ObamaNomics: Tim Geithner Says the United States Is Insolvent, Will Default if Debt Limit Isn’t Increased…
How did we get to this point and, more importantly, how do we get out of it?
(Daily Bail) — The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury. Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt.
In his words:
- “Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States.”
He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.
After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations.
Suppose that you had a debt of $10,000 that required a payment of $500 in order to stave off your creditors’ seizing your assets. Suppose that you didn’t have the $500. One way out would be to borrow $500 from a new lender and use that $500 to pay off the old lenders. That buys you time. However, now you have debts of $10,500. You have to find ways of lowering this or else you will again be faced with an even worse situation.
You are approaching insolvency when you begin to run out of new lenders who are willing to add to your debt. The willing lenders dry up because they know that they have to get in line to get their promised payments while you continually seek out new borrowers, all the while making your situation worse and worse.
Knowing their precarious position, the new lenders are likely to demand rising default risk premiums.
That means they demand higher interest rates.
That means your cash payment obligations go up. That hastens your approach to insolvency. . . .
A few months back, Laurence Kotlikoff wrote that “The U.S. is bankrupt.” Using the government’s numbers properly labeled, he found that the U.S. fiscal gap, which is the difference between the present value of projected spending and revenues, is $202 trillion. An IMF study of the U.S. finances found that it would have to double taxes to close its fiscal gap. This is an impossibility. It would destroy the struggling economy.
Posted by ZIP on Friday, January 21, 2011, at 10:32 am | 
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I think i know how to free up a few trillion dollars.
REPEAL OBAMACARE!
He’s flat out lying. The only way the US would default is if we decided to pay (with our now limited resources) the salaries of those at the Department of Whatever, instead of interest on the debt.
All it means is that we can’t issue new debt. That we only have to spend, what we take in. It doesn’t mean we stop spending, and it especially doesn’t mean we stop spending on servicing the existing debt.
Rule #1. You know when leftist trash is lying, whenever their mouth is moving.
Here’s an idea that I’m sure has never occurred to them. STOP SPENDING!
If you’re broke, and can’t pay bills, how does raising the credit limit on the credit card help in the long run. That does nothing more than put one further into debt.
Sooooo, why do these ass-clown not ever think of cutting spending? How about sending these people to debt counseling or better yet, kick all their asses out of power and let’s return our country to the greatness it used to be.
This is a fucking game of Monopoly with these people, and they have tossed out the instructions and rules and are now just making shit up as they go along.
Cut Goverment spending. Stop paying for all obamas stupid pet projects that is bring America down.
Get rid of the Czars and EPA defund,defund,defund.
and put Turbo Timmy in a nice jail cell with cousin Ackmed.
Government not Goverment…..
Cut salaries and benefits of current government employees on all levels.
Cut back on the promises made to all those same people of what they will be getting when do they retire.
And even those currently retired.
Gut Obama’s benefits for his parties and for Moochelle. No more trips, vacations.
No more freebies for illegals.
Repeal Obamacare.
Cut the government workforce.
Get rid of the FCC, EPA, teachers’ unions, all the organizations getting paid by the government.
Shut down the U.N.
No more funding for other nations.
Stops the wars.
Quit sending jobs overseas like Obama is doing with Immelt and GM.
I’m just rambling but there are many places to cut.
And I believe Timmy wants us to switch over to the yuan instead of the dollar.
God help us.
If America falls, all other free nations fall.
Crazy people. We are a nation with crazy people who react and overreact over so many things. Geitner makes my skin crawl. But like it or not he is correct. But that said, its imperative that Congress take dramatic steps to cut spending so this does not happen again and as the debt reduces, they reduce the debt ceiling with it.
Yes, unfortunately I don’t think we can trust our U.S. Sec. of the Treasury, which is a sad state to be in. I think he said it to add the biggest possible impact in being sure the ceiling gets raised, and it gives Republicans the excuse they need to do it.
If we lost our jobs, we would truly have no income to pay our bills. If we ran up too much on our card, yet still had income, we would cut back on all needless items in our budget so we could pay off that card. The government is not without income. They simply do not want to cut back on their budget to pay the bills.
Well that’s a lie … There is plenty of tax money to cover the debt, just not as much as the commies want to pay their voters. You just need to make hard choices lil tax cheat Timmy.
So many so-called departments that need to go, pick them all and defund.
Wow, that was easy.
We can not leave these idiots to do what is right for America.
Bullshit. Reign in your spendthrift ways buckwheat. Enough of your lies.
It’s called CUT SPENDING and FINANCIAL RESPONSIBILITY. Increasing the debt ceiling only makes the current insolvency problem exponentially worse. But, maybe Goldman Sachs likes that scenario.
“Suppose that you had a debt of $10,000 that required a payment of $500 in order to stave off your creditors’ seizing your assets. Suppose that you didn’t have the $500. One way out would be to borrow $500 from a new lender and use that $500 to pay off the old lenders. ”
Gee…I’m not a Harvard grad but even I understand this. If you can’t pay the debt, file bankrupcty or get a part-time job to make that $500 payment and quit borrowing. It’s almost like they’re deliberately……nah…..no one would be that evil.
Thats a real nice thing to teach our kids timmy. If you max out oyour credit card just go get another to pay it off until its maxed and oh yeah just make minimum payments. I hope and pray this guy quits soon.
