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J.P.'s moment of common sense - Debt limit

August 6, 2011

[This is the second of my weekly five-minute oratorial expositions on Broad View, KBZZ 1270 AM Reno...]

Golly gee willickers, America, they managed to raise the federal government's debt ceiling this week. Isnít that peachy?

Raising the debt ceiling may or may not be a good thing in your opinion, depending on which coven of politicians you choose to believe and whether you think another two trillion dollars of debt piled on your grandchildren's backs is a good idea.

Me, Iím pretty sure itís a bad idea. And Iím angry about it.

The politicians did their best to scare people into liking this convoluted deal with a series of lies that would shame a two-dollar whore, but most of us didnít buy into Washingtonís scam. Not this time. Polls taken since Tuesday show that Americans do not approve... they donít approve of the debt limit increase, they donít approve of Congress, and they donít approve of the president.

Refreshing to see us all agreeing for a change, isnít it?

A quick review of lies used over the last few weeks starts with the biggest one, the one thatís already collapsed in disgrace: they said if we didnít raise the debt limit, the nationís credit rating would be lowered. Well, in case you havenít heard, at about five oíclock yesterday Standard & Poorís lowered our credit rating. Thatís right, as of right now the United States of America is no longer considered the best credit risk.

Debt limit raised on Tuesday, credit rating lowered on Friday. Thatís a lie that barely lasted three days!

The lower credit rating isnít a surprise to anybody with a lick of common sense. Maybe you were confused by the rhetoric and the constant repetition by TV talking heads and the smooth assurance of all those important people in Washington wearing their expensive suits and flashing their used-car-salesmen smiles, but come on, people, did you really think the credit rating could be helped by diving deeper into debt? Really?

Economics isnít complicated. Donít let Ďem fool you. Operating the countryís checkbook is no different fundamentally than operating your own checkbook. Have you ever wanted to buy a house and needed to convince a banker that you could afford the payment? Did you run down to the nearest Cadillac dealer and lease a new Escalade to help your case?

Of course not! But thatís what our Republican House and Democrat Senate, after pooling their collective wisdom and discussing the matter for weeks, decided to do.

Didnít work. The lie that gave the credit rating lie its legs was the suggestion that failure to raise the debt limit would cause the U.S. to default on its debt obligations. That was never true, not even a little bit! The nonsense about default was repeated in headlines and news broadcasts to the point of nausea Ė at least I was nauseous Ė to the point where the politicians and news media were using the word ďdefaultĒ as an ersatz nickname for the debt limit issue, even though this never had anything to do with default.

Once again, this isnít complicated stuff. Leaving the debt limit where it was didnít mean the old debt couldnít be serviced. It simply meant the government couldnít borrow more money. Call me crazy, but I like the sound of that. There was enough money coming in to make interest payments, and as for the rest of the governmentís expenses, well, by golly, theyíd have to prioritize and decide what they can afford. What a revolutionary thought!

Maybe George Soros wouldnít get his two billion dollars to drill for oil in Brazil. Wouldnít make me cry.

Another lie, this one coming directly from the mouth of our president, was that August social security checks might not go out if the debt limit wasnít raised. He said it to CBS News on July 12, in the middle of the debt limit debates:
ďI cannot guarantee that those checks go out on August 3 if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it.Ē
This is a lie on two different levels. Number one, thereís enough revenue coming in to pay for Social Security, interest on debt, Medicare, and essential defense, even if the government canít borrow more money. One would think the president would know that, so itís hard to excuse his statement. But thatís not even the biggest problem with what he said...

Remember, Social Security has a unique status in the federal budget. Payments donít come from general funds. The paycheck deductions stolen from working Americans since 1935 sit in four trust funds. Those four trust funds are managed by a Board of Trustees which, unfortunately, lends the money to the general fund as fast as it comes in. So we all know there isnít really money sitting there, the whole thing basically boils down to a Bernie Madoff-like Ponzi scheme.

But... even though there isnít actual money in the trust funds, the trusts do have Treasury Bonds sitting there as IOUs from the federal government, and Ė hereís the kicker Ė those IOUs are considered part of the overall debt just like regular bonds. When the debt ceiling stood at $14.34 trillion dollars, before they raised it Tuesday, approximately two and half trillion of that amount was owed to the Social Security trust funds.

Iíll say it one more time: economics isnít complicated. If President Obama wants to send out Social Security checks, he doesnít need to raise the debt limit one single penny, because trading trust fund IOUs for regular Treasury debt to raise cash leaves the total amount of government debt exactly the same.

The president was lying to you, the Treasury Secretary's been lying to you, congresscritters from both political parties were lying to you, and most of the news media's been lying to you. But Iím not lying to you. Iím just using common sense to figure out whatís really happening to our country.

And it isnít pretty.

"It is an affront to treat falsehood with complaisance." Ė Thomas Paine


From Reno, Nevada, USA       



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