Skip to comments.Why Won't This Debt Idea Work?
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.
No. It is Mr. Black who is totally wrong.
Bolobaby is correct. Paying off maturing bonds with new bonds can be done within the ceiling limit.
You issue a new bond to retire the maturing bond. Thus, there is no net change in the outstanding debt total.
A higher debt limit is only needed if spending on programs is going to be more than incoming revenue. We have the option of cutting spending so it doesn’t exceed revenue. The debt ceiling would, if left unchanged, become a defacto “balanced budget” requirement.
Default on our debt would only occur if the Administration chooses not to pay interest as it comes due.
Mr. Black is incorrect. The legion of those trying to explain the concept of rolling over the debt without going over the ceiling to him cannot break through his barricade of arrogance.
There need be no delay at all.
The US Treasury is continually issuing new bonds to cover maturing bonds. There is no element of surprise involved—the Treasury knows well in advance which bonds are maturing on which dates and prepares to issue new bonds to coincide with the maturity dates. This action does not increase the total debt and could not, by itself breach the ceiling.
What breaches the ceiling is issuing new bonds for new spending.
Obama will never sign such a bill because it would deny him the scare tactics of default and Granny not getting her SS check. You can bet the Dims in both Houses have instructions to bury these bills and make sure they never reach his desk.
Yes. We passed the point of no return some time ago.
As for those who expect private consumption and investment to take up the slack quickly....I suggest they dispose of the drugs they're consuming before the cops notice them.
Yes, that's the official definition of Gross Domestic Product.
But, I contend it should be:
GDP = C + I + NE as governmental expenditures don't contribute to real growth.
Jack - See this is where I don’t think you quite get it.
Technically you are correct. *If* this game was exactly like the credit card example you gave, we would default, But it’s not.
Why? Because the U.S. government has a power that a normal consumer does not have. The U.S. government can *print money*. Printing money is NOT borrowing. It only affects the value of the dollar.
So - follow me here - the U.S. government can PRINT the money needed to cover the principle payments without incurring new debt. Then they SELL new debt without going over the debt limit. Then *remove* the money obtained from the debt sale from the supply so as to NOT dilute the dollar.
In the end, it is a zero sum game. And it could be executed without roiling markets.
See, I think you are thinking the government is subject to the same rules as a normal bloke with his bank account. It’s not.
You are right about one thing: we are broke. We are living on debt. In that way, it’s just like check kiting because there really is no “value” (money) there to pay the bill. It’s just that the government doesn’t have to worry about that minor temporary annoyance because they can just print the stuff.
What a well thought out convincing argument. Are you honestly saying that 'G' exists in a vacuum having no effect on C, I or NE? You have fallen for the Keynesian fallacy of spending oneself to properity. You have to define what you mean by 'quickly' (which no one actually claimed, but you threw in as a straw-man). Would it be immediate? Probably not, but, released from the bonds of regulation and taxation, this economy would take off. And surprisingly soon. Besides, as was pointed out, it could be argued that government spending should not be included in the first place, since it can only spend what it takes from the economy in taxes, borrowing or inflation. So, even if the nominal GDP figure went down, therefore meeting the definition of a recession, the economy would actually be better off (unless your a government moocher or looter).
The assertion does not have support in literature. While the Austrian school contends that increased debt produces diminishing growth over time, there is no basis for the revised equation that removes government spending from the calculation.
If we eliminate the "G" in the equation, then we suppose that government ceases to exist. That includes the military. Is this your position?
Huh? If I don't include fried peanut butter and banana sandwiches in the equation, does that mean they don't exist? No, just that Elvis' gastro-pleasures don't add to the strength of the economy. You pick the military to try to make it sound like I don't care about our troops so as to interject emotion into the argument. Just like your strawman and ad hominem arguments, it is the refuge of those without a leg to stand on. However, even your supposed point, taking wealth created by the private sector to support a military doesn't add to the economy, because, and I will try to use small words, government (sorry, that one has three syllables) does not create wealth, it takes it.
That has to be one of the most amusing posts I have read in quite some time. Thank you for the chuckle.