The Sanity Ceiling

In a recent Gallup survey, 47% of Americans said they don't want the debt ceiling raised.

In separate -- but I think highly correlated -- surveys, nearly half of Americans lacked basic knowledge about interest rates, and 51% don't know what a credit freeze is. 

Regardless of how you feel about the debt ceiling, here's what UBS senior economist Drew Matus thinks could happen if it's not raised:

The main impact on markets would come from sharply reduced liquidity in the U.S. Treasury market, as financial firms' procedures and systems would be tested by the world's largest debt market being in default. Given the existing legal contracts, trading agreements, and trading systems with which firms operate, could U.S. Treasurys be held or purchased or used as collateral? The aftermath of the failure of Lehman Brothers should be a reminder that the financial system's "plumbing" matters. All the legal commitments and limitations in a complex financial system mean a shock from an event that is viewed as inconceivable -- such as a U.S. Treasury default -- can cause the system to stall. The impact of a U.S. Treasury default could make us nostalgic for the market conditions that existed immediately after the failure of Lehman Brothers.

I don't know how anyone can argue that not raising the debt ceiling and letting the Treasury default would be anything but calamitous. The closest I've seen comes from hedge fund manager Stanley Druckenmiller, who argued that missing a few interest payments is preferable to not getting federal spending under control. 

But this would only be true for long-term debt holders whose only immediate risk is interest payments. For short-term bond holders who might face a delay in principal repayment, a Treasury default could sap liquidity and push the financial system into a cascade of default. 

If I owe you $100, and I plan on getting that $100 from the proceeds of Treasury securities that are about to mature, and suddenly the government delays repaying those securities, then I'm defaulting on you. That's when things start to spiral. 

What killed Lehman, after all, wasn't its long-term holdings. It was the loss of its short-term financing. Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , and JPMorgan Chase (NYSE: JPM  ) -- as well as untold numbers of nonfinancial companies -- own tens of billions worth of Treasuries. What happens when these securities suddenly default? I don't want to find out.

But let's focus on the issue at hand: the deficit. You can't blame people for not wanting the debt ceiling raised amid trillion-dollar deficits. But understanding the cause of those deficits is vital. David Leonhardt of The New York Times put it best:

Eventually, the country will have to confront the deficit we have, rather than the deficit we imagine. The one we imagine is a deficit caused by waste, fraud, abuse, foreign aid, oil industry subsidies and vague out-of-control spending. The one we have is caused by the world's highest health costs (by far), the world's largest military (by far), a Social Security program built when most people died by 70 -- and to pay for it all, the lowest tax rates in decades. 

Here's what this looks like in terms of spending:

Total Federal Outlays (in billions)

Segment

2011

Percent of Total

Defense $768 20%
Social Security $748 20%
Income security* $623 16%
Medicare $494 13%
Health (Medicaid) $388 10%
Net interest $207 5%
Veterans benefits $141 4%
Education/training $115 3%
Transportation $95 2%
Justice $61 2%
International affairs $55 1%
Natural resources/environment $49 1%
Science/space/technology $33 1%
General government $32 1%
Energy $28 1%
Community/regional development $26 1%
Agriculture $25 1%
Commerce and housing $17 <1%
Undistributed offsetting receipts ($90) (2%)
Total $3.8 trillion 100%

Source: Office of Management and Budget. *Unemployment benefits, food stamps, etc.

And taxes:

Source: Office of Management and Budget.

What next
To extend Leonhardt's point, the biggest hurdle to raising the debt ceiling may be overcoming misconceptions about the deficit. For example, the hugely powerful AARP just released an ad claiming:

If Congress really wants to balance the budget, they could stop spending our money on things like a cotton institute in Brazil; poetry at zoos, and treadmills for shrimp. But instead of cutting waste or closing tax loopholes, next month Congress could make a deal to cut Medicare -- even Social Security.

But that's deeply untrue. You can't balance the budget simply by cutting waste in discretionary spending. Even if all discretionary spending were eliminated, the deficit would still be several hundred billion dollars a year. The only way to balance the budget on the spending side of the ledger is to focus on the top few lines of the table above. That means big cuts to defense, Medicare, Social Security, and unemployment benefits -- all of which are massively popular and political dynamite to even mention.

Then there are taxes, which are more prone to hysteria and controversy than any kind of spending. There are really two groups in the tax debate. One says current taxes are crushingly high. The other says they're the lowest in modern history. It's possible for both to be right, but the chasm of disagreement on taxes is so wide that one has to think major tax compromises are off the table in the debt-ceiling debate. The dispute right now isn't even over what's right. It's over what counts as a fact. That's when you get nowhere.

By Aug. 2, the day the Treasury will default without raising the debt ceiling, one of four things will likely have happened. The first is a short-term extension of the debt ceiling without any changes to spending or taxes -- the kick-the-can-down-the-road solution. Second is huge cuts to social programs that curtail the deficit but are so unpopular that they likely get overturned. Third is a compromise of modest spending cuts and tax hikes to make the deficit more manageable over the next decade. Fourth is default.

What do you think should happen?

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel owns B of A preferred. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of JPMorgan Chase. The Fool owns shares of and has opened a short position on Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 28, 2011, at 4:40 PM, islandertrader07 wrote:

    Good article. It should be option 2. Unfortunately, its going to be option 1 they choose

  • Report this Comment On June 28, 2011, at 5:03 PM, fantoozler wrote:

    I have a quibble: Social Security does not contribute to the deficit. To quote from Dean Baker at cepr.net,

    --------

    Social Security is prohibited from spending any money beyond what it has in its trust fund. This means that it cannot lawfully contribute to the federal budget deficit, since every penny that it pays out must have come from taxes raised through the program or the interest garnered from the bonds held by the trust fund.

    The one exception to this rule is the roughly $120 billion being credited to the Trust Fund in 2011 to offset the lost payroll tax revenue due to the 2 percentage point reduction in the payroll tax. Apart from this special 1-year exception approved by Congress at the end of last year, Social Security is literally prohibited under the law from adding to the deficit.

    -------

  • Report this Comment On June 28, 2011, at 5:35 PM, billfed1 wrote:

    Morgan, Your experience with Citigroup and their credit card auto-pay discontinuance is a sign of how this bank has fallen apart. In today's WSJ (6/28) page C1 is an article headlined "Rich? Have we got the card for you" which talks about how issuers (including specifically Citigroup) :"are scrambleing to take customers away from one another". Sounds more like C is trying to get rid of them...and probably will. A 39+ it's 40% of book but I believe there are plenty of problems ahead and that there will be more losses. It's probably a good short.

    Billfed

  • Report this Comment On June 28, 2011, at 6:21 PM, xetn wrote:

    What a load of crap! Just cut spending and the problem is solved. Besides, the treasury collects enough to pay interest on the debt.

