DEBT CEILING 101

This is a ckear and simple explanation of something I've seen completely misunderstood in arguments on Facebook recently. Being a musician and a songwriter, I really appreciate these kinds of articles since I, like so many, don't have any background to understand financial matters and the inner workings of our government seems like a matrix made of quicksand.

Mike Patton wrote this article on Forbes:I write for a world filled with confusion and self-interest. If you agree that people search for simple, straight-forward and unbiased analysis follow along as we "Make Cents" of topics ranging from the economy (including a splash of political analysis), the world of investing, and financial planning (ex; estate & tax, insurance, risk management, and retirement strategies).

In this article, we will explain the debt ceiling; examine a few rules that govern it, discuss the current national debt, and reveal what could happen if Congress fails to raise it.

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Simply put, the US government has reached a point of no return

ZERO HEDGE: Paying Down The Debt Is Now Almost Mathematically Impossible

Re: financial illiteracy

From the American School of Entrepreneurship

We normally don’t write about politics or economics, but the feverish comments about ‘default’ and associated topics by pundits, radio talk show hosts and other are just too much.

We’d like to inject, for our readers at least, some financial sanity into the discussion.

About the only national pundits on this topic who know what they’re talking about on the default topic are Rush Limbaugh, Dr. Charles Krauthmmer and George Will, who have all correctly used the ‘default’ term.

It’s clear that most of the national punditry never took a course in finance.

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Senate leaders race to draft debt-limit bill after House effort collapses

First, Treasury Secretary Jack Lew made up this arbitrary deadline (he felt the children in the government needed some guidelines) and second, we have PLENTY of money coming into the government to pay ALL of our obligations (including Social Security) but a default (which would be the first time in U.S. history and would be an impeachable offense for the president) would only prevent the spend-mad politicians from borrowing more money.

...it was unclear whether an agreement between Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) could pass the Senate before the Treasury Department exhausts its borrowing power Thursday.

House GOP plans Tuesday night vote on latest debt ceiling plan

Situation is very "fluid" and doesn't look all that great for a solid deal at this point...

News from The Hill

Sarah Palin explains what the debt default really means

Obama’s Debt Default is on His Shoulders While We Shoulder His Impeachable Offenses

Apparently the president thinks he can furlough reality when talking about the debt limit. To suggest that raising the debt limit doesn’t incur more debt is laughably absurd. The very reason why you raise the debt limit is so that you can incur more debt. Otherwise what’s the point?

It’s also shameful to see him scaremongering the markets with his talk of default. There is no way we can default if we follow the Constitution. The Fourteenth Amendment, Section 4, requires that we service our debt first. We currently collect more than enough tax revenue to service our debt if we do that first. However, we don’t have enough money to continue to finance our ever-growing federal government (with our $17 trillion dollar national debt that has increased over 50% since Obama took office). That’s why President Obama wants to increase the debt limit. He doesn’t want to make the tough decisions to rein in government spending. So, he’s scaremongering the markets about default, just as he tries to scaremonger our senior citizens about their Social Security, which, by the way, is funded by the Social Security Trust Fund and is solvent through 2038.

It’s time for the president to be honest with the American people for a change. Defaulting on our national debt is an impeachable offense, and any attempt by President Obama to unilaterally raise the debt limit without Congress is also an impeachable offense. A default would also be a shameful lack of leadership, just as mindlessly increasing our debt without trying to rein in spending is a betrayal of our children and grandchildren who will be stuck with the bill.

- Sarah Palin

"I personally believe the month of October may be a major turning point in America's history."

The Possible Outcomes Of The Shutdown Theater

The right thing to do

We are watching the fiscal destruction of this country. How else can one phrase it? When interest rates return to the mean, the federal government's reckless spending policies will instantly quadruple the amount it must pay to service the debt. What happens then? It's anyone's guess, but one thing is certain: all of the outcomes are bad, ranging from another Great Depression to a complete collapse of the civil society.

Top 5 Reasons the GOP Will Win the Shutdown (Unless They Fold With the Winning Hand)

Who really owns the Long Beach Naval Base in California?

...and the REAL reason behind the Obama administration's big push for gun control:

In 2012, a Chinese Officer was arrested for trespassing. When it went to court, although he was a Chinese Citizen and Officer on American Soil, he had to be acquitted, because he was on Chinese property. There have also been sightings of Chinese Warships in 2013, which were calmly explained away as a joint effort with the Chinese Military. They are parking in the Naval Yard they now own and there is nothing Americans can do about it.

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Holy Sh*t: Prepare for a NEW American Revolution!

CNBC via Doug Ross:

Based on CBO projections, if interest rates just rise to their 20-year average, we will have an untenable, unacceptable interest rate bill whose beneficiaries are China, Japan, and others who own our bonds.

