What Will Happen if Debt Ceiling Isn't Raised?

[InTheLight]

We're about three weeks away from the deadline. What do you think will happen if the debt ceiling isn't raised? How bad could the economy get?

Because of the limited poll format I couldn't fill out the scenarios. Here are my original choices:

1. Not much. The stock market will lose a few percentage points but regain it within weeks.

2. The stock market will take a big hit, perhaps 8%-10% decline or more. The so-called recovery would be over.

3. Stock market takes a big hit and banks stop lending money, businesses lay off people, leading to the double dip recession.

4. U.S. government goes into default, meaning it does not make its loan payments to debtors. Instead the U.S. picks and chooses who to pay interest only payments. Rates on treasury bonds would rise sharply, as would mortgage rates and credit card rates. Deep recession.

5. U.S. goes into default & can‘t pay anyone, bond rates rise, mortgage rates rise, business lending dries up or is too expensive, businesses lay off people, exports decline, unemployment rate rises to 12% or more. Major depression.

6. U.S. defaults & pays no one including medicare, social security, and military. Credit card rates reach 25% or more causing consumers to clamp down on all spending, unemployment goes way up, stock market crashes, houses are foreclosed, China and other creditors no longer buy U.S. securities, the dollar is dropped as the world’s reserve currency. Meltdown.



Feel free to add comments or alternate scenarios.

 

[preachinjesus]

I'm completely against raising the debt ceiling. We have to cut off the source of our major problems.

That said, I went for the third option.

By not raising the debt ceiling the US will begin the process of going into economic default with the many nations that are its creditors. This will begin a global contagion that will spread throughout the world and cause inexorable harm to all markets. There will be significant job loss throughout the world and some governments could go under. It really is a doomsday scenario...for a short term period.

Then things will get back to normal. The global center of the economy will shift from the US to China and major emerging economies will begin to underwrite the global system. US industry and business will be completely locked out of these markets. It will be economic retribution for the harm caused so many countries. At the end of all of this the US will be forced to raise the debt ceiling and all of this will be for naught.

But maybe this is what we need. Sort of like a forest fire is a cleansing act that produces growth, we need this kind of thing to produce a longer term health for the global economy.

 

[Matt Black]

It will mark the beginning of the end of the US being the paramount world power.

 

[Havensdad]

You don't provide a positive option. I believe that within 6 months, the economy will SOAR if the debt ceiling is not raised. Benefits will be dramatically scaled back. Congress will be forced to slash spending to pork projects. Money for horrific programs like providing money for Planned Parenthood, will have to be done away with.

The only salvation for this country, in terms of economics, is NOT to raise the debt ceiling, and get a balanced budget amendment in the constitution. If not, this country is headed for bankruptcy, riots in the street, and complete economic ruin.

 

[Havensdad]

It will mark the beginning of the end of the US being the paramount world power.

The only thing that will do that, is continuing the reckless spending that we are currently engaging in. The only chance we have of remaining the paramount power in the world, is to NOT raise the debt ceiling, cut back government benefits and "income redistribution," and force people to get off their butts and start working hard again.

THEN, we must retake an attitude in our society of American Exceptionalism. Quit pandering to the governments of the world. Reaffirm our sovereignty as a nation, and quit allowing "free trade" across our borders. We are the number one importer in the world...it is STUPID to have a free trade agreement.

 

[Earth Wind and Fire]

It will mark the beginning of the end of the US being the paramount world power.

Agreed but it the USA you will have many who will cover their Ears, Eyes & Mouth in a scene reminisent of See No Evil.

Yesterday on American Programming, Zbigniew Brzezinski outlined all the social implications & also indicated that Class Warfare will begin to rear its ugly head.

"It seems to me that if America were really expanding economically, that kind of wealth, that kind of disparity is palpable. But when you have stagnation when you have a chronic case of unemployment, the sense of social injustice can be terribly demoralizing and politically in the long run, very dangerous. It can politicize social economic issues, create radicalism, class conflict [and] extremism and I think that is a real risk in our society. Especially since so many of those who made so much money recently produce very little wealth for others. They essentially pocket the money. They are engaged in financial manipulations but not in enhancing productivity and increasing employment," Zbigniew Brzezinski said on MSNBC's "Morning Joe" on Wednesday.