    What caused the deficit in the first place is out-of-hand spending in an Keynesian attempt to "spend our way out of the credit collapse of 2008, caused by too much spending in the first place.

    It is obvious to many that spending huge amounts in an attempt to correct the result of huge amounts of spending is completely stupid.

  • Report this Comment On June 28, 2011, at 6:28 PM, xetn wrote:
  • Report this Comment On June 28, 2011, at 6:28 PM, TMFMMTInvestor wrote:

    The President/Treasury have a trump card they can use at the last minute, if necessary: debt ceilings are statutory law, which are overruled by constitutional law--specifically, section 4 of the Fourteenth Amendment to the Constitution, which has been interpreted by the SCOTUS (see Perry v. US) to affirm the sacrosanct nature of public obligations entered into by the United States government. Thus, if the fiscal conservatives draw too hard a line, Obama could simply side-step the discussions and instruct the Treasury dept to issue debt securities to the markets (or primary dealers directly). Of course, this would require some political cajones, but it's a possible outcome.

  • Report this Comment On June 28, 2011, at 7:08 PM, gs8212 wrote:

    One important point missed is that the plan to not raise the ceiling in the short-term would not result in defaulting on short-term debt as the author suggests. There would be no default on any debt. But all other spending would be on the chopping block. Their would be no default on public debt. Contractors would take a hit. But we are committing slow suicide in our country's finances. It will take the serious threat of not raising the debt ceiling to make anyone step-up and do the right thing. Americans' ignorance of the issues does not releive congress or the pres of their responsibilities to the country.

  • Report this Comment On June 28, 2011, at 8:22 PM, hbofbyu wrote:

    When have they NOT kicked the can down the road?

    All I can say is that Osama Bin Laden is winning still. Just like we outspent the Russians on defense to the point of collapse, he has caused us to outspend ourselves with war after war after war and create billion dollar bureaucracies (Homeland Security, TSA) out of our own paranoia.

    100 years from now when we are a shadow of a superpower with a crumbling infrastructure Time magazine will pronounce the "Most Influential Person of the 21st century" to be Osama Bin Laden.

  • Report this Comment On June 28, 2011, at 8:48 PM, mountain8 wrote:

    Question: What are "huge cuts to social programs"?

    Are we talking $2 per recipient monthly? Are we talking 50%? "Huge" is a very vague descriptive term that I don't believe I've ever heard anyone monitize. I'm a Social Security recipient and I know I can make it with a 10% cut across the board. Thats about $110. That's big but not huge like a 50% cut in money and an increase in my medicare payments by $500. That's not really huge either. That's fatal. So please, somebody, tell me in terms I can understand, what social cuts would actually be necessary to end this Washington Bulls$%^? What would I have to give up to fix this?

    I'll check back in a couple days. Thanks.

  • Report this Comment On June 28, 2011, at 8:56 PM, mracz425 wrote:

    "half of Americans lacked basic knowledge about interest rates, and 51% don't know what a credit freeze is."

    Hmmm...lets continue to cut education spedning...makes a lot of sense for our future. The GOP will risk a default. That's ridiculous of them. Since when are the Republicans so fiscally responsible because they sure weren't under Bush lol. Remember 2 wars, TARP,tax cuts for the rich...come on this whole debt ceiling thing is nonsense.

  • Report this Comment On June 28, 2011, at 8:57 PM, Kiffit wrote:

    It may be that the GFC wounds/debts are mortal/unpayable ones. and that the US as a society, body politic and economic system will crumble into security cantonments, some of which maybe viable; even prosperous. But the rest will just have to be allowed to rot.

    The way you know a wound is likely to be mortal, is if any of the available interventions to save the patient have more negatives than any projected benefit, You know the wound is mortal if the only thing the surgeons can agree on is how to delay death, in the hope that a miracle will happen, or something 'turns up' to save the day.

    If it doesn't matter what you do to solve the problem, because whatever happens, it means large slabs of America taking extremely heavy hits from which they may never recover, you are stuffed.

    And you will know this is happening when the politics of playing-for-keeps starts to make itself felt and consensus politics starts to disintegrate; when political opponents become enemies, not just of each other, but the country..

  • Report this Comment On June 28, 2011, at 9:05 PM, mountain8 wrote:

    Dear Fantoozler,

    Your source is nice for a solid defination of what the law says. But if you believe social security has money, you probably believe the president has to get congressional approval to go to war. We haven't been at war since Korea.

    There is a congressional law that says only congress can declare war. Of course the President in every year since Johnson has sent our boys off to "legally shoot at people and die" against that law. Or do you believe what we are doing all over the world is peace?

    Somewhere out there is a "balanced budget" law. Ha ha ha ha ha!

    Somewhere out there is a "line item veto" law that's probably been used so little as to have cobwebs.

    There is a law out there that says I have to have someone proceed my car, on foot, with a lit lantern to warn any loose horses and cattle that I am driving on the road.

    A law is what the law says it is. Ask any cop. Ask any judge. Ask any senator. So help yourself to your "law" on social security. Washington bypasses so many laws every day that it is really just an illusion that we have laws.

    It's a law that every employee that is legally employed has to contribute to social security. Except NO CONGRESSIONAL PERSON HAS TO FOLLOW THAT LAW!

    You're living in a fantasy world.

  • Report this Comment On June 28, 2011, at 11:25 PM, FutureMonkey wrote:

    Raise the debt limit.

    Then make war profiteering = treason

    If we start hanging the CEOs of companies that quadruple the charge on product sold to the military, I bet we could renegotiate the remaining contracts and watch the federal military spending shrink by a good 10-20% in a quarte without reducing our military readiness or commitment to veterans.

    Next up medicare fraud and tax cheats.

  • Report this Comment On June 29, 2011, at 12:01 AM, rd80 wrote:

    "The GOP will risk a default. That's ridiculous of them."

    Both sides are risking a default. The GOP position is an increase in the debt ceiling should be tied to spending cuts, not 'no increase period.'

    I seem the recall the President saying something about reducing deficits with a mix of cuts and revenue increases, but mostly cuts, during the State of the Union. Now, spending cuts are apparently every bit as poisonous to the democrat side as tax increases are to the republican side.

    To date, neither side has budged, hence both sides are risking default, and, by your logic, if one side is being ridiculous, both sides are being ridiculous.

    FWIW, I'm old enough to remember a lot of politicians promising spending cuts and some promising tax increases. The tax increases always happen, the spending cuts never do. So, maybe it would be nice to lead with the cuts first for a change.

  • Report this Comment On June 29, 2011, at 7:43 AM, dbtheonly wrote:

    xten has found the solution. Just cut spending BRILLIANT!!

