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Nicole Gelinas
TARP’s Shadow « Back to Story

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Bravo, que palabras..., el pensamiento admirable
http://www.shampes.com/

crystal
Your Op-Ed in today's LATimes, "A Free Market fix...housing hangover", is most welcome if indeed tardy by about three years. But the tardiness is not your fault.
I do object to "banks need to modify...by reducing the amount owed." The securitization of home loans and the reward this gives to home speculators who traded up all those bygone years...all parties need to take the hit. Many speculators took their gains and now need to take their losses. And don't forget the moral issues of reducing the loans. Thanks for the article.
City Journal should be embarrassed this intellectually shallow article even saw the light of day. And to take this opportunity to attack the Tea Party, really?
http://www.youtube.com/watch?v=2zago1FrIMk
I'm surprised this was actually posted on City Journal. The article falls right in line with progressive (and my) beliefs about the causes of the financial crisis and why our economic calamities continue - too little regulation, the government allowing banking institutions to become to big, and bailouts for banks rather than average Americans, leaving businesses with no one to buy their products.

I wonder if any of the other "free market" authors will contradict what Gelinas has said here? (I use the term in quotes because free markets are not supposed to be synonymous with anarchy. Where the different elements of perfect markets are not present, the government can potentially intervene to make things more efficient. City Journal's typical stance is something like "even when markets would fail, too bad; there's nothing that government can or should do about it.)
Part two , please Nicole . Read your readers' comments and then follow up with more insight . You have the ability if you have the desire .
Yeah ....... and ? Great insight and a very nescessary contribution to the debate followerd by a weak conclusion . We don't trust the insiders because the insiders continue to prove that they are so untrustworthy . We really have only one option and that is to refuse to pay and then force the insiders to make the overdue cuts .Excessive spending is a cancer and we must kill it before it kills us .
Random Blowhard July 22, 2011 at 2:34 AM
If the spending is not brought under control the United States will wake up one day and discover it no longer has the worlds "reserve currency" and is facing economic collapse ala Argentina 2001...

Look at the PIIGS in Europe, it can and IT WILL happen here...
We've been sliding just under the 100% mark of gross debt-to-GDP ratio for several months now. The debt is almost equal to the entire output of our economy. This is a precarious place to be as it is. The last time we exceeded this ratio was 120% of GDP during WW II, and we suffered skyrocketing inflation afterwards.

Cicely Tyson was correct when she said that the government can afford to spend more. That's not what I'm worried about in the near term. China is still buying and holding our bonds, just the long-term debt, not the short-term variety--they've divested the short-term stuff, probably because they see an increase in interest rates in the near future. Long-term, I'm worried that we won't be able to find it within ourselves to stop borrowing. The Fed has made it clear it will not allow interest rates to rise. It can only do this by creating more money. What I'm more worried about is we will continue to devalue our currency and run up inflation. This does terrible things to an economy if it isn't stopped.

In reality, a growing, more aggressive government discourages business activity. An inflationary environment actually makes people cash-averse, because holding onto cash, even saving, under inflation is a fool's game. It encourages borrowing instead, because then someone else is holding the bag at the end of the day. What actually happens is people go deep into debt, assuming they can pay it off tomorrow with depreciated dollars. The economic environment discourages long-term business investment, which is necessary for long-term economic growth, which is the only real way you can grow wealth in an economy, which is the only real way to keep people financially secure. Inflation destroys these aims. The sooner we realize that, the better off we'll be.
Its never a bad time to cut. A debt ceiling increase is exactly a good time to force the issue - because only the urgency of the default has the potential to force people to enact cuts. Agreed, reforms to Medicare and SS will not happen on an urgent basis, but there are so many, so many other areas to cut - and this opportunity must be used to cut.

As pointed out by many, a true default isn't at risk.

The big spenders don't play fair, they don't care, they just spend. To argue - foolishly in my opinion - that somehow it is unprincipled and dig in at this moment on cuts that are "window dressing" is unbelievable. Why not cut $100 or $200 billion a year now? Every day is a good day to cut waste.

It won't solve entitlements, but the big spenders are unprincipled, will raise spending at every opportunity, and will be checked only by absolute, unyielding will power to stop. If not now, when exactly does Nicole think it would be a good time to cut that non-entitlement unnecessary spending?

