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What Will Happen If The Debt Ceiling Isn’t Raised?

According to former GOP Senator Judd Gregg, the U.S. government borrows 41 cents out of every dollar it spends. In other words, if they can’t borrow any more money it means they have to cut 41% of the budget.

According to Gregg,

“The practical effect of hitting the debt limit is not that the entire activities of the government suddenly stop. It is that 41 percent of the government stops… To put it another way, it is as if Congress passed a spending-freeze bill, only this time cutting 41 percent.”

The key of course is… which 41% stops?

Gregg continues,  the decision as to who and what gets paid is left to the president and his people, it is more than likely that the politics of the situation might cause them to choose not to send out Social Security checks or pay  Medicare… This would give them the double benefit of enraging seniors, whose rage  the president’s party would adeptly (with the assistance of NPR) direct  at the Republicans while continuing to fund their favored departments such as Labor and Transportation that take care of their issues and friends.”

How Could they Spend the Remaining 59% to Prevent a Default?

According to Gregg, they could take 15% and support the military in the field, take 12% and pay the interest on the debt (thus preventing a default), they could also fund all of Social Security and 85% of Medicare plus all of the Federal Aviation Administration (FAA) and the Department of Homeland Security.  See Full Article
Interesting Quote from Illinois Senator Obama 2006-

The fact that we’re here today to debate raising America’s debt limit is a sign of leadership failure. Leadership means ‘The buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.

Dan Ferris Editor of  Extreme Value says,
Would there be disruptions to the economy if the government’s role in it  was instantly reduced? Of course there would. Would that look ugly in the short term? You bet it would.
But I doubt it would be as bad as everyone is trying to scare you into believing. Remember… it’s not you and me going broke here. It’s the government. And it should go broke. It is broke. It should be forced to shrink expenses, reduce debt, and sell assets. Would this be a bad thing in the long term? Absolutely not.
There are many good reasons to reduce the size and cost of government in  the United States – and few good reasons to pretend the job can wait another minute. We could be in for a rocky ride, but it’s hard for me to understand how 44% less government would be anything but an economic miracle.

 

Our economy doesn’t suffer from a lack of government intervention. It suffers from too much government intervention. The solution to too much government intervention in the economy isn’t more government intervention. It’s less government. That’s what you’d get on August 3, without a higher debt ceiling.

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About Tim McMahon

Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+

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