# Will a failure to raise the US debt ceiling force a default?

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PhilKravitz
Restore federal government spending, across the board, to FY 2007-2008 levels. That will more than do it. Several of the states, at least the sanes ones, already have done similarly.
What was the federal budget in 2007? It is now 3.0T (2010).

I see what you mean. How the **** did that happen?
That's what happens when legislators decide not to read the Bills before they vote. Congress seems to operate in a world where everybody gets the spending for projects they want. It's easy - they just need to agree to what someone else wants.

Mech_Engineer
Gold Member
It's also easy because there is no expectation of a balanced budget from the federal gov't. We've been operating under a deficit for so long no one believes it's possible to operate under a balanced budget. Now that we're hitting our self-imposed "credit limit" of $14T (an unimaginable number IMO) they just want to raise it rather than ask what got us here and how can we avoid getting deeper in debt... It seems to me that no one has a real plan for doing anything with our current debt except increasing it. We can't just let debt pile up forever, we have to pay it back eventually... PhilKravitz We can't just let debt pile up forever, we have to pay it back eventually... When you owe the bank$100 the bank owns you. When you owe the bank $10000000000000 you own the bank. I do not expect the Federal government ever to pay off the debt in an honest way. They may create hyper-inflation and then pay off the worthless dollars. It's also easy because there is no expectation of a balanced budget from the federal gov't. We've been operating under a deficit for so long no one believes it's possible to operate under a balanced budget. Now that we're hitting our self-imposed "credit limit" of$14T (an unimaginable number IMO) they just want to raise it rather than ask what got us here and how can we avoid getting deeper in debt...

It seems to me that no one has a real plan for doing anything with our current debt except increasing it. We can't just let debt pile up forever, we have to pay it back eventually...
I've posted similar thoughts in other threads. I'm in favor of this Congress doing nothing else but hone in on waste. I don't know any other way - except to dig into the details - instead of rounding to the nearest $1 Trillion. I want to hold President Obama to his own standard. http://www.nationalreview.com/corner/256199/obama-not-always-fan-upping-debt-ceiling-katrina-trinko "Here are Obama’s thoughts on the debt limit in 2006, when he voted against increasing the ceiling: The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. In 2007 and in 2008, when the Senate voted to increase the limit by$850 billion and $800 billion respectively, Obama did not bother to vote. (He did vote for TARP, which increased the debt limit by$700 billion.)"

When you owe the bank $100 the bank owns you. When you owe the bank$10000000000000 you own the bank.

I do not expect the Federal government ever to pay off the debt in an honest way. They may create hyper-inflation and then pay off the worthless dollars.
On the other hand, we could always pay off in nukes.

Gold Member
The Republican first cut at spending reduction came out today. There are serious big number cuts here. Not enough, but its a start.

Republican Study Committee said:
The Spending Reduction Act of 2011 reduces federal spending by $2.5 trillion over ten years. The bill will specifically hold FY 2011 non-security discretionary spending to FY 08 levels, hold non-defense discretionary spending to FY 06 levels thereafter for the rest of the ten-year budget window... Some specifics. I agree with all of them. • “Stimulus” Repeal: Eliminate all remaining “stimulus” funding.$45 billion total savings.
• Eliminate federal control of Fannie Mae and Freddie Mac. $30 billion total savings. • Repeal the Medicaid FMAP increase in the “State Bailout” (Senate amendments to S. 1586).$16.1 billion total savings.
• Amtrak Subsidies. $1.565 billion annual savings • Corporation for Public Broadcasting Subsidy.$445 million annual savings. (Good riddance)
• Legal Services Corporation. $420 million annual savings. My objections include the fact that they mostly left defense untouched. They do included defense in the 15% cut via attrition of all federal workers but aside from that nothing specific. One could argue that Obama/Gates have already proposed some hundred billion in defense cuts, but they should have signed on as cosponsors to those Obama/Gates cuts. Last edited by a moderator: Gold Member Here Ryan's rules committee went ahead and voted to cut spending back to 2008 at least. The Democrats opposed, every one of them. That's just politically stupid at this point. Sign on at least for big picture and work later to save what you want. Both Republicans and Democrats come into this Congress with little fiscal responsibility credibility. But if the R's go ahead and cut spending as planned, the "kick me I'm stupid" t-shirt will hang solely on the D's. The House Rules Committee on Wednesday approved by a party-line vote of 8-4 a resolution calling on House Budget Committee Chairman Paul Ryan (R-Wis.) to limit non-security discretionary spending in the second half of 2011 to 2008 levels “or less.” http://thehill.com/homenews/house/138975-republicans-to-hold-spending-vote Vanadium 50 Staff Emeritus Science Advisor Education Advisor 2019 Award I just made a very interesting plot - it's Federal revenues and expenditures (on-budget), vs. time, scaled by population and inflation. There are several periods. From 1900-WW1, both are flat at about$160 (2009 dollars) per person. At WW1, there's a slight bump in revenues and a bigger jump in expenditures, and it settles down to slight surplus at twice the pre-WW1 spending. During the New Deal, spending doubles and revenues go up by perhaps 35 or 40%.

