Dont Let Government Scare You To Raise the Debt Ceiling. It is Bogus

Ronald Reagan said, “Government is the problem, not the solution.” That statement speaks volumes and it is share by many Americans, especially the Tea Party Movement. Republicans and Democrats are guilty for not telling the truth. We are one week away till we meet our maximum debt ceiling. The media, Republicans, and the Democrat are claiming an eventual shutdown in the government. That is nonesence. It will mean public employees may see a delay in their paycheck. It will also mean that Congress cannot create any new debt, which is good. With the revenues collected from the tax payers, there is enough money to pay our interest debt obligations, including Social Security.




The Obama Administration says, “Failure to raise debt limit quickly could cripple US.”

but,

(Tucson Citizen) The Reason Foundation, a libertarian, free-market think tank takes a different view:

The statutory debt limit, or debt ceiling, was designed to control congressional spending by limiting the amount of debt the federal government could accumulate. Clearly, it has not fulfilled its legislative purpose. In fact, the government has lost its ability to monitor its own spending. Having to raise the debt ceiling yet again is a sign that Congress has failed to do what is necessary to get the nation’s finances in order. Here are three myths about the debt ceiling, each one rebutted by a fact.

Myth 1: Failure to increase the debt ceiling is insanity. Unless we increase the debt ceiling, the U.S. government will default on its debt.

Fact 1: The federal government has other options. If the debt ceiling is not increased, the Treasury Department can make interest and debt payment its first priority to avoid a default. Then it can essentially put the government on a stringent pay-as-you-go basis.

The Obama administration warns of an economic armageddon if Congress doesn’t raise the debt ceiling. It is called “insanity” not to take the simple step of allowing the government to borrow more money. Treasury Secretary Timothy Geithner has warned that if we don’t increase the debt ceiling the U.S. would default, resulting in a bond market crash with disastrous impacts felt at home and abroad.

Technically, if the debt nears its statutory limit, the Treasury Department cannot issue new debt to manage short-term cash flows or manage the annual deficit—the government may therefore be unable to pay its bills. But in the real world things are different.

First, if the debt ceiling is not increased it doesn’t mean the federal government will have to repay the entire debt at once. The government just won’t be able to increase its borrowing. Americans understand the difference between not being able to borrow more money and defaulting on one’s mortgage.

Also, while Congress has never before refused to raise the debt ceiling, it has frequently taken its time about doing so. In 1985, for example, Congress waited nearly three months after the debt limit was reached before it authorized a permanent increase. In 1995, four and a half months passed between the time that the government hit its statutory limit and the time Congress acted. And in 2002, Congress delayed raising the debt ceiling for three months. It took three months to raise the debt limit back in 1985 as well. In none of those cases did the world end.

More importantly, the Treasury Department has other options. For instance, if the debt ceiling is not increased, the Treasury can prioritize interest and debt payment to avoid a default.

If Congress refuses to raise the debt ceiling, the federal government will still have more than enough money to fully service the debt. This year, for instance, about 6.1 percent of all projected federal expenditures will go to interest on the debt, and tax revenue is projected to cover about 60.1 percent of all government expenditures. With roughly 10 times more income than needed to honor its debt obligations, why would the government ever default?

Let’s sum it up: As long as the government continues to pay interest on the debt, then it technically is not in default. With tax revenues expected to be $2.2 trillion, interest payments amount to roughly $300 billion—this would still leave $1.9 trillion in revenues to pay for the government’s most important priorities. For instance, lawmakers could decide to honor the promises made to people benefiting from entitlement spending, such as Social Security, Medicare, and Medicaid. In that case, even after paying for all of the entitlement spending, the Treasury would still have $300 billion left.

Would that involve cuts in government spending? Absolutely. But it could, and should, be done.

Would it make the bond market nervous? Yes, it would. Not raising the debt ceiling would probably introduce additional uncertainty. However, market participants (especially foreign creditors who now own a majority of our debt held by the public) may have already changed their expectations due to the increased attention to this issue and because of the alarmist language being used by the Treasury and White House.

With some signs of life—such as increases in consumer spending—we could expect declines in demand for Treasury and fixed-income assets. However, the Federal Reserve is still actively purchasing notes, which will likely increase demand. Ultimately, it makes predictions on the effect of interest rates very tricky.

One thing is certain: not increasing the debt ceiling will make us travel to a new equilibrium, which almost always means a certain level of disruption in the short term. But shouldn’t such change be the easiest way to mitigate short-term concerns while moving to a more sustainable long-term equilibrium?

Those who are worried about default should realize that our ability to remain solvent depends on our continued commitment and ability to pay the interest on our debt, not on our willingness to raise the debt ceiling. As long as we continue to run deficits, our ability to borrow money cheaply, with low interest rates, is the key to avoiding default.

This could change if investors become worried about their chances of getting paid back. In that case, they might find some safer or more profitable place to invest their capital than the United States government. Also, they may demand an increase in the interest rate for the money they lend. Either of these changes could result if the U.S. government’s reputation as a conscientious debtor is called into question by a continued increase in the demand for funds.

The bottom line is that the government must make serious changes to the way it spends and borrows money, it must stop paying the interest on the debt by borrowing additional money, and it must stop making benefit promises it will never be able to deliver.

