Should Congress vote to raise the US debt limit?

[Hemodoc]

10 Things That Would Be Different If The Federal Reserve Had Never Been Created

The vast majority of Americans, including many of those who believe that they are "educated" about the Federal Reserve, do not really understand how the Federal Reserve really makes money for the international banking elite.  Many of those opposed to the Federal Reserve will point to the record $80.9 billion in profits that the Federal Reserve made last year as evidence that they are robbing the American people blind.  But then those defending the Federal Reserve will point out that the Fed returned $78.4 billion to the U.S. Treasury.  As a result, the Fed only made a couple billion dollars last year.  Pretty harmless, eh?  Well, actually no.  You see, the money that the Federal Reserve directly makes is not the issue.  Rather, the "magic" of the Federal Reserve system is that it took the power of money creation away from the U.S. government and gave it to the bankers.  Now, the only way that the U.S. government can inject more money into the economy is by going into more debt.  But when new government debt is created, the amount of money to pay the interest on that debt is not also created.  In this way, it was intended by the international bankers that U.S. government debt would expand indefinitely and the U.S. money supply would also expand indefinitely.  In the process, the international bankers would become insanely wealthy by lending money to the U.S. government.

http://theeconomiccollapseblog.com/archives/10-things-that-would-be-different-if-the-federal-reserve-had-never-been-created/comment-page-1

[Bill Peckham]

Maybe you could start a thread about the Fed. I'd say that in this context bring it up is just a way to distract from the mess the Republican House has created.


I will note that the Economic Collapse website you linked to seems pretty darn excited at the prospect of the House not doing its job.


Peter I asked, Given that the only proposal that the Republican House can deliver, cannot pass the Senate and is supported by only 20% of the American people what is the President suppose to do? What would be a reasonable demeanor in the face of those facts?

[Hemodoc]

Maybe you could start a thread about the Fed. I'd say that in this context bring it up is just a way to distract from the mess the Republican House has created.


I will note that the Economic Collapse website you linked to seems pretty darn excited at the prospect of the House not doing its job.


Peter I asked, Given that the only proposal that the Republican House can deliver, cannot pass the Senate and is supported by only 20% of the American people what is the President suppose to do? What would be a reasonable demeanor in the face of those facts?

Bill, without the Fed, there would not be a 14 trillion dollar debt, plain and simple. It owns nearly half of our current debt. They are not our friends and they are not part of the Federal government. Since we are speaking about raising the debt limit that will most benefit the owners  of the Fed since that is who is going to get the interest payments, I would say that it is quite appropriate to understand their role in this entire mess since they are the cause.

As far as the popularity of raising the debt limit, I would state that Americans in the last two Gallup polls on this issue oppose raising the limit 2:1:

July 12, 2011
U.S. Debt Ceiling Increase Remains Unpopular With Americans
More are concerned about higher level of spending than risk of economic crisis
by Lydia Saad
PRINCETON, NJ -- Despite agreement among leaders of both sides of the political aisle in Washington that raising the U.S. debt ceiling is necessary, more Americans want their member of Congress to vote against such a bill than for it, 42% vs. 22%, while one-third are unsure. This 20-percentage-point edge in opposition to raising the debt ceiling in Gallup's July 7-10 poll is slightly less than the 28-point lead (47% vs. 19%) seen in May.

http://www.gallup.com/poll/148454/debt-ceiling-increase-remains-unpopular-americans.aspx

I personally don't have an issue about raising the limits at this point if, IF, we begin to take steps to control our spending and bring our house in order just as the Republicans are attempting to do. Obama's proposals will lead us off the brink. No doubt, since Reagan, both the GOP and the DEMS have used deficit spending. The only time it was reversed was during Clinton when the Republicans imposed fiscal spending reductions: Take a look:

http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms

So, let's just go back to what worked for Clinton.

[Bill Peckham]

It just is not true to say the Fed currently owns half our debt. Debt held by the Federal Reserve PLUS the other intergovernmental holdings comprise about 50% of all outstanding debt.

http://www.treasurydirect.gov/govt/reports/pd/pd.htm


That 50% includes about ~$2.5 trillion in SS Trust funds and another ~$1.5 Trillion held by other Federal trust funds.


About a third of US Banks are members (aka owners) of the Federal Reserve but it isn't ownership as it is ordinarily understood. They do not have a say in the operations of the Fed and they can not sell their stakes. They receive a set dividend and any profits above that are transferred to the US Treasury.
http://www.federalreserve.gov/aboutthefed/section2.htm


The Fed has nothing to do with how much the Congress has borrowed in the past and it has nothing to do with determining how much Congress needs to borrow in the future.

[Hemodoc]

Bill, as always you are a gentlemen in your debates which I have always appreciated even though we often disagree.

The issue of the Fed is one that little is written and few know any details since it is shrouded in secrecy. We do know some facts though:

1) The Fed is not Federal at all, it is a privately owned bank.
2) Our currency is fiat money that are simply printed with nothing backing up their value.
3) The Fed exerts enormous control over our economy and our politics. Look up Andrew Jackson and why he got rid of the national bank during his time in office. The same dangers apply to our situation today.

There is a reason that Ron Paul wants to audit the Fed, something that I don't believe will ever happen since the Fed has power over the US government and people and we have none over the Fed. They are the master and we are the slave in this arrangement.  Finding reliable websites is a difficult chore when it comes to the issues of the Fed. Here is one that looks like it has reliable information.

THEY PRINT IT - WE BORROW IT AND PAY THEM INTEREST

An example of the process of currency creation and its conversion into "people's debt" will aid our understanding. The Federal Government, having spent more than it has taken from its citizens in taxes, needs (for the sake of illustration) $1 billion. Since it does not have the currency, and Congress has given away its authority to create it, the government must go to the creators for the $1 billion. But the Federal Reserve, a private corporation, does not give its currency away for free! The bankers are willing to deliver $1 billion in currency or credit to the federal government in exchange for the government's agreement to pay it back with interest. So Congress authorizes the Treasury Department to print $1 billion in U.S. Bonds, which are then delivered to the Federal Reserve bankers. (The bonds are a kind of "IOU" that bears interest.)

The U.S. Treasury prints $1 billion in bank notes. The printing cost is about $20.62 per 1,000 bills - it costs the same irrespective of the denomination - the cost of printing a $1 note is about the same as for a $100 note: about .0206 cents. The Federal Reserve "buys" these bills from the U.S. Treasury, paying only for the printing costs. The bills are then exchanged at full face value for the bonds. The government uses the currency to pay its obligations. What are the results of this fantastic transaction? Well, the government's bills are paid all right, but the U.S. Government has now indebted the people to the Federal Reserve bankers for $1 billion plus interest!

Since this process has been going on since 1913, the people are now indebted to the bankers to the tune of trillions of dollars. The people are taxed billions of dollars each month just to pay the interest on this "national debt." With both the principal and the interest climbing every month, there is no hope of ever paying off this "debt." The working people of the United States now "owe" the approximately 300 banking families and their consorts more than the assessed value of all the assets in the United States. And realize, the bankers got all this for the cost of paper, ink, and bookkeeping!

http://www.buildfreedom.com/tl/rape3.shtml

Here is another illustration of how the Fed works:

Here is an illustration to explain how the Federal Reserve works.

1-In 1913 the privately owned Federal Reserve Bank issues the first Federal Reserve Notes to the US Treasury for $1,000 (amount is figurative).

2-The US Treasury now owes the Fed Res  Interest + Principal.  So the US Treasury is now indebted for $1,200.

3-The US Treasury owes $1,200 but only $1,000 exists. The additional $200 has not been created yet.

4-The US Treasury now has no choice they must go back to the Fed Res and borrow $200. The Fed Res creates the new money and backs it up with additional debt.

5-The US Treasury now owes $1,400.  Same problem. Only $1,200 exists. More money most be borrowed.

Today- The US Treasury owes 14.5 Trillion. That amount of money does not exist. The US Treasury needs to borrow more to pay back that interest. Which will only increase the total debt owed next year. What we have here is a dog trying to catch its own tail and running in circles.

http://libertythinkers.com/education/debt-ceiling-hocus-pocus-illusions/

America at this point has no choice but to raise the debt limit because otherwise the Fed will call in the debts and the entire system will collapse. The crises we are in today was foreordained from the moment we turned our treasury over to foreign bankers. This is a topic that I doubt anyone will bring up publicly in these debates other than so called conspiracy nuts, but it is at the heart of the entire debate.

