Reaching the Debt Ceiling Does Not Equal Default - Please Read

My fellow ATS members,

You are being lied to by politicians, TV and radio pundits, "news" channels, and pretty much everyone else. On August 2, 2011, if a deal is not reached to raise the debt ceiling, the United States of America will not default on its debt payment obligations.

The legal definition of default is "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" (Default (finance) at Wikipedia.org).

Unless President Obama and Timothy Geithner plan on not paying the minimum payments on our debt obligations, we will not default. Now, the money to pay those obligations may have to come from other areas, but they will be paid.

I've fallen upon tough times in my adult life, where bills have come due and I had to decide how I was going to make things work. I know from experience that when push comes to shove, you will find a way to pay the bills, even if it means Ramen Noodles for two weeks. Our country could face a similar situation. If we are no longer legally allowed to increase the national debt to keep everything running at status quo, it DOES NOT mean we will not make the necessary payments on our debt. It does mean that difficult decisions will need to be made.

Perhaps everyone in the government making $150,000+ per year will have to take a pay cut. Heaven forbid! Or maybe funding to research programs that put shrimp on treadmills will need to be put on the shelf. Or maybe we won't be able to bomb nine other countries at the same time. Whatever decisions are made, I can tell you this: If Obama puts Social Security on the chopping block first, the overwhelming majority will utterly oppose him and any agenda he puts forward. But there is a big IF. If and only if we tell the people relying on Social Security the real story. If they know that cuts could come from other areas of government first and Obama decided to sacrifice them, they will not be happy.

But honestly, I think Obama is being an economic fear-monger. He is trying to convince everyone that we must raise the debt ceiling to avoid Armageddon. He is trying to instill more fear than Bush did. And that's saying something!! I think he is trying to get people to think emotionally, rather than rationally about the situation. People who rely solely on their emotions are easier to manipulate.

I firmly believe it is far past due for the government to guarantee a balanced budget every year. How do we expect to plateau on our national debt if we always have deficits? If we can have a balanced budget, meaning we spend no more than what we take in (including interest payments on our debt), we will be able to stop the national debt clock. Once there is stability and the economy improves, we will be able to reassess how much we can pay toward the debt. Hopefully we can get the debt clock to roll in reverse! That is, if interest rates don't explode first.

We can start by cutting the food stamps. it's not fair to look at how much money im forced to spend on food each week, while you get it all for free.

Move back in with mom and dad and pool your money together, I don't care. Stop leeching off the government.

and subsidized housing can go to. Free apartments? WTF?? I pay frikken $600 a month for that. WTF?

reply to post by Mikeyy


Suck it up champ.

Yeah, wouldn't raising the debt ceiling be the equivalent of raising the spending limit on your credit card? In this case, it is of course with the intention of maxing it out, just to ask for another increase a few months down the road. This would not technically mean we've defaulted, but it's definitely a sign we are way over extended and are in serious financial trouble. It also means more of our taxes will be going towards interest on the debt and not towards paying down the debt itself, which is always the goal of the lender.

When are we going to come to terms with the fact that we don't have the money to continue operating the current system and that raising the debt ceiling does absolutely nothing but exacerbate the problem? It's like buying an alcoholic another 12 pack.

reply to post by Fury1984


If the debt ceiling isn't raised we cannot issue new debt to pay principle and interest on outstanding debt. So, as you say, it comes from somewhere else. This leads to a rather fast decline of governing power (what they can afford) and ultimately leads to a complete demise of the system. Meanwhile the chaos ensuing the collapse of the Governments ability to spend will send the Dollar into a tailspin, creating a global economic collapse long before the government actually, officially, defaults.

Well Op, your post is somewhat accurate.

What people have to realize is that the debt ceiling has already been breached. Our "public debt" is limited, but our actual debt is much higher. Some say "unfunded liabilities" are almost 100 trillion not the

Not default on FOREIGN creditors...

But yes it's a default on those who have government contracts... health care providers, military contractors, government employees pension funds... etc...

And SP said they would downgrade the US if they default on anyone in America even if they pay foreign creditors...

So kaboooooooom if the debt ceiling ain't raised.

That vid is pure crap. never base your opinions on anything you see on youtube.

