You may have been distracted by events related to New Year’s Day and negotiations over the “fiscal cliff” to notice that the United States reached its authorized debt ceiling of $16.394 trillion on New Year’s Eve. Rich Barbieri and Jeanne Sahadi reported on the CNN Money website Monday morning:
It’s official: U.S. debt reached its legal borrowing limit Monday, giving Congress about two months before it must raise the debt ceiling or risk causing the government to default on its bills and financial obligations.
“I can confirm we will reach the statutory debt limit today, Dec. 31,” a Treasury Department official said Monday.
As for increasing the nation’s debt ceiling yet again, U.S. President Barack Obama doesn’t want debate from Congress on the subject. From Reuters this morning:
President Barack Obama vowed on Tuesday to avoid a repeat of last year’s divisive fight with Congress over an extension of the nation’s borrowing authority.
“While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up,” Obama said in remarks in the White House.
“I will not have another debate.” Hmm. Back on December 5, Zachary Goldfarb wrote on the Post Politics blog on the Washington Post website:
As part of the fiscal cliff negotiations, Obama has proposed effectively ending the need for Congress to periodically raise the debt limit, which Republicans have rejected.
I wonder if this proposal won’t be pushed again in the near future?
By Christopher E. Hill, Editor
Survival And Prosperity (http://www.survivalandprosperity.com)
Barbieri, Rich and Sahadi, Jeanne. “It’s official: U.S. hits debt ceiling.” CNN Money. 31 Dec. 2012. (http://money.cnn.com/2012/12/31/news/economy/debt-ceiling/) 2 Jan. 2013.
“Obama Debt Ceiling Statement: Limit Increase Not Up For Debate After Fiscal Cliff Showdown.” Reuters. 2 Jan. 2013. (http://www.huffingtonpost.com/2013/01/02/obama-debt-ceiling-fiscal-cliff_n_2394164.html). 2 Jan. 2013.
Goldfarb, Zachary A. “Obama on debt ceiling fight: ‘I will not play that game.’” Post Politics. 5 Dec. 2012. (http://www.washingtonpost.com/blogs/post-politics/wp/2012/12/05/obama-on-debt-ceiling-i-will-not-play-that-game/). 2 Jan. 2013.
“The U.S. runs out of federal borrowing authority around the end of the year, but the Obama administration can use special measures to extend borrowing through late February or early March. As part of the fiscal cliff negotiations, Obama has proposed effectively ending the need for Congress to periodically raise the debt limit.”
-Washington Post website, December 5, 2012
Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital, talked about the looming U.S. “fiscal cliff” and a White House proposal to give the President the power to raise the nation’s debt “ceiling” as needed in his December 3 entry on The Schiff Report YouTube video blog. Schiff, who correctly-predicted the bursting of the U.S. housing bubble and 2008 global economic crisis, zeroed in on the debt limit proposal:
This could be a moment where our creditors maybe get shocked into reality. To understand the situation that they are in, that we are in. That there is no limit. That we will borrow money until we can’t do it anymore. That we’re not going to do anything about this crisis. We’re not going to do anything to diffuse this ticking bomb. It’s simply going to go off. And I think our creditors are going to want to put as much distance as they can between themselves and the explosion. They’re going to want to sell dollars. They’re going to want to sell debt denominated in dollars. What is that going to mean? A weaker dollar and higher consumer prices for Americans. It ultimately means higher interest rates for Americans. It means the rug is going to be pulled out from the slowing economy. It means we’re going to go over the Mother of All Fiscal Cliffs, and one that is impossible to avoid.
So, my advice is don’t wait for that. Get out of your dollars. I’ve been saying this for a while, but I think the urgency, and the time with which to do it, is going to be running out. So you get out of your dollars. Get out of any debt denominated in any dollars. Because we’re not going to pay our bills, we’re going to inflate them away, which is the same thing as default. So you don’t want to ride out that inflation. You want to get out of U.S. currency. You want to look at foreign currencies where the governments are much less irresponsible. Look at real money. Look at gold and silver. Look at foreign stocks if they’re suitable that pay dividends. Do whatever you can to get out of Dodge, because just when the government assures you that there’s nothing to worry about, that’s the time where you need to worry the most.
