I’ve been accused on more than one occasion on this blog of being a “debt alarmist”. The argument being that the debt will take care of itself and we just need to keep stimulating – or more accurately – borrowing ourselves out of this recession.
If there is anyone who still thinks that the national debt is not a critical make or break issue for our country in the next couple years, think about the words of the chairman of the White House Council of Economic Advisers, Austan Goolsbee. On ABC’s “This Week” on Sunday, Goolsbee said that refusing to raise the debt ceiling would push the country into default — and a far greater economic crisis than Americans saw in 2008. For Goolsbee’s full comments see here.
Really? The simple act of deciding that we are not going to take on more debt and live within our means will put the country into default?
That says to me that the US cannot pay its bills today. So actually we are already in pretty much in default. Sound familiar to the news from Europe all last year? It should, because we are in the same boat.
Two predictions for 2011 that will continue to fuel the Tea Party movement and create actual progress against the debt.
- Moody’s and S&P will inform the federal government (in private) that US government debt will be downgraded in 2012 if drastic actions are not taken. These guys aren’t going to be the whipping boy for the financial crisis and not tell the feds that if they want more transparency in ratings its starts with uncovering the sham that is our country’s debt rating. We’ll never know if this happens, but we will see signs in Congressional actions. BTW – “drastic” will mean something much more substantial than the debt commissions recommendations that were rejected as too draconian.
- Several states and 50 + cities will go belly up. There will be no bailouts, and there will be hundreds of thousands of public sector layoffs unless in return the Republicans get things like
- Radical tax reform
- Complete overhaul of Obamacare
- Strict enforcement of “pay-go” rules
- Substantial cuts and reform for social security and Medicare
2011 will see the mother of all games of chicken played. Next year will see both parties do things they vowed never to do. Why? We are officially out of options.
Guest Blogger Jeff