 

[Earth Wind and Fire]

The only thing that will do that, is continuing the reckless spending that we are currently engaging in. The only chance we have of remaining the paramount power in the world, is to NOT raise the debt ceiling, cut back government benefits and "income redistribution," and force people to get off their butts and start working hard again.

THEN, we must retake an attitude in our society of American Exceptionalism. Quit pandering to the governments of the world. Reaffirm our sovereignty as a nation, and quit allowing "free trade" across our borders. We are the number one importer in the world...it is STUPID to have a free trade agreement.

See, the British have lived through it......

How do you propose to ..... "force people to get off their butts and start working hard again" when unemployment is hovering at 9%, which isnt even a real number. Got a few 100,000 jobs laying around?

 

[freeatlast]

I need to point out you did not ask what if the debt sealing is not raised on time, but you asked what if the debt sealing is not raised (as if never).

I answered the poll according to what was written as if never raised, even though I believe it will be raised.
So if the debt limit is never raised the world market would crash along with the US economy, but not nearly as bad as the US crash. No longer would we be a world power as we would become like Mexico or worst and our currency would no longer be the word standard. There would be widespread poverty through out the nation as people lose just about everything.The Federal Government would most likely declare marshal law and we would become a military state as wide spread crime and rebellion would take over our streets with murders and robberies.
By the way this is going to happen in my opinion. Not this year, but in the near future as the time will come when we cannot borrow enough to push back the default.This will open the door for a new currency to be the world currency and the growth of eastern nations as never before seen while we remain a used to be world power.

 

[Earth Wind and Fire]

I need to point out you did not ask what if the debt sealing is not raised on time, but you asked what is the debt sealing is not raised (as if never).

I answered the poll according to what was written as if never raised, but it will be raised.
So if the debt limit is never raised the world market would crash along with the US economy, but not nearly as bad as the US crash. No longer would we be a world power as we would become like Mexico or worst and our currency would no longer be the word standard. There would be widespread poverty through out the nation as people lose just about everything.The Federal Government would most likely declare marshal law and we would become a military state as wide spread crime and rebellion would take over our streets with murders and robberies.
By the way this is going to happen in my opinion. Not this year, but in the near future as the time will come when we cannot borrow enough to push back the default.This will open the door for a new currency to be the world currency and the growth of eastern nations as never before seen while we remain a used to be world power.

Then what nation do you speculate would turn into the lead nation?

 

[freeatlast]

Then what nation do you speculate would turn into the lead nation?

I don't think it will be one nation, but a group of nations coming together to deal with the world as a whole under a common currency.

 

[InTheLight]

Keep in mind if you select one of the harsher outcomes you are agreeing with Barack Obama whereas Tea Party favorite Michelle Bachmann says Obama is engaging in scare tactics.

The United States risks a financial meltdown if Congress doesn’t raise the debt ceiling, President Barack Obama said Tuesday (June 14.) “We could actually have a reprise of a financial crisis if we play this too close to the line,” Obama said in an interview on NBC’s “Today” show.

http://blogs.marketwatch.com/election/2011/06/14/crisis-if-debt-ceiling-isnt-raised-obama/


White House hopeful Michele Bachmann on Tuesday accused President Obama of using scare tactics to convince Congress to raise the statutory limit on how much money the United States can borrow to keep the government running.

"I think these are scare tactics by the Obama administration," the Minnesota Republican Representative said in an interview on CBS' "The Early Show," referring to assertions that financial markets would be face turmoil if Congress does not raise the $14.3 trillion debt ceiling by August 2.

http://www.cbsnews.com/8301-503544_162-20074952-503544.html?tag=contentMain;contentBody

 

[freeatlast]

Keep in mind if you select one of the harsher outcomes you are agreeing with Barack Obama whereas Tea Party favorite Michelle Bachmann says Obama is engaging in scare tactics.

The United States risks a financial meltdown if Congress doesn’t raise the debt ceiling, President Barack Obama said Tuesday (June 14.) “We could actually have a reprise of a financial crisis if we play this too close to the line,” Obama said in an interview on NBC’s “Today” show.

http://blogs.marketwatch.com/election/2011/06/14/crisis-if-debt-ceiling-isnt-raised-obama/


White House hopeful Michele Bachmann on Tuesday accused President Obama of using scare tactics to convince Congress to raise the statutory limit on how much money the United States can borrow to keep the government running.