To "negotiate against ourselves" on the fiscal conservative side as to when its appropriate to cut seems ... well, to be blunt, it seems cowardly in face of the reckless spending bullies. Its not like entitlement reform hasn't been discussed since 2005 ...

And just a bit of history ... the slowdown (but not stoppage) of TARP got a marginally better deal than the original garbage that was proposed. So let's absolutely dig in and get the best we can.
What the wimpout Republicans don't get is that they are 100% totally in the drivers seat on this. The House could adjourn and go home and guess whag? There wouldn't be an increase in the debt limit and deficits would would stop today. And we also know that the interest on the debt would be paid and social security checks would still go out.

The fact is, Obama and the spendocrats have to accept whatever conditions the House cares to name in they want their precious debt increase!
What this writer and all the other purveyors of impending disaster that will insue if the debt ceiling is not raised, all these folks miss is somehow the market yield on U.S. treauries is if anything trending downwards.

It seems that the people who actually buy U.S. Treasuries didn't get the spendocrats talking points memo.
Yet another Conservative (I think) pundit tossing the Tea Party under the bus. You people keep talking about trees, while the forest is being consumed by Leftist fire. As far as the Tea Party is concerned, there is a line drawn in the sand. No more capitulation. Period. All this budget talk is window dressing, and the Tea Party knows it. Those GOP'ers who venture into the aisle will regret it at the next voting booth opportunity. If you think the Dems caught a lot of flack from their constituents over Obamacare, wait until you see what happens after this.
the gestalt of the article is correct - working, tax paying Americans who have had to produce results to receive a paycheck trust nothing coming out of the beholding beltway bloviators - not the claims of doom or gloom from the administration's never-worked-a-day-in-the-private-sector-always-been-a-government-employee bureaucrats,not their policy, not their alleged facts, not the purported consequences,not the we know best rhetoric, not the we can break the law without consequences, because we're politicos...zero, zip, zilch, nada. Whatever trust or remants of respect for office holders that existed once, if any, exist no more.
Why worry about the debt and debt limits now? There are absolutely not any good options at this point. We should have worried about this when the Democrats were racking up $14.3 trillion in debt, without a single positive result to show for all the waste and corruption they created.

LBJ's War on Poverty cost $6.6 trillion, failed to alleviate poverty, destroyed Black family life in America, and left us with a $6 trillion national debt. Democrats blamed Reagan because he did the best job of reviving the economy despite the Democrats' waste and fraud.

Clinton's dot.com bubble tripled the DOW from 1996 to 1999 and the bubble popped one solid year before Clinton left office. The NASDAQ was down $2.5 trillion before Clinton's term ended. The DOW also peaked and started down before Clinton was gone. Democrats blamed GBush for the Bubba Recession because Bush minimized the damage from the Bubba Bubble, held unemployment to 6.3%, and created new highs in GDP, government revenues, the DOW, and employment.

The Democrats were the only active players in the CRA and the relaxation of mortgage loan standards, were solely responsible for the Housing Bubble and the Fan and Fred fraud and corruption, and so were responsible for the Housing Bust. Naturally they blamed GBush for the economic catastrophe that Democrats had created.

Democrats hzve frantically pushed their Marxist agenda for the last fifty years, have succeeded in electing a Marxist president who has applied Marxist poicies, amd now we are seeing Marxist results. Really, what did you expect?

America is a center right country infiltrated and governed by hard leftists. The leftists are exposed as dishonest, blundering ignoramuses, and will go the way of the Whigs and the Know-nothings. The question is whether this will happen before or after the democrats have destroyed the economy.
I love the Tea-party and I would absolutely support raising the debt limit if we would show "self-restraint on new entitlement programs" like obamacare. I love it that you want to go back to the 1980's to talk about problems but not to the 60's with LBJ or the 30's and 40's with FDR. The "SIMPLE" fact is that unless we cut REAL spending and do so now - we will end up like Greece.
Sure, let's keep propping up the banks as they play with others' money and get pay, perks, and bonuses whether or not their funds make a profit. We can also continue to make sure companies overpay their executives as they ship jobs overseas.
The freshmen/tea party folks aren't and shouldn't cave because this debt limit is the very last piece of leverage left until after the 2012 elections. Yes it will be easier to fix some of these problems in 2013 if we win the Senate and White House but the general feeling is that unless we do something now it will be too late, we will all be fighting over the ruins of a shattered world by then.

