A Second Government Shutdown: U.S. Could Default on its Debt October 17th

So I guess congress has 45 minutes left to vote on a budget for next year.



700,000 Federal Employees will be sent home without pay
Including 400,000 Department of Defense employees
Smithsonian Institutions in Washington D.C. would close
National Parks would close
Passport and Visa offices would close
Department of Motor Vehicles would close
City Government in Washington, D.C. would shut down
Libraries would be closed as well

Hopefully this would only last for a week or so... although I have a friend from college who was a history major, is currently going to law school and was involved in state politics (D) that thinks that the government is not interested in keeping things running.

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So, even after the government shutdown (including 400,000 DOD jobs), we would immediately be proceeding onto the next problem involving the debt ceiling.

From a discussion I had with my friend, if congress does not agree on anything before the debt ceiling is reached, the default action that will be taken is that the government would default on its debt, which would affect its credit rating, and massively slow down not only the U.S. economy but the economy of its creditors - we would not be paying them back their debt payments.

The shutdowns in 1995 and 1996 lasted five and 21 days, respectively.

There would be a fairly big impact on the economy. Economists estimate that a two-week shutdown could cut GDP growth by 0.3 percentage points and one that lasted three-to-four weeks could cut growth by as much as 1.4 percentage points. That's a pretty hefty hit as the US was projected to grow and an annualised rate of about 2.5% in the fourth quarter.

And then it could get worse - the US could default on its debt.

So there you go, a double-hitter.

Until recently, it wasn't a big issue. Since 1960, the debt ceiling has been raised 78 times. The real debate was always over the spending bills rather than using the debt ceiling as a bargaining chip of sorts.

However, it has become a bargaining point with a divided Congress. This is the third time that there's been a showdown during the Obama administration.

And it has been damaging. In 2011, the US lost its top AAA credit rating for the first time. The rating company S&P made the historic downgrade partly on the basis of the fiscal impasse.

We lost our AAA credit rating due to almost defaulting.

BBC The U.S. Government Shutdown isn't the Worst of It

There has been talk about using the Executive Branch to bypass the debt ceiling, but the White House says doing so would be unconstitutional.

The argument over the 14th Amendment goes like this Section IV says that “the validity of the public debt of the United States, authorized by law … shall not be questioned.”

Therefore, if you believe that the “public debt” can’t be questioned in any context, the debt ceiling itself is unconstitutional.

Clinton said he would use the 14th Amendment “without hesitation, and force the courts to stop me.”

Last December, Obama spokesman Jay Carney said the 14th Amendment was off the table as a negotiating ploy.

“This administration does not believe that the 14th Amendment gives the president the power to ignore the debt ceiling—period,” Carney said.

And back in 2011, President Obama reacted to President Clinton’s comments with a widely quoted response “I have talked to my lawyers. They are not persuaded that that is a winning argument.”

Reviewing the 14th Amendment Debt Ceiling Argument

(Reuters) - U.S. Treasury Secretary Jack Lew warned Congress on Wednesday that the United States would exhaust its borrowing capacity no later than October 17, at which point it would have only about $30 billion in cash on hand.

U.S. to Exhaust Borrowing Capacity by October 17th

reply to post by darkbake


I was going to put this in the World War Three forum because it could cause a war or something, but I figured one step at a time.

They can't shut down.

What are the alternatives?

Cut spending-- they will... on you.

Shut down. Thats impossible.

Rasie the debt ceiling. Borrow more money.

darkbake
reply to post by darkbake

 

I was going to put this in the World War Three forum because it could cause a war or something, but I figured one step at a time.

edit on 30-9-2013 by darkbake because: (no reason given)

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I'm just curious, how would this cause WW3? we have had government shutdowns before, 5 times under Reagen, an no WW3 then. Why would this one be any different.

Like I said, just curious as to why you think this.

Ok, maybe not WW3, but any kind of war...

Thank you, that was in infromative read.
I wasnt previously aware of the 14th, although im not a US citizen so you know..

Okay next step then, what ramifications do you believe this will have in the international community?
Surely the lenders arent just going to stand by and say "oh well thats bad luck".

Thats like the school bully, telling the kid hes rolling for his lunch money, that he will pay him back.

intrptr
They can't shut down.

What are the alternatives?

