h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

When you think about countries defaulting on their debt, it's usually some Third World nation that comes to mind. Argentina has done it more than once, I believe. Mexico has come close. Even Brazil. We're watching Iceland and Greece twist in the wind for recent budgetary black holes that they've gotten themselves into.

But the United States? This is pure, honest to goodness shame that many of my fellow Americans are feeling. Okay, the default has not yet happened, but our governmental leaders in Washington, D.C. have until August 2. The day after tomorrow, but without Dennis Quaid and Jake Gyllenhaal.

I've seen so many ideas about working around the crisis that I'm a little dizzy. The 14th Amendment to our Constitution apparently would allow our President to issue an executive order to raise the debt ceiling enough to avert the crisis. Another idea is that the Federal Reserve could make the money supply larger by running the government printing presses. The problem with this solution is that the amount of U.S. paper currency in circulation has an upper limit that is statutorily fixed. Okay, here's where things get loony: there is no limit on the number of coins that can be in circulation. Therefore, the president could direct the Treasury Department to create titanium coins worth one trillion dollars each. All it has to do is create two of them, deposit them in the Treasury, and issue bonds based on them. Did I say this sounds loony to me?

We are in a Depression. It is not *yet* as severe as the one of the 1930s, nor even the almost-depression that was narrowly averted in 1906. The U.S. bailed out huge banks and mortgage companies and auto makers with money that it didn't actually have, on the grounds that the alternative (letting them go under, with the resulting sudden contraction of funds) was worse. Yeah, that probably would have been worse, but now we have a hideously overextended U.S. Government. That which we call "entitlements" (monthly checks to Social Security recipients, Medicare programs, medicaid money, pension payments to U.S. Government workers) will likely be trimmed. I feel very, very sorry for the people who will be affected by these cuts. Chances are, few (if any ) of them caused the financial fiasco that had to be resolved with almost a trillion dollars of bailouts to banks etc., yet they likely won't get cost of living raises in future years. Their younger friends and relatives will have to work to later ages before they can get any benefits at all.

Social Security benefits are *not* all that generous. Medicare is a great deal (my mother has been in convalescent homes three times since she turned eighty; all of these stays were paid for by Medicare).

If the U.S. *does* default, the ripples will likely spread across the seas, as well as deeply into the U.S. economy itself. Borrowing costs will go up for pretty much *everybody* (including the U.S. government). What we are being alerted to now, though, is that local cities and towns and states will have higher borrowing costs as well, and there might not be as much money to borrow as they would like.

Not to mention the Long Depression of 1873-1896. During that time, I have it on anecdotal evidence that a farmer and his wife saved their property tax a penny at a time. If they couldn't pay the 80 cents or so, they might lose their ancestral farm.

I hate economics. I'm hoping the 14th-Amendment argument works. Failing that, titanium coins.

But people, don't drag everybody down with you. It is absolutely no comfort to be yelling at this point, 'We told you so!'

But, hey, we did. We did when they outsourced everything in sight. We did when they acted like Warren Harding, and let business have its own way about it all. We did when we tried to point out that you can't balance a budget just by eliminating cheap little social programs. Somewhere along the line, the military has got to take a cut or two.

They've got a hiring freeze on in at least parts of the Navy. The nuclear people had to cut their budget. This I know only because I've got relatives who aren't going someplace they'd planned to be this summer.

Thanks, Dmitri. I hear that Obama is understandably reluctant to use the 14th Amendment.

Our social programs tend to be neither cheap nor little, but the people who benefit from them are not living in the lap of luxury.

So many times during the last 15 or 20 years, our Congress and President (whoever they happened to be at the time) were put into situations where they pretty much *had* to commit the country to some very expensive options. Saddam Hussein was kind of unforgiving when he invaded Kuwait; there wasn't much chance that we could avoid being part of the force that went in against his armies. Likewise, those terrorists who destroyed the Twin Towers and killed almost 4,000 people who were simply going about their work. One might argue that Iraq was unconnected to al-Qaeda, but *someone* needed to roust Bin Laden out of Afghanistan. Then there was about $900 billion in stimulus and bailout money that averted (or postponed, depending on your economic background) a major depression.

Individually, each of those expensive projects had something going for it. In my humble opinion, the Iraq incursion was the least defensible. Nevertheless, once the country had committed itself to going in, we were obligated to pay whatever bills resulted.