“Debt Ceiling & the Fiscal Cliff”
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)
The federal government keeps spending… and the nation’s financial health keeps on deteriorating. Rachelle Younglai wrote on the Reuters website last night:
The Obama administration said on Wednesday that the nation would hit the legal limit on its debt near the year’s end, although it can tap emergency measures to stave off a default and keep the government running into early 2013.
As of Monday, the U.S. Treasury was $235 billion below the $16.4 trillion statutory ceiling on the amount it can borrow. That gives the government enough funds to pay its bills, including interest on its debt and retirement health benefits, until the end of the year, the Treasury said, reiterating a forecast it made in August.
So, the U.S. national debt is on track to reach $16.4 trillion by the end of 2012.
As I pointed out back on September 4 when the Treasury Department revealed the debt had surpassed $16 trillion:
When President George W. Bush took office, the national debt stood at $5.768 trillion.
By the time President Barack Obama occupied the White House, the national debt had risen significantly to $10.626 trillion.
During the Bush 2.0 administration, the national debt increased by $4.858 trillion.
So far in the Obama administration, the national debt has increased by $5.39 trillion.
Make that last figure around $5.8 trillion by the end of this year.
Our “financial reckoning day” is fast-approaching…
Younglai, Rachelle. “UPDATE 3-U.S. gov’t poised to hit debt limit before 2013.” Reuters. 31 Oct. 2012. (http://www.reuters.com/article/2012/10/31/usa-debt-idUSL1E8LV2LU20121031). 1 Nov. 2012.
This afternoon I was surfing the shooting sports news site AmmoLand.com when I came across the following warning from the gun rights group Gun Owners of America:
Gun owner registration … bans on semi-automatic firearms … adoption of a UN gun control treaty — all of these issues could very well be decided over the next 24 hours.
Both houses of Congress will be voting on a debt ceiling bill that establishes a legislative committee with TREMENDOUS powers. Fox News is calling this committee a SUPER CONGRESS, because its legislative proposals (which could include gun control provisions) CANNOT be filibustered or amended in the Senate or House.
Have you heard about this “Super Congress?” The Huffington Post’s Ryan Grim wrote back on July 23:
Debt ceiling negotiators think they’ve hit on a solution to address the debt ceiling impasse and the public’s unwillingness to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress.
This “Super Congress,” composed of members of both chambers and both parties, isn’t mentioned anywhere in the Constitution, but would be granted extraordinary new powers. Under a plan put forth by Senate Minority Leader Mitch McConnell (R-Ky.) and his counterpart Majority Leader Harry Reid (D-Nev.), legislation to lift the debt ceiling would be accompanied by the creation of a 12-member panel made up of 12 lawmakers — six from each chamber and six from each party.
Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote. With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law. A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits. Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.
(Editor’s notes: Italics added for emphasis)
Both Grim and the Post’s Michael McAuliff added yesterday morning:
Senate Democrats are exploring ways of giving the proposed “super Congress” even greater super powers, according to multiple news reports and congressional aides with knowledge of the plan.
Under the new proposal, if the new legislative body, made up of six Democrats and six Republicans from both chambers, doesn’t come up with a bill that cuts at least $1.5 trillion by Thanksgiving, entitlement programs will automatically be slashed.
Under the reported framework, legislation the new congressional committee writes would be fast-tracked through Congress and could not be filibustered or amended.
Returning to that AmmoLand piece and how a proposed Super Congress could potentially impact gun rights, GOA noted:
To understand what a huge deal this is, consider that House Speaker John Boehner is able to keep a mountain of gun control bills from coming to the floor of the House. That’s the power of the Speaker.
And in the Senate, we have been able to kill much of the gun control agenda by filibustering legislation (that is, requiring the Majority Leader to get a supermajority or 60 votes in order to pass gun control).
The most recent example of this occurred earlier this year when we defeated a radical, anti-gun judicial nomination (Goodwin Liu) using the filibuster. The filibuster has been our saving grace in the Senate, but that could be tossed within the next 24 hours.
