I am amazed, our country has not fallen into default since we did not approve an increased debt ceiling. Isn't that Secretary Tim Geithner said would happen? Or do we have to wait until August to have the calamity befall us?
Remember in 2008, when then Secretary Paulson said that if we did not approve the 787 billion going into the banks that we would surely have another depression. Many agree that was the right message, but just for a second, lets consider might have occurred? Housing sales would have dried up, mortgage foreclosures would have increased, unemployment would increase and the banks would have collapsed. Pretty scary, huh?
Well, in retrospect the only thing that did not happen was that the banks did not collapse and now we are getting the same scare tactics from the present Treasury Secretary. I am getting a "scare me once shame on you, scare me twice, shame on me" feeling. Why should I believe these Henny Penny warnings?
I understand that the national debt payment is half of what tax revenues are collected. We will not default on our payments on the debt (at present, however if the debt limit is increased, that will not be true in the future.) Other payments will not be so lucky. Of course, the first ones that this Administration will cut will be the pay for the members of the Armed Forces. Why? It will bring a cry from the public much the same as does cutting police and fire when a city needs to cut its spending.
For some reason government cuts always start with those services that they are supposed to provide. They never look at the unnecessary ones. It is easier to cut where it hurts, other ones might take some work. Give me the power of the pen and I am sure we can round up some really juicy programs that could be cut. I have written about the training programs that have never been audited and that have questionable results. Or the seven layers of government that effect one salmon. Or the Energy Department whose original goal was to make us energy independent, that really has worked well!
If I were in Congress, I would not approve an increased debt ceiling until government is put on a major diet in areas that do not effect defense, interstate commerce, foreign trade and other areas the states cannot handle. How about eliminating drinking training for the Chinese prostitutes that I wrote about last week? I am sure there are many other programs that could be cut, reduced or combined with similar programs that could save billions if not trillions of dollars.
Our poll last week asked if the debt limit should be lifted and a vast majority of respondents said it would. I would hope that it will be raised only after major spending cuts were taken. If not, we are putting off the inevitable collapse of our economy and the resulting riots not unlike those occurring in Greece right now. Do we want to be like them. I hope not but we do not have much time.
Of all the budget plans floating around (Obama, Ryan, Simpson/Bowles, Domenici-Rivlin, etc.), if you are a truly serious fiscal conservative, then you should be supporting the CPC budget. It gets us to budget surplus by 2021. None of these other plans come close. The Ryan budget adds $6 trillion to the national debt over the next 10 years, and the Obama budget is even worse than Ryan's.
ReplyDeletehttp://www.economist.com/blogs/democracyinamerica/2011/04/debt_proposals
The only problem with the CPC budget is that it doesn't have a prayer of getting through Congress, which is why Biden's secret gang-of-five isn't even looking at it. In the end, they will have to do something along these lines, but not until they're forced into it by the next financial markets collapse.
We have not defaulted on the debt, because the Treasury is taking money out of the federal employees trust fund. When that money runs out in August, we will start defaulting on contractual obligations. At some point (probably early), there would be a panic in the bond markets, and Congress will raise the debt ceiling and then start borrowing money at exorbitant interest rates like Greece. They will have no choice. It would get very ugly, very fast. No Ph.D economist or banking CEOs or institutional bond traders I have read believes that defaulting on the debt is a good idea under any circumstances.
--David
I would agree that defaulting is not a good idea and I do believe that Greece has not yet (I could be wrong, but do not remember that occuring.) However, at some point our Congress and President have to make a decision to stop this out of control train. Right? What is it going to take to get the government's attention?
ReplyDeleteIf not, we will see the same things as Greece--riots and very high interest borrowing rates with the very probable elimination of the greenback as the world's reserve currency. Again that will be a major hit to the US.
I have read the CPC budget and do not agree with the basic assumptions. Gutting the military is not where we need to start.
Come on, Tom. There is more money wasted in the Defense budget than in everything you want to cut in the so-called "non-security" discretionary spending combined. They are only 12% of the budget, and cutting some of them would increase unemployment, weaken economic growth, and actually add to the deficit. Not all spending cuts would have a net of effect of deficit reduction, when they put a person out of work who was paying taxes (revenue incomng!) and is now collecting unemployment, TANF, etc. (revenue outgoing!). That is why budget-cutting must be done INTELLIGENTLY or else can be counter-productive.
ReplyDeleteIn that regard, I want to talk more about military spending. On this, I am a big Ron Paul fan. I don't have time to explain now, but I will write more later.
--David
Tom, here is a graph that shows the combined military spending in 2010 by Turkey, Canada, Australia, South Korea, Brazil, Italy, India, Germany, Saudi Arabia, Japan, Russia, France, Britain, and China.
ReplyDeletehttp://www.economist.com/blogs/dailychart/2011/06/military-spending
The United States spent more on military than all these countries COMBINED. Why are we still in Iraq? Afghanistan after 10 years propping up a corrupt regime? 50,000 troops in Germany! Why?
Ron Paul is the only guy from either party who seems to understand how insane this is.
I don't want to "gut" the military (as you call it). I would be happy to just spend twice as much as China. Most of that spending could be financed by the savings from ending operations in Iraq and Afghanistan.
As Gates says, it is time to let some of these other rich countries pay more for their own security instead of depending on the U.S. to police the world. We can't afford it.
--David