"I think these are scare tactics by the Obama administration," the Minnesota Republican Representative said in an interview on CBS' "The Early Show," referring to assertions that financial markets would be face turmoil if Congress does not raise the $14.3 trillion debt ceiling by August 2.

http://www.cbsnews.com/8301-503544_162-20074952-503544.html?tag=contentMain;contentBody

I certainly agree that this administration is dealing in scare tactics, but the republican party is dealing in lies and cover-ups that thye are as guity of bringing the nation as the Demiocrats.
With a 14.4 trillion debt and currently borrowing over 4 billion a day just to keep afloat there is no way to overcome the problem. All that can be done is push it back a little longer until we finally default.
The current administration's plan will keep us from defaulting next month, but it will still happen in the coming months.
The republican plan will do the same and perhaps buy us a little more time, but both sides no matter what will end up in the same place as the current debt has went too far to correct.

 

[Havensdad]

The idea of the Economies crashing around the world, is just plain nonsense. Not even the U.S. economy would collapse. The U.S. is not going to default on their payments, if the debt ceiling is not raised. All it would mean, is that we would be forced to cut spending in the U.S. to around 1.5 trillion dollars, a large chunk of which would come out of programs like Medicaid, Medicare, foodstamps, and welfare.

We could start with the large number of wealthy Americans that are currently drawing Social Security and Medicare benefits...it is absurd to send someone a check every month for 1500 dollars, when they have ten million in the bank. It is also nuts to pay for their medical care. If you are worth ten million dollars, pay for your own insurance.

 

[Havensdad]

See, the British have lived through it......

How do you propose to ..... "force people to get off their butts and start working hard again" when unemployment is hovering at 9%, which isnt even a real number. Got a few 100,000 jobs laying around?

How about 5 million? Start aggressively defending the borders. Bring our boys home, and stick them on our borders where they belong. Begin a VERY aggressive deportation program...if you are caught, and you are illegal, you go back the next morning. Start checking documentation. You can''t speak English? You get checked. You get pulled over and you don't have a license? You get checked.

If this was employed, life in this country would improve exponentially in just a couple of years.

 

[freeatlast]

The idea of the Economies crashing around the world, is just plain nonsense. Not even the U.S. economy would collapse. The U.S. is not going to default on their payments, if the debt ceiling is not raised. All it would mean, is that we would be forced to cut spending in the U.S. to around 1.5 trillion dollars, a large chunk of which would come out of programs like Medicaid, Medicare, foodstamps, and welfare.

We could start with the large number of wealthy Americans that are currently drawing Social Security and Medicare benefits...it is absurd to send someone a check every month for 1500 dollars, when they have ten million in the bank. It is also nuts to pay for their medical care. If you are worth ten million dollars, pay for your own insurance.

I can only assume that you have not actually set down and run the numbers. I sure am glad you are not in politics with your understanding as we already have enough there who have no clue as to what is happening.
First off we are borrowing over 4 billion a day just to keep afloat. 1 Billion is 1000 one million dollar bills if there was such a thing. We are borrowing over 4 times that every day. That is about 20% of the annual costs to run the government.
Multiply that times 356 days and you come up with Approx. 1.5 trillion a year in borrowed money. If we cut Medicare totally our we would only save about 500 billion (2010 costs were about 509 billion). However we would then be left with people having no medical and now on some other form of government assistance.
You mentioned social security and the rich. My friend where have you been? That fund has been self sustaining until last year and now there is a very little extra that needs to be put in and that is only because congress keeps robbing the fund. To date there is 2.5 trillion dollars in IOU's from the pilfering of the federal government in the SS fund.
You mentioned welfare. Welfare is a joint venture between the states and the federal government. Welfare is already on the down ward trend according to the federal budget office.

