What exactly happens if the debt ceiling is not increased? n/t

that is the least bad of the consequences.

Today a certain host in the financial channel suggested an IMF rescue package, where the nation looses quite a bit of independence. Given that happens everywhere else, I would not discount it.

At that point the austerity plan will force things like cuts in SS payments, privatiization of things like Amtrak, the firing of government workers, as well as freezing of salaries. Oh the end of certain subsidies and essentially the rape of the nation. This is based on IMF history everywhere else. As they say.. roost and birds.

Incidentally this also means the end of the USD as a reserve currency and of course of the American Empire.

Yes it could also lead to a wold wide depression.

Reality is... will be somewhere in between, my view closer to armageddon.

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Who promptly privatized and dismantled everything under the sun and sent the profits out of Russia in the name of the free market.

I am not so convinced of such an occurance. As long as there are people out there who want to protect their assets in US currency, then this scenario will not occur. And let's be honest - right now the US is still the safest bet in town - and I think it still would be even for a politically motivated default. POLITICALLY MOTIVATED. As a percentage of overall GDP, the debt is still nowhere near what it was just after world war 2.

The money has no safer place to go...the euro? Hardly. The full faith and credit of the US treasury IS THE SAFETY NET OF WALL STREET, BAY STREET AND LONDON and most of the world. They are not about to abandon it because of a political move - the numbers simply do not support that - even if it seems guargantuan. As a percentage of GDP, America's debt is still managable. Heck, after WW2, the debt was over 100 percent of GDP - and that was still managable.

What we are being asked to do, at gunpoint, is to cut programs that had nothing to do with the debt, or else armageddon will occur....their armageddon.

No, Nadine, with all due respect, my sense of this is an elaborate sleight of hand to force us all to pay for the mismanagement of the financial arms of the world.....it is their lack of confidence in what each othe held in terms of bad debt that caused the first crisis - and that confidence has not returned.

President Obama alluded such - that a grand bargain would impress the financial market. I am sure it would. But it was the financial market that got us into this mess, along with irresponsible tax cuts during two wars. Why should Grandma have to wait two more years before qualifying for medicare to impress the financial market - so they would be happy with us? Who is the boss really?

And really, still none of these solutions have one iota to do with the real issue facing most americans - high unemployment. That is the issue that no one wants to talk about....cutting programs will not create jobs, will not improve demand, and will not grow the economy.

I have the utmost respect for President Obama, and I like him allot. I think he believes that what he is proposing is what is best for America, but I cannot mesh this concept into something that would somehow make America grow. It will have the opposite effect. EVERYONE will tighten their belts with uncertainty and a lack of confidence of if, how and when the US will ever grow again.

For me a nation defaulting is not theory. By the way, check where interests went last time we technically defaulted (thanks to Hartman for that). You might remember the last year of the Carter administration.

a repository of value. It's like why we accept a tiny piece of round metal will buy something. If we default, it changes everything in that system. Worldwide, fund managers are bound by certain rules. A Default would mean they have to sell US bonds and buy something else. Both here and abroad. Those things they call money markets - dollar equivalents? They would be afloat on a sea of doubt, but not worth the thing they are supposed to be. Much of the banking system uses these instruments to provide liquidity on a daily basis to their assets. It would all go away. The damage would be permanent. We would not recover the valuations on anything we currently enjoy---stocks,bonds, the money in your pocket, food, in this generation. Hyperinflation would no doubt set in. Everything , the entire fabric of society , would strain to the breaking point. It's unthinkable. And you can't fix it once it's done.

will they have to walk?

The whole thing is a piece of cheap theater put on to scare people and make them compliant with cuts to Social Security and Medicare. Democrats (especially Geithner and Obama) and Republicans are complicit in this.

