In two hundred seventy four words Sarah Palin sums up why the GOP is fracturing into a party of establishment Republicans, a vanguard minority of TEA Party radicals and moderates that may migrate into the Democratic Party:
Apparently the president thinks he can furlough reality when talking about the debt limit. To suggest that raising the debt limit doesn’t incur more debt is laughably absurd. The very reason why you raise the debt limit is so that you can incur more debt. Otherwise what’s the point?
It’s also shameful to see him scaremongering the markets with his talk of default. There is no way we can default if we follow the Constitution. The Fourteenth Amendment, Section 4, requires that we service our debt first. We currently collect more than enough tax revenue to service our debt if we do that first. However, we don’t have enough money to continue to finance our ever-growing federal government (with our $17 trillion dollar national debt that has increased over 50% since Obama took office). That’s why President Obama wants to increase the debt limit. He doesn’t want to make the tough decisions to rein in government spending. So, he’s scaremongering the markets about default, just as he tries to scaremonger our senior citizens about their Social Security, which, by the way, is funded by the Social Security Trust Fund and is solvent through 2038.
It’s time for the president to be honest with the American people for a change. Defaulting on our national debt is an impeachable offense, and any attempt by President Obama to unilaterally raise the debt limit without Congress is also an impeachable offense. A default would also be a shameful lack of leadership, just as mindlessly increasing our debt without trying to rein in spending is a betrayal of our children and grandchildren who will be stuck with the bill.
Sarah Palin has made a name for herself and a massive pile of wealth by doing just what she accuses the President of the United States of doing. Palin uses fear to convolute an already confusing issue for most Americans. We, Ourselves realize that there would be far reaching and potentially disastrous ramifications for the global economy if the United States Treasury would default on its debt on 17 October 2013. Clearly, Ms Palin does not understand the difference between debt and the debt ceiling. The United States debt ceiling comments made by President Obama are analyzed by Louis Jacobsen at PolitiFact:
Experts we spoke to agreed that Obama is on safe ground when he says that raising the debt ceiling “does not increase our debt. It does not grow our deficits.”
Obama is correct that the debt ceiling addresses debt, not spending — at least not directly. Raising the debt ceiling allows the United States government to borrow funds that cover the obligations the government has already incurred. It doesn’t by itself prompt any new spending: Congress and the president must separately sign off on any new federal spending commitments. Put simply, the United States has chosen to divorce spending and financing decisions.
The part where Obama is somewhat misleading is when he says that raising the debt ceiling “does not allow for a single dime of increased spending.” (We asked the White House for comment but didn’t hear back.)
In fact, raising the debt ceiling is a necessary condition for eventually raising spending without a default. Spending can only be raised in the future if the debt ceiling is raised (or if progress is made on paying down the existing debt, something that’s rarely happened in recent decades). Without a debt ceiling hike, Congress and the president would find their hands tied if they ever wanted to make any new financial commitments.
So, contrary to what Obama said, if the the debt ceiling is raised high enough, it does, in fact, “allow” for additional spending. It just doesn’t demand it.
“Clearly, raising the debt ceiling does not in and of itself increase the debt or grow the deficit,” said Steve Ellis, vice president of Taxpayers for Common Sense. “But to say that it doesn’t allow for a dime of increased spending is misleading. When the credit card company increases my credit limit, it doesn’t increase my debt load or even my spending. But it certainly facilitates it. The same is true with the debt ceiling.”
Satya Thallam, director of financial services policy with the the center-right American Action Forum, concurred, saying that while the debt ceiling has “little to do with the present,” it has “everything to do with future potentials.”
Thallam said the debt ceiling can be perceived as a prerequisite for future spending — though a better term, he said, may be “post-requisite.”
“It’s like signing a contract to purchase new furniture, and then going to your credit card company and asking for a credit limit increase to cover the amount,” he said. The debt ceiling “doesn’t lead to additional spending, but it does risk the possibility that you won’t be able to pay.”
Not that the threat of the debt ceiling has scared off Congress from spending in the past.
“Congress has passed budgets knowing that the borrowing to follow through on their budget commitments would exceed the debt ceiling,” said Tara Sinclair, a George Washington University economist. “I wish they treated it as a prerequisite, but instead they go ahead and spend and then find themselves at risk of defaulting on obligations. If they were limited by the debt ceiling in terms of planning the budget, then that would be different, but they appear not to be.”
The United States Treasury web site has this regarding the United States Debt Limit:
The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations – an unprecedented event in American history. That would precipitate another financial crisis and threaten the jobs and savings of everyday Americans – putting the United States right back in a deep economic hole, just as the country is recovering from the recent recession.
Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents. In the coming weeks, Congress must act to increase the debt limit. Congressional leaders in both parties have recognized that this is necessary. Recently, however, a number of myths about this issue have begun to surface.
The Congress, while it has the power to impeach a President for acting outside his constitutional authority, also bears the burden of assuring America does not default on her debt—not the President. In this again Ms Palin is offering misinformation simply for the purpose of maligning President Obama. Sarah Palin does not have anyone to hold her to account for these remarks on the Right because these nuggets of disinformation serve the greater purpose of making political action committee dollars flow from the pockets of people who are febrile with the desire to make a case that the 44th President is the worse one America has ever had.
Economist Barry Eichengreen notes in contrast to Palin the effect of a US economic settlement default:
But a default on US government debt precipitated by failure to raise the debt ceiling would be a very different kind of shock, with very different effects. In response to the subprime disruption and Lehman’s collapse, investors piled into US government bonds, because they offered safety and liquidity – prized attributes in a crisis. These are precisely the attributes that would be jeopardized by a default.
The presumption that US Treasury bonds are a safe source of income would be the first casualty of default. Even if the Treasury paid bondholders first – choosing to stiff, say, contractors or Social Security recipients – the idea that the US government always pays its bills would no longer be taken for granted. Holders of US Treasury bonds would begin to think twice. The impact on market liquidity would also be severe. Fedwire, the electronic network operated by the US Federal Reserve to transfer funds between financial institutions, is not set up to settle transactions in defaulted securities. So Fedwire would immediately freeze. The repo market, in which loans are provided against Treasury bonds, would also seize up.
For their part, mutual funds that are prohibited by covenant from holding defaulted securities would have to dump their Treasuries in a self-destructive fire sale. Money-market mutual funds, virtually without exception, would “break the buck,” allowing their shares to go to a discount. The impact would be many times more severe than when one money-market player, the Reserve Primary Fund, broke the buck in 2008.
Indeed, the entire commercial banking sector, which owns nearly $2 trillion in government-backed securities – would be threatened. Confidence in the banks rests on confidence in the Federal Deposit Insurance Corporation, which insures deposits. But it is not inconceivable that the FDIC would go bust if the value of the banks’ Treasury bonds cratered. The result would be a sharp drop in the dollar and catastrophic losses for US financial institutions. Beyond the immediate financial costs, the dollar’s global safe-haven status would be lost.
We, Ourselves, of the Collective are forced to wonder if Ms Plain is aware that there is such an organ as the Bank for International Settlements? To understand the metrics of how central banks settle their accounts is sine qua non to understanding the implications of a debt default by a sovereign nation. Sarah Palin could examine the troubles in Iceland in 2008-2011 and the implosion of the Somalian currency in the 1990s as examples of what steps can be taken by the International Monetary Fund and what takes place when no action of aid is taken internally or externally. None of these things matter to Palin for her goal is simply to make this about the 44th President of the United States failing the people she feels are the “true Americans.” This is why Sarah Palin can see the mirage of impeachment from her house.
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