I agree that there needs to be spending cuts, but the facts are that it is now impossible to cut enough because of what our irresponsible and corrupt politicians have done if we are to stay a world power. And we will default in the coming months and we will go under in the world standing. You say that if this country defaults it would have little to no effect. If that was the case then we would default, wipe out our debts and start over and all would be fine. You have no clue as to what you are talking about.
Give us all some real numbers and show us in dollars just how and where to cut enough out of the budget to stop borrowing money and also to lower the debt. Use percentages in each area and then lets hold a educated conservation.

 

[Havensdad]

I can only assume that you have not actually set down and run the numbers. I sure am glad you are not in politics with your understanding as we already have enough there who have no clue as to what is happening.

I can only assume you have gotten your numbers from some crazy socialist windbag. Unfortunately, we already have a lot of people like yourself in congress, which is why we are in the mess we are in...keep gulping the kool-aid, my friend.

First off we are borrowing over 4 billion a day just to keep afloat. 1 Billion is 1000 one million dollar bills if there was such a thing. We are borrowing over 4 times that every day. That is about 20% of the annual costs to run the government.


Multiply that times 356 days and you come up with Approx. 1.5 trillion a year in borrowed money. If we cut Medicare totally our we would only save about 500 billion (2010 costs were about 509 billion). However we would then be left with people having no medical and now on some other form of government assistance.

Lets get real! The Fed took in 2.381 trillion dollars in 2010. Of that, 800 billion was Medicare/Medicaid. 700 billion was Social Security. 164 billion was the national debt. There were also other programs considered "mandatory", that totalled around 560 billion. This means the total of ALL mandatory spending was only about 2.1 trillion dollars, less than what was taken in.

The other 1.17 trillion dollars (or 1.3, depending who is telling the story), which was borrowed, was discretionary spending, which can easily be cut at LEAST by two thirds. The military budget can be slashed simply by bringing our people home, and not engaging in unnecessary warfare. The Medicare/Medicaid budget (mandatory, so-called), can at LEAST be cut by half, by reorganization, state-control, and making a cap on who can receieve it (such as, if you make over 100 K a year, or have a net worth of over 1 million dollars, you buy your own insurance). Same thing with SSI.

THEN> We raise taxes. Oh, not on Americans. On the imports coming into this country. Give the U.S. companies a "fighting chance" in our own market. Impose a 10 to 15 percent tariff on every single thing that comes into this country.

Simultaneously begin deportation of illegals, which means more people actually working in the U.S. who are paying taxes. Whoila! Federal Revenue is increased even more!

Those things would bring us within our revenue levels, without raising the debt ceiling. Whoila! Shrink the government, and stop borrowing, all in one fell swoop.

You mentioned social security and the rich. My friend where have you been? That fund has been self sustaining until last year and now there is a very little extra that needs to be put in and that is only because congress keeps robbing the fund. To date there is 2.5 trillion dollars in IOU's from the pilfering of the federal government in the SS fund.

Not true. Here is the report from the SSA...

https://www.socialsecurity.gov/pressoffice/pr/trustee10-pr-alt.pdf

Notice it says that the status "has not changed" since the last report in 2009... Social Security is completely unsustainable, even according to those whose jobs depend upon it.

You mentioned welfare. Welfare is a joint venture between the states and the federal government. Welfare is already on the down ward trend according to the federal budget office.

The Federal Budget office is playing with the numbers, just like they are with unemployment. We have around 1 in 5 Americans without a job, yet we have a 9.2 percent (and rising) unemployment rate.

I agree that there needs to be spending cuts, but the facts are that it is now impossible to cut enough because of what our irresponsible and corrupt politicians have done if we are to stay a world power. And we will default in the coming months and we will go under in the world standing. You say that if this country defaults it would have little to no effect. If that was the case then we would default, wipe out our debts and start over and all would be fine. You have no clue as to what you are talking about.
Give us all some real numbers and show us in dollars just how and where to cut enough out of the budget to stop borrowing money and also to lower the debt. Use percentages in each area and then lets hold a educated conservation.

We do not have to default on our debts. We can not raise the debt ceiling, and STILL make our payments.

 

[freeatlast]

I can only assume you have gotten your numbers from some crazy socialist windbag. Unfortunately, we already have a lot of people like yourself in congress, which is why we are in the mess we are in...keep gulping the kool-aid, my friend.



