Wednesday, April 13, 2011
Imagine you have a credit card. Not just Any credit card- no, this is a very very special card...
And what makes it so special? Does it have a good APR? Or triple points to be used on airline flights?
No, what makes this card special is it does not have a credit limit.
Well, OK, it does have a credit limit 'technically' but what makes this card so super is every time you spend and spend to the point you're at your credit limit, you simply extend it to a larger limit. Now you will still have to pay what you owe on the card with interest (sorry, the card's not That special), and that minimum payment will still expand as the debt total grows... And like any normal credit card, if you keep adding debt, you will get to a point where realistically, the debt will never get repaid...
But nonetheless, with this special credit card, every time you reach the maximum you can charge on it, you simply close your eyes, thing happy, magical thoughts and.. new debt limit.
This is the US National Debt and the way Congress and the Presidency deal with budgetary and spending issues which are unpopular to an elected populace- you 'kick the can' and extend the debt limit.
And this man stated the following on the floor of the Senate...
" “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure... It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” " (ABC News.com)
And this same man is now President and on April 12th, his Press Sec said:
"The president regrets that vote and thinks that it was a mistake. He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy it is not a vote even when you are protesting an administration’s policies and play around with, and you need to take very seriously the need to raise the debt limit so the full faith and credit of the United States government will be maintained around the globe.” (CNS News)
To not raise the debt ceiling means to default on the debt since the US is completely financially incapable of paying down even a small portion of its total debt. (as it is, the US struggles to make minimum payments, known in layperson terms as deficits), and "at a minimum, a default could hurt U.S. bonds, the dollar and investors' portfolios" (CNN Money)
Repeat- it could hurt investors. Not citizens or people of other nations...
The entirety of both American and global fiscal policy is to appease investors.
This is the crux of the phony 'debate'- we know it will be raised albeit at the 11th hour... The populace of a nation can work and work.. and pay more and more.. and a nation's prosperity will suffer horrifically but ultimately, the investor's personal economic interest Must be satisfied.
Nations have defaulted before.. Some nations numerous times.
Argentina defaulted back in 1999 and within 6-7 years, banks were lining up to lend to the nation once more. In post Wiemar Republic Germany (early 1930s), Hitler came to power, defaulted on the debts and war reparations, and almost immediately banks corporations throughout Europe and the US were lining up to help the new Nazi government grow and prosper. (I'm speaking specifically and solely about the economic situation of Germany before it defaulted vs. the period around (1932-38) after it did so, and not glorifying the evil, vile Nazi regime politically, socially or any other way...)
Would it be bad if the US defaulted? Somewhat yes. Would it be horrific? No. It would mean adjustments to economic life as we know it, and certainly most people do poorly adjusting to new things. But then again, there are no happy solutions to this economic tale. To use a tired cliche, our politicians have over time dug too deep a hole.
There is one easy solution though.. Raise the debt ceiling.
Posted by Susquehanna at Wednesday, April 13, 2011