Comments on: The US won’t default, even if the debt ceiling stays http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Del Merica http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-55191 Thu, 16 Oct 2014 14:47:44 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-55191 In 2006, Amanda began to serve as the executive director of her local NAMI (National Alliance on Mental Illness) affiliate and in 2007, she founded Florida Borderline Personality Disorder Association 501(c)(3) organization dedicated to BPD education and awareness.

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By: vanityvehicle http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-25930 Tue, 19 Apr 2011 23:39:05 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-25930 RobSterling makes a decent point: If the main consequence of a failure to raise the debt ceiling is that the administration has to make an ongoing series of painful cuts to keep paying its bills, all the incentives for Republican members of Congress will still be to vote against raising the debt ceiling.

GOP reps want to get the credit for shrinking government without copping the criticism for cutting specific programmes. This situation would give them exactly that situation, with the administration facing an escalating series of Sophie’s Choice moments on spending cuts–decisions for which it, and it alone, would be seen as responsible–until it gives in to whatever concessions the GOP would demand in return for finally raising the debt ceiling.

I don’t see this administration responding by just targeting programmes that Republicans like: they have taken such pains to appear centrist and reasonable, why throw that all away with a set of cuts that would look vindictive?

It’s much more likely that if we got to this point, the first stuff to go once accounting gimmicks, phantom surpluses etc are used up would be stuff that appeals more to Democrats than Republicans. That way independents would see Obama as being ‘fair-minded’.

So I guess we might not have a default, but I think the period after the debt limit runs out could be more drawn-out and painful than people are anticipating.

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By: TFF http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23230 Mon, 17 Jan 2011 13:00:40 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23230 justsayin, I think you misunderstand the situation.

Social Security is funded by the Social Security tax. For the last twenty years, the revenues from Social Security taxes have been greater than the payments. That is a “surplus” by any definition, at least for Social Security itself. For a half-dozen years the surplus was quite large.

However the Social Security cash flow is now transitioning from surplus to deficit. In theory the deficit can be covered for another 30 years by cashing in those Treasury IOUs that you mention. In practice, the Treasury may have trouble redeeming the IOUs. But your comments are confusing the cash flow and the balance sheet.

A better analogy…

You find yourself short on money, so you “borrow” against your 401k. You continue to make retirement contributions, but you immediately borrow that surplus back again to spend.

It is true that in this analogy you do not have any actual assets (just IOUs that you will have trouble redeeming) in your 401k. But your 401k isn’t in debt, it simply doesn’t have anything of value to fund your retirement. It is “money we don’t have” but it is also “debt we don’t have”.

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By: Sinbad1 http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23229 Mon, 17 Jan 2011 12:52:49 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23229 The idea that the US can easily afford to pay the interest on borrowings is premised on the AAA credit rating and low interest rates. Try re running the numbers at 6% interest like other over indebted nations have to pay. The extra interest causes even more debt and even higher interest rates.

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By: justsayin2011 http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23226 Mon, 17 Jan 2011 05:19:31 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23226 Must be missing something. A social security fund full of IOUs for treasury debt is a surplus? Following that logic, when my checkbook runs dry I can just buy a T-bill with money I don’t have and run a surplus again. No matter how much political and financial mumbo jumbo you use, a debt is still money WE DON’T HAVE. What say we try having every one pay a fair tax and stop spending what we don’t have. On the other hand, I’m sure China would be willing to forget that it owns a third of our GDP and just tell us to forget about that pesky debt thing.

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By: dshelley25 http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23225 Mon, 17 Jan 2011 04:57:24 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23225 I totally disagree with this article. The U.S. is going to lose it’s status very shortly to China as the world’s number one economy. Our ballooning national debt and continued trade deficits are going to get worse because our economy is not going to be able to grow quickly enough to generate budget surpluses. America has been given a free ride by the expansion of the dollar and its use in worldwide commerce – but that is changing. Just look at the decline in the dollar in the last 10 years. Combine that with many underfunded government programs, blank checks for Fannie and Freddie, an oil based economy, unlimited QE and you see that we are on a collision course. Just wait until inflation kicks in and interest rates start going up. Don’t believe me? Then I’ve got some AAA rated subprime bonds I want to sell you at par. Obama is a one-term president who has failed to address the many problems of our nation. America please wake up.

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By: limapie http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23221 Sun, 16 Jan 2011 22:25:38 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23221 I’m going to quote nbywardslog’s link above and just say
Oh my goodness, brace yourselves people.

“If Berlin and Paris hold the line on this, the Eurozone is dead. And the contagion from such a consequence will be horrific. Not even Bernanke has the QE clout to inflate US equity markets in the face of a selloff caused by an end-game EU debt crisis. He’ll have no alternative but to focus on saving the financial system. The brakes will come off gold, and the Dow will plunge.

Don’t believe anyone who tells you otherwise: the Sarkozy-Merkel hardball on bailout funds will guarantee a collapse in the euro – and in equities just about everywhere.

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By: TFF http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23188 Sat, 15 Jan 2011 11:23:47 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23188 Not a significant surplus at this point.

The surplus was only large for half a dozen years, smack on top of the Bush administration. I suspect that is how they funded the tax cuts.

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By: threeRivers http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23187 Sat, 15 Jan 2011 10:06:38 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23187 Social Security is still running a surplus?

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By: zipflash http://blogs.reuters.com/felix-salmon/2011/01/13/the-us-wont-default-even-if-the-debt-ceiling-stays/comment-page-1/#comment-23169 Fri, 14 Jan 2011 18:28:57 +0000 http://blogs.reuters.com/felix-salmon/?p=6936#comment-23169 Yes, the US will not default, but this post does not argue the point well.

You essentially say the US will not default because such a default would be voluntary.

But most actual defaults are voluntary. For example, an insolvent municipal government could in theory make interest payments by stiffing its police and fire departments. That doesn’t happen. Cities choose, with good reason, to default instead.

I’m also concerned that readers may misinterpret the post to mean that the federal deficit, currently over 60% of gross receipts, is not an urgent problem. I’m sure that’s not what you intended.

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