Lets get real! The Fed took in 2.381 trillion dollars in 2010. Of that, 800 billion was Medicare/Medicaid. 700 billion was Social Security. 164 billion was the national debt. There were also other programs considered "mandatory", that totalled around 560 billion. This means the total of ALL mandatory spending was only about 2.1 trillion dollars, less than what was taken in.

The other 1.17 trillion dollars (or 1.3, depending who is telling the story), which was borrowed, was discretionary spending, which can easily be cut at LEAST by two thirds. The military budget can be slashed simply by bringing our people home, and not engaging in unnecessary warfare. The Medicare/Medicaid budget (mandatory, so-called), can at LEAST be cut by half, by reorganization, state-control, and making a cap on who can receieve it (such as, if you make over 100 K a year, or have a net worth of over 1 million dollars, you buy your own insurance). Same thing with SSI.

THEN> We raise taxes. Oh, not on Americans. On the imports coming into this country. Give the U.S. companies a "fighting chance" in our own market. Impose a 10 to 15 percent tariff on every single thing that comes into this country.

Simultaneously begin deportation of illegals, which means more people actually working in the U.S. who are paying taxes. Whoila! Federal Revenue is increased even more!

Those things would bring us within our revenue levels, without raising the debt ceiling. Whoila! Shrink the government, and stop borrowing, all in one fell swoop.



Not true. Here is the report from the SSA...

https://www.socialsecurity.gov/pressoffice/pr/trustee10-pr-alt.pdf

Notice it says that the status "has not changed" since the last report in 2009... Social Security is completely unsustainable, even according to those whose jobs depend upon it.



The Federal Budget office is playing with the numbers, just like they are with unemployment. We have around 1 in 5 Americans without a job, yet we have a 9.2 percent (and rising) unemployment rate.



We do not have to default on our debts. We can not raise the debt ceiling, and STILL make our payments.

I fail to see how you can be so deceived. Social security is a paid for program by Social security taxes from workers. It has nothing to do with the general fund. So that 700 billion you mentioned does not apply. The reason it doesn't is because if you do away with SS you need to do away with the tax. DA! They don't want to do away with the tax because they have been robing the fund so what they want to do is change SS and keep the Tax so they can continue to rob the fund.
Next Medicare for 2010 was not 800 billion. It was 510 billion. Third the national debt was around 12 trillion, not 164 billion. Our national debt is growing at the rate of 1.5 trillion a year. That is 1.5 thousand billion a year my friend.

As to SS being un-sustainable that also is another political lie from our politicians. SS is not an entitlement program as they are claiming. SS is being funded separately from our Federal tax rate. HELLO! SS has a surplus of 2.4 trillion in the form of IOU's from the federal government because they have been raping the fund over the years using it for things other then it was designed for. That alone is enough to keep the fund in the black along with the current pay ins workers have to make for the next 20 years then the baby boomers will be dying off the the out going money will again be much less then the population pay ins.
The two highest money problems is the Military and the federal pensions which are 25 and 21 percent respectively.
All that being said if you have listened at all to Washington the republicans are trying to get just 2 to 4 trillion spending cuts over the next 10 to 20 years and they are struggling to figure how to cut that much. That means with a 1.5 trillion annual debt growth and if they get 4 trillion cuts over 10 years our debt would still grow by 11 trillion so there is no benefit as we actually get worst off. And it is went over 20 years the debt would growth would be double that. So the rest would have to be made up in more taxes which would have to double or triple to even break even much less pay down the debt. The problem with more taxes is then the politicians just spend more.
No this is not going to be fixed as there is not even a proposal on the table to do so. All that is proposed is to push back the default for a few more months or perhaps a few years and save face for their irresponsible and corrupt activities with the American tax payers money until we default and we go down the drain as the nation we are.

 

[Havensdad]

I fail to see how you can be so deceived. Social security is a paid for program by Social security taxes from workers. It has nothing to do with the general fund. So that 700 billion you mentioned does not apply. The reason it doesn't is because if you do away with SS you need to do away with the tax. DA! They don't want to do away with the tax because they have been robing the fund so what they want to do is change SS and keep the Tax so they can continue to rob the fund.

