Yelling "Fire" in a crowded place

Secretary Geithner, Obama and other politicians are doing the moral equivalent of yelling “Fire!” in a crowded theater and they are doing so for political reasons rather than financial reasons. They simply do not want any interruptions in the bloated spending underway in Washington and they want to scare Americans (notice the abscence of "Fear Mongering" rhetoric from the liberal press). I guess simple math is just too difficult for politicians.

The BPC study found that the United States is likely to hit the debt limit sometime between August 2 and August 9. “It’s a 44 percent overnight cut in federal spending” if Congress hits the debt limit, Powell said. The BPC study projects there will be $172 billion in federal revenues in August (and approx $200 billion monthly on average) and $307 billion in authorized expenditures. That means there's enough money to pay for, say, interest on the debt ($29 billion), Social Security ($49.2 billion), Medicare and Medicaid ($50 billion), active duty troop pay ($2.9 billion), veterans affairs programs ($2.9 billion).
That leaves you with about $39 billion to fund (or not fund) the following:

Defense vendors ($31.7 billion)
IRS refunds ($3.9 billion)
Food stamps and welfare ($9.3 billion)
Unemployment insurance benefits ($12.8 billion)
Department of Education ($20.2 billion)
Housing and Urban Development ($6.7 billion)
Other spending, such as Departmens of Justice, Labor, Commerce, EPA, HHS ($73.6 billion)
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The decision to prioritize payments would fall on the Treasury department.

The decision is easy, slash Food Stamps and Welfare by 75% and Unemployment by 50%. Kill HUD, Dept of Labor, Dept of Ed, EPA and HHS,these services should be provided at the state level. Thats approx $110 billion in savings. Problem Solved

 

That is a very simple way to look at things that does not work in reality. The truth is the United States will default on some obligations if the debt ceiling is not raised. The revenues generated in August come in throughout the month, and the bills to be paid will as well.

If the Treasury prioritizes payments in order to have enough cash on hand to make the interest payment they will have to hold off sending out social security checks, paying the military, and making Medicare and Medicaid payments. That is the simple fact of when these payments come due and when the cash comes into the Treasury. And that is assuming the Treasury even has the authority to prioritize payments. Lots of folks are arguing they do not.

and your solution does not work at all. It would require massive legislative reforms that cannot happen fast enough. Not to mention all the states are broke anyway, and could not absorb the additional burdens.

 

The interest on the debt is $29 billion, the government takes in $200 billion a month.

You can only default on a debt that is owed. Entitlements are not owed. So yes it is that simple!

 

This is not true. Ask Moody's and Standards and Poor's.

Your entire premise is inaccurate. Entitlements are owed. That is the very definition of entitlement, an expenditure the governement is legally obligated to make.

All the major rating agencies have gone on record as saying the United States putting off obligated expenditures in order to not miss the interest payment on the debt would be viewed as a default. And again it is not clear that the Treasury even has the authority to prioritize payments. Timmy G is saying they do not and bills will be paid on a first in first out approach.

 

The answer to the problem really is simple. Its all the socialists who keep saying that it's so complex and can't be fixed anytime soon. They are saying that because they are scared to death that the endless flow of other people's money for them to spend is, in fact, about to end.

I'm not an economist, accountant, or financial advisor, but even I can see the solution to the problem is to cut spending and massively reform how the national government collects revenue and spends said revenue.

 

my friend worked at a large movie theater (at the time) when we were in high school. He screamed fire on the PA system and cleared out the joint. I know because I was there since he had gotten us free tickets and popcorn as he had done many times before. but never again.

He was fired immediately and almost arrested. lots of unhappy campers in the parking lot.

 

This is rhetoric, and it doesn't even make sense.

We agree on this, I think, entitlement reforms and massive spending cuts are needed going forward. But that will not help us to pay the bills that are due on August 3rd. The only way we can avoid default on our current obligations is to raise more debt. We don't have the cash. The debt ceiling will have to be raised, but we have to tie it to real reforms and cuts.

 

wow, that dude is lucky, if someone had gotten trampled it coulda really ruined his life.

 

It should be easy to cut and hard to spend.