Jul 16, 2011

Republicans Coming To Their Senses?

An increase in the debt ceiling is needed to keep the August Social Security checks from being delayed or reduced.  From the Los Angeles Times:
Republican leaders in the House have begun to prepare their troops for politically painful votes to raise the nation's debt limit, offering warnings and concessions to move the hard-line majority toward a compromise that would avert a federal default. ...
At a closed-door meeting Friday morning, GOP leaders turned to their most trusted budget expert, Rep. Paul D. Ryan of Wisconsin, to explain to rank-and-file members what many others have come to understand: A fiscal meltdown could occur if Congress fails to raise the debt ceiling.
House Speaker John A. Boehner of Ohio underscored the point to dispel the notion that failure to allow more borrowing is an option.

"He said if we pass Aug. 2, it would be like 'Star Wars,'" said Rep.
Scott DesJarlais, a freshman from Tennessee. "I don't think the people who are railing against raising the debt ceiling fully understand that."

The warnings appeared to have softened the views of at least some House members who, until now, were inclined to dismiss statements by administration officials, business leaders and outside economists that the economic impact would be dire if the federal government were suddenly unable to pay its bills.

Freshman Rep.
Steve Womack (R-Ark.) said the presentation about skyrocketing interest rates that could result from downgraded bond ratings was "sobering."


Anonymous said...

Now why exactly is this happening? The party line has been that intake to the trust fund will exceed expenditures for another twenty years or so. Guess that's not really the case. So Social Security is currently spending more money to pay current benefits than its taking in. Right? Everyone agrees on that?
If not, why the threat to not send out Social Security checks on August 3rd? Just politics? Using Social Security to make political hay for the President?

Don Levit said...

As of last year, the trust fund was paying out more in benefits than it received in income (excluding interest).
Why not use the interest to continue paying beneficiaries?
Well, the interest credited to the fund was Treasury securities, not cash.
Those treasury securities were loaned to the Treasury. Pretty neat, huh?
Debt was borrowed to create more debt.
Wow, the government (not only God) can create something out of nothing!
To liquidate the interest to pay beneficiaries takes cash, general revenues.
With a deficit, there are no general revenues available.
Don Levit

Anonymous said...

Which is more frightening? Some members of the GOP caucus needed to be schooled on the effects of default or that a sizable number knew the effects and were willing to put the country through it for political purposes?