Listen to what Thomas Jefferson had to say about this issue 2 centuries ago:

Thomas Jefferson on the dangers of a central bank wrote:


If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation the banks and corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. Thomas Jefferson, President of the United States 1801-1809

http://www.worldviewweekend.com/worldview-times/print.php?&ArticleID=3264

Jefferson went even further in his comments:

A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army...We must not let our rulers load us with perpetual debt."

Thomas Jefferson, One of the Founding Fathers 3rd President of the United States of America

Continue reading at NowPublic.com: THOMAS JEFFERSON WARNED AGAINST A PUBLIC CENTRAL BANK | NowPublic Photo Archives http://www.nowpublic.com/world/thomas-jefferson-warned-against-public-central-bank#ixzz1SICs4fWV

What do we do now? If we wish a confrontation with the world bankers, go against the debt ceiling and go further in debt. It would buy some time but lead to the outcome of complete bankruptcy some time in the future, but we would be able to limp along without any great changes. If we choose to not raise the debt ceiling then we will precipitate a conflict with the bankers that have control over our fate through interest rates and other powers completely under their control. Either outcome in my opinion is not acceptable, but for the short term raising the debt limit is less painful. In other words, America is now at the mercy of the international bankers and we are slaves to our lenders. Everyone likes to talk about China, but they are NOT the big player in this entire drama. Can we regain our independence from them? Perhaps but we don't have people willing to go through that painful transition. So be it, raise the debt ceiling and give us a bit more peaceful bliss in our ignorance of what is happening. The politicians and the people cherish security more than true freedom at this time. I see no way but to go forward and raise the debt ceiling since undoing nearly 100 years of slavery to the central bank is probably an impossible act to consider let alone accomplish at this time.

God bless,

Peter

[Bill Peckham]

I think this is a separate question - I'll start a separate thread.


As to raising the debt limit - I'd like to hear what you all expect to happen if the US adds 14 trillion to the debt over the next 10 years - which I would take to be unlikely but possible. What do debt limit raising skeptics think would happen?

[YLGuy]

I am completely disgusted with John Boehner.  Even the Catholic Church is questioning why he wants to balance the budget on the backs of the sick and elderly.

[MooseMom]

I am completely disgusted with John Boehner.  Even the Catholic Church is questioning why he wants to balance the budget on the backs of the sick and elderly.

I don't know what to think anymore, but I DO believe that the reason he wouldn't speak to the President about his plans to walk away until so late in the day is because he didn't want to spook Wall Street.  He waited until the markets closed for the weekend to throw his hissy fit.  The last thing Wall Street wants is a default.

So, that's Coburn, Cantor and now Boehner who have walked away.  I find it really odd that they would choose this particular kind of behaviour.  I don't think the American people are particularly sympathetic to this tactic.

[Bill Peckham]

We're coming into some uncharted water starting Monday (assuming nothing gets done on Sunday except the Sunday political talk shows).

It is possible that markets aren't going to react, but at some point they have to or they will have stopped functioning as a market. If Bohner can't deliver 216 votes on any sort of legislation other than the highly unpopular cuts only approach, then the only way forward that I see, legislatively, is if the Republican Caucus fractures allowing 24 Reps to join with all the Dems, or some greater number of Reps to join with some portion of the Dems - whatever is needed to get it over the line. Because at this point it can't be done with only Reps.

If that is right then it's going to have to go to the wire for there to be enough consequence for there to be the pressure it will take to fracture the Rep's caucus ...  and of course it could be that the Reps don't fracture, or a fracture happens on both sides of the aisle in a way that doesn't allow for piecing together enough votes to pass the House.

Really, from this point, the options just get worse.

[Bill Peckham]

And in the analogies department the one I would make is that it is as if the House Republicans are making the argument that the plane we are in is going to crash because flight is impossible  - planes are way heavier than rocks; rocks can't fly; ergo planes can't fly - so we should open the doors and hope something good comes from ending a doomed flight.

[Bill Peckham]

Looking back, I'd say this has been a disaster. And I say disaster because I can't really think of a better word (maybe meinuk could come up with one). Like a hurricane or an earthquake this is going to have long term consequences for what is possible, but of course the difference is that this was purely an artifact of politics gone bad, we've self limited our potential as a country, stunted what economic growth is possible. And like the Japanese earthquake and tsunami this effect on growth is a worldwide problem. It's a disaster.

