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Why Won't This Debt Idea Work?
http://www.freerepublic.com ^ | 7/14/2011 | bolobaby

Posted on 07/14/2011 8:47:07 PM PDT by bolobaby

Victory in the debt ceiling battle seems so simple to me. Can someone tell me where I'm wrong?

Here's my idea:

1) Immediately draft a short, simple bill that states "In the event that the United States debt limit is reached, the treasury's first obligation is to use incoming revenue to pay our existing debt obligations." (That is, the interest on the existing debt.)

Since it's a spending bill, it should be presented in the House. Since our continuous federal revenue greatly exceeds our interest obligations, a bill like this would ensure that we could not default. If it passes Congress, would the President be stupid enough to veto it - basically announcing to the world that he intends to default? If it did pass, it would take the "world crisis" and "default" question off the table. If it didn't pass, it would be the most tremendous tool to use against any democrats who voted against it. After all, they would be signalling to the world that they want to destroy our credit rating.

2) Draft and present another bill that names Social Security as the second priority item that *must* be paid.

While I am all for Social Security reform, I think this bill would be smart since SS withholdings are not supposed to be part of the general fund. Supposedly, SS is running a "surplus." Basically, the SS withholdings exceed the current SSN outlays. Then Congress raids that money to pay ACORN, Planned Parenthood, and other BS.

BUT, if this bill was presented, it's another no-win situation for the democrats. If it passes, the "Grandma" tactic is off the table. If it doesn't pass, it's the greatest political weapon against democratic opponents. Plus, it only reinforces what those funds are supposed to be for *anyway*, so I think we should single it out.

(There may be logic to ensuring soldier's paychecks also get paid - not the entire defense budget, mind you, but the paychecks. I'm not presenting that here because I'm trying to keep this simple.)

With these two bills, Republicans could just let the debt reach it's limit and do nothing. At that point, the president is forced to shut down other functions of gubbermint, but the two "crisis" items are off the table. By strategically choosing which parts of gubbermint shut down, Obama could cause a crisis, but it would also force him to play his hand.

Imagine, for example, if he decided to withhold soldiers' paychecks. Now imagine if he withheld their paychecks but Congress and the White House staff still got paid! Ooooh.


TOPICS: Chit/Chat
KEYWORDS: budget; debt; default; ryan
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Why wouldn't this work?

BTW - when the president said he couldn't guarantee that SS checks would go out, the *immediate* follow-up question should have been, "What about the White House staff? Will they get paid? Can you guarantee that? Is there any condition under which Grandma would not get her check but a staffer of yours would?"

1 posted on 07/14/2011 8:47:13 PM PDT by bolobaby
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To: bolobaby
Rush proposed this Wednesday--pass a bill that said "in the event of a shortfall, the treasury would pay interest on the debt, SS, veterans' and military benefits, and disability benefits first."

There is no reason not to, except that apparently every member of the leadership from Boehner and Cantor and McConnell on down to the janitor, is corrupt and a game player.

Otherwise no problema.

2 posted on 07/14/2011 8:53:20 PM PDT by hinckley buzzard
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To: bolobaby
The present level of spending is 40% new debt and 60% revenues such as taxes.

If we cut spending by 40%, then we should reflect upon the implications of the equation:

GDP = C + I + G + NE

where C is consumption, I is investment, G is government spending, and NE is net exports.

Cut spending by 40% and GDP declines sharply. If you like the present recession, you'll just love the greater depression.

There is no good solution. No matter what happens, it will hurt.

3 posted on 07/14/2011 8:53:23 PM PDT by neutrino (Globalization is the economic treason that dare not speak its name.(173))
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To: bolobaby

I am wondering why there even is a debt limit. Where did it come from? What is its purpose. Why all this insanity over it. I say get rid of it and fight it out on the House and Senate floors. WTF with all these secret meetings? This whole thing STINKS!


4 posted on 07/14/2011 8:55:31 PM PDT by screaminsunshine (Socialism...Easier said than done.)
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To: bolobaby

Before any benefit checks are printed or interest is paid, Congress and the POTUS loses their pay until they meet the budget. Same as us lowly little taxpayers have to do each month with our own home budgets.


5 posted on 07/14/2011 8:57:16 PM PDT by bgill
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To: neutrino

Yeah - I’m fully aware that a spending cut causes major pain in GDP. I’m ready for the country to suffer for that. Because, honestly, we have to if we want to ever get back to a proper private economy.


6 posted on 07/14/2011 9:07:25 PM PDT by bolobaby
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To: hinckley buzzard

Yeah, sad but true analysis, it would seem...


7 posted on 07/14/2011 9:08:22 PM PDT by bolobaby
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To: bolobaby
Senator Toomy is way ahead of you. See S.163

Full Faith and Credit Act - Requires the authority of the Department of the Treasury to pay the principal and interest on debt held by the public to take priority over all other obligations incurred by the government in the event the federal debt reaches the statutory limit.
8 posted on 07/14/2011 9:08:42 PM PDT by sefarkas (Why vote Democrat Lite?)
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To: neutrino

Oh please.

Government spending is a net NEGATIVE for the economy. They suck the blood from the economy. They produce NOTHING.

Cut 40% and watch the economy bloom.


9 posted on 07/14/2011 9:10:06 PM PDT by GeronL (The Right to Life came before the Right to Happiness)
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To: bolobaby

It would work as long as we don’t care about funding any defense spending except military paychecks, don’t care about funding the border patrol, federal prisons, FBI, etc.

I may be wrong (I’d love see figures if someone has them from a reliable source) but what I’ve heard is that interest payments, SS, Medicare and Medicaid, Military paychecks and Veteran’s benefits would be about all that the revenue would fund.


