Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

@parados,

parados wrote:

You can argue that the fund managers were remiss in their investment strategy, but you can't argue that they spent the money.

Nonsense. The money was borrowed from the trust but that doesn't relieve the Trustee of the obligation to fulfill the Trust obligations as long as he has the ability to pay them. That ability remains intact as long as the Trustee has any assets.

Truly, there appears to be no level to which you will not stoop.

1 Reply

@roger,

Al Gore will definitely be on the offensive

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@roger,

roger wrote:

I think I see a looming EPA issue with your torches.

If we really go ahead and default this time - again! - the EPA employees won't get paid, so H2O's torches and pitchforks are safe enough. Here's a tip for an early warning indicator: drive by the Philadelphia Fed building at night and see if all their lights are on - they're the ones clearing the Treasury's checks Smile

Quote:

..... the Fed is developing procedures about how the Treasury would notify it on which checks would get cleared and which wouldn't....."We are developing processes and procedures by which the Treasury communicates to us what we are going to do," Plosser said, adding that the task was manageable. "How the Fed is going to go about clearing government checks. Which ones are going to be good? Which ones are not going to be good?"

http://www.reuters.com/article/2011/07/20/us-usa-debt-fed-idUSTRE76J6IT20110720

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@Thomas,

Thomas wrote:

cicerone imposter wrote:
Washington (CNN) - Congressional Democrats, frustrated that President Obama is including entitlement changes in debt negotiations, pushed back Friday, insisting they will not support any benefit cuts to Medicare or Social Security.

The 2010 reform would have had Medicare means-test treatments, and not pay for the ones it found not to work. Treatments that aren't working have no benefit, so arguably it isn't a benefit cut to cease paying for them. But it would save money, and hence would do the job of reducing the deficit.

"Means-testing" refers to the means of the recipients, not to the effectiveness of the treatments. Proving treatment effectiveness is hellishly difficult, btw, once you allow for market segmentation: e.g. drugs found by the FDA to be ineffective on the population as a whole are very effective on black patients.

1 Reply

@georgeob1,

georgeob1 wrote:

Nonsense. The money was borrowed from the trust but that doesn't relieve the Trustee of the obligation to fulfill the Trust obligations as long as he has the ability to pay them. That ability remains intact as long as the Trustee has any assets.

So in other words the Trustee is REQUIRED to BORROW if they have future tax earnings to borrow against.

Maybe you should tell that to the GOP.

1 Reply

@High Seas,

Thanks for the correction, High Seas. In that case, CI is right and the liberal wing of House Democrats is inconsistent to categorically refuse benefit cuts.

1 Reply

@realjohnboy,

realjohnboy wrote:

Obama argued that, if reform was not agreed on by some date, the Bush tax cuts would not be renewed again. Boehner held the Dems to the fire by saying that if reform was not agreed to, portions of the Health Care bill (including the requirement that everyone had to have insurance) would not go into effect.
Those "triggers" didn't sit well with House members on either side.

They don't sit well with me, either. Primarily because I see them as opportunities for both parties to make sure the other guy doesn't meet his goal. I don't see this as a carrot to make them get it done at all. I have no faith whatsoever that either party will work cooperatively to make sure the triggers aren't met. It will more of the same politics as usual.

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Speaker Boehner says that it is important to announce some sort of plan by 4 pm ET today (Sunday). That is when Asian financial markets open the week. 5 hours from now.
I suspect that there will not be a significant fall, which will lead some to conclude that default is no big deal.

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@Thomas,

I was going to let this one "go," because I agree with your opinons most of the time, and felt this will settle itself in the future.

Thanks to High Seas for making the clarification.

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I'm reading multiple reports that the new plan in the House is to pass a 2-tiered bill, with one vote right now extending the limit about a trillion dollars, and another one next year, extending the limit more but with a larger deficit reduction packet with both spending cuts and tax increases.

On one hand, this isn't what Obama and Reid want, and they've said so; on the other, the Republican base is acting like this is sell-out of the year. So it's tough to say what will happen.

Cycloptichorn

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@parados,

parados wrote:

georgeob1 wrote:

Nonsense. The money was borrowed from the trust but that doesn't relieve the Trustee of the obligation to fulfill the Trust obligations as long as he has the ability to pay them. That ability remains intact as long as the Trustee has any assets.

