Tuesday, August 2, 2011

Debt ceiling. What next?

Phew, sigh, and one big :-)  the kids in Washington who were playing chicken on their bikes sure did give us all a scare and make it look close, but luckily they all bailed out with just enough time to avoid a big spectacular crash.  Good show all!  I mean, it was a show right?  What else could that whole series of events been beside a staged act.  And in the end all they did was leave everyone in the audience hanging until next season when we'll all find out what really happens next.  Woah.  Who could have seen that formula plot coming at us all? 

But here is a strange twist about which I would like to find out more.   Link to story..

"... Another $1.5 trillion would be sought this fall by a special committee with unique power to force congressional action. If it fails to reach that goal, spending could be cut by $1.2 trillion automatically, divided equally between defense and domestic programs. "
Call me a cynic, but the phrase "special committee with unique power to force congressional action" raises a red flag for Constitutionality issues.  I presume those unique powers over Congress will eventually get challenged in court. We'll see how that all turns out. 

Here are some things I would do, knowing we are broke. 
  • Sell major tracts of US owned property up to and including Territories and perhaps States.
  • Reduce US military presence in foreign nations by closing most military bases in Germany, Korea, etc. 
  • End the tax deduction for church contributions.  Salvation doesn't need a tax deduction.
  • End the tax shelters referred to as private foundations and assign their assets back to the owners.
  • End the war on drugs.  A monumental waste of money and lives to prop up police employment.
  • Promote merging of Municipalities into regional authorities.  Does every Mayberry RFD need a mayor, police chief, etc,?
  • US mail reduced to 3 days delivery per week.  Saves gas and trees and no one will miss it.
  • Public Schools convert to 4 day weeks.  Immediate 20% drop is busing costs
  • Quit using the Navy as a global escort service for ships bringing imports into US.
  • Quit subsidizing the production of ethanol and other farm products

We need to grow out of the economic crisis. We can't shrink to prosperity.  To grow an economy the most important thing to do is reduce waste and reallocate the resources that were saved somewhere else where they will be more productive in the big picture. 


  1. Nice post Jim. We appreciate you writing and giving us Econ types a place to comment.

    You are right about the super-committee. We saw what happened with the deficit commission. The commission never actually issued a consensus report because they couldn't agree (even though the press often refers to Simpson's report as the commission report). Same deal with this new committee I would bet. And you're right, they don't have force of law. Just another committee.....

    These budget ideas are good ones. The only concern I have is that you say "knowing we are broke." I know it is all through-out the press but it seems to be the kind of news that sells papers and TV shows.

    I don't believe we are broke. It's Pete Petersen and the Repubs scare mongering. They are not stupid they know that if folks are scared they will agree to anything. However we could be broke someday if we really worked at it. But we must remember, we the people have the power. Nowhere in our constitution does it say we need to have money to vote. So, we the people could, if we wanted to, tax the crap out of everyone starting tomorrow and be debt-free in a year. I don't think being broke is the issue.

    Unfortunately most of the budget and debt reporting only focuses on our liabilities and not our net worth. We could spend $1 trillion dollars building buildings this year and the entire amount would come off this years budget even though this property would have an expected life of 30+ years. Before knowing we are broke we should consider the assets we own collectively; $1.6 trillion in Gold, Forex Bonds, and Oil reserves, leases, etc. Some 1.2 million buildings and 650 million acres of land yada yada. Not to mention the bridges, roads, dams and planes, weapons. The bond markets know this, T-bonds went up when the S&P downgraded.

    The Repubs have done a disservice to the American people in their attempts to oust Obama. They are very clear in their goal to be obstructionist. They only want Obama out and they don't seem to care about their constituents or they see their constituents as big money.

    My prescription is to balance the budget of course, but not now. We are not broke and since we are sovereign and have our own currency we are extremely creditworthy. We just need some cooperation in Congress and the economy, like a big jet that needs folks calmed down so it can raise up off the runway and fly!!!! The voters need to go to the polls in 2012 remembering the game of "chicken" Cantor, Boehner, Ryan et al played with their economic future.

  2. Thanks and you bring up some good points John. But the debt is about equal to the GDP, so it can't be eliminated by short term taxes, as that would put us way to far to the right on the Laffer curve and it would bring everything to a grinding halt.

    Now I do agree with your point that the USA has untold billions in land and assets around the country, but I'm not sure how you put a dollar number on them or how they could be used as collateral for a loan. I did write a post a while back that maybe we could sell Alaska to Canada for a couple trillion. link here.


    When people are short on cash and can't pay the bills they have to sell the cottage up north, and that's about what Alaska is for the USA. Every single year Alaska sucks in more tax dollars than it generates for the rest of the USA. Why do we even need it?

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