And if Americans find out that the lion's share of their income tax payments are going to service the debt, prepare for a new American revolution.

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The best frozen treat you'll ever eat

I'll bet you $16,699,396,000,000.00 I'm right!

The Sovereign Debt Bubble Will Continue To Expand Until – BANG – The System Implodes

Why are so many politicians around the world declaring that the debt crisis is "over" when debt to GDP ratios all over the planet continue to skyrocket? The global economy has never seen anything like the sovereign debt bubble that we are experiencing today. The United States, Japan, and nearly every major nation in Europe are absolutely drowning in debt. We have heard a lot about "austerity" over in Europe in recent years, but debt to GDP ratios continue to rise in Greece, Spain, Italy, Ireland and Portugal. In general, most economists consider a debt to GDP ratio of 100% to be a "danger level", and most of the economies of the western world have either already surpassed that level or are rapidly approaching it. Of course the biggest debt offender of all in many ways is the United States. The U.S. debt to GDP ratio has risen from 66.6 percent to 103 percent since 2007, and the U.S. government accumulated more new debt during Barack Obama's first term than it did under the first 42 U.S. presidents combined. This insane sovereign debt bubble will continue to expand until a day of reckoning arrives and the system implodes. Nobody knows exactly when that moment will be reached, but without a doubt it is coming.

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USA PLAN: Immediately cuts the $138 trillion of debt to $30 trillion upon enactment

This is what Americans need – a time out from the politics of ideologues in Congress, political parties and the media and a simple easy-to-understand solution to the many problems we face.

Dick McDonald's solution is simple but outside the box of conventional thinking.

THE USA PLAN

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Republicans are attempting to divert the nation — not from the “fiscal cliff” but from something much worse...

If government debt is not controlled by spending cuts (tax increases on the rich make scarcely a dent), the U.S. is headed for drastic economic decline. Interest rates will rise to attract wary international investors. Rising interest rates will in turn increase our debt service burden, while a diminished private sector will provide less and less tax revenue. The combination of spiraling debt service and entitlement spending will quickly leave no funds for any other purpose.

Think: Mad Max

OUR DEBT IS NOT 16 TRILLION

Chris Cox and Bill archer pointed out in a Wall Street Journal article on
November 27th that our government has not been including Social
Security and Medicare liabilities when computing our national debt.

“The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.”

“Why haven't Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet. But it is possible to discover them. Included in the annual Medicare Trustees' report are separate actuarial estimates of the unfunded liability for Medicare Part A (the hospital portion), Part B (medical insurance) and Part D (prescription drug coverage).

“As of the most recent Trustees' report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion. The realworld impact will be felt when currently unfunded liabilities need to be paid. In theory, the Medicare and Social Security trust funds have at least some money to pay a portion of the bills that are coming due. In actuality, the cupboard is bare: 100% of the payroll taxes for these programs was spent in the same year they were collected.

“In exchange for the payroll taxes that aren't paid out in benefits to current retirees in any given year, the trust funds got nonmarketable Treasury debt. Now, as the baby boomers' promised benefits swamp the payroll-tax collections from today's workers, the government has to swap the trust funds' nonmarketable securities for marketable Treasury debt. The Treasury will then have to sell not only this debt, but far more, in order to pay the benefits as they come due. “

Mr. Cox, a former chairman of the House Republican Policy Committee
and the Securities and Exchange Commission, is president of Bingham
Consulting LLC. Mr. Archer, a former chairman of the House Ways &
Means Committee, is a senior policy adviser at
PricewaterhouseCoopers LLP.

21 municipal defaults so far in 2012.

10 Signs That America Is On The Verge Of A Horrible Municipal Debt Crisis

Paul Ryan’s new budget offers a path to prosperity and solvency

AMERICAN ENTERPRISE INSTITUTE

Debt Bomb Chart of the Day

Chancellor Osborne: “The British Government has run out of money because all the money was spent in the good years”

Uh oh

They should have listened to Margaret Thatcher when they had the chance:

"The problem with socialism is that eventually you run out of other people's money [to spend]."

Let's pretend...

I love it when complex things are simplified so that we can all understand.


Check this out in less than 60 seconds.

• United States Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000

Now, remove 8 zeros and pretend it's a household budget.

• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on credit card: $142,710
• Total budget cuts: $385

Sorta brings the issue "home" doesn't it?

Palin knocks it out of the park

Hot Air: Green Room

Few people in the public eye have said anything useful about the recent unpleasantness with the national debt and the national credit rating. The president hasn’t. The vice president hasn’t. Surprisingly few of the declared Republican candidates have. The MSM haven’t. They’re busy trying to make the expression “Tea Party downgrade” go viral. . .What is interesting is how few in our national political life have put the case together, as Palin has, without temporizing or bloviating. I haven’t heard anyone else do what she does with this post.

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