America Debt Default

[Ross Scott]

Well it's possible I may be wrong about an impending oil crisis with how our economy is being run. If America defaults on its debt, we could have a major economic crisis in just a few weeks, not years!

 

Summary:

 

http://www.reuters.com/article/2011/07/25/us-investment-default-idUSTRE76O22I20110725

 

 

Summary by The Onion (seriously, it's not even a spoof, this is 100% true, except for the direct quotes of course):

 

http://www.theonion.com/articles/congress-continues-debate-over-whether-or-not-nati,20977/

 

 

This is kind of insane and it's going to be an ongoing topic since something similar was happening months ago. It's essentially a game of chicken between the Republicans and the Democrats, with the consequences being an all-out economic disaster if no agreement is reached. I think in actuality there will be some sort of agreement because no president wants his name tied to what would be the biggest economic disaster in American history, even larger than the great depression.

 

Anyway, I'm not exactly sure how to prepare in the event that the US DOES default (either in a week or else later), but I thought this was worth mentioning here. This is absolutely an issue with the ability to change our entire society for a long time.

 

 

EDIT:

 

Here's a good visualization of the kind of money we're talking about:

 

http://www.wtfnoway.com/

[Princess Luna]

Damn it lol I was hoping it would be an oil crises of some sort in a few years, atleast enough time to get a self sufficient farm started lol

 

But, they could let it default, instate martial law from riots and what not, and take control of the country as a dictatorship

 

So its anyones guess as to what they will do :S

[Brad]

I seriously hope that we're not heading where I think we're heading. Why can't they come to an agreement over something this serious!?

Edited July 25, 2011 by Guest (see edit history)

[danielsangeo]

I don't believe that America will default, to be honest. At the extreme deadline, like at 11:59:59, I fully believe the Congress will pull through and do what needs to be done (raising the debt ceiling, whatevs). It might be a half-assed temporary half-measure while the Congress piddles and whines, but eventually, the debt limit will be raised and we'll go on like before.

 

It's just the Repubs playing politics with the debt and, in my opinion, are running in direct contravention of the United States Constitution here. The Dems are bending over backwards to cut spending but the Repubs are crossing their arms like a spoiled child and sticking their thumb in all our eyes by not even giving the tiniest bit of compromise the Dems' way.

 

But that's a discussion for another time and I'll just say this:

We'll be okay. The debt ceiling will eventually be raised as it always has been and we'll go on.

[Ross Scott]

danielsangeo: I think it will be raised, but it's kind of scary we're getting to this point. Also I think whatever last minute solution will be made will just stall the problem rather than address it.

 

The US government almost shut down in April until a compromise was reached with the budget at the 11th hour, but as I understand it, that whole scenario is due to repeat again in October unless we manage to fix things before then.

[ProHypster]

I'm pretty sure you guys will get out of this one way or another.... if not solved with an agreement by august or so??, the government still has too much power and might harass other countries somehow for it's economic benefit.

[BTGBullseye]

It's just the Repubs playing politics with the debt and, in my opinion, are running in direct contravention of the United States Constitution here. The Dems are bending over backwards to cut spending but the Repubs are crossing their arms like a spoiled child and sticking their thumb in all our eyes by not even giving the tiniest bit of compromise the Dems' way.

You have no concept of American government spending if you really believe that.

[danielsangeo]

What makes you say that, BTG?

[Doom Shepherd]

In government terms, raising spending only 5 percent instead of the 10 percent you'd planned on raising it counts as a "spending cut.". In democrats' terms, it counts as a "drastic and unacceptable" cut.

 

It also doesn't help that the dems keep almost reaching a compromise agreement with the reps, then saying "oh, now we're gonna want an additional $400 billion in tax increases over the $800 billion we just got you to agree to."

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.]

--- Barack Obama, 2006

[danielsangeo]

So, let me get this straight, if I can. If you have a family and you have another baby, your expenses go up, right? If your expenses go up, your spending has to go up or you're not being a responsible adult. That is what happens to America. The population of America goes up, the American government, therefore, MUST grow to accommodate that increase. If the government doesn't grow with the population, then they aren't doing their job and being completely irresponsible.

 

This is what the Republicans fail to account for and disingenuously ignore when they complain about "growth of government" and "increasing spending". Obama and the Democrats are trying to cut spending as the Republicans want (this is called a compromise) but they HAVE to increase the revenue (tax increases) that they bring in because, well, the expenses are going up whether you and I like it or not (which the Republicans refuse to compromise on).

 

Paying your bills is not fiscally irresponsible no matter how much the "fiscally responsible" conservatives try to lie and tell you that it isn't.

 

So, tell me this:

What will the Republicans compromise on?

[Ross Scott]

Regarding spending by democrats and republicans, this might clear up some confusion:

 

http://www.nytimes.com/imagepages/2011/07/24/opinion/sunday/24editorial_graph2.html?ref=sunday

 

As you can see there's been a lot of spending over the past decade, however keep in mind these are CHANGES in spending, it includes the spending that was already in place by the former president. So you can add Bush's spending on top of the Clinton administration's and the Obama's on top of Bush's. So more spending was enacted under the Bush administration, but more OVERALL spending has occurred under Obama's since it includes what Bush's added.

 

So which party spent more? It depends on how you define it. If by "more" you mean:

 

1. The DIFFERENCE in dollars spent from the beginning of the term v. the end of the term (or equivalent) = the Republicans have currently spent more.

