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Understanding the debt ceiling debate: Separating myth from fact

Posted by on Oct. 18, 2013 at 8:53 AM
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2 moms liked this

Understanding the debt ceiling debate: Separating myth from fact


Understanding the debt ceiling debate requires separating myth from fact. This user handbook answers many questions. Photo: AP

LOS ANGELES, October 13, 2013 — The political battles over Obamacare, the government shutdown, and the debt ceiling are actually three separate issues. While there is some overlap, these three issues are of varying importance. Obamacare is a fight over a single piece of legislation. The shutdown has been met with a collective shrug, as most people remain unaffected. The debt ceiling is serious.

Away from the political fog, it is necessary to understand why the debt ceiling matters so that myths can be separated from facts.

The debt ceiling is the borrowing limit for the United States government. Once reached, the United States would be unable to spend more. Like a credit card, there is a spending cap. Unlike a credit card, the government can raise its own “credit limit” — with congressional approval.

Raising the limit has always been routine. Why not now?

Conservatives have concluded that the debt is now unsustainable, and that raising it further would do long-term harm to the American economy. Liberals note the debt limit has always been raised, but conservatives say that is precisely the problem. 

Is defaulting on debt payments Armageddon?

Absolutely. Default could cause worldwide panic. America has never missed a debt payment. The dollar is the world’s reserve currency solely because it is 100 percent safe. Default must not happen under any circumstances.

President Obama claims that raising the debt ceiling does not mean more debt.

This is theoretically true, but ludicrous in reality. Raising the ceiling does not automatically increase spending, but every single increase has been followed by more spending. Asking for more credit without needing or using it defies history and common sense.

Does refusing to raise the debt ceiling mean default?

Absolutely not. Limiting the debt ceiling forces Obama to make painful budgetary choices. He could slash social, other domestic, or military spending. The 14th Amendment to the Constitution mandates that all debts be paid first. Social Security payments also go out as scheduled as a priority. Default would be solely President Obama’s decision and a Constitutional violation.

America takes in between $225 to $250 billion per month. Interest on debts is only about 10 percent of that. Plenty of money remains to service foreign debt and avoid default.

How did America get $17 trillion in debt?

America was $5 trillion in debt when President George W. Bush took over. After 9/11, America waged wars in Afghanistan and Iraq. While the left staunchly disagreed with the war spending, the amount was minuscule compared to what really eats America’s budget.

Entitlement spending on Social Security and Medicare has America facing $90 trillion in unfunded liabilities. When Obama entered office, the debt was $10 trillion. So while Bush added $5 trillion in eight years, Obama has added $7 trillion himself in only five years. Obamacare has added over $1 trillion alone.

Isn’t Obama asking Congress to pay for bills Congress already racked up?

No. This sound bite is false. Republicans opposed the expenditures, but Democrats controlled both houses of Congress for the first two years of Obama’s presidency. Most congressional expenditures are specifically designed to mirror a president’s priorities. Republican congresses passed Bush’s agenda. Congressional Democrats enacted Obama’s desired expenditures. The spending is Obama’s spending. His passing the buck to Congress and distancing himself from it is disingenuous.

Isn’t the deficit falling?

This is technically true, but misleading. The sequester temporarily reduced the deficit. Obama wants to repeal sequestration. The sequester contains no actual spending cuts, only reduced increases in growth. Additionally, falling deficits do not mean reductions in actual debt. Debt is still increasing, only at a slower rate. If the sequester is repealed, spending will skyrocket again.

Why does Obama want another debt limit increase?

He is a committed liberal who deeply believes that increased government spending will improve society. Conservatives disagree. This ideological struggle is as old as civilization.

What specific new expenditure(s) does he need to fund?

Education. Obama has said for years that his top three priorities are healthcare, environmental-energy issues, and education. He passed healthcare and used executive orders to fund green energy projects. His last main goal is to “invest in education.” While initially undefined, he wants mandatory pre-school for all children. This requires a new government program, just as healthcare did.

Would Obama let America default?

