President Barack Obama warned Tuesday there could be another global financial crisis if the U.S. Congress fails to raise the national debt ceiling.
But in an interview with NBC’s “Today” show, Obama also said he took Republican leaders at their word that they want to avoid such a situation and he expects a deal to increase the debt limit “in a sensible way.”
“The full faith and credit of the United States is the underpinning not only of our way of life, it’s also the underpinning of a global financial system. We could actually have a reprise of a financial crisis, if we play this too close to the line. So we’re going be working hard over the next month,” he said.
Disrupting the Borg is expensive and time consuming!
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Well. Next someone will tell us it’s cold because it’s hot somewhere else.
If you don’t borrow more short term then you will default and that means you will have to pay much higher interest rates on your bonds. As you already pay over $400b per year in interest (from memory) that would not be a good thing.
However in the long term you will have to cut debt. At the moment you are spending your way out of recession, in the UK and Europe we are going the other way and belt tightening, it remains to be seen which is best.
How about raising indirect taxes? Putting an extra $1 tax on a gallon of gas would raise $200b per year. That’s better than being taxed on income. Don’t like it get a more economical car or bike like you do Steve.
Andy, we don’t have to default, even if we don’t raise the debt ceiling. What we would have to do, is dramatically cut our expenditures. The revenue of the U.S. govt more than easily covers the debt payments, mandatory spending such as our Social Security and still have some left over for discretionary spending….. here’s 2009’s budget to get an idea ….http://en.wikipedia.org/wiki/2009_United_States_federal_budget
BTW, I’m thinking our spending isn’t moving us out of a recession but prolonging it.
An extra $1 on gasoline, well Andy, you are consistent.(A leftist) But the problem with your idea is that commerce runs on gasoline. So too, does our travel industry rely on affordable fuel. Do you honestly believe that would raise revenue as people less frequently engage in commerce? Do you honestly believe we’re so rich as to be able to change vehicles like we can socks? What of our poor? Its thinking like that which has gotten us into this mess that we’re in to begin with.
The solution is to allow people to freely engage in economic activity(not to restrict or discourage as your tax idea would do), thereby raising the receipts of the govt. In this manner, the people and government can both prosper.
Your gasoline prices are a lot less than in Europe still so although it will have some impact it will have more benefit than bad. It’s either that or raise tax at source. If you raised tax at source though then that gives people no choice at all. I guess you would say not raise taxes at all, but it is the tax breaks that have assisted the increase in spending in getting your debt level so high. You need to decrease spending AND increase taxes in my opinion. Like I said this is what the UK has done, however both economies currently are still not very good, so we have yet to see which theory is better.
The revenues of the US government does pay your debt repayments, but it does not cover the US running costs, ie if you do not raise the debt level then you can’t afford to pay to keep things going. Ok, you can make budget cuts, but they do not happen immediately. So you would be screwed that way too.
Any how as you say I am middle of the road politics wise ( in the UK!) and as I admit it is not known yet will happen. Yoiu may well be right.
Andy
Andy, the problem isn’t that we are not taxed enough, the problem is we spend too much. It has been shown, if the government stays out of the way, then economic activity increases…….as the economics increase, so to does the revenue for the govt., even without raising taxes. Only when we adopted the decidedly European, Keynesian economics (and horribly misapplied it) did we get into this mess.
The public sector has a role, but it is mostly to maintain stability…..not much more than that. It is when commerce is on stable ground does it thrive and prosper.
Big government is never good government. Start to make government smaller and the problems will start to get smaller.
The government has to intervene at some level, otherwise having no taxes at all is best for the economy, but nobody is suggesting no taxes. So therefore you have to have some. Now I agree about what you say about spending. However none of the parties in the US wants to reduce the amount of spending in some places where you could cut back, such as the US military. Rather than increase gas by $1 per gallon to raise $200 billion I could suggest cutting the military budget by $200b but not one politician in the US would go for that. Then they would say jobs would be lost at a time when unemployment is high. I could say the same for your medical industry as well. So in effect spending will be slightly reduced and taxes will not be increased … so you are not going to ever reduce the budget and your interest payments will get higher. I can imagine a time when interest payments will be your governments biggest bill.
