July 11, 2011
For the next couple of weeks, it appears the only thing our government will do is posture over how and who should be taxed, and how much and what for our tax dollars should be spent with the impeding doom of reaching the debt ceiling the catalyst for whatever change will happen.
Reaching the debt ceiling means the Treasury can no longer borrow funds to pay for appropriations set by congress. I think I read somewhere that 44% of spending would have to be stopped, immediately. Not being able to borrow more would leave only enough revenue to pay the interest on the current debt with a little left over to ensure Veteran’s, Medicare and Social Security programs continue (must keep the number one voting block in America, the Seniors, as happy as possible), but just about everything else will go unfunded, including military pay and allowances.
So, why August 2nd? Not that I think they were smart enough to pick the date the check book runs dry, I think the date was chosen because obligations on the 1st of August will be met, including military pay, and on the 2nd declare we have entered a default with really about a week to get a deal signed before the world really could come crashing down.
In the end, I think it will be August 5th before a deal is reached. The markets will actually view the whole process as a positive thing – the United States’ treasury rates will bump up about three quarters of a percent for about a week, then recede to even lower than current levels. Some spending and some subsidies will be cut – just enough for both sides to claim a victory for bipartisan politics, but the sad thing is, you won’t hear the can being kicked down the road over the din of themselves patting each other on the back.
Just a little cynical this morning. Time to mow the yard.