David Stockman on the debt ceiling

[maxx]

http://thedianerehmshow.org/shows/20...t-negotiations

Stockman poo poos the Aug. 2 deadline.

http://globalpublicsquare.blogs.cnn....e-u-s-economy/

[Jimaz]

Robert Reich:

When consumers are pulling away from spending, when businesses are not going to make new investments, they're sitting on $1.9 trillion. It's not a problem of businesses not having access to capital or the money. They're not going to build new facilities or create new jobs without customers.

So you've got the private sector in a kind of paralysis right now. This is when the public sector has got to fill in the gap....

There's that $2 trillion figure again. Every time I hear that I can't believe there isn't something more constructive to do with it. It's just sitting there idly on the sidelines. Tsk, tsk, tsk.

[maxx]

The bankers are paying themselves quite generously. What do they need to loan money for? Millionaires can afford to wait this out especially when Congress is being so generous to them.

[oladub]

The bankers are paying themselves quite generously. What do they need to loan money for? Millionaires can afford to wait this out especially when Congress is being so generous to them.

maxx, I actually agree with you. Since the bankers have a fiduciary responsibility to make a profit for their shareholders and accepting federal money is a means to that end, they might be pigs but they are not entirely at fault. The greater fault lies with all the economic traitors in Congress and recent presidents who have structured bailouts to make it possible for bankers to behave the way they do with public money at the expense of the unemployed, retirees, other savers, and taxpayers.

[rb336]

I've heard a bunch of Section 4, 14th Amendment BS lately, and really can't see how it relates to the debt ceiling other than preventing servicing of the already accrued debt.

[oladub]

I've heard a bunch of Section 4, 14th Amendment BS lately, and really can't see how it relates to the debt ceiling other than preventing servicing of the already accrued debt.

A Ceiling We Can't Wish Away by Lawrence Tribe

[Zacha341]

'Kick the can the road' policies related to our insane spending [[from the repubs and dems) is finally catching up! China is watching....

[Zacha341]

Compelling article:

"So the arguments for ignoring the debt ceiling are unpersuasive. But even if they were persuasive, they would not resolve the crisis. Once the debt ceiling is breached, a legal cloud would hang over any newly issued bonds, because of the risk that the government might refuse to honor those debts as legitimate. This risk, in turn, would result in a steep increase in interest rates because investors would lose confidence — a fiscal disaster that would cost the nation tens of billions of dollars."

All of this would bow really well for business and finance and further impact the economy. Less hiring for certain.... oh, duh.

A Ceiling We Can't Wish Away by Lawrence Tribe

[Danny]

President Obama threaten Democrats and Republicans that he will cancel all Social Security checks, veterans benefits and medicare after August 3rd if they don't get a compromise on the debt ceiling!

Over 70 million Americans will be affected, especially the elderly.

[oladub]

President Obama threaten Democrats and Republicans that he will cancel all Social Security checks, veterans benefits and medicare after August 3rd if they don't get a compromise on the debt ceiling!

Over 70 million Americans will be affected, especially the elderly.

How can this be? In March, "President Barack Obama's budget chief, Jack Lew, took to his White House blog to repeat his claim that the Social Security trust fund is solvent through 2037." "Social Security enjoys a $2.5 trillion fund surplus, which is expected to grow to $4 trillion by 2025." Although Social Security tax is shown as a separate deduction on paychecks, Congress long ago pilfered money set aside for Social Security and replaced it with IOU's. The Social Security money was mixed in and spent with other Treasury funds used to pay for President Obama's $100M/week war on Libya and other government expenses. Money continues to flow into Social Security adequate to meeting its obligations. The problem lies with thieving politicians who divert Social Security tax and spend it on things for which those taxes weren't intended and then have the audacity to claim that if the debt ceiling isn't raised, Grandma and Grandpa will suffer.