We don't have to solve all of our problems now; we do have to do something substantial enough to buy a little time. The current Senate proposals fail that test.
CKAinRedStateUSA July 19, 2011 at 3:09 PM
Perhaps one reason Tea Partiers won't listen, as you allege, is that there's been so much said, with so very little, if any, truth coming from Obama, Geithner, Reid, Pelosi, Biden and the rest of the Democrat/progressive/liberal/leftist Party.
Tea partiers did not oppose TARP because they thought it would be a "sellout" vote (way to avoid the issue) but because they believed that TARP would make the financial crisis worse, not better. Say what you will about this assessment, but it was sincerely held and reasonable minds could differ. I happen to believe TARP prolonged the crisis. Given that the economy still hasn't recovered, anyone who believes TARP helped has a tough empirical case to make.

The same is now true today with the debt ceiling. Tea partiers, like Michelle Bachmann, believe the U.S. WILL NOT DEFAULT on its bond obligations if the debt ceiling is not raised. This is surely true. Debt service on U.S. treasury bonds is only around 12% of monthly tax revenue and the 14th Amendment requires bond debt service to be paid before anything else.

So, after paying bond debt service, Obama will have a finite amount of money to spend. He will then have to choose how to spend it. He will no longer have a blank check. He will have to prioritize. Will he keep drawing a paycheck? Will he fund the NEA, PBS? Will he send out Social Security checks? Real people have to live within a budget and prioritize. Obama and the Democrats do not want to face this reality, so they prefer to inflate the currency (in effect, steal from everyone's savings accounts). This is why Obama refuses to specify any cuts to the budget he is willing to make.

Even if the debt ceiling is raised, no sane person is going to loan the U.S. any more money. Instead, all the new debt will come straight from the Fed - QE3. Pure printing money, pure inflation.

Of course, Obama could choose not to pay bond debt service, but that decision would be unconsitutional. Any payment to anyone else before bond debt service is completely paid would be akin to embezzlement and, surely, a high crime and misdemeanor.
Jerome Berryhill July 19, 2011 at 12:36 PM
"Long-term fixes to programs like Medicare won’t happen overnight. They’ll come after years of open-minded experimentation."

Wrong. They'll come after the train wreck. Not before. So it's time to wreck the train.
All the screaching about 'default' is vastly
overdone. Everyone (including the author)
knows that the U.S. can and will make any
debt payments due. Even if we go past the
arbitrary August 2 deadline and are technically in default, the most that will
happen is that there will be a temporary
suspension of debt payments. Any party
owed will get their money once the budget
negotiations are completed. There isn't
anyone who doesn't believe this. So why
would there be a financial armageddon
at this time?

If anyone is dumb enough to continue buying
the debt of a country routinely running
$1.5 Trillion deficits I don't think they
will panic over a temporary suspension of
payments.

Allowing Obama to continue piling on trillions
in new debt will definitely lead to a 'real'
default in the future and that is something
to worry about.
Do we have years for "open-minded" experimentation? I don't think so. Is Medicare and Social Security even fixable? I don't think so. We might be able to delay the inevitable, but in the end, these massively expensive programs, along with Obamacare, will destroy this nation's fiscal soundness.
At the end of the day, we and our beloved countrymen will have to decide whether (a) we are prepared to actually pay for a large and rapidly expanding entitlement state, or whether (b) it is time to shrink the size and scope of our federal government and to significantly reduce our profligate spending. That’s what the 2012 election should be about, and one can only hope that the choices are outlined explicitly, honestly, and with the utmost clarity. If past is prologue, it is doubtful that they will be.
Nothing will happen after the vote. It will be more of the same. Politics has become one crisis to the next. Get through one crisis, campaign, get re-elected, get on with the next crisis. People want a smaller government, but all we get is more and more expensive and less efficient government. They won't learn until there is no short term "fix" and the whole thing crashes down.
When our family reached our debt limit, we did not raise it. We re-prioritized who we paid first and reduced spending significantly. This happened after the govt., the banks and" Wall Street collaborated to steal our American dream by killing the housing market. This was done in order to ensure "fairness" in helping all American families buy a house even if they could not afford it! Those who could not afford those mortgages defaulted and the rest of us who are continuing to pay our mortgage on houses that have no equity are the responsible ones. Can we expect less from our government who got us into this mess in the first place!
So when do we stop this nonsense? tomorrow? at $20 trillion? next fall? Enough is enough. I only HOPE the freshmen have Michelle's resolve. I don't think you have a grasp of the situation if you think you can compare this to TARP. It is not the same and we are in much worse circumstances. God bless Michelle Bachmann.
"Paulson, Pelosi, Bernanke, the tax cheat Geithner and the rest of that foul bailout-loving TARP-supporting pieces of filth have earned every milligram of contempt that America can bestow upon them. They have no credibility and I wouldn't trust as far as I could kick them."

