Is the Debt Ceiling Crisis a Hoax?
You’ve heard it…
- If we don’t extend the debt ceiling the economy will come crashing down and smash us like bugs.
- The USA will default on everything.
- Your interest rates will soar.
- No one will like us anymore.
- Maybe the world will end.
- All the computers in the world will lock up and have the blue screen of death, even Macs… no wait, that was the Y2K crisis… this is a different crisis.
Well, as we used to say on the schoolyard, I’m calling bullshit.
There’s a whole lot of hype and fear mongering going on out there. Is it real?
Default
Once again the old guard, “main stream media” is displaying their uselessness for all the world to see. They just seem to take the talking points and run with them.
Every report I see on TV or listen to on the radio says the United States will default on our loans if the debt ceiling isn’t raised.
I have a really big dictionary on my desk, Webster’s Encyclopedic Unabridged Dictionary of the English Language. Got it as a Christmas gift from one of my kids. The thing is 3″ thick and weighs several pounds, which is why it sits on the desk instead of being in my book bag… it’s too heavy to pack around. You can trust a monster dictionary like this to know what it’s talking about.
Right there on page 378 I find the word “default.” There are 13 definitions listed. When we are told the nation will “go into default” if the debt ceiling isn’t raised by Aug. 3, I think definition number two is what most of us think of:
2. Failure to meet financial obligations.
Will we fail to meet our financial obligations if the credit limit isn’t raised?
Depending on who you listen to, the government in Washington D.C. brings in anywhere from $175 billion to a shade over $200 billion every month (kind of illustrates how trust worthy numbers provided by the government are). We’ll use $200 billion here because it’s easy. The amount needed to pay the interest and principal on our loans is around $29 billion. I went to school many years ago, and maybe math has changed, but I don’t think so. $29 billion is less than $200 billion.
So no, we won’t default on our financial obligations.
That is unless President Obama decides to do so on purpose for political reasons. He has a history here. When he took over GM, the bond holders were told to go pound sand. They got ripped off. So if you hold U.S Treasury bonds you have reason to worry. But probably not. We won’t default.
In my big dictionary, close to the word “default” is the word “dishonest.” It’s a word that describes most of this default talk and the debt ceiling debate in general.
This is just a big scare tactic.
Social Security
Our president has also stated he may not be able to pay Social Security recipients if the debt ceiling isn’t raised. Like so many Democrats before him, he has dipped into that tired but effective strategy of scaring the crap out of the old people. It almost always works.
Can you blame the oldie crowd for getting upset? Step into their shoes for a second. The president of the country gets up in front of the cameras and tells you there won’t be any money in your bank account after Aug. 2 if he isn’t given a bigger credit card to play with. You need money to eat. Wouldn’t you worry too? Wouldn’t you raise hell about it? Wouldn’t you demand to be paid no matter what? I mean, you may be old, but you still gotta eat. Right?
So will the senior citizens of the nation go on a forced diet after Aug. 2 if the debt ceiling stays the same?
Only if the president wants them to.
In fiscal year 2008, the government spent around $51 billion per month on Social Security. Let’s say for fun that has risen to $60 billion now.
We had $200 billion and paid our loan payments of $29 billion. We still have $171 billion.
Hmm… $171 billion is more than $60 billion. President Obama can pay the senior citizens.
But that doesn’t even matter.
Michael McConnell, (Director, Stanford Constitutional Law Center; Senior Fellow, Hoover Institution) pointed out in a recent article that Social Security isn’t really part of this debate.
We’ve all heard about the Social Security Trust Fund. We’ve also all heard there’s no money in there… just a bunch of IOU’s.
Those IOU’s are in the form of U.S. Treasury bonds. They are debt instruments. Part of our national debt.
When the trustees running Social Security need money to send out, they can cash out the bonds needed to cover the checks. The president is obligated to pay them. Paying these bonds would reduce the national debt. Once again we would fall below the debt ceiling, so the Treasury department could go out and borrow that money again.
The Social Security payments are pretty much a wash when it comes to the debt ceiling.
They’re only part of the debate because this president wants to run his “scare the old people” play again. It’s shameless and disgusting.
So What Are We Really Talking About Then?
OK, so if we won’t default, and the Social Security checks will go out as always… why all the uproar?
What this all boils down to is shutting down a portion of the federal government.
Like all numbers dealing with government, you hear a wide range of figures, but the most common amount I hear is, we borrow 40 cents of every dollar we spend. My senator Rand Paul was on the Mandy Connell show the other day, and put the figure at 30 cents.
Without a debt ceiling hike we’d have to cut 30 – 40% of the government. Oh darn.
I’d have no problem doing this – make me king for a day and I’ll show you – but among the best and brightest up in Washington D.C. none can imagine such a thing. This is not a crisis… it’s a grand opportunity we should grab with both hands.
While hundreds of thousands of Americans are jobless, many, many more worry about losing their jobs soon. We’re all having to cut back to make ends meet. Yet the ruling class in the halls of government think they should be protected from this same reality. They should all keep their jobs, and in fact should be able to grow their power even more. That future generations will be crushed with the debt is just fine with them.
That’s what the debt ceiling debate is really about.
Another Reason For the Hype?
That may not be the only reason for all the fake crisis talk and scare tactics. In a recent article on the debt ceiling, Dan Farris explained why he thinks the government types are so terrified of any cuts:
In the meantime, in the weeks and months that follow August 2, something unexpected would happen… something nobody in government wants you to know. You’d find out how much you don’t need the government.
For example, you’d find out that the Departments of Commerce, Energy, Interior, Agriculture, and a few others are completely unnecessary and a total waste of money. They’d spend only a couple hundred billion dollars out of a $3 trillion budget, but it would be a huge start on the way to showing you how unneccessary government is. Once that ball got rolling, it’d get harder and harder to stop.
That’s why Geithner is saying it would be a catastrophe not to raise the debt ceiling. And that’s why Fed Chairman Ben Bernanke says it would be calamitous. Komrade Obama says it would be “financial Armageddon.” They’re all trying to scare you, because they don’t want you to know that the big, strong government we all depend on so much is really a weakling you can easily live without.
Makes sense, doesn’t it?
The Bottom Line
If you make $56,000 a year and spend $78,000 common sense tells you bad things are headed your way. You might pull it off for a short time, but the crash will come, and you know it. The size of the crash depends on how soon you change course and start living on less than you make.
It’s a lesson we must force our politicians to learn before they take us all down with them.
And we can’t let them scare us out of doing the right thing.