Point 1 was not accurate. The deadline was pushed back because the treasury stopped certain programs to get to the august 2 deadline. Thats scrimping, and our goverment has already done it.
scrimping

point 2

comparing our fiscal debt to a credit card may seem logical. But its not. The accounting involved in our governments books is far more convoluted, large, and easily manipulated than a personal credit card.

point 3

I really dont think his 3rd point even supports his thesis. But??

Legislating by panic was 2008 and the over reaction by Hank Paulson that made many people very rich. Where is the panic here? We are talking about it on many forums. Its mentioned in the papers some. Wall street isnt panicked. I never hear this topic talked about. There is no panic. Not yet.

Originally posted by Vitchilo
Not default on FOREIGN creditors...

But yes it's a default on those who have government contracts... health care providers, military contractors, government employees pension funds... etc...

And SP said they would downgrade the US if they default on anyone in America even if they pay foreign creditors...

So kaboooooooom if the debt ceiling ain't raised.

your on the money. no pun intended.

If you live any where near a less than affluent neighborhood, and the debt ceiling isnt raised??

When the food stamps stop, there will "demonstrations"

not sending out the social security checks WOULD BE A DEFAULT!!

the money was borrowed by the gov't from the fund, or rather, and exchange was made, they money for paper that are much like our treasury bonds, that draw interest, and are PAYABLE ON DEMAND!! and that demand is activated if the fund needs the money to send out the checks!!

the gov't is under obligation to do this!!!

there are other things that could be cut, that quite honestly, most of the american people wouldn't never notice were missing!! they've been griping about the gov't debt for a couple decades now, but well, not only haven't they've taken the time to find these senseless items in the budget that no one really cares about, but they have just been creating new senseless items....
presidential coins that now need a new $600,000+ vault built, plus an extra million to move because no one wants them, and yet, they are still minting a million of the things a day!!
bridges for critters to cross the road, and so fish can swim upstream into overly polluted creeks.
bridges to nowhere, while important, main bridges are left to decay till they collaspe!!!
trips to europe to study billboards...
there's a ton of senseless expenditures that could be cleaned out, and yet, their first attack seems to be on the poor and elderly....
well, maybe, just maybe, if the first family would cancel one of their overseas trips, because we are so broke, the elderly and the poor would feel more kind hearted about giving up a little of what they are getting....
maybe, just maybe, if they put that airport that no one needs, and no one wants on the backburner, we'd get the message and see the need to pay a little more in taxes ....
leaders are supposed to lead!!! lead us dear leaders by example!!! you want us to trim our budgets down so that we can live in this ecnonomy on an $8 an hour job without starving our children, or raising them under a bridge?? fine show us how, show us you can run a gov't on just the money you are getting!! ten to one, that family trying to live on that eight dollar an hour job is doing a better job keeping to a budget than you are keeping the nation on it's budget, with it's trillions in revenue!!

reply to post by dawnstar


and I could ride my purple flying unicorn to the chocolate falls of the south Antarctic shore.

Nope, the poor and elderly are eating this default of "public debt" to foreign creditors.

The threat is not if we can pay the debt or not. -- no, you picking and choosing which credit card you don't pay, or letting the "buy here pay here" guys repossess your 1997 F150.

The problem comes from the perception -- that is why the bond rating guys are important, and they are saying that they are about to pull the trigger. If they do that then the US becomes toxic and the world moves on to a country that is a little more capable.

This is wholly different than your relationship with the WalMart layaway desk.

reply to post by Bluesquid


globalresearch.ca...

that's where all the money is, let's take back the bailouts, since they are just sitting on it, and still drawing interest on it.....

Originally posted by Vitchilo
Not default on FOREIGN creditors...

But yes it's a default on those who have government contracts... health care providers, military contractors, government employees pension funds... etc...

And SP said they would downgrade the US if they default on anyone in America even if they pay foreign creditors...

So kaboooooooom if the debt ceiling ain't raised.

After more thought, I think you are the most correct. It is not a default on our debt, but on our domestic obligations. I think that defaulting on our debt would be worse to the economy, but it's not good no matter how you cut it (no pun intended).

Ron Paul talks about this in his latest article: Debt Ceiling Drama