Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Raising U.S. Debt Ceiling Spells Economic Disaster

Interest-Rates / US Debt Apr 22, 2011 - 08:39 AM GMT

By: LewRockwell


Best Financial Markets Analysis ArticleJeff Scribner writes: Nero fiddled while Rome burned. The President and the Congress are playing political games while the national debt grows to out of control proportions. We should hold the government’s feet to the fire and force an end to spending using borrowed money. An opportunity to do this will arise in a month or so.

In April, almost seven months after the start of the fiscal year, Congress finally passed the FY 2011 Federal Budget, nominally $38 Billion (about one percent) less than the proposal by the President. Two things are significant here. The first is that this is the first budget for FY 2011. Congress has spent money from the beginning of FY 2011 (01 October 2010) until mid April by "continuing resolution" in the absence of any budget. The second important point is that the 2011 budget, with the aforementioned $38 Billion reduction, spends more money than was spent in 2010. It is still in deficit. It has been adding to the national debt all year through continuing resolution and will continue to add to the debt for the rest of the year via the budget that was finally passed.

The House of Representatives has also passed a "Budget Blueprint" prepared by Congressman Paul Ryan, Chairman of the House Budget Committee. If all spending and receipts outlined in this document are implemented by the House and Senate and are then signed by the president, spending will be reduced by about six trillion dollars and the deficit will be reduced by about four trillion dollars over ten years. Do you really believe that this will happen? Even if it does, the Federal Government will continue to run deficits and add to the national debt for the next ten years, albeit at a slower rate than the present.

What does this tell you about the difficulty in reining in the runaway spending that has become the habit of Congress? It tells me that something a lot more drastic has to be done to get a grip on Federal spending and to stop adding to the debt immediately.

It so happens that there are just about enough votes in the current House of Representatives to prevent an increase in the debt ceiling. If the debt ceiling is not increased, there will be bigger spending cuts in the 2011 budget and the 2012 budget and every budget after that because we are very close to the debt ceiling. If the debt ceiling is not increased, money cannot be spent that would raise the debt over that ceiling. Deficit spending would end immediately. Congress will be finally forced, at least for a little while, to allocate austerity rather than funding their favorite expenditure with borrowed money.

The voters could then decide whether to re-elect those who voted to increase the debt ceiling or those who tried to be responsible and voted not to. Some people are saying that failure to raise the debt ceiling will cause a catastrophe. If that happens, the voters can consider it. What if there is no catastrophe – just a lot less spending? The voters can consider that, too. Some big spenders are claiming that failure to increase the debt ceiling will cause a recession. We have managed to get into a recession and sustain it while adding to the debt every minute. Deficit spending has not prevented a recession. Moreover, there is reason to believe that not extending the debt limit will actually be good for the economy. Government spending will be curtailed. Some government services will also be curtailed. This provides fertile ground for more free enterprise solutions, more little companies, more employment in the private sector and more GDP growth. Why should we believe those who say increase the debt ceiling or suffer a recession?

Using the FY 2010 numbers above we can see that in order not to create more debt, Congress would have to hold spending, including debt service, to $2,162 Billion. Congress would have to cut $1,294 Billion from FY 2010 spending levels to do that. Where would you cut?

We can fund Social Security and Defense without borrowing. However, the first call on available funds would have to be servicing the current debt. We might have to change Medicare and Medicaid along the lines suggested by Paul Ryan and we would have to be very careful about everything else. Wouldn’t this be a good thing? Just think, after a few years, Congress might actually start to think about surplus budgets to pay down debt and gain spending flexibility from lower debt service costs.

Finally, since Congress will never cut spending enough to balance the budget, it is necessary to force that action via refusal to increase the debt limit. There is no time like the present to do this.

Jeff Scribner [send him mail] is President of ASI Enterprises, Inc., an investment bank serving small and medium sized businesses.

© 2011 Copyright Collin Moshman / - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


22 Apr 11, 15:54
sensible choices

Congress nor the president will do anything other than kick the can as far down the road as possible. Until we are on the precipice of disaster and there is a public outcry, nothing will be done other than to spend and borrow. Sadly, that time is fast approaching. There really isn't anything one can do about it any longer other than to prepare for yourself and your loved ones.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules