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There's one item curiously let out of the Cut the Budget Mania

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TomClash Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-16-11 09:49 AM
Original message
There's one item curiously let out of the Cut the Budget Mania
INTEREST ON THE NATIONAL DEBT.

If poor people can shiver in the dark and we all are supposed to "share in the sacrifice" then why shouldn't T-Bill, T-Bond and T-Note holders have to sacrifice too?

I know the answer but I just want to put the lie to the "across-the board" cuts meme.

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badgolfer Donating Member (153 posts) Send PM | Profile | Ignore Wed Feb-16-11 09:57 AM
Response to Original message
1. Farm Subsidies
Also, the farm subsidies aren't mentioned; probably because numerous Congress critters and/or their families benefit from this such as Bachman, Grassley, and others.

Also, hardly any mention of the Congress critters own staffs, budgets, and pensions. Look at exSenator to be Kyl who will garner $139,000 for life once he leaves in two years.
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HereSince1628 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-16-11 09:58 AM
Response to Original message
2. I'm not sure China and others holding Tbills wants to share in our sacrifice
The damage to the national and world economies that could follow from the US defaulting on interest payments of its T-bills is potentially, well, apocalyptic.





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TomClash Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-16-11 10:12 AM
Response to Reply #2
3. Yes I am well acquainted with this theme
Apocalypse now. Hmm.
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HereSince1628 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-16-11 10:28 AM
Response to Reply #3
4. Ok, maybe you can grasp this piece--SS depends on T-bills.
You destroy T-bills and you destroy Social Security in very short order.
You destroy SS and you take down a huge traditionally stable revenue stream in the US economy.

If you think it's only the rich and undeserving that will be hurt if T-bills lost their value you are over-looking some potentially very important collateral damage.


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TomClash Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-16-11 12:22 PM
Response to Reply #4
7. I understand the consequences
Read the OP. Perhaps it wasn't articulated well, but my point was that if not everything is on the table for cuts, then other items can be taken off too.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-16-11 10:30 AM
Response to Original message
5. Are you actually advocating a general default of Treasury obligations?
Edited on Wed Feb-16-11 10:39 AM by Statistical
Do you have any concept of what the the repercussions of a Treasury default would be?

First. US borrowing rates would skyrocket to junkbond status. Future borrowing would command junk bond yields; 10% to 15% or higher. This would make borrowing prohibitively expensive. The US would instantly (not in a decade, not in a year, not in a week but instantly) match revenue with expenditures.

That would mean cutting $1.5 trillion in spending and/or raising taxes $1.5 trillion. Either way a massive hit to GDP enough to push us into a depression and collapse the world economy also. The dollar would devalue massively so expect some fun hyperinflation. Dollar falls in value by 50% then gasoline for example doubles.

Business borrowing rates float above Treasury rates (they both compete for same money) so liquidity for business capital expansions, mortgages, auto financing etc would dry up or command insane premiums (in 1982 30 year mortgage had a 18% APR).

Lastly Social Security depends on repayment of Treasury bonds so SS as we know it is dead or at best significantly scaled back. The single largest private holding of Treasury bonds are pension funds which would be hurt even more (SS can at least depend on current year payroll taxes) so expect widespread pension defaults.

Nobody except those hoping for the complete destruction of the United States should be advocating for a general default on Treasury obligations.
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TomClash Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Feb-16-11 12:19 PM
Response to Reply #5
6. The world collapses
It stops spinning on its axis. I know the consequences of default. I said in the OP I know the answer why this is not on the table.

Only people who can't read fail to grasp my point. Let me try to make more plainly. My point was that not everything is on the table so some other items can be taken off the table.
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