But wait… Aren’t we too big to fail?
Several countries around the world are facing [national bankruptcy], the US among them, and one or several such defaults would make the corporate bankruptcies of 2008 look like fallen grass blades before falling redwoods.
In the case of the US, national debt held by corporations, foreign governments, individual investors, and institutions such as pension funds grew just last year from 41% of GDP to 53%. That led the Committee on the Fiscal Future of the United States to issue a warning last week that the US must rein in its deficit.
[…]
I think everybody agrees that the US needs to cut its deficit, but it takes only a glance at the federal budget to see that doing so is politically out of the question. Consider that the five biggest gobblers of the US budget are Social Security, Medicare, Medicaid, the Department of Defense, and interest on the debt.
[…]
Quietly, my circle of investors and geopolitical thinkers are wondering if a national bankruptcy is just what America needs to finally get corporate bloodsuckers off the taxpayer aorta. Given the political impossibility of reducing costs, will Democrats actually try raising taxes to retain US solvency? Imagine how that would go over as the bankers who caused the latest mess announce their record bonuses courtesy of taxpayer funds. The explosions to come may be the only way through the lobbyist choke-hold on Washington. Pick your poison: bankruptcy or bellicosity.
#29 chris
‘Including “unfunded liabilities” is intellectually dishonest. That is how insurance works. You wouldn’t tell a life insurance company that they are insolvent because they don’t have enough cash on hand to pay out every policy. By ignoring future premiums you make the problem seem worse than it is.’
So you’re not talking the national debt, you’re talking the additional stuff that pushes us to over 54 trillion.
It would be dishonest if it was calculated without taking into account likely ‘premiums’ – in our case the tax regime + likely economy performance.
But I don’t think it is calculated that way. In the movie IOUSA (which you can see a cut down version for free online) they show what happens to social security in an animated graph, and it shows that we are spending the surplus we have now (ie spending the future) – and how in a few years that goes from surplus to deficit as the baby boomers claim social security. Ie it appears to take into account the inputs (ie the current surplus) and the outputs.
So perhaps your argument is the same as this guy.
I don’t get it – the argument seems to be since we don’t know the performance of the vehicle (the stock market), do nothing. So why is this different from my saving money for a future obligation? I know I (unlike the government) can’t just print money – but that of course has an impact.
#31 Here you go.
#32 I never said to ignore demographic changes that will cause the immediate cost of socSec/medicare/medicaid to change. I’m just pointing out that that needs to be accounted for in a different way than government debt. Government debt consists of bonds, bills, and the like.
“Unfunded liabilities” is means that say we are never going to collect another penny of social security tax. Now the “debt” is much bigger. It sounds like a much more dramatic problem. It isn’t a proper, meaningful, financial formulation. It is only a political formulation trying to sell people on the idea that taxes are pointless because the ship of state is going down. It’s just bogus.
#26 LibertyLover,
so you love liberty, but you want everyone else to pay for your liberty.
Got it.
where are people drawing up these numbers of the “average” americans’ income being this ridiculously high 25-50k ?? , i’ve neeeevverrrr cleared more than 18.6k and that was with masssive overtime!!
im talking i had no personal life , i barely slept – i only worked.
its near impossible to find sustainable work thats not foodservice but thats not a sustainable job it puts you in debt, the same of any part time or less than i’d say 10$ an hour job roughlyyy.
the kicker is im a college student, and i work – i get shit, im lucky i havent been evicted and my teeth are gonna inevitably cause me some sickness from abscess since i dont have money for insurance and that even if i had insurance the cost of my extractions,fillings,surgical removal , drilling and braces want money upfront and lottts of it – unless you get government insurance.
heres the catch florida is effectively payin dumbsh%t$ money for breeding – heres the problem , they’re paying for dumbpeople to have kids … equals =more and even dumber peoples..
soo people like myself that contribute to the system as opposed to milk it – get jack and squat
If the US made an official declaration of Bankruptcy, it would signal to the world that the US Gov is illegitimate and have no authority what-so-ever. Therefore the US and all her territories would be unclaimed land and open for the taking by any country.
I don’t see that happening, but boy would that be fun!
wtfdave, I have made the most by taking jobs nobody else wanted. However, after a time, the money was no longer worth the sacrifices.
The answer is simple, yet impossible for a pollitician. You cut spending, if its not absolutely needed, and the constitution does not mandate it, its on the chopping block.
That should at least get us back to a balance budget. After that, time to start the real cutting. Across the board, every department should be required to cut 10%. If the department says they can’t, you fire the person in charge, and bring in a hatchet man.
If the the department of eduction says they can’t cut, then you send in Ron Paul to do it. If the department of defense says they can’t cut you bring in Barny Frank.
This will have to be done several times, perhaps every 4 years or so. But most of all, an amendment needs to be added to the Constitution, that states that government shall not spend more than it takes in. A balance budget amendment basically.
Yes, my liberal friends, the military will have to be scaled back. But it can’t just be the military. Everything needs to be scaled back or, eliminated entirely. Even the democrats pet programs like welfare. If the program is important, the states can take it over. Look at the constitution, it spells out what the feds are suppose to do.
Even if all this is done, the problem will not be fixed in our lifetimes. The amount of money we are talking about is just too huge. But we cannot continue to spend money at the rate we are, its just that simple.
And I hate to tell my liberal friends this, but simply screaming, “cut the military by 90%” won’t solve the problem, especially if we replaced the spending with more spending every year. Like most people who go bankrupt, the country does not have an income problem, we have a spending problem.
50/50 we end up like Argentina did. You try to spend your pay check before your get it because your money is inflating so fast and no country will take dollars.
This of course means no imported fuels. No deals at Walmart or anywhere else. No imported anything. Does that mean empty stores?
