Quote :

"Former Vice President Dick Cheney famously said, "Deficits don't matter." A staunch Republican, he was arguing against raising taxes on the rich; but today, Republicans seem to have forgotten this maxim. They are bent on stripping social programs, privatizing public assets and gutting unions, all in the name of "deficit reduction." Worse, Standard & Poor's has now taken up the hatchet. Some bloggers are calling itblackmail. This private, for-profit rating agency, with a dubious track record of its own, is dictating government policy, threatening to downgrade the government's long-held triple AAA credit rating if Congress fails to deal with its deficit in sufficiently draconian fashion. The threat is a real one, as we've seen with the devastating effects of downgrades in Greece, Ireland, and other struggling countries. Lowered credit ratings force up interest rates and cripple national budgets. The biggest threat to the dollar's credit rating, however, may be the game of chicken being played with the federal debt ceiling. Nearly 70 percentof Americans are said to be in favor of a freeze on May 16, when the ceiling is due to be raised; and Tea Party-oriented politicians could go along with this scheme to please their constituents. If they get what they wish for, the party could be over for the whole economy. The Chinese are dumping US Treasuries and the Fed is backing off from its "quantitative easing" program, in which it has been buying federal securities with money simply created on its books. When the Fed buys Treasuries, the government gets the money nearly interest-free, since the Fed rebates its profits to the government after deducting its costs. When the Chinese and the Fed quit buying Treasuries, interest rates are liable to shoot up; and with a frozen debt ceiling, the government would have to default, since any interest increase on a $14 trillion debt would be a major expenditure. Today, the Treasury is paying a very low .25 percenton securities of nine months or less, and interest on the whole debt is about 3 percent (a total of$414 billionon a debt of $14 trillion in 2010). Greece is paying4.5 percenton its debt, and Venezuela is paying18 percent- six times the 3 percent we're paying on ours. Interest at 18 percent would add $2 trillion to our tax bill. That would mean payingthree timeswhat we're paying now in personal income taxes (projected to be a total of$956 billionin 2011), just to cover the interest. "

http://www.truthout.org/cheney-was-right-about-one-thing-deficits-dont-matter/1303850419

Republicans are hell-bent for election to crash the economy by not raising the debt ceiling.

4/27/2011 6:47:34 PM

All but the most hardcore Tea Party types know that not raising the debt ceiling is going to be a disaster. They're simply using the threat to try and squeeze greater concessions out of Congressional Democrats. In my opinion, the real threat is a strategic miscalculation where both sides misjudge each other, thinking that the other is going to flinch soon, and thus, even if neither side never intended to freeze the debt ceiling, they accidentally do. Also, I don't think S&P's position is too unreasonable: we do need to get the deficit under control, but I don't like this thinking that draconian cuts are the only way to go. We need to be reasonable and also increase taxes and close loop holes.

4/27/2011 7:01:05 PM

RedGuard should post more.

4/27/2011 7:14:13 PM

I lived through 1994, I don't remember anything bad happening beyond the republicans losing some seats in 1996. Is that what you mean by disaster?

4/28/2011 12:07:34 AM

Quote :

"All but the most hardcore Tea Party types know that not raising the debt ceiling is going to be a disaster."

I think it would be a disaster. Here's why: if the Treasury can't issue more debt, foreign and domestic bond traders will panic and start dumping bonds. At that point, the Treasury will be obligated to hike rates. The U.S. treasury bond market (which has been regarded as the ultimate flight to safety in the past) will be destroyed. That's when the real depression starts, and life here gets really bad really fast.

Unfortunately, all we can really do is prolong the disaster. I don't know for how long. Failing to raise the debt ceiling means foreign investors will lose confidence in treasuries sooner than they would have, but it could be any other shock to the system that causes that to happen. The outlook isn't good.

4/28/2011 12:33:38 AM

Quote :

"In my opinion, the real threat is a strategic miscalculation where both sides misjudge each other"

The real threat is an American public which does not recognize the severity of the problem that faces us. Both sides say they want to balance the budget but we fail to recognize that, even if we cut ALL discretionary spending (including DoD) we could still not maintain a balanced budget due to the obligations of Medicare, Medicaid and Social Security.

4/28/2011 8:37:08 AM

Social Security has a 2 trillion dollar surplus.

4/28/2011 11:46:30 AM

^hope this helps

http://money.cnn.com/2010/08/09/news/economy/social_security_value.fortune/index.htm

There isnt a pile of money sitting anywhere.

Lets say at the end of this month you have 100 dollars more than you spent. So you give yourself an IOU of 100 bucks and go out and blow the money. Awesome, bc you have 100 worth of stuff and a "trust fund" of 100 bucks.

And SS is now officially in the RED. Meaning they spend more money than they take in.

[Edited on April 28, 2011 at 12:00 PM. Reason : .]

4/28/2011 11:59:55 AM

I think the democrats should take the Republicans up on not raising the debt ceiling. Defaulting on the debt would be a massive transfer of wealth away from the rich.

The Republicans will never EVER stand for what they propose.

4/28/2011 2:05:48 PM

Don't be silly. The Democrats represent the interests of the rich just as much as the Republicans do. They are just different rich.

4/28/2011 3:03:38 PM

Quote :

"They are just different rich."

Who?

4/28/2011 7:15:38 PM