As long as money keeps going east to China and India both Europe and the USA will be in the doldrums. No matter which fiscal policy is right I fear 🙁
Part I
Andy, I agree with some of what you say, but you’re really missing the point. This is likely a cultural difficulty, and an attempt to equate Britain’s situation to the U.S. Yes, there are similarities, but there are striking differences, too. Your comment about the gas tax is one example of your lack of understanding the different dynamics.
Many Europeans live in countries you can basically throw a rock across. The price of gasoline takes on a different meaning there as opposed to here. Currently, I live in a town of about 10,000 residents. The next larger town (population 20,000) in “close” proximity is about 100 km away. As you can see, a gasoline tax here would take on an entirely different meaning than one in the cramped confines Europe.
Further, the economic policies I advocate are proven. It has been shown to work. I don’t believe one size fits all in economics, but least interference is usually the better side to error upon. I believe the cultural difference stems from Europe’s feudal system where most if not all of the wealth belonged to the central authority……the birth of many of Europe’s countries stemmed from this system and even today, your country still holds to many of the traditions of such a system. Contrast that to the birth of this nation. This is an historical antithesis.
Andy, I agree when you stated, “As long as money keeps going east to China and India both Europe and the USA will be in the doldrums.” The solution to the U.S.’ difficulty is much easier than Britain’s……here’s why.
Resources. The U.S. has almost unlimited resources of so many varieties that we don’t really need to import much of anything from anybody.
Oil? We’ve got plenty of it, all we need to do is to decide to go get it. If we were to commit to doing such a thing, there would be 3 immediate benefits. First, U.S. dependence of foreign oil would drop significantly. We may still have to import some, but not nearly as much as we do today. Secondly, world oil price would dramatically drop. OPEC would respond, but it wouldn’t have the same effect. And thirdly, and this would interest you more than myself, there would be less environmental impact from the drilling here. We’ve much stricter standards than say Brazil, Yemen, or coastal Cuba.
Coal and natural gas. I think we have the most retrievable, and certainly enough to sustain this nation for many years to come, And, we keep finding more!!!
Food….. I probably don’t need to expound on this much. But, suffice it to say, the world needs to come to us in this regard.
Metals…… we have plenty to make the various alloys, and we have the capacity in place right now.
REE….. the stuff necessary for chip making, cell phones and even solar panels. We had the worlds largest mine in California, but was shut down because of the whacky enviros…… now China produces it all. Again, environmentally, who would you want mining the stuff, us or China?
The worlds largest consumer force in the free world!!!! Again, the world needs to come to us, not us to them.
An unlimited work force! Currently, we have more people looking for work than most nations have population. If we needed more, all we’d have to do is open more immigration.
To facilitate this, all we’d have to do is have the will to do so. Some specifics. We have to shut our borders to regulate the work force.(That’s a public sector role.) Secondly, we have to withdraw from our asinine trade agreements. Free trade doesn’t = fair trade. We should also withdraw from the WTO. I know these moves wouldn’t sound fair to other nationals, but my priority is this nation, and it isn’t like we’re perceived as all that fair to begin with.
Part II
Andy, quite obviously Britain’s situation is decidedly different. While you have many resources, you don’t have all that you need. You are reliant upon others, so you can’t really withdraw from the various agreements, the retaliations would be very detrimental towards G.B.
That stated, I’m one that believes the U.S. and G.B. have a special relationship, and I think the U.S. could and would evenly make up for many of the short falls of resources. As too, I believe, would Canada and Australia. Both have various abundances, too.
G.B. still has a large workforce available, and I believe a large enough to facilitate all of her needs. G.B. also has a very considerable consumer force. Countries such as the U.S. and G.B. need to start using it as an asset and not a detriment. If other nation’s wish to sell us their wares, we need to negotiate the better end of the arrangement. (Again, the public sector would play a large role.) To assist you in understanding this thought, consider China. While they have a very large number of consumers, the individual consumer has very little in terms of wealth. Even if China opened for free trade, what would it mean to gain a significant market share there? Not much. To gain a significant market share in the U.K., OTOH, of anything, would be very significant.
