Debt ceiling: America's budget crisis

[HONDO74]

Debt ceiling: America's budget crisis of its own creation
https://www.bbc.com/news/world-us-canada-64341875

A screen in New York city displays the US national debt in real time as it climbs


Fire up the giant digital billboards with their ever-increasing dollar displays. Start calculating how much every American man, woman and child owes. Cue the comparisons to a family budget, or credit-card spending or running a small business.

The national debt - and the legally mandated cap on the amount of new debt the federal government can issue - are back in the headlines.

First, a bit of context. The US government is in the enviable position of being able to issue new debt pretty much whenever it wants. American Treasury securities have been viewed as one of the safest, most stable investments in the modern world. In times of economic turbulence, US debt is a harbour in the storm.

If the US issues new government debt in the form of Treasury bonds, bills, notes and securities, there will be investors, both in the US and abroad, who are interested buyers.

While the current figures for the US debt - $31tn (£25tn) and growing - are astounding in both numerical and comparative terms, they do not represent an impending crisis.

The US debt-to-gross-domestic-product ratio, typically a more illuminating measure of a nation's ability to manage its debt, sits at 128%.

[healey36]

Print some money, then use it to pay down the debt. Highly inflationary, but life's full of trade-offs. The Fed's been doing it for the last fifteen years (see Quantitative Easing), which is part of the reason why we are where we are inflation-wise.

But it's "different this time"...uh, no, it's not.

[Rufus T. Firefly]

But it's "different this time"...uh, no, it's not.

Right; it's a lot of the same old, same old.

[Mitch]

McCarthy tells the President and Democrat congressional leadership that for every dollar that they want the ceiling raised he wants $3.00 in spending cuts. The Democrats are asking for more spending and more tax increases, so the odds of that happening is zero. You'd have a better shot at the Powerball or MegaMillions. It is Medicare/Medicaid, welfare & other social services, and the Military budget that are about 70% of spending. The 'Crats will not stand for any social cuts of any kind, and the Republicans will not allow any military cuts, so we'll be sittin' back waitin' for someone to blink. I think either one of those expenditures could survive a 10% cut, but when you ask the Democrats to give up 1 penny on every dollar, their eyes go wild and they rant and rave and begin flailing their arms about as if you're standing on their air hose, and they and the media begin reporting about killing grandma with the Draconian cuts in the budget. It is a never ending story.

[Rufus T. Firefly]

National defense, Social Security, healthcare, and interest payments account for about 70% of all federal spending.

And 67% of the population cannot afford a $400 emergency. That percentage has gone up while the emergency threshold has dropped. People are saving less than ever and failing to prepare themselves for shortcomings while living paycheck to paycheck.

[robert.]

This may be the 2nd year in a row i fail to make a deposit in my IRA. In the coming weeks i will sell off a classic LP collection. Prayers eBay can net me a worthy sum.
What happens if the USA defaults?

[Rufus T. Firefly]

This may be the 2nd year in a row i fail to make a deposit in my IRA. In the coming weeks i will sell off a classic LP collection. Prayers eBay can net me a worthy sum.

Good luck! I've thought about selling mine off, but it seems like a lot of work.

What happens if the USA defaults?

Not much, just world wide depression....

[healey36]

I don’t think anyone knows as it’s never happened before. Theoretically the debt rating downgrades, which then drives up the interest rate the U. S. will have to pay to borrow. Suddenly the Chinese and others stop buying U. S. debt offerings for fear of another default, or worse. The amount of the budget consumed by payments of interest on the debt goes way up. It’s sort of a Catch-22, theoretically.

I see the Republicans are proposing a national sales tax of 23%-30% to replace the Federal income tax. I hope folks are smart enough to realize what that would do to them.

[robert.]

That national tax had a snowball’s chance in hell.
We don’t really have a world wide booming economy by raising the ceiling we are defaulting . Just calling it by different terms. We should have sold those 31 tanks to a non nato country. That would have placed some money back into the till.

[Mitch]

I see the Republicans are proposing a national sales tax of 23%-30% to replace the Federal income tax. I hope folks are smart enough to realize what that would do to them.

That's dead in the water, healey. McCarthy and some other 'Pubs are against it, and there'd be a snowballs chance even if it cleared the House. I don't think it even cleared the committee. It supposedly would eliminate all taxes, ie individual & corporate, Medicare FICA, any of the Fed taxes, while the originator of the bill would still allow for state income taxes. There simply is no way they'll ever balance a budget because they need it all: tax increases across the board, spending cuts across the board, and there is no way that happens as neither side is gonna budge. They wanted a balanced budget in 10 years. I heard it on the business channel today that to do that they would have to eliminate 70% of all spending while paying off the debt, which is costing 1/2 trillion dollars per year.

[healey36]

Even after working in accounting/finance for nearly forty years, I can’t wrap my brain around the complexity of accumulating and servicing the national debt. So complicated, so many moving parts. Certainly the tax structure will need to change incrementally over time. For instance, as EVs become pervasive, how will the Federal highway funding part of the budget (currently partially funded by an excise tax on gasoline and diesel) be accomplished?

[robert.]

They can place a meter on charging stations public/private. At some point they will tax. Batteries. One thing is for sure. Given enough time our government will be able to find a method of taxation.

[Rufus T. Firefly]

For instance, as EVs become pervasive, how will the Federal highway funding part of the budget (currently partially funded by an excise tax on gasoline and diesel) be accomplished?

Odometer numbers. That info will get used somehow.

[robert.]

For instance, as EVs become pervasive, how will the Federal highway funding part of the budget (currently partially funded by an excise tax on gasoline and diesel) be accomplished?

Odometer numbers. That info will get used somehow.

That could create a hardship on people. I would need to be collected monthly. Imagine paying your gas tax once a year. By the end of a year lots of people wont have $400-1,200 a car.

[Rufus T. Firefly]

For instance, as EVs become pervasive, how will the Federal highway funding part of the budget (currently partially funded by an excise tax on gasoline and diesel) be accomplished?

Odometer numbers. That info will get used somehow.

That could create a hardship on people. I would need to be collected monthly. Imagine paying your gas tax once a year. By the end of a year lots of people wont have $400-1,200 a car.

Well, it might be a hardship if they are as sharp as a bag of wet mice.

If they are driving an EV then they aren't paying a gas tax all year or getting their oil changed, or paying for emissions testing, etc. They need to actually think about that yearly taxation - x dollars per y miles and set that aside....or pay it quarterly like a lot of other people pay their state and Fed income tax.

Maybe it's time for people to take a little personal responsibility for their finances instead of looking for excuses and blaming everyone else for their own poor decision making.