    Perhaps he will now enlighten us as to exactly which programs he will cut? Mr. Housel has given us a list, use it as a menu, select your cuts. Be specific.

    Spare us the slogans.

    Now, my quibble.

    Social Security has its' own source of funding. Those funds are (I believe) invested in T-Bills, but they are separate funds. Therefore, cuts in Social Security should not affect other budget items. So pull Social Security off the table. It's a different game entirely.

    Rd80,

    You remember tax increases? Wow! When was that?

  • Report this Comment On June 29, 2011, at 8:31 AM, TigerPack1 wrote:

    BEN's QE2 PONZI scheme of printing money and supporting the Treasury market ends in a few days (officially at least).

    If you have ONLY two choices from here, which does Morgan and/or Motley Fool choose? We are quickly becoming Greece and Japan by the way, where too much debt, actually has consequences for the economy.

    Starting in mid-2011, do you choose:

    (1) austerity and a lost decade or two of economic growth, while risking a deflationary depression in 2012.

    (2) raising the debt ceiling, with the requisite FED accumulation of debt (PONZI) from new money printing hitting the economy in larger waves each year. The net result will be skyrocketing inflation and backwards economic growth in 2012. (Stagflation or Hyperinflation depending on your view of things).

    Our leaders are currently faced with this dilema, with the Repooplicans choosing choice #1, and the Demorats desiring choice #2.

    Either way more pain is coming, we just get to choose our destructor (Ghostbusters reference).

    Baby-boomers have reached retirement age and health care expenses for Uncle Sam will now rise at double the rate each year for a deacde, as compared to the last decade. Bascially, the buzzer is now sounding in 2011, and the free ride period of Chinese and Japanese investment in Treasuries is ending.

    Stupid leaders and arrogant policy for decades have brought U.S. to this faterful chioce in the world's history. We are already doing a great job messing up the world, with QE2 PONZI and related economic imbalances created. Our next choice will cause even greater chaos on the planet. I weep for my country.

  • Report this Comment On June 29, 2011, at 8:40 AM, TigerPack1 wrote:

    20 guys with box knives hit U.S. with a sucker punch and this is how we react...

    http://news.yahoo.com/u-cost-war-least-3-7-trillion-counting...

    We could have put a billion dollar bounty on Osama Bin Laden's head, and had his body hand delivered in 2 weeks flat.

    $1 billion or $4 trillion to retaliate, which would you choose? Our leaders choose $4 trillion, 10,000 American soldier lives, many tens of thousanads in Afghan and Iraqi lives, and hundreds of thousands displaced. Go Figure!

  • Report this Comment On June 29, 2011, at 8:49 AM, TigerPack1 wrote:

    10 years later, we have become the mercenary army of Middle East dictators, with no way out - all because of 20 dorks with knives. Does this make sense to anyone? Pride and arrogance at work in the real world.

    We should have nuked Osama when we had him trapped on that mountain in 2002. Lack of common sense and courage is America's problem now; we will be "paying" for the idiotic Lehman failure decision by BEN, alongside Bush's decision to overrun the Middle East with American military might for generations to come.

    That should conclude my rant for the day. Thank you for listening.

  • Report this Comment On June 29, 2011, at 8:58 AM, xetn wrote:

    dbtheonly

    I guess you meant xetn; if so, then my suggestions would be to:

    eliminate the department of miseducation

    eliminate the department of energy (which has not done one thing it was mandated to do, except spend an average of 25 billion every year since it was created.)

    close every foreign military base and bring our troops home.

    end the "war on..everything" they have resulted in money down a rat hole.

    I would certainly end the fed which has resulted in the complete destruction of the US dollar and can mostly be blamed for every boom/bust cycle since they were created.

    As for whoever thinks that there is money in the SS trust fund, you are completely mistaken. All the money collected for SS, goes to the general fund and the Treasury issues IOUs to the trust fund.

    Lastly: you should read this really excellent analysis of "Timmy and the debt ceiling:

    http://lewrockwell.com/north/north998.html

  • Report this Comment On June 29, 2011, at 9:05 AM, titus77 wrote:

    The question is not whether or not to raise the debt ceiling but to ask why do we have one? Has a debt ceiling ever been a barrier to government policy?

    Over the past 50 years, the debt ceiling has been raised over 70 times... for those that are not math majors, that averages out to more than once every year.

    If you look at the voting records for senior congressmen, you will find that those pounding the table for not raising the ceiling have voted for it in the past and those that are advocating the debt ceiling level increase have voted against it in the past.

    The debt ceiling is just a politicized non-event. It will get raised and we will kick the can down the road a little bit further.

  • Report this Comment On June 29, 2011, at 9:32 AM, CluckChicken wrote:

    @mountain8

    "Somewhere out there is a "line item veto" law that's probably been used so little as to have cobwebs."

    - The USSC said this was unconstitutional in 1998 (Clinton v. City of New York)

    "Somewhere out there is a "balanced budget" law."

    - Way back when Newt was speaker this passed the House but never made it through the Senate, so it never made it to Clinton to sign, who was the only President in the last 30+ years to have at least 1 yr of a balanced budget.

    "There is a congressional law that says only congress can declare war."

    - This is true but if Congress had declared war we would not be having this discussion about the debt ceiling because it would not be in effect. When the nation is in a state of war there are many changes in regards to the powers of the President and Congress and many so called limits are removed during the state of war.

    As for the topic at hand we must increase the ceiling. Obviously we have to cut spending on defense. The whole medical system needs to be changed because any cut we make will be short lived given the annual rate at which these costs are increasing. Taxes either have to go up, loopholes have to be closed and/or deductions have to be changed. The solution to this issue can not be handled by cuts alone.

  • Report this Comment On June 29, 2011, at 10:14 AM, bbell46356 wrote:

    I agree with dbtheone with regards to specific spending cuts.

    We as a nation are bankrupting our kids to support people who believe the government should support them. Yes, unfortunately that includes you Grandma.

    While eliminating funding for treadmills for shrimp won't make a dent in the budget, neither will reducing Grandma's monthly check by $5.00.

    However, Grandma would be justified in asking why she should give up $5 if we can afford $100,000 or whatever for a treadmill for shrimp.

    Rational compromise from those who must sacrifice, by either paying more tax or by accepting fewer benefits requires the elimination of irrational spending as a necessary first step.

  • Report this Comment On June 29, 2011, at 10:22 AM, dbtheonly wrote:

    @xten:

    Allright, we eliminate the Department of Education. We don't support loans or grants for higher education. We don't encourage programs like Head Start. We limit education the wealthy and maybe allow the serfs enough education to read. Or better we just use pictures as in Orwell's 1984. Brilliant move! Do you intend to impose an income limit on the right to vote?

