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Let's break all this debt ceiling talk down into terms for laypeople


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If we don't increase the debt ceiling, what would the government need to cut? You hear all the time about how we'd have to cut "important" programs or services, but what about unimportant programs or services? And how do you define what is important and unimportant? What wasteful programs/services are we currently engaging in that could (or should) be cut out that are responsible for this current balloon of debt that we've got? Let's talk about this shit like it's actually going to affect us, not like we're preparing for a business exam or math quiz or political debate match.

Btw, I saw this article about a solution Ron Paul came up with where the Fed would "destroy the $1.6 trillion in government bonds" it holds. I don't know how that would affect the Fed, the debt, or the debt ceiling. I don't even know how it fits into the topic of this thread other than cutting things that we deem unimportant, or as that article points out, things that aren't "tied to specific obligations" or necessities.

Surely, with all of the talk over the years of stupid government spending on unnecessary things they could find things to eliminate from the budget that won't affect people's basic quality of life. e.g. > I, along with many others, have family members who depend on their social security for their livelihood. While I realize that may not be what SocSec was intended for... oh well, it is what it is. Shit happens. Life happens. Gotta make do. Can't afford to have the government welshing.

All I want are bottom line answers, but maybe I'm not asking the right questions. If not, then point out what the right questions are.

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The military budget does seem like the most obvious spending to cut. But, there's very smart people in your govt that think those wars are necessary to the long term health and security of the US and the financial stress of it all is a price that needs to be paid to protect it's future.

You obviously don't (and I am not saying you're wrong)...but I'd really like to see a good point - counterpoint to that whole debate.

I mean before the Bush admoin was just painted as a bunch of warmongering crazies...but the militarty initiatives just continues on with a new admin.

It seems a price the US can't afford but there are obvioulsy compelling reasons related to the long term health of the US as to why they keep funding the war machine in spite of a dire economic outlook.

At some level people that are much smarter than us are saying the oil, the relationships, national security, not allowing the spread of terror friendly government, etc...trumps everything else and the consequences of pulling the troops all back are too big.

And it's not just wars as you know...whgat about the massive bill to keep the military npresence in Korea and Japan and Cuba...you guys are everywhere.

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It's beyond laughable that the first thing they are not talking about is the wars. How about starting there?

That was basically the last plan from the Democrats.

http://articles.cnn.com/2011-07-25/politics/debt.talks.obama_1_debt-ceiling-spending-cuts-budget-plan?_s=PM:POLITICS

"The Reid plan includes $1.2 trillion in spending cuts, including the military budget, as well as $1 trillion in savings from winding down the wars in Iraq and Afghanistan."
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For laypeople, I think all of us need to switch our minds away from finance and dollars (things that are not real and have no value onto themeselves and are only tools to facilitate transactions of real economic activity ) and instead concentrate on real assets, real production, real economic capacity to make more goods and services when debating this.

The US government, being the monopoly issuer of a freely floating fiat currency, neither has too many nor too few dollars - it creates them via its spending. The rest of us, who transact in those dollars, whether citizens, foreigners, foreign nations, businesses, even state and local governments are "user" of that currency. The "issuer" of the free floating currency will never not have dollars - it can create as many as it wants. Currency user are the ones who must trade economic value to get the dollars they have. And the currency issuer of free floating currency can never been insolvent - how could it not pay its obligation if by the action of paying those obligation it is creating the very things in which those obligation are denominated.

The only "cost" or restrain to this process of increasing our transactional tool (i.e. money) is the risk of inflation but that leads to question, do we have enough real assets and real production to produce the added goods and services to meet the increase in demand that government sepnding is.

So, ask yourself, ss there economic capacity to produce the extra goods that the government is requesting via its spending. - that should be the be-all question to answer. If there is capacity, then those extra goods and services will tend to be produced, versus prices rising and we all are more wealthy (we would have more goods and services than we would have had had that spending not taken place.) If there is not capacity, then prices will rise and we will neither be more wealthy or less - i.e. there will be equal consumption transfers versus more goods and services produced from that spending.

Now, ask yourself. Are we near capacity? Are companies producing all they can? Does everyone wanting a job have one?

