published Friday, July 29th, 2011

Obama, Congress march toward partial default

Attempts by members of Congress to head off a partial U.S. default on our country's debts are coming fast and furious, as the date when the federal government will run out of money to meet some of its obligations is now only four days away.

One plan after another -- involving more borrowing, higher taxes, spending cuts or a combination of those things -- has been proposed and voted down. Other ideas have been dismissed before they could get a vote.

And yet, next Tuesday's deadline to raise the debt limit draws closer and closer.

At least as of this writing, it is a possibility that the U.S. government will in fact go into partial default early next week. While the government will still have tens of billions of dollars in tax revenue, it will have tens of billions of dollars in financial obligations beyond what that tax revenue will cover.

That means Washington will have to make choices about which bills to pay and which bills not to pay. There will be enough money to continue paying Social Security benefits, military salaries and other essentials. But things that may not be truly essential but are nonetheless important may not be funded until Congress comes up with a debt limit solution.

Commendably, conservative members of Congress have so far held firm in favor of large, necessary spending cuts -- and no tax increases. After all, with our national debt at a mind-boggling $14.3 trillion, it should be obvious that America's problem is out-of-control spending, not insufficient taxation.

Nevertheless, the Democrat-run Senate has killed or promised to kill any really serious budget-cutting measure that makes it out of the GOP-controlled House.

So Congress as a whole -- not to mention President Barack Obama -- isn't ready to face financial reality, and the march toward partial default continues.

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nucanuck said...

No serious budgetary proposal have been put forth by either party. If the best we can hope for is the slowing of debt growth in later years, then default may be the shock therapy needed to remind us that the party is over.

Should default occur, it is the debt that should be defaulted on first. Let the bankers and bondholders suffer the consequences of having made bad loans. Nationalize and clean up the banks before returning them to the private sector. Default on all credit default swaps and kill that monster once and for all.

Life would not be easy and much more would be required, but we would have taken the first necessary steps toward rebuilding rather than continuing this journey into collapse.

July 29, 2011 at 3:47 a.m.
dfclapp said...

We would not be in this mess if the Republicans sought a budget bill with Democrat concerns addressed instead of insisting on a plan that was only endorsed by Republicans in the House, something that is doomed to fail in the Democrat controlled Senate. Instead of acting like servants of the country, both sides act like some terminator machine programmed with a one-track course. I wonder who they think is going to appreciate their inability to work together for the public good?

July 29, 2011 at 5:05 a.m.
Livn4life said...

Clapp, Clapp, Clapp; you sound exactly like most of the national media. Let me look at it another way, We wouldn't be in the mess if the DEMOCRATS sought to realisticall look at the dire economic situation of our country to which they have contributed immensely instead of keeping up the insanity of retaining spending which needs to be cut or eliminated altogether. Please please give a neganod to both parties for the games they play then watch and see if the debt ceiling is still raised and we stay on the same downward track. It is frustrating. As for their not working together, yes it is tough but that is but an indicator of the country at large not willing to work together. The division I see constantly has me highly concerned.

July 29, 2011 at 9:43 a.m.
dfclapp said...

The one organization, besides the bipartisan gang of six, that has tried to address this question in a mature way is The Concord Coalition, which is also bipartisan and has been warning about this day long before the Tea Party existed. Both groups include raising taxes as part of the solution. Pointing fingers is a cop out, whoever does it, as is proposing a bill that shuts out the consensus of a winning majority, whoever does it.

July 29, 2011 at 10:57 a.m.
nucanuck said...

Congress is looking for a way to calm the waters and continue business, more or less as usual. The "responsible" proposals still just kick the can down the road with no one seeing the BRIDGE OUT AHEAD sign.

We are now seeing the work-arounds that signal the eventual end to the reserve status of the US dollar. We don't know the timing, but the direction and outcome should be clear for anyone paying attention. When and if the dollars reserve status falls, life in the US will become quite different. We would pay for imported products in the designated currency, which means we would have to earn, not print it. As it now stands we would not be able to buy enough oil to run our economy. that is freightening.

Congress is looking for a way to avoid national pain and there is none.

July 29, 2011 at 11:58 a.m.
librul said...

A Fake Crisis ....

I repeat - In my opinion, all those tea party wonks should be hunted down and shot in the street like rabid dogs.

July 29, 2011 at 1 p.m.
nucanuck said...

I agree, librul, the crises is manufactured, but that doesn't mean that we aren't on a destructive economic path. The banker created debt bomb took many decades to reach the point of explosion and the (know nothing) Tea Party is just part of the fusing mechanism.

Even if/when the debt ceiling is raised, the fuse on the debt bomb is still going to be ticking down.

July 29, 2011 at 1:34 p.m.
Livn4life said...

I suppose none of us want to admit that we are headed for more and more trouble economically in this nation. On the left, well they know everything and blame everyone else but themselves. The right, well you know they get tired of taxes but keep on increasing spending as well dreaming it will all get fixed somehow. Both parties ignore the fact that if real tough(politically)decisions are not made, decisions which can potentially de-empower some of the establishment, we will hit a wall. This has been a long time coming. While you folks in the know are claiming this a manufactured crisis, I see it as harbinger of not good things that are to come. It is a given the debt ceiling will be raised and on we will go irresponsibly. At some point the grace period runs out. We are near that wall now. If we are just too blind to see it, then we will be blind-sided when the crash occurs.

July 29, 2011 at 5:26 p.m.
hambone said...

There are two type in congress, those that fear not getting re-elected and those that don't care about getting re-elected. One would think that those that don't care would be the ones that would do what is best for the country, but they are the problem. Determined to drive us into default.

July 29, 2011 at 9:01 p.m.
ceeweed said...

I am tired of politicians of all stripes. I'll be watching Law and Order reruns if you need me.

July 29, 2011 at 9:15 p.m.
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