The Debt Deception

The national and global discourse makes this association: Debt is to good financial practice as cancer is to good health. We’re now seeing the cancerous results of debt-centered financial practice worldwide, as countries are being eaten alive by debt, with some on the brink of collapse. We’ve been saying for decades that this day would come, and our reaping must follow our sowing.  But there’s a very personal aspect of this I have only recently realized.

We’ve all heard stories of a well-off married couple, man and wife (using an outdated definition of marriage, but sufficient for our purposes), where the man dies unexpectedly. Turns out that he had no life insurance. Turns out he had $50K in credit card debt. Turns out he mortgaged the house and wasted it all in Vegas. Turns out, after all the figures come in, the wife is now hundreds of thousands of dollars in debt. We shake our heads and murmur a tsk tsk. How could he?

After all, they were living pretty well. House on the lake. Vacation home in the mountains. Beautiful children. Pretty well indeed. Tsk tsk.

This story, is, of course, an illustration of what’s happening to us as a nation, and to other peoples of other nations. Our partner, government, is doing us wrong.  We lived our lives not completely ignorant of what was going on, but lazy enough not to stop it. We heard the warnings, but were not very motivated to heed them.  We heard about the fiscal cliff a few years ago, not realizing that we sailed off the cliff in the 1950s or 1960s, maybe before, and now we are in free fall. They say it’s not the fall that kills you, but the sudden stop at the bottom, and our partner cares nary a bit.

As I look back over my fifty-plus year life in America, growing up in a medium-sized city, attending average public schools, going to public college, and working regular jobs as a regular guy, I’m realizing that a large proportion of my America was bought with borrowed money. Think about all the things that massive debt spending has, in part, purchased.

• Interstate and most other highways
• Public utilities
• Public schools
• Moonwalks and space exploration
• Agricultural advances
• Basic scientific research
• The Internet
• All things retirement

Tax revenues and borrowed money have been mixed to pay for these items, the proportions being muddled, but we can get an idea by looking at the Federal deficit over the years. Since 1930, the government has run deficits in 74 of the 87 years.  (See historical figures published by OMB.) From 2006 to 2015, the average of deficits has been 770 billion dollars, per year.

Via: American Thinker

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40 Days: Treasury Says Debt Has Been Frozen at $18,112,975,000,000

CNSNews.com) - According to the Daily Treasury Statement for Wednesday, April 22, which was published by the U.S. Treasury on Thursday, April 23, that portion of the federal debt that is subject to a legal limit set by Congress closed the day at $18,112,975,000,000—for the 40th day in a row.

$18,112,975,000,000 is about $25 million below the current legal debt limit of $18,113,000,080,959.35.

Table III-C on the Daily Treasury Statement for April 22 shows that the federal debt subject to the legal limit began April at $18,112,975,000,000, began the day of April 22 at $18,112,975,000,000 and closed the day of April 22 at $18,112,975,000,000.

This is Table III-C from the Daily Treasury Statement of April 22, 2015, reporting that the debt subject to limit has been $18,112,975,000,000 for 40 straight days.

In fact, every Daily Treasury Statement since March 13—which was a Friday--has said that the debt subject to the limit has closed the day at $18,112,975,000,000.

Via: CNS News

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$17,000,000,000,000

President Obama boasted last week that he had signed legislation to lift “the twin threats” to our economy of government shutdown and default. But what was done to fix the problem of growing debt that leads Washington to repeatedly raise the debt ceiling?

Nothing. In fact, by Friday, the U.S. debt had rocketed past $17 trillion.

What does this mean?

• At $17 trillion, this number has passed total U.S. gross domestic product (GDP), the measure of all that is produced in the economy.
• Since Obama took office, the national debt has increased from about $10.6 trillion to more than $17 trillion—a 60 percent increase.

How quickly Obama changed his tune when he transitioned from Senator to President. Here’s what he said just a few years ago:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. (Senator Barack Obama, March 16, 2006)

Via: The Foundry

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U.S. debt jumps a record $328 billion — tops $17 trillion for first time

U.S. debt jumped a record $328 billion on Thursday, the first day the federal government was able to borrow money under the deal President Obama and Congress sealed this week.

The debt now equals $17.075 trillion, according to figures theTreasury Department posted online on Friday.

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The $328 billion increase shattered the previous high of $238 billion set two years ago.

The giant jump comes because the government was replenishing its stock of “extraordinary measures” — the federal funds it borrowed from over the last five months as it tried to avoid bumping into the debt ceiling.

Under the law, that replenishing happens as soon as there is new debt space.

Enlarge Photo

(Treasury Department) more >

In this case, the Treasury Department borrowed $400 billion from other funds beginning in May, awaiting a final deal from Congress and Mr. Obama.