Shame on them.

to the amount of taxation we actually take in. In August we are scheduled to spend $306.7 billion dollars and take in $172.4 billion. That means we would have to cut $134 billion or about 44%. In terms of government programs we could pay interest $29 billion (if we don't then we would definitely lose our credit rating), SS $49.2 billion, Medicare $28.6 billion, Medicaid $21.4 billion all of which have to be paid. Add in defense vendors $31.7 billion, active duty pay $2.9 billion, and veterans affairs $2.9 billion. Add in unemployment $12.8 billion. We are now over by $4 billion. We haven't funded anything else. No courts, no FBI, no special ed programs, no pell grants, no nothing. This is if, a huge if, interest rates don't go up. For every 0.5% interest rates increase, the monthly interest would increase by a bit over $4 billion.

I thought everyone knew that.

:spray:

And a chainsaw in case we have to kill zombies.

...there will be zombies. :)

Will there be any UI checks issued?

If not, general strike? Or massive "hunger" strike? (If millions will not be able to even buy food, why not?)

We are still a young growing country after all.

It's pretty much the consensus that bad shit will happen if we go into default, but people disagree on the specifics. It will certainly mean we'll pay more to borrow money, and that can't be good.

I'm amazed at the number of economic denialists are out there. These folks assume that because they don't understand economics, then anything is possible. One example is the counter-intuitive notion that lower taxes result in increased revenue to government. There's a very good reason this notion is counter-intuitive - it's bullshit.

The idea that we can get away with refusing to pay bills when they become due is also nonsense.

I would expect multiple groups advocating revolutionary ideas.
Any "incident" could spark violence. Violence could escalate quickly.

The rich benefit from the status quo. The rich will not be happy.

I would expect a radical group on the left advocating communism,
only they won't call it communism. They will give it a new name.
http://en.wikipedia.org/wiki/The_Communist_Manifesto
I think this group will advocate ownership of property and corporations by the state.

I would hope a less radical group, on the left would advocate FDR's Second Bill of Rights:
http://en.wikipedia.org/wiki/Second_Bill_of_Rights
The rich would have to pay more, but at least they could still be rich.

I would expect a radical group on the right advocating Nazism.
The rich would hate Nazism. No unearned income, no trusts....
I found the Nazi Manifesto here, at least I think it's the Nazi Manifesto:
http://www.scrapbookpages.com/dachauscrapbook/25Points.html
Glancing at this URL, I picked out the following:

"7 We demand that the State shall above all undertake to ensure that every citizen shall have the possibility of living decently and earning a livelihood. If it should not be possible to feed the whole population, then aliens (non-citizens) must be expelled from the Reich."

"8 Any further immigration of non-Germans must be prevented. We demand that all non-Germans who have entered Germany since August 2, 1914, shall be compelled to leave the Reich immediately."

"9 All citizens must possess equal rights and duties.
10 The first duty of every citizen must be to work mentally or physically. No individual shall do any work that offends against the interest of the community to the benefit of all.
Therefore we demand:

11 That all unearned income, and all income that does not arise from work, be abolished."

"13 We demand the nationalization of all trusts."

"14 We demand profit-sharing in large industries."

"15 We demand a generous increase in old-age pensions."

"16 We demand the creation and maintenance of a sound middle-class, the immediate communalisation of large stores which will be rented cheaply to small trades people, and the strongest consideration must be given to ensure that small traders shall deliver the supplies needed by the State, the provinces and municipalities."

"17 We demand an agrarian reform in accordance with our national requirements, and the enactment of a law to expropriate the owners without compensation of any land needed for the common purpose. The abolition of ground rents, and the prohibition of all speculation in land."

"20 In order to make it possible for every capable and industrious German to obtain higher education, and thus the opportunity to reach into positions of leadership, the State must assume the responsibility of organizing thoroughly the entire cultural system of the people. The curricula of all educational establishments shall be adapted to practical life. The conception of the State Idea (science of citizenship) must be taught in the schools from the very beginning. We demand that specially talented children of poor parents, whatever their station or occupation, be educated at the expense of the State."

"21 The State has the duty to help raise the standard of national health by providing maternity welfare centres, by prohibiting juvenile labour, by increasing physical fitness through the introduction of compulsory games and gymnastics, and by the greatest possible encouragement of associations concerned with the physical education of the young."