Somehow that needs repeating, although the name Obama must be added. Soros too, since his hand may be directing some of this, or at the least he is part of the edifice upon which the institutionally corrupt organization known as known as the Democratic Party rests.

And wasn't it someone in the Obama Administration who said something about the opportunities presented by a crisis shouldn't be wasted?
"If I rip up your credit card, you're not in default - you're just not incurring additional debt."
If you rely on incurring that additional debt to pay off promised commitments, and then cannot pay those commitments…that's one species of default.

"The Fed gets enough money in every month to easily keep us out of default without new borrowing."
I personally do not know the numbers well enough to speak with any authority to that; but the numbers below, adapted from http://nationaljournal.com/congress/congressional-gop-leaders-slowly-convincing-newer-members-of-importance-of-raising-debt-ceiling-20110716, clearly suggest otherwise.
------------------------
In a presentation to the House Republican Conference on Friday, 15-VII-11, Jay Powell, a former Under Secretary at the Treasury Department under George H.W. Bush and a visiting scholar at the Bipartisan Policy Center, laid out just what would happen if a debt-limit deal isn't reached.

On Wednesday, 03-VIII-11, according to Powell's presentation, the federal government would be on the hook for...

* $32.0 billion in committed spending.
This includes...
* $23.0 billion in Social Security checks (~72% of the total)
* $   0.5 billion in federal worker salaries
* $   1.4 billion owed to Defense Department vendors
* $   0.1 billion in refunds the IRS owes to businesses

On the same day, the government will take in only $12 billion in revenue, giving the us a $20 billion cash deficit.

And it doesn't stop there: By August 15, when the federal government is on the hook for a $29 billion interest payment, the cash shortfall will have grown to $74 billion—and possibly more, if interest rates on U.S. debt rises owing to down-grading of our rating.
Nicole, May we put you up for Secretary of the Treasury? The two recent articles are certainly clearly stated. I wonder if in fact it is too late given the internet politics that we now have. We seem to have vastly more people involved and far more knowledgeable than in the past when the establishment had a much firmer lock on what the spin was. Had this been in place long ago when you said the decisions needed to be made, perhaps, likely, a different tack would have been made. The only thing I think will happen is that the Republican's will make some tax concessions hoping the voters will not choose a Democrat to replace them which is what would happen if in fact the refusal to budge on the debt ceiling resulted in a significant unwinding of our diminished wealth and starkly higher costs of trying to do business because of the lack of credit. I am concerned. I do hope Obama will conclude that he has to make a deal as he does, to some degree own the recession. Certainly the 2008 collapse came at the worst possible time with Bush leaving and Obama coming in.
The point of a massive credit rating downgrade, whether or not the rating agencies even declare a default event, is to allow radical changes in the current transfer payment regime to be pushed through with minimal legislative obstacles; obstacles that may be bypassed in periods of national emergency. On D-Day +1 and every day thereafter, with the expense of servicing our debts exploding, this government may throw themselves at the mercy of our creditors and ask: What can we do to earn back our AAA rating? Of course, I do not expect any democracy to willingly vote away their entitlements so default is the logical consequence. If 40% of the federal budget is funded by debt, then we will have to make do with 40% less services. Of course the citizenry will cry of our leaders to do something and the printing presses at the US Treasury will run non-stop. When the chaos settles down, it is my hope that the right people with the right values will have survived. This upheaval will shift the center of gravity to the states that produce resources that are exchangeable for more stable currencies. For those that are left in the rubble, they have only their neighbor to blame, the ones who wrote their representative to demand cheap mortgages from their bank.
State governments in the US have default in the past. In fact, the House of Morgan rose to early prominence handling such matters. But that was back in the 1830s and 1840s.