Regarding the debt ceiling compromise, here’s what one legislative analyst (inside a Republican office on Capitol Hill) had to say:
Right now, we have limited protection from the schemes of the left – even if they have some Republican support, we have a speaker who wouldn’t bring horrible bills to the floor, and we have the Senate filibuster.
Both of these are rendered moot by the Super committee. There is NO Senate filibuster on the product they report. The Speaker CANNOT stop a vote in the House….
[Hence], 22 liberal Republicans can join the Congressional Democrats and the President in: Closing the gun show “loophole,” banning semi-automatic weapons, creating a national handgun registration, or ordering state gun laws moot.
While the idea of a Super Congress is being pitched as some super-efficient way of keeping this nation on-course in dealing with our massive debt, who’s not to say the responsibilities assigned to such a panel won’t be expanded down the road.
Gun Owners of America. “Congress To Vote On Super Congress That Could Be Usurped to Impose Gun Control.” AmmoLand.com. 1 Aug. 2011. (http://www.ammoland.com/2011/08/01/congress-to-vote-on-super-congress-that-could-be-usurped-to-impose-gun-control/). 1 Aug. 2011.
Grim, Ryan. “’Super Congress’: Debt Ceiling Negotiators Aim To Create New Legislative Body.” Huffington Post. 23 July 2011. (http://www.huffingtonpost.com/2011/07/23/super-congress-debt-ceiling_n_907887.html). 1 Aug. 2011.
Grim, Ryan and McAulif, Michael. “Super Congress Getting Even More Super Powers In Debt Deal.” Huffington Post. 31 July 2011. (http://www.huffingtonpost.com/2011/07/31/super-congress-debt-ceiling-deficit-deal_n_914272.html). 1 Aug. 2011.
I haven’t touched on the debt ceiling issue and related potential debt default by the United States as it’s my belief that the ongoing “debate” is just another example of political posturing, especially when one considers the fact that the nation’s debt ceiling has been raised 102 times since 1917, with 10 of those increases occurring since 2001. But tonight, America’s central bank is weighing in on the prospect of a default. From Reuters’ Kristina Cooke and Tim Ahmann this evening:
The Federal Reserve is actively preparing for the possibility that the United States could default as a deadline for raising the government’s $14.3 trillion borrowing limit looms, a top Fed policymaker said on Wednesday.
Charles Plosser, president of the Philadelphia Federal Reserve Bank, said the U.S. central bank has for the past few months been working closely with Treasury, ironing out what to do if the world’s biggest economy runs out of cash on August 2.
“We are in contingency planning mode,” Plosser told Reuters in an interview at the regional central bank’s headquarters in Philadelphia. “We are all engaged. … It’s a very active process.”
(Editor’s note: Italics added for emphasis)
Cooke and Ahmann also talked about the U.S. Treasury Department’s take on all this. From the article:
The Treasury has repeatedly said default was unthinkable and that there was no alternative to raising the debt ceiling. Plosser’s remarks marked the most extensive public comments yet on preparations for a default from a U.S. official.
A Treasury spokesperson could not be immediately reached for comment.
Bloomberg’s Wes Goodman and Cheyenne Hopkins discussed Treasury’s stance on raising the debt ceiling and a potential default back on July 6. They wrote:
The U.S. must raise its debt limit, the Treasury Department said after Reuters reported that officials are discussing legal options to stave off default if Congress fails to amend the ceiling by the Aug. 2 deadline.
“As we have said repeatedly over the past six months, there is no alternative to raising the debt limit,” Colleen Murray, a Treasury spokeswoman, said when contacted late yesterday in the U.S. “The only way to prevent a default crisis and protect America’s creditworthiness is to enact a timely debt limit increase, which we remain confident Congress will do.”
Considering the chaos in the global financial system that would likely result from not increasing the debt limit- and the tremendous pain the Federal Reserve would experience from an actual default- I have to wonder if Plosser is merely acting as a Fed mouthpiece here, with the central bank hoping his statements might induce a concerned public to contact their legislators and demand an end to the drawn-out posturing.
My prediction? The debt ceiling will be raised. And it will keep getting raised until we the hit the proverbial brick wall.