Clearly the President made a mistake. He miscalculated and should have linked the extension of the Bush tax cuts with the debt increase back in December - when facing a hostage situation, take your own hostage - but since that didn't happen, it is hard to argue with S&P's downgrade, given all the Republican presidential candidates have said they would not raise the debt ceiling.

Looking ahead I'm not sure how this resolves. It is interesting to consider the possibility of this leading, over time, to the formation of a third party. The one example of third party success is the Republican party, circa 1850 - 1860. A new party could try to form using their example -establish a political base in the NE, elect people to statehouses and to Congress by drawing away office holders from both the Dems and the Reps and by 2024 they might be in position to change the dynamics of US presidential politics.

Shorter term, it is not clear how this resolves. Supposedly, the military's budget is at stake for the next round of talks but politically that is not a strong threat. Future Congress isn't going to give a wit what this Congress says; the Reps are operating under the understanding that whatever they do, they can undo once they regain the White House.

I don't see a way forward so long as the Dems aren't willing to take the same risks as the Reps. And the Dems shouldn't be willing to take the risk. I don't see the way forward.

It's a hostage situation. The hostage has just been shot in the toe, can we doubt their willingness to shoot them in the head? S&P doesn't.

[Hemodoc]

Bill,

I would use the words of S&P, they down graded not because of Tea Party activists, but because the debt deal did not deal with the debt problem in any substantial manner. In other words, not enough cuts were made and our debt will double in the next 10 years going to 40% of GDP. How is that "Hostage" taking.

I do agree, why did Obama not take care of this issue when he had control of congress? Even so, since no one is serious about reducing the debt and feel it is not a problem to spend 42 cents of every dollar from borrowing, that is the hostage that is going to cripple our economy and soon lead to a situation where our bankers will be dictating American policy. Sorry, but just because folks can see the writing on the wall that America cannot keep accumulating debt at the rate we are doing does not in any manner constitute a hostage situation. I would simply state that as Obama stated many times, elections have consequences. The Dems lost big time in that last election. Obama knowing this could easily have unilaterally done a lame duck move after the November election that the conservatives could not stop. If Obama is complaining now, I see it as nothing but his own fault on not doing what he wanted when he could have.

Meanwhile, we continue to borrow 42 cents on every dollar of govn't spending, that is the true kidnapper in this entire situation. I defy anyone to produce a historical account of a nation that has gone down this path that did not bankrupt themselves. I go to the store and food prices have DOUBLED in a little over a year, yet no one talks about Obama's inflation. We are already suffering the consequences of printing more and more money and dumping it into our economy.

The one thing I agree on is the fact that Washington does not have the resolve to evaluate and actually do something to improve things. This crises is completely at the hands of the politicians in WA. If Obama had not spent 4 trillion in deficit spending in the first place, we would not be in this situation. He has kidnapped this economy and it only continues. I see very little reason for optimism.

[Bill Peckham]

Bill,

I would use the words of S&P, they down graded not because of Tea Party activists, but because the debt deal did not deal with the debt problem in any substantial manner. In other words, not enough cuts were made and our debt will double in the next 10 years going to 40% of GDP. How is that "Hostage" taking.

I do agree, why did Obama not take care of this issue when he had control of congress? Even so, since no one is serious about reducing the debt and feel it is not a problem to spend 42 cents of every dollar from borrowing, that is the hostage that is going to cripple our economy and soon lead to a situation where our bankers will be dictating American policy. Sorry, but just because folks can see the writing on the wall that America cannot keep accumulating debt at the rate we are doing does not in any manner constitute a hostage situation. I would simply state that as Obama stated many times, elections have consequences. The Dems lost big time in that last election. Obama knowing this could easily have unilaterally done a lame duck move after the November election that the conservatives could not stop. If Obama is complaining now, I see it as nothing but his own fault on not doing what he wanted when he could have.

Meanwhile, we continue to borrow 42 cents on every dollar of govn't spending, that is the true kidnapper in this entire situation. I defy anyone to produce a historical account of a nation that has gone down this path that did not bankrupt themselves. I go to the store and food prices have DOUBLED in a little over a year, yet no one talks about Obama's inflation. We are already suffering the consequences of printing more and more money and dumping it into our economy.

