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July 27, 2011

The Debt Debate In A Nutshell

Topics: Political News and commentaries

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Monty Pelerin has got the right idea. The debt debate needs to be put in terms that the average person not closely following what's going on in Washington is likely to understand.

Imagine that you are hopelessly in debt and spending 60% more than you make each month. You have maxed out your credit cards and have no money to make this month's mortgage payment. Miraculously in the mail comes a new credit card enabling you to make the mortgage payment.

Voila! Problem solved! Now let's get back to spending.

As Monty points out, this is the absurd bottom line of what the debt ceiling debate is really all about. And both the Democrats and the Republicans want a new credit card, even though neither side wants to correct the problems that brought us to this point.
The Republicans want to provide a new credit card with a lower limit than the Democrats, the Democrats want one that will not max out until after the 2012 elections. Both give lip service to spending cuts but neither is serious. The cuts discussed are equivalent to turning out a light when you move from one room in the house to another. When you are going to lose your house, marginally cutting the electric bill does nothing.
In other words, just like a family getting a new credit card in no way prevents eventual foreclosure on their house ... they can't keep borrowing forever and spending over 60% of what they take in, the same principle applies to our nation - America can't keep borrowing forever and spending over 60% of what it takes in. There's only one possible endpoint from this approach - the nation eventually becomes bankrupt. Meanwhile, neither the Dems nor the GOP is willing to make the changes that will prevent eventual bankruptcy, and the president of the United States is still itching to keep spending.

Monty has more on this - here (hat tip for the image).

Meanwhile Speaker Boehner's plan is "laughably pathetic". As Robert Romano notes at the WSJ, the spending cuts being proposed will not in any way offset the increase in the debt ceiling -- by a long shot -- even with revisions. It is pure nonsense. If all leadership's hopes to achieve is a mere $1.2 trillion in ten year savings, instead of $1 billion of initial cuts, we'd likely be looking at $1.4 billion of initial cuts.

And as for Senate Majority Leader Harry Reid's plan ... it's just as laughably pathetic as Boehner's and, as is the case in both plans, filled with the same scoring gimmicks in the budget plan they voted for earlier this year.

In other words ... our nation is so screwed!

Related: Just a guy speaking his mind on the debt-ceiling debate

Posted by Richard at July 27, 2011 12:21 PM



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