There are indeed any federal expenditures we could do without and promptly. Ag subsides, Dept. of Educations, energy subsidies and most of the EPA.

Of course, the real long-term issue is entitlements. Bush II tried to address those but with no help from either party in Congress.
RE: With the debt ceiling, as with TARP, what really matters is what happens after the vote.

But there lies the problem, no? After all the other debt limit hikes nothing fiscally responsible happened. But the government got a new shiny credit card to 'buy' new toys and programs expecting to get another card when the newest one is tapped out. And here we are, junior is begging for yet another credit card and we are in fear not to give him one. Hasn't the government defaulted in the past?
"Which do we lay off -- The air traffic controllers, the USDA food inspectors or the FBI?"

Your question implicitly claims that we cannot live without all of the federal expenditures we've been making. I think you're wrong. I think it may well suck if we have to, but . . . we have to. We've spent next year's money already, and the next decade's money too. If we cannot support the programs we insist that we need, we have a conflict: our sense of entitlement versus reality.

So maybe ATC gets privatized, as does food inspection, and the cost gets added to our tickets and to our grocery carts. Yeah, we'll fly less because it will cost more, and we'll eat less of the good stuff, but the fact that we don't like those consequences means nothing. We're spoiled, and we spoiled ourselves with what we thought was OPM, and now we have to pay for all the fun.
E.O'Neal: "We are headed for ruin within a just few years if we don't sharply reduce spending. . . . BUT not paying our bills will cause a worldwide financial crisis almost overnight."

But if you believe, as I do, that the ONLY way we're ever going to reduce that spending - and thus avoid ruin - is to incur that short-term crisis now, then the crisis makes much more sense.

A crisis is a bad thing, hanging in the balance, causing pain, and we fight hard in crises in order to avoid . . . ruin.

At least this way we get to battle against possible ruin. Avoiding a crisis just to make ruin a sure thing, albeit a later thing, is no bargain.
The Democrat House, under the hesitant yet resigned wisdom of Ms. Pelosi, only grudgingly (and just barely) gave its support to TARP, taking the hit because they knew someone had to be the adults? All I'm going to say is, I hope your readers can either remember what TARP was going to be, what it turned into, and who got most of it, or at least look it up.

If there is no timely raise to the debt cap, default will be the obvious and immediate result? Well, no, not at all. If I rip up your credit card, you're not in default - you're just not incurring additional debt. The Fed gets enough money in every month to easily keep us out of default without new borrowing.

"It’s too late now to worry about debt that’s the legacy of past choices." Old debt? That's what this is all about? There's no component in this controversy concerning someone's insistence that he will veto any bill that doesn't let him have his trillions in NEW DEBT too?

Ask yourself why people are having a tough time believing that we need to do what the Democrats claim we need to do, when people like you write articles such as this in their support - so blatantly dishonest, so full of misdirection and outright lies, that you cannot get through more than two sentences without discovering another whopper.

The debt ceiling could stay where it is without any default. That's not an issue at all. You know that. You just hope your readers don't. You also hope your readers have forgotten that Fannie Mae and friends caused most of this, by sending all those trashy mortgages out to the market and mandating that they be taken, and now we know for certain that even now, after all that has happened, Fannie Mae is doing the exact same thing all over again - mandating that banks ignore what the banks know to be valid creditworthiness indicators. Can't anyone kill this beast?!