The one thing I agree on is the fact that Washington does not have the resolve to evaluate and actually do something to improve things. This crises is completely at the hands of the politicians in WA. If Obama had not spent 4 trillion in deficit spending in the first place, we would not be in this situation. He has kidnapped this economy and it only continues. I see very little reason for optimism.

Here is a link to the report http://www.standardandpoors.com/ratings/us-rating-action/en/us/

Reading their analysis they say they aren't taking a position on the balance between taxes and cuts to achieve budget sustainability but they point out that the recently released Bureau of Economic Analysis data revealed that the 2008 downturn was much greater than previously known (thus the counter measures i.e. stimulus, were even less than what was needed) and given the inability of the federal government to effectively tax its citizens the US's willingness (not ability, but willingness) to repay the debt is in doubt.

Compared with previous projections, our revised base case scenario now
assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012,
remain in place. We have changed our assumption on this because the majority
of Republicans in Congress continue to resist any measure that would raise
revenues, a position we believe Congress reinforced by passing the act.

I can't understand saying this is a case of "if only Obama had not spent 4 trillion in deficit spending in the first place, we would not be in this situation. He has kidnapped this economy and it only continues." Besides being wrong it is needlessly inflammatory. The only money that the US has spent is money Congress has authorized. The problem is we are unwilling to tax.

I don't think the problem would have been solved in December 2010 if he had made the extension of the Bush tax cuts contingent on a debt increase, I think for the strategy to have worked he would have had to have had a political fight for the last eight months (or possibly longer since the higher revenues from letting the tax cuts expire would have pushed the default date back) but what itwould have done is link the cause and the effect.


I find myself agreeing with those that say the current republican positions would not pass muster in an Economics 102 class.

[Hemodoc]

Bill,

How can we continue to borrow our way to prosperity? I know no historical success for that strategy. I cannot fathom why people believe we can take that approach today and be successful. That is the entire crux of the problem. Cities cannot do it, counties cannot do it, states cannot do it, no other country has ever gotten away with it. Why now will the US turn this into success? At some point we have to look at our spending and make decisions on how to get them in line. Placing the current US, European debt debacle into an historical context yields a very gloomy forecast.

[YLGuy]

We also know that trickle down economics certainly does not work.  All it does is make the rich richer.

[Bill Peckham]

Bill,

How can we continue to borrow our way to prosperity? I know no historical success for that strategy. I cannot fathom why people believe we can take that approach today and be successful. That is the entire crux of the problem. Cities cannot do it, counties cannot do it, states cannot do it, no other country has ever gotten away with it. Why now will the US turn this into success? At some point we have to look at our spending and make decisions on how to get them in line. Placing the current US, European debt debacle into an historical context yields a very gloomy forecast.

You borrow, you grow,  you tax, you repay. The risk is at that at some future date interest rates will go up - how can it be a good idea to speed that process up? Which is all the Reps have managed to do, while people's life time earning is suppressed by prolonged unemployment. Yet another way that the current Republican budget policy is making our long term revenue problem worse - the less people earn, the lower they stay on the pay scale the bigger the Medicare hole we face.

As you have pointed out some 4 or so Trillion of debt is owed to the Fed. What do you suppose would happen if Congress decided to only default on the Fed debt? What would happen if the Fed debt was never repaid?  If that portion of the debt was erased? Just about nothing (potential inflation down the road) which is why the Fed is nothing like Chase, a bank owned by the Queen of England or whatever. The Fed isn't owned in the normal sense of the word, no one would experience a presonal financial loss if the Fed's treasury pile disappeared.

[texasstyle]

Two days ago, my 19 year old daughter asked "what is going to happen to us?" (meaning her generation)  My 14 year old a while longer back, asked "we there ever be a time people have to sell apples again?" Just saying.... this is on the thoughts and minds of young children today.

[Willis]

... It is interesting to consider the possibility of this leading, over time, to the formation of a third party. The one example of third party success is the Republican party, circa 1850 - 1860. ...

And that led to a devastating civil war...the electoral votes were split between four candidates. If I remember correctly Lincoln is still the President elected with the lowest percentage of the popular vote...something less than 40%. Actually, there was two "third-parties" and the Democrat party was split North/South and nominated two different candidates. So we think things are chaotic now! Sometimes we forget history!

And history also shows that "Honest Abe" got the Republican nomination--the convention was in his home state of Illinois that year--when his delegates packed the convention hall with so many (non-delegate, non-voting) Lincoln supporters that his opponent's delegates couldn't get in the door to cast their votes! (Lincoln himself wasn't there...in those days it was considered undignified for a politician to attend the nominating conventions.)