Usually Congress sets a borrowing limit, or debt ceiling, that caps the total amount the government can be in the red.

But under the terms of this week’s deal, Congress set a deadline instead of a dollar cap. That means debt will rise by as much as the government spends between now and the Feb. 7 deadline.

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Judging by the rate of increase over the last five months, that could end up meaning Congress just granted Mr. Obama a debt increase of $700 billion or more.

Via: Washington Times

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Out of Control! Buying Time with Borrowed Money

WASHINGTON — Announcing the budget deal he reached with Senate Majority Leader Harry Reid, Kentucky Republican Sen. Mitch McConnell said on Wednesday he was thankful Republicans were at least able to keep in place the automatic spending cuts that went into effect across government agencies earlier this year.

 

“That’s been a top priority for me and my Republican colleagues throughout this debate,” the Senate Minority Leader said on the floor of the Senate, referencing what’s known as the sequester. “And it’s been worth the effort.”

But while the deal freezes in place current spending numbers, the budget deal actually blows through the sequester spending caps that were supposed to go into effect on Oct. 1 — by nearly $20 billion.

Via: Daily Caller

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Obamatude Ahead

It will be foolish to rush into a debt ceiling deal that fails to curb spending.

Polls show the nation growing impatient. The public wants Washington politicians to get a deal done now to raise the debt ceiling and open the government. Rushing is a mistake. The urgency of the debt ceiling is exaggerated, while the drastic consequences of a deal that fails to curb spending are being ignored.

Here are three reasons not to rush a settlement:

1. The U.S. will not default on its debt this week or anytime soon.

On October 7, Moody’s rating agency circulated a memo on Capitol Hill explaining that “there is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.” First of all, “there are no interest payments until the end of the month…. Thus, a Treasury based default is not technically possible until that date.”

What’s more, “the government is very likely to prioritize interest payments,” meaning servicing the debt before paying other bills.

Backing up Moody’s analysis, Fitch rating service called default “a low risk.”

Yet Rep. Peter T. King, Republican of New York, said “We’re now backed into a corner. We have to do this by Thursday. We have to make it work, but it’s not going to be perfect.” 

No one expects perfection in politics, but Republicans should be fighting to keep the “savings” they gained in 2011, in exchange for agreeing to the largest debt ceiling hike in history.

Via: The Spectator

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HURT: No need for lectures from a debt-saddled president

In the seven years since President Obama voted as a U.S. senator not to raise the federal debt ceiling any higher, he and his government cronies have piled up $7 trillion in crazy new spending that even our grandchildren have little hope of ever paying off.

We citizens signed no document assuming responsibility for this unthinkable spending binge. We never co-signed any trillion-dollar loans.

Yet as reckless and inexcusable as this crowd’s behavior has been, we never missed a payment. We just keep on paying the bills and these people just keep on racking up crazy debt.

Anyone caught failing or refusing to continue paying the bills — no matter how strongly they object to them — has been fined, kicked out of their homes, imprisoned or worse.

Still, Mr. Obama and his government cronies have gone flat broke, yet again, using our credit. And like drug-addled little punks, they have come home — stinking and drunk in the night — and are now pounding on the windows demanding one more loan. They are at the height of their drug-fueled binge and they’ve just got to keep it rolling.

Seven years ago, when then-Sen. Barack Obama objected to raising the debt ceiling, he said that merely bumping up against the debt ceiling was “a sign of leadership failure.”

“It is a sign that the U.S. government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies,” he intoned, senatorially.

Via: Washington Times

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It's back with a vengeance: Private debt

As Washington is struggling with debt and all its political ramifications, American companies and consumers are embracing it, running up record amounts in 2013.

Whether it's corporate loans, all quality levels of bonds or simple consumer credit, the debt party is back on in the U.S., whether it's in the boardroom or the living room.

Amid the financial crisis of 2008, the U.S. went into what economists call a "debt deleveraging cycle"—akin to a credit hangover, where the party has ended and everyone there decides to quit drinking cold turkey.

Somebody has clearly turned the lights back on, though, and corporate and individual buying is soaring.

Consumer credit, for instance, surged past the $3 trillion mark in the second quarter of 2013 and continues on an upward trajectory, according to the most recent numbers from the Federal Reserve.

Via: CNBC

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Obama’s national debt rate on track to double

Says raising limit ‘won’t add a dime’

President Obama likes to say that raising the nation’s borrowing limit “won’t add a dime” to the federal debt, but he neglects to mention that the government already has borrowed the equivalent of more than 60 trillion dimes since he took office.