You need some new lies, I guess.
Controse, you decide: Which do we lay off -- The air traffic controllers, the USDA food inspectors or the FBI? Actually, Obama would decide. Who's going to win that political tussle? Try thinking two or three moves ahead/
Frankly, any hammer that can be used to pound fiscal sanity into the establishment should be used relentlessly. The establishment did not ask the american taxpayer what they should do when they spent the money. They just set up their little progams, they just kept passing those spending bills right in the face of multitudes yelling "you're heading for an ice berg!!!", for decades. Well now the bill has come due and now, as usual, the establishment wants the taxpayer to suck up and pay it for them, while they drive off in their limos drinking fine wine leaving the disaster behind them. The time has come to say not only "no" to new taxes, but "hell no!!!" If Bernanke and Geitner are so concerned about default, then lets see them cut some government departments and programs that as Jerry Pournelle says, "we can do without right now."
Nicole you surprise me. Surely you know there is more than enough money to avoid default on our debt. All the Treasury has to do is pay the interest and buy back maturing debt to avoid default. We can do that every month from now on. It is just everything else we can't do. We will have to stop spending. The world won't end for the rest of us. Maybe it will end for the financial and political elites who have lead us into this box canyon.
Joseph Somsel, I'm with you. The GOP has to get control of the White House and Senate to do anything meaningful with the budget and entitlements and tax reform. With just the House, though, it is possible to cap federal spending and to prevent new boondoggles. That's all we can do for now.

Not paying our bills next month would be terrible for the country and probably give the Dems a sweep next year. I support what the freshman Republicans are trying to do, but it's important not to take away Boehner and McConnell's leverage by making it impossible for them to pass a modest debt ceiling increase coupled with the same amount of real spending cuts. That's our best case outcome at this point. A deal on the Dem's terms or not paying the bills is the worst case.
This is a curious essay of the 'should have closed the barn door' sort in which we seem to be told that nothing we do now can even begin to save America's economy from implosion---except to continue cynical compromise with the very people who brought us to this ugly pass. Many of these arrogant and mediocre talents are Republicans; the majority are Democrats. In both parties, but especially among leftists, loyalty to the founding principles of the nation are not just dubious but often non-existent.

Ms. Gelinas is not a mediocrity, but her faith in future thoughtful process I think is misplaced. We American conservatives are at war with the left over what principles will guide us. Given the proportion of Americans now dependent on the government giving them other people's money, it is a war we will likely lose. It seems to me, rather than hiding this war from the public, we need to bring it into the air where the public must look at it and think about it as best they can.

The central principle at issue is whether liberty means freedom from responsibility (as Obama believes), or the individual's freedom of choice as defended in the Constitution---it is Obama against the Constitution.
E. O'Neil,

How can the House, controlled by Republicans, get a budget passed if the Democrat-controlled Senate refuses, as they've done for the last two years, to consider a real budget bill?

The Democrats have created this crisis, both strategically and tactically.

And I agree with --Nick, the Republicans share in the blame for prior, repeated choices of "just going along." Take G.W. Bush's prescription drug benefit for an example.

But the issue before us is, what to do now? Ms. Gelinas' has not (yet) made a contribution to a solution.
"The liberal Democrats have to stop the insane spending!"
Yes; and -- for balance -- the (so-called conservative) Republicans have to stop the insane borrowing. Both parties act less for the national good than for their personal political ambitions. Both.
Of course, had Congress insisted on measures to "force lenders to take their losses, albeit in a less panicky manner" as part of TARP, we'd be better off. It's logical to insist that we add reforms necessary to reduce further spending to the debt ceiling, or you'll find yourself in the boat of having given away the only leverage you had to get the administration to speak seriously of entitlement reform. The chief fault of Republicans wasn't to insist on consonant spending reform - it was walking away once the President showed he was willing to speak seriously of reducing budget deficits.
This is simply part of a continuing effort to confuse the issue. The issue is simple. The government cannot continue simply printing money to continue spending. It is writing checks against a negative balance.
The country has not had a budget for over two years. Mr. Obama refuses to present a budget. Without a budget how are we to know where the finances of the country stand. We have had too much of Mrs. Pelosi's "let's pass the bill so we can learn what's in it".
John Gillis, the leverage is in the budget process. Every penny that the government spends has to be appropriated by Congress. Entitlement reform is the big deal, along with tax reform. Those can't really be done in a debt ceiling deal. The most crucial action to save this country from bankruptcy is to fire Obama.

