Without getting too high up on my horse, and certainly not trying to turn this blog into a platform for my views, humor me this week, because I was shocked at the number of people who didn't recognize the phrases "debt crisis" or "economic downgrade".....particularly people my own age. If you turn on the news or pick up a newspaper, it's almost impossible to miss, yet we do. It's easy to get suckered into day to day life, or to be so fed-up with mess in Washington so as to not want to tune in for the latest fiasco - I know because it happens to me, too, from time to time. But our democracy, a government of the people by the people, demands at least some level of involvement. Could you spend 10 minutes a week reading up on the current issues? Have you ever written to your congressmen to tell them what you think? Are you even registered to vote?
If you are interested in those things, but not enough to go look them up yourself, let me make it a little easier:
Let’s use the simplified version of a credit card to explain the debt ceiling, which here is the maximum borrowing power of a governmental entity. You apply and get a credit card, and they give you a $1000 limit to start. You go, you purchase some things, make regular payments on the interest, but soon find that you are at $950, and still have some other things to buy. So you call up the credit card company, ask if they will raise your limit to $2000, and they say that since you've been making regular payments, sure, no problem. Things are going great for the next few months, you're still making payments, but you've spent enough that now you're up to $1900. Another call to the credit card company, another limit raise to $3000. Which goes great - regular payments, etc. - until you're at $2900. Unless you start to change how you spend your money, every few months you end up back in the same boat.
You have to ask yourself, at what point do we say there's a problem? Our current U.S. debt is over $14.5 trillion. If Congress and the President can't agree on something, we may default on our loans on August 2nd. Remember, we have a democratic administration, but a republican-dominated house right now. So let's break down who is involved, and where parties stand on the major issues:
Major Players:
We've got a few weeks until that August 2nd deadline, and it seems that Democrats and Republicans can't compromise. All of the talking of those major players listed up top is going on behind closed doors. Reid has a bill (the Reid Bill) that passes through the Senate, but gets voted down in the House because it included the largest debt increase in U.S. history, tax hikes, and puts off any further resolutions for 2 years. Boehner's bill (Cut, Cap, and Balance) would cut the deficit in half next year, cap federal spending, and balance the budget so we're not spending more than we're making. It passed the House, but the Senate tabled it (meaning they won't even vote on it, meaning their votes won't be on record in the next election). Obama vowed to veto the bill if it ever made it to his desk. He also keeps talking about how we need a solution, but hasn't proposed anything.
There's a lot of squabbling, finger-pointing, name-calling, and we are within days of the deadline. It's not like we didn't know this was coming - Congress put working on the budget off for 800 days already. A lot of congressmen are tired of having bills sent to them at 3 in the morning, having to read and vote on it by 3 that afternoon, and are unable to propose any changes to it when we shouldn't have waited til the last minute to deal with this.
We manage to pass a bill right at the deadline. It allows the president to increase the borrowing limit by $400 billion immediately, but has to cut $917 billion over the next decade. Obama can hike the limit another $500 billion later, and only be blocked if Congress actively votes to disapprove. It also sets up a select committee of 12 congressmen that will look for a way to cut another $1.5 trillion from the deficit over the next decade. This "super-congress" will have to make its recommendations before Thanksgiving, whereupon other members of Congress won't be able to make modifications, only vote the cuts up or down. If the committee somehow fails to agree on cuts (much like what just happened with the whole of Congress), the debt bill also includes triggers to cut $1.2 trillion, divided between domestic spending and the military.
You may have noticed some spending cuts, but remember what those credit rating agencies said? If we don't make $4 trillion in cuts over the next 10 years, they will downgrade our credit rating. Here comes the part where everyone votes with their money. Two of the companies (Moody's and Fitch) let us keep our AAA rating for now, but put us on the negative outlook list. It's like putting us on probation, and is contingent on our follow-through (i.e. there had better be some more major reform that addresses this or we get downgraded soon). The third company, S&P, took a few more days to tell us their verdict: we are downgraded to AA+ (same as Belgium and New Zealand - there are 18 countries ahead of us now with a AAA rating). On Thursday, August 4th the DOW dropped 500 points in 1 day (about 3%). Everyone is waiting with bated breath til Monday morning to see what happens on the market since we've been downgraded, but most predictions aren't good. The more question there is about financial security, the less people spend and expand and take risks, and the further into a double-dip recession we go.
That's pretty much my summary.
I've got one more thing I'd like to include - a throw-back to history and Reaganomics. Here's a video (pretty unbiased, just economic) from Reagan's economic adviser: http://video.foxnews.com/v/1094994303001/path-to-double-dip-recession. It's not in this video, but there was another phone interview with this guy, and he laid it out there again as government spending needs to change. He said all governments and businesses will borrow some money to put into things that will generate prosperity - you have to do it. But we shouldn't be spending the money we borrow on welfare for people who need to get jobs, stimulus packages and bailouts for companies that need to fail, money on wars abroad we don't belong in, and the list goes on. The spending has to come down for the economy to go back up - and there will still be dicey time of recession in that transition, but we can stop the double-dip from cutting too deep if we do it right. I like his thoughts, personally.
Starting to think this is a disaster and your disappointed in our current leadership? Remember that link to tell your elected representative what you think and what it will take to win your vote in the next election? Go ahead.....do it.