Ahmann, Tim and Cooke, Kristina. “Exclusive: Fed planning for potential default.” Reuters. 20 July 2011. (http://www.reuters.com/article/2011/07/20/us-usa-debt-fed-idUSTRE76J6IT20110720). 20 July 2011.
Goodman, Wes and Hopkins, Cheyenne. “U.S. Treasury Department Says It Sees No Alternative to Raising Debt Limit.” Bloomberg. 6 July 2011. (http://www.bloomberg.com/news/2011-07-07/u-s-treasury-department-says-it-sees-no-alternative-to-raising-debt-limit.html). 20 July 2011.
Before I introduce the latest “Resource of the Week,” I want to recap all the prior ROTW’s since Survival And Prosperity came out last November for those who might have missed them (the posts are also archived in the sidebar under “Categories,” “Resource Of The Week”). Starting from the beginning:
• “Survival Database Downloads”- A multitude of survival-related downloads compiled by “Rourke” on ModernSurvivalOnline.com, “Thoughts on Survival and the World Today”
• Shadow Government Statistics- Home of John Williams’ Shadow Government Statistics electronic newsletter, which “exposes and analyzes flaws in current U.S. government economic data and reporting, as well as in certain private-sector numbers, and provides an assessment of underlying economic and financial conditions, net of financial-market and political hype”
• Financial Sense® Newshour- Financial/market broadcast hosted by money manager Jim Puplava on the week’s market action, interviews with financial experts, and Jim’s personal perspective on the markets/economy
• STRATFOR- Website for “The Shadow CIA.” That’s what Barron’s once called Strategic Forecasting, Inc., or STRATFOR, a global intelligence company that distributes a number of intel products, two of them being the free reports Geopolitical Weekly and Security Weekly.
• The Survival Podcast- Daily online audio show hosted by modern survivalist Jack Spirko that focuses on self-sufficiency and self-reliance in the modern world
• Weiss Ratings’ “Strongest & Weakest Lists”- Weiss Ratings’ lists of their strongest and weakest-rated annuity insurers, auto insurers, banks and thrifts, business insurers, credit unions, health insurers, homeowner insurers, life insurers, long-term care insurers, and medigap insurers
• American Red Cross’ “Preparedness Fast Facts”- The Red Cross’ emergency-specific checklists, developed using the latest research, science, best practices, and expert opinion
This week’s ROTW is Comeback America Initiative’s “Slide Pack.” CAI is a Bridgeport, Connecticut-based project headed up by founder/CEO David M. Walker. Why does that name sound familiar? On March 24 I wrote:
I used to follow former Comptroller General of the United States David M. Walker quite a bit. Appointed by President Clinton, Walker served as Comptroller General and head of the Government Accountability Office from 1998 to 2008. While at the GAO, Walker warned Americans about the nation’s long-term fiscal challenges as part of the “Fiscal Wake-Up Tour.” Frustrated by Washington’s refusal to confront these challenges, Walker left the public sector on March 12, 2008, to head the Peter G. Peterson Foundation and continue his work on righting a sinking ship. On September 17, 2010, it was announced that David Walker was leaving the foundation to launch a new project called the “Comeback America Initiative.” As the Founder and Chief Executive Officer of CAI, Walker continues to engage the public and promote fiscal solutions to America’s significant financial hurdles.
On the same day I penned the above, the former chief accountant of the United States appeared on CNBC’s Squawk Box and warned that America could be rapidly-heading towards a debt crisis. He said:
I think we’re going to have an adult conversation. We just need to have it sooner rather than later before we have our own U.S. debt crisis. You know, a U.S. debt crisis could come within the next two to three years. We have huge interest rate risk. We have the lowest average maturity of any sovereign nation or major nation on debt. We have historically-low interest rates. We’re adding debt at record rates. We have to rollover a great amount each year. Our largest holder of our debt is the Federal Reserve. I mean, that’s not an arm’s length transaction. And QE2 is supposed to expire on June 30. Wake up Washington- we’ve got a problem. It’s time to come to work.
David Walker designed the Comeback America Initiative “to promote fiscal responsibility and sustainability by engaging the public and assisting key policymakers on a non-partisan basis in order to achieve solutions to America’s fiscal imbalances.” CAI hopes to “keep America great and the American Dream alive for future generations.”