When Mr. Obama became president in January 2009, the total federal debt stood at $10.6 trillion. This week, it hit $16.7 trillion — an increase of 57 percent. In the same time frame under President George W. Bush, total federal debt rose 38 percent. Under President Clinton, it rose 32 percent.

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The administration says the government will run out of authority to pay its bills by Oct. 17 unless Congress raises the debt limit again to allow more borrowing. The president portrays the move as one of simple responsibility.

“It does not increase our debt,” Mr. Obama said. “It does not grow our deficits. All it does is allow the Treasury Department to pay for what Congress has already spent.”

The president rarely mentions that he, by law, approves congressional spending, and his argument glosses over the nation’s burgeoning total debt.

“It’s certainly not the whole story,” said Alex Brill, a budget specialist at the American Enterprise Institute. “We’ve seen a dramatic increase in the debt held by the public in the last four or five years, and it’s projected to only get worse.”

Via: Washington Times

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Open thread: Obama to make undoubtedly helpful statement about shutdown at 4:45 p.m. ET; Update: “You don’t get to extract a ransom for doing your job”

Two ways he could go with this. One: Something conciliatory designed to make it easier for Boehner to agree to an eleventh-hour face-saving compromise. Two: Tough talk designed to show Republicans he intends to use the bully pulpit every day during a shutdown to make sure they bear the brunt of public discontent. The two aren’t mutually exclusive, of course, but we can all guess where the emphasis will lie. Per Dave Weigel, odds of a “let me be clear” happening shortly: North of 95 percent.

Boehner told reporters within the past hour that there’ll be no clean CR tonight. Stand by for updates.

Update: Wouldn’t surprise me if O uses the bulk of his time to pitch the ObamaCare exchanges opening tomorrow. The shutdown has created an intense media spotlight for him today; he’d be a moron not to use it while people are paying attention to get young adults to log in and sign up in the a.m. That may end up being his core message contra the GOP, in fact — “I’m not going to defund a program that’s starting literally tomorrow.”

For what it’s worth, a new poll shows that only one-third of the public wants Congress to defund, delay, or repeal O-Care. In fact, those who say they want the law expanded outnumber those who want delay/defunding.

Update: You might hear O mention this convenient data tidbit too.

Update: I’m skeptical, but here you go. For what it’s worth:

They’re going to pass it through the Senate when Boehner might not even be able to pass it through the House?

Update: The money line from O’s presser ended up being something about one faction of one party in one house of one branch of the government attempting to dictate terms after losing this fight in the last election. The rest of it was, as expected, a sales pitch for ObamaCare plus a reminder that the law can’t be defunded in the CR since spending for most of its core functions has already been appropriated. In other words, he said, the exchanges will open tomorrow, no matter what happens tonight.

Via: Hot Air

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The Atlantic Magazine Downplays America's Debt Burden

When the senior editor of The Atlantic, Derek Thompson, tried to explain away concerns over the massive unfunded liabilities facing the U.S. government repeatedly pointed out by experts, such as Peter Peterson (the former chairman of the Council on Foreign Relations), Boston University economics professor Laurence Kotlikoff, and James Hamilton of the University of California, he used a combination of false assumptions, simplistic reasoning, and frivolous complacency to do so.

It was Peterson’s incisive and persuasive book Gray Dawn, published in 1999, that first attempted to warn of the impending crisis. Without immediate and drastic changes to entitlement programs such as Medicare and Social Security, those programs would face bankruptcy, declared Peterson. Declining fertility rates and low tax revenues would exacerbate the problem, according to Peterson. In re-reading Gray Dawn in May 2013, professor Doug Erlandson said:

The problem has become worse since Peterson wrote his book. The predicted date of Social Security’s insolvency has been pushed up from 2040 (per Peterson’s projections) to the mid-2030s. The date that Medicare is projected to become bankrupt is even sooner.

Professor Kotlikoff presented his findings in a paper published by the International Monetary Fund in 2010 in which he stated: “The world’s largest economy faces a daunting combination of high and rising costs for health care and pension benefits and constrained sources of revenue that will put enormous pressure on its fiscal soundness.” One of Kotlikoff’s solutions was the immediate doubling of current income tax rates in order to make those two programs solvent. When such a draconian hike was simply ignored as fantasy, the reality of the government’s problems was reflected less than a year later when Standard and Poor’s downgraded America’s sovereign debt for the first time in history.

All of this was just a bit too much for Thompson, who decided to question these conclusions by doing some parsing of definitions. First of all, said Thompson, all that’s owed is “not our debt.” Part of what is owed is what the government has already spent using borrowed money. That’s “real” debt and must be paid back: “Failing to do so would be an illegal and disastrous default.”

