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Hold onto your coins, penny pickers! This time we just might default.

http://www.sacbee.com/2011/07/01/374130 ... e-for.html

Treasury confirms deadline for raising debt limit

By CHRISTOPHER S. RUGABER
AP Economics Writer
Published: Friday, Jul. 1, 2011 - 7:40 am
Last Modified: Friday, Jul. 1, 2011 - 11:36 am

WASHINGTON -- Congress has one month to raise the nation's borrowing limit or the government will default on its debt, the Treasury Department said Friday.

Treasury officials confirmed the Aug. 2 deadline in a monthly update that assesses the nation's borrowing situation. The United States reached the $14.3 trillion limit in May. Higher revenue and accounting maneuvers have allowed the government to keep paying its bills in the interim.

Treasury Secretary Timothy Geithner urged Congress to raise the limit and "avoid the catastrophic economic and market consequences of a default crisis."

President Barack Obama and Congressional Republicans are engaged in tough negotiations over resolving the issue. Republicans are demanding deep spending cuts as a condition of increasing the limit. But Republicans will not support tax increases, which Democrats say must be part of any deal.

A Democratic official said Thursday that the real deadline for reaching agreement is mid-July. That's because congressional leaders need a week or two to finalize the details and line up votes.

The U.S. government will continue to take in revenue after the Aug. 2 deadline passes. But it won't be enough to meet its obligations. The government borrows 40 cents for every dollar that it spends and that adds up to an average deficit of about $125 billion each month, the Treasury says.

In May, the government took in $175 billion in revenue and spent almost $233 billion.

The government faces several payments in August that will necessitate a higher borrowing limit, Treasury officials say. About $23 billion in Social Security payments must be made on Aug. 3. And a $30 billion interest payment is due Aug. 15.

A default would likely raise interest rates and threaten the economic recovery, analysts say. But some congressional Republicans are skeptical of such scenarios. Administration officials worry that it could take a financial calamity before Congress acts.

The Senate has canceled its planned July Fourth recess and will work on reaching a deal next week. But partisan divisions remain wide.

Obama has said that Republican and Democratic negotiators have found more than $1 trillion in potential spending cuts over the coming decade.

The White House is also proposing about $400 billion in higher tax revenues. Republicans want no tax increases and deeper spending cuts than Democrats have proposed. The overall goal would be to cut at least $2 trillion over 10 years.

An increase in the borrowing limit of about $2.4 trillion would carry the government through the end of 2012. That would enable Congress to avoid another vote on the issue until after the presidential election.

Read more: http://www.sacbee.com/2011/07/01/374130 ... z1R2YJ8Goy

Naw. They won't. At least there will be a story of why they haven't. Actually they already have, as they've been spending money that was supposed to go into other committed funds and not funding the other committments (which they've been doing for years anyway), so they've already technically defaulted, but they've created this fiction that they haven't.

It’s funny how removal of a tax “break subsidy" in one article turns into a tax “increase” in another. It just depends on who the author is and what his or her political views are. Either way, elected officials need to make some tough decisions soon that may not set well with their constituents to ease the budget crisis......or else.

I listened to the Housing Sec for the Administration this morning on a national talk show say:
1) For the past 30 months the housing prices have plummeted.
2) Since Obama took over, the housing prices have essentially stabilized.

I think the president has been in office about 30 months.

Even if our "leaders" do not reach an agreement on raising the debt limit, it will not automatically result in a default. Our tax revenues are still sufficient to service the debt - there just won't be a whole lot of money left over for anything else.

To me, there is a far greater danger of reaching a business as usual "compromise" that allows the borrowing machine to continue for another year or two. I can't shake the fear that the United States is going to go belly up exactly as the Soviet Union went belly up if we continue very much longer on our current path. It would be much better if the debt limit was NEVER increased, and we learned how to live within our means today, than to follow the Soviet Union into oblivion in a year or two.

"To me, there is a far greater danger of reaching a business as usual "compromise" that allows the borrowing machine to continue for another year or two."

I am afraid this is exactly going to happen. I contacted my newly elected congressman and implored him not to vote to raise the ceiling. My fear is that this is going to be pushed into next year and, with the election coming up, the decision will be further delayed until 2013.

Another 3 trillion dollars (in added debt) later...

If they default what will happen with mortgages etc? What will happen in the banking institutions?


Is this the case where we have no choice but to go into competing currencies?

This is a pretty bad time for the united states.

Two scenarios come to mind:
soviet union (as above mentioned when they were at war with Afghanistan ironically)
Nazi Germany (when they waged wars on two fronts(ironically) and financially sank)

Mike wrote:Even if our "leaders" do not reach an agreement on raising the debt limit, it will not automatically result in a default. Our tax revenues are still sufficient to service the debt - there just won't be a whole lot of money left over for anything else.

To me, there is a far greater danger of reaching a business as usual "compromise" that allows the borrowing machine to continue for another year or two. I can't shake the fear that the United States is going to go belly up exactly as the Soviet Union went belly up if we continue very much longer on our current path. It would be much better if the debt limit was NEVER increased, and we learned how to live within our means today, than to follow the Soviet Union into oblivion in a year or two.

I actually talked to a Russian immigrant this weekend that lived through their financial demise. Pretty interesting stuff.