If you are interested in those things, but not enough to go look them up yourself, let me make it a little easier:
- To register online to vote: http://www.rockthevote.org/rtv_register.html%20
- To contact your congressmen: http://www.house.gov/writerep/
- To catch-up on current events: http://www.cnn.com/US/
- And for anyone who believes in actively supporting the 2nd amendment: http://home.nra.org/#/ila
Let’s use the simplified version of a credit card to explain the debt ceiling, which here is the maximum borrowing power of a governmental entity. You apply and get a credit card, and they give you a $1000 limit to start. You go, you purchase some things, make regular payments on the interest, but soon find that you are at $950, and still have some other things to buy. So you call up the credit card company, ask if they will raise your limit to $2000, and they say that since you've been making regular payments, sure, no problem. Things are going great for the next few months, you're still making payments, but you've spent enough that now you're up to $1900. Another call to the credit card company, another limit raise to $3000. Which goes great - regular payments, etc. - until you're at $2900. Unless you start to change how you spend your money, every few months you end up back in the same boat.
You have to ask yourself, at what point do we say there's a problem? Our current U.S. debt is over $14.5 trillion. If Congress and the President can't agree on something, we may default on our loans on August 2nd. Remember, we have a democratic administration, but a republican-dominated house right now. So let's break down who is involved, and where parties stand on the major issues:
Major Players:
- President: Barack Obama (D)
- Speaker of the House: John Boehner (R) (pronounced bay-ner)
- Senate Majority Leader: Harry Reid (D)
- Senate Minority Leader: Mitch McConnell (R)
- D: want a savings and debt limit deal that gets the U.S. government past the date of the next election on November 6, 2012
- R: have backed short-term solutions that would reopen the debt ceiling debate in 2012 as the election season gets underway
- D: willing to include tax increases, want to close tax loopholes, and want to increase government revenue in overall deficit reduction plans
- R: have ruled out tax increases as part of any debt limit deal, mostly opposed to including revenue increases
- D: opposed to including a balanced budget amendment in exchange for a debt ceiling limit increase
- R: Tea Party caucus (group of supporters or members of a political party or movement) strongly support including a balanced budget constitutional amendment
- D: opposed to deep cuts in key social welfare programs, especially social security payments and health care
- R: willing to include aggressive cuts and revisions to social welfare programs as part of long-term savings
- D: support plan that includes $1 trillion on lower spending on military operations in Afghanistan and Iraq
- R: say reduced military spending should not be counted as part of deficit reduction proposals
We've got a few weeks until that August 2nd deadline, and it seems that Democrats and Republicans can't compromise. All of the talking of those major players listed up top is going on behind closed doors. Reid has a bill (the Reid Bill) that passes through the Senate, but gets voted down in the House because it included the largest debt increase in U.S. history, tax hikes, and puts off any further resolutions for 2 years. Boehner's bill (Cut, Cap, and Balance) would cut the deficit in half next year, cap federal spending, and balance the budget so we're not spending more than we're making. It passed the House, but the Senate tabled it (meaning they won't even vote on it, meaning their votes won't be on record in the next election). Obama vowed to veto the bill if it ever made it to his desk. He also keeps talking about how we need a solution, but hasn't proposed anything.
There's a lot of squabbling, finger-pointing, name-calling, and we are within days of the deadline. It's not like we didn't know this was coming - Congress put working on the budget off for 800 days already. A lot of congressmen are tired of having bills sent to them at 3 in the morning, having to read and vote on it by 3 that afternoon, and are unable to propose any changes to it when we shouldn't have waited til the last minute to deal with this.
We manage to pass a bill right at the deadline. It allows the president to increase the borrowing limit by $400 billion immediately, but has to cut $917 billion over the next decade. Obama can hike the limit another $500 billion later, and only be blocked if Congress actively votes to disapprove. It also sets up a select committee of 12 congressmen that will look for a way to cut another $1.5 trillion from the deficit over the next decade. This "super-congress" will have to make its recommendations before Thanksgiving, whereupon other members of Congress won't be able to make modifications, only vote the cuts up or down. If the committee somehow fails to agree on cuts (much like what just happened with the whole of Congress), the debt bill also includes triggers to cut $1.2 trillion, divided between domestic spending and the military.
You may have noticed some spending cuts, but remember what those credit rating agencies said? If we don't make $4 trillion in cuts over the next 10 years, they will downgrade our credit rating. Here comes the part where everyone votes with their money. Two of the companies (Moody's and Fitch) let us keep our AAA rating for now, but put us on the negative outlook list. It's like putting us on probation, and is contingent on our follow-through (i.e. there had better be some more major reform that addresses this or we get downgraded soon). The third company, S&P, took a few more days to tell us their verdict: we are downgraded to AA+ (same as Belgium and New Zealand - there are 18 countries ahead of us now with a AAA rating). On Thursday, August 4th the DOW dropped 500 points in 1 day (about 3%). Everyone is waiting with bated breath til Monday morning to see what happens on the market since we've been downgraded, but most predictions aren't good. The more question there is about financial security, the less people spend and expand and take risks, and the further into a double-dip recession we go.
That's pretty much my summary.
I've got one more thing I'd like to include - a throw-back to history and Reaganomics. Here's a video (pretty unbiased, just economic) from Reagan's economic adviser: http://video.foxnews.com/v/1094994303001/path-to-double-dip-recession. It's not in this video, but there was another phone interview with this guy, and he laid it out there again as government spending needs to change. He said all governments and businesses will borrow some money to put into things that will generate prosperity - you have to do it. But we shouldn't be spending the money we borrow on welfare for people who need to get jobs, stimulus packages and bailouts for companies that need to fail, money on wars abroad we don't belong in, and the list goes on. The spending has to come down for the economy to go back up - and there will still be dicey time of recession in that transition, but we can stop the double-dip from cutting too deep if we do it right. I like his thoughts, personally.
Starting to think this is a disaster and your disappointed in our current leadership? Remember that link to tell your elected representative what you think and what it will take to win your vote in the next election? Go ahead.....do it.
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