The Nazi manifesto is extremely authoritarian. One can feel the violence waiting to happen.

I haven't figured out where the Tea Party fits...I looked for the Tea Party Manifesto.
Forgive me for saying it, but it reads like a rich person's dream with one exception,
I don't know if the rich would like point 4, "4. Enact Fundamental Tax Reform".
http://drudgeretort.wordpress.com/2010/04/27/tea-party-manifesto/
"1. Protect the Constitution"
"2. Reject Cap & Trade"
"3. Demand a Balanced Budget"
"4. Enact Fundamental Tax Reform"
"5. Restore Fiscal Responsibility & Constitutionally Limited Government in Washington"
"6. End Runaway Government Spending"
"7. Defund, Repeal, & Replace Government-run Health Care"
"8. Pass an All-of-the-Above Energy Policy"
"9. Stop the Pork"
"10. Stop the Tax Hikes"
It's not clear to me if the rich would want fundamental tax reform.
The rich benefit from the current system. The rich take advantage of tax loopholes.
The rich benefit from the lower, long term capital gains tax rate.
It depends what the Tea Party intends to do with these tax loopholes and tax benefits.
It depends what the Tea Party intends to do regarding the long term capital gains tax rate.
Given my belief the Tea Party is a puppet of the Koch brothers,
I believe the Tea Party will be very careful not to advocate anything untoward for the rich.

The elderly will be hurt if we go into default.
They (I guess I should say we since I'm getting up there in years) will be pragmatic.
We will ask what's in our best interest. We will do what we can to protect our programs.
We won't consider "our programs" to be government handouts, or even government programs.
I know they are government programs; I won't quibble if someone says they are government handouts.
We will get more from social security than we paid in. I define that as a handout.

The Tea Party speak of guns and violence. They are weekend warriors.
It's one thing to talk about violence against strangers and foreigners.
It's another thing to actually do it.
They don't know about Kristallnacht.
They weren't alive during the time of the Ku Klux Klan.
They don't know the meaning of the phrase, "the Red Terror".
Kidnapping and assassinations occur in other countries, not here.

Radical left wing groups and radical right wing groups will commit horrible atrocities.
We like to think we are immune to this. We like to think this can't happen here.
Push people, until they think they have nothing to lose, and watch the results.

Drip, drip, drip, changes work with a minimum risk of violence. People remain quiescent.
Quick, sudden, changes will elicit violence. People wake up and become violent.

I'm reminded of a parable...is there truth to this parable, I don't know...
how does one cook a live frog?
If one gets the water boiling, then throws in the frog, the frog will jump out.
If one puts the frog in cool water, brings the water to a boil, the frog will cook nicely.

Most people are politically naive. Most people are political frogs.
Most people don't act until it's too late. They don't see the water boiling until it's too late.

is that the US will have to devote more budgetary money to debt servicing/reduction which in turn means that some programs/departments (which ones are open to ideological debate) will not have the funds to operate.

in the short term, their will be a cash flow issue as tax revenue is not a steady flow, it peaks and valleys throughout the year and having some borrowing ability can help steady the cash flow.

http://www.realclearpolitics.com/articles/2011/07/15/make_my_day_110588-2.html

"Contrary to popular impression, going into default would not be just a matter of stiffing the autocrats in Beijing. Less than a third of the $14.3 trillion national debt is owed to foreigners -- roughly 10 percent of the total to China. The biggest chunk, about 40 percent, is owed to U.S. individuals and institutions. Another 25 percent or so is owed to the Social Security trust fund, the U.S. Civil Service Retirement Fund and the U.S. Military Retirement Fund. In a sense we would primarily be stiffing American retirees, including veterans."


So, 1/3 to foreigners, only 10% to China.

40% to US people and institutions

25% to Fed retirement fund, SS trust fund and military ret fund.

If the government cuts spending by 40% instantly, we fall into immediate depression. If the government defaults, then it will most likely have a domino effect leading to seized credit. However, noboby knows for sure what happens in default scenario.

default is not an option.