Government needs to borrow money every week or so to avoid default. That's how the current system works, and anyone who doesn't understand this basic issue needs to stay out of the credit ceiling debate.
I'm willing to listen to anyone who thinks they have a solution for getting us out of this "rolling debt" system, but unless you can solve both problems simultaneously, it will be better to just raise the debt ceiling and then start fixing the issue.
The problem is that they're going to raise the debt ceiling, and then not start fixing the issue.
At that point masterleep's comment is not quite so far out as you claim it is. On the surface, it's wrong, and yet in terms of the long-term dynamics that never actually get addressed, there's a definite point there.
> The problem is that they're going to raise the debt ceiling, and then not start fixing the issue.
Republicans have had control of the House since 2012, and a majority of the Senate since 2014. They haven't even passed a real budget (not this Continuing Resolution crap).
All that happens, is that more debt gets borrowed. How about actually passing a budget and telling the American people what services get cut? How about raising taxes for once? The US got out of its last major debt (ie: World War 2) by raising taxes on the highest bracket to 91%, and holding it there from 1940s through 1964.
If you don't got the courage to cut programs, then raise taxes. If you don't got the courage to do anything, then GTFO out Congress so that real decision makers can get in and actually try and solve the issue.
How do you solve the budget issue? You do it by cutting spending, or raising revenue. Or a combination of both. Period. There's no way around it.
The Debt Ceiling itself doesn't do jack diddly. And it has lost its effectiveness as a bargaining point in this new do-nothing Congress. Its time we get rid of the Debt Ceiling and just focus our debates on actually making the first actual budget for the Federal Government since 2012.
Look, I understand how the House and Senate being split from 2012 through 2014 caused the continuing resolutions of 2013 and 2014 to happen. However, with an entire year with BOTH houses under control of the Repubs, you'd expect them to actually get a budget to Obama by now.
>...How about raising taxes for once? The US got out of its last major debt (ie: World War 2) by raising taxes on the highest bracket to 91%, and holding it there from 1940s through 1964.
This is misleading. The effective tax rates were roughly the same then as now - very, very few people paid those high rates. Instead a lot of effort went into hiding income, getting tax deductions made into law, getting compensation in forms other than taxable income, etc . (For example, this is why employer paid for health insurance came about.) There were people who weren't able to avoid the high rates, but it was a tiny percentage of revenue. These high rates distorted economic activity (and surely stopped some economic activity that would have happened).
The reason the US got out of WW II debt is that federal spending dropped dramatically after WW II and the US had the advantage of being the major industrialized country that wasn't attacked in WW II.
Yeah. I mean, I blame the Democrats for not even holding a vote on a budget while they had the Senate. "Failure to fulfill their most basic legislative duty" was a phrase I read. It's just depressing that the Republicans aren't even pretending to pass one either.
The US Government is currently in the position of constantly rolling over its debt into new forms of debt. Much akin to how a person can continuously roll over their credit into new credit cards.
So as long as the market continues to give the US 0% loans, I'm not _super_ worried about borrowing. But we seriously need to get our spending and revenue under control.
Furthermore, the only people who can give the US Government a "credit cap" is Congress itself. This whole situation is a self-imposed limit on spending and debt. There is no Bank in the world who is denying credit to the US right now.
In essence, we'd be like a significant other saying "We can't pay this month's bills with ANOTHER credit card. I'd rather not pay any bills rather than take more credit"... despite the fact that credit is still available. Clearly, we need to get spending under control... but until we do so, taking additional credit opportunities is the only thing that is preventing the US from defaulting.
This reflects a fundamental misunderstanding of finance and capital structure.
Anyone operating a business has to have assets. In order to fund those assets, you issue a claim to either equity holders (your "owners" in the traditional sense) or your lenders.
There's nothing stopping a business from simply using debt, rather than owned money (equity capital) to fund a business long-term. You just treat the interest as an ongoing cost of doing business and never really "pay back" the debt. The New York subway (MTA), for instance, is entirely financed through a huge amount of debt historically used to pay for cars, railways, signaling systems, and everything else used to make the system go. The taxpayers just pay the interest on an ongoing basis and don't really "own" anything.
It's a nice system because the government doesn't have to make giant speculative purchases of land, buildings, and other long-term assets -- they can just lease them -- and usually they can borrow quite cheaply, so it works out for everyone. Bottom line, there is no "paying off the debt" -- governments and corporations operate much differently than how households think about debt.
I'm sure everyone can think of examples of government spending they don't like, but I've yet to see anyone make a credible argument -- and few people even try to make any argument -- that the US would be better either with any combination of spending cuts, revenue increases (either by taxation or sale of sovereign assets) that would eliminate rolling over debt.
Why is it that choosing to roll over debt is a "bad situation".
> It's amusing that you think an entity that needs to borrow more in order to service its existing debt is somehow not insolvent
You've just confused liquidity with solvency. An entity which is able to borrow money to service its existing debt (and, which therefore has assets providing a basis for access to credit sufficient to meet its obligations) is not insolvent, even if it needs to borrow money because it does not have sufficient liquid assets to meet those required payments without borrowing.
I'm willing to listen to anyone who thinks they have a solution for getting us out of this "rolling debt" system, but unless you can solve both problems simultaneously, it will be better to just raise the debt ceiling and then start fixing the issue.