Cut spending-- they will... on you.

Shut down. Thats impossible.

Rasie the debt ceiling. Borrow more money.

Too Late !!!

They did it !!!!!

www.abovetopsecret.com...

intrptr
They can't shut down.

What are the alternatives?

Shut down. Thats impossible.

Rasie the debt ceiling. Borrow more money.

There is basically a Civil War going on right now between the Republicans and Democrats, I think that it is entirely possible they aren't going to resolve this - the Republicans are completely willing to sink the ship if they don't get their Obama Care changes, and the Democrats are not going to give in.

We are already dealing with the government shutdown from October 1st, is it going to be possible to fix that and then immediately shift gears into solving the October 17th debt ceiling in time? Also, are we still going to hit the debt ceiling on October 17th?

Arnie123
I'm just curious, how would this cause WW3? we have had government shutdowns before, 5 times under Reagen, an no WW3 then. Why would this one be any different.

Like I said, just curious as to why you think this.

Ok, maybe not WW3, but any kind of war...

This would not just be a government shutdown (which we are in right now) but we would be defaulting on our debt and not paying our creditors (like China) the money we owe them. This means that China, and other countries, would have their budgets affected because they would not be getting the cash we owe them on interest payments.

We would also not be able to spend any more money, we would be left with $30 billion dollars - Washington State's budget for next year is going to be $33 billion dollars.

In addition, there are already tensions between the U.S. and Russia. Without a budget, our military could have trouble functioning, although I'm not sure on the specifics - I believe some troops may already be headed home -

So. It would definitely be an opportunity for terrorists, Iran and even Russia to strike at us while we are helpless - although I'm not sure they would.

NightTImeLord
Okay next step then, what ramifications do you believe this will have in the international community?
Surely the lenders arent just going to stand by and say "oh well thats bad luck".

I tried asking some people what they thought the ramifications would be on the international community or on our country in general, and no one was really willing to consider it - I did not get any clear answers.

Me: So what is the default that happens if congress does not vote successfully, defaulting on our debt or a bigger government shutdown?

Friend: No. It would be a refusal to pay off the credit card for the things we have already spent. Even worse.

Me: Would that crash the economy?

Friend: Let's just say that the United States government would have serious cashflow problems. And so would our creditors. Massive economic slowdown.

Me: What is Obama allowed to do with Executive Orders?

Friend: White House sources have said that Congress has to do this for it to be constitutional.

Me:

reply to post by darkbake


Fitting that a bunch of animals are the main picture of the B.B.C. YouTube video

I guess they are hopping foreign investors (china) will buy back whats left of America after those stupid selfish idiots left office. (both sides I mind you)

It just doesn't add up and the people that will pay the tab will be the population.

reply to post by darkbake

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Okay I see where you are coming from, but in all honesty, lets be real, despite whatever troubles these fools are facing in Washington, there is always going to be a budget allocated for military.

IMHO, I seriously don't think that because we have a government shut down that we are going to be left helpless to our enemies.

Take THIS shutdown for example, the Armed Forces all still got paid.

Even supposing the military did end up with a financial problem, I'm just not going to sit idly by an watch another foreign nation sail into our waters, let alone walk on our soil.......

reply to post by intrptr


would you Want a towel to wipe that egg off your face? never say never, the Gov is shut down!, if you did not receive the memo here is the link nbcpolitics.nbcnews.com... 17 times this has happend www.washingtonpost.com... from the link

Here is every previous government shutdown, why they happened and how they ended
By Dylan Matthews, Published: September 25 at 9:00 amE-mail the writer
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Since the modern congressional budgeting process took effect in 1976, there have been a total of seventeen separate government shutdowns (or "spending gaps" in Hill jargon).

Given that we appear to be headed for another one imminently, let's look back at those experiences, the political circumstances around them and what happened as a consequence. Most of the specifics were drawn from The Washington Post print archives, which you can access for a modest sum here.

It's also important to note that not all shutdowns are created equal.

Before some 1980 and 1981 opinions issued by then-Attorney General Benjamin Civiletti, a failure to fund some part of the government didn't necessarily mean that that part of government would stop functioning. Civiletti's opinions interpreted the Antideficiency Act, a law passed in 1884, as meaning that a failure to pass new spending bills required government functioning to shut down in whole or in part.

