers, pay social security checks, pay anyone working for the goverment, and pay for medicare.
Even if all we paid was military, entitlements and interest, homeland security, border security, any disaster/flood relief and shut everything else down wouldn't we be short?

All current creditors will still be paid. Social security checks will keep coming. Our soldiers will be paid at normal rate. The only thing different if we fail to raise the debt limit is that we will not be able to borrow more money. That means drastic cuts in "non-discretionary" spendings.

I think Congresswoman Bachmann as a former tax attorney has to know enough about finance to know what she is saying isn't true.

Seems to me it is really a game of chicken and if congress wants to save money don't they pass a budget? It seems wrong to pass a budget then refuse to pay for it.

What is the point of a debt ceiling if we keep raising it whenever we get close to it?

[Roosveltrepub]

I agree whole-heartly. Flat tax for all. Remove tax breaks and subsidies for businesses large and small. End ethanol subsidies. End green energy subsidies. And what is it with the waiver on Obamacare?



All current creditors will still be paid. Social security checks will keep coming. Our soldiers will be paid at normal rate. The only thing different if we fail to raise the debt limit is that we will not be able to borrow more money. That means drastic cuts in "non-discretionary" spendings.



What is the point of a debt ceiling if we keep raising it whenever we get close to it?

I agree what is the point of a debt celing since congress already approved all spending? Is it to threaten to destroy full faith and confidence in american debt so our interest payments skyrocket and the dollar tanks driving oil prices for us much higher? Oh and where do you get the math that just discretionary spending stops and are you for ending border security and furloughing the fbi and stopping all federal permitting for any type of work and the jobs that will effect?

[Chunder]

I've been of the opinion that debt ceilings make for slack policy making, and continually pushing the boundaries. Having heard many argument about the debt only being 'x percentage of GDP' time and again I can't help but feel such arguments are only assisting on weakening 'dept ceilings' - of which any politician or party with 'conviction' or weak budgetry constraint can manipulate citing budget shortfalls or otherwise.

That and it is always used as an election score card. Why not just get rid of it and build a reserve? I admit to political naivity on the last point.

[gunnut]

I agree what is the point of a debt celing since congress already approved all spending? Is it to threaten to destroy full faith and confidence in american debt so our interest payments skyrocket and the dollar tanks driving oil prices for us much higher? Oh and where do you get the math that just discretionary spending stops and are you for ending border security and furloughing the fbi and stopping all federal permitting for any type of work and the jobs that will effect?

Once again, failing to raise the debt ceiling will NOT affect current interest and debt payment by the United States federal government. Those are NON-discretionary spending, just like Social Security and Medicare. When we have to cut NON-discretionary spending, it will be the military, future Social Security, and Medicare obligations first before we default on interest and debt services.

The United States government WILL NOT default on interest and debt services.

[DOR]

Greetings from Hanoi!

The US has already been put on the rating agencies' watch list, which is costing tens of billions in extra interest. That money is no longer available as part of the package of spending reductions. As long as we continue to play games, the cost goes up. This isn't an academic exercise; it costs real money to refuse to pay one's bills, just like the extra hit on your credit card when you miss a payment.

If Ms Bachmann is serious about "everything on the table" she should start putting pressure on her colleagues to accept defense cuts. And, if she is serious about it, she should lay out her plan for slashing Social Security and Medicare benefits.

After that, if she still has a campaign left, I will be very impressed.

[Laser]

I'd like to see them freeze the limit, terminate every single discretionary spending bill, and kick every single person OFF unemployment, all at the same time. On the same day even. Then we'll see some economic activity.

I guess it's a good thing I'm not the President.

[Doktor]

Freezing the limit to a certain amount is plain wrong. What if someone froze the limit to 1 bil 150 years ago?

Anyway with current GDP at 14,12 tril it's over 100% of annual GDP which is fairly high by any standard.

[Laser]

What's wrong with it?

In fact, I'd go a step further, and repeal the Article of Constitution the authorizes the Fed to incure debt of any kind, except in time of War or National Emergency.

[Doktor]

Well, the best case scenario is to have 0 debt.