On the other hand, the “unfunded liabilities” that Peterson and Kotlikoff are concerned about aren't “as real” because “we can change them whenever we want.” Fixing Social Security would be easy, said Thompson: "For example, raising the taxable income ceiling and slowing down the growth of benefits could reduce the Social Security gap to zero tomorrow."

Via: New American

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Watch Obama Botch the Debt Negotiations. Again. There's an easy way to best the GOP. The White House isn't using it.

How should Obama approach the next installment of our ongoing fiscal groundhog day?

The administration itself appears to be confused on this question. While the White House insists it won’t negotiate over raising the debt ceiling, negotiation appears to be precisely what it’s up to. Politico reports that White House officials are meeting with Republican senators on Thursday to explore a deal that would simultaneously fund the government past the September 30th end of the fiscal year, replace the sequester with a more sane combination of spending cuts and revenue, and raise the debt ceiling before it crushes us in mid-to-late October. 

his, to employ a clinical term, is nuts. Whether or not the White House maintains its no-debt-ceiling negotiation stance within these talks, the whole construct throws the GOP a lifeline where none would otherwise exist. After all, the Republican leadership knows it would be suicidal to force a debt-default by refusing to raise the debt ceiling. It also knows that forcing a government shutdown by failing to fund the government past September 30th would be politically disastrous. (John Boehner has said he believes it could cost Republicans their House majority.) But, of course, rank-and-file Republicans in Congress are demanding that their leadership hold the line on at least one, and preferably both, of those issues. The right-wingers want their leadership to balk at keeping the government open unless they can first defund Obamacare, and to resist raising the debt ceiling unless they extract massive additional spending cuts, particularly from entitlement programs.

Via: New Republic

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Debt Crisis Grows in Localities and States

States and localities owe far, far more than their citizens know.

Maria Pappas, the treasurer of Cook County, Illinois, got tired of being asked why local taxes kept rising. Betting that the answer involved the debt that state and local governments were accumulating, she began a quest to figure out how much county residents owed. It wasn’t easy. In some jurisdictions, officials said that they didn’t know; in others, they stonewalled. Pappas’s first report, issued in 2010, estimated the total state and local debt at $56 billion for the county’s 5.6 million residents. Two years later, after further investigation, the figure had risen to a frightening $140 billion, shocking residents and officials alike. “Nobody knew the numbers because local governments don’t like to show how badly they are doing,” Pappas observed.

Since Pappas began her project to tally Cook County’s hidden debt, she has found lots of company. Across America, elected officials, taxpayer groups, and other researchers have launched a forensic accounting of state and municipal debt, and their fact-finding mission is rewriting the country’s balance sheet. Just a few years ago, most experts estimated that state and local governments owed about $2.5 trillion, mostly in the form of municipal bonds and other debt securities. But late last year, the States Project, a joint venture of Harvard’s Institute of Politics and the University of Pennsylvania’s Fels Institute of Government, projected that if you also count promises made to retired government workers and money borrowed without taxpayer approval, the figure might be higher than $7 trillion.

Via: California Political Review

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U.S. Piled Up More Debt Since Election Day ’08 Than Under All Presidents From Washington Through Clinton

(CNSNews.com) - The federal government has now piled up more debt since Election Day 2008 than it did under all presidents from George Washington through Bill Clinton, according to official debt numberspublished by the U.S. Treasury.

When the polls opened on the morning of Tuesday, Nov. 4, 2008, the total debt of the U.S. government stood at $10,556,177,748,045.21 (the number it had reached by the close of business on Nov. 3, 2008). As of the close of business on Friday, Nov. 2, 2012, the most recent day reported by the Treasury, the total debt of the U.S. government stood at $16,206,129,028,709.29.

That is a four-year increase of $5,649,951,280,664.08.

According to the Treasury, the total debt of the U.S. government last surpassed $5,649,951,280,664.08 on June 21, 2001—five months after George W. Bush succeeded Bill Clinton as president. During the two years leading up to that date, the debt had periodically moved above and below that level, according to the Treasury, but since rising from 5,641,023,159,870.17 on June 20, 2001 to 5,650,400,532,764.38 on June 21, 2001, the debt has never again dropped below $5,649,951,280,664.08.

Thus, the $5,649,951,280,664.08 in new debt accumulated since Americans started voting on Tuesday, Nov. 4, 2008 exceeds the total debt accumulated in the first 224 years after the United States declared independence from England on July 4, 1776. That includes all the debt accumulated during the terms of all of America presidents, starting from George Washington, whose first term began in 1789, and running through Bill Clinton, whose second term ended on Jan. 20, 2001.

Via: CNS News

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