Definition of INSOLVENT. 1. a (1): unable to pay debts as they fall due in the usual course of business (2): having liabilities in excess of a reasonable market value of assets.
So you borrow MORE money to pay off your debts.
In accounting A=L+C assests = liability plus capitol.
You cannot increase your assests by increasing your liability.
It the old axiom robbing peter to pay paul.
This is not hard to comprehend and everyone suffers equally
1. immediate 25% across the board cuts in every govt agency, program, payout incl ss,mil,medicade,medicare,govt manpower in every office as well as immediate 25% cut in gov employ salaries, staffing, pensions, no exceptions no mercy.
2. another 1% cut per yr for 10 yrs across the board.
3. eliminate govt perks like vehs, drivers,etc except for pres,vp, everyone else drives themselves or pays out of pocket for their limos etc. (they are servants not kings) no more mil air travel, coach or private paid outta pocket.
3a. defund obomacare, repeal in toto,
3. immediately defund eliminate all govt subsidies to all programs like ethanol,farm,green wind, solar etc.
4. eliminate NEA,PBS,and defund private research grants and earmarks passed in the last 10 yrs.
5. pass 10% flat income tax, no deductions etc, and defund elim IRS, states collect tax send to fed
7. set corp tax rate at 15% flat
For starters, I’m justa dumb hillbilly and I’m sure there are other ideas to add.
Debt Limit: Another example of words that don’t mean what they sound like they should mean. How can it be a debt “limit” if you can arbitrarily raise it everytime you bump up against it without consequence?
Can I arbitrarily up my credit card limit if I bump up against it? No. I can call my credit card company and see if they will raise it for me. If I do that, they will look at my credit rating and payment history and make a determination if I am a good risk for an increased limit. If they think I am, they may raise it. If they think not they won’t.
Who makes this determination for the United States? No one. The congress just raises the “limit”. I submit that a “limit” that can be raised at will with no regard for constraining spending or ability to pay back the debt is not a limit at all, but rather an unlimited blank check, written by our elected officials on the backs of we, the public.
I for one am sick and tired of it.
OMG, another CRISIS!!!eleventy!!!
Haven’t you resigned yet Timmy?
“How did we get to this point” Answer: Immoral and Godless men kept getting elected by a nation that largely consists of people who view Government as a way to manipulate markets in their favor (for the short term) and to the disfavor of others. But these (for the most part) Immoral men do not respect the property rights of the Individual (this includes financial assets). They view this “property” as their property to do with as they please.
“how do we get out of it” Answer: Painfully, first of all, start with looking at which of your Elected Representatives voted for the Gramm-Leech-Bliley Act of 1999 (forget any other issues you think are important that they stand for, this Act was the BIGGY that caused the economic catastrophe) This is a good litmus test concerning your elected Reps. This is how they voted —> http://www.govtrack.us/congress/vote.xpd?vote=s1999-354
If your Representative voted for this Act, they have to go. More importantly, you have to find Elected Representatives who are financially accountable and responsible. This is where things can get really hard. Americans have changed in a bad way, ultimately the foundations for morality and accountability to God and others has deteriorated in America by in large.
I left this link out on how your reps voted on the Gramm-Leech-Bliley Act (this is for the House) – http://www.govtrack.us/congress/vote.xpd?vote=h1999-570
I was just thinking about Al Capone who in the mid 1930′s started a soup kitchen to “clean up his shady image”. http://www.u-s-history.com/pages/h1660.html
I am certain that there were a lot of people in Chicago who liked him and thought well of him for starting that soup kitchen. You know, it wouldn’t surprise me that there would have been people back in those days who would have voted Capone into some political office, maybe even President.
@Rodger
“as the debt reduces, they reduce the debt ceiling with it.”
What has this administration done to make anyone believe this is their intention?
@RJ
Pretty good list with a few exceptions – notably in item number one.
Are you really advocating immediately dumping about 500,000 people into unemployment? People with lives, families, just like you?
In whatever business you are in, are YOU willing to take an immediate 25% cut plus additional 1% cut over 10 years? How is this going to affect the way you take care of you and your loved ones?
A more rational approach is to freeze pay over a period 5 years or so. Reduce staff through attrition and early retirement. Eliminate automatic in grade step increases – make them merit based.
These are, in fact, some of the steps the House is advocating to reduce government spending.
Caveat: I am not a civilian government emplyee.
What do you do when you wake up one day and they don’t take those printed Andrew Jacksons at the grocery store any more???? or the gas station???????
Better have something else to barter with…..either that, a weapon bigger than the one the merchant is carrying………
There is no way for the US to get out of the hole it has dug itself into. Get ready for the down turn into the second leg of the Depression after the economy runs out of gas later this year.
I was thinking… who would benefit from our nation being “bankrupt”? Would Fearless Leader declare “Marshall Law”? No doubt all we would hear is how Capitalism is a “failed system” and “Let’s try State Capitalism!! (ie Communism).
Yeah, whatever. No new taxes. No tax rate increases. And start hiring engineers used to working within real-world constraints instead of economists who would assume a can opener to get at the beans.
Yeah, as someone has already said, you aren’t insolvent unless you can’t meet the payroll (pay for day-to-day salaries, services and goods) and/or pay the interest on your debt. Geithner is an idiot who couldn’t balance his checkbook yet is atypical of all of Obamas minions.