Andy, the role of the public sector in my scenario would mostly be to delineate the confines of the private sector. But, in order for it to work, after establishing the confines, it needs to get the heck out of the way. We don’t have to subsidize windmills. The markets will decide if they are worth the investment. (They aren’t.)
Obviously, there are more details, but to prevent this from being a published manifesto, I’ll end it here, but I think you get the general idea. But I would answer any questions you’d have.
James
Andy,
Are you proud of your comments? You must be. You sign your name at the end.
No
Andy
Government always FUBAR’s everything it touches. Why add even more government?
Yes Mr. Obama, keep America going downhill. Just what you want. What is it I heard him called, “The first post-America American President”?
Too big NOT to fail, how big government is a terrible problem from a man who saw it first hand in Russia:
Too Big Not to Fail: Imperial Governments from Moscow to Washington
31 minutes
(don’t worry, it’s worth watching)
http://www.youtube.com/watch?v=lAxKAzpGmVA
OT
Fast acting Boehner gets tough with Obama (footnote: after 3 months: end of footnote) in true Republican form: said Mr. Obama must provide a clear justification by Friday for committing troops to Libya.
http://www.washingtontimes.com/news/2011/jun/14/boehner-gives-obama-friday-deadline-libya/
Hey Mr. Boehner, that’s what you’re supposed to do before the thing-a-ma-jig starts.
It’s not like Boehner is stopping that war (footnote: or whatever it’s being called where American troops and armament are there and people are being killed: end of footnote). No, he’s not doing that. He’s just telling the President that he wants a reason why he unilaterally started his war. Mr. Boehner doesn’t want to actually make a decision and stick with it or anything. No, heck, that could ruin a potential round of golf with Mr. Obama.
Hey, everything’s fine:
It’s official: The housing crisis that began in 2006 and has recently entered a double dip is now worse than the Great Depression.
http://www.cnbc.com/id/43395857
And we haven’t even hit bottom yet.
Wasn’t Obama’s stimulus supposed to make it all better? DOH!!!!!
Twenty-eight months after Congress passed President Obama’s signature economic stimulus law, and nearly one year after he declared the summer of 2010 to be “Recovery Summer,” 1.9 million fewer people are employed……The fraction of the population with a job has in fact fallen in the 28 months since Congress passed the stimulus – down from 60.3 percent in February 2009 to 58.4 percent in May 2011.
The economy cannot create jobs fast enough to keep pace with layoffs and recent high school and college graduates seeking employment.
http://cnsnews.com/news/article/after-28-months-stimulus-spending-19-mil
“Recovery Summer,” ahhhh, yes, puts one in mind of “Barbecue Summer”.
Where’s my Obama money! He’s got it in his stash…..that’s why we voted for him!
http://www.youtube.com/watch?v=pIkksi344cM&feature=related
Obama is going to pay for my gas and mortgage!
The real cure is to reduce spending.
What has me scared is the GDP…
…it’s back to about where it was 2007/8
That means that we are producing what we were producing….
….with less people employed
Obviously, fat needed trimming. It is alarming to have the GDP regress. But more, it is proof industry will seek efficiency on its own, without impetus of the government. Unless one considers govt. policies that keep us in a recession an impetus.
We’re Too Broke To Be This Stupid (Mark Steyn):
http://www2.macleans.ca/2010/05/27/were-too-broke-to-be-this-stupid/
If you thought that interesting, you may be interested in this offering of mine. http://suyts.wordpress.com/2011/06/15/when-bad-intentions-become-evident/
We’re rewarding the dysfunctional that Mr. Steyn speaks about, the ones that won’t or can’t and we’re punishing the ones that will and can, to the point where they are forced to be part of the dysfunctional group.