“Welcome to Comeback America Initiative”
YouTube Video Link
On the CAI website is an 84-page publication packed with easy-to-read charts entitled “Comeback America: The Nation’s Fiscal Challenge and A Way Forward.” This “Slide Pack,” as the CAI site calls it, provides what might be the best, most complete, easily-accessible picture out there of our nation’s financial health. Key charts include (in the order they were depicted):
• Growth of Government
• Defense, Social Security, & Medicare Per Capita
• Discretionary Spending Patterns
• Changes in Spending
• Composition of Current & Projected Federal Revenues
• Federal Debt Burdens
• Historical Deficit Levels
• Historical Receipts & Outlays
• Historical CBO Deficit Projections Vs. Actual
• Cash Vs. Accrual Federal Deficits (Fiscal 2000 –2010)
• Historical Debt Burdens
• Federal Debt Per Capita & The Political Party In Power
• Comparative Debt Burdens
• Fiscal Fitness Index
• Our Fiscal Future
• CBO’s Public Debt Projections
• Future Debt Burdens
• CBO Alternative Estimate of Projected Federal Deficits
• Growing Foreign Dependency
• Debt Maturity Trends
• Interest Rate Trends
• Interest Rate Sensitivity
• Federal Health Care Outlays
• Escalating Health Costs
• Historical Consumption Trends
• Health Cost Growth
• Comparative Health Costs
• Social Security Cash Flow
• Impact of Health Reform
• Entitlement Cost Growth
• Entitlement Programs Status
• Relative Defense Spending
• Historical Defense Spending
• Research Spending Trends
• Federal Revenue Composition
• Federal Revenue Trends
• Tax Burden
• Progressive Tax System
• Individual Tax Expenditures
• Effective Tax Rates
• Statutory Corporate Tax Rates
• Household Debt Levels
• Personal Saving Rates
• National Saving Rates
• State and Local Deficits
• State Property Tax Burdens
• State and Local Health Costs
• Pension and Health Obligations
• Pension and Health Funding
• Pension and Health Costs
• Total Liabilities and Unfunded Obligations Per Capita
• State and Local Ratings
• Statutory Debt Ceiling
Whew! You know that saying, “A picture is worth a thousand words?” Comeback America Initiative’s “Slide Pack” compilation speaks volumes concerning our nation’s present and projected financial health- yet still illuminates a path towards achieving fiscal responsibility.
The “Slide Pack” can be accessed on CAI’s site here (.pdf format).
(Editor’s note: Link added to “Resources” page)
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance the government’s reckless fiscal policies.
-Then-U.S. Senator Barack Obama, speaking on the Senate floor in 2006
I’m all for shooting for the stars. But this is just ridiculous. From the Associated Press today:
The United States just passed a dubious milestone: Government debt surged to an all-time high, passing $14 trillion – $45,300 for every person in the country.
That means Congress soon will have to lift the legal debt ceiling to give the almost maxed-out government an even higher credit limit or dramatically cut spending to stay under the current cap…
Remarkably, about half of today’s national debt was run up in the past six years. It soared from $7.6 trillion in January 2005 as President George W. Bush began his second term to $10.6 trillion the day President Obama was inaugurated and to $14.02 trillion now.
With a $1.7 trillion deficit in fiscal 2010 alone, and the government on track to spend $1.3 trillion more than it takes in this year, annual budget deficits are adding about $4 billion a day to the national debt. Put another way, the government is borrowing 41 cents for every dollar it spends.
In a letter to congressional leaders, U.S. Treasury Secretary Timothy Geithner said the $14.29 trillion debt limit could be reached as soon as March 31 and “most likely” by May 16. A showdown looks to be brewing over the issue, as Republicans in Congress informed President Obama and Democrats last week they won’t agree to raise the debt ceiling unless specific spending cuts are made.
“U.S. debt tops $14 trillion, nears ceiling.” Associated Press. 17 Jan. 2011. (http://www.washingtonpost.com/wp-dyn/content/article/2011/01/16/AR2011011604005.html). 17 Jan. 2011.
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