    Allright we eliminate the Department of Energy. We don't support scientific research into alternate fuels. We continue to burn oil, but we don't control any additives or pollutants that may be introduced. Brilliant move! The pollution will kill us all before the lack of education can cause any problems. Are you old enough to remember the pollution of the early 70's? Ask your parents.

    But according to Mr. Housel's figures that's 3% & 1% of the budget. Big Whoop!

    You want to close every overseas Military Base & end all the wars. Okay, but you are limiting the ability to respond swiftly to any crisis which may occur.

    The issue of whether the US ought to have a "National Bank" was hotly debated for about the first 50 years of the US. It was decided not to have one about 1836. All the other major industrial nations have a National Bank and by the early 20th Century it was decided that the USA could not have a national economy without some sort of national guidance. Read the debates of the time.

    You're calling T-Bills Treasury IOUs? Okay.

    You're playing with fire in a room of explosives. Admit that John Quincy Adams wasn't a "Founding Father", Paul Revere didn't warn the British of anyhting, and the battles of Lexington & Concord took place in Massasschusets.

  • Report this Comment On June 29, 2011, at 2:07 PM, slpmn wrote:

    dbtheonly - spot on. So tired of the endlessly repeated simplistic logic used by the right in their pathetic attempts to understand/solve the problems that exist in a complex world.

  • Report this Comment On June 29, 2011, at 2:27 PM, slpmn wrote:

    What we have is the right wing attempting to dicatate policy by holding the credit rating of the United States of America hostage. They control precisely one house of congress, and have latched on to the debt ceiling law as a means to advance their agenda of cutting the social programs and regulatory agencies they have always hated, while simultaneously scoring politcal points against the Obama administration by fabricating a crisis and blaming it on the democrats.

    Folks, the United States of America is not "bankrupt". It has ample access to credit (at least until we destroy our own rating by voluntary default), and also has a level of taxable wealth unrivaled by any other nation on the planet. The fact is, we can pay our bills if allowed to do so. That is a fundamental truth that gets lost in all the shouting by the right wing.

    If the Republicans really cared so much about the national debt, they would have forced through the cuts they now advocate when they controlled the presidency and both houses of congress for six years. Like Dick Cheney said "Deficits don't matter." Unless they can be used to attack your opponent, that is.

  • Report this Comment On June 29, 2011, at 2:56 PM, FutureMonkey wrote:

    I hate it when people pretend that Government spending is lost money, as if we don't get anything in return, as if the money is not recirculated, as if it doesn't support revenue generating business, as if it doesn't get returned in tax revenue. Every dollar goes somewhere. Those unemployment checks got spent - usually locally which go into other's pockets, some paid back as taxes, some invested, some spent on other investments. Ultimately, much of it is now sitting on the balance sheets of businesses we invest in. Much of it has been off-shored by those businesses, much has flowed out of our national economy into the international business community in exchange for resources and products we use (oil, raw materials, consumer products). To simply say "cut spending" is naive as everything we cut comes at a price. We need to understand the consequences of each cut and what we lose.

    The deficit is not the result of "out of control" spending on the domestic side, entitlements or even military. The problem is that we keep relentlessly choking off the revenue side of the equation without dialing back spending.

    We didn't arrive at this position overnight, demanding an overnight solution acheived only through spending cuts is ridiculous. Return offshored money through some sort of partial tax amnesty and create a balanced method of preventing this tax evasion technique going forward. Back off the spending more slowly. Comprehensive tax reform. And focus on export and domestic solutions to gradually lower our trade deficits. We can start with our addiction to cheap plastic disposable crap.

  • Report this Comment On June 29, 2011, at 3:22 PM, Bert31 wrote:

    The debt ceiling should be raised and spending cuts should be implemented. When the economy recovers, the revenue "problem" will resolve itself.

  • Report this Comment On June 29, 2011, at 3:38 PM, bbell46356 wrote:

    To the person advising not to play with fire...

    A treasury Bill is an IOU, that is what bonds are.

    What does the location of Lexington and Concord have to do with anything?

    The premise that we would be worse off without the Department of Energy is tenuous. We don't have one benefit from all of the spending since this department was formed.

    We still are dependent on oil.

    The market will never develop commercially viable alternatives to oil until it is profitable to do so.

    By the way, I do remember the 70s and for the record, the department of Energy does not regulate air pollution nor can they take any credit for any air improvements.

    Pollution is regulated by the Clean Air Act implemented in the 1970s, administered by the EPA and enforced by the states. The EPA director reports directly to the President and the Agency is not part of the Department of Energy or any other Cabinet level Agency.

    The department of Education was formed in 1979. Free public education was well established for generations prior to the formation of the department.

    The average American is definitely not any better educated today than the average American of 1970 massive increases in funding.

    These departments are an excuse to line the pockets of special interests.

    Give one example of any specific benefit that has resulted from either department.

  • Report this Comment On June 29, 2011, at 3:51 PM, whereaminow wrote:

    Morgan,

    You know as well as I do that there is no serious discussion on the debt ceiling. It has been raised 80 times in a row. 80!

    Why should you start caring now, on vote #81, when you didn't care before?

    This is a big hoax bro. The Republicans have already assured their cronies that they will raise the debt ceiling. This is just pandering right now to the Tea Party base. They are hoping that the Tea Party voters are too stupid to realize what is going on.

    (I don't think they are. But I'm in the minority on that opinion.)

    It also serves the Democrats well. They get to put the fear of God in everyone that Mommy Government might close her doors for a few days.

    Fire and brimstone!

    David in Qatar

  • Report this Comment On June 29, 2011, at 4:12 PM, CluckChicken wrote:

    "Give one example of any specific benefit that has resulted from either department. (DoE or Education)"

    I guess none of that research that the DoE pushed for, that business had no interest in, around Radio Isotopes has had no effect on the medical equipment. This has led directly to kemo treatments and most of your advanced scanning tools. Maybe later I will do some research for you into both departments rather then just dumping the obvious.

  • Report this Comment On June 29, 2011, at 4:33 PM, whereaminow wrote:

    Cluck,

    How much do you want to bet that the DoE didn't actually perform any of that research? That they contracted with private business?

    You know, if the government sets up a Toilet Agency, I'm not going to thank them every time I take a dump.

    Usage ALWAYS preceeds law. If something does not exist, you cannot regulate it. There is nothing the government creates except death. It is VERY good at that. Just ask brown people.

    David in Qatar

  • Report this Comment On June 29, 2011, at 5:51 PM, Gato337 wrote:

    Dear David, JOBS are not death? right?