But is it possible and sustainable? I remember Ceausescu wanted to clean Romania's debt, just to see his regime collapsed few months later ;)

[Laser]

Well it raises all kinds of 'what if questions'. The first one that comes to mind is, how do you compete against another country that DOES use debt to finance domestic or international operations? Then it would be O.K. to declare a national emergency, and issue debt for that purpose. I don't have a problem with individual, or corporate debt (carefully regulated), but this catastrophic, irresponsible, automatic debt machine that the Fed has become, is unacceptable to me.

[DOR]

Well, the best case scenario is to have 0 debt.

Not so.

Say you want to build a bridge to connect with another area, and the expected benefits over the life of the bridge are very large. To pay for the bridge, you plan to charge a toll.

Now, in a "all debt is bad" world, that bridge would never be built until every last dime required, inflated over the time it takes to gather the money, is sitting in youir hands. And, all that money is doing nothing except collecting a bit of interest.

Alternatively, you could would borrow the money, build the bridge and pay the loan and interest out of the earnings on the tolls. Once the bridge is built, all the non-toll benefits begin to pour in.

The basic idea is that long term benefits and long term costs go together. Borrowing to pay salaries isn't a good idea, but borrowing to build infrastructure (schools, hospitals -- things with long-term benefits) is a terrific idea.

[Laser]

A very good example of the use of 'good' debt. Here's another. The Eisenhower administration building the interstate highway system. It started out as a make work project to relieve post war unemployment. This was good, in that it increased the productivity of the national transportation system. It also stimulated the demand of the American public to buy new cars and travel the country.( Can you say 'Road Trip'!) Simply put, for every dollar that was invested, more than a dollar was recovered (like your bridge). A value was created.

Now here's an example of 'bad debt'. The Bush and Obama administrations use debt to pay for millions of Americans to sit at home and not work, while at the same time, giving billions of dollars to banks and financial institutions, thereby shifting the debt from the banks to the taxpayer. No value created.

I guess that's the difference between an 'investment' and a 'bailout'.

[DOR]

Now here's an example of 'bad debt'. The Bush and Obama administrations use debt to pay for millions of Americans to sit at home and not work, while at the same time, giving billions of dollars to banks and financial institutions, thereby shifting the debt from the banks to the taxpayer. No value created.

I guess that's the difference between an 'investment' and a 'bailout'.

So, your solution would be (a) f*ck 'em if they can't afford groceries; and (b) let the global financial system go down the crapper?

Not my chosen set of policy options.

[Laser]

I'll take (b) first because that's the easiest- The 'global financial system going down the crapper', is a myth, perpetrated by (guess who) global financiers.
I suggest the following would have been better.

The Fed Govt. should have invested all stimulus monies (later to become Govt. debt) from the bottom. Lump payments given directly to American households. They would put the money into their bank account, (solving the bank liquidity problem). Then they would have monies to pay their mortgages, ( putting a floor in the housing market) and would have kept demand from falling off a cliff ( softening the unemployment problem). So the stimulus would have moved UP through the economy, and at a much faster rate, than trickle down.
At the same time, the big, poorly managed banks and wall street firms would have gone bankrupt. The LAW is already in place for this to happen. Every one of THOSE guys would have lost their job, ( of course not as devastating an unemployment picture, as they would be forced to sell their luxury cars and million dollar houses to make ends meet). And, almost overnight, thousands of newly graduated MBA's would have stepped into the picture to start new, (debt free) investment houses and small banks. Everything " too big to fail" would have failed; and new ' more conservative, less indebted, and better managed, smaller operations would be allowed to flourish. The market would have recovered, just as it always does, with capitalist ideals intact. Instead of the Govt. sponsored abomination we have now. And all the debt would be in the hands of the people who caused this problem, instead of the low income guy that is going to have his taxes raised, to bailout the ineptitude. That's my short answer,Respectfully
As for (a)- I'll ignore the demagogary. No disrespect was intended, on my part. Pure Economics.
Yes, many people would have become unemployed. But LESS in number, FEWER of the most vulnerable, and for a shorter period of time. (Please remember that people buy groceries with food stamps, not unemployment checks). And, come Dec. 2011, they are going to be forced to rejoin the employment roles anyway. They have already been on the dole for 99 weeks. They are just putting off the inevitable. Of course, with all these big, stupid, insurance companies, investment houses and bailed out banks still in the picture, and still making huge profits, it will be more difficult for them to compete. Very sad.