 

[Hemodoc]

Bill,

How can we continue to borrow our way to prosperity? I know no historical success for that strategy. I cannot fathom why people believe we can take that approach today and be successful. That is the entire crux of the problem. Cities cannot do it, counties cannot do it, states cannot do it, no other country has ever gotten away with it. Why now will the US turn this into success? At some point we have to look at our spending and make decisions on how to get them in line. Placing the current US, European debt debacle into an historical context yields a very gloomy forecast.

You borrow, you grow,  you tax, you repay. The risk is at that at some future date interest rates will go up - how can it be a good idea to speed that process up? Which is all the Reps have managed to do, while people's life time earning is suppressed by prolonged unemployment. Yet another way that the current Republican budget policy is making our long term revenue problem worse - the less people earn, the lower they stay on the pay scale the bigger the Medicare hole we face.

As you have pointed out some 4 or so Trillion of debt is owed to the Fed. What do you suppose would happen if Congress decided to only default on the Fed debt? What would happen if the Fed debt was never repaid?  If that portion of the debt was erased? Just about nothing (potential inflation down the road) which is why the Fed is nothing like Chase, a bank owned by the Queen of England or whatever. The Fed isn't owned in the normal sense of the word, no one would experience a presonal financial loss if the Fed's treasury pile disappeared.

Bill,

I just saw a CNBC special on the 1975 financial crisis in NY City where the banks refused to back the cities unsustainable debt. We are exactly where NYC was in 1975. They had to be bailed out by the FEDs to avoid default. NYC got its house in order under Koch who brought fiscal responsibility back to the city. Take a look at how it happened and what the solution was. Sorry, but S&P is telling us our continued spending and borrowing is unsustainable, this has nothing to do with the Tea party whatsoever, it is our profligate spending that is placing the country at huge risk.

The Republicans on the other hand placed a sensible cut, cap and balance package that the Dems rejected. History is on the side of the Republicans in this debate. The solution for the FEDs is the same as it was for NYC in the 70's when Koch, cut, capped and balanced and got back on a sound footing.

[Bill Peckham]

I just saw a CNBC special on the 1975 financial crisis in NY City where the banks refused to back the cities unsustainable debt. We are exactly where NYC was in 1975. They had to be bailed out by the FEDs to avoid default. NYC got its house in order under Koch who brought fiscal responsibility back to the city. Take a look at how it happened and what the solution was. Sorry, but S&P is telling us our continued spending and borrowing is unsustainable, this has nothing to do with the Tea party whatsoever, it is our profligate spending that is placing the country at huge risk.

hmmm the FEDs, aka President Ford, specifically did NOT bailout NYNY, see NY Post headline attached. It's when easily verified history such as this is misstated that it calls into question the quality of your sources.

The larger point is that the US Federal Government is unlike a city government or state government or a business or a household. Those other entities share the vocabulary of the US's financial situation but they have few of the details in common. For instance, the US government can print money and the US government has vastly greater ability to tax. The demographics of the US are "better" from a financial point of view than NYNY in 1975.

The situation the US faces is not like NY in 1975 or Greece in 2011. It just isn't. The Republican insistence on making these comparisons is yet another way that today's Republicans have turned what it historically meant to be a conservative on its head. The Conservatism of Bill Buckley was said to see the world as it is - that's the fundamental problem - the Republicans no longer seem to see the world as it is.

The Republicans on the other hand placed a sensible cut, cap and balance package that the Dems rejected. History is on the side of the Republicans in this debate. The solution for the FEDs is the same as it was for NYC in the 70's when Koch, cut, capped and balanced and got back on a sound footing.

A balanced budget amendment isn't a good idea and the Republicans know it - as evidenced by the fact that from 1/01-12/06 when they controlled all three branches of government they never once brought a BBA to the floor of Congress. The Republicans are imagining a smaller United States where we shrink to achieve a sustainable budget. This won't work - their policies shrink revenues faster than they shrink spending. We end up poorer, more in debt and with less ability to repay. The only way forward is growth.

[Bill Peckham]

Two days ago, my 19 year old daughter asked "what is going to happen to us?" (meaning her generation)  My 14 year old a while longer back, asked "we there ever be a time people have to sell apples again?" Just saying.... this is on the thoughts and minds of young children today.