 

2. The TOTAL dollars being spent during the term (or equivalent) = the Democrats are currently spending more

[Ross Scott]

Also, anyone want to take guesses as to what will happen? I saw this chart listed here:

 

 

If I had to guess, I'd say we'll have the 6+ month extension, but the situation seems kind of tenuous.

 

EDIT:

 

The other option not listed on here is that the republicans compromise more to meet more of the democrats' demands, like allowing Bush's tax breaks to expire, but I think the general consensus is that's unlikely.

[Kyon]

If we do default, I'm going to go to Guam, where my family has power.

 

Edit: But in all seriousness, I hope this all goes good. And I wasn't joking about my above statement. I'm going to Guam, and my family has power. Though there might be trouble there too. In that case, I'm going to take all the gold I can get and move to a place that is in a good economy (independence from American economy). And that my friends, could take me anywhere.

[BTGBullseye]

If we do default, I'm going to go to Guam, where my family has power.

 

Edit: But in all seriousness, I hope this all goes good. And I wasn't joking about my above statement. I'm going to Guam, and my family has power. Though there might be trouble there too. In that case, I'm going to take all the gold I can get and move to a place that is in a good economy (independence from American economy). And that my friends, could take me anywhere.

Mind if I come with you? My Dad was stationed on Guam for a couple years, and my parents would love to return...

[Edgar Howard]

Several economists are speculating that the credit rating for the United States could possibly be reduced even if an agreement is reached to raise the debt limit before next week's deadline. Some say, however, that a downgrade isn't the death sentence several make it out to be. It Seems like every few hours we are assured that this or that compromise was reached, only to have this "deal" broken shortly after. Realistically, the debt ceiling is not the issue here, it will be lifted. Rather, the future budget cuts as conditions to the agreement, are the real obstacle here. Once the negotiators work out the details, there will be a period of time during which analysts debate their impact, possibly creating increased volatility. The proof is here: U.S. credit rating may be downgraded even if debt ceiling not increased

[Ross Scott]

Several economists are speculating that the credit rating for the United States could possibly be reduced even if an agreement is reached to raise the debt limit before next week's deadline. Some say, however, that a downgrade isn't the death sentence several make it out to be. It Seems like every few hours we are assured that this or that compromise was reached, only to have this "deal" broken shortly after. Realistically, the debt ceiling is not the issue here, it will be lifted. Rather, the future budget cuts as conditions to the agreement, are the real obstacle here. Once the negotiators work out the details, there will be a period of time during which analysts debate their impact, possibly creating increased volatility. The proof is here: U.S. credit rating may be downgraded even if debt ceiling not increased

Yes, I've heard that as well, I was looking at some videos on the Wall Street Journal's site about the issue and some investors think America has already lost its AAA rating unofficially. As for the debt ceiling being lifted, I agree that's what will probably happen, but it's still quite uncertain as to what terms that will happen under.

[Doom Shepherd]

So, let me get this straight, if I can. If you have a family and you have another baby, your expenses go up, right? If your expenses go up, your spending has to go up or you're not being a responsible adult. That is what happens to America. The population of America goes up, the American government, therefore, MUST grow to accommodate that increase.

 

I just LOVE bad analogies, and this one... gets a gold star. You have another baby, it doesn't mean that you have to doubhle up on mommies. And if you were doing things right, it doesn't even mean either parent needs a new job or extra revenue. There's this awesome thing called "living within your means" that folks REALLY oughtta try sometime. Sure, maybe it means having a little two-bedroom instead of a McMansion, but it's a lot more sustainable in the long run. And of course the fact that government spending is outpacing population growth AND inflation combined is just... an inconvenient fact we can ignore in this analogy.

 

But let's look at the ACTUAL math, and see if we can't support DSG's position.

IN 1790, the population of the US was 3,893,374.

So it's grown about 100-fold since then.

The Government in 1790, having just assumed the Revolutionary War debt, was in deficit for $75 million. Times 100... hmm, something doesn't add up, there. You multiply by 100, you just add two zeroes. But that would be $7.5 billion, not 14 trillion...

 

Incidentally, the "Progressive" (a word that should always be put in massive sarcasm quotes when used in this context) Caucus (roughly 75 House Democrats) has come out against any form of compromise bill on raising the debt ceiling. "Let us spend without limit, without consequence" seems to be their new mantra.

 

An honest person would have to allow that that attitude is just as obstructionist and counterproductive as that of their opposing numbers among the Tea Party.

 

I won't hold my breath.

 

All that crap said... I get that it's time for some tax reform in this country. But we can do that in ways that don't actually raise apparent rates. Closing a few loopholes and taking out a few pointless giveaways would save us a lot of money. For example, it's past time we acknowledge that ethanol (expecially corn ethanol) is a dead end that does nore to raise food prices and help Big Corn than it does to help the environment, and $6 billion in subsidies a year isn't going to change that.

[Ross Scott]

Good news, it looks like the economy won't be completely destroyed:

 

http://blogs.abcnews.com/thenote/2011/07/obama-boehner-announce-agreement-to-raise-debt-ceiling-avoid-default.html

 

Still have to wait for the house vote though.

[Doom Shepherd]

Good news, it looks like the economy won't be completely destroyed:

 

http://blogs.abcnews.com/thenote/2011/07/obama-boehner-announce-agreement-to-raise-debt-ceiling-avoid-default.html

 

Still have to wait for the house vote though.

 

Passed the House, 269-161. On to Senate.

 

[Ross Scott]

I don't think there will be any trouble in the Senate. It doesn't sound like a plan that will help much economically, but pretty much anything is better than a default.