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Old 07-14-2011, 08:23 PM
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It all makes my head hurt too. Here is an article from June 12 by Stephen Moore, an economist who seems relatively non-partisan and writes for the WSJ.


Rumors are bouncing through Washington and Wall Street that Republicans in Congress are flirting with a debt default in August as a way to get President Obama to agree to spending cuts.

This rumors got steam from a widely cited Reuters report that said "an increasing number of Republicans do not believe the Obama administration's dire predictions of economic catastrophe if the debt limit is not increased" and that the GOP thinks "a period of technical default can be managed without plunging markets into chaos."

The story cites Republican presidential candidate Tim Pawlenty, the former Minnesota governor; Republican Pat Toomey, the freshman U.S. senator from Pennsylvania; and GOP Rep. Paul Ryan of Wisconsin. They agree that a short-term failure to raise the debt limit would not lead to Armageddon and might even be a welcome turn of events.

But other Republicans and Wall Street insiders tell me that the possibility of a U.S. default on debt is close to zero. Wall Street economist and Republican economic advisor David Malpass said that "Treasury is required to make the interest and principal payments, and will." He also believes, as do many other economists, that talk of "downgrading the debt from AAA" is misinformation. "Treasury will be able to provide persuasive data to the rating agencies that there won't be any missed interest payments," said Mr. Malpass in a note to his investor clients.

Mr. Toomey has proposed legislation that is designed to make sure that there will be no default. His bill would guarantee that if the debt ceiling is not extended, bondholders would be paid first from tax revenues collected each day. This would mean that other nonessential activities of government may not get funded until an agreement were reached on the debt ceiling.

Nevertheless, Democrats on Capitol Hill and in the White House who are arguing about how dangerous a default would be are also opposing Mr. Toomey's bill to ensure that this will never happen. Economists note that the continued slide in interest rates on 10-year Treasury bonds to 3% suggests almost no market fear that default is a realistic option. If investors were truly worried about a default and a downgrading of the debt, we would see a rise in interest rates to reflect this higher risk.

House Speaker John Boehner, who's involved in the negotiations with the Obama administration, wants to cut $1 of spending for every $1 of debt increase. The goal is to secure $2 trillion of savings before the August debt ceiling deadline. The first $1 trillion reportedly has been agreed to, but the White House is balking on the second trillion in cuts.
Link Here

And here is his most recent article which analyzes Mitch McConnell's new "plan" which would allow Obama to raise the debt ceiling.

This short article explains it in everyday terms:


With all the politics going on about the necessity of raising our debt ceiling in the United States, we need to have an understanding of just what it means. Therefore, I would like to put the debt ceiling in understandable terms for all the citizens.

For example, if you have a credit card with a ceiling of $15,000, you have that much money available to you for purchases. So, if you reach that level, all you have to do is contact the credit card holder and have that ceiling raised to $20,000 and now you can spend another $5,000 without worrying about paying off the balance. Then, when you reach the $20,000 level, contact the credit card holder and have it raised again.

That is exactly what is going on in Washington in the negotiations to raise the U.S. debt ceiling. What is so hard about figuring this out? We just keep going in debt deeper and deeper.

What needs to be done is to stop spending. There are necessities that have to be bought in order to survive. Put this on a "family" level. We need food, medical treatment, a place to live. But is it a necessity to donate to all the agencies that constantly are sending us requests? No. Our family needs to come first, and most definitely, if you can afford the donations, it is very nice. But if you do not have available cash, do you call your credit card company and ask to have your credit limit raised so you can make these donations?

It is very commendable for the United States to give aid to needy countries in crisis. But it should be only to the level of being able to afford it. The United States should come first and then, if available, we can help out the other countries in the world.
Link here.
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Last edited by flo; 07-14-2011 at 08:28 PM.
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