WW2 is a huge bump in revenue ($4000 per person) and an even larger one in expenditures$8000). After that, things return briefly to the $2000 range, and then increase linearly to$5000 by 1975.

In 1975, revenues and spending take two different paths. Spending grows to about $8000 by 1985 or so, and holds steady for 15 years. It then grows linearly to about$11,000 by last year. Revenues take a more chaotic path, basically tracking the stock market - the booms and busts are clearly visible.

The lesson I take from this is that it's an unintended consequence of having most of the income taxes paid by the wealthiest Americans. They get a relatively large fraction of their income from stocks, either through dividends or capital gains. When the market performs well, the government gets more money. The downside of this is when the market crashes and the government wants to spend more, that's precisely when they are broke(est).

talk2glenn
The Republican first cut at spending reduction came out today. There are serious big number cuts here. Not enough, but its a start.
What's amusing is that it doesn't go nearly far enough, and still doesn't have a snowballs chance in hell of passing the Senate.

The Republicans probably intend to condition lifting the debt ceiling on acceptance of these terms. Curious to see if that's enough to get it through.

My objections include the fact that they mostly left defense untouched.
Defense is a pittance and frankly doesn't need to be cut; it exists as an issue only for the left to attack Republican fiscal bona fides. The Democrats largess over the past 4 years was focused almost in whole on non-defense discretionary, and this is where most of the cuts should come from.

I agree with Gates that the size of the armed forces needs to be scaled back as we wind down our ongoing commitments in Iraq and Afghanistan, but programs should be protected. It's purely a function of prestige: the threat of the American military is sufficient to keep the world stable. A rising China threatens that stability. Cutting defense spending now would aggravate the problem.

What they really need to address are the entitlements. No Democrat that I can name at this point, will back this. Heck, even when Republicans held every chamber, they couldn't get Social Security reform out the gates, let alone to a vote, and only 2 Democrats voted to repeal an unpopular entitlement in the House (healthcare reform). Definitely will take another election cycle, at the least, before we see real progress, and when it happens it will probably cost the Republicans quite a bit politically.

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Gold Member
What's amusing is that it doesn't go nearly far enough, and still doesn't have a snowballs chance in hell of passing the Senate.
Maybe not. Many Senate Democrats are up for election in '12, and even now the Senate only needs four Democratic votes. As we were all educated in the health care debate, only 51 votes are needed for 'reconciliation' of budget matters.

Defense is a pittance and frankly doesn't need to be cut;
$782B (2009), more than the rest of the entire world combined, seven times China, and the largest item in the budget is a pittance? it exists as an issue only for the left to attack Republican fiscal bona fides. The Democrats largess over the past 4 years was focused almost in whole on non-defense discretionary, and this is where most of the cuts should come from. Er, partially agree. The increase in civilian salaries and numbers also applied to the Defense Department. Also, Democratic congress persons suddenly become defense hawks when it comes to keeping defense programs in their districts. The Boeing tanker program is a good example. Washington state's senators Cantwell and Murray would vote to invade Vancouver if they thought they it would guarantee some more Boeing military sales. I agree with Gates that the size of the armed forces needs to be scaled back as we wind down our ongoing commitments in Iraq and Afghanistan, but programs should be protected. It's purely a function of prestige: the threat of the American military is sufficient to keep the world stable. A rising China threatens that stability. Cutting defense spending now would aggravate the problem. I don't care to pay the federal government for prestige. Let the Europeans pay for some. One lesson from 911 is that spending a lot money on defense doesn't guarantee security. For that matter spending a lot of money on anything doesn't guarantee it's success. See public education. What they really need to address are the entitlements. Agreed$782B (2009), more than the rest of the entire world combined, seven times China, and the largest item in the budget is a pittance?

