Well our Secretary of the Treasury, Timothy "turbo-tax Tim" Giethner, is out talking about how a refusal to raise the debt ceiling will make the
Republicans responsible for the First Default of US Treasury Bonds in history.
Geithner: GOP will bear
responsibility for default
Treasury Secretary Timothy Geithner said Tuesday that if Republicans insist on passage of their budget plan as a condition for approving an
increase in the nation's borrowing limit, they will be responsible for the consequences.
Speaking to a New York audience, Geithner said that Republicans would bear responsibility for the first debt default in the nation's history if
they insist they will not vote for an increase in the $14.3 billion borrowing limit unless they win approval of a House Republican budget
Tim-may (ala southpark as I like to refer to him) seems to be taking a page from his Republican predecessor Hank "Skeletor" Paulson's handbook by
threatening TEOTWAKI if the administration (I say administration but I really mean the administrations masters on Wall Street) doesn't get it's way
in regards to the debt ceiling. In case you don't remember Hank Paulson went before Congress and pretty much extorted them with threats of "Tanks in
the streets" into the $800Billiion TARP at the outset of the Financial Crisis.
Giethner is obviously aware of the definition of default or he wouldn't be in the position he is in, so he must be lying for political purposes. For
those not aware, default happens when either a principal or interest payment to an obligation is missed.
In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled
payment, or has violated a loan covenant (condition) of the debt contract. A default is the failure to pay back a loan. Default may occur if the
debtor is either unwilling or unable to pay their debt. This can occur with all debt obligations including bonds, mortgages, loans, and promissory
In FY 2010 debt service was around 5% of all spending by the government. Since we ran and are running a huge deficit debt service is around 8% of
total revenue. Bad but not TEOTWAKI.
So why are things so dire if the debt ceiling isn't raised? Simple they are not. Timmay is lying and counting on you being too stupid or bad at math
to know the difference. Not raising the debt ceiling does not mean default it means that the government will only be able to spend what it brings in.
There is still plenty of money to pay the interest on the debt. What there is not, is money to pay for two, oops sorry I mean three wars, 99 weeks of
funemployment,welfare (individual and corporate), bloated beaurocracies, and a plethora of other non-essential spending.
Not only is Turbo lying about the math and default, he seems historically challenged as well. I know of at least two times that the US has defaulted
if not in fact but in practice. In the 30's when the US went off the gold standard and in the 70's when Nixon closed the gold window. I believe
there was once in the mid 1800's as well.
Now for an analogy that might make it understandable to most everyone. Hitting the debt ceiling is like maxing out the last credit card. But
fortunately, your credit card payments are only 10% of your total income. You've been using those cards to help out some family that might be: down
on their luck (basic unemployment), lazy (welfare/extended unemployment), elderly/sick (SS and Medicare), and you've got a gun fetish (defense), but
now some hard decisions must be made. The bank has said no increase what do you do? A smart person brings his gun fetish under control, says Eff You
to the lazy, and figures out a way to still help the helpless even if it's not as much as before.