I see this as an example of your daughter's generation picking up on the signaling coming from our generation. I see our generation signaling that we've lost our nerve, we've lost our belief in American exceptionalism. I think our generation is signalling we've lost our belief in America.

It's as if your daughter's generation is watching as our generation bet against America. Against the country. No wonder she wonders if she'll be selling apples.

I'd tell her that I don't think apple selling is in her future (unless she moves to WA and starts wholesaling). I would tell her that she should never bet against America. There are plenty of people who haven't lost their nerve. At some point this political dynamic will pass like a fever and when she retires into Medicare (at the age of 90 hahah) she'll still live in the world's economic and military hegemon.

[cariad]

Two days ago, my 19 year old daughter asked "what is going to happen to us?" (meaning her generation)  My 14 year old a while longer back, asked "we there ever be a time people have to sell apples again?" Just saying.... this is on the thoughts and minds of young children today.

I see this as an example of your daughter's generation picking up on the signaling coming from our generation. I see our generation signaling that we've lost our nerve, we've lost our belief in American exceptionalism. I think our generation is signalling we've lost our belief in America.

It's as if your daughter's generation is watching as our generation bet against America. Against the country. No wonder she wonders if she'll be selling apples.

I'd tell her that I don't think apple selling is in her future (unless she moves to WA and starts wholesaling). I would tell her that she should never bet against America. There are plenty of people who haven't lost their nerve. At some point this political dynamic will pass like a fever and when she retires into Medicare (at the age of 90 hahah) she'll still live in the world's economic and military hegemon.

Yes, beautifully said, Bill.

Politics are very much on my mind tonight, as Wisconsin sits on the eve of a history-making set of recall elections. I know this economic nightmare will pass like all others before it, I just hope the state where I reside does not have to demonstrate to the world just how awful things can get when politicians refuse to take risks, compromise, look at the world through another person's point of view....

[Hemodoc]

I just saw a CNBC special on the 1975 financial crisis in NY City where the banks refused to back the cities unsustainable debt. We are exactly where NYC was in 1975. They had to be bailed out by the FEDs to avoid default. NYC got its house in order under Koch who brought fiscal responsibility back to the city. Take a look at how it happened and what the solution was. Sorry, but S&P is telling us our continued spending and borrowing is unsustainable, this has nothing to do with the Tea party whatsoever, it is our profligate spending that is placing the country at huge risk.

hmmm the FEDs, aka President Ford, specifically did NOT bailout NYNY, see NY Post headline attached. It's when easily verified history such as this is misstated that it calls into question the quality of your sources.

The larger point is that the US Federal Government is unlike a city government or state government or a business or a household. Those other entities share the vocabulary of the US's financial situation but they have few of the details in common. For instance, the US government can print money and the US government has vastly greater ability to tax. The demographics of the US are "better" from a financial point of view than NYNY in 1975.

The situation the US faces is not like NY in 1975 or Greece in 2011. It just isn't. The Republican insistence on making these comparisons is yet another way that today's Republicans have turned what it historically meant to be a conservative on its head. The Conservatism of Bill Buckley was said to see the world as it is - that's the fundamental problem - the Republicans no longer seem to see the world as it is.

The Republicans on the other hand placed a sensible cut, cap and balance package that the Dems rejected. History is on the side of the Republicans in this debate. The solution for the FEDs is the same as it was for NYC in the 70's when Koch, cut, capped and balanced and got back on a sound footing.

A balanced budget amendment isn't a good idea and the Republicans know it - as evidenced by the fact that from 1/01-12/06 when they controlled all three branches of government they never once brought a BBA to the floor of Congress. The Republicans are imagining a smaller United States where we shrink to achieve a sustainable budget. This won't work - their policies shrink revenues faster than they shrink spending. We end up poorer, more in debt and with less ability to repay. The only way forward is growth.

Sorry Bill, you don't have the complete story. Yes, Ford did tell them to Drop Dead so to speak at first, but roll the frame ahead a few months and Ford did eventually at the last minute give in and the FEDS did in fact bail out NYC and set up a commission to oversee their financial house.

