A friend of mine was trying to explain to his children the significance of the debate going on over what to do about our national debt.
He showed them a clip of something you’ve probably seen: the National Debt Clock in New York City. On Monday, the National Debt Clock said our national debt was more than $14.4 trillion, and it said each family’s share of this monstrous total was $122,303.
Steve tried to explain the situation this way to his kids:
“Who would you vote for? Someone who promises to give you lollipops every day at school, even though he can’t afford them? Or someone who says he needs to take your desks away because we can’t afford to pay for them?”
Now that the Kabuki theatre, also known as the debt ceiling negotiations, is over, what really happened? And, who voted for the debt deal?
Lobbyists will be busier than ever in the next weeks and months ahead, trying to influence both the makeup and the recommendations of the new "supercommittee" that is supposed to recommend $1.2 trillion in deficit reductions over the next ten years. Under the terms of Budget Control Act of 2011 passed by the Congress and signed by President Obama on Tuesday, mandatory budget cuts will take effect if Congress cannot agree on the committee recommendations or some other plan to reduce the amounts being added annually to the nation's debt. The prospect of mandatory cuts has alarmed and aroused lobbyists and trade groups, especially those in the powerful defense and health care industries.
If you are as confused as I am about this new bill that increases our debt ceiling and is supposed to save the country from defaulting on its debts, it’s probably because we are getting conflicting reports about what’s in it. And if you scan down the text of the bill, you can see that it was not written so that the average individual could understand it. Indeed, I wish that all such laws passed by Congress would be accompanied by a simplified translation into plain English that the average citizen could understand.
Like so many of these laws crafted by congressional staffers, they are written in a kind of Washington legalese meant to make it impossible for ordinary folk to know what’s in them. For example, Nancy Pelosi said that they had to pass the Obama healthcare bill so that we could find out what was in it. Well, I have news. It’s just as impossible to know what’s in it after it’s been passed. Even the title of the law is meant to deceive the average citizen. Its official title is: Patient Protection and Affordable Care Act. Of course it’s nothing of the kind. It is the Federal Takeover of Healthcare Act. It passed the Democrat-controlled Senate on December 24, 2009. The Democrat-controlled House passed it on March 21, 2010, and our Socialist-in-Chief signed it into law on March 23, 2010. The first task of a new Tea Party Congress and White House in 2012 must be to repeal it.
Hours after Congress voted to raise the debt ceiling, the national debt rose enough to consume 60 percent of $400 billion allowed. According to the Washington Times, spending shot up $239 billion on Tuesday, the largest one-day increase in American history.
Other debt news includes this heartening tidbit: Thanks to the big jump, the national debt may well exceed the gross domestic product.
It appears that Republicans and Democrats, Congress and the White House, have arrived at agreement on the debt ceiling. To sum it all up: the debt ceiling will be raised (shocker there) and Armageddon will be averted! Both Republicans and Democrats are claiming victory for their respective sides. All of this was more than just a bit predictable. Republicans swore that they would not vote to raise the debt ceiling unless Democrats in turn swore not to raise taxes. Presumably, then, Republicans believed that we could afford not to raise the debt ceiling, that the alternative to not doing so, though perhaps not all that pleasant, would nevertheless be tolerable. At the same time, they continually told us that unless they agreed to raise the debt ceiling, world-wide economic catastrophe would ensue. So, the debt ceiling would have to be raised.
As GM share prices plunge so do Chevy Volt sales, according to the latest auto sales figures. Throughout July, a whopping 125 Chevy Volts were sold, making the seemingly low 281 units sold in February a groundbreaking month.
GM spokeswoman Michelle Bunker attributed the fallback to "supply constraints," alleging that GM was "virtually sold out" and supply was down nationwide. But Mark Modica, associate fellow at the National Legal and Policy Center, confirmed Bunker’s assertion was false, as he wrote on FoxNews.com:
President Obama announced a deal with Republican leaders to raise the debt ceiling, avoiding default. The deal would cut $1 trillion in spending over the next decade, “the lowest level of domestic spending since Dwight Eisenhower was president,” Obama said.
These governors are not sufficiently aware that “in China’s state-monopoly system of Leninist ‘capitalism,’ its corporations are instruments of national policy, fully integrated with, and subservient to, the Communist Party of China (CPC) and the Peoples Liberation Army (PLA).”
Moody’s announcement on Tuesday that it would retain its AAA rating of U.S. government sovereign debt as a result of the debt-limit agreement came with a warning: The government must rein in spending or risk a downgrade anyway. The deal “virtually eliminated the risk of [a] default,” but the agency warned that “Should the new mechanism put in place by the Budget Control Act prove ineffective, this could affect the rating negatively.” Moody’s added that it wanted to see the United States lower its debt-to-GDP ratio, now approaching 100 percent, to around 73 percent by 2015, and then gradually move the ratio lower.
Credit rating agencies like Moody’s issue opinions as to the credit worthiness of debt issued by various entities including governments, with 'credit worthiness” being defined as the ability to pay interest on and ultimately pay back the debt. Those ratings directly affect the interest rates offered in the issuance of that debt, and changes in a credit rating will impact the market value of the debt before it is retired.