If you are smart you can figure out at least some of what happens next.
Pain beyond words.
#39 I disagree with your view of the problem and the solution, but I like that you have a cohesive strategic viewpoint.
Here is mine: Attack the largest repetitive costs in society.
Governance
Declare a unilateral surrender in the Drug War. Take all the financial investigators and send them to go watch the banks. Make it clear that public companies must act in the interests of the shareholders and that fraud by organizations is a priority target.
Increase the top marginal tax rate significantly and make the top tax bracket cover the wealthiest 1%. Tax all types of income equally. Eliminate the insurance industry and combine it with taxes. Much of the stuff the government does is a type of insurance and the insurance industry sucks. It would also decrease insurance fraud, when it is the government’s dollar they WOULD prosecute.
Decrease expensive benefits that cover small segments of the population. Tough times mean that you have to help the most people as efficiently as possible.
Radically restrict the size of media distribution ownership. Separate the content from the distribution and you will get better of both.
Investment
Massive investment in localized power collection/creation sites. Everything: solar roofs, windmills, mini-generators, and nuclear plants(with a special focus on some newer and simpler types). This is the type of market structure that actually does cause competition.
A rapid build-out of high speed rail on the large close urban areas of the east and west coasts. Any big cities within 500 miles of each other would be connected by a maximum of one train hop. Build inwards from both the coasts. Use the rail network to pick up power from many small operators and bring it directly into the cities.
Once the network is in place it will be hugely valuable, and you can sell off parts of it.
Either the US is going to have to default on its debt and start over, or it is going to have to drive the value of a dollar down to zero, create a new currency — likely based on energy– and start over.
One of these will happen before the baby boom generation dies out.
#37 GetSmart,
We’d end up in a land that was depicted in Snow Crash. I actually WANT that to happen here. The Feds would be nothing more than a meaningless franchise smaller than Taco Bell.
# 39 Bob:
“You cut spending, if its not absolutely needed, and the constitution does not mandate it, its on the chopping block.”
Let’s see — that would leave the President and Vice President, Congress, the Supreme Court and the Census Bureau. Yep, much cheaper!
In a similar vein, # 43, TooManyPuppies said,
“We’d end up in a land that was depicted in Snow Crash. I actually WANT that to happen here. The Feds would be nothing more than a meaningless franchise smaller than Taco Bell.”
So each state would have to have its own Army, Navy, Air Force, Marines, Coast Guard? The country would be carved up by the rest of the world in about six months. I really don’t want to have to learn another language at my age…
#44, no need, english is pretty much the standard language franchise wide. No military either, each franchise is free to contract out to any other franchise. I’d probably start up my own franchise of The Klink and COPS.
Of course I say this all in good humor, but the depiction in Snow Crash could be a very real possibility the way Corporations are deeply rooted in today’s world in controlling many aspects of our lives. I don’t see it as far fetched either.
If the nations of the world really decided the US Gov was illegitimate how would they react? Our money worthless, our words meaningless, a land open for the taking to everyone we owe tangible worth to?
That wont happen, we all know that. As long as the rest of the world considers on demand printed money with no real value they keep taking ours as payment. But, what would it be like if our debtors said they no longer accept the Fed Note as payment? Give them a State and call it even?
#34, so you love liberty, but you want everyone else to pay for your liberty.
Got it.
Then you got it wrong.
Where did you get that from?
#35, the kicker is im a college student,
Go to the school nurse.
Colleges have insurance on their students to cover things like this. I had a root canal and crown while in college. All on their nickel (actually mine as it was included in the tuition costs).
#28, If that’s the case, where is the incentive to do better? Where is the incentive to be “honest” and not work under the table?
Many outstanding observations above. 😉
I suspect that the current admin (and probably the previous as well) are deliberately spending the dollar into oblivion and offloading all of our debts onto foreigners and politically dis-favored corporations. The next step will be to make an abrupt transition to the Amero and drop the dollar completely.
What makes a fiat currency function is that the government accepts it in payment of your liabilities. If they stop accepting the dollar for this then the dollar dies. If they make a switchover to accepting the Amero it will crash the dollar and null all of their debts. Currencies can exist independently of the government’s acceptance of them for payment, so you couldn’t definitively accuse them of a deliberate default, but it would have the same effect.
Just a thought. I have those sometimes.
wtf?
-ah, in case no one noticed, we already arebankrupt..
-and if Mr. O insist on his current “blame the banker” regulation..instead of “blame the asshats in government that de-regged and allowed the banks to consolidate, create the derivative bombs etc..
He forgets that the banks *own* us. (well G&S-goldman sachs and jp morgan/chase..The Fed
and treasury, respectively)
G&S could simply close its NY operations move them to London..or/and even close its recently formed “bank”. (remember, G&S owns that “black nanosecond trading box” they can cause major pain at the push of a button.
end result, he kills american competition and hands europian banks a BIG win. -sadly, “financial paper” is the only “industry” we have left.. (its a big catch 22 -as i’m all for re-instituting Glass-Steagal)
Oh and he lifted the caps on (the bankrupt) fannie and freddie for three years..the same length of time the next wave of mortgage resets will happen in..coincidence, -i think not.
In case no one noticed G&S and company already have taken major shots across the bow by cutting $1billion in small business loans..
Jan 20th, 2010:“Bailed Out Banks Continue to Cut Small Business Loans”
I wonder if that is in addition to this Nov 27, 2009 article at CNN: “Small business loans: $10 billion evaporates”
This is almost exactly the same play (cutting off credit) that was done prior to the 1929 crash.
The writing is on the wall folks.. (not to mention the scheduled spring food crisis just a few months away..)
-s
“Should We Allow The US To Go Bankrupt?”
Do “we” have any say in the matter?