Infamous ‘Drop Dead’ Was Never Said by Ford
By SAM ROBERTS
Published: December 28, 2006

… Mr. Ford, on Oct. 29, 1975, gave a speech denying federal assistance to spare New York from bankruptcy. The front page of The Daily News the next day read: “FORD TO CITY: DROP DEAD.”

Mr. Ford never explicitly said “drop dead.” Yet those two words, arguably the essence of his remarks as encapsulated in the immortal headline, would, as he later acknowledged, cost him the presidency the following year, after Jimmy Carter, nominated by the Democrats in New York, narrowly carried the state.

“It more than annoyed me because it wasn’t accurate,” he recalled years later. “It was very unfair.”

That view is echoed in an evolving version of historical revisionism. Only two months after saying or meaning or merely implying “drop dead” — or, perhaps, resorting to tough love by holding the city’s feet to the fire — Mr. Ford signed legislation to provide federal loans to the city, which were repaid with interest…

Moreover, the speech spurred New York’s civic, business and labor leaders to rally bankers in the United States and abroad, who feared their own investments would be harmed if New York defaulted on its debt.

Mr. Ford was also an unlikely whipping boy. His resolve against profligacy was stiffened by more inviting villains, especially his treasury secretary, William E. Simon, whom even the president referred to as “hard-nosed.”

http://sweetness-light.com/archive/ford-was-right-to-tell-nyc-to-drop-dead

So Ford did indeed bail out NYC after much international pressure came to him.

In addition, Koch, a liberal democrat became one of the most fiscally conservative mayors NYC has ever seen. He has shown all of us how to overcome the great debacle that Obama is leading us into, it is exactly the plan of the Republicans by cutting spending and balancing the budget. Once again, he is one of your folks heros in the last 50 years. He did remarkably well and we should follow his example.

With New York City's treasury near empty, Koch restored the city's credit in his first term through a series of budget cutting measures, enabling the city to enter the bond market within a few years and raise capital funds. As the city's fiscal prognosis began to brighten, so too did the mood of New Yorkers. The characterization of Koch as low key was soon revised after he took office, with his ebullient personality, and his trademark greeting, "How 'm I Doin'." Under Koch, the city's annual budget doubled to $26 billion and approximately $19 billion was spent on capital projects in the 1980's.

http://www.nyc.gov/html/nyc100/html/classroom/hist_info/mayors.html#koch

[Bill Peckham]

Which was it, Koch's budget cutting or a FED bailout? Ford made a political error and then retreated under fire, it turned out American's like NYNY. In Ford's own words NYNY bailed itself out but of course that statement was a political calculation because he needed to fend off Reagan in the Primaries.

But whatever, NYNY's situation in 1977 is nothing like the situation the US faces today. It's comparing Apples with a fruit stand.

The United States can't shrink its way to solvency. Walk through what the Republicans are proposing. If a President Perry in 2013 cut that year's US budget by 1.4 trillion in order to avoid having to borrow as much it would result in an immediate contraction of GDP by 10%. That contraction would increase the costs of existing government programs and decrease revenues as unemployment spiked.

That's math. Not borrowing money at this point would contract our country's economy by an amount great than whatever was cut, and then to get the resulting budget in balance you'd need to repeat the cycle.

You can not shrink your way to a sustainable budget. The only way forward is growth and consistent, steady progress towards sustainability.

[Hemodoc]

Which was it, Koch's budget cutting or a FED bailout? Ford made a political error and then retreated under fire, it turned out American's like NYNY. In Ford's own words NYNY bailed itself out but of course that statement was a political calculation because he needed to fend off Reagan in the Primaries.

But whatever, NYNY's situation in 1977 is nothing like the situation the US faces today. It's comparing Apples with a fruit stand.

The United States can't shrink its way to solvency. Walk through what the Republicans are proposing. If a President Perry in 2013 cut that year's US budget by 1.4 trillion in order to avoid having to borrow as much it would result in an immediate contraction of GDP by 10%. That contraction would increase the costs of existing government programs and decrease revenues as unemployment spiked.

That's math. Not borrowing money at this point would contract our country's economy by an amount great than whatever was cut, and then to get the resulting budget in balance you'd need to repeat the cycle.

You can not shrink your way to a sustainable budget. The only way forward is growth and consistent, steady progress towards sustainability.

Bill, the current budget is 25% higher now than it was two years ago. Koch was the one that took NYC back from the FEDs control by fiscally responsible actions. It is exactly like NYC just on a larger level.