Skip to comments.Worst Case Scenario on Debt Ceiling is Balanced Budget, Not Default
Posted on 07/30/2011 6:46:48 AM PDT by Kaslin
President Barack Obama, Treasury Secretary Tim Geithner, and many in the media continue to forward the absolute farce that the federal government will default on August 2 if we don’t increase the debt ceiling.
If the government fails to raise the ceiling, the worst-case scenario is a cold-turkey balanced budget, not a default.
The government borrows 40 cents of every dollar it spends, which still leaves the 60 cents of revenue coming in—enough to pay the government’s mandatory bills (including entitlements and the interest payments on the debt).
This scenario isn’t pretty. The government’s discretionary operations would stop, and in order to fund defense, the government might have to partially pay for entitlements through the two trust funds and get some help from the Federal Reserve.
But still, the government will never default unless Geithner and the Obama Administration decide not to use the $2.2 trillion of annual revenue to pay our most important bills.
America faces a financial cliff, but that cliff isn’t from the debt ceiling. It’s from the debt itself. The Obama Administration must stop using scare tactics to force their big-government agenda down the throats of the American people.
Not only has this administration said we face this faux cliff in the debt ceiling, they’ve also implied that conservatives want to push Granny of a cliff by cutting entitlement programs. Considering no serious plan cuts benefits for those over 55, this is another fanciful, faux cliff.
America’s youth face the only real financial cliff in this debate.
The debt is all but literally dragging my generation off a cliff. At $14.3 Trillion, the US national debt would weigh approximately 315 million pounds in 100 dollar bills—the equivalent weight of 32 million golf balls or 600 Air Force Ones.
Those are some heavy shackles. In more graspable terms, by 2020 the interest payments on the debt alone will equal around $5500 per taxpayer. Paying this interest, not even the principle, on our nation’s credit card will result in a big enough tax increase to severely damage our economy in the coming decade.
Failure to enact serious entitlement reform will doom my generation to fiscal servitude to the government.
Everyone except for the far left and the White House realizes that Medicare and the other entitlements are the largest drivers of our debt. While defense and discretionary spending can certainly be rolled back, entitlements and interest payments will consume all projected revenue in a little over 10 years.
At this rate, my generation will never see a dime of Social Security or Medicare. Yet, we’ll still be saddled with the yoke of the ever-growing national debt which financed these programs for older generations.
Age supposedly brings long-term insight, but at age 21, I would rather see our government go cold turkey for a couple weeks to figure a real solution to this debt problem than to keep spending my generation into future oblivion.
Ideally, our leaders will come up with a solution before we hit the debt ceiling, but if not, the worst thing that happens is a temporary shutdown for some of Washington’s bureaucracies. It won’t be the end of the world.
In fact, Geithner’s theory that the global markets will collapse from a partial US government shutdown is ludicrous. The last time the US government had shutdowns in 1995 and 1996, the Dow and S&P 500 went up both times.
Precipitously (and temporarily) cutting spending to balanced levels will inevitably sting, but Americans should ask ourselves: How did we get fooled into fearing a balanced budget?
It’s time for the Obama Administration to act like adults and protect America’s younger generations. Instead of threatening a fake financial Armageddon, our government needs to look out for all of America’s vulnerable populations, including young people.
Just in time for Ramadan.
As I posted a week ago a balanced budget is upon us. That is why democrat heads are exploding. If the republicans blow this opportunity, and they are doing everything possible to do so, we will never have a chance again to balance the budget. It is now or never...and never will win.
They shoved Obamacare down our throats.Shove CCB down theirs. Pass CCB or they get cold turkey balanced budget now!.
Dims are incapable of reforming entitlements because to do so would leave them with NO constituants and they would rather see the U.S. destroyed than voluntarily do the right thing. Anyone think Obama, Reid, Pelosi has what it takes to reform Congress and the Administration?
I didn't think so.
Can we get this word out? It’s put so simply here, would relieve a lot of minds.
When the bill comes back from the Senate, table it, filibuster it or write up a new bill that will work! Play the same game as the Senate! Don’t let it go to a VOTE!
No such thing as the filibuster rule in the House.
And that, right there, is why the Dems (and their propaganda arm the "media") are all in a tither over the debt ceiling "crisis".
I agree except for that title. Am I missing something about the title?
Young people need to wake up. Their futures are being severely damaged by the indescribably massive government debt.
For decades, by censoring America's founding ideas of liberty from textbooks and public discourse, so-called "progressives" have robbed youth of their birthright of freedom in order to enslave them to a large, powerful government. It is time for youth to rediscover the ideas of 1776, assert their own independence, and reject the counterfeit ideas of Obama and the Democrats.
America's older generations inherited a land of liberty because a group of learned individuals over 200 years ago were willing to put their lives, property and sacred honor on the line on behalf of liberty for individuals and and, later, through their written constitution, they placed strict limitations on the persons whom they would elect to serve them in government.