    Of course the DoE doesn't perform the research themselves, just like the National Institute for Health doesn't perform all of the research on treating diabetes. Rather they are in charge of distributing government grants (money to do that research) to laboratories at mostly public/private universities and private bio/med research companies. That grant money is keeping thousands of (smart) people employed. It is not getting wasted! While the DoE uses $28 billion of the federal budget, that money does not just go straight to DoE paychecks. Im sure the cost of running the department is quite small compared to what they distribute out as research grants. Those grants create/maintain much-needed jobs and business opportunities. (Sure, maybe some $ gets lost in the bureaucracy - but such research would not exist if it were left to private interests). Plus most research takes years if not decades to produce tangible benefits. While the past 10 years of research may not have solved our energy problems, its very likely that it was laying the necessary groundwork for future discoveries/inventions that WILL help our oil crisis. Scientific knowledge is cumulative, don't expect instantaneous results.

    Without such government-supported research programs the U.S. would experience a massive brain drain as a chunk of the educated population (and their inventions/discoveries) move to other countries where their contributions would be appreciated. Between cutting education spending and cutting research funds, the average American I.Q. is going to decline very quickly in the next few decades. These days, the average high school kid is barely literate and has abysmal math skills, not to mention a complete lack of knowledge about our Nation's great history (ala Sarah Palin). I worry for our future.

  • Report this Comment On June 30, 2011, at 8:56 AM, dbtheonly wrote:

    @slpmn

    Thank you.

    @bbell

    Are you really arguing that a high school education is sufficient? That's how far your "free education" carries you.

    We can debate whether recent cuts in local educational funding, the growth of private/charter schools, (60 years ago they were used to avoid integration), the growth or religion science in the public classrooms, and the attacks on the teaching profession are a positive. For now though I will reiterate that the DOEd organizes grants and loans for higher i.e. college education. I assert that if America is going to be competitive in the 21st Century; then we need a top-notch educational system, starting with programs like Head Start ,so that truly no child gets left behind, and through colleges and universities which ought to be the envy of the world.

  • Report this Comment On June 30, 2011, at 9:02 AM, TigerPack1 wrote:

    Morgan,

    You need to write an article on the projected rise in interest expense the next 5-10 years. With interest costs at $200 billion annually (or 1.5% on $14 trillion in outstanding debt), BEN and Uncle Sam's biggest problem is containing inflation rates and "EXPECTATIONS." America NEEDS to keep a low level of interest for investors as a believable option and alternative for their investment dollars. The sky-rocketing rate of interest expesnse is what is destroying Greek society in 2010-2011, and forcing bailout after bailout, and austerity programs like rising tax rates and spending cuts.

    If foreign investors lose faith in the low inflation fiction BEN is trying to write, the Dollar will implode in value and interest rates (expesnse) will double yearly as we refinance all our short-term term debt at higher rollover rates. We now have ultra-low and unsustainable "teaser" rates on our debt financed almost entirely under 5 years in duration.

    If you put a 5% interest rate on $20 trillion in total debt in 5 years (this is the most optimistic projection out there), you come up with $1,000 billion in annual interest expense, not $200 billion. THAT'S AN INCREASE OF NEARLY $200 BILLILON ANNUALLY, SUCCESSIVELY.

    [Congress cannot even agree on $100 billion in annual cuts, so their budget debate is quite meaningless at this late stage, IF we do not support a strong Dollar, low inflation policy at the FED.]

    And this is the ROSY scenario of keeping inflation well below average. The truth of the matter is inflation rates (as calculated based on the 1970s formula for CPI) are already running at 6% YoY, so short-term rates of ZERO cannot last much longer.

    If Saudi Arabia's regime is overthrown in 2011 or 2012, we likely get $150-$200US a barrel oil, and inflation rates apporaching 10% annually for several years. Given a 10% interest rate and rollover of debts for the next 5 years, you get closer to $2 trillion ($2,000 billion) in ANNUAL INTEREST EXPENSE and a DOUBLE IN THE TOTAL DEFICIT to 20% of GDP!!!!!!

    All things being equal, a large rise in oil prices in the second half of 2011 could destroy the western world's economy dependent on record high and rising debt levels with almost no interest expense. That's why the Arab revolutions and still uncertain outcome of who will control oil reserves and pricing is very disturbing and unsettling for our leaders. The reason we support Yemen, Bahrain, Kuwait and Saudi dictators, and why we are trying to get a say in Libya's resolution, revolves around controlling inflation rates the next few years. In BEN's PONZI backwards world, saving American and European democracy DEPENDS on our support of dictatorships overseas. NICE

    TOO MUCH DEBT IS TOO MUCH DEBT, STOP THE MADNESS AS WE DIG DEEPER AND DEEPER EACH DAY!!!!

    -End TigerPack Rant

  • Report this Comment On June 30, 2011, at 9:31 AM, TigerPack1 wrote:

    Using your chart above and a 10% interest rate in 5 years, the INTEREST EXPENSE line would rise from 5% of America's total annual federal budget to around 40%!!!!

    YES, every Dollar we have borrowed the last 20 years of looking the other way on debt accumulation, could come back to bite U.S. in a huge way soon.

    Less debt would be a much better strategy at this stage to keep inflation rates low and confidence in the Dollar high. A sharp $300 billion deficit reduction package annually would be quite painful and push U.S. back into recession, but the long-term benefits of low inflation and keeping the Treasury debt rollovers funded should now be a paramount concern, not jobs and economic growth at all and any cost!!!! Classic short-term pain, long-term fix debate. Politicians and Americans however want short-term gain and gratification above all else.

    I propose an ACROSS the board 5% budget spending cut for EVERY department and program (including Social Security, Medicare, the War Department, Congressional pay, Judicial Branch budgets, EPA, Education, whatever, etc.) alongside a $100 billion increase in taxes on the rich to help offset the tax cuts they have received the last many decades and take some pressure off the rising middle class tax burden. That gets you to $300US billion in tax cuts and should piss off everyone about equally. Seems fair to me.

    GDP in 2012 will likely be negative as a result, and we will have to pick up our boot straps and likely cut even more next year to maintain a falling deficit situation for 2013, but the alternative is U.S. bankruptcy in 2012 in my humble opinion, not just the Uncle Sam variety. We are Greece x50 in terms of our debt problem and exploding liability setup, so following Obama's advice yesterday of looking the other way another few years is not a realistic option anymore.

  • Report this Comment On June 30, 2011, at 10:07 AM, bbell46356 wrote:

    CluckChicken,

    Thanks for the update on radio isotopes. To argue against or for the abolishment of the DOE does not equate with ending all government sponsored research.

    The example you gave was most likely funded by the Atomic Energy Agency, which I concede we need. This Agency was alive and well since WWII however - way before the DOE existed. We didn't need the DOE then and we don't need it now.

