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Some Republicans OK with short-lived debt default
U.S. Rep. Paul Ryan (R-WI), chairman of the House Budget Committee, holds up a copy of the 2012 Republican budget proposal during a news conference April 5, 2011 on Capitol Hill in Washington, D.C.
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JEREMY HOBSON: Well the Treasury Department says Congress has until August 2 to raise the federal debt ceiling or the U.S. will have to stop paying its creditors. There have been dire warnings about what would happen if the federal government defaults on its debt. But now, it seems more and more Republicans are saying publicly that a short-lived default wouldn't be so bad.
Marketplace's Amy Scott reports.
AMY SCOTT: Republicans say failing to raise the U.S.'s $14.3 trillion borrowing limit wouldn't be catastrophic. Some like Minnesota Governor Tim Pawlenty -- who's running for President -- say we can put paying creditors ahead of domestic spending.
Other Republicans, including Paul Ryan -- head of the House Budget Committee -- say a short-term default wouldn't lead to calamity. Ryan speaking to CNBC.
PAUL RYAN: If a bondholder misses a payment for a day or two or three or four -- what is more important is you are putting the government in a materially better position to better pay its bills going forward.
Jack Albertine of forecasting firm Albertine Enterprises says the idea does seem to be catching on.
JACK ALBERTINE: I think it's more out of frustration and out of almost desperation to find an end game that this idea will be gaining traction.
That's not to say Republicans are dismissing a compromise entirely. House leadership is taking part in bi-partisan debt ceiling talks with Vice President Joe Biden. Tomorrow, the two sides meet again.
I'm Amy Scott for Marketplace.
JD makes a good point, but needs to nail-down the actual numbers rather than rely on vague emotional language.
Annual Deficit spending projected at: $1.4 Trillion this year alone, or 10% of GDP. The national debt is over $14.3 Trillion dollars, or 91.2% of GDP, which is not sustainable.
Service on the national debt amounts to nearly $400 billion each year, based on a interest rates of 3% to about 5% (average ~3.9%).
If the U.S. were to actually default on its debt payment we may lose our AAA rating (determined by Standard & Poors, Moody's, Fitch), which in theory could cause our interest rates to increase; that is, if the U.S. rating was downgraded from "AAA" to "AA-" it could result in an increase from .25% to .50% percent paid in interest, or $1-$2 Billion per year.
Compared to our national debt, annual deficit spending, and even the annual service on our national debt, $2 Billion is chump-change considering the debate in Congress is about slashing federal spending by Hundreds of Billions, even Trillions of dollars!
Politicians are addicted to spending other people's money, and like a drug addict they will do anything to satisfy their addiction, no matter the harm done to others. It is well-past time for intervention; our only recourse now is interdiction. True fiscal conservatives must stand their ground at all costs, they must NOT cave-in on demands to lift the debt ceiling or raise taxes! Our junkie government has a SPENDING problem, not a revenue problem. Time for tough love, they must go Cold Turkey.
Think of it this way. If you miss a payment on your credit card the interest rate skyrockets and stays there forever. Same for Uncle Sam except the trillions of dollars amount means that even a 1% interest rate increase would mean a really, really big chunk of money paid as a penalty... forever.
Raising the debt ceiling should only occur this one last time to avoid default (and insane interest rate hikes) then this country will have to make very painful spending cuts and work to reduce the debt ceiling.
Unfortunately, given the bank owned politics of this country, the austerity will be placed disproportionately more on those who have suffered the most and those who perpetrated the misery will just be less rewarded.
@ Eric Feinberg
Republicans grow up? The Democrats haven't even presented a budget for 2 years now. How else will we ever see any spending cuts unless all of Congress(Democrats and Republicans) is forced to address our spending issues.
For all those who think this is a good idea: http://finance.yahoo.com/news/US-debt-default-unimaginable-rb-544637721....
REPUBLICANS: ITS TIME TO GROW UP AND LET THE ADULTS HANDLE THE ECONOMY