Today's citizens who loosely call themselves the Taxed Enough Already party (that's party with a little 'p') people (named for their ancestors who rebelled against the King's abusive taxation)--these brave citizens are intelligent, resourceful and have studied the ideas of liberty. They understand that America can no longer be free, if the philosophy of Mao/Marx/Lenin and Keynes is allowed to prevail over the philosophy of Washington, Adams, Madison, Jefferson and Adam Smith.
Can anyone cite any authority on either economics or freedom who is more eloquent than Thomas Jefferson on the question of the ideas of liberty or of the consequences of debt and deficit?
"To preserve [the] independence [of the people,] we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude. If we run into such debts as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in the twenty-four, give the earnings of fifteen of these to the government for their debts and daily expenses, and the sixteenth being insufficient to afford us bread, we must live, as they now do, on oatmeal and potatoes, have no time to think, no means of calling the mismanagers to account, but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers." --Thomas Jefferson to Samuel Kercheval, 1816. ME 15:39
"I deem [this one of] the essential principles of our government and consequently [one] which ought to shape its administration:... The honest payment of our debts and sacred preservation of the public faith." --Thomas Jefferson: 1st Inaugural, 1801. ME 3:322
"I sincerely believe... that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." --Thomas Jefferson to John Taylor, 1816. ME 15:23
"[With the decline of society] begins, indeed, the bellum omnium in omnia [war of all against all], which some philosophers observing to be so general in this world, have mistaken it for the natural, instead of the abusive state of man. And the fore horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression." --Thomas Jefferson to Samuel Kercheval, 1816. ME 15:40
The Democrat Party's control of the Congress since 2006, and of the Presidency for the last 3 years, along with any Republicans who have been coopted to go along with the Democrats' policies have brought us close to the kind of "wretchedness and oppression" spoken of by Jefferson.
Thank God for technology and the so-called TEA party movement! Else, future generations would never know that there were those in 2012 who stood for liberty, not "servitude."
“I agree except for that title. Am I missing something about the title?”
No, you just really have to read the article to figure out what the short title is trying to convey, and it doesn’t do a good job if it.
Article made stop and think, if my household revenue is limited, and my borrowing capacity is limited, I just pay for my necessities and prioritize spending, which means I cut however much of “discretionary spending” I need to in order to make the budget balance. The feds could do the same.
From the article: “...the government might have to partially pay for entitlements through the two trust...”
This is actually the key to the whole matter, in my opinion.
Cutting $140 billion from a $310 billion August budget is just too large to even consider. Even the author admits that it will only work for a couple of weeks.
However, if the two Trust Funds (Social Security’s and Medicare’s) are not used to just “partially pay for entitlements,” but rather are used exclusively to pay all of the August SS/Medicare expenses, they would then be tapped for about $100 billion that month.
Then the entire $170 billion of tax receipts (including SS/Medicare receipts) could be used to address the remaining $210 billion of expenses outside of SS/Medicare. This is a budget shortfall of “only” $40 billion, instead of $140 billion.
I could live with the federal government being on a $40 billion a month diet all the way to the next election. Total savings would be about $600 billion, and they would be real savings.
In the comment above, I put forth a “solution” to this debt ceiling mess that I think most Conservatives would be happy to see implemented (even if that’s not obvious at the outset.)
Yet, I can generate no discussion of it, no matter where I post it. Why is that?
1. Too complicated to wrap your brains around it?
2. Don’t want to raid the Trust Funds?
3. Want the government to downsize all $140 billion each month (even though that just won’t happen)?
4. Don’t think the Trust Funds have any assets to use this way?
5. Don’t believe $40 bn a month can be cut either?
6. Other? (Feel free to be brutally honest.)
Please, I’m curious. What stops people from even wanting to consider how this would work? After all, if Congress does nothing, it could very well be what happens.
“”Age supposedly brings long-term insight, but at age 21, I would rather see our government go cold turkey for a couple weeks to figure a real solution to this debt problem than to keep spending my generation into future oblivion””
Is this writer really only 21? Excellent writing and analysis if he is. It makes more sense than anything uttered by any congress critter in the last month! OR anyone in the administration for that matter but of course, they haven’t been telling the truth anyway so how could they make sense?
Only problem I see is his reference to “pay from the two trust funds.” I hope he really doesn’t believe there are ANY trust funds left in DC....
“”Yet, I can generate no discussion of it, no matter where I post it. Why is that?
1. Too complicated to wrap your brains around it?
2. Dont want to raid the Trust Funds?””
Probably because we can’t wrap our brains around trust funds that don’t exist.
The trust funds most certainly do exist. And not only do they exist, but they could possibly be used to our advantage in this situation, but no one apparently bothers to take the time to read what I’m proposing be done.