US Debt Default?!?

[Riceball]

https://www.businessspectator.com.au/bs.nsf/Article/US-debt-US-default-financial-crisis-pd20110406-FMT98?OpenDocument&src=sph

I'm guessing this is just another sensationalised news article in a string of sensationalised news articles by this Australian author (she's the most gloomy, depressing economics writer going I reckon). Apparently, the US Government is going to have to "shut down" as early as Saturday because they've run out of money.

I'm not buying it. A cursory glance at the figures has lead me to my conclusion:

The Republicans have proposed spending cuts of $61 billion, but Democrats say these cuts are too deep, and are instead offering $33 billion in cuts.

Last time I checked, the forecast US budget deficit for this year was somewhere around $1.5 trillion (ie $1,500 billion). Let me throw some percentages at you:

Spending cuts of $61 billion in a deficit of $1.5 trillion amount to a 0.041% cut in the deficit
Spending cuts of $33 billion in a deficit of $1.5 trillion amount to a 0.022% cut in the deficit

Despite the fact they are getting close to the debt ceiling (we are talking trillions again, not  billions), I for one can't see much of a difference.

Is there something I'm missing here? Or is the debate on the economy is the US so sordid that they are arguing about a 0.019% difference in deficit reduction? Seems bizzare...

[ReaPsTA]

Or is the debate on the economy is the US so sordid that they are arguing about a 0.019% difference in deficit reduction? Seems bizzare...

Yes.

Politicians say they cut 61 billion dollars from the budget.  Because these are big numbers, people focus on that instead of what 61 billion dollars means as a percentage of the whole deficit.

[orcus116]

What's sad is how much $61 billion is in terms of, say, munitions as far as bombs and shit. One or two of those bombs they need so much could've funded stuff like NPR and PBS for another year or two which they seem to want to cut so badly.

[ack44]

Have people agreed yet that the collapse of the dollar is unavoidable? Good ol Rep v.s. Dem politics isn't going to solve this, as OP shows. I think the question is who is going to bail the U.S. out when it comes.

[Tanatra]

Or is the debate on the economy is the US so sordid that they are arguing about a 0.019% difference in deficit reduction? Seems bizzare...

Yes.

Politicians say they cut 61 billion dollars from the budget.  Because these are big numbers, people focus on that instead of what 61 billion dollars means as a percentage of the whole deficit.

I'm pretty sure the Republican's idea of a budget cut revolves around the idea of just totally dissolving the EPA. Last time I looked over a list of their proposed budget cuts, at least a third of the total dollar value of the cuts were environmentally-related. Also, this made me LOL:

The plan, which was drafted by House Budget Committee chairman, Paul Ryan, aims to end the “relentless government spending, borrowing and taxing that are leading America, right at this moment, toward a debt-fueled economic crisis.”

It also plans to cut the top individual and corporate tax rate to 25 per cent, from 35 per cent at present.

Only Republicans would consider tax breaks to be a logical addition to a list of budget cuts.  

Anyway, although I'm sure some radicals want Obama to fail so badly that they are calling for a debt default, I really can't see it happening. Yet again voting to raise the debt ceiling is a necessary evil, because if the debt defaults, lender confidence in the US government will plummet and the feds will never again be able to borrow money at the ridiculously low interest rates they enjoy now. The government wouldn't shut down overnight, but thousands of people would be laid off, welfare programs and benefits (and perhaps even paychecks on some odd months) to military personnel would be slashed, etc., and all the while congress will continue to vote themselves "cost of living increases" for their salaries.  

And no, absolutely none of that would lead to a reduction in taxes (though Republicans will make a political football out of it) because if nobody wants to lend money to the US government anymore, where do you think they are going to get it from?

Solvency is a damn good thing and certainly something that our government needs, but defaulting on the debt now would set back economy recovery at least several more years, and not just for us, but the rest of the world as well.

[rumborak]

What's sad is how much $61 billion is in terms of, say, munitions as far as bombs and shit. One or two of those bombs they need so much could've funded stuff like NPR and PBS for another year or two which they seem to want to cut so badly.

That's what drives me nuts really. They're talking about defunding NPR and shit to save money, and never dare to touch the elephant ion the room, the US' military spending, which is through the roof.

rumborak