Both Moody’s and Standard & Poor’s have warned that our credit rating will be reduced unless we get a handle on our national debt. We’ve heard a lot recently about the European debt crisis, but, as one senior Chinese banking official recently noted, in some ways the U.S. financial position is more perilous than Europe’s. “We should be clear in our minds that the fiscal situation in the United States is much worse than in Europe,” he recently told reporters. “In one or two years, when the European debt situation stabilizes, [the] attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines.”

Myth 2: These are extraordinary times. We need to increase the debt ceiling now and will cut spending later.

Fact 2: In the last 10 years, Congress has raised the debt ceiling 10 times, sometimes twice in the same year. Congress has raised the debt ceiling 98 times since 1940. The government has lost its ability to monitor its spending. Having to raise the debt ceiling again is a sign that Congress has failed to do what is necessary to get the nation’s finances in order.

Myth 3: Democrats are the big spenders and are the party of debt. We know this because they now want to increase the debt ceiling while Republicans oppose the increase.

Fact 3: Historically, the party in power always wants to increase spending. As a result, lawmakers in power—regardless of party affiliation—overwhelmingly vote to increase the debt limit.

In conclusion, the data presented above reveals that the debt limit, far from providing fiscal discipline, has in fact served only as a symbolic cap that Congress, regardless of the party in power, will simply push higher and higher as spending increases dictate.

If We Reach the Debt Ceiling and Dont Extend, the Government has Enough Money to Cover What We Owe

The rhetoric by Obama and Congress that we must extend the debt ceiling is completely bogus. Since the media enjoys interchanging debt ceiling and default without scrutiny, there is a big difference between the two terms. This confusion is making many Americans antsy. The main thing is that when we reach the debt ceiling, in the next couple weeks, life will continue without the dramatic "the sky is falling." The only changes that we will see is that Congress will not be able to create more debt, and public employees may see a delay in their paychecks. But the more important to note, USA will be able to pay the interest on our debt obligations. Also, the USA will not default. Don't believe the hype from the media and from Washington.

(The New American) At this moment the national debt, according to the U.S. National Debt Clock, is at $14.094 trillion and increasing by $4 billion every day. With the current ceiling on the U.S. National Debt at $14.294 trillion, there are just 49 days left until U.S. government spending hits the ceiling. Expect the noisy chorus of misinformed warnings about the consequences of such an action to rise as well.

The new Speaker of the House, John Boehner, explained on Fox News that the Republicans would push for spending cuts regardless of the imminent coming of the debt ceiling, and he was then pilloried by a Fox News writer. Boehner said:

If the president is going to ask us to increase the debt limit, then he’s going to have to be willing to cut up the credit cards. I think our team has been listening to the American people. They want us to reduce spending, and there is no limit to the amount of spending that we’re willing to cut.

Just because the bank has pulled the credit cards from the government (to expand on Boehner’s analogy) doesn’t mean the government won’t have the money to continue making the minimum payments, as noted by newly elected Senator Pat Toomey (R-Pa.) during an interview with Neil Cavuto:

The debt service, [the] interest on our debt, is about 6 percent of everything the federal government has to pay. So we would be taking in enough revenue to cover more than 10 times all the interest we owe. There is no reason we would have to default on our interest obligations….

Now, there are vendors who would have to wait to be paid. There are probably employees of the federal government who would have to wait to get paid. This [would result in] lots of dislocation. I am not suggesting that this is a desirable path, but I am suggesting that we have to get serious about getting our budget under control.

Ten Myths About the Bush Tax Cuts-and the Facts

It is important for conservatives to have the correct facts to battle with ignorant people who base their ideology from ignorant friends and the news on television. Spread the good word. The Bush tax cuts does work!!!

Ten-Myths-About-the-Bush-Tax-CutsTen Myths About the Bush Tax Cuts-and the Facts

Myth #1: Tax revenues remain low.
Fact: Tax revenues are above the historical average, even after the tax cuts.

Myth #2: The Bush tax cuts substantially reduced 2006 revenues and expanded the budget deficit.
Fact: Nearly all of the 2006 budget deficit resulted from additional spending above the baseline.

Myth #3: Supply-side economics assumes that all tax cuts immediately pay for themselves.
Fact: It assumes replenishment of some but not necessarily all lost revenues.

Myth #4: Capital gains tax cuts do not pay for themselves.
Fact: Capital gains tax revenues doubled following the 2003 tax cut.

Myth #5: The Bush tax cuts are to blame for the projected long-term budget deficits.
Fact: Projections show that entitlement costs will dwarf the projected large revenue increases.

Myth #6: Raising tax rates is the best way to raise revenue.
Fact: Tax revenues correlate with economic growth, not tax rates.

Myth #7: Reversing the upper-income tax cuts would raise substantial revenues.
Fact: The low-income tax cuts reduced revenues the most.

Myth #8: Tax cuts help the economy by "putting money in people's pockets."
Fact: Pro-growth tax cuts support incentives for productive behavior.

Myth #9: The Bush tax cuts have not helped the economy.
Fact: The economy responded strongly to the 2003 tax cuts.

Myth #10: The Bush tax cuts were tilted toward the rich.
Fact: The rich are now shouldering even more of the income tax burden.