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The idiotic statement of the day

22 Jun

When it comes to the debt ceiling, I’ll be the first to admit I am not sure what to think. There are many highly respected economic experts on both sides of the aisle with differing opinions about the consequences of failing to raise the debt ceiling by August 2nd. Some caution that it will cause a global panic while others maintain that we can still utilize the $200 Billion in monthly revenue to service our debt and essential spending while the congress works on bringing our budget back into balance.
So when I heard that Representative Jim Himes was going to be on C-Span to discuss the debt ceiling, I made sure to tune in. You see not only is Jim a Democrat congressman from Connecticut, he also is a Harvard graduate and a Rhodes Scholar at Oxford University who after his studies he worked his way up to Vice President at Goldman Sachs. With these credentials I expected some brilliant insight into the intricacies of the federal budget but what I got was “the idiotic statement of the day“.

After Himes stated that spending cuts were necessary if we are to avoid financial collapse a C-Span viewer tweeted in questioning why we need to raise the debt ceiling if we are going to make spending cuts. His answer defies belief.

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That’s right, the Democrats are so insistent on raising the debt ceiling that this Oxford trained financial wizard just said that even if the federal government cut all of the spending we would still have to raise the ceiling. Now I am not an economist but I do know that we take in about $2.6 Trillion a year in revenue and the interest payments on our debt amount to around $250 Billion a year. This would still leave us with well over $2 Trillion to spend before we had to increase the debt ceiling.

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2 Comments

Posted by on June 22, 2011 in Budget, Jim Himes, politics, Spending

 

2 responses to “The idiotic statement of the day

  1. P. Henry Saddleburr

    June 22, 2011 at 10:01 pm

    Harvard. check.
    Rhodes scholar at Oxford. check.
    Democrat. check.
    Goldman Sachs. check.

    Idiot. check.

    And.

    He employs the chicken little approach to governance. Create legislation through a phony panic.

    That’s how we got here. Remember Bush? We have to abandon the free market in order to save it. Or something.

    When politicians are in panic mode, trying to whip up a media frenzy, look what their doing off camera.

     
  2. Saddlesore

    June 23, 2011 at 4:23 pm

    Here is what seems to me to be most important aspect about this issue. Assume the debt limit is not raised. What happens? We can not increase the amount of outstanding debt, but the government can (and will) roll over existing debt. Also, not raising the debt limit does not create a default. A default will occur if, and when, the executive branch chooses not to pay an principal and interest payments on its debt. That is what default is.

    The bottom line is that if the debt limit is not raised, the government has to solve the following problem: We spend about 40% more than we take in in revenue, so this is really a simple arithmetic problem. To be able to pay prinicipal and interest payments other spending will need to be reduced and doing so will avoid default. The real problem is that the Administration is unwiliing to face up to that and to cut spending. Realistically, the government is not going to be able to reduce spending by 40% immediately, hence that is why even the Ryan plan has a gradual impact on the deficit as entitlements are reformed and the savings begin to build over time.

    Hence, the debt limit will be raised, but if the Republicans stick to their guns and do get meaningful cuts we can start to turn this ship around.

     

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