The budget process is for attacking the deficit. Raising the debt ceiling is about paying our bills.
It's not clear to me, but is Ms. Gelinas saying she would vote for the debt-ceiling hike? I suspect so, on the premise that all the bad stuff is already baked in the cake, so to speak.
Once you raise the ceiling, what leverage is there for statists to cut the massive welfare state?
Why not refuse to raise the debt, and accept the chaos that results, since how else will the statists be stopped from stealing more money from taxpayers?
So many hidden, and incorrect, assumptions here that lead Ms. Gelinas to the wrong conclusion: that is, "if the Tea Party sticks to its guns, we'll default and the world will go to Hell in a hand basket."

The Tea Party has to stand firm. This is a desirable point of inflection in the national debt and our fiscal sanity. The liberal Democrats have to stop the insane spending!

Yes, this is a game of political chicken but to put the country on the right track, as Ms. Gelinas recognizes, requires that the Tea Party win.

That means COURAGE is required. I suggest the author do some research on that character subject.

Not a Tea Partier, but sorry, I no longer trust the government to do anything good for me. All the programs they promised have turned out to be only for their own good- they care only about getting more and more of our money.

I don't care if they do default, and why should I ? They clearly don't care about me. Default would be the best thing that could happen to our country- we in fly-over country already know how to make an honest dollar- it's the rest of the government people and their dependants that don't.

A default not hurt us as much as it will them- that's why they're so desperate to stop it. The government has lost the trust of middle America, and soon they will find that once lost, it isn't easily regained.
"But nothing is risk-free. If and when the market discovers this about Treasury bonds, the consequences will be dire. Companies short of cash would shed workers. Global asset selloffs could send the slow-brewing Eurozone crisis into multiple defaults, and European governments would struggle to protect their own financial institutions from panic."

Sounds like when the default is avoided people ought to rethink their hatred for America and realize that they're functioning because we allow them to? Just asking...
The govt takes in $200B a month. The debt payments being discussed for August 2nd aren't nearly that much. An honest president could prioritize what's paid so nothing is defaulted on. Obama is a gutter thug.
And our financial system continues to stumble along, avoiding the difficult decisions, patching here, sidestepping there, and talking about future steps to that grand solution we'll have just as soon as we get past this debt ceiling problem. Talking about the past only provides blame assessment, and visualizing what we should do in the never-never cannot replace making a start toward sound money and reduced red tape in the present.
Shorter Nicole--
Oh when oh when will those darned Tea Partiers stop being so irrational?

''BUT not paying our bills will cause a worldwide financial crisis almost overnight. This is a fact. ''

That is not true.

Not raising the debt ceiling would NOT lead to a default on treasuries. That is the big bluff.
Conservative Voter July 16, 2011 at 3:18 AM
Lies. All lies. The bankrupt financial state of affairs in America is due to this line of thinking.

No compromise!

No debt ceiling increase with new spending or new taxes!

Get it?

Don't Tread On Me!
I'm as much a debt hawk as anyone. We are headed for ruin within a just few years if we don't sharply reduce spending. the world isn't going to keep lending us 40 cents of every dollar we spend. BUT not paying our bills will cause a worldwide financial crisis almost overnight. This is a fact. It will also destroy the Republican party. How long do you think the resolve of the 25-30 Bachmann-type idiots in the House who won't vote for a debt ceiling increase under any circumstances will last once the frightened grannies start calling their offices or the air traffic controllers, FBI, and USDA food inspectors are laid off? No one with any sense of reality believes this could go on more than a few days, but huge damage would already be done.

The Rush Limbaughs and Shawn Hannitys need to start telling the truth to their flocks instead of spouting populist nonsense. There is such a thing as reality, and right wing nonsense is just as out of touch with it as left wing nonsense.

What's going to happen is the reality-based Republicans won't have enough votes to pass a strong debt ceiling/spending cut package because of the 25 to 30 zealots/nuts who will vote against anything that could become law, so they will have to cave and join with the Democrats to pay our national bills, which MUST be done. Then the Tea Party people (whom I've considered myself one of until now) will go off and stop supporting Republicans -- thus ensuring we get four more years of the reckless fool who's destroying America.
When you're in debt you don't fix it by going further into debt. You fix it by cutting out unnecessary expenditures and STOP going further into debt.