The Republicans have some kind of bug in their bonnet about raising taxes to whittle down the deficit. Were they always this adamant? I remember George Bush senior raising taxes in the early 1990s, which would have been about 20 years ago. I think he was acting respobsibly.

The Health Care program is eing phased in over several years, so I don't know how much new decifit it will pile on top of what's already there.

Still, the bottom line, for me, is that if you promise to pay somebody for a product or service, you're a deadbeat if you don't pony up the money for it.

I doubt the two of us could ever agree about whether all those wars were necessary. Or who did what to whom.

But you're right - they need to find a way to pay for stuff. This is a mess.

it's all a play to the gallery. We've seen it before

I can respect your views on the wars, Dmitri, whatever those views are. The second incursion into Iraq turned out to be a money pit that was plagued by civilian casualties and suicide bombings. All I'm saying is that we shipped some talented, committed young men over there, and too many of them came back in boxes or shattered in body or mind. You talk about cutting back on the military budget. Wanna bet that the *first* part of the military budget they trim is VA hospitals? It drives me up a tree thinking about grievously maimed men in hospitals, and their own country doesn't want to pay for their care. Heck, we treat dogs better than that!

Good point, Paul. Elektra and I were fussing about that yesterday. Remember when soldiers' families were buying them body armour?

I would never say a word against the VA. An aunt of mine was a VA nurse her whole career, and the VA treated many of my relatives.

Their care of my dad was a wonder in itself.

Crisis over

I wonder what brought (brings) this on

You never hear anything like this in Denmark, Germany, France, the UK

There must be a specific historical reason

My learned colleague has lectured me that this is in fact also going on inside the EU. A member country may only owe a certain percentage of its gross national income (or something along that line) and the reason why Greece is knee deep in natural fertilizer stems from them not living up to the standards

Your learned colleague is right, Pierce. Each of the last five or six Presidents has added to the national debt. It's a bipartisan problem . Obama has added 2.4 trillion in two and a half years. His predecessor, George W Bush, has added 6 trillion in eight years. I don't remember how much the others added, but it was less.

An update, though probably anybody who has been reading this thread knows what happened anyway. On Monday, the lower chamber passed the compromise debt ceiling bill. Yesterday, the Senate followed suit, and the president signed it right away.

My father argues that the tea Party activists played a useful role by saying that reducing the national debt had to be the number one priority. They would not budge from the position that the reduction had to happen by way of deep spending cuts, and not through raising taxes.

Although no one involved had much good to say about the final bill, it did incorporate the best parts of all the proposals that had been made. It met President Obama's standard of bipartisan balance. No one likes to drink poison, but this was the least awful poison that they could come up with.

So much for averting the crisis of default in the short term.

Longer term, no one really knows how this is going to affect the world economy. An educated guess is that spending cuts will have the effect of removing stimulus to the U.S. economy, which is still trying to recover from its brush with depression. Obama recognizes this, and has asked that the cuts be gradual enough that they don't derail the recovery. The last President who dealt with this type of scenario was herbert Hoover, who dutifully balanced the federal budget every year, only to see the Depression get worse and worse.
This could conceivably happen for us as well, but with the offsetting factor of a social security and medicare and health-care safety net to keep the hardest-hit people from falling through the cracks.

Keep your fingers crossed, everybody. Medicare providers came into this with cuts from the health care program. Now they are likely to suffer further cuts, and some of them won't make it. We will see some hospitals and nursing homes go under.

It always seems to be the weakest and poorest in society that have to tighten their belts and are always the ones have their funding cut for any help that they get from central government as over here many with charities that are helping the most vulnerable in society.

That's quite true, Katrine. The "No more taxes" people seem impervious to the fact that levels of taxation in the U.S. are at a fifty-year low. Concentration of wealth in the hands of the wealthiest is more pronounced than it has been in decades. People in the lowest echelons of society have little or nothing to fall back on when hard times arrive.

I'm speak in generalities, though. There would certainly be exceptions -- extraordinarily versatile people who can support themselves with produce from well-managed gardens, and recycled items from thrift shops and even landfills. Scott and Helen Nearing proved the point in the 1970s and 1980s by retiring to Maine and living self-sufficiently on a farm well into their nineties.

Meanwhile, there are affluent families who squander their wealth through bad judgment, mixed with substandce abuse and gambling addictions.

A lot of money is gambled away. This rivals the amounts that are put into retirement accounts. Most (but not necessarily all) of the people that blow their money at casinos and in state lotteries can afford to lose it, but there are many who cannot.