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No one was seriously suggesting that we never pay our debts ever again, There really was two things proposed: One was too not raise the debt ceiling and use SS
by cop359 15y ago
No one was seriously suggesting that we never pay our debts ever again, There really was two things proposed:
One was too not raise the debt ceiling and use SS and Medicare funds to pay off the debt;
The other was to default but just for a short while so as to provide more pressure on the Democrats. If we defaulted for say a month; it would hurt a minuscule fraction of the debt holders. If it actually would hurt debt holders China would be pointing nukes at us.
So the risk that a lender would not get his money back is incredibly small. As for inflating the money away. They could come to the conclusion that that would hurt the economy more then it is worth and default on all the debt collective (like of like declaring bankruptcy). This is a possibility in the distant future.
- fauigerzigerk 15y agoI believe that the US government has an obligation under current law to make payments to Medicare and SS recipients. It's not a voluntary donation. I don't think the government can simply stop making those payments tomorrow without violating current law. You see, it is this entire attitude of political parties negotiating in the 11th hour about whether or not to honor this or that obligation that isn't exactly encouraging. This is just not a responsible way to deal with political differences over government spending. I also doubt the quality of the solutions coming out of that kind of process.
- orijing 15y agoHow can that be? Suppose our debt limit were hit. Law says we can't issue more debt; another law says we must pay social security. Until more taxes start rolling in, we'd be breaking one law or the other.
- fauigerzigerk 15y agoThat's a very good question. In my view, it's simply incompetent, populist, law making. How can it be that a country can even have such a rule on the statute books without getting downgraded on the spot?
- mkr-hn 15y agoBecause it's been raised with minimal problems for the law's near century of existence.
- fauigerzigerk 15y agoGood point. I didn't know the rule was that old.
- yummyfajitas 15y agoNo, SS can be paid without affecting the debt ceiling. "By law the Treasury is bound to redeem any bonds presented to it by the Social Security Administration. And when the Treasury does, total government debt subject to the debt limit falls by the amount of the redemption—thus freeing up the Treasury's ability to issue new bonds equal in amount to the redeemed Trust Fund bonds." http://online.wsj.com/article/SB10001424053111903554904576458294273264416.html http://online.wsj.com/article/SB1000142405311190355490457645...
- njharman 15y agoUm, you do realize the US government makes (and changes) those laws you seem to value so highly.
- fauigerzigerk 15y agoWhat makes you think I do not realize that? It's exactly why I took (small) pains to say "current law" and not just "law". Under the rule of law, the government has to honor its own laws even though they can change them. They cannot make a law that incurs costs, take on debt, and then stop paying down their debt just because they could potentially change the law that caused those bills to run up in the first place.
- pessimizer 15y agoSS is self-funding, and is one of the creditors owed as a part of the debt, because it holds treasuries. To suggest that we use SS funds to avoid default is to suggest that we default to avoid default.