You are the one who is deceived. I am paying in money on a program that CANNOT sustain itself. I will never see that money. How can someone be so blind? Its simple...several years ago, there was a cap on SSI. If you made over so much, you didn't get it. That needs to be re instituted, at a higher rate (the old rate was abysmally low), and needs to also have provisions to exclude those with high net worths.

Next Medicare for 2010 was not 800 billion. It was 510 billion. Third the national debt was around 12 trillion, not 164 billion. Our national debt is growing at the rate of 1.5 trillion a year. That is 1.5 thousand billion a year my friend.

You don't read so good, my friend. I said Medicare AND Medicaid were 800 billion...and they are. I said the debt PAYMENT (our minimum payment on the debt we already have) is 164 billion...and it IS.

Our national debt is growing at 1.5 trillion per year, because we KEEP BORROWING! But the interest payments are only 164 billion, annually.

As to SS being un-sustainable that also is another political lie from our politicians. SS is not an entitlement program as they are claiming. SS is being funded separately from our Federal tax rate. HELLO! SS has a surplus of 2.4 trillion in the form of IOU's from the federal government because they have been raping the fund over the years using it for things other then it was designed for. That alone is enough to keep the fund in the black along with the current pay ins workers have to make for the next 20 years then the baby boomers will be dying off the the out going money will again be much less then the population pay ins.

The money is gone, and cannot be put back...we cannot afford it. So it is, indeed, unsustainable.

The two highest money problems is the Military and the federal pensions which are 25 and 21 percent respectively.

No, the highest money problems are medicare/medicaid, and SSI, as well as other entitlement programs, which take up the bulk of the Fed Budget.

I agree with the pensions as well as over paid politicians. Obama has several staff members that make several million dollars per year. That is outrageous. All government salaries should be capped at the national average, IMHO. Ridiculous that the politicians are making 5-10 times more than the people who are paying them.

All that being said if you have listened at all to Washington the republicans are trying to get just 2 to 4 trillion spending cuts over the next 10 to 20 years and they are struggling to figure how to cut that much. That means with a 1.5 trillion annual debt growth and if they get 4 trillion cuts over 10 years our debt would still grow by 11 trillion so there is no benefit as we actually get worst off. And it is went over 20 years the debt would growth would be double that. So the rest would have to be made up in more taxes which would have to double or triple to even break even much less pay down the debt. The problem with more taxes is then the politicians just spend more.
No this is not going to be fixed as there is not even a proposal on the table to do so. All that is proposed is to push back the default for a few more months or perhaps a few years and save face for their irresponsible and corrupt activities with the American tax payers money until we default and we go down the drain as the nation we are.

Which is why we need to balk, and not raise the debt ceiling. The government can make it, they just don't want to. Not raising it, will FORCE them to do something about their out of control spending.

 

[mandym]

We're about three weeks away from the deadline. What do you think will happen if the debt ceiling isn't raised? How bad could the economy get?

Because of the limited poll format I couldn't fill out the scenarios. Here are my original choices:

1. Not much. The stock market will lose a few percentage points but regain it within weeks.

2. The stock market will take a big hit, perhaps 8%-10% decline or more. The so-called recovery would be over.

3. Stock market takes a big hit and banks stop lending money, businesses lay off people, leading to the double dip recession.

4. U.S. government goes into default, meaning it does not make its loan payments to debtors. Instead the U.S. picks and chooses who to pay interest only payments. Rates on treasury bonds would rise sharply, as would mortgage rates and credit card rates. Deep recession.

5. U.S. goes into default & can‘t pay anyone, bond rates rise, mortgage rates rise, business lending dries up or is too expensive, businesses lay off people, exports decline, unemployment rate rises to 12% or more. Major depression.

6. U.S. defaults & pays no one including medicare, social security, and military. Credit card rates reach 25% or more causing consumers to clamp down on all spending, unemployment goes way up, stock market crashes, houses are foreclosed, China and other creditors no longer buy U.S. securities, the dollar is dropped as the world’s reserve currency. Meltdown.



Feel free to add comments or alternate scenarios.

We will lose our credit rating. Not much else.

 

[Eric B]

We will lose our credit rating. Not much else.

That does seem to be what they're talking about now

http://www.foxnews.com/politics/201...t/?icid=maing-grid7|main5|dl1|sec1_lnk3|77741