Er, partially agree. The increase in civilian salaries and numbers also applied to the Defense Department. Also, Democratic congress persons suddenly become defense hawks when it comes to keeping defense programs in their districts. The Boeing tanker program is a good example. Washington state's senators Cantwell and Murray would vote to invade Vancouver if they thought they it would guarantee some more Boeing military sales.
There are savings to be had in defense and every other "sacred cow".

Gold Member
The lesson I take from this is that it's an unintended consequence of having most of the income taxes paid by the wealthiest Americans. They get a relatively large fraction of their income from stocks, either through dividends or capital gains. When the market performs well, the government gets more money. The downside of this is when the market crashes and the government wants to spend more, that's precisely when they are broke(est).
Sounds right.

Al68
This is not accurate.

Mandatory spending is so called because it is required by law. No matter what, the government must spend this money, unless the law is changed.

There is no such requirement for interest payments....
You say my post is not accurate, yet say nothing that explains how so. And you even say "unless the law is changed", which means "not mandatory" by a reasonable definition.

The obligation to pay interest on the debt can't be avoided with a change in law, because they are not owed simply because some law says so. That's a reasonable definition of mandatory.

Using the word "mandatory" to refer to entitlements but not debt obligations is absurd.

Gold Member
What they really need to address are the entitlements.
Agreed
Here's an opportunity. The current ACA health care law has large Medicare cuts that just went into effect - means testing premiums, cuts to hospitals, and the like. The Republicans should include the same ones, at a minimum, in their separate cuts package. Ex:

Kaiser Health Summary said:
Freeze the threshold for income-related Medicare Part B premiums for 2011 through 2019, and reduce the Medicare Part D premium subsidy for those with incomes above $85,000/individual and$170,000/couple. (Effective January 1, 2011)

I don't know the savings figures for these actions, but anything that touches Medicare is worth billions. Political cost should be low too.

How will freezing the threshold for income-related Medicare Part B premiums for people above $85,000 help with the deficit? The percentage of people paying extra premiums MIGHT be fewer than the number of people receiving Part B subsidies. I'll try to find some stats. Gold Member How will freezing the threshold for income-related Medicare Part B premiums for people above$85,000 help with the deficit? The percentage of people paying extra premiums MIGHT be fewer than the number of people receiving Part B subsidies. I'll try to find some stats.
I'm focused on this phrase: "reduce the Medicare Part D premium subsidy". That is cut in spending, though I don't know how much.

I'm focused on this phrase: "reduce the Medicare Part D premium subsidy". That is cut in spending, though I don't know how much.
I'll try to find a breakdown. The last I looked, the average cost of an MAPD was $849.50 per month - about$10,000 per year. My guess is the PDP component is $50 to$100 per month of the total.

Staff Emeritus
2019 Award
Here's an opportunity. The current ACA health care law has large Medicare cuts that just went into effect - means testing premiums, cuts to hospitals, and the like. The Republicans should include the same ones, at a minimum, in their separate cuts package.
If only it were so easy.

According to the http://articles.chicagotribune.com/...icare-formula-medicare-and-medicaid-services", Medicare pays $56 for a basic office visit that may last up to 15 minutes. Blue Cross pays$65 for the same visit, Cigna pays $75 and the sticker price is$95 for uninsured patients.

Without the "doc fix", that $56 becomes 23% smaller, or$43. The cost-cutting plan essentially says that the government will only pay less than half-price. A predictable consequence of this is that some doctors will stop taking Medicare/Medicaid patients. If the only negotiation allowed is "take it or leave it", some doctors will choose "leave it".

Or have the choice forced upon them. http://www.cms.gov/ActuarialStudies/Downloads/S_PPACA_2010-01-08.pdf", "roughly 20 percent of Part A providers would become unprofitable within the 10-year projection period".

Congress needs to understand that if they pay less, they will get less.

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talk2glenn
You say my post is not accurate, yet say nothing that explains how so. And you even say "unless the law is changed", which means "not mandatory" by a reasonable definition.
I won't address this sillyness further, except to say that in the real world (outside of an undergraduate philosophy classroom) there are rules, and those rules must be followed. Amongst those rules is that the United States Government must obey the law. It is not reasonable for you or it to say, "well, the law might change, therefore its not mandatory".

Would you argue that paying taxes and not murdering your neighbor are not "mandatory" behaviors because, gosh, the law might change? Of course not. It is no more reasonable in this case.

Mandatory expenses, by definition, refer to expenses which are required by law and not discretionary. This is not something I made up - it is accepted prose in every discussion about differentiable categories of government spending by reasonable people. Further, the original question was what categories of expenses would have to come first, under the law. The answer is mandatory programs, like entitlements, with the leftover funds going to discretionary programs, like interest payments (whether you agree with this order or not is irrelevant to the point).