So in other words the Trustee is REQUIRED to BORROW if they have future tax earnings to borrow against.

Maybe you should tell that to the GOP.

Wrong again. The government still has substantial tax receipts with which to directly fullfill its obligations as Trustee. Nothing prevents the government from reducing other expenditures.

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@georgeob1,

Ah,...
So you are proposing that the government cut military pay or not pay other bond holders.

1 Reply

@parados,

These are possibilities. They could also cut some of the many bloated bureaucracies that so infest the government, or even some of the new and expanded ones the current administration is so assiduously expanding,

1 Reply

@georgeob1,

georgeob, You speak as though the government expansion happened only during Obama's tenure, and we must now act to cut expenses.

GW Bush started two wars that cost this country a fortune - in every aspect of cost in human lives and assets, our economy, and the huge deficit carried over to Obama.

That the GOP wants to correct this "accumulated" deficit in one year is ridiculous. That exceeds common sense or taking responsibility for their own actions - when they approved increasing the debt ceiling for many decades while a member of congress.

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@georgeob1,

georgeob1 wrote:

These are possibilities. They could also cut some of the many bloated bureaucracies that so infest the government, or even some of the new and expanded ones the current administration is so assiduously expanding,

The simple fact of the matter is that based on revenues and expenditures, the government doesn't have enough to pay SS, Military and Medicare and interest on the debt alone. If they attempt to pay all those it leaves them with no money for anything else.

National Defense - 768
Medicare - 494 (Trust fund)
SS - 784 (Trust fund)
Interest on debt - 206

Total of those 4 items - 2252
Projected Government Revenues for 2011 - 2173
DEFICIT - 79 BILLION

That means they won't pay for Veteran's benefits -
or unemployment benefits (which is a trust fund like SS)
Nor are you paying the retirement of Federal employees including retired military - 129
they wouldn't be able to house and feed Federal prisoners
Of course those prisoners wouldn't have any courts to resort to since they would not be paid.
Then there's the highway trust fund that can't be raided by your logic.

So.. let's recap..with just the trust funds

Medicare - 494
SS - 784
Highway - 59
Air - 22
Unemployment - 135
The Trust funds alone are 1,494

If we pay Interest on debt - 206
Then we should pay for Federal retirees if we are paying for SS - 194
That gives a total of 1894

If we pay the military personal - 156
and ongoing military operation and maintainance costs -294
military benefits -
Total of 2344...

Damn.. we are out of money again.. and we aren't even paying for all the war costs when we run out of money.

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@parados,

In the first place you are mixing up real trust funds with other, admittedly important, expenditures. There is a distinction here, and it has been the subject of our recent postings. Military O&M funds and unemployment payments are not part of any Trust. Very little of the enormous increases in government expenditures initiated by the Obama administration has been covered by these trusts: we could start by cutting them. You are again changing and evading the issues under discussion.

However, overall you have made a pretty good case for the proposition that we need to make significant reductions in Government expenditures and entitlement programs, some of which are funded by government established trusts. The added borrowing can't go on forever.

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@georgeob1,

I never said that the Military and O&M were trust funds...
I am merely pointing out you can't continue to fund the military.

Unemployment is considered a trust fund however.

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@parados,

Can't forget to pay the treasury and IRS, either, or we can't collect any money at all and will default immediately.

Cycloptichorn

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@georgeob1,

georgeob1 wrote:

However, overall you have made a pretty good case for the proposition that we need to make significant reductions in Government expenditures and entitlement programs, some of which are funded by government established trusts. The added borrowing can't go on forever.

The added borrowing isn't the result of the trust funds. It's the result of the general fund not even being able to pay for the military and interest on the debt as it now stands.
IN 2011. Trust funds will have receipts of 1.6 trillion, the general fund of 1.3 trillion.
Military - 768
Total interest including that earned by Trust funds - 430
Veteran's benefits - 141
TOTAL - 1.339

You can't cut anything george because there is nothing but Military and Veterans to cut if you want to protect the Trust funds.

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@parados,

Quote:

You can't cut anything george because there is nothing but Military and Veteran's to cut if you want to protect the Trust funds.

That cracks me up every time I hear it..."trust fund" infers that their is money set aside in , you know, a trust....there is no money, all there are is slips of paper with IOU written on them. There is nothing to protect.

2 Replies

Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

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