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July 27, 2011

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I hate to accuse a president of lying, but President Obama is selling a massive fraud to the American people by warning of a catastrophe if the debt limit is not increased. There will be no catastrophe unless the president goes out of his way to will it and create it.

Federal spending averages about $300 billion per month. Federal tax collections run to about $180 billion. Our vital obligations are a lot less than that: Federal debt service is about $25 billion per month. Social Security is about $58 billion per month. The entire defense budget also is about $58 billion per month. Tax revenues are more than sufficient to fund each of these items if the president chooses to allocate federal tax money to this purpose.

Confronted by a congressional refusal to raise the debt limit, the president will have a choice as to where to allocate the tax revenues that will continue to flow in. If he wishes to cause a catastrophic crisis by deliberately routing the money to purposes other than debt service, he can do so. If he wants to trigger a massive political crisis by withholding tax revenues from Social Security or military pay, he can do that, too. But these decisions are his to make. He could do the responsible thing and make sure these vital expenses are paid and withhold money from the run-of-the-mill federal bureaucracy, closing or restricting the activities of the departments of Labor, Agriculture, HUD, State, Justice, Commerce and the various boards and commissions. American can do very well without an FCC or an FTC or an NLRB for a few days or weeks.

The real political threat to Obama is that the debt limit is not increased and few people notice any change in their lives and nobody much cares. So some will have to wait a few more weeks for passports. So what?

The president is likening the government shutdown that would follow failure to raise the debt limit to that which took place in 1995-96. But in those years, there was a prohibition against spending money Congress had not yet appropriated. Now it’s perfectly legal to spend any money that comes into the Treasury; there just won’t be as much of it, because the debt limit will preclude further borrowing. The president still can fund any 60 percent of the government he wants (the proportion that comes from tax revenues).

In his speech to the nation Monday night, Obama used tricky words to camouflage these obvious facts. He no longer spoke of defaulting on money we owe, but instead used the more vague phrase “defaulting on our obligations.” By that he means our obligations to the bureaucrats, not to our creditors.

Since when are we obliged to fund the bureaucracy? The Congress voted the money, but if it rescinds the borrowing authority, the money won’t be there and it won’t be spent.

Obama’s entire strategy is to conceal his real goal: protecting every last desk in the bureaucracy behind a facade of threatening to close the most popular and fiscally necessary programs. He’s like a local mayor who knows that nobody is going to get hot and bothered if the commercial licensing bureau gets closed for a few days, so he warns that teachers and police will have to be laid off if there are budget cuts.

The House and Senate are close to a deal. They both agree to raise the debt limit without tax hikes. The Senate wants it raised by two years, the House for one. The Senate is pushing to include accounting gimmicks like ending the wars as a savings; the House is resisting. But these all are bridgeable gaps. None of these differences are causes for a breakdown. The only player who is holding out for tax hikes is the president, who has staked out a position to the left of his senators. It’s time for him to come in from the cold.

DIck, you really need to educate yourself about the consequences of a federal default instead of parroting Tea Party talking points.

Interest rates will shoot up . This will cost consumers and businesses an awful lot of money.

The value of the dollar will decline substantially. This will raise the price of oil and other stuff we buy from overseas.

Unemployment will skyrocket and the business climate will sink like a stone. People will be afraid to spend, leading to a vicious cycle of "less demand, less business activity, less jobs, less demand..."

If you believe that 40% of the federal government can be shut down with no adverse consequences, you're seriously deluded.

Brian Quote:

"Interest rates will shoot up . This will cost consumers and businesses an awful lot of money."

Why is it that this kind of stuff seems to happen when we have a liberal in the office of president that doesn't know anything about the economy other than he thinks the Government needs to regulate it and tax the daylights out of it, and can't figure out why it won't improve. See FDR, and Carter.

Brian quote:

"The value of the dollar will decline substantially. This will raise the price of oil and other stuff we buy from overseas.

Unemployment will skyrocket and the business climate will sink like a stone. People will be afraid to spend, leading to a vicious cycle of "less demand, less business activity, less jobs, less demand...""

This has already happened.


Dan, facts are inconvenient truths.

Fact: Obama has lowered taxes, not raised them.

Fact. Since Obama took over the horrible Bush economy, things are much better. Jobs have increased. The TARP money has mostly been paid back. THe American auto industry has recovered. The stock market is almost back to where it was.