    Dbtheone,

    Once again, the example you give, Head Start, has been a program of the Federal Government since the 1960s. US Colleges and Universities have been the envy of the world for a very long time, and yes, people went to college well before the DOEd was formed.

    Rational people can argue the merits of programs such as Head Start or radio isotope research, but to use programs that predate these Departments to justify the existence of those departments is a pretty weak argument.

    To equate elimination of a redundant and costly Government beauracracy with the statement "high school education is sufficient" is a bit farfetched.

    Extreme arguments may be entertaining political theatre, but the deadlock created only ensures the deficit problem will get worse.

    The cost of these departments is high and the benefits are few. Neither has accomplished or even made progress towards their stated goals.

    We are more dependent on foreign oil today than we were in the 1970s and we are not any better educated. Time to stop wasting money on stuff that doesn't work.

  • Report this Comment On June 30, 2011, at 10:48 AM, kurtullman wrote:

    Of course SS contributes to the deficit. The SS "surplus" since the 80s has, because of the specifics of the law, been put into non-marketable Treasury securities. There is no income stream to pay back these securities, let alone interest. So, while it it can't technically spend more than is in the trust fund, that trust fund is made up of so much US debt that it works out the same in real life. It is just another bit of creative bookkeeping on the part of the government (through many different administrations of both parties)

  • Report this Comment On June 30, 2011, at 11:20 AM, CluckChicken wrote:

    bbell46356

    "The example you gave was most likely funded by the Atomic Energy Agency, which I concede we need. This Agency was alive and well since WWII however - way before the DOE existed. We didn't need the DOE then and we don't need it now."

    So the Atomic Energy Agency should be around, I assume you also think that the Nuclear Regulatory Commission should as be around and I would hope that the Energy Research and Development Administration (they manage the nuclear weapons supply, naval ships and research of such things). If we can agree that all of those are needed then The Department of Energy Organization Act (Oct 1977) should be considered a good thing since it merged those three groups (and others) into one which is now the DoE doing away with a lot of redundent things between all the groups.

  • Report this Comment On June 30, 2011, at 11:37 AM, whereaminow wrote:

    Gato and Cluck,

    Have you ever heard of the Capture Theory of Regulation?

    David in Qatar

  • Report this Comment On June 30, 2011, at 11:58 AM, CluckChicken wrote:

    David in Qatar

    I know you love to use theories to cover every and all possible things that it could in some form of imagination cover but not every situation is the same and as I am sure you know not all theories work everywhere. Saying that the DoE is damaging the development of the market around nuclear research, alternative energy development or even in the safety of the business is short sighted.

    The vast majority of the research done by groups linked to the DoE are educational based, with nothing stopping companies from either joining in on the research or doing it themselves. Nearly all of the advancements in alternative energy over the last 20 years have all started as a DoE program, again nothing stopping the business world from having started it.

    In areas that have high cost of research without any easily visable profitable outcome in the near term you will not find business leading the way.

  • Report this Comment On June 30, 2011, at 12:10 PM, mountain8 wrote:

    dbtheonly!

    T-bills are technically IOUs. Therefore Social Security is funded by IOUs. Brings up the question everyone is avoiding... what happens to Social Security if the USA Defaults?

    Social Security is funded by air.

  • Report this Comment On June 30, 2011, at 12:25 PM, mountain8 wrote:

    CluckChicken ,

    Thank you for the information. I'm probably one of millions of posters who can't keep up with the government. Do you see a way out?

  • Report this Comment On June 30, 2011, at 12:35 PM, mountain8 wrote:

    Gato,

    "These days, the average high school kid is barely literate and has abysmal math skills, not to mention a complete lack of knowledge about our Nation's great history (ala Sarah Palin). I worry for our future."

    So the Dept of Education must be doing an exemplary job????

  • Report this Comment On June 30, 2011, at 2:17 PM, mauser96 wrote:

    "Income Security"??? If you mean unemployment payments say so. I know it sounds so much better to call cow droppings roses but still..

    The main cause of lower tax receipts is that the economy sucks, people aren't making as much money as they were so they aren't paying as much in taxes.

    "Lowest tax rates in decades"of course depends on who you are. And what goodies you get. I'm sure that for that nearly half of households that now pay no income tax at all, they are indeed having the lowest tax rates in decades. But for the rest of us who pay taxes to support them it's a different story.

    This article is intellectually dishonest.

  • Report this Comment On June 30, 2011, at 2:46 PM, IIcx wrote:

    "The only way to balance the budget on the spending side of the ledger is to focus on the top few lines of the table above. That means big cuts to defense, Medicare, Social Security, and unemployment benefits -- all of which are massively popular and political dynamite to even mention."

    I disagree with the part about big cuts to Medicare, Social Security, and unemployment benefits.

    What needs to happen is reorganization of the Social Security Administration. Its ancient and no longer serves its primary purpose. It needs to be eliminated with unemployment and disability oversight sent back to the States to manage. Social Security cards and benefits management should move to the IRS and a flat tax needs to be adopted to streamline the IRS.

    The SS trust fund needs to purchase debt from the Fed via Treasuries and pass the interest benefit on to future generations of taxpayers. This will give future taxpayers the additional income they'll need for private health insurance policies and ensure the idiots in Congress don't raid the Trust Fund ever again.

    We need Congress to enact something intelligent and in the best interest of The People for a change instead of cutting benefits!!!

    I do agree, its time to look at military spending and eliminate unnecessary government agencies and regulations.

  • Report this Comment On June 30, 2011, at 3:38 PM, IIcx wrote:

    By the way, we are NOT at risk of defaulting on our loans if the debt ceiling isn't raised -- its complete nonsense. They take in 200B per month and the debt service is 20B per month.

    There are also hidden benefits with an IRS in charge of Social Security identification and benefits and States in charge of unemployment and disability benefits:

    - fake IDs will be much harder forge to use which will help curb illegal immigration

    - if someone can't pay their taxes, the tax due could be deducted from benefits which will eliminate the interest due on unpaid taxes

    - States can simply absorb Social Security employees as needed and consolidate office space which will eliminate the rental fees charged to the Fed. etc....

  • Report this Comment On June 30, 2011, at 3:48 PM, IIcx wrote:

    Here's another idea.

    HUD was principally created to ensure housing related public health issues are addressed and to house all the soldiers who returned from WWII.

    We got a Federal HUD office in nearly every major city and or county seat.

    This isn't the 1940s, close HUD and turn over housing and urban development to State governments. The authority exercised by HUD on State and Municipal communities is no longer needed.

    Closing Freddie and Fannie is another must!