Possibly. He believes “no pain” for Americans, “no gain” politically for himself. He used the sequester to close White House tours. The strategy backfired politically, but the precedent was set. Obamacare is his prized program representing his deepest ideological beliefs. Default would hurt the world. Repealing Obamacare would hurt him.

If Obama thought Republicans would be blamed for global collapse, he might allow default. On his watch, America’s credit rating was downgraded for the first time ever. He still won reelection. Nothing in his political DNA suggests he would voluntarily scale back Obamacare rather than allow a catastrophic but possibly politically beneficial default.

Is refusing to raise the debt ceiling irresponsible?

This is the crux of the entire argument. Democrats and some liberal Republicans say yes. Conservatives argue that continuing to spend money until America is broke would be irresponsible. In the long run, the house of cards that is the global financial system will collapse if spending is not reined in. No individual, business or government can spend more money than it collects without eventually having their line of credit cut off. Delaying painful choices makes the inevitable reckoning worse.

Read more: http://communities.washingtontimes.com/neighborhood/tygrrrr-express/2013/oct/14/understanding-debt-ceiling-debate-separating-myths/#ixzz2i01Hnvx1 

by on Oct. 18, 2013 at 8:53 AM
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pvtjokerus
by Platinum Member on Oct. 18, 2013 at 9:10 AM
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Please take note:  "

How did America get $17 trillion in debt?

America was $5 trillion in debt when President George W. Bush took over. After 9/11, America waged wars in Afghanistan and Iraq. While the left staunchly disagreed with the war spending, the amount was minuscule compared to what really eats America’s budget.

Entitlement spending on Social Security and Medicare has America facing $90 trillion in unfunded liabilities. When Obama entered office, the debt was $10 trillion. So while Bush added $5 trillion in eight years, Obama has added $7 trillion himself in only five years. Obamacare has added over $1 trillion alone."

KenneMaw
by Bronze Member on Oct. 18, 2013 at 2:44 PM
3 moms liked this

I know most people don't believe the govt should be run like a business, however, when it comes to spending, yes it should.  during the recession, the majority of companies had to face reality - they were hurting, sales were down, and apinful decisions had to be made.    My employer had a series of layoffs, reduced all  40-hr employees to 35-hour employees and cut out expensive tradeshows and other 'extras'.  The changes hurt.  Our CFO stood up and said, we are not the same company we were 5 years ago so we need to stop comparing ourselves to that.   Although we aren't a $200 million/yr company, we are $100 million/yr and that is pretty damn good.      That was a BIG reality check.    The US govt needs the same realilty check.   We are not the economy of hte booming 80s and 90s.   Our general population is older, we have more immigrants, etc...   THe US govt must make some hard decisions or we will all be doomed.   As for the $1000 hammers and toilet seats, the only reason they cost that much is because the govt has so much red tape to go through before cutting a purchase order.  They have to do evaluations, bids, re-bids, meetings, tons of paperwork - jsut to justify people's jobs.  It it total BS.   We sell alot of the govt and lose money on almost every deal.   Our govt is brilliant at creating 'busy work' which costs everyone money.

cjsbmom
by Lois Lane on Oct. 18, 2013 at 6:17 PM
1 mom liked this

While he makes some good points, I absolutely disagree that the debt ceiling and the deficit do not go hand in hand. One absolutely affects the other. That's simple economics. 

cjsbmom
by Lois Lane on Oct. 18, 2013 at 6:18 PM
3 moms liked this

I would agree that some small businesses had to make painful decisions. But larger corporations weren't affected in the same way, and quite frankly, some of them are the biggest abusers of corporate welfare there is. 