Such fear mongering has also recently been used to justify the Iraq War, the Patriot Act, Bush's Wall Street bailout, and Porkulus. In each case, we were told, as we are now, that if actions the public didn't like weren't taken immediately, tragic consequences were imminent. It would make more sense to instead just dedicate Social Security taxes to making Social Security payments instead of lying, frightening the elderly, and using Social Security taxes for other things.

[maxx]

Or using Soc. Sec. overpayments to pay for Medicare since that tax is not covering all the expenses.

[maxx]

A Ceiling We Can't Wish Away by Lawrence Tribe

from the article:

The Constitution grants only Congress — not the president — the power “to borrow money on the credit of the United States.” Nothing in the 14th Amendment or in any other constitutional provision suggests that the president may usurp legislative power to prevent a violation of the Constitution.

But the President must sign the bill which borrows money, so the President has some power over borrowing.

Moreover, it is well established that the president’s power drops to what Justice Robert H. Jackson called its “lowest ebb” when exercised against the express will of Congress.

Then what were all those signing statements that W tacked onto a lot of legislation he signed?

[oladub]

from the article:

But the President must sign the bill which borrows money, so the President has some power over borrowing.

Then what were all those signing statements that W tacked onto a lot of legislation he signed?

The President can veto whatever he wants. He can also terrorize seniors if he so chooses by scaremongering and lying about no money being available for monthly SS payments. A trial ballon was being floated by some in his administration that he could borrow on his own on some mumbo-jumbo constitutional basis based on the 14th Amendment. Democratic jurist Lawrence Tribe simply put the kibosh on that legal nonsense. I am not an apologist for W. Bush but two wrongs don't make a right. I think that Bush should be in prison or Paraguay.

[Papasito]

http://quickfacts.census.gov/qfd/states/00000.html

112,611,029 households in the US
2 trillion more to bail out the Government so we don't "slip back into recession, and to cover our costs"

$17760.25 per household.
Give me that, give everyone that, watch the economy react.

Or give it to bankers and and to buy the next election and nothing will change except the country's monthly payment and the value of the dollar.

[Danny]

My theory of U.S. Government default of the Debt ceiling.

The debt ceiling limit is now 14.3 trillion dollars.

A refusal to raise the debt ceiling means that the U.S. government will NOT be able to pay its bills to its creditors meaning they are dead broke!

1. Our free world trade global ecomony could be destablized. Lots of world governments want their money back. Lots of investors could demand it even through a declaration of a possible WORLD WAR!

2. Interest rates will go high as the speed of light! People can't borrow money to buy a house, car, apts and condos meaning the housing market is dead! Possibly people could lose their homes in a flash if they loss their jobs in a defaulted nation. Property values would become WORTHLESS, that only a low-income family can buy. Even homeless squatters can get in to stay in you once happy home and banks will have to let them stay for a while. Banks will fail and close for a long"furlough" days. People will not deposit or withdraw their accounts. [[ I suggest that you all may go your bank and check your accounts. If you have the chance, withdraw what's left of your hard earned savings because the bankrupt U.S. governments' FDIC may not recover your savings.) DON'T PANIC YET!

3. The U.S. Dollar would be WORTHLESS! World government investors would demand U.S. government GOLD, SLIVER OR LAND! for repayment of loans [[ For example Saudi Arabia invests over 70% of U.S. Arable land. They can buy the land from U.S. and make it theirs anytime they want if the U.S. govt' can't repay its loans.) Other world governments can do the same, too.

4. Also the loss of U.S. Dollar value means possible international sanctions in world trade export and imported products. All products from food to clothing will be very expensive, hard to buy and no supply and less damand of more products. [[ Look what happen to the Soviet Union when their communist government can't close its debt ceiling! no food and clothing their market selves.)

5. Loss of stock market value. This is could lead into less investor confidence, DOW JONES, S&P 500, and NASDAQ shares will drop until it crashes. Our country will be headed into a longer depression. Jobs will be loss from 20 to 50%.

6. The U.S. Government default will NOT be able to pay its workers, Social Security, Welfare checks, WIC, Food Stamps, Medicaid, Medicare, tax refunds, U.S. Armed Forces.