Even a moron knows that, which means either that individual in the white house is more stupid than a moron, along with the rest of the democrat party, or they know it's what is right and are determined to destroy this economy.
I love you Nicole, but you too live in the East coast echo chamber of banks and looters. We in the midwest know we already have a 300 foot gash below the waterline and you are worried about the smoothness of the velcro on the life jackets. We are manning the pumps and welding torches. Do youself a favor and find a lifeboat.
Wake up Nicole, there will be no treasury note, or any other kind of US Securities default. Lets understand something, the US cubbermint takes in around $2.7T a year and interest payments on loans are around $500B a year. We have plenty of $$ to pay interest and principal on all loans, we just need to decide which other programs we don't need. How about Ethanol subsidies? Or, maybe tobacco farmer subsidies? Or, how about throwing out all the illegals that are on welfare, food stamps, free housing? How about cutting some of our bloated gov't bureaucracies, like the 250K employees at the USDA? Or, maybe eliminating the entire Dept of Education _ they don't really do anything but screw up states' depts. of education anyway!

There is so much we can do to cut spending, and we won't default on any debt.
How can it be good for our credit rating if we are continually increasing our limit? The more we borrow the less creditworthy we become. We can only default if we don’t pay our bills. This can happen even if we increase our credit limit. Borrowing money to pay a debt is not very smart. Paying our bills instead of dolling out money to our enemies is smart.
Whoever thought of a debt ceiling unconnected to the ppropriations process was nuts. Balancing the budget, good. Destroying the credit of the United States, problematic.
Would someone please explain why "failure-to-raise-the-debt-ceiling" is taken as synonymous with "default"?
I think if Miss Gelinas would look at what she wrote she would see the rationale of the Tea Party position:

"the only sane way to have avoided TARP would have been to end the government’s too-big-to-fail approach to the financial world long before, and that approach dates all the way back to the 1980s. The problem with TARP was not the vote for it but what government failed to do afterward: force lenders to take their losses, albeit in a less panicky manner, thus liberating the economy from the bubble’s legacy. And government failed, too, to enact financial rules to ensure that it wouldn’t happen again."

This "should've done that" approach is airy-fairy stuff. Guess what? It's very rare if this sort of thing happens! I hoped they would do what Gelinas said the government should have done as well, but it didn't. It's the nature of the political system. There are enough people in this country who believe that we have an endless supply of money to sustain the lie that we can keep doing what we're doing: Just manage the crisis. Cover over the bad spots, and make everything nice. Only everything is not nice. The system is working for the politically connected. It is not working for a lot of other people. It is going to continue this way until the current establishment is discredited.

The problem with the debt is we can either deal with this now, or we will inevitably deal with it later, if we keep allowing it to grow the rate that it is. Gelinas acts like we have a lot of time to do this. We don't. Medicare goes broke in 6 years. How long has it been since the crash? Almost 3 years. The point is, time is effectively up. We have very little wiggle room left.

The other thing is there's no guarantee that a government shutdown will result in the Treasury defaulting. It will require prioritizing. We have sufficient cash flow now to service our debt. The Treasury will have to decide who gets paid first. Presumably that would be the bondholders. The rest will have to get whatever money is left, or IOUs. The only reason this administration can talk with any credibility about defaulting on our debt is it's effectively what Obama did in the auto bailouts. He stiffed the bondholders with threats of public humiliation and gave the lion's share to the unions. If the government actually believed in following the law, and the Constitution for that matter, which says that we will honor our debt obligations no matter what, bondholders would have absolutely no reason to worry, and we wouldn't be talking about this. But we don't know what Obama's administration is going to do, do we?
Not raising the debt limit would NOT mean that there would be any default on Treasury bonds.

There is sufficent tax income for all bond payments to be made. Instead, spending on Federal benefits such as social security would be hit. A completely different issue.

So, all this talk of economic meltdown turns out to be just yet more misdirection, bluff and blackmail. All the more reason to not let the tax and spend idiots get their way yet again.
Paulson, Pelosi, Bernanke, the tax cheat Geithner and the rest of that foul bailout-loving TARP-supporting pieces of filth have earned every milligram of contempt that America can bestow upon them. They have no credibility and I wouldn't trust as far as I could kick them.