Quoting KenneMaw:

I know most people don't believe the govt should be run like a business, however, when it comes to spending, yes it should.  during the recession, the majority of companies had to face reality - they were hurting, sales were down, and apinful decisions had to be made.    My employer had a series of layoffs, reduced all  40-hr employees to 35-hour employees and cut out expensive tradeshows and other 'extras'.  The changes hurt.  Our CFO stood up and said, we are not the same company we were 5 years ago so we need to stop comparing ourselves to that.   Although we aren't a $200 million/yr company, we are $100 million/yr and that is pretty damn good.      That was a BIG reality check.    The US govt needs the same realilty check.   We are not the economy of hte booming 80s and 90s.   Our general population is older, we have more immigrants, etc...   THe US govt must make some hard decisions or we will all be doomed.   As for the $1000 hammers and toilet seats, the only reason they cost that much is because the govt has so much red tape to go through before cutting a purchase order.  They have to do evaluations, bids, re-bids, meetings, tons of paperwork - jsut to justify people's jobs.  It it total BS.   We sell alot of the govt and lose money on almost every deal.   Our govt is brilliant at creating 'busy work' which costs everyone money.


cjsbmom
by Lois Lane on Oct. 18, 2013 at 9:15 PM

BUMP!

kailu1835
by Ruby Member on Oct. 18, 2013 at 9:17 PM
The dollar is the world’s reserve currency solely because it is 100 percent safe.

Does anyone actually believe this shit? The dollar is not even remotely safe!! I didn't even bother reading the rest of it. And no, raising the debt ceiling has not always been routine.
pvtjokerus
by Platinum Member on Oct. 18, 2013 at 9:35 PM

 Compared to every currency in the world the dollar was the safest.  However, because of the over printing of the dollar in the past 3 years, those safeguards have fallen by the waist side.  The Germans are making the Euro look better and better each day.


Quoting kailu1835:

The dollar is the world’s reserve currency solely because it is 100 percent safe.

Does anyone actually believe this shit? The dollar is not even remotely safe!! I didn't even bother reading the rest of it. And no, raising the debt ceiling has not always been routine.


 

pvtjokerus
by Platinum Member on Oct. 18, 2013 at 9:40 PM

 And can you imagine that same government growing bigger?  Unfortunately, this administration is not looking to making hard decisions.  It is looking to expand its voting base.  The more people that is on the 'tit' the more that will consistently vote for that party.  Therefore, this group will do anything in its power to stay in control which means no hard decisions will be made to help the future America as a whole.


Quoting KenneMaw:

I know most people don't believe the govt should be run like a business, however, when it comes to spending, yes it should.  during the recession, the majority of companies had to face reality - they were hurting, sales were down, and apinful decisions had to be made.    My employer had a series of layoffs, reduced all  40-hr employees to 35-hour employees and cut out expensive tradeshows and other 'extras'.  The changes hurt.  Our CFO stood up and said, we are not the same company we were 5 years ago so we need to stop comparing ourselves to that.   Although we aren't a $200 million/yr company, we are $100 million/yr and that is pretty damn good.      That was a BIG reality check.    The US govt needs the same realilty check.   We are not the economy of hte booming 80s and 90s.   Our general population is older, we have more immigrants, etc...   THe US govt must make some hard decisions or we will all be doomed.   As for the $1000 hammers and toilet seats, the only reason they cost that much is because the govt has so much red tape to go through before cutting a purchase order.  They have to do evaluations, bids, re-bids, meetings, tons of paperwork - jsut to justify people's jobs.  It it total BS.   We sell alot of the govt and lose money on almost every deal.   Our govt is brilliant at creating 'busy work' which costs everyone money.


 

Della529
by Matlock on Oct. 18, 2013 at 10:02 PM

 Perhaps Congross should recognize, realize and understand there is a "debt ceiling" before it authorizes spending.  None of them are inncocent including the Tea Party members you so believe in.

kailu1835
by Ruby Member on Oct. 18, 2013 at 10:05 PM
That's kind of my point. We are anything but stable thanks to the past few years.

Quoting pvtjokerus:

 Compared to every currency in the world the dollar was the safest.  However, because of the over printing of the dollar in the past 3 years, those safeguards have fallen by the waist side.  The Germans are making the Euro look better and better each day.




Quoting kailu1835:

The dollar is the world’s reserve currency solely because it is 100 percent safe.

Does anyone actually believe this shit? The dollar is not even remotely safe!! I didn't even bother reading the rest of it. And no, raising the debt ceiling has not always been routine.



 

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