You should pay more attention to economic reality and less to Fox News.

Fortunately, its looking like this debt limit crisis will mark the beginning of the end for the Tea Party. Whatever deal is reached will be more centrist than Boehner's plan, and even that plan is being criticized as too moderate by Tea Party leaders.

The moderates are on the march. Centrists are increasingly in control. Watch the next election: it will be a disaster for hard core conservatives.

Brian,

Fact: Since Obama took over, federal spending has increased from 1.4 billion dollars a day under Bush to 4 billion dollars a day under Obama.

Fact: Since Obama has taken over, unemployment has increased and the debt crisis has come home to roost.

In the sixties President Johnson instituted "Great Society" entiltlement spending to improve the lives of the less fortunate and less affluent. It hasn't worked.

Fact: The number of people at the poverty level in this country was 14% in the sixties. Today, it is 14.3%.

After spending trillions of dollars on entitlements the situation hasn't improved at all. It is actually worse.

America is bankrupting itself with nothing to show for it.

After this massively expensive plan has failed abysmally after a 55 year trial Obama wants to continue it with his "social justice" philosophy and continue to expand government and its intrusion into our lives.

Yeah, we need some government, but expanding it's powers and size seems pretty foolish to me in light of its past failures to manage itself responsibly.


I have some news for you.
Nothing is going to happen next week that wasn't inevitable in the first place.
Some people will be slightly happier, and some people will be slightly more dismayed. Politicians are as much the hapless victims of evolutionary forces that are forever beyond comprehension as any other two-legged sentient life form.
My first social security check is due in the middle of August. I will be among the ranks of the dismayed if that check is not forthcoming.

"Since when are we obliged to fund the bureaucracy? The Congress voted the money, but if it rescinds the borrowing authority, the money won’t be there and it won’t be spent."

There's the heart of the Tea Party moral compass - simply walk away from an obligation we've already made (like defaulting on a mortgage when we can afford to pay it). Lets not forget - we are the richest country in the world and we CAN afford to pay our debts. Don't like the amount of expenditures - fine, lets talk about reducing them, but don't destroy US credit worldwide in the process. Holding hostages and throwing tantrums is not helpful.

Fact: Downgrading the US credit will have a permanent negative effect on the US economy and will destabilize the world economy.

Ritz,

I think you misunderstood Dick as did Brian. Dick was saying what you said. We don't have to walk away from our obligations. Funds can be allocated to service the debt while expenditures are cut elsewhere. For example, those in research programs funded by the govt., such as the federal grant to chronicle the reproductive cycle of the Samoan sea rat, may have to seek private funding. It may be hard times for them rat researches, but no one needs to miss a social security check. Right, Dick?

Willie R, my wife is set to get her first Social Security check next month also. So like you, we're hoping the Republicans don't allow a default on federal obligations.

tucson, the federal government doesn't just owe money to bondholdhers. It also has obligations to the American people, including our military and other federal employees.

If 40 to 50 percent of the government shuts down, as is looking more likely, the American people are going to realize how important federal programs are to their lives.

No meat inspectors, no meat. No air traffic controllers, no flying. The examples go on and on. The good news is that this will mark the end of the Tea Party, because the vast majority of citizens don't want government to go away.

The bad news is that everybody is going to be hurt by this debacle. Everybody.

The debt can be serviced and vital services can be sutained with current revenues, but the country is going to have to do without many government functions that have been created in the last 50 years. Start with ending funding for NPR, Planned Parenthood, subsidies for this and subsidies for that, etc., etc., etc. End the wars. Stop foreign aid. Maybe the foreigners would like to aid us for a change. In other words, cut the fat and leave the meat (sorry, vegetarians). Sure it will cause a depression, but that is inevitable anyway. Close tax loopholes and create a flat tax system. Start a 1% national sales tax. Time to pay the piper and every american will have to suffer for the corruption of the power elite in both private and public sectors that has been running rampant for so long. Dream on, tucson.

tucson writes:

Fact: Since Obama took over, federal spending has increased from 1.4 billion dollars a day under Bush to 4 billion dollars a day under Obama.

...

What is the source of your facts? Both your numbers are way off.

Look here, (even an approved batshit crazy website!): http://www.heritage.org/Research/Reports/2010/06/Federal-Spending-by-the-Numbers-2010

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