Stark realities of U.S. life without credit

July 14, 2011

Amid the political fingerpointing over which party will catch the blame if Congress fails to raise the $14.3 trillion debt limit, comes the stark reality of what bills get paid after Aug. 2, if the U.S. government can’t borrow more money.

A group of House Republicans wrote a letter to President Barack Obama on Thursday to say there would be plenty of money from tax receipts to make interest payments to creditors, pay Social Security retirement benefits, cover Medicare health payments and pay U.S. military troops.

Senate Democrats at a news conference made clear that once those bills were paid, little would be left for anything else.

“It would require the Treasury to make some very dark and difficult choices,” said Senator Charles Schumer, a member of the Senate Democratic leadership.

The U.S. monthly revenue totals $172 billion, while its monthly obligations total $307 billion. Payments for Social Security, Medicare and Medicaid, interest on the debt, troops and defense needs will gobble up the entire monthly income.

There would be no money for student loans just as young people are heading back to school, no money for the Federal Bureau of Investigation, border security, health research, food inspections, Schumer said.

“You don’t have anyone at the border, anyone doing food inspections, anyone in the FAA (air traffic control) towers. America would come to a grinding halt,” Schumer said.

On top of that, global financial markets would punish the United States and interest rates would rise throughout the economy.

Democrats are betting that the stark reality of failing to raise the debt limit will push congressional Republicans toward compromise on a roughly $4 trillion deficit reduction package that has both spending cuts and tax increases. Such a package  would help clear the way for Congress to raise the credit limit. But Republicans want only spending cuts and no tax increases.

Democrats argue that a balanced approach is needed to prevent steeper cuts to Medicare and Medicaid health programs and Social Security.

A new poll by Quinnipiac University found that the public might be more likely to blame Republicans if a deal is not reached. Also, 67 percent agree that the deficit package should include tax hikes for the wealthy and big corporations as well as spending cuts.

Photo Credit: Reuters/Mike Segar (The Wall Street Bull sculpture in lower Manhattan)

7 comments

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Quinnipiac University that is hilarious. End the wars! Bring home the troops!

Posted by M.C.McBride | Report as abusive

The crux of the issue is that most of us have not had the dynamics of the problem explained in a way that can be understood. And by now, because it will be painful no matter how it is handled, it is hyper political. Most folks don’t trust anyone. Not just politicians but economists and Wall Street types especially. And the current White House is not doing much of anything different than any other White House has done since 1979. And they can’t because the solution entails much higher unemployment in the short term, yet that will be the least painful compared to where it is going to end up as. If Obama did what he needs to do it would be Malaise Speech II and he would be gonzo. SO we keep headed to the cliff.

Posted by threeRivers | Report as abusive

I agree with threerivers. The public’s loss of a strong sense of integrity coming from those in office, those who seek to be, and those who filter all that they say and do while overlaying still more opinions of their own (yes the media) leaves the public deeply cynical of all that they hear.

There is always room for anyone to be wrong. Calling into question the constructs built on the folly that can be human endeavor is necessary, even noble. But history and well grounded theories standing ready to be challenged by new, valid observations should not easily yield in our minds to single, simple truths and should never yield to mere accusations spilling from anyone’s mouth. Default is not new and the potential size of a US default is not something to just hide behind. The implications have needed to be front and center and well understood.

It is the thrust of science over superstition, juried justice over mobs, and individuals that thoughtfully and fairly debate their differences rather than weaponizing them that has established the wisdom of consensus building as the bedrock of the society we still aspire to be. But rather than promoting the advance of all that we call knowledge gleaned from careful, truthful observation and rooted in an abundance of fact, many of those in venues of influence or authority are gifted at manipulating factoids and mere accusations into ready made perspectives rooted often in the service of self.

Americans need the facts that should transcend the politics on what will happen and what is very likely to happen. Where is the return on investment in securing freedom of the press when what seems to motivate the media now leaves too many of us uninformed, misled, adrift in uncertainty and all too willing to listen to anyone claiming to know the truth regardless of their source, their credentials, or their credibility?

Posted by Philip_Andolina | Report as abusive

To the last two philosophical sort of posts…………huh ???????????? I don’t get it. Read what it says on your paper money. “Backed by the good credit and faith of the U.S. Govt.” Default and no good credit and faith. Nobody to buy U.S. bonds except at junk bond interest rates. That is worse then the current debt crisis and will impact everyone immediately. So before it all happens I’m buying a new home, a Mercedes and a shack on the island of Grenada…..just in case.

Posted by pablo222 | Report as abusive

pablo222 offers a seemingly irrefutable simple truth – an understanding about the integrity of the promise made by the US government on behalf of all Americans. It is in keeping with the spirit of any American commitment. His thought is so easy to believe without even pulling a bill from your wallet. But pablo222 misquotes our currency which only reads “This note is legal tender for all debts, public and private” and my reading of these words does not offer the necessary constraints on Congress from the current spectacle of party brinkmanship.

Our currency also says “In God we trust” – another factoid and to many a simple truth. So rather than wrestling its own government to the ground should all Americans just cross their fingers and pray until August 2? For voters to do their jobs we need all the facts – not clichés – to distinguish between what can be said and what is absolutely necessary to know.

Posted by Philip_Andolina | Report as abusive

[...] debt ceiling is the amount set by Congress that can be withdrawn; defaulting or going over the national debt is unthinkable.  The consequences would freeze international investing, because nobody will be able to rely on [...]

[...] debt ceiling is the amount set by Congress that can be withdrawn; defaulting or going over the national debt is unthinkable.  The consequences would freeze international investing, because nobody will be able to rely on [...]

The root problem is no budget.No debate, YEARS OF no plan and no accountability are the cause of the current crisis. Cutting expenditures is the first step to fixing the budget shortfall. raising revenues with tax reforme being madeis the second step and should occur at the same time as real spending cuts ar It is time to stop the smoke and mirrors game. No economy can stand up to the huge budgetary shortfalls we currently in the USA.The time to start balancing the budget is now and that will strengthen, not weaken the economy in the short and the longer term in the USA. The budget must be balanced and soon.

Posted by clc123 | Report as abusive

The real problem is that the military means the USA bought to achieve world hegemony have failed. Spectacular (and very expensive) tactical defeat in Iraq and Afghanistan: We failed to plunder Iraq’s oil, and we failed to gain control of the pipeline route into Central Asia from the Taliban.
The 20th century was not kind to defeated empires. No reason to believe the 21st will be different.

Posted by ChrisHerz | Report as abusive