So NewsBusters thinks Reuters is “spinning” the US Debt Ceiling story by not pointing out that the US Treasury will have the ~$20 Billion to pay the interest on the debt in August. With $175 billion coming in, $20 billion for interest and $49 billion for Social Security, no problem!
Now what NewsBusters left out (and/or doesn’t understand)
- The $49 billion for social security is due on August 2nd, not August 30th. The monthly revenue comes in spread out during the month.
- The Treasury doesn’t have to just pay the interest, they have to deal with the existing debt that matures each month, especially short term Treasury Bills. T-Bills are sold at a discount without periodic interest payments. As the T-Bill matures, the face value is due, and when they refund the existing T-Bill, that will increase the face value of the existing debt which they can’t do.
- There is a lot more to the Federal government than interest and Social Security. Most of it is legally required by contract, not discretionary. Taking the numbers from my prior research and dividing by 12
– Medicare – $40 billion ($66 billion left)
– Peacetime military – $50 billion ($16 billion left)
– War in Iraq/Afghanistan – $10 billion ($6 billion left)
– Veteran’s Pensions – $5 billion ($1 billion left)
– VA hospitals – $5 billion – oops, sorry veterans (-4 billion)
– Pell Grants – $3 billion – sorry kids – (-7 billion)
– SSI – $4 billion payments to very poor disabled or retirees (-11 billion)
– Medicaid – $25 billion – you states are on your own (-$36 billion)
– Interest on trust funds – $15 billion – no more IOUs in the lock box (-$51 billion)
– WIC / Food Stamps / School lunches – $8 billion – (-59 billion)
– Section 8 housing – $1.3 billion
– Unemployment insurance – $8 billion (+loans to bankrupt state funds)Then there is matter if the ~2 million non-military government employees getting a paycheck. If you lay them off, then they go on unemployment, so you still are paying them. Who will run the prisons, the TSA, the parks, the FBI, CIA, NSA, Coast Guard, Border Patrol, INS, Customs, NOAA/NWS, USGS (Earthquake/Tsunami warnings), Secret Service, Railroad safety, mine safety, nuclear safety, food safety, disease prevention, Army Corps of Engineers, FEMA, Federal courts and Attorney offices. If you pay some of them, then you can’t pay for some of the above list. You don’t pay hospitals for Medicare, they stop taking patients and/or go out of business. Don’t make required Section 8 housing payments, the landlord kicks out the tenants onto the street.
- The US government doesn’t work on a monthly budget – around April 2012, there will be a large outflow for tax refunds – if there is no money in the treasury, there is no money for tax refunds
- 30 year bonds mature in groups every 3 months and have to be paid off or refunded with new debt – August is one of those months http://www.treasurydirect.gov/indiv/research/indepth/tbonds/res_tbond_rates.htm
It’s a huge problem with no obvious solution. The biggest “fix” is to increase revenue without changing taxes – meaning get people off the unemployment roles and going back to work (but not at jobs being paid by the government). But even that will take several years to catch up, and we don’t have years.
There are other options that ought to be on the table for serious discussion- such as import tariffs and sale of government lands, buildings, and equipment to pay off the debt principal. But the free-traders and big government socialists will have a hard time compromising on those solutions.
Would default be so bad? If Communist China learns the hard way that investing in the U.S. was a really bad idea, and U.S. citizens learn that investing in a spendthrift national government causes them to lose their savings, exactly how is the U.S. hurt by that long term?
What you say is right, to a point. Asset sales or selling oil/gas leases would be a non-tax way to increase revenues.. but the problem is now way too big for that.
The US Government owns 245 million acres of land that BLM administers. Let’s say that land was sold for $1000 per acre (a lot of the land is in the desert or only usable for cattle grazing). That would raise $245 billion, which would maybe keep things afloat for 3 months.
But we don’t have years to do that, even if we wanted to. I heard the statistic the other day that only 54% of adult americans able to work are currently working (that’s me!). We need to be rounded up and taken to labor camps to be reeducated about the virtues of sharing.