  • Report this Comment On June 30, 2011, at 4:09 PM, IIcx wrote:

    Other ideas:

    - Privatize the Postal Service

    - Privatize Amtrak

    - Consolidate the federal prison system

    - Eliminate EPA offices in the States

    - Privatize the Census Bureau -- they alone waste Billions

  • Report this Comment On June 30, 2011, at 5:12 PM, Gato337 wrote:

    @mountain8

    My argument for the DoE was a specific case. No, actually I think the federal Dept. of Education has not done a good job - in fact they are failing miserably. Besides, I think education is a state matter, not a federal one.

    However, many states rely on the federal government to subsidize their education funds. And currently so many states are beginning to react to their own budget crises, making huge slashing cuts to their education budgets (ex: California has cut their education spending by at least 1/3 over the past few years), firing teachers and closing schools right and left.

    Im not saying that education should be left alone when considering national budget cuts (frankly everything on the list needs to recieve some sort of budget reduction), but I am saying that federal education spending should be spared as much as possible if we have any hope of being a strong/educated nation in 20 years because the states cannot manage the costs on their own (at least not right now - maybe it will be a different story in 5 years).

  • Report this Comment On June 30, 2011, at 5:41 PM, dbtheonly wrote:

    @Ilcx,

    Just for it, for the first several years in business, UPS did not deliver to the states of Montana or Utah. It just wasn't profitable. Too much space, not enough people.

    So unless you want to screw everyone living in a rural area, you might wish to keep the Postal Service.

    Equally I'm not sure how you cut costs on the prison system while trying to keep people in prison, or do you want to run the risk of another "Willie Horton"?

    @Gato

    One problem with allowing States to run the educational system is the impact of local politics on the system. As examples: Texas re-writing their textbooks to make Joe McCarthy a hero and Kansas insisting that "Creation Science" is science. Do you wish a national minimal level of competence? If so you need a national level monitor.

  • Report this Comment On June 30, 2011, at 6:00 PM, IIcx wrote:

    @dbtheonly,

    Good point about rural delivery yet a PO box at regional locations with the option of a delivery service would be logical. Does everyone really need front door delivery?

    A new Federal Prison out in the middle of some desert (cheap land) would allow for the closure of other prisons in more expensive areas. I'm pretty sure the prison guards will not like this idea but it makes sense.

  • Report this Comment On June 30, 2011, at 10:53 PM, CluckChicken wrote:

    @IIcx

    " fake IDs will be much harder forge to use which will help curb illegal immigration"

    - Huh? The IRS does not issue IDs. Illegal immigrants still pay state, federal taxes plu medicare and SS because their employor takes it out of their paycheck.

    "Privatize Amtrak"

    - How about instead we make the feight carriers pay for some or most of the upkeep of the lines. This would make Amtrak profitable. Frieght lines got a sweet deal when the GOP gave them the lines and said that the government would repair the lines.

    "Consolidate the federal prison system"

    - Consolidate it to what? There are no federal prisons that are empty.

    "Eliminate EPA offices in the States"

    - By this I assume you just want to do away with the EPA. Personally I like the fact that right now there are no lakes or rivers in danger of catching fire and the lovely sunset is actually a sunset and not just an extra thick layer of smog.

    "Privatize the Census Bureau -- they alone waste Billions"

    - This can not be done. Article 1 Section 2 says that the government has to conduct a census every 10 years: 'The actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by Law direct.'

  • Report this Comment On June 30, 2011, at 11:02 PM, CluckChicken wrote:

    This just came up recently: http://www.huffingtonpost.com/2011/06/28/14th-amendment-debt...

    Can Congress legally not pass an increase in the debt ceiling? As the 14th Amendment says: http://www.usconstitution.net/xconst_Am14.html

    "4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. 5.The Congress shall have power to enforce, by appropriate legislation, the provisions of this article."

    First this blows away the recent Tea Party belief that the debt is somehow illegal or non-existant. Second that sounds a lot like Congress has to make sure that we make good on our debt that we have.

  • Report this Comment On July 01, 2011, at 10:57 AM, IIcx wrote:

    Hey Cluck,

    4. Yes and there are wackos who think income tax is unconstitutional. Just ignore them.

    The point is, the debt ceiling doesn't need to be raised. The only reason it would need to be raised is if Congress intends to add the additional 2.5 Billion to the 2012 budget and if Congress isn't willing to balance the budget to meet the existing debt load.

    They aren't going to default on the debt payments if they don't raise the debt ceiling -- its all political spin from Obama and the spend thrift Democrats who aren't willing to listen to the American people. We don't want any more tax dollars spend on wasteful and poorly thought out programs from Congress. I guess Obama and the spend thrift Democrats in the Senate are in denial?

    Huh? The IRS does not issue IDs -- not yet but they could and it would centralize all the information. Example, if someone is paying taxes from a pay check but not filing returns, if the same SS number is cropping up all over the place, etc. The issue is, instead of Congress approaching the problem in a logical way, they are simply slapping bandaids on older and unresolved problems and wasting money.

    "Privatize Amtrak" -- I think you're on to a good idea and the true cause of the problem with rail lines. But, Amtrak needs to close service that isn't profitable and run as a business. It needs to be privatized.

    "Consolidate the federal prison system" -- just an idea. What's the point of having prisons scattered all over the countryside -- is it more cost effective to manage the problem in one place -- like a desert in the Southwest that isn't being used for anything?

    "Eliminate EPA offices in the States" -- States are responsible for meeting EPA regulations. Why do we also need EPA Federal offices in each State? This is wasteful, unnecessary, and intrudes on State Rights.

    "Privatize the Census Bureau -- they alone waste Billions" -- over 7 billion to be more accurate. They need to look at alternatives to cut the waste isn't a good idea?

  • Report this Comment On July 01, 2011, at 10:59 AM, IIcx wrote:

    oops -- typo:

    if Congress intends to add the additional 2.5 Billion to the 2012 budget

    s/b

    if Congress intends to add the additional 2.5 Trillion to the 2012 budget [that Obama wants]

  • Report this Comment On July 01, 2011, at 11:27 AM, IIcx wrote:

    I guess the part that mystifies me is why we need so many federal agencies.

    The IRS example is an interesting one.

    - if everyone is required by law to file an annual return

    - if the return contains household information like number of children

    Why do we we need the Census Bureau when the information is already known? If the answer is, because they "crunch" all sorts of information IRS returns don't contain but which resides in the SS system... then it seems logical to merge the 2 agencies and streamline the process.

    If the answer is, because people aren't filing returns. That's a State problem, not a Federal problem to solve. States receive Federal dollars based on populate but the Fed doesn't have the authority to police the States.

    Congress needs to streamline Federal government. We know we're likely to pay more State taxes but they should be offset by reduction in Federal spending.

  • Report this Comment On July 01, 2011, at 12:05 PM, drborst wrote:

    Morgan, this was a great half article... (it was worth quite a bit more than what I paid for it).