I’ve left a comment over at your site 🙂
A few comments to clarify where I believe the US stands related to the National Debt based on the 2010 Federal Budget.
The nation has a $14.3 trillion deficit. The 2010 federal budget had a $1.3 trillion deficit. The states are facing a $4 trillion public pension liability shortfall.
In the 2010 federal budget total revenues included $899 billion in individual income taxes, $865 billion in social security and Medicare and Medicaid taxes, $191 billion in corporate income taxes and $200 billion in other revenue.
Total expenditures were $724 billion for Medicare and Medicaid, $707 billion for social security, $553 billion for unemployment and other entitlements and $196 billion in interest on the over $14 trillion in debt.
The expenditures only list non-discretionary entitlements and interest and total $2,180 billion. Total revenue was $2,155 billion. So, total revenue in 2010 was $25 billion short of non-discretionary entitlements and interest. I note that the interest payment on the debt exceeded all revenue from corporate income taxes by $5 billion.
The balance of 2010 federal expenditures includes $694 billion for defense, $431 billion for non-defense discretionary spending and $152 billion for discretionary one time expenditures.
Obviously, IMHO, the US is providing too much money for entitlements. You can simply not spend more than revenue generated. Balance the US budget by curtailing entitlements and putting people to work. I am concerned that our nation will not survive this mess because the total number of people receiving entitlements will exceed those that pay for such entitlements and consequently vote to maintain the status quo. I believe that interesting times are ahead for all of us. Democracy will end when those that vote begin to feel entitled to the net income of those that succeed.
Yes, there needs to be a renewed sense of the work ethic that once was much more prevalent than today. While I’m optimistic that we’ll get this mess worked out, I’m profoundly concerned by the ignorance of basic economic principles of the people in this nation.
For instance, many can’t distinguish the difference between public and private sector jobs and the monetary contribution of a private sector job. Most don’t understand the detriment of printing more money. Some actually believe that if we confiscated the wealth of the very rich in this nation that it would solve our fiscal woes. Others still, simply don’t know where government monies come from. Nothing illustrates that better than AAM’s video above on this thread. http://stevengoddard.wordpress.com/2011/06/15/obama-says-we-need-to-borrow-more-to-solve-the-debt-crisis/#comment-63932 .
The vidoe does illustrate your point quite well.
I often hear many people say that the wealthy are not paying their fair share of taxes. I would recommend the article “Eat the Rich by Walter Williams found at:
http://www.creators.com/opinion/walter-williams/eat-the-rich.html
Mr. Williams provides examples of the effect of fully taxing and confiscating all wealth and how that will help the US Federal Deficit. The following applies:
“Can we prey upon the rich to cough up the money? According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies one as being rich. It’s not even yacht and Learjet money. All told, households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days, but there’s a problem because there are 224 more days left in the year.
How about corporate profits to fill the gap? Fortune 500 companies earn nearly $400 billion in profits. Since leftists think profits are little less than theft and greed, Congress might confiscate these ill-gotten gains so that they can be returned to their rightful owners. Taking corporate profits would keep the government running for another 40 days, but that along with confiscating all income above $250,000 would only get us to the end of June. Congress must search elsewhere.
According to Forbes 400, America has 400 billionaires with a combined net worth of $1.3 trillion. Congress could confiscate their stocks and bonds, and force them to sell their businesses, yachts, airplanes, mansions and jewelry. The problem is that after fleecing the rich of their income and net worth, and the Fortune 500 corporations of their profits, it would only get us to mid-August. The fact of the matter is there are not enough rich people to come anywhere close to satisfying Congress’ voracious spending appetite. They’re going to have to go after the non-rich.”
Walter Williams has been a favorite of mine for some time now. I guess I should have assumed that he’d have a blog, but I’ve never seen it before………bookmarked!
Thanks much!
Obama himself on not being re-elected if the economy doesn’t recover in his third year:
http://www.youtube.com/watch?v=CRAMdUNo2Cg
true… you know what they say…The world needs ditch diggers, too.