$782B (2009), more than the rest of the entire world combined, seven times China, and the largest item in the budget is a pittance? Keep in mind that the DOD regards China's actual defense expenditures to be about double the published figures, and that China (unlike the United States) has relatively tiny operational and maintenance costs. A large chunk of American payments go to personnel costs, followed by procurement and maintenance costs on existing equipment. The leftover goes to development and procurement of new weapons systems, and isn't all that much. From Wikipedia: Components Funding Change, 2009 to 2010 Operations and maintenance$283.3 billion +4.2%
Military Personnel $154.2 billion +5.0% Procurement$140.1 billion −1.8%
Research, Development, Testing & Evaluation $79.1 billion +1.3% Military Construction$23.9 billion +19.0%
Family Housing $3.1 billion −20.2% Total Spending$685.1 billion +3.0%

Put that into perspective vis a vis China's true budgetary outlays of approximately $160B, a significantly larger chunk of which goes to developing and procuring new weapons systems relative to the United States, and you're suddenly looking at a better relative picture. Again according to the DOD, China is spending about 50% of its budget on procurement, and 15% on R&D - much higher ratios than in the United States. Cut some of those operational and personnel costs, I agree, but these are much harder to go after politically than, say, a new fighter plane. We are in real danger of losing our generational lead on the Chinese. We may outnumber them in number of units and quality of operators, but as a matter of international prestige, the damage is in Chinese technical parity regardless of practical parity. The loss in clout to the Chinese will damage our ability to get what we want on the international stage (Iran, N. Korea, and Taiwan, for starters); this is the nature of real politik. I don't know the savings figures for these actions, but anything that touches Medicare is worth billions. Political cost should be low too. http://crfb.org/blogs/updated-health-care-charts See there for the numbers. Specifically, the new Medicare taxes are projected to raise$54B in revenue, while the cuts to Medicare are projected to save $544B. The trouble is, outside the new payroll tax and the cuts to Medicare Advantage (which is an example of a program within Medicare we should be putting greater emphasis on, not cutting), they are all hypothetical and promised cost reductions based on promises of Congressional and bureaucratic action that may or may not arise but are independent of the Affordable Care Act. The doc fix, which Vanadium talks about, is a great example of this. The point being, the Act itself doesn't cut much of anything. Congress just instructed CBO to consider separate government cutting action when scoring the budgetary impacts of ACA. Repeal the Act, and implement the cuts anyway (where reasonable and prudent), and we've got the savings minus the cost of this massive new entitlement. Al68 I won't address this sillyness further, except to say that in the real world (outside of an undergraduate philosophy classroom) there are rules, and those rules must be followed. Amongst those rules is that the United States Government must obey the law. You're aware that the situation we're specifically referring to is one in which paying entitlements would violate, not uphold, the (debt ceiling) law? The law as a whole requires that entitlements be paid only up to the debt ceiling limit. Paying the interest first only results in reducing the amount that can be legally spent on entitlements without violating the debt ceiling law. Paying the interest first doesn't itself violate any law. In fact, paying interest on the debt when due without assurance of the future ability to pay entitlements (because of debt limit) is routine. Last edited by a moderator: Vanadium 50 Staff Emeritus Science Advisor Education Advisor 2019 Award Amongst those rules is that the United States Government must obey the law. Yes, but Congress makes the law. The legal theory is that a new law that is inconsistent with an old law supersedes it. Gold Member If only it were so easy. According to the http://articles.chicagotribune.com/...icare-formula-medicare-and-medicaid-services", Medicare pays$56 for a basic office visit that may last up to 15 minutes. Blue Cross pays $65 for the same visit, Cigna pays$75 and the sticker price is $95 for uninsured patients. Without the "doc fix", that$56 becomes 23% smaller, or \$43. The cost-cutting plan essentially says that the government will only pay less than half-price. A predictable consequence of this is that some doctors will stop taking Medicare/Medicaid patients. If the only negotiation allowed is "take it or leave it", some doctors will choose "leave it".

Or have the choice forced upon them. http://www.cms.gov/ActuarialStudies/Downloads/S_PPACA_2010-01-08.pdf", "roughly 20 percent of Part A providers would become unprofitable within the 10-year projection period".

Congress needs to understand that if they pay less, they will get less.
The means test I referred to is not the doc fix; they're two different things and possible sources of cuts. Now that the ACA has already said that it will at some point do means testing, the Republicans have the political cover to go ahead and do it on their own.

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