WORD FROM THE STREET PROPHET!

Get ready for the Neo-Boshevik conflict. I think there would be a social [[communist) conflict going on in our free country. I SAY TO YOU ALL, DON'T PANIC! JUST PREPARE FOR THE HARD TIMES!

Neda, I miss you so.

[Papasito]

If you spend more than you take in, you get this.

It's not a Democrat or Republican issue, both parties are guilty, even if one spends more than the other.

What is amazing is everyone on the street knows how to fix this problem, but every suit in Washington DC doesn't have a clue.

[Gistok]

I think that Bush should be in prison or Paraguay.

LOL.... aw hell let's make it both....

[maxx]

The President can veto whatever he wants. He can also terrorize seniors if he so chooses by scaremongering and lying about no money being available for monthly SS payments. .

Seniors should be afraid for their soc. sec. since there are a lot Republicans in Congress who would like to get rid of that program along with Medicare.

[mjs]

Seniors should be afraid for their savings since there are alot on both sides that can't prioritize. At some point, the bills will have to get paid. That means taxes will have to go up, benefits will have to go down, and the Fed will likely "assist" by printing money. Then food and medicine will really go up. Everything that is hard to do right now is going to keep getting harder and harder as we keep spending 140% of what we make.

These guys aren't even fighting about what its going to take to get the debt under its current $14 trillion. They're arguing over how many more trillions we want to add over the next decade. They aren't even going to try to live within their means once the economy comes back in the next few years. Who budgets this way?

I really don't get the claiming things like social security have to be the items to take the hit. Obama couldn't have cut back on a few things months ago so he would have enough for the basic necessities next month? No new checks to foreign nations. Cease writing wind, solar, gas, and farm subsidy checks within the hour. Hell, we could close all the federal parks and government cafeterias before stopping the SS checks. Ground all non-military essential planes and vehicles. Put a hold on the checks to congressmen and their aides and turn off the lights and AC in the White House and Capital.

At some point, these guys will have to face the tough decision to spend less or earn more or both and the longer they wait, the worse its going to be.

[ghettopalmetto]

I really don't get the claiming things like social security have to be the items to take the hit. Obama couldn't have cut back on a few things months ago so he would have enough for the basic necessities next month? No new checks to foreign nations. Cease writing wind, solar, gas, and farm subsidy checks within the hour. Hell, we could close all the federal parks and government cafeterias before stopping the SS checks. Ground all non-military essential planes and vehicles. Put a hold on the checks to congressmen and their aides and turn off the lights and AC in the White House and Capital.

At some point, these guys will have to face the tough decision to spend less or earn more or both and the longer they wait, the worse its going to be.

The federal government is an insurance agency with an army. Social Security and Medicare are on the chopping block because [[get this!): If you eliminated ALL federal spending aside from Social Security, Medicare/Medicaid, Defense, and interest on the debt--there would STILL be a spending deficit!!!

The easiest way to eliminate a deficit problem is to grow the economy. Think about it in terms like this--if you have $10, a 10 dollar debt is all of your money [[or 100% the size of your personal "GDP"). If you have $100, then that same $10 debt is only 10% of your money [[and a lot easier to swallow). When you have $1000, then $10 suddenly doesn't seem like as much money as it used to, does it?

In a recession, tax revenues fall and demand for social services--like unemployment benefits--rises. In a period of economic growth, tax revenues increase and demand for social services decreases. [[NOTE: This is exactly why a "Balanced Budget Amendment" is a terrible idea.)

This is how we achieved budget surpluses at the end of the Clinton administration--it wasn't hocus-pocus bookkeeping so much as the economy GREW its way to a surplus. At that time [[I can't remember the exact figures, so bear with me) we had revenues that were 19% of GDP and expenditures that were 18% of GDP. Currently, we have revenues at 13-14% of GDP and expenditures at 24% of GDP. Unless the Republicans plan to cut $1.42 trillion PER YEAR from federal spending, their plan to "slash our way to imagined prosperity" is completely dishonest--it will cut social programs at a time of high demand for them, and do nothing to stem falling revenues from the weak economy.