    I know you are better than anyone at pulling and putting together real data. What I would love to see is a second line on the chart, with spending as a percent of GDP.

    Also, I didn't realize that medicade and medicare combined passed defense spending, when did that happen? While the health care debate was painful to watch, at least its the right topic, the debate on the debt ceiling seems to be centered on 5-10% cuts to the "1%" catagories that won't really do anything, that's not painful, that's depressing. (maybe that's why the commentors this week sem tame to me)

  • Report this Comment On July 01, 2011, at 12:49 PM, mountain8 wrote:

    Gato,

    I believe in foundations. And the foundation of this nations future is education. And currently it sucks as you pointed out.

    Educational cuts will hurt this country more than anything else being discussed. My belief though is the DOE is so inefficient and so far counter to real education that it needs to be scrapped or completely reinvented. Scrapping is less expensive and serves as a 'deterant' to other wasteful departments of government.

    Regulators have failed. Standards have failed. I like the theory of DOE but their reality is worthless. My kids actually got credit for ceramics and basket weaving and they can't write a cognitive sentence or balance their checkbook. So, as I said, what the DOE is/was supposed to accomplish is a failed experiment with our future.

    Unfortunately I can not offer a solution. The damage is done. History will show a huge gap in the progress of the US solely because of a Department that screw everything up for our kids, with the help of Social Services.

    By the way, if the teachers had the power to discipline like my generation was disciplined, we probably wouldn't have metal detectors at the doors of our schools, and my elementary school of 45 years ago wouldn't be bragging about being "drug free!" DRUG FREE SHOULD BE EXPECTED. It's no brag. It's shame on our country for even having to worry about it. It's like bragging about your kids brushing their teeth.

  • Report this Comment On July 01, 2011, at 3:25 PM, CluckChicken wrote:

    IIcx

    You are missing a lot of stuff with the IRS and SS office being the same. If you have no income you are not required to file taxes. For instance lets say my wife doesn't work and my 18yr kid doesn't work and goes to school in another state. The IRS would only count 1 person the census would count 3 and all is legal. 15,000 homes like that could change the number of reps a state gets. Also the federal government issuing IDs makes a lot of states have major redundancies with the DMVs. I think you think that the SS office and the federal government have a major issue with illegals paying SS and taxes. None of this takes into consideration the amount of time that adds to filing or reviewing taxes. Also doesn't take into consideration the small fact that the overwhelming majority of the people do not like the IRS and hate when any one part of the government has what they might think is too much private information about them.

    Having prisons all over the place reduces costs in transporting criminals, makes it easier to find people to work at them, reduces the possibility that an organization will gain large influence over the guards (see the UK for this). Also neither side really wants to fight the 'cruel and unusual punishment' right over location.

    The EPA fight has already been done and it was decided that the federal government does not infringe on state rights with it. Also there are federal offices because most of the states are like little children and when one is not doing something and it causes another state issues the parent has to step in.

  • Report this Comment On July 01, 2011, at 4:03 PM, IIcx wrote:

    CluckChicken,

    Your points are focused on what is currently occurring, think about as what could be occurring but currently isn't.

    So, is it far-fetched to believe that we can easily eliminate hundreds of Billions from the federal budget by simply instituting a flat tax with simplified tax codes that also helps to eliminate redundant activity in areas like the Census Bureau, Bureau of Immigration, Social Security Administration, etc.

    Personally, I'm mystified as to why Congress isn't doing this.

  • Report this Comment On July 01, 2011, at 11:12 PM, mountain8 wrote:

    dear licx,

    I'm a bit of a cynic, licx. But, I believe the only reason congress does anything is to keep their jobs, not to benefit anyone.

    Congress isn't doing anything because We, the people, can't afford as much as the power lobbies. We can only vote. And we don't.

    The status quo hasn't worked for decades. Let's try something different. Ron Paul for Presiident. You can't believe congress will let him do all he wants to. Or maybe they'll just step aside like they did for Bush. Or they'll gridlock like they are doing now. The point is that it will send a message. If we elect Ron Paul, all politicians will suddenly fear for their jobs, reality will set in, and maybe they will get something productive done. They didn't get the message when they lost so many seats to the Tea Party last election. How can so many stupid people claim to be able to govern?

  • Report this Comment On July 04, 2011, at 12:00 PM, frediano wrote:

    If the only way to repay debt is to take on more debt, that such an entity is already in trouble and deserves to have its bond rating lowered.

    If that makes it harder to take on more debt, then... the system is working as it should.

    If that means countless weeks of scenes of moving vans heading out of DC, then ... please, get to the bad part.

  • Report this Comment On July 04, 2011, at 8:10 PM, kpole wrote:

    drborst,

    After reading your post, I did some research. Best I can tell, the last year in which defense was larger than Medicaid and Medicare combined was 2006.

  • Report this Comment On July 04, 2011, at 10:05 PM, kpole wrote:

    It seems to me that there are two debates going on: raise taxes and cut spending vs. raise taxes only, and we have to do something major about the problem vs. we don't have to do something major. Reading all these comments, everybody seems to agree that the national debt is bad, and the future costs of paying out the Social Security, Medicare and Medicaid that has been promised to current and future retirees will be high. Opinion poll results and anecdotes in most news stories about government debt tell the same conflicting message: "Balance the budget and eliminate the deficit, but don't raise my taxes and don't cut what I receive from the government!" Thanks for a well-written article, Morgan, that shows with clear and easy-to-read data why people can't have it both ways. While we (including me) complain that our government should do something, I don't see many voters pushing their government to make realistic choices and accepting small pain now in order to avoid saddling the next generation with bigger problems. This July 4 it's worth remembering that freedom comes with concomitant responsibilities.

  • Report this Comment On July 05, 2011, at 1:59 AM, ikkyu2 wrote:

    I owe $100, due today. I have two options: pay $100 today, or default.

    The Federal Government owes $100, due today. The Federal Government has three options: pay $100 out of coffers filled by tax revenues; default; or print $100 out of thin air and pay $100. There is no penalty for printing $100 out of thin air.

    This one's a no-brainer. We can argue all we want about what ought to be done, but there's no rational argument about what *is* going to be done.

  • Report this Comment On July 05, 2011, at 1:28 PM, Wjcushing wrote:

    About 25 ys ago charles reich wrote "Rise and Fall of nations" which laid out a pattern common to prior empires. What we are doing is very similar to what roman empire, spanish and british empires did in their day. This seems less a function of current politics or economic insanity than simply a pattern of behavior of large groups of our species. The tiime frame may be unceratin but the end result will be the same.

  • Report this Comment On July 06, 2011, at 12:15 PM, mountain8 wrote:

    As long as other countries are stupid enough to take our debt, we'll be fine.

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