10 posted on 07/14/2011 9:12:18 PM PDT by sometime lurker
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To: bolobaby

It won’t work because you are thinking bonds are like credit cards. They are not. I have posted this on 20 boards in the last few days, it is becoming irritating to deal with people who dont understand the first damn thing about bonds.

Bonds have two components. There is the interest which is called the coupon. For your $1000.00 bond you get $12.50 a quarter. But at the end of the term which now a days is typically two years you must repay the principle, $1000.

I August we have $474 Billion in principle due
We pay this by ‘rolling over ‘ this debt. That is using new debt to part the old. Without new borrowing we will have to pay this out of taxes. Taxes for august might hit $175 Billion.
Leaving $300 Billion unpaid.

Default.

People doing stupid analysis saying we can pay this based on their lack of understanding of bonds are idiots.

No debt limit increase equals default.

A nyone who doesn’t admit this is an idiot.


11 posted on 07/14/2011 9:13:02 PM PDT by Jack Black ( Whatever is left of American patriotism is now identical with counter-revolution.)
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To: bolobaby

It won’t work because you are thinking bonds are like credit cards. They are not. I have posted this on 20 boards in the last few days, it is becoming irritating to deal with people who dont understand the first damn thing about bonds.

Bonds have two components. There is the interest which is called the coupon. For your $1000.00 bond you get $12.50 a quarter. But at the end of the term which now a days is typically two years you must repay the principle, $1000.

I August we have $474 Billion in principle due
We pay this by ‘rolling over ‘ this debt. That is using new debt to part the old. Without new borrowing we will have to pay this out of taxes. Taxes for august might hit $175 Billion.
Leaving $300 Billion unpaid.

Default.

People doing stupid analysis saying we can pay this based on their lack of understanding of bonds are idiots.

No debt limit increase equals default.

A nyone who doesn’t admit this is an idiot.


12 posted on 07/14/2011 9:13:16 PM PDT by Jack Black ( Whatever is left of American patriotism is now identical with counter-revolution.)
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To: screaminsunshine
-- I am wondering why there even is a debt limit. Where did it come from? --

It's purely a creation of Congress. Good description at http://fpc.state.gov/documents/organization/105193.pdf

13 posted on 07/14/2011 9:15:24 PM PDT by Cboldt
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To: Jack Black

Very clear and succinct. Thanks.


14 posted on 07/14/2011 9:16:00 PM PDT by sometime lurker
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To: bolobaby

better include the military and medicare along with social security.


15 posted on 07/14/2011 9:20:19 PM PDT by greeneyes (Moderation in defense of your country is NO virtue. Let Freedom Ring.)
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To: bolobaby

H.R.728
Latest Title: To require that the Government give priority to payment of all obligations on the debt held by the public, payment of Social Security benefits, and military funding in the event that the debt limit is reached.
Sponsor: Rep Stutzman, Marlin A. [IN-3] (introduced 2/15/2011) Cosponsors (None)
Related Bills:H.R.568, S.259
Latest Major Action: 2/15/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.
..............................

H.R.568
Latest Title: To require that the Government give priority to payment of all obligations on the debt held by the public and payment of Social Security benefits in the event that the debt limit is reached.
Sponsor: Rep Heller, Dean [NV-2] (introduced 2/9/2011) Cosponsors (None)
Related Bills:H.R.421, H.R.728, S.163, S.259
Latest Major Action: 2/9/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

..............................
And this one is in committee in both House and Senate

H.R.421
Latest Title: Full Faith and Credit Act
Sponsor: Rep McClintock, Tom [CA-4] (introduced 1/25/2011) Cosponsors (101)
Related Bills:H.R.568, S.163, S.259
Latest Major Action: 1/25/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

Full Faith and Credit Act - Requires the authority of the Department of the Treasury to pay the principal and interest on debt held by the public to take priority over all other obligations incurred by the government in the event the federal debt reaches the statutory limit.
..................

But nothing is on the floor.


16 posted on 07/14/2011 9:21:35 PM PDT by mrsmith
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To: hinckley buzzard

No. You and Rush are totally wrong. If we only paid debt in August we would be $300 B short of what we needed.

Talk Radio is a ghetto of morons.p


17 posted on 07/14/2011 9:21:35 PM PDT by Jack Black ( Whatever is left of American patriotism is now identical with counter-revolution.)
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To: hinckley buzzard

No. You and Rush are totally wrong. If we only paid debt in August we would be $300 B short of what we needed.

Talk Radio is a ghetto of morons.p


18 posted on 07/14/2011 9:22:00 PM PDT by Jack Black ( Whatever is left of American patriotism is now identical with counter-revolution.)
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To: Jack Black; sometime lurker

Uh...

I’m not so sure you are right. Let’s play with numbers.

Say our debt limit is $1000. We have it maxed out.

Let’s also say I earn $100/mo. And, just for the sake of argument, let’s say that the interest on my $1000 debt is $25.

In August, $400 worth of the principle comes due. OK, fine. I pay out that $400 worth of principle, reducing my total debt by $400. Now I am at $600 worth of actual debt *with a $1000 debt limit.*

It’s a shell game.

It doesn’t matter whether or not you sell NEW DEBT totaling $400 first or second, at the end of the day, you still have $1000 worth of debt. So you can pay that old debt principle with new debt. It doesn’t affect the debt limit.

The revenue still pays the $25 coupon on $1000, leaving $75 surplus for other expenditures.


19 posted on 07/14/2011 9:30:04 PM PDT by bolobaby
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To: Jack Black

An overlooked fact. But...

Every dime paid off frees up a dime to borrow.
Only the interest is NEW debt.


20 posted on 07/14/2011 9:37:41 PM PDT by mrsmith
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