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Old 07-14-2011, 05:50 PM
BamaGrits84
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Default Explain Debt Ceiling Please

I'll just be honest - I don't fully understand the deal with the debt ceiling so I need help. I keep hearing that the US will default on loans if we don't raise the debt ceiling. Since my debt is limited to a credit card and mortgage default to me just means failing to follow payment terms. So how is we raise out debt ceiling does that stop default? We won't be able to borrow from one lender to pay another? I guess I don't understand why after 3 weeks of talks on raising the debt ceiling they haven't found ways to cut enough fat from spending to come up with the money to pay whatever is at risk of default.
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Old 07-14-2011, 07:23 PM
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flo flo is offline
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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.

Quote:
DEMS PLAY THE DEFAULT CARD

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:

Quote:
DEBT CEILING IN PLAIN LANGUAGE

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 07:28 PM.
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Old 07-15-2011, 04:17 PM
CAVEMAN
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http://www.defeatthedebt.com/

Checkout the above website. Great information when it comes to the debt!
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Old 07-15-2011, 06:52 PM
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Quote:
Originally Posted by BamaGrits84 View Post
I'll just be honest - I don't fully understand the deal with the debt ceiling so I need help. I keep hearing that the US will default on loans if we don't raise the debt ceiling. Since my debt is limited to a credit card and mortgage default to me just means failing to follow payment terms. So how is we raise out debt ceiling does that stop default? We won't be able to borrow from one lender to pay another? I guess I don't understand why after 3 weeks of talks on raising the debt ceiling they haven't found ways to cut enough fat from spending to come up with the money to pay whatever is at risk of default.
put it this way. IF the US defaults on its Debts...Barack Obama can kiss goodbye to a second term in office

The Democrats and The Republicans need to have a deal on the financial state before the first week in August...if they cant aggree on how, to come up with the extra money...they wont HAVE the money to repay debts...THAT will be bad.

In Short...the Democrats want to raise taxes, and spend the extra income on Debt repayment. The Republicans think that the US simply needs to cut back on all the shyte it spends and give what they have left to national debt.

What the Republicans are calling for is an Austerity budgit for the United States...and frankly...thats what all the European Nations are trying to do...massive spending cuts, the closure of non essential services from the Government, cuts for Defence budgit, Cuts for health services, cuts for EVERYTHING...and give the spare money to plug the debt

The Democrats think that they can simply raise taxes...but noone likes paying taxes for a debt that THEY as individuals did not incure.

Barack Obama got REALLY heated within a debate yesterday...where he litterally got up and stormed out, claiming that if the US defaults on the debt because the Republicans wont aggree with him, it will bring down his presidency.

...I think the Republican response was


"so what if it does"

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