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US Hits ‘Debt Ceiling’ – Life Still Goes On

From CNN’s Money.Com:

U.S. hits debt ceiling

By Jeanne Sahadi, May 16, 2011

NEW YORK (CNNMoney) — It’s official: The U.S. government hit the debt ceiling on Monday, Treasury Secretary Timothy Geithner told Congress.

Sorry, but wasn’t this supposed to be the end of the world? And, at least up until a few days ago, we were told that breaching the laughably called ‘debt ceiling’ would mean the end of life on earth as we know it.

And yet the sky is still blue and the birds are still singing. (To quote Barack Obama.)

Geithner said he would have to suspend investments in federal retirement funds until Aug. 2 in order to create room for the government to continue borrowing in the debt markets.

The funds will be made whole once the debt limit is increased, Geithner said. "Federal retirees and employees will be unaffected by these actions."

Man alive. It is always about government retirement pensions. First and last.

He went on to urge Congress once again to raise the country’s legal borrowing limit soon "to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens."

No wonder Mr. Geithner had so much trouble with TurboTax. Raising the debt limit is the real catastrophic economic choice here. And he will lead to far worse consequences than finally trying to live within our means.

Congress, meanwhile, is not showing any signs of budging. Many Republicans and some Democrats say they won’t raise it unless Congress and President Obama agree to significant spending cuts and other ways to curb debt.

There is bi-partisan support for spending cuts. So where are they?

Geithner told Congress that he estimates he has enough legal hoop-jumping tricks to cover them for another 11 weeks or so.

Again, all of the doomsday stories for the last two months were flat out lies. And nobody will ever call the media on their fearmongering.

But then he said that’s it. If lawmakers don’t get it together by Aug. 2, the United States will no longer be able to pay its bills in full

This too is probably a lie.

How many times has the ceiling been raised? Since March 1962, the debt ceiling has been raised 74 times, according to the Congressional Research Service. Ten of those times have occurred since 2001.

Expect more of the same over the next decade. Barring major changes to spending and tax policies, "Congress would repeatedly face demands to raise the debt limit," CRS wrote…

So why even have a debt limit if it is meaningless?

What happens if Congress blows the debt ceiling?

Treasury would not have authority to borrow any more money. And that can be a problem since the government borrows to make up the difference between what it spends and what it takes in. It uses that borrowed money to help fund operations and pay creditors…

But since average spending — minus interest — outpaces revenue by about $118 billion a month, Geithner won’t be able to pay all the country’s bills

So let’s just cut government spending by $118 billion a month. That should be easy as pie.

Geithner said it would be akin to a homeowner who pays his mortgage but puts off his car loan, credit cards, insurance premiums and utilities. The mortgage is taken care of, but the homeowner’s credit could still be damaged.

Or it could be akin to a homeowner cutting down on his expenses. Such as by not eating out quite so much. Or, more exactly when we are talking about such small percentages – buying a cheaper brand of toothpaste.

Ultimately, if lawmakers fail to raise the ceiling this year, they will have two choices, both awful.

They could either cut spending or raise taxes by several hundred billion dollars just to get through Sept. 30, which is the end of the fiscal year. Or they could acknowledge that the country would be unable to pay what it owes in full and the United States could effectively default on some of its obligations.

The first option would be impossible to execute without serious economic repercussions. And the second option could cripple the economy and send world markets into a tailspin…

Or they could do what they always do, and print more money.

Will reaching the debt ceiling for good cause a government shutdown? Not technically. A government shutdown occurs if lawmakers fail to appropriate money for federal agencies and programs.

By contrast, if the debt ceiling is breached, Uncle Sam would still have revenue coming in that could be used to fund the government, Penner noted.

Something we have said until we are quite bluish in the face.

But if Geithner is coming up short by $118 billion every month, and lawmakers just decide to cut spending by that amount, that could effectively mean a partial government shutdown.

Or they could use this as a great excuse to finally get serious about cutting spending. Even by these relatively paltry amounts.

This article was posted by Steve on Monday, May 16th, 2011. Comments are currently closed.

5 Responses to “US Hits ‘Debt Ceiling’ – Life Still Goes On”

  1. Liberals Demise says:

    Nobody is going to jail?
    If I couldn’t balance my checkbook guess where my ass
    would be against a wall?
    Oh…I get it. There are two sets of rules.
    One set for us to follow and others for them not to follow.

  2. proreason says:

    Would that ms reason should be so tolerant.

    I tried to raise the “ceiling” on my admiration for the female form once, and it was catastrophic.

    But seriously, I’m with Steve on this. What good is a debt ceiling if you raise it 73 times? It’s like Bubba promising not to rape any more women or Spike promising not to lie.

  3. Right of the People says:

    This is just another play in the Dimocraps playbook of moves to get what they want.

    99% of their plays are “scare” tactics; If you don’t do ______ then ________ will happen, just fill in the blanks and voila, you’ve got your strategy.

    When Barry the Bungler and his henchmen see this isn’t working they’ll pull out the next play and give a try.

  4. tranquil.night says:

    Okay this is interesting because over the weekend they’ve been spinning this like Lil’ Timmy just magically foound a way to extend the time we have until we reach the limit. This is the first time I’m seeing an acknowledgment.

    But there you have it. The regime is out of breathing room and out of cards. Just gotta hold the line.

  5. untrainable says:

    Geithner said he would have to suspend investments in federal retirement funds…
    The funds will be made whole once the debt limit is increased

    … social security is solvent, medicare is solvent, income tax is voluntary, and the pigs up my arse are warming up for takeoff.

    I believe it all.

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