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sad clowns
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The debt ceiling "crisis" is a farce, created by DC Republicrats, and has almost no meaning at all but one. "They" knew this would happen, probably expected it to happen during the election year though, they planned it for a fight about taxes v. spending. Like, there is a fight there, we need to work on both. The only actual thing that might come from this is, these scum, used to grandiose lives, ego-driven, are risking the faith and credit of the US Government for their own gratifying aims.
The US currently benefits dramatically from the AAA rating given "our" debt. (The ignorance of the rating agencies are a different topic.) If we go into technical default, then they have threatened to lower our rating to AA+. This will raise interest rates for, not merely all US Government debt, but every debtor in the US. This means a great transfer of wealth from someone to someone, rest assured, you/we arent on the receiving end, except will get the proverbial stick.
I could solve this crisis with two strokes of a pen. The US Federal Reserve owns about 1.5 trillion dollars worth of US debt. Why? The US government's own central bank, during the recent stimulus, monetized some debt. Their ownership is irrelevant, we own the government, we own the central bank, if the Fed would just rip up those bonds, then "our" debt would go down by 1.5 trillion dollars. Why won't they do that, I wonder?
The Social Security fund, which is backed by the US government, owns over 1 Trillion dollars of US Debt. We are on the hook for their obligations regardless. Maybe SS stays the same, maybe it gets reformed, whatever, but the Social Security admin. could do the same thing, just rip up the bonds, voila, another 1 trillion in debt expunged.
Why don't the egomaniacs in DC not do either or both of these actions? You tell me.

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Why don't the egomaniacs in DC not do either or both of these actions?

Because the voters aren't competent or interested in forcing them to do so. The US (and most of the modern world) is so damn rich that politics is more sport than governance, and news/entertainment media has become effective enough that any ability to make good decisions in spite of popular stupidity is just gone. This is an overall failure of democracy, not just an isolated government stupidity.

I don't see any real way it comes out except one of the following options:
1) write off the last century as a golden age of perfect good luck, and expect to get back to reality over then next few generations.
2) survive long enough for the singularity to change everything by enough that it just doesn't matter whose politicians did what stupid things.

i'm not sure it is a failure of democracy so much as it is a failure of too much centralization of political power. If the republic were less centralized, more regional and local in its power, some of this failure would have been less likely to occur. Perhaps we would have had different failures...:)

I hope that there are more options, but I fear you may be right.

You don't even have to "rip up" the SS debt. Treasury shorts SS, SS calls in the shortfall in loans in order to meet its obligations, which the government is legally required to honor, Treasury pays that out of revenues, the debt goes down by the amount called, and now the government is below the debt ceiling again.

Very creative. cool!

If the Fed and SS forgive US debt, wouldn't that be technically a default? Just like Moodys keeps threatening the Europeans and Greece that anything that looks like forgiving debt, or just restructuring debt is a default?

I think that Moodys, especially given they are mere "regulators", pressured by the US Government, would be able to draw a technical distinction between the outright "debt forgiveness" that is being attempted in Europe in Greece and the "mere" accounting transfer that I am describing. But since they all are corrupt and have hidden agendas, perhaps you are right.

Each worker has a separate SS account that shows how much money HE INDIVIDUALLY paid in while he was working. It's different for each worker. SS pays each person according to this. It's not something the current Congress can mess around with.

They'd sure like to, though. They borrowed money from the SS Trust Fund, and now they don't want to pay it back. Instead they want to cut SS benefits, or add a means test. They want to treat it like the Dole. Which wouldn't last long with a Republican government (or with a closet Republican Obama President).

I dont believe that the SS idea I suggest is something that the Congress cant mess around with, individual accounts or not. When they first started buying Treasuries for the SS Trust Fund, there was an uproar then, and yet that corrupt idea became policy. The idea I propose was pointed out then (albeit obliquely), that this will mean that we will now be creating an accounting fiction of investment, it was realized to be true, yet they did it anyway. This followup step is something that is less onerous than what they did in the first place, in my opinion.
All the individual accounts do is record the level of payback (relative to other accounts) that one might be due. Congress can (and will have to, someday) reform the actual payouts, perhaps, probably, they will still use that relative payin as an index of payout, but that record of paid FICA tax is just a piece of paper that can be used at will, with some law changes, especially by a system as centralized and distant as ours is.
Someday soon they will have to raise the age for receiving benefits, and maybe more than once. That is just one change. Congress can reform (or alter, whatever), the SS system as they deem fit, I bet.

You can call it an accounting fiction if you want, but the SS does that and the Treasury never makes good on the trust fund -- then we will have effectively financed regular government activities with regressive FICA taxes, instead of with progressive income taxes. People accepted the regressive nature of FICA *because* that money is intended as retirement insurance, not general revenue.

Right wingers have been perpetuating this meme forever that it is "merely an accounting fiction". It's not. That money has been set aside for a particular purpose, and if you simply forgive those bonds, then you've eliminated that.

Sorry if i implied the SS part of my post was an "accounting fiction", cause it is a few things more than that. But it IS an obligation of the US Government, one which it can (and will) change in the future. But yes, for now, I remove my foot from the proverbial 3rd rail of national politics.

the other part of what i wrote IS an accounting fiction, pure and simple, and all the Treasury has to do is tell the FedReserve to rip up that debt, and it will be obligated to do so. So, why havent they done that already?

You're right about the farce. If you'd like to listen to an hour long discussion about it:


Guy gives a number of ways (including yours) where a hard deadline is essentially meaningless. It's all talk. Obama wants things squared away before the elections, the Republicans would like things to explode before the elections. Geithner just wants this to get through so he can finally resign and "spend time with his family"

'Cause that's exactly what I'd do if I was confident that the economy was about to recover. I'd resign, right away -- that way the next guy in gets all the credit. It makes perfect sense. Unless...

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