Of course we have plenty of capacity - lack of demand for the capacity we have is the complete problem our economy is facing now. Therefore we have idle real assets and people who could produce more and would if government spending was higher and/or taxes lower. Therefore reducing the deficit means less wealth - in other words we are poorer right now by choice and it seems most want to be even poorer by their desire to reduce the deficit. Do not get me wrong, I think spending could be better targeted (such as long lasting infrastructure, green energy development and other things with long term payoff) but reducing the deficit, whether via tax increases or spending cuts, is completely the wrong thing to do.

To summarize in an analogy. With almost every single person debating the "debt", they are all concentrating on the finance, on the dollars while pretty much no one, in the debate, is analyzing and asking about real assets and real economic production. It is like everyone is at a football game and instead of watching the real game and seeing how players and the teams are actually playing and doing, all eyeballs are glued on the unreal, the scoreboard. Everyone is mesmerized by how the scoreboard is getting the points it keeps putting up (is the scoreboard going to run out of points, how will it get 6 more points if another team scores, if the officials nullify a scoring play, where will the scoreboard put the points it takes off, do we need a balanced scoreboard amendment that makes sure the scoreboard is taxing an equal amount of points that it is displaying - all these silly questions dancing through the minds of these insane fans, while they ignore the actual players and teams playing on the field.)

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It's beyond laughable that the first thing they are not talking about is the wars. How about starting there?

http://swampland.time.com/2011/07/27/harry-reids-canny-waiting-game/

There ya go. Reid's plan, which according to this article is the most likely to get passed- considers the draw down of the wars.

The Repeblican's in the House are a mess and its going to hurt them come election time. The Tea Party folks are making the Republican party look incompentent and the Democrats, Senate, and President look good. If Reid can get his passed through both the Senate and House, save the credit rating, and default..... the Tea Party and ultimately the Republicans take a huge political hit.

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40% of what the federal government spends is borrowed. So start with that right off the top. In addition, much of what the government spends is already mandated by law and can't be cut, so that's makes it an even bigger problem.

One thing that some people don't realize, it that there are two levels of risk. The first is default which will prove catastrophic in a very short period of time. Maybe, not the first day, but very soon.

The second level of risk is that the debt ceiling is actually raised but the congress fails to deal with the underlying problem and doesn't get the annual deficit under control. This could be a serious problem even in the short run. If the bond rating agencies, Moody's and S & P, lower the quality of US Treasury bonds from AAA to AA as they have threatened to do then intrest rates will rise accross the entire economy. All interest rates are essentially tied to the government rate. That will mean less money for everyone to spend and throw the economy back into recession. That means more unemployment and more government expenditures to deal with it. Not to mention the impact this would have on the world economy.

This is self-inflicted wound, if it happens. Congress needs to raise the limit immediately. But they also need to put everything on the table, spending, entitlements, defense, tax loopholes, etc. and reduce the deficit significantly. Go big, and take some of everything back.

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For laypeople reading, please see Warren Mosler's Seven Deadly Frauds of Economic Policy (June 17, free PDF Link)

http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

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Amazing how things change...

“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 US Government can not 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.”

--Senator Barack H. Obama, March 2006

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The Repeblican's in the House are a mess and its going to hurt them come election time. The Tea Party folks are making the Republican party look incompentent and the Democrats, Senate, and President look good. If Reid can get his passed through both the Senate and House, save the credit rating, and default..... the Tea Party and ultimately the Republicans take a huge political hit.

LOL

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Can someone explain how not raising the ceiling = defaulting? If I max out a credit card, I'm not defaulting. I just need to pay the payments still, right? Help an economics 'tard out here.

You default when you refuse to pay your monthly credit card bill not when you max out the card. The analogy that all these politicians keep using is ridiculous. Family finances and National finances are not even close to being similar. They are doing a disservice to the American Public by continuing to make a comparison between the two.

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You default when you refuse to pay your monthly credit card bill not when you max out the card. The analogy that all these politicians keep using is ridiculous. Family finances and National finances are not even close to being similar. They are doing a disservice to the American Public by continuing to make a comparison between the two.

I think the scary part is that is how many of them understand it. The problem with democracy is that we are often ruled by stupid people.

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