It is beginning to look as though conservatives are serious about their proposal to refuse to raise the debt ceiling and to allow the country to default on its obligations. This is a serious business and the results could be catastrophic for the economy.
Whenever expenditures exceed revenues, the resulting deficit must be funded by borrowing. Throughout most of its history the government has run an annual deficit and issued Treasury Bonds/Notes to makeup the difference. These are purchased by individuals, organizations, and other nations. They are considered safe investments by investors around the world and as a result the United States can offer these instruments at low interest rates.
Before 1917 Congress had to approve every borrowing, but this was replaced by a debt ceiling, approved by Congress every so often, which allowed for smoother operation.
Expenditure and debt authorization are separate actions by Congress. The debt ceiling does not place any limit on expenditure in advance—it merely permits financing of deficits after they have been accrued. The debt ceiling has been raised numerous times in the past and until recently this action by Congress was routine.
Deficits are generally small—except when the country is fighting a war or in the midst of a recession—and the national debt is not a problem. Wars are enormously expensive. Recessions reduce revenue because people are out of work and not paying taxes.
What happens if Congress refuses to raise the debt ceiling to cover deficits resulting from expenditures they have approved? The country's credit rating will be downgraded and investors will demand higher interest rates to purchase our bonds. The increase in interest rates will actually make the deficit even worse. The lack of confidence in the nation's fiscal policies could also do substantial harm in the markets and push the country back into recession.
Defaulting is something you do only once, like losing your virginity. Getting the credit rating back to previous levels after a default would be extremely difficult. Investors would be likely to take a wait and see attitude, meanwhile enjoying a higher rate of return on their investments.
Threatening default has always been an unthinkable option to this point, but it is now a serious threat.
>>the Dems for lying us into a war in Viet Nam and the Repubs for lying us into a war in Iraq.
Shrewd comment. Most people have forgotten or were too young to remember the Gulf of Tonkin Resolution which gave President Johnson authority to use whatever force he wished without a formal declaration of war. It has long been known that the attack on naval vessels on which the resolution was based never occurred at all. The resolution was later repealed and the War Powers Act was substituted, another dubious piece of legislation. On the other hand if Republicans had had their way, we would still be fighting in Vietnam.
It turns out there is nothing the United States likes more than war, and we prefer them undeclared whenever possible. Wartime Presidents are always ranked among our greatest—Lincoln, Wilson, Roosevelt. One President who disliked war was Eisenhower, who ended the Korean War and stayed out of Vietnam. Nobody thinks much of him today.
Dr. Allan H. Clark, thank you for the report!
U.S. Health in International Perspective: Shorter Lives, Poorer Health
Released: January 9, 2013
Type: Consensus Report
Topics: Public Health, Aging
Activity: Understanding Cross-National Health Differences Among High-Income Countries
Boards: Board on Population Health and Public Health Practice, Division of Behavioral and Social Sciences and Education
Tom Sarbeck, Thank you so much for your information and insight. I am still boiling mad about Obama placing Wall Street sycophants in his cabinet and now, it appears he is naming the same Wall Street bunch in to carry forward during his last term. I voted for him the first time, not the second because I didn't trust him. My distrust is well founded. He had so many good people on his first election campaign and the day of Inauguration, they began to peel off his roster, not to reappear. I speak of Van Jones, Samantha Powers, Joe Stiglitz. They didn't fit with the Geithner and Bernanke crowd.
You wrote, "Upon realizing they did not have the votes in Congress to shut down the social programs, they decided to borrow the government into bankruptcy, which would force the shutdown of those programs. In two words, they succeeded."
That is exactly what they did.
And, you trusted Romney more? Corporations may not be facing "stringent limits" under the Obama administration, but at least the head honcho isn't the face of big money.
Humble Pie, I assume you refer to my statement that I didn't vote for Obama the second time. I didn't vote for Romney either, he is as far out on the other end of the teeter totter from me that he can get. I voted Green for the first time, not because I thought she could win, but she was closer to environmental issues than anyone else.
In my opinion, climate change is our biggest challenge we leave our children and seven generations on. Living from the Great Depression to the peak of post WWII prosperity, I see what is ahead of us and it is not going to be pretty. With fervent desire USA presidents don't use war as an excuse to climb out of this depression. After the depressions of the late 1800s and early 1900s, WWI and the Great Depression the world began to open up to opportunities in many ways.
If the call comes out for war, I will see that my grandchildren and great-grandchildren go to a safe haven. I did not go through all I did to create a healthy and productive family to see government use them as fodder for war. It won't happen and I hope other great-grandmothers feel the same way.
I guess I feel like, America isn't Germany, or Australia, or even Iraq. In all of those places, a vote for a small party means something. Here, because of our winner take all electoral system, those votes essentially count for nothing. We need to have a fundamental change in the way our system works for it to be truly representative. Unfortunately, that will require the extant parties to basically vote for their own demise.
Our elected officials are bought and paid for by wealthy, they legislate in their own self interest, they feel free to regulate in Wall Street's favor. The men and women who build our homes, cook our meals, deliver our goods and services, have little representation at the federal, state or local level.
Privilege does not give up power willingly. Freedom is not given to others willingly. Both have to be fought for. So, that means you and me. Will that mean another civil war? Perhaps. However enlightened self-interest should convince wealthy and workers that involvement in political action is necessary or we have an oligarchy.
noun \ˈä-lə-ˌgär-kē, ˈō-\
1: government by the few
"The iron law of oligarchy is a political theory
"It claims that rule by an elite, or "oligarchy", is inevitable as an "iron law" within any organization as part of the "tactical and technical necessities" of organization. Michels particularly addressed the application of this law to representative democracy, and stated: "It is organization which gives birth to the dominion of the elected over the electors, of the mandataries over the mandators, of the delegates over the delegators. Who says organization, says oligarchy." He went on to state that "Historical evolution mocks all the prophylactic measures that have been adopted for the prevention of oligarchy." Michels stated that the official goal of representative democracy of eliminating elite rule was impossible, that representative democracy is a façade legitimizing the rule of a particular elite, and that elite rule, that he refers to as oligarchy, is inevitable.
The United States is also a plutocracy—a country ruled by its wealthy. One excellent book on this subject is Kevin Phillips' Wealth and Democracy. It is not a new book—it appeared ten years ago—and Phillips is not a liberal—he worked in the Nixon administration. He makes a careful case that the concentration of wealth in a relatively few hands distorts democratic goals and leads to national decline.
Joan, thanks for supplying the info on Robert Michels and his Iron Law. I read of him long ago as a sociologist and saw the logic of his conclusion: as soon as one person in an organization does not vote, it starts down the path to oligarchy. Your post moved me to go to Wikipedia for more.
The term "Our democracy" irritates me more than the line "I'll pray for you." I also hear it more often.
When I think of ending the oligarchy, I remember the words in the Declaration of Independence, "...all experience has shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed."
Shall we thank today's fundamentalist xian GOP for the energy they are putting into making their evils unsufferable? They seem determined to persuade more people to abolish some accustomed forms.
Yup, they are so serious about debt trouble they are writing bills to declare life begins at conception on the first day of the new Congress (to outlaw abortion and most contraception nationwide) and to repeal the Johnson Amendment (to allow churches to politick and donate money to political campaigns).
Contrary to what the political pundits are saying about the GOP being increasingly irrelevant, they sure are still acting like the Reicheous Right.
No. We can thank their fundamentalist xian candidates (Todd Akin, etc) for the increase of Dems in Congress.
But simply the fact that it takes comments about legitimate rape for people to realize how evil these guys are says a lot about our country.