Unfortunately, the current House leadership is trying to repeat 1937. They want to CUT government spending in the face of rising demand for social services, and REFUSE to raise taxes in the face of falling revenues. Until the economy is growing again, the government has to be the spender of last resort, as there is nothing else right now that is growing the GDP.

[oladub]

GP, So let's resume the pre-Bush taxes on the rich and also go back to the pre-Bush level of federal spending allowing for subsequent inflation and population increases. There is plenty of income to meet monthly Social Security payments from current Social Security taxes. The problem at hand are the thieves in Washington have diverted Social Security taxes to pay for unconstitutional wars and every other program they dream up and then terrorize Grandma and Grandpa about starving them. President Obama keeps hitting new lower notes. After 2.5 years of Obamanamics, we continue to slide.

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” “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. I therefore intend to oppose the effort to increase America’s debt limit.” -Senator Obama March 16, 2006.

"I Would Rather be Talking About Stuff That Everyone Welcomes, Like New Programs or the NFL Season Getting Resolved." -President Obama July 11, 2011

[ghettopalmetto]

GP, So let's resume the pre-Bush taxes on the rich and also go back to the pre-Bush level of federal spending allowing for subsequent inflation and population increases. There is plenty of income to meet monthly Social Security payments from current Social Security taxes.

I'm okay with that, in principle. The problem is, however, that revenues have fallen to 13-14% of GDP. In 2000, revenues were more like 19% of GDP.

At the same time, the recession has caused demand for spending--unemployment, Medicaid, aid to states--to increase, to the point where spending is 24% of GDP [[versus 18% of GDP in 2000).

In other words, we CAN'T do what you propose until we lessen the demand for spending while simultaneously raise revenues. The math doesn't work any other way. To pretend otherwise, like John Boehner is doing, is fiscally irresponsible.

Of course, your proposal ignores the political reality that the Republican-led House opposes any type of tax increase whatsoever. They're not looking to balance the budget--they're looking for an excuse to apply their ideology. If Boehner and company were interested in lessening the deficit, they'd have ideas on how to grow the economy. Since they don't actually have these ideas, they repeat what they do know: Cut Cut Cut. In a recession, it's a recipe for disaster.

[oladub]

GP, We already went through this. Harding slashed the budget when confronted with skyrocketing unemployment and high employment returned within two years. Hoover/Roosevelt did what you are proposing and extended high unemployment for a decade just like Obama is doing. Coolidge managed to free 98% of Americans from paying income tax and continued the peace and prosperity. Why do you so prefer approaches that make Americans suffer?

And so, shockingly Harding practiced what he preached. Regarding deflation, the Federal Reserve jacked up interest rates from 4.75% in January 1920 to 7% in June 1920, and held this rate through the aforementioned major drop in prices through May of 1921. Harding slashed the federal budget from $18.5bn in 1919 to $6.4bn in 1920 all the way down to $5.1bn in 1921. Meanwhile, the government actually ran surpluses during these years, allowing them to pay down the debt by $300mm from 1920-21.
http://www.citizeneconomists.com/blo...ing-revisited/

[Goose]

http://www.realclearpolitics.com/vid...stainable.html

[ghettopalmetto]

GP, We already went through this. Harding slashed the budget when confronted with skyrocketing unemployment and high employment returned within two years.

Harding's recession was inflationary in nature. The current recession is due to a LACK of economic demand [[interest rates are at record lows, and the Fed cannot lower it's effective rate any further). You can't insist on using the same solution to solve diametrically-opposed problems.

Hoover/Roosevelt did what you are proposing and extended high unemployment for a decade just like Obama is doing.

Unemployment dropped under Roosevelt, until Andrew Mellon advised him to balance the budget in 1938, at which time unemployment spiked again. Unemployment didn't begin to drop again until we entered World War II.