So the "shutdowns" listed below that happened between 1976 and 1979 did not always entail an actual stop to government functioning; they were often simply funding gaps that didn't have any real-world effect.

this is nothing new nor is it the end of the USofA it is a grand stand show boat for us to think it is and get all upset and panicked over , do not let it , let it run it's course if it is a month or two so be it , if this effects you then your not ready for a SHTF any way

reply to post by Arnie123


To begin with, I do agree with you, our country will probably stop paying all kinds of social programs before they dent the military too much.

400,000 Department of Defense employees aren't going to get paid, although I don't think that is related to the military.

The federal government has until midnight Monday to come to a spending compromise, otherwise there will be a partial government shutdown.

The partial shutdown would affect about half of the Department of Defense’s civilian workforce—around 400,000 people—while military and contractor personnel will not be affected.

Unlike the furloughs that resulted earlier this year, the DOD has fewer options when it comes to deciding how the furloughs should be divvied up and what services it affects.

The DOD is only allowed to keep services related to life and safety, as well as a few other essential services. Civilians that are involved in these activities may not be affected by the furloughs.

How the Government Shutdown Will Affect Department of Defense Employees

This is from Wyoming:

The Wyoming National Guard will furlough 400 technicians who work in human resources, logistics, purchasing, contracting and other areas. All active guard members will continue to work and be paid.

Shut it Down: Government Shutdown affects Parks, Military and Drilling in Wyoming

So yeah, very minor military cuts, but that's for the first shutdown, the debt ceiling could be more substantial.

reply to post by bekod


Thanks man, you got me interested, so I found this.

Wikipedia: List of U.S. Government Shutdowns


Oh, while I am at it, here is this that I just found. I think it lists the various effects of the shutdown.

Wikipedia: The U.S. Government Shutdown of 2013

reply to post by darkbake

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Yeah true that.

A lot of military families are also on Gov payroll for various other agencies, I don't know if you ever knew, but if your a civilian contractor under the government, you also get a set BAH like the military does, but nowhere near the full amount, like maybe 20%, but hey 20% is 20%! an anything helps in this day and age.
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As for military reservations, yes. Unless your in a huge post like Ft. Hood, a lot of the smaller post rely on surrounded federal lands to do their training on, BUT one simply doesn't go onto their, the military still needs permission because a lot of the land has animals that you just can't go around shooting and other preserves that we NOT aloud to go into. With the shutdown, nobody will be there to enforce those rules an preserves, better to keep everything out in case something happens and that delays training, hardcore, training at the UNIT is not very effective as it's a admin work environment.
I know in Hawaii, those ranges will be closed, but here in Ft. Hood, its all ran by us, so we still got to train.
Units are resourceful, they will find a way, even if training means sitting around a box of MRE's an learning how to eat an properly dispose of one.....

Meh. Most of these affected things shouldnt exist or exist at the scale they do anyway.

It's like me adopting 50 kids then threatening not to feed them. I never should have adopted 50 kids in the first place.

Oh no, I wont be able to see Travon Martin's hoodie at the Smithsonian!!!

reply to post by darkbake

Thing is they do this once in a while... wait, RT this morning relayed that the US government has "shutdown" 20 times since 1976!

Thats why I personally take this with a grain of salt. The government is going to just eventually raise rates, taxes and decrease benefits (yours not theirs).

Thats the end result. If you look at it in that light you realize they are just picking their noses up there and this is all another in a long line of dog and pony shows.

One day it will collapse but not because they actually did anything to stop it.

reply to post by bekod

would you Want a towel to wipe that egg off your face? never say never, the Gov is shut down!,

I like mine scrambled...

Like your link says, big damn deal. I have seen all those supposed "shutdowns". Its nothing more than fear tactics to get the American people to accept higher rates, taxes and less benefits (yours, not theirs).

I keep saying this, it will crash one day, because they let it. They over spent and let the bankers, corps, and military run wild.

As usual. (roll eyes emoticon)

Also while your taxes will not change one bit (except upward), the governing bodys pay will surely not change either (except upward).

I say put these men in a room and lock the door without pay. They'll have a budget in a day. Its taken them years to screw it